Rule 21 of the General Financial Rules 2017 Standards of financial propriety
Original Rule Text
(i) Every officer is expected to exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money.
(ii) The expenditure should not be prima facie more than the occasion demands.
(iii) No authority should exercise its powers of sanctioning expenditure to pass an order which will be directly or indirectly to its own advantage.
(iv) Expenditure from public moneys should not be incurred for the benefit of a particular person or a section of the people, unless –
(a) a claim for the amount could be enforced in a Court of Law, or
(b) the expenditure is in pursuance of a recognized policy or custom.
Visual Summary
Prudent Spending
Spend public money with the same care you would use for your own money.
Necessary Expenditure
Do not spend more than what the situation reasonably requires.
No Self-Advantage
Officials must not sanction spending that benefits them directly or indirectly.
Public Benefit
Public funds should not benefit a specific person unless it’s a legal claim or part of a recognized policy.
Executive Summary
Rule 21 establishes the fundamental principles for any government officer handling public money. It mandates that all spending must be guided by high standards of financial propriety. The core ideas are to be as careful with public funds as one would be with their own money, to spend no more than is necessary, to avoid any decision that could lead to personal gain, and to ensure that public money is used for the public’s benefit, with very specific exceptions.
In-Depth Analysis of the Rule
Introduction
Rule 21 serves as the ethical compass for all financial transactions within the government. It lays down four key principles that every officer, from the highest to the lowest level, must follow when spending or authorizing the spending of public funds. These principles are not just guidelines; they are the bedrock of financial discipline, accountability, and public trust.
Breakdown of the Principles
- The Prudent Person Principle (Rule 21(i)): This is the most crucial principle. It states that an officer must handle public money with the same vigilance and care as a person of ‘ordinary prudence’ would with their own money. This means being economical, avoiding waste, and always seeking the best value. It’s a simple but powerful test: ‘Would I spend my own money this way?’
- Expenditure Not More Than Occasion Demands (Rule 21(ii)): This principle is about proportionality. The amount of money spent should be appropriate for the purpose. It prohibits extravagance and unnecessary expenditure. For example, if a minor repair is needed, one should not sanction a complete replacement if it’s not justified.
- No Self-Advantage (Rule 21(iii)): This is a direct rule against conflict of interest. An officer cannot use their power to sanction expenditure in a way that benefits them, either directly (e.g., approving their own travel claim for a trip not taken) or indirectly (e.g., awarding a contract to a company owned by a relative).
- Spending for Public Benefit (Rule 21(iv)): This principle establishes that public money is for the public good. It should not be used to benefit a particular individual or a small group. However, the rule provides two important exceptions:
- Legal Claims: If a court of law can enforce a claim for payment (e.g., a legal settlement or a contractual obligation), then the payment must be made.
- Recognized Policy or Custom: If the expenditure is part of an established government policy (like a scholarship scheme) or a recognized custom, it is permissible even if it benefits individuals.
Practical Example
Imagine a government office needs a new printer. The officer in charge has a few options. Following Rule 21, the officer would:
1. Assess the actual need. Does the office need a high-end color laser printer, or would a standard black-and-white printer suffice? (Rule 21(ii) – not more than the occasion demands).
2. Research prices from different vendors to get a reasonable rate, just as they would if buying it for their home. (Rule 21(i) – prudent person principle).
3. Avoid buying from a shop owned by their cousin, especially if the price is higher, as this would be an indirect advantage. (Rule 21(iii) – no self-advantage).
4. The purchase is for the office’s use, which is a public purpose, so it aligns with Rule 21(iv).
Conclusion
Rule 21 is the cornerstone of financial integrity in public service. It ensures that every rupee of taxpayer money is spent with utmost care, for legitimate public purposes, and without any hint of personal gain. Adherence to these standards is essential for maintaining financial order and public confidence in the government.
Related Provisions
The principles laid out in Rule 21 are foundational and connect to several other rules that govern financial management. Understanding these related provisions provides a broader context for financial propriety:
- Rule 22: Expenditure from Public Funds – This rule directly follows Rule 21 and states that no expenditure can be incurred without sanction from a competent authority. The act of sanctioning must be guided by the standards of financial propriety set in Rule 21.
- Rule 26: Responsibility of Controlling Officer in respect of Budget allocation – This rule outlines the duties of a controlling officer, which include ensuring expenditure is in the public interest and guarding against waste. This is a practical application of the principles of economy and propriety from Rule 21.
- Rule 37: Responsibility of losses – This rule holds an officer personally responsible for any loss to the government caused by their fraud or negligence. A failure to adhere to the standards of financial propriety in Rule 21 can be considered negligence, leading to personal liability.
Learning Aids
Mnemonics
- Remember the principles with the acronym WISE:
W – Watchful: Spend public money as watchfully as you would your own.
I – Incur only what is necessary for the occasion.
S – Self-advantage is strictly forbidden.
E – Ensure spending is for public benefit, with legal or policy exceptions.
Mindmap
Multiple Choice Questions (MCQs)
1. [Easy] What is the core principle of financial propriety mentioned in Rule 21(i)?
- A) Prioritizing the lowest cost for all purchases.
- B) Spending public money with the same care as one’s own.
- C) Ensuring all expenditure is approved by a higher authority.
- D) Following all financial rules without exception.
Show Answer
Correct Answer: B) Spending public money with the same care as one’s own.
2. [Medium] According to Rule 21(iv), expenditure from public money should not benefit a particular person, UNLESS which of the following conditions is met?
- A) The person is a government employee.
- B) The expenditure is for a charitable cause.
- C) The expenditure is in pursuance of a recognized policy or custom.
- D) The amount is less than a specified monetary limit.
Show Answer
Correct Answer: C) The expenditure is in pursuance of a recognized policy or custom.
3. [Hard] An officer sanctions an emergency purchase that is necessary but slightly overpriced. The supplier happens to be a company where the officer’s spouse has a minor, non-controlling share. Which part of Rule 21 is MOST directly violated?
- A) Rule 21(i), as a prudent person would have found a cheaper option.
- B) Rule 21(ii), as the expenditure might be more than the occasion demands.
- C) Rule 21(iv), as it benefits a particular person or section.
- D) Rule 21(iii), as the order could be seen as indirectly to the officer’s own advantage.
Show Answer
Correct Answer: D) Rule 21(iii), as the order could be seen as indirectly to the officer’s own advantage.
Frequently Asked Questions
What does ‘financial propriety’ mean in simple terms?
Financial propriety means handling public money with the highest standards of honesty, integrity, and common sense. It’s about making sure every financial decision is responsible, ethical, and in the public’s best interest.
Can I ever approve spending that helps a single person?
Yes, but only under two specific conditions mentioned in the rule. You can approve spending that benefits an individual if (1) they have a legal right to that money that could be enforced in court, or (2) the payment is part of an officially recognized government policy or an established custom (like a scholarship or a relief fund).
What if an urgent situation requires me to spend more than the usual amount?
The rule states that expenditure should not be ‘prima facie more than the occasion demands’. ‘Prima facie’ means ‘at first sight’. While urgency might justify a higher cost, it must still be reasonable for the situation. You must be able to justify that the extra cost was unavoidable and proportionate to the emergency, and not simply extravagant.
Key Takeaways
- Always treat public money with the same level of care and vigilance as you would your own personal funds.
- Ensure that the amount of expenditure is reasonable and never more than what the situation genuinely requires.
- Never use your authority to approve spending that could result in any direct or indirect personal benefit for yourself.
- Public funds must be used for the benefit of the public, not for private individuals, unless there is a clear legal or policy justification.