Rule 127 of The General Financial Rules 2017 Interdepartmental Adjustments in Account Year
Original Rule Text
Visual Summary
Adjustments must be made in the current account year, not past years.
Anticipate adjustments; Controlling Officer proves non-anticipation.
Recoveries are deductions from gross expenditure or departmental receipts.
Executive Summary
Rule 127 of The General Financial Rules, 2017, outlines the principles for inter-departmental adjustments within the current account year. It mandates that such adjustments, especially those that could have been reasonably anticipated, must be finalized before the accounts are closed. The rule places the burden of proof for non-anticipation on the Controlling Officer. It also clarifies how recoveries for services rendered between government departments are to be classified, distinguishing between deductions from gross expenditure and departmental receipts, particularly for commercial departments.
In-Depth Analysis of the Rule
Rule 127 is critical for maintaining accurate and timely financial records across various government departments. It ensures that financial transactions between different entities within the government are properly accounted for in the correct financial year, preventing discrepancies and promoting fiscal discipline.
Breakdown of the Rule:
- Timing of Adjustments: Inter-departmental adjustments must be made within the current account year. They are explicitly not to be made in the accounts of past years if they could have been reasonably foreseen.
- Anticipation and Responsibility: For adjustments that are recurring or of a fixed character, the Accounts Officer will automatically process them. If an adjustment was not anticipated, the onus of proving this lies with the Controlling Officer.
- Classification of Recoveries (Service Departments): Recoveries for services rendered between different departments of the same government are generally classified as deductions from the gross expenditure.
- Classification of Recoveries (Commercial Departments): For commercial departments (e.g., Railways, Posts) acting in their primary function, recoveries for services rendered are treated as departmental receipts. However, if they act as an agent for functions outside their essential purpose, recoveries are a reduction of expenditure.
- Specific Exception: Recoveries of fees for purchase or inspection by Central Purchase Organizations are treated as departmental receipts.
- Definition of ‘Recovery’: The rule clarifies ‘recovery’ as repayment or payment by one department to another for charges initially incurred and classified as final expenditure (Revenue or Capital Head).
- Reporting Recoveries: Recoveries classified as deductions from gross expenditure are shown “below the line” in the relevant Demand for Grant.
- Adjustment of Actual Recoveries: Actual recoveries, regardless of the year they relate to, are adjusted in the accounts in the schedule of recovery attached to the Appropriation Account of the year in which the recovery is made.
Practical Example:
Consider the Ministry of Health requiring services from the Central Public Works Department (CPWD) for minor repairs to a government hospital. If the CPWD charges the Ministry of Health for these services, Rule 127 dictates how this financial transaction should be recorded. Since CPWD is a service department, the recovery made by CPWD from the Ministry of Health would typically be classified as a deduction from CPWD’s gross expenditure. The Ministry of Health, as the recipient of the service, would reflect this payment in its current year’s accounts. If this was a recurring maintenance charge, the Accounts Officer would anticipate and process it automatically. If it was an unforeseen, one-off repair, the onus would be on the Ministry of Health’s Controlling Officer to justify why it wasn’t anticipated if questions arose about its timing in the accounts.
Related Provisions
Understanding Rule 127 is enhanced by reviewing other rules governing financial management and accounting:
- Rule 126 of The General Financial Rules 2017 Procedure for Settlement of Interdepartmental Adjustments: Details the procedures for settling inter-departmental adjustments.
- Rule 78 of The General Financial Rules 2017 Classification of Transactions in Government Accounts: Provides general rules for classifying transactions in government accounts.
- Rule 74 of The General Financial Rules 2017 Cash Based Accounting: Explains the cash-based accounting principle followed by the government.
Learning Aids
Mnemonics:
- A.C.T.I.O.N.: Account year, Controlling Officer onus, Timely, Inter-departmental, Organization type, Notes.
Process Flowchart:
Multiple Choice Questions (MCQs)
1. According to Rule 127 of The General Financial Rules, 2017, when should inter-departmental adjustments be made?
- A) In the accounts of the past year if unforeseen.
- B) In the current account year, if reasonably anticipated.
- C) Only at the end of the financial year.
- D) When funds are obtained from the proper authority, regardless of the year.
Show Answer
Correct Answer: B) In the current account year, if reasonably anticipated.
2. Who bears the onus of proving that inter-departmental adjustments could not have been reasonably anticipated, as per Rule 127 of The General Financial Rules, 2017?
- A) The Accounts Officer.
- B) The Head of Department.
- C) The Controlling Officer.
- D) The Finance Ministry.
Show Answer
Correct Answer: C) The Controlling Officer.
3. How are recoveries for services rendered between different Departments of the same Government generally classified under Rule 127 of The General Financial Rules, 2017?
- A) As receipts of the rendering department.
- B) As deductions from the gross expenditure.
- C) As capital expenditure.
- D) As a separate head of revenue.
Show Answer
Correct Answer: B) As deductions from the gross expenditure.
4. Under Rule 127 of The General Financial Rules, 2017, when does a commercial department treat recoveries for services rendered as departmental receipts?
- A) Always, regardless of the service.
- B) When acting as an agent for functions not germane to its essential purpose.
- C) When the services are in pursuance of its core functions.
- D) Only if the recovery amount exceeds a specified limit.
Show Answer
Correct Answer: C) When the services are in pursuance of its core functions.
5. According to Rule 127 of The General Financial Rules, 2017, how are recoveries of fees for purchase/inspection by Central Purchase Organizations treated?
- A) As reduction of expenditure.
- B) As departmental receipts.
- C) As a suspense head credit.
- D) As a direct credit to the Consolidated Fund.
Show Answer
Correct Answer: B) As departmental receipts.
Frequently Asked Questions
Q1: What is the primary objective of Rule 127 of The General Financial Rules, 2017?
A1: The primary objective is to ensure that inter-departmental adjustments are made within the correct account year, promoting accurate financial reporting and preventing delays in accounting for transactions between government entities.
Q2: How does Rule 127 of The General Financial Rules, 2017, differentiate between recoveries for service departments and commercial departments?
A2: For service departments, recoveries are generally classified as deductions from gross expenditure. For commercial departments, recoveries are treated as departmental receipts if the service is part of their core function, but as a reduction of expenditure if they act as an agent for non-germane functions.
Q3: What happens if an adjustment could not be reasonably anticipated according to Rule 127 of The General Financial Rules, 2017?
A3: If an adjustment could not have been reasonably anticipated, the onus of proving this lies with the Controlling Officer. In such cases, adjustments are generally not made in the accounts of the past year.
Key Takeaways
- Inter-departmental adjustments must primarily occur within the current account year.
- The burden of proof for unforeseen adjustments rests with the Controlling Officer.
- Recovery classification depends on the nature of the department (service vs. commercial) and the function performed.
- All actual recoveries are adjusted in the Appropriation Account of the year they are effected.
Conclusion
Rule 127 of The General Financial Rules, 2017, provides essential guidelines for the meticulous handling of inter-departmental financial adjustments. By emphasizing timely accounting, clear responsibility for anticipation, and precise classification of recoveries, it underpins the integrity and transparency of government financial operations, ensuring that public funds are managed with utmost accuracy and accountability.