Rule 233 of The General Financial Rules 2017 Funding of Sponsored Projects or Schemes

Original Rule Text

Rule 233 Funding of Sponsored Projects or Schemes.(i) Ministries or Departments of Government sponsor projects orschemes to be undertaken byUniversities, Indian Institute ofTechnology and other similarAutonomous Organisations suchas ICAR, CSIR, ICMR etc., theresults from which are expectedto be in national interest.Normally the entire expenditureon such projects or schemesincluding capital expenditure, isfunded by the Ministry orDepartment. The funds releasedfor such projects or schemes inone or more installments are nottreated as Grants-in-aid in thebooks of the implementingagency. Apart from therequirement of submission oftechnical and financial reports oncompletion of the project orscheme, a stipulation should bemade in such cases that theownership in the physical andintellectual assets created oracquired out of such funds shallvest in the sponsor. While theProject or Scheme is ongoing,the recipients should not treatsuch assets as their own assetsin their Books of Accounts butshould disclose their holding andusing such assists in the Notes toAccounts specifically.(ii) On completion of the Projects orSchemes and the receipt oftechnical and financial reports,the Ministries/Departmentsshould decide and communicateto the implementing agencieswhether the assets should bereturned, sold or retained bythem.[Note: In relaxation of the extantprovisions of the rule, ScientificDepartments are allowed toextend the provisions of Rule233(i)&(ii) to private sector /NGOs who are commissioned toexecute projects or schemes.]Ifthe assets are to be sold, theproceeds therefrom should becredited to the account of thesponsoring Department /Organisation. If the assets areallowed to be retained by theInstitution/ Organisation, theimplementing agency shouldinclude the assets at the bookvalue in their own accounts.

Visual Summary

Funding Source

Government Ministries/Departments provide full project expenditure.

Project Executors

Universities, IITs, Autonomous Orgs, and sometimes private sector/NGOs.

Asset Ownership

Physical and intellectual assets vest in the sponsoring government entity.

Executive Summary

Rule 233 of the General Financial Rules, 2017, outlines the funding and asset management for sponsored projects and schemes undertaken by various organizations, including universities and autonomous bodies. For scientific departments, this can extend to private sector/NGOs. The rule specifies that the entire expenditure, including capital, is typically funded by the sponsoring Ministry/Department. Crucially, funds are *not* treated as Grants-in-aid, and ownership of physical and intellectual assets created vests with the sponsor, not the implementing agency. Implementing agencies must make specific accounting disclosures. Upon project completion, the sponsoring Ministry decides on the disposition of assets (return, sale, or retention), with proceeds from sales credited to the sponsor’s account.

In-Depth Analysis of the Rule

Introduction: Rule 233 of the General Financial Rules, 2017, provides a comprehensive framework for the funding and management of sponsored projects and schemes by government ministries and departments. These projects, often undertaken by academic and autonomous institutions, are deemed to serve national interests.

Breakdown of the Rule:

Funding Mechanism: Ministries or Departments fully fund projects/schemes, including capital expenditure.
Implementing Agencies: Primarily Universities, Indian Institutes of Technology (IITs), and other similar Autonomous Organisations (e.g., ICAR, CSIR, ICMR). A note specifies that Scientific Departments can also extend these provisions to private sector/NGOs.
Accounting Treatment: Funds released for such projects are *not* treated as Grants-in-aid in the implementing agency’s books of accounts.
Asset Ownership: A critical stipulation is that the ownership of both physical and intellectual assets created or acquired out of such funds shall vest in the *sponsor* (the Government Ministry or Department).
Ongoing Projects: While a project is ongoing, recipients should not treat such assets as their own in their Books of Accounts but must disclose their holding and use in the Notes to Accounts specifically.
Project Completion: Upon completion and receipt of technical and financial reports, the sponsoring Ministries/Departments decide and communicate to the implementing agencies whether the assets should be returned, sold, or retained by them.
Sale Proceeds: If the assets are to be sold, the proceeds must be credited to the account of the sponsoring Department/Organisation.
Retention: If the assets are allowed to be retained by the Institution/Organisation, the implementing agency should include them at their book value in their own accounts.

Practical Example: Imagine the Ministry of Health and Family Welfare sponsors a leading medical university to conduct a research project on a new vaccine. The Ministry provides all necessary funds, including for specialized laboratory equipment. During the project, the university uses this equipment but does not list it as its own asset in its balance sheet; instead, it discloses its use in the Notes to Accounts. Upon successful completion of the research and submission of reports, the Ministry, recognizing the national importance of the vaccine, decides that the intellectual property and the specialized equipment should be transferred to a government-owned research institute for mass production and further development. The university complies, ensuring the assets serve the broader public interest as intended by the sponsor.

Related Provisions

Understanding Rule 233 is enhanced by examining related provisions within the General Financial Rules, 2017:

Rule 230 of The General Financial Rules 2017 Principles and Procedure for award of Grants-in-aid: This rule provides the general principles for awarding grants, offering a contrast to Rule 233’s specific treatment of sponsored project funding.
Rule 234 of The General Financial Rules 2017 Register of Grants: Details the maintenance of a register for grants, which is relevant for tracking various forms of financial assistance, including those that are distinct from Rule 233 projects.
Rule 235 of The General Financial Rules 2017 Accounts of Grantee Institutions: Outlines how institutions receiving grants should maintain subsidiary accounts, providing context for the specific accounting requirements under Rule 233.

Learning Aids

Mnemonics

SPONSOR VESTS ASSETS:
Sponsor funds fully
Projects for national interest
Ownership vests in sponsor
Not grants-in-aid
Specific accounting disclosure
On completion, Ministry decides
Return, Sell, or Retain assets

Process Flowchart

Multiple Choice Questions

1. Under Rule 233 of the General Financial Rules, 2017, who typically funds the entire expenditure, including capital, for sponsored projects or schemes?

A) Implementing Agency
B) Sponsoring Ministry/Department
C) Private Donors
D) International Organizations

Show Answer

Correct Answer: B) Sponsoring Ministry/Department

2. According to Rule 233 of the General Financial Rules, 2017, how are funds released for sponsored projects treated in the books of the implementing agency?

A) As Grants-in-aid
B) As Loans
C) Not as Grants-in-aid
D) As Capital Investments

Show Answer

Correct Answer: C) Not as Grants-in-aid

3. Rule 233 of the General Financial Rules, 2017, stipulates that ownership of physical and intellectual assets created from sponsored project funds shall vest in whom?

A) The Implementing Agency
B) The Project Director
C) The Sponsor
D) A Joint Venture

Show Answer

Correct Answer: C) The Sponsor

4. When a project is ongoing under Rule 233 of the General Financial Rules, 2017, how should the recipient implementing agency account for the assets created?

A) As their own assets
B) As liabilities
C) Disclose in Notes to Accounts
D) As deferred revenue

Show Answer

Correct Answer: C) Disclose in Notes to Accounts

5. Upon completion of a sponsored project under Rule 233 of the General Financial Rules, 2017, if assets are sold, to whose account should the proceeds be credited?

A) The Implementing Agency
B) The Sponsoring Department/Organisation
C) A designated charity fund
D) The Consolidated Fund of India

Show Answer

Correct Answer: B) The Sponsoring Department/Organisation

Frequently Asked Questions

Q: What is the primary difference between funding under Rule 233 of the General Financial Rules, 2017, and Grants-in-aid?

A: Under Rule 233, funds for sponsored projects are explicitly not treated as Grants-in-aid in the implementing agency’s books, and asset ownership vests with the sponsor. Grants-in-aid typically transfer ownership or control of funds/assets to the grantee.

Q: Can private sector entities or NGOs undertake projects funded under Rule 233 of the General Financial Rules, 2017?

A: Generally, Rule 233 focuses on Universities and Autonomous Organisations. However, a note specifies that Scientific Departments are allowed to extend the provisions of Rule 233(i)&(ii) to private sector/NGOs commissioned to execute projects or schemes.

Q: What happens to assets created under a Rule 233 project after its completion?

A: The sponsoring Ministry/Department decides whether the assets should be returned, sold, or retained by the implementing agency. If sold, proceeds go to the sponsor. If retained, the agency includes them at book value in their accounts.

Key Takeaways

Rule 233 governs government-sponsored projects, distinct from traditional grants-in-aid, ensuring clear financial management.
Sponsoring Ministries or Departments fully fund these projects, including all capital expenditure, for national interest.
Ownership of all assets (physical and intellectual) created or acquired through these funds vests directly with the sponsoring government entity.
Implementing agencies must disclose these assets in their Notes to Accounts, not as their own, and follow the sponsor’s directives on asset disposition post-project completion.

Conclusion

Rule 233 of the General Financial Rules, 2017, establishes a clear and accountable framework for government-sponsored projects, ensuring that public funds are utilized for national interest while maintaining government ownership and control over the resulting assets. This structured approach facilitates strategic investments in research and development through various institutions, with precise guidelines for funding, asset management, and accountability.

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