Rule 12 of the General Financial Rules 2017 Adjustment of Outstanding Government Dues
Original Rule Text
Visual Summary
Outstanding Dues
Money owed to the government must be collected diligently and not neglected without a valid reason.
Irrecoverable Amounts
If a debt seems impossible to collect (e.g., the debtor is bankrupt or cannot be found).
Official Adjustment
A designated ‘competent authority’ must issue a formal order to adjust or write off an irrecoverable debt.
Executive Summary
Rule 12 establishes a fundamental principle of financial discipline: the government must not neglect the collection of money owed to it. It mandates that all dues must be pursued actively. However, it also provides a practical solution for situations where a debt is genuinely uncollectable. In such cases, the debt cannot simply be ignored; a formal process must be followed where a designated ‘competent authority’ reviews the situation and issues an official order to ‘adjust’ the amount, effectively writing it off the books.
In-Depth Analysis of the Rule
Introduction
Rule 12 of the General Financial Rules, 2017, is a concise but critical regulation that governs the management of government receivables. It ensures that public funds are not lost due to negligence in collection while establishing a formal procedure for handling debts that are genuinely impossible to recover.
Breakdown of the Rule
The rule can be broken down into two main components:
- The Duty to Collect: The first part, ‘Amounts due to Government shall not be left outstanding without sufficient reasons,’ places a clear responsibility on government departments to be diligent. They cannot simply let debts slide. There must be a ‘sufficient reason’ for any delay, such as an ongoing legal dispute or a formal, approved payment plan. This prevents carelessness and ensures that all possible efforts are made to collect public money.
- The Procedure for Write-Off: The second part, ‘Where such amounts appear to be irrecoverable, the orders of the competent authority shall be obtained for their adjustment,’ outlines the process for dealing with bad debts. An amount is considered ‘irrecoverable’ when all reasonable collection efforts have failed (for instance, the debtor has gone bankrupt, cannot be traced, or has passed away without assets). In such a scenario, the department cannot unilaterally decide to write off the debt. It must seek a formal order from a ‘competent authority’—an official who has been delegated the specific financial power to approve such write-offs. This ‘adjustment’ is an accounting entry that removes the irrecoverable amount from the list of active receivables, ensuring the government’s financial statements are accurate.
Practical Example
Imagine a government agency rented out a small shop to an individual. After a few months, the individual closes the business and disappears, leaving six months of rent unpaid. The agency tries to contact the person, sends legal notices to their last known address, and attempts to trace them through official records, but all efforts fail. The agency documents these failed attempts and concludes that the outstanding rent is ‘irrecoverable’. They then prepare a formal proposal, with all the evidence, and submit it to the designated ‘competent authority’ (perhaps a Director or a higher-level officer). After reviewing the case, the authority issues a sanction order to ‘adjust’ the unpaid rent, and the amount is formally written off in the agency’s account books.
Conclusion
Rule 12 strikes a balance between the strict requirement to collect all government dues and the practical reality that some debts will become uncollectable. It prevents the loss of public funds through administrative laziness and ensures that the process of writing off a debt is formal, transparent, and approved at an appropriate level, thereby maintaining financial accountability.
Related Provisions
Understanding Rule 12 is enhanced by looking at other related rules that deal with government revenue and losses. Here are a few key connections:
- Rule 17: Miscellaneous Demands – This rule requires Accounts Officers to monitor the collection of various government demands. It complements Rule 12 by focusing on the active tracking of receivables, which is the first step before a due can be considered outstanding or irrecoverable.
- Rule 18: Remission of Revenue – This rule states that a claim to revenue cannot be given up (remitted) without the sanction of a competent authority. This is conceptually similar to Rule 12’s requirement for an order to adjust an irrecoverable due, as both involve formally forgoing money owed to the government.
- Rule 33: Report of Losses – An irrecoverable due is a form of financial loss. Rule 33 outlines the procedure for reporting losses of public money, which would be a necessary step when a significant amount is deemed irrecoverable under Rule 12.
Learning Aids
Mnemonics
- C.A.R.E.: Collect All dues, but for Really Exceptional (irrecoverable) cases, get official approval.
Mindmap
Multiple Choice Questions (MCQs)
1. (Easy) What is the primary instruction of Rule 12 regarding amounts due to the Government?
- A) They should be written off immediately if not paid within 30 days.
- B) They should not be left outstanding without a sufficient reason.
- C) They should be doubled as a penalty after one year of non-payment.
- D) They can be ignored if the amount is below a certain threshold.
Show Answer
Correct Answer: B) They should not be left outstanding without a sufficient reason.
2. (Medium) According to Rule 12, what specific action is required when a government due appears to be irrecoverable?
- A) The amount is automatically written off from the accounts.
- B) The matter must be reported to the police for investigation.
- C) Orders for its adjustment must be obtained from the competent authority.
- D) The officer responsible for collection must personally pay the amount.
Show Answer
Correct Answer: C) Orders for its adjustment must be obtained from the competent authority.
3. (Hard) Rule 12 implies a sequential process for managing outstanding dues. Which option best describes this sequence?
- A) First, get approval for potential write-off from a competent authority, then attempt collection.
- B) First, adjust the accounts to reflect the loss, then inform the debtor that the due is cancelled.
- C) First, diligently attempt collection; if that fails and the amount is proven irrecoverable, then seek formal approval for adjustment.
- D) First, report the outstanding amount as a loss, then wait for one year before seeking recovery.
Show Answer
Correct Answer: C) First, diligently attempt collection; if that fails and the amount is proven irrecoverable, then seek formal approval for adjustment.
Frequently Asked Questions
What is considered a ‘sufficient reason’ for a due to be outstanding?
A ‘sufficient reason’ is a valid, documented justification for why a due has not yet been collected. Examples include an ongoing legal case to determine the final amount, a formal payment plan that the debtor is currently following, or other administrative processes that must be completed before collection can be finalized. It cannot be an excuse for inaction or negligence.
Who is the ‘competent authority’ mentioned in Rule 12?
The ‘competent authority’ is a specific government officer or body that has been officially granted the financial power to approve the write-off or adjustment of irrecoverable dues. This authority is typically defined in the Delegation of Financial Powers Rules and varies based on the department and the monetary value of the due. It is not just any senior officer but one with specific authorization for this purpose.
Does ‘adjustment’ mean the debt is completely forgiven?
Primarily, ‘adjustment’ is an accounting action. It means the amount is removed from the active list of receivables because it is considered uncollectable at the present time. While this effectively closes the collection case, it does not legally extinguish the debt forever. If the debtor’s financial situation improves or they are located later, the government could potentially reopen the case and attempt recovery.
Key Takeaways
- Government departments must actively pursue the collection of all money owed to them.
- A debt cannot be ignored or left uncollected without a valid and documented reason.
- If a debt is proven to be impossible to collect, it can only be written off after receiving a formal order from a specifically authorized official.
- This rule ensures financial accountability and prevents the loss of public money through negligence.