Rule 2 of the General Financial Rules 2017 Definition
Original Rule Text
(i) “Accounts Officer” means the Head of an Office of Accounts or the Head of a Pay and Accounts Office set up under the scheme of departmentalization of accounts;
(ii) “Administrator” means Administrator of a Union Territory, by whatever name designated;
(iii) “Appropriation” means the assignment, to meet specified expenditure, of funds included in a primary unit of appropriation;
(iv) “Audit Officer” means the Head of an Office of Audit;
(v) “Competent Authority” means, in respect of the power to be exercised under any of these Rules, the President or such other authority to which the power is delegated by or under these Rules, Delegation of Financial Power Rules or any other general or special orders issued by the Government of India;
(vi) “Comptroller and Auditor General” means the Comptroller and Auditor General of India;
(vii) “Consolidated Fund” means the Consolidated Fund of India referred to in Article 266 (1) of the Constitution;
(viii) “Constitution” means the Constitution of India;
(ix) “Contingency Fund” means the Contingency Fund of India established under the Contingency Fund of India Act, 1950, in terms of Article 267 (1) of the Constitution;
(x) “Controlling Officer” means an officer entrusted by a Department of the Central Government with the responsibility of controlling the incurring of expenditure and/or the collection of revenue. The term shall include a Head of Department and also an Administrator;
(xi) “Department of the Government of India” means any of the Ministries, Departments, Secretariats and Offices as notified from time to time and listed in the First Schedule to the Government of India (Allocation of Business Rules);
(xii) “Drawing and Disbursing Officer” means a Head of Office and also any other Gazetted Officer so designated by a Department of the Central Government, a Head of Department or an Administrator, to draw bills and make payments on behalf of the Central Government. The term shall also include a Head of Department or an Administrator where he himself discharges such function;
(xiii) “Ministry of Finance” means the Ministry of Finance of the Central Government;
(xiv) “Financial Year” means the year beginning on the 1st of April and ending on the 31st of March following;
(xv) “Government” means the Central Government;
(xvi) “Government Account” means the account relating to the Consolidated Fund, the Contingency Fund and the Public Account; as defined in these rules;
(xvii) “Head of the Department’’ means an authority or person (not below the rank of a Deputy Secretary to the Government of India), declared by the concerned Department in the Government of India as a Head of Department in relation to an identifiable establishment or establishments to exercise the delegated financial powers under these Rules;
(xviii) “Head of Office” means (a) a Gazetted Officer declared as such in the Delegation of Financial Powers Rules and (b) any other authority declared as such under any general or special orders of the competent authority;
(xix) “Local Body” means an authority legally entitled or specially empowered by Government to administer a local fund;
(xx) “Local Fund” means a local fund as defined in Rule 652 of the Treasury Rules;
(xxi) “Non-recurring expenditure” means expenditure other than recurring expenditure;
(xxii) “President” means the President of India;
(xxiii) “Primary unit of appropriation” means a primary unit of appropriation referred to in Rule 8 of the Delegation of Financial Powers Rules;
(xxiv) “Public Account” means the Public Account of India referred to in Article 266 (2) of the Constitution;
(xxv) “Public Works” means civil/ electrical works including public buildings, public services, transport infrastructure etc., both original and repair works and any other project, including infrastructure which is for the use of general public;
(xxvi) “Re-appropriation” means the transfer of funds from one primary unit of appropriation to another such unit;
(xxvii) “Recurring expenditure” means the expenditure which is incurred at periodical intervals for the same purpose. Expenditures other than recurring expenditure are non-recurring expenditure;
(xxviii) “Reserve Bank” means the Reserve Bank of India or any office or agency of the Reserve Bank of India and includes any Bank acting as the agent of the Reserve Bank of India in accordance with the provisions of the Reserve Bank of India Act, 1934 (Act II of 1934);
(xxix) “Subordinate authority” means a Department of the Central Government or any authority subordinate to the President;
(xxx) “Treasury Rules” means the Treasury Rules of the Central Government;
(xxxi) CAPEX model: In the CAPEX Model, Capital expenditures is used by the buyer to straightway purchase goods followed by procurement of consumables, arranging comprehensive maintenance contract after warranty period and finally disposing the product after useful life;
(xxxii) OPEX model: In the OPEX model, the Seller provides the goods, maintains it and also provides the consumables as required and finally takes back the goods after useful / contracted life. The expenditure is made by the Buyer in a staggered manner as per the terms and conditions of the contract.
Visual Summary
Key Terms Defined
This rule acts as the official dictionary for the entire GFR, 2017, ensuring everyone understands terms consistently.
Financial Concepts
It defines crucial financial concepts like the Consolidated Fund, Contingency Fund, and Public Account.
Official Roles
Clarifies the meaning of important roles such as ‘Accounts Officer’, ‘Audit Officer’, and ‘Competent Authority’.
Expenditure Models
Explains different ways of spending, such as the CAPEX (Capital Expenditure) and OPEX (Operating Expenditure) models.
Executive Summary
Rule 2 of the General Financial Rules (GFR), 2017, serves as the official glossary for the entire document. It provides clear and precise definitions for 32 key terms related to government finance, accounting, and administration. This ensures that everyone, from government officers to the general public, has a common understanding of concepts like ‘Financial Year’, ‘Consolidated Fund’, ‘CAPEX model’, and the roles of various authorities. By establishing a standard vocabulary, this rule prevents confusion and ensures the consistent application of financial regulations.
In-Depth Analysis of the Rule
Introduction
In any set of complex regulations, clear definitions are the foundation for understanding and compliance. Rule 2 is that foundation for the GFR, 2017. It lists and explains the essential terms that will be used throughout the rules, ensuring there is no ambiguity in their meaning. This section breaks down some of the most important definitions in simple terms.
Key Definitions Explained
- Government’s Money Chests: The rule defines three critical accounts where public money is held:
– Consolidated Fund (vii): This is the main bank account of the government. All revenues received (like taxes) and all expenditures made are routed through this fund. No money can be taken out without Parliament’s approval.
– Contingency Fund (ix): Think of this as the government’s emergency fund. It’s a fixed amount of money kept aside for urgent, unforeseen expenses, for which parliamentary approval can be obtained later.
– Public Account (xxiv): This account holds money that the government is just a custodian for, like provident fund deposits. This money doesn’t belong to the government and has to be paid back to the rightful owners. - Key People and Their Roles:
– Accounts Officer (i) vs. Audit Officer (iv): An Accounts Officer is responsible for managing and making payments. An Audit Officer is like an independent inspector who checks the work of the Accounts Officer to ensure rules were followed and money was spent correctly.
– Drawing and Disbursing Officer (DDO) (xii): This is the official authorized to ‘draw’ (withdraw) money from the government treasury and ‘disburse’ (pay) it for official expenses, like salaries and office supplies. - Models of Spending:
– CAPEX model (xxxi): This stands for Capital Expenditure. It refers to a one-time, significant purchase of an asset, like buying a new building or heavy machinery. The government owns the asset outright.
– OPEX model (xxxii): This stands for Operating Expenditure. Instead of buying, the government pays for a service in a staggered manner. For example, instead of buying a fleet of cars (CAPEX), the government might lease them and pay a monthly fee that includes maintenance (OPEX). The seller owns and maintains the asset.
Practical Example
Imagine the Ministry of Health decides to set up a new research lab. The ‘Competent Authority’ (the official with the power) gives administrative approval. The ‘Appropriation’ (budget allocation) for this is approved by Parliament from the ‘Consolidated Fund’. The ‘Drawing and Disbursing Officer’ (DDO) of the ministry will make payments to contractors. The purchase of expensive lab equipment is a ‘CAPEX’ expenditure. The annual contract for maintaining this equipment would be an ‘OPEX’ expenditure. This entire process, from approval to payment, is guided by the clear definitions provided in Rule 2.
Conclusion
Rule 2 is more than just a list of words; it’s the key to unlocking the rest of the General Financial Rules. By providing clear, unambiguous definitions, it creates a common language for financial governance, ensuring that all transactions are handled with clarity, consistency, and accountability.
Related Provisions
Understanding the definitions in Rule 2 is the first step. The following rules are closely related and build upon the concepts defined here:
- Rule 1: Short Title and Commencement – This rule establishes the scope and applicability of the GFR, defining which government bodies must follow the definitions laid out in Rule 2.
- Rule 5: Removal of Doubts – This rule provides the procedure for what to do if there is any confusion or doubt about the interpretation of any definition in Rule 2 or any other rule.
- Rule 84: Capital or Revenue Expenditure – This rule elaborates on the concepts of Capital and Revenue expenditure, which are introduced in the definitions of the CAPEX and OPEX models in Rule 2.
Learning Aids
Mnemonics
- For the three main funds (Consolidated, Contingency, Public): Remember **CCP**. The government **C**ollects all money into the main fund, keeps some for a **C**risis, and holds the **P**ublic’s money in trust.
- For CAPEX vs. OPEX: Think of it this way: **CAP**EX is for buying the **CAP** (the big, one-time item like a building). **OP**EX is for the **OP**eration (the ongoing costs to run it, like electricity and maintenance).
Mindmap
Multiple Choice Questions (MCQs)
1. What is the definition of a ‘Financial Year’ according to Rule 2(xiv)?
- A) The period from 1st January to 31st December.
- B) The period beginning on the 1st of April and ending on the 31st of March of the following year.
- C) The period from 1st July to 30th June of the following year.
- D) The calendar year in which the Union Budget is presented.
Show Answer
Correct Answer: B) The period beginning on the 1st of April and ending on the 31st of March of the following year.
2. According to Rule 2, what is the key difference between the ‘CAPEX model’ and the ‘OPEX model’?
- A) CAPEX is for services, while OPEX is for goods.
- B) CAPEX involves a one-time purchase by the buyer, while in OPEX the seller provides and maintains the goods for a staggered payment.
- C) CAPEX is for recurring expenditure, while OPEX is for non-recurring expenditure.
- D) In CAPEX the seller takes back the goods after their useful life, while in OPEX the buyer owns them permanently.
Show Answer
Correct Answer: B) CAPEX involves a one-time purchase by the buyer, while in OPEX the seller provides and maintains the goods for a staggered payment.
3. Which of the following is NOT included in the definition of ‘Government Account’ under Rule 2(xvi)?
- A) The Consolidated Fund
- B) The Contingency Fund
- C) The Public Account
- D) The Reserve Bank’s Account
Show Answer
Correct Answer: D) The Reserve Bank’s Account. The ‘Government Account’ specifically comprises the Consolidated Fund, Contingency Fund, and Public Account.
Frequently Asked Questions
What is the purpose of having a whole rule just for definitions?
The purpose is to create a common and precise understanding of key financial terms. This prevents misinterpretation, ensures consistency across all government departments, and avoids legal disputes that could arise from ambiguous language.
What’s the simple difference between an ‘Accounts Officer’ and an ‘Audit Officer’?
Think of it as ‘doing’ versus ‘checking’. An Accounts Officer is responsible for managing funds and making payments (the ‘doing’). An Audit Officer independently examines these accounts and payments to ensure everything is correct, follows the rules, and was properly authorized (the ‘checking’).
Do these definitions apply to State Governments as well?
No, as per Rule 1, these General Financial Rules, 2017, and therefore the definitions in Rule 2, apply to all Central Government Ministries/Departments, their attached and subordinate bodies, and certain Autonomous Bodies. State Governments have their own financial rules and regulations.
Key Takeaways
- Rule 2 is the official dictionary for the General Financial Rules, ensuring all terms are understood uniformly.
- It defines the three core government accounts: the Consolidated Fund (main account), the Contingency Fund (emergency), and the Public Account (money held in trust).
- The rule clarifies the distinct roles of key financial officers, such as the Accounts Officer (manages payments) and the Audit Officer (checks payments).
- It introduces modern financial models, explaining the difference between one-time capital spending (CAPEX) and ongoing operational spending (OPEX).