Rule 236 of The General Financial Rules 2017 Audit of Accounts
Original Rule Text
Visual Summary
Accounts of grantee institutions open to inspection by sanctioning authority and CAG.
Mandatory for grants/loans ≥ ₹25L & ≥75% total expenditure, or ≥ ₹1 Cr.
Other cases by Chartered Accountants; CAG as sole auditor for local bodies.
Executive Summary
Rule 236 of The General Financial Rules, 2017 outlines the comprehensive framework for auditing the accounts of institutions and organizations that receive grants-in-aid or loans from the government. It specifies the conditions under which the Comptroller and Auditor General of India (CAG) conducts audits, including monetary thresholds, and clarifies the audit responsibilities for other cases, such as those handled by Chartered Accountants or where the CAG acts as the sole auditor for local bodies.
In-Depth Analysis of the Rule
Rule 236 establishes the critical mechanisms for ensuring financial accountability and transparency for entities receiving government grants and loans. It delineates the scope of audit, the authorities responsible, and specific conditions that trigger different levels of scrutiny.
Breakdown of the Rule:
- Rule 236 (1) General Audit Scope: This sub-rule mandates that the accounts of all institutions or organizations receiving grants are open to inspection by the sanctioning authority and the Comptroller and Auditor General of India (CAG) under the CAG (Duties, Powers and Conditions of Service) Act, 1971. It also includes internal audit by the Principal Accounts Office of the Ministry or Department. A provision to this effect must be included in all grant sanction orders.
- Rule 236 (2) (i) CAG Audit Thresholds: A CAG audit is mandatory under Section 14 of the CAG Act, 1971, if the grants or loans to an institution in a financial year meet either of these conditions: (a) they are not less than Rupees twenty-five lakhs AND not less than seventy-five percent of the institution’s total expenditure, OR (b) they are not less than Rupees one crore. Once the CAG audits accounts in a financial year, it continues for a further two years, even if the initial conditions are no longer met.
- Rule 236 (2) (ii) CAG Access to Records: For grants and/or loans given for specific purposes to any institution (excluding foreign states or international bodies), the CAG is empowered under Section 15(1) of the CAG Act, 1971, to scrutinize the procedures used by the sanctioning authority to ensure that grant conditions are fulfilled. For this purpose, the CAG has the right to access the books and accounts of that institution.
- Rule 236 (3) Other Audits: In all cases not covered by the mandatory CAG audit criteria, the institution or organization is required to have its accounts audited by Chartered Accountants of its own choice.
- Rule 236 (4) CAG as Sole Auditor: If the CAG is designated as the sole auditor for a local body or institution, the auditing charges are payable by the auditee institution, unless the Government specifically waives these charges.
Practical Example:
Consider a research institute that receives a grant of ₹30 lakhs from the Central Government, which constitutes 80% of its total annual expenditure. According to Rule 236 (2) (i), this institute’s accounts would be mandatorily audited by the Comptroller and Auditor General of India because the grant exceeds ₹25 lakhs and is more than 75% of its total expenditure. If, in another year, the same institute receives a grant of ₹1.2 crore, it would also be subject to CAG audit, irrespective of the percentage of its total expenditure, as the grant amount alone crosses the ₹1 crore threshold. However, if the institute only received a ₹10 lakh grant (less than both thresholds), it would be required to get its accounts audited by a Chartered Accountant of its choice, as per Rule 236 (3).
Related Provisions
Understanding Rule 236 is enhanced by reviewing these related provisions:
- Rule 235 of The General Financial Rules 2017 Accounts of Grantee Institutions: Details the requirement for grantee institutions to maintain subsidiary accounts and furnish audited statements.
- Rule 237 of The General Financial Rules 2017 Time Schedule for Submission of Annual Accounts: Outlines the deadlines for submitting annual accounts for audit and reporting to Parliament.
- Rule 238 of The General Financial Rules 2017 Utilization Certificates: Specifies the requirements for submitting utilization certificates for grants-in-aid.
Learning Aids
Mnemonics:
- All Grants Covered: Audit Guidelines Clear.
Process Flowchart:
Multiple Choice Questions (MCQs)
1. What is the primary purpose of Rule 236 of the General Financial Rules, 2017?
- A) To regulate the sanctioning of grants-in-aid.
- B) To define the process for procurement of goods.
- C) To establish guidelines for the audit of grantee institutions’ accounts.
- D) To specify rules for inter-departmental adjustments.
Show Answer
Correct Answer: C) To establish guidelines for the audit of grantee institutions’ accounts.
2. Under Rule 236 (2) (i) of the General Financial Rules, 2017, when is an audit by the Comptroller and Auditor General of India mandatory for a grantee institution?
- A) If grants or loans are less than Rupees twenty-five lakhs.
- B) If grants or loans are less than seventy-five percent of the total expenditure.
- C) If grants or loans are not less than Rupees twenty-five lakhs AND not less than seventy-five percent of the total expenditure.
- D) Only if grants or loans exceed Rupees one crore, regardless of percentage.
Show Answer
Correct Answer: C) If grants or loans are not less than Rupees twenty-five lakhs AND not less than seventy-five percent of the total expenditure.
3. According to Rule 236 (3) of the General Financial Rules, 2017, who audits the accounts of grantee institutions in cases not covered by CAG audit?
- A) The Principal Accounts Office of the Ministry.
- B) Chartered Accountants of the institution’s choice.
- C) The sanctioning authority’s internal audit team.
- D) A special committee appointed by the Government.
Show Answer
Correct Answer: B) Chartered Accountants of the institution’s choice.
4. Rule 236 (2) (ii) of the General Financial Rules, 2017 grants the Comptroller and Auditor General access to books and accounts for what purpose?
- A) To determine the eligibility of institutions for future grants.
- B) To scrutinize procedures for fulfilling grant/loan conditions.
- C) To advise on the financial management of foreign states.
- D) To prepare the annual budget for the institution.
Show Answer
Correct Answer: B) To scrutinize procedures for fulfilling grant/loan conditions.
5. If the Comptroller and Auditor General of India is the sole auditor for a local body or institution under Rule 236 (4) of the General Financial Rules, 2017, who is generally responsible for paying the auditing charges?
- A) The Central Government.
- B) The sanctioning authority.
- C) The auditee Institution.
- D) The Ministry of Finance.
Show Answer
Correct Answer: C) The auditee Institution.
Frequently Asked Questions
What are the primary conditions for a CAG audit of a grantee institution under Rule 236 of the General Financial Rules, 2017?
A CAG audit is triggered if grants or loans in a financial year are not less than Rupees twenty-five lakhs and also not less than seventy-five percent of the institution’s total expenditure, or if grants or loans are not less than Rupees one crore.
Can the Comptroller and Auditor General of India access the books of accounts of a grantee institution under Rule 236 of the General Financial Rules, 2017?
Yes, under Section 15(1) of the CAG’s (DPC) Act, 1971, the CAG is competent to scrutinize procedures for fulfilling grant/loan conditions and has the right of access to the books and accounts of the institution, provided it’s not a foreign state or international body.
Who audits accounts if a grantee institution does not meet the criteria for a CAG audit under Rule 236 of the General Financial Rules, 2017?
In such cases, the institution or organization is required to get its accounts audited from Chartered Accountants of its own choice.
Key Takeaways
- Rule 236 mandates that all grantee institutions’ accounts are open to inspection by the sanctioning authority and the Comptroller and Auditor General of India (CAG).
- Specific financial thresholds (grants/loans ≥ ₹25 lakhs AND ≥ 75% of total expenditure, or grants/loans ≥ ₹1 crore) trigger a mandatory CAG audit.
- The CAG has broad access rights to the books and accounts of institutions (excluding foreign states/international bodies) to ensure the fulfillment of grant/loan conditions.
- For cases not meeting CAG audit criteria, institutions must engage Chartered Accountants for their audits.
Conclusion
Rule 236 of The General Financial Rules, 2017 is fundamental to ensuring accountability and transparency in the utilization of public funds by grantee institutions. By clearly defining audit responsibilities and thresholds, it strengthens financial oversight and promotes prudent financial management across all entities receiving government support.