Rule 256 of The General Financial Rules 2017 Utilization Certificate Reports Statements

Rule 256 of The General Financial Rules 2017 Utilization Certificate Reports Statements

Original Rule Text

Rule 256 (1) Submission of Utilization Certificate, Reports, Statements, etc.In cases in which conditions are attached to the utilization of loan, either in the shape of the specification of the particular objects on or the time within which the money must be spent or otherwise, the authority competent to sanction the loan shall be primarily responsible for certifying to the Accounts Officer where necessary, the fulfillment of the conditions attaching to the loan, unless there is any special rule or order to the contrary. The loans sanctioned to the State Governments and the Local Administration of Union Territories shall not, however, come within the purview of this rule.Rule 256 (2)(i) The certificate referred to in Rule 256 above shall be furnished as in Form GFR 12-B and at such intervals as maybe agreed to between the Audit Officer and/or the Accounts Officer, as the case may be, and the Ministry or Department concerned. Before recording the certificate, the certifying officer shall take steps to satisfy himself that the conditions, on which the loan was sanctioned, have been or are being fulfilled. For this purpose, he may require the submission to him at suitable intervals of such reports, statements, etc., which shall establish the utilization of loan for the purpose for which it was sanctioned. The loanee institution may also be required to furnish a certificate from its Auditors that the conditions attaching to the loan have been or are being fulfilled. The certificate shall give details of the breaches, if any, of those conditions.(ii) A Certificate of Utilization of the loan shall be furnished to the Accounts Officer in every case of loan made for specific purposes, even if of the any conditions is not specifically attached to the grant. Such certificates are not, however, necessary in cases where loans are sanctioned not for any specific purpose or object but take the shape of a temporary financial aid or where the loans have been sanctioned to the Public Sector Undertakings intended for financing of their approved capital outlays. The repayment of loan, however, has to be watched in the usual manner.(iii) In respect of loans the detailed accounts of which are maintained in the Audit Offices, the authorities sanctioning the loan shall furnish the Utilization Certificate in respect of each individual case.(iv) Where the detailed accounts of the loans are maintained bythe Departmental authorities, a consolidated Utilization Certificate shall be furnished to Audit by the Ministries/Departments sanctioning the loans to Institutions / Organisations for the total amount of the loans disbursed during each year for different purposes including the loans sanctioned by their subordinate officers. This certificate shall not cover the loans to individuals for which Utilization Certificates need not be furnished to the Accounts Officer. The Certificate shall indicate the year-wise and object-wise break-up of loans disbursed and the loans for which Utilizations Certificates are furnished. The utilization certificate shall also show the loans disbursed separately for each sub-head of account to facilitate verification by the Accounts Officer.(v) The Utilization Certificates shall be furnished within a ‘reasonable time’ after the loan is paid to the institutions. The Department of Central Government shall prescribe, in consultation with the Ministry of Finance, target dates for the submission of the Utilization Certificates by the Department concerned to the Accounts Officer. The target date shall, as far as possible, be not later than eighteen months from the date of sanction of the loan.(vi) In respect of loans, the detailed accounts of which are maintained by Departmental Officers and where consolidated Utilization Certificates are to be furnished to the Accounts Officer, the period of 18 months shall be reckoned from the expiry of the financial year in which the loans are disbursed. The consolidated Utilization Certificates in respect of such loans paid each year shall, therefore, be furnished not later than September of the second succeeding financial year.(vii) The due dates for submission of the Utilization Certificates shall be specified in the letter of sanction for loan. The target date as specified shall be rigidly enforced and extension shall only be allowed in very exceptional circumstances in consultation with the Ministry of Finance under intimation to the Audit Officer and/or the Accounts Officer, as the case may be. No further loans shall be sanctioned unless the sanctioning authorities are satisfied about the proper utilization of the earlier loan sanctioned to an Institution, etc.

Visual Summary

Loan Sanction Authority

Primarily responsible for certifying loan condition fulfillment.

Conditional Loan Use

Applies when specific objects or time limits are attached to loan utilization.

Excludes State Loans

Does not apply to loans sanctioned to State Governments and Union Territory Administrations.

Executive Summary

Rule 256 of the General Financial Rules, 2017, establishes the critical framework for ensuring accountability in the utilization of government loans. It places primary responsibility on the loan sanctioning authority to certify that conditions attached to a loan’s use (e.g., specific objects or timeframes) are met. This rule, however, explicitly excludes loans granted to State Governments and Union Territory Administrations. It details the procedures for furnishing Utilization Certificates (UCs) in Form GFR 12-B, specifying intervals, the certifying officer’s duties, and the requirement for supporting reports and auditor certificates. The rule differentiates between individual UCs for loans with detailed accounts in Audit Offices and consolidated UCs for those maintained by Departmental authorities. It mandates that UCs for specific purpose loans be submitted within a ‘reasonable time,’ ideally not exceeding eighteen months from sanction, with strict enforcement of these deadlines to prevent further loan sanctions without proper utilization.

In-Depth Analysis of the Rule

Introduction: Rule 256 is a cornerstone of financial propriety within the General Financial Rules, 2017, focusing on the diligent tracking and verification of how government loans are utilized, particularly when specific conditions are attached to their disbursement. This rule ensures that public funds lent for particular purposes achieve their intended objectives.

Breakdown of the Rule:

  • Rule 256(1) – Primary Responsibility: The authority that sanctions a loan is primarily responsible for certifying to the Accounts Officer that all conditions related to the loan’s utilization (e.g., specific projects, time limits for expenditure) have been fulfilled. This responsibility applies unless a special rule dictates otherwise. Crucially, this rule does not apply to loans sanctioned to State Governments and Union Territory Administrations.
  • Rule 256(2)(i) – Utilization Certificate Format and Verification: The Utilization Certificate (UC) must be furnished in Form GFR 12-B at intervals agreed upon by the Audit Officer/Accounts Officer and the concerned Ministry/Department. The certifying officer must ensure that loan conditions are being met, often requiring reports, statements, and even auditor certificates from the loanee institution detailing any breaches.
  • Rule 256(2)(ii) – Scope of UC Requirement: UCs are mandatory for all specific-purpose loans, even if explicit conditions are not attached. However, they are not required for loans that are temporary financial aid or for those sanctioned to Public Sector Undertakings for approved capital outlays. Repayment of these loans is monitored separately.
  • Rule 256(2)(iii) – Individual UCs for Audit Office Accounts: If detailed loan accounts are maintained in Audit Offices, the sanctioning authorities must provide individual UCs for each case.
  • Rule 256(2)(iv) – Consolidated UCs for Departmental Accounts: When detailed loan accounts are maintained by Departmental authorities, Ministries/Departments must submit a consolidated UC to Audit. This consolidated certificate covers the total amount of loans disbursed annually to institutions/organizations (excluding individual loans) and must include year-wise, object-wise, and sub-head-wise breakdowns for verification.
  • Rule 256(2)(v) – Timelines for UCs: UCs must be submitted within a ‘reasonable time’ after the loan disbursement. The Central Government, in consultation with the Ministry of Finance, sets target dates, aiming for submission not later than eighteen months from the loan’s sanction date.
  • Rule 256(2)(vi) – Timelines for Consolidated UCs: For loans with departmental accounts, the 18-month period is calculated from the end of the financial year in which the loans were disbursed. Consolidated UCs for such loans must be furnished by September of the second succeeding financial year.
  • Rule 256(2)(vii) – Enforcement and Future Loans: The specified due dates for UCs are strictly enforced. Extensions are granted only in exceptional circumstances with Ministry of Finance consultation. Crucially, no further loans will be sanctioned until the authorities are satisfied with the proper utilization of previous loans.

Practical Example: Imagine the Ministry of Health sanctions a loan to a private hospital for the specific purpose of purchasing new MRI equipment, with a condition that the equipment must be operational within 12 months. Under Rule 256, the Ministry of Health is responsible for ensuring this condition is met. The hospital must submit a Utilization Certificate (Form GFR 12-B) within the agreed timeframe, along with reports and possibly an auditor’s certificate, confirming the purchase and operational status of the MRI equipment. If the hospital fails to submit the UC or demonstrate proper utilization, the Ministry could withhold future financial assistance.

Related Provisions

Understanding Rule 256 is enhanced by examining these related provisions:

Learning Aids

Mnemonics
  • L-S-U-R-T: Loans Sanctioned, Utilization Required, Reports Timely. This helps remember the core aspects of Rule 256.
Process Flowchart
STARTLoan Sanctioned(Conditional)Sanctioning Authority(SA) ResponsibleSA Requires UC(Form GFR 12-B)Accounts in Audit Office?YesSA Furnishes Individual UCNoDepartmental AuthoritiesMinistry/Dept FurnishesConsolidated UCLoanee Submits Reports& Auditor CertificateSA Satisfies ConditionsUC Submitted toAccounts OfficerTarget Date Enforcement(18 Months)END

Multiple Choice Questions

1. According to Rule 256(1) of the General Financial Rules, 2017, who is primarily responsible for certifying the fulfillment of conditions attached to a loan’s utilization?

  • A) The Accounts Officer
  • B) The loanee institution’s auditor
  • C) The authority competent to sanction the loan
  • D) The Ministry of Finance
Show Answer

Correct Answer: C) The authority competent to sanction the loan

2. Which of the following types of loans are explicitly excluded from the purview of Rule 256(1) of the General Financial Rules, 2017?

  • A) Loans to private institutions for specific projects
  • B) Loans sanctioned to State Governments and Union Territory Administrations
  • C) Loans to Public Sector Undertakings for capital outlays
  • D) Loans for temporary financial aid
Show Answer

Correct Answer: B) Loans sanctioned to State Governments and Union Territory Administrations

3. According to Rule 256(2)(v) of the General Financial Rules, 2017, what is the maximum target date for the submission of Utilization Certificates from the date of sanction of the loan?

  • A) Six months
  • B) Twelve months
  • C) Eighteen months
  • D) Twenty-four months
Show Answer

Correct Answer: C) Eighteen months

4. When are Utilization Certificates NOT necessary for loans, as per Rule 256(2)(ii) of the General Financial Rules, 2017?

  • A) For loans made for specific purposes with explicit conditions.
  • B) For loans sanctioned to Public Sector Undertakings for approved capital outlays.
  • C) For loans where the loanee institution’s auditor provides a certificate.
  • D) For loans where detailed accounts are maintained in Audit Offices.
Show Answer

Correct Answer: B) For loans sanctioned to Public Sector Undertakings for approved capital outlays.

5. What is the consequence if a sanctioning authority is not satisfied with the proper utilization of an earlier loan sanctioned to an institution, according to Rule 256(2)(vii) of the General Financial Rules, 2017?

  • A) The institution will be subject to a penalty interest rate.
  • B) No further loans shall be sanctioned to that institution.
  • C) The loan’s repayment period will be extended.
  • D) The institution must provide additional security for future loans.
Show Answer

Correct Answer: B) No further loans shall be sanctioned to that institution.

Frequently Asked Questions

Q1: Does Rule 256 of the General Financial Rules, 2017, apply to all government loans?

No, Rule 256(1) explicitly states that it does not apply to loans sanctioned to State Governments and the Local Administration of Union Territories. It primarily focuses on conditional loans to other entities.

Q2: What is the typical deadline for submitting Utilization Certificates under Rule 256 of the General Financial Rules, 2017?

Rule 256(2)(v) and (vi) specify that Utilization Certificates should generally be furnished within a ‘reasonable time,’ ideally not later than eighteen months from the date of sanction of the loan. For loans with departmental accounts, this period is reckoned from the expiry of the financial year in which the loans were disbursed, with consolidated UCs due by September of the second succeeding financial year.

Q3: What happens if an institution fails to submit a Utilization Certificate as required by Rule 256 of the General Financial Rules, 2017?

Rule 256(2)(vii) states that the specified due dates for UCs are rigidly enforced. If the sanctioning authorities are not satisfied with the proper utilization of an earlier loan, no further loans shall be sanctioned to that institution. Extensions are only allowed in very exceptional circumstances with prior consultation with the Ministry of Finance.

Key Takeaways

  • The loan sanctioning authority bears primary responsibility for certifying the fulfillment of loan conditions.
  • Rule 256 does not apply to loans given to State Governments and Union Territory Administrations.
  • Utilization Certificates (Form GFR 12-B) are crucial for specific-purpose loans, with strict submission timelines (generally 18 months from sanction).
  • Failure to provide satisfactory UCs can lead to the withholding of future loan sanctions.

Conclusion

Rule 256 of the General Financial Rules, 2017, is indispensable for maintaining financial discipline and accountability in government lending. By clearly delineating responsibilities for certifying loan utilization and establishing rigorous procedures for reporting, it ensures that public funds are used effectively and for their intended purposes, thereby safeguarding taxpayer money and promoting good governance.

Related posts:

  1. Rule 238 of The General Financial Rules 2017 Utilization Certificates
  2. Rule 250 of The General Financial Rules 2017 General Conditions for Loans
  3. Rule 257 of The General Financial Rules 2017 Installments of Loans
  4. Rule 260 of The General Financial Rules 2017 Accounts and Control