Rule 78 of The General Financial Rules 2017 Account Classification

Original Rule Text

Rule 78 Classification of transactions in Government Accounts. As a general rule, classification of transactions in Government Accounts, shall have closer reference to functions, programmes and activities of the Government and the object of revenue or expenditure, rather than the department in which the revenue or expenditure occurs. Major Heads (comprising Sub-Major Heads wherever necessary) are divided into Minor Heads. Minor Heads may have a number of subordinate heads, generally known as Sub Heads. The Sub Heads are further divided into Detailed Heads followed by Object Heads. The Major Heads of account, falling within the sectors for expenditure heads, generally correspond to functions of Government, while the Minor Heads identify the programmes undertaken to achieve the objectives of the functions represented by the Major Head. The Sub Head represents schemes, the Detailed Head denotes sub scheme and Object Head represent the primary unit of appropriation showing the economic nature of expenditure such as salaries and wages, office expenses, travel expenses, professional services, grants-in-aid, etc. The above six tiers are represented by a unique 15-digit numeric code.

Visual Summary

Primary Focus

Classification based on government functions, programs, and activities.

Structured Tiers

Major, Minor, Sub, Detailed, and Object Heads, with a 15-digit code.

Object Heads

Represent economic nature like salaries, office expenses, grants-in-aid.

Executive Summary

Rule 78 of The General Financial Rules, 2017, outlines the fundamental principles for classifying transactions within Government Accounts. The primary objective is to categorize financial activities based on their functions, programs, and government activities, rather than solely by the department involved. This rule establishes a six-tier hierarchical classification system, starting from Major Heads (functions) down to Object Heads (economic nature of expenditure like salaries, office expenses, or grants-in-aid), each represented by a unique 15-digit numeric code. This structured approach ensures clarity, consistency, and accountability in government financial reporting.

In-Depth Analysis of Rule 78

Rule 78 is a cornerstone of government accounting, ensuring that financial transactions are systematically recorded and reported. It moves beyond a mere departmental view to a more programmatic and functional perspective, which is vital for effective public financial management and transparency.

Breakdown of the Rule:

Primary Principle: Classification prioritizes government functions, programs, and activities, and the object of revenue or expenditure, over the department where the transaction occurs. This ensures a holistic view of government spending and revenue generation.
Hierarchical Structure: The rule establishes a six-tier classification system:
- Major Heads: Generally correspond to broad government functions (e.g., General Services, Social and Community Services).
- Minor Heads: Identify specific programs undertaken within a function.
- Sub Heads: Represent individual schemes.
- Detailed Heads: Denote sub-schemes.
- Object Heads: Represent the primary unit of appropriation, showing the economic nature of expenditure (e.g., salaries, office expenses, travel, professional services, grants-in-aid).
Unique Numeric Code: Each of these six tiers is represented by a unique 15-digit numeric code, providing a standardized and precise method for accounting.

Practical Example:

Consider a government department undertaking a “Skill Development Program.” Instead of simply recording expenditure under the “Ministry of Labour” head, Rule 78 mandates a more granular classification. The expenditure would be categorized under a Major Head like “Social and Community Services,” then a Minor Head for “Skill Development,” a Sub Head for a specific “Training Scheme,” a Detailed Head for a “Vocational Course,” and finally an Object Head for “Salaries and Wages” for trainers, “Office Expenses” for materials, or “Grants-in-Aid” if funds are disbursed to training institutes. This allows for clear tracking of funds against specific objectives and economic purposes.

Related Provisions

Understanding Rule 78 is enhanced by reviewing related rules that govern the overall structure and management of government accounts:

Rule 77 of The General Financial Rules, 2017: Main Divisions and Structure of Accounts – This rule details the three main parts of government accounts (Consolidated Fund, Contingency Fund, Public Account) and their internal divisions, providing the overarching framework for classification.
Rule 79 of The General Financial Rules, 2017: Authority to Open a New Head of Account – This rule specifies who has the authority to open new heads of account and modify existing ones, directly impacting the practical application of Rule 78’s classification system.
Rule 80 of The General Financial Rules, 2017: Conformity of Budget Heads with Rules of Classification – This rule ensures that budget heads align with the prescribed classification rules, reinforcing the importance of consistent financial reporting.

Learning Aids

Mnemonics:

To remember the six tiers of classification: Many Ministers Subtly Direct Outlays. (Major, Minor, Sub, Detailed, Object Heads).

Process Flowchart:

Multiple Choice Questions

1. What is the primary basis for classifying transactions in Government Accounts according to Rule 78 of The General Financial Rules, 2017?

A) Departmental structure
B) Functions, programs, and activities
C) Geographical location
D) Size of the transaction

Show Answer

Correct Answer: B) Functions, programs, and activities

2. How many tiers of classification are established by Rule 78 of The General Financial Rules, 2017, for Government Accounts?

A) Three
B) Four
C) Five
D) Six

Show Answer

Correct Answer: D) Six

3. Which of the following best describes the purpose of ‘Object Heads’ in the classification system under Rule 78 of The General Financial Rules, 2017?

A) To identify broad government functions
B) To denote specific programs
C) To represent the economic nature of expenditure
D) To categorize revenue sources

Show Answer

Correct Answer: C) To represent the economic nature of expenditure

4. According to Rule 78 of The General Financial Rules, 2017, what is the unique identifier for the six tiers of account classification?

A) A 10-digit alphanumeric code
B) A 15-digit numeric code
C) A 20-character text string
D) A 5-digit departmental code

Show Answer

Correct Answer: B) A 15-digit numeric code

5. Which level of classification under Rule 78 of The General Financial Rules, 2017, generally corresponds to the broad functions of the Government?

A) Object Heads
B) Detailed Heads
C) Minor Heads
D) Major Heads

Show Answer

Correct Answer: D) Major Heads

Frequently Asked Questions

Why is classification based on functions and programs rather than departments in Rule 78 of The General Financial Rules, 2017?

This approach provides a clearer picture of what the government is spending money on in terms of its objectives and services, irrespective of which specific department is executing it. It enhances transparency and accountability by linking expenditure directly to public policy goals.

What is the significance of the 15-digit numeric code mentioned in Rule 78 of The General Financial Rules, 2017?

The 15-digit numeric code provides a standardized and unique identifier for each level of the six-tier classification system. This ensures consistency across all government entities in recording and reporting financial transactions, facilitating accurate aggregation and analysis of data.

How do ‘Object Heads’ differ from ‘Major Heads’ under Rule 78 of The General Financial Rules, 2017?

‘Major Heads’ represent broad government functions (e.g., ‘Social Services’), while ‘Object Heads’ represent the economic nature of the expenditure within those functions (e.g., ‘Salaries and Wages’ or ‘Office Expenses’). Major Heads provide a functional overview, while Object Heads detail the type of resources consumed.

Key Takeaways

Rule 78 mandates a functional and programmatic classification of government transactions.
It establishes a six-tier hierarchy: Major, Minor, Sub, Detailed, and Object Heads.
Object Heads define the economic nature of expenditure (e.g., salaries, grants).
A unique 15-digit numeric code standardizes this classification across government accounts.

Conclusion

Rule 78 of The General Financial Rules, 2017, is crucial for maintaining a robust and transparent financial management system within the government. By shifting the focus from departmental silos to functional and programmatic objectives, it ensures that public funds are accounted for in a manner that reflects their true purpose and economic impact, thereby fostering greater accountability and informed decision-making.

Continue to Rule 79 →