Rule 86 of The General Financial Rules 2017 Public Financial Management System PFMS
Original Rule Text
Visual Summary
PFMS centralizes financial management for various government functions.
Ministries register agencies and track fund flow for grant-in-aid.
Ensures ‘just-in-time’ payments and online submission of Utilization Certificates.
Executive Summary
Rule 86 of The General Financial Rules, 2017, mandates the use of the Public Financial Management System (PFMS) as an integrated platform for all Central Government financial transactions. It covers sanction preparation, bill processing, payments, receipt management, Direct Benefit Transfers (DBT), fund flow tracking, and financial reporting. The rule emphasizes efficiency through ‘just-in-time’ payments, transparency by requiring the uploading of Detailed Demand for Grants (DDG) and online submission of Utilization Certificates (UCs), and accountability in managing public funds.
In-Depth Analysis of the Rule
Rule 86 introduces the Public Financial Management System (PFMS) as a cornerstone of modern financial governance in India. Developed by the Controller General of Accounts, PFMS is designed to bring an unprecedented level of integration, transparency, and efficiency to the management of public finances across all Central Government Ministries and Departments.
Breakdown of the Rule
- Integrated Financial Management (Sub-rule 1): PFMS serves as a comprehensive system for various financial operations, including sanction preparation, bill processing, payments, receipt management, Direct Benefit Transfer (DBT), fund flow management, and financial reporting. This integration aims to provide a holistic view and control over government expenditures and receipts.
- Grant-in-Aid Tracking (Sub-rule 2): Ministries responsible for sanctioning grant-in-aid are required to register all implementing agencies, down to the last level, on PFMS. This ensures meticulous tracking of fund flow and unspent balances, enhancing accountability in grant utilization.
- ‘Just-in-Time’ Payments (Sub-rule 3): The rule promotes the release of payments by Ministries through PFMS on a ‘just-in-time’ basis. This minimizes idle funds, improves liquidity management, and reduces opportunities for misuse.
- DDG Upload (Sub-rule 4): Approved Detailed Demand for Grants (DDG) must be uploaded on PFMS at the beginning of each financial year. This ensures that budgetary allocations are transparently available and linked to actual expenditures.
- Re-appropriation and Surrender Orders (Sub-rule 5): All orders related to re-appropriation (transfer of funds between budget heads) and surrender of unutilized funds must be generated through the PFMS system, standardizing the process and maintaining an audit trail.
- Utilization Certificates (Sub-rule 6): Grantee institutions are mandated to submit Utilization Certificates (UCs) on PFMS. This digital submission streamlines the process, reduces paperwork, and provides real-time visibility into the utilization of funds.
- DBT Transaction Charges (Sub-rule 7): The Ministry of Finance is responsible for stipulating the transaction charges for financial intermediaries involved in facilitating Direct Benefit Transfer (DBT) payments through PFMS, ensuring clarity and consistency in these costs.
Practical Example
Consider a Ministry sanctioning a grant-in-aid to a state-level implementing agency for a welfare scheme. Under Rule 86, the Ministry would register the agency on PFMS. When the agency incurs expenditure, it submits its Utilization Certificate through PFMS. The Ministry, having tracked the fund flow and unspent balances on PFMS, can then release subsequent payments ‘just-in-time’ via the system. This entire process, from sanction to final reporting, is managed and monitored digitally, ensuring transparency and reducing delays, unlike older manual systems prone to inefficiencies and pilferage.
Related Provisions
Understanding Rule 86 is enhanced by examining its connections to other financial regulations:
- Rule 87 of The General Financial Rules 2017 Direct Benefit Transfer: Directly follows Rule 86 and details the procedures for DBT, a key function integrated into PFMS.
- Rule 65 of The General Financial Rules 2017 Re-appropriation of Funds: This rule governs the transfer of funds between primary units of appropriation, a process that Rule 86(5) mandates to be generated through the PFMS system.
Learning Aids
Mnemonics
- PFMS: Sanctions, Payments, Funds, Reports, DBT, Uploads, Certificates.
Process Flowchart
Multiple Choice Questions (MCQs)
1. According to Rule 86 of the General Financial Rules, 2017, which of the following is NOT a primary function of the Public Financial Management System (PFMS)?
- A) Sanction preparation
- B) Employee performance appraisal
- C) Direct Benefit Transfer
- D) Financial reporting
Show Answer
Correct Answer: B) Employee performance appraisal
2. As per Rule 86(2) of the General Financial Rules, 2017, what must ministries sanctioning grant-in-aid do on PFMS?
- A) Approve all vendor invoices directly
- B) Register all implementing agencies till the last level of implementation
- C) Conduct annual audits of all grantee institutions
- D) Develop new financial policies for grant distribution
Show Answer
Correct Answer: B) Register all implementing agencies till the last level of implementation
3. Rule 86(3) of the General Financial Rules, 2017, states that payments, to the extent possible, shall be released by Ministries through PFMS in what manner?
- A) Quarterly in advance
- B) On a ‘just-in-time’ basis
- C) After physical verification of expenditure
- D) Annually at the close of the financial year
Show Answer
Correct Answer: B) On a ‘just-in-time’ basis
4. According to Rule 86(5) of the General Financial Rules, 2017, what types of orders must be generated through the PFMS system?
- A) Only new project sanction orders
- B) All re-appropriation and surrender orders
- C) Only procurement orders for goods
- D) Employee transfer orders
Show Answer
Correct Answer: B) All re-appropriation and surrender orders
5. Who is responsible for stipulating transaction charges for financial intermediaries facilitating DBT payments, as per Rule 86(7) of the General Financial Rules, 2017?
- A) The Controller General of Accounts
- B) The respective administrative Ministries
- C) The Reserve Bank of India
- D) The Ministry of Finance
Show Answer
Correct Answer: D) The Ministry of Finance
Frequently Asked Questions (FAQs)
What is the primary purpose of PFMS as per Rule 86 of the General Financial Rules, 2017?
The primary purpose of PFMS is to serve as an integrated financial management system for sanction preparation, bill processing, payment, receipt management, Direct Benefit Transfer, fund flow management, and financial reporting for the Central Government.
How does PFMS enhance transparency in financial management according to Rule 86?
PFMS enhances transparency by requiring Ministries to upload approved Detailed Demand for Grants (DDG) at the start of each financial year and by mandating grantee institutions to submit Utilization Certificates (UCs) online through the system. This provides a clear, digital trail of financial transactions and fund utilization.
What does ‘just-in-time’ payment mean in the context of Rule 86 of the General Financial Rules, 2017?
‘Just-in-time’ payment, as per Rule 86(3), means that payments should be released by Ministries through PFMS only when they are actually needed, rather than in advance. This approach optimizes cash flow, reduces the holding of idle funds, and improves the efficiency of government expenditure.
Key Takeaways
- PFMS is an integrated platform for comprehensive financial management across Central Government functions.
- It mandates the registration of implementing agencies and tracking of grant-in-aid funds to ensure accountability.
- The system promotes ‘just-in-time’ payments and digital submission of Utilization Certificates for efficiency and transparency.
- All re-appropriation and surrender orders, along with DDGs, must be processed through PFMS.
Conclusion
Rule 86 of The General Financial Rules, 2017, firmly establishes the Public Financial Management System (PFMS) as an indispensable tool for modernizing and streamlining government financial operations. By integrating various financial processes and promoting digital compliance, PFMS aims to foster greater transparency, efficiency, and accountability in the utilization of public funds, ultimately contributing to better governance and service delivery.