General Financial Rules (GFR) 2017 Part 2: Structure of GFR 2017

We are back with the second instalment of our three-part blog series to learn about what General Financial Rules (GFR) is and the significance it has for the Indian economy.

In the first part, we covered the objectives, applicability and how GFR has evolved to support the modern requirements of managing public finances.

Before we proceed towards its structure, let us revisit - What is GFR?

They are a combination of rules and order, which act as a cornerstone of India’s financial governance framework, regulating budget formulation and procurement to inventory management and grants, basically everything related to public finances.

Structure of GFR 2017#

The General Financial Rules (GFR) 2017 are a meticulously organized document developed to cover all aspects of financial management within Indian government systems. Which are updated regularly based on the feedback received from stakeholders to cover the latest aspects.

Its structure consists of 324 rules consolidated in 12 chapters, each focusing on a specific area, ensuring a systematic and comprehensive approach to public finance.

Below is an overview of the structure and what each chapter encompasses.

Chapter 1: General#

This chapter lays the foundation of the rules by defining key terms and concepts used throughout the document and how they should be interpreted in a general sense.

Key Definitions: Includes terms like "Accounts Officer," “Public Works”, “Public Accounts”, "Administrator," "Appropriation," and "Recurring Expenditure."
Interpretation and Modifications: Explains the procedure for interpreting the rules, resolving doubts, and modifying the provisions when necessary.
Departmental Regulations: Guides departments on aligning their internal rules with GFR, ensuring uniformity.
Modification: This chapter also includes the provisions for the modification of these rules by the Ministry of Finance.

👉 Importance: This chapter ensures clarity and uniform understanding of the key terms and concepts across all departments, forming the base for the entire document.

Chapter 2: Systems of Financial Management#

This chapter focuses on the system of assessment, collection, allocation, and management of all the funds received or expenditures.

Outlines the general principles relating to expenditure and payment of Money.
Defines the roles of various stakeholders such as the Controlling Officer, Accounts Officer, and Heads of Departments in managing the funds.
Provides guidelines for managing miscellaneous demands, fines, and adjustments for uncollected revenue.
It also covers the instructions on what is expected to be performed in the defalcation and loss scenarios.

👉 Highlight: Ensures timely and accurate credit of revenues to government accounts, minimizing and addressing losses and delays, and submission of records and information

Chapter 3: Budget Formulation and Implementation#

This chapter is crucial for managing the government’s financial year, i.e. starts from the 1st day of April and ends on the 31st day of March of the following year. This chapter covers:

Preparation of Budget Estimates: Guidelines for calculating anticipated revenues and expenditures of central government.
Presentation of the Budget: Rules for presenting estimated receipts and expenditures in respect of a financial year, before the commencement of that year to Parliament:
Control of Expenditure: Procedures to monitor and manage expenditures against the allocated budget.
Key Person Responsibilities: Also includes the duties and responsibilities of the Chief Accounting Authority for financial management.

👉 Highlight: Provides a roadmap for creating a fiscally responsible, trackable and transparent budget.

Chapter 4: Government Accounts#

This chapter describes the structure, preparation, and classification of government accounts. As per the instructions given, the accounts of the Union Government shall be prepared every year showing the receipts and disbursements for the year, surplus or deficit generated during the year and changes in Government liabilities and assets.

Preparation and Presentation of Accounts:
- The accounts of the government shall be kept in three parts:
  - Consolidated Fund: Includes revenue and capital receipts and expenditures.
  - Contingency Fund: An account that is used to cover unexpected or urgent government expenses.
  - Public Account: For transactions relating to debt (other than those included in "Consolidated fund"), reserve funds, deposits, advances, suspense, remittances and cash balances shall be recorded.
Classification of Transactions: As a general rule, the classification of transactions in Government Accounts has closer reference to functions, and activities of the Government and the object of revenue or expenditure, rather than the department in which the revenue or expenditure occurs.
Public Financial Management System (PFMS): An integrated financial management system to provide integration and governance across various processes.

👉 Highlight: Ensures systematic and standardized accounting for all government transactions.

Chapter 5: Works#

This chapter regulates the execution and classification of government works, including:

Original Works: Construction of new infrastructure or projects, special repairs to newly purchased or previously abandoned buildings or structures, including remodeling or replacement
Minor Works: Means works which add capital value to existing assets but do not create new assets.
Repair works: means works undertaken to maintain building and fixtures. Works will also include services or goods incidental or consequential to the original or repair works.

Maintenance of existing assets: It also includes the guidelines for maintenance of the work and assigning appropriate works to Public Works Organizations (PWOs).

👉 Highlight: Promotes efficient resource utilization for government projects and infrastructure.

Chapter 6: Procurement of Goods and Services#

This chapter is one of the most significant, detailing procurement policies and procedures, applicable to all ministries or departments, regarding the procurement of goods required for use in public service:

Defines procurement methods, including tendering and two-stage bidding.
Mandates the use of Government e-Marketplace (GeM) for transparency and efficiency.
Covers pre-bid conferences, maintenance contracts, and consultant engagements.

👉 Highlight: Establishes transparent procurement processes to prevent corruption and inefficiency.

Since this is one of the most important chapters of the policy, we will cover this and all other chapters separately in detail in the third part of this blog series.

Summing Up#

The General Financial Rules 2017 are detailed instructions, an attempt to cover all aspects of effectively managing the public funds and basically act as a cornerstone for India’s financial governance, ensuring transparency, accountability, and efficiency. And, by promoting the integration of technology to overcome modern challenges, GFR 2017 remains essential for a transparent and competent governance system.

What’s your take on GFR 2017 and our take on this? Share your thoughts and questions with us. If you found this blog informative, don’t forget to share it with your network!