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«Government of India Ministry of Finance Department of Expenditure General Financial Rules, 2005* (* Amendments issued upto March 2010 have been added as ...»

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(2) Proper procedure for safe custody and monitoring of Bank Guarantees or other Instruments should be laid down. Monitoring should include a monthly review of all Bank Guarantees or other instruments expiring after three months, alongwith a review of the progress of supply or work. Extensions of Bank Guarantees or other instruments, where warranted, should be sought immediately.

(3) Wherever disputes arise during implementation of a contract, legal advice should be sought before initiating action to refer the dispute to conciliation and/or arbitration as provided in the contract or to file a suit where the contract does not include an arbitration clause. The draft of the plaint for arbitration should be got vetted by obtaining legal and financial advice. Documents to be filed in the matter of resolution of dispute, if any, should be carefully scrutinized before filing to safeguard government interest.


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Rule 206. As a general principle grants-in-aid can be given to a person or a public body or an institution having a distinct legal entity.

Thus grants-in-aid including scholarships may be sanctioned by an authority competent to do so under the Delegation of Financial Powers Rules, 1978 to :a) institutions or organizations set up as Autonomous Organisation under a specific statute or as a society registered under the Societies Registration Act, 1860 or Indian Trusts Act, 1882 or other statutes.

(b) Voluntary organizations or Non Government Organisations carrying out activities which promote the welfare schemes and programmes of the Government should be selected on the basis of well defined criteria regarding financial and other resources, credibility and type of activities undertaken.

(c) Educational and other institutions by way of scholarships or stipends to the students.

(d) Urban and Rural local self government institutions (e) Co-operative societies.

(f) Societies or clubs set up by Government servants to promote amongst themselves social, cultural and sports activities as recreational avenue.

Rule 207. The Ministry or Department of the Central Government directly concerned with the aim or activity of the Institution should consider requests for grants-in-aid in consultation with the concerned Financial Adviser.

The Financial Adviser may associate a representative of Ministry of Finance wherever considered necessary.

Rule 208. General Principles for setting up of Autonomous Organisations referred to under Rule 206 (a) : i) No new autonomous institutions should be created by Ministries or Departments without the approval of the Cabinet.

(ii) Stringent criteria should be followed for setting up of new autonomous organisations and the type of activities to be undertaken by them. The Ministry or Department should examine in detail; (a) whether the activities proposed to be taken up are necessary at all; (b) whether these activities, if necessary, need to be undertaken by setting up an autonomous organisation only or whether these could be performed by the concerned government agency or any other organisation already existing.

(iii) All autonomous organisations, new or already in existence should be encouraged to maximise generation of internal resources and eventually attain self sufficiency.

(iv) Instead of giving recurring grants, wherever possible, the Ministry or Department may consider creating a Corpus Fund, the returns on investment of which, alongwith their internally generated resources should enable the autonomous organisation to meet its revenue expenditure.

(v) A system of external or peer review of autonomous organisations every three or five years depending on the size and nature of activity should be put in place. Such a review should focus, inter alia, on;

(a) the objective for which the autonomous organisation was set up and whether these objectives have been or are being achieved;

(b) whether the activities should be continued at all, either because they are no longer relevant or have been completed or if there has been a substantial failure in achievement of objectives. A zero based budget approach should be followed in making this assessment.

(c) whether the nature of the activities is such that these need to be performed only by an autonomous organisation.

(d) whether similar functions are also being undertaken by other organisations, be it in the central government or state governments or the private sector, and if so, whether there is scope for merging or winding up the organisations under review.

(e) whether the total staff complement, particularly at the support level, is kept at a minimum, whether the enormous strides in information technology and communication facilities as also facilities for outsourcing of work on a contract basis, have been taken into account in determining staff strength; and whether scientific or technical personnel are being deployed on functions which could well be carried out by non scientific or non technical personnel etc.

(f) whether user charges, wherever the output or services are utilised by others, are levied at appropriate rates (g) the scope for maximizing internal resources generation in the organisation so that the dependence upon government budgetary support is minimised.

(vi) An organisation whose performance is found to be outstanding and internationally acclaimed as a result of the review envisaged under (v) above should be granted greater autonomy and increased flexibility in matters of recruitment and financial rules thereby enabling it to devise and adopt staff structures, procedures and rules suited to improving their productivity.

(vii) Autonomous organisations as defined in (vi) above as also others with a budgetary support of more than Rupees five crores per annum, should be required to enter into a Memorandum of Understanding with the Administrative Ministry or Department, spelling out clearly the output targets in terms of details of programme of work and qualitative improvement in output, alongwith commensurate input requirements. The output targets, given in measurable units of performance, should form the basis of budgetary support extended to these organisations.

Rule 209. Principles and Procedure for award of Grants-in-aid :

(1) Any Institution or Organisation seeking grants-in-aid from Government will be required to submit an application which includes all relevant information such as Articles of Association, bye-laws, audited statement of accounts, sources and pattern of income and expenditure etc. enabling the sanctioning authority to assess the suitability of the Institution or Organisation seeking grant. The application should clearly spell out the need for seeking grant and should be submitted in such form as may be prescribed by the sanctioning authority. The Institution or Organisation seeking grants-in-aid should also certify that it has not obtained or applied for grants for the same purpose or activity from any other Ministry or Department of the Government of India or State Government.

NOTE : In order to obviate duplication in grants-in-aid, each Ministry or Department should maintain a list of Institutions or Organisations alongwith details of amount and purpose of grants given to them on its web site.

(2) The Internal Finance Wing of the Ministry or Department concerned should lay down the rules or pattern of assistance under the broad guidelines contained in this Chapter and instructions issued by the Ministry of Finance from time to time. All sanctions of grants-in-aid issued by a Ministry or Department of the Central Government or an Administrator in exercise of their powers under Rule 20 of the Delegation of Financial Powers Rule, 1978, as amended from time to time, should conform to the pattern of assistance or rules governing such grants-in-aid.

(3) Award of grants should be considered only on the basis of viable and specific schemes drawn up in sufficient detail by the Institution or Organisation. The budget for such schemes should disclose, inter alia, the specific quantified and qualitative targets likely to be attained against the outlay.

(4) Subject to the following terms and conditions, grants-in-aid towards administrative expenditure may be sanctioned to voluntary organizations to ensure a certain minimum staff structure and qualified personnel to improve their effectiveness and expand their activities under the following conditions :a) The grants-in-aid should not exceed twenty-five per cent. of approved administrative expenditure on pay and allowances of the personnel of the voluntary organisation concerned;

(b) Grants-in-aid to meet administrative expenditure to any private institutions other than the voluntary organizations should not ordinarily be sanctioned. In exceptional cases such grants can be considered for sanction in consultation with Internal Finance Wing.

(5) Every order sanctioning a grant shall indicate whether it is recurring or non-recurring and specify clearly the object for which it is being given and the general and special conditions, if any, attached to the grant. In the case of non-recurring grants for specified object, the order shall also specify the time limit within which the grant or each installment of it, is to be spent.

(6) (i) The sanctioning authority may prescribe conditions regarding quantum and periodicity for release of Grants-in-aid in installments in consultation with the Financial Adviser. However, the release of the last installment of the annual grant must be conditional upon the grantee institutions providing reasonable evidence of proper utilization of installments released earlier.

(ii) In order to avoid delay in sanction or release of grants in aid to the grantee Institutions, the Ministry or Department should impress upon Institution or Organisation desiring grants from Government, to submit their requirement with supporting details by the end of October in the year preceding the year for which the grants-in-aid is sought. The Ministry or Department should finalize their examination of the requests with the utmost expedition and make the necessary budget provision where it is decided to sanction grants. The Institution or Organisation should be informed of the result of their requests by April of the succeeding year.

(iii) When recurring grants-in-aid are sanctioned to the same Institution or Organisation for the same purpose, the unspent balance of the previous grant should be taken into account in sanctioning the subsequent grant.

(iv) (a) All grantee Institutions or Organisations which receive more than fifty per cent. of their recurring expenditure in the form of grants-in-aid, should ordinarily formulate terms and conditions of service of their employees which are, by and large, not higher than those applicable to similar categories of employees in Central Government. In exceptional cases relaxation may be made in consultation with the Ministry of Finance.

(b) Grantee Institutions or Organisations should be encouraged to take advantage of the pension or gratuity schemes or group insurance schemes or house buildings loans or vehicle loans schemes etc. available in the market for employees instead of undertaking liability on their own or Government account.

(v) In making grants to non-government or quasi-government Institutions or Organisations, a condition should be laid down that assets acquired wholly or substantially out of Government grants, except those declared as obsolete and unserviceable or condemned in accordance with the procedure laid down in the General Financial Rules, shall not be disposed of without obtaining the prior approval of the authority which sanctioned the grants-in-aid.

(vi) The sanctioning authority, while laying down the pattern of assistance, may decide whether the ownership of buildings constructed with grants-in-aid may vest with Government or the grantee Institution or Organisation. Where the ownership is vested in the Government, the grantee Institution or Organisation may be allowed to occupy the building as a lessee. In such cases suitable record of details of location, cost, name of lessee and terms and conditions of lease must be maintained in the records of the granting Ministry or Department. In all cases of buildings constructed with grants-in-aid, responsibility of maintenance of such buildings should be laid on the grantee Institution or Organisation.

(vii) Any other special terms and conditions or procedures for transaction of business as Government may desire to be followed by the grantee Institution or Organisation, shall be got incorporated in the Articles of Association or bye-laws of the Institution or Organisation concerned before release of grants-in-aid.

(viii) Grants-in-aid may be sanctioned to meet the bona fide expenditure incurred not earlier than a year prior to the date of issue of the sanction.

(ix) Before a grant is released, the members of the executive committee of the the grantee should be asked to execute bonds in a prescribed format binding themselves jointly and severally to:a) abide by the conditions of the grants-in-aid by the target dates, if any, specified therein; and (b) not to divert the grants or entrust execution of the scheme or work concerned to another Institution(s) or Organization(s); and (c) abide by any other conditions specified in the agreement governing the grants-in-aid.

In the event of the grantee failing to comply with the conditions or committing breach of the conditions of the bond, the signatories to the bond shall be jointly and severally liable to refund to the President of India, the whole or a part amount of the grant with interest at ten per cent. per annum thereon or the sum specified under the bond. The stamp duty for this bond shall be borne by the Government.

(x) Execution of bond will not apply to quasi-Government Institutions, Central Autonomous Organisations and Institutions whose budget is approved by Government.

(xi) The stipulation in regard to refund of the amount of grant-in-aid with interest thereon should be brought out clearly in the letter sanctioning the grant as well as in the bond so required to be executed.

(xii) (a) As a precondition to the sanction of grants-in-aid to the agencies where:– (aa) the recipient body employs more than twenty persons on a regular basis and at least fifty per cent.

of its recurring expenditure is met from grants-in-aid from Central Government; and (ab) the body is a registered society or a co-operative institution and is in receipt of a general purpose annual grants-in-aid of Rupees twenty lakhs and above from the Consolidated Fund of India;

the grant sanctioning authority should ensure that a suitable clause is invariably included in the terms and conditions under which the grants-in-aid are given, to provide for reservation for Scheduled Castes and Scheduled Tribes or OBC in posts and services under such organizations or agencies. The relative provision may be on the following lines :…………….. (Name of Institution or Organization etc.) agrees to make reservations for Scheduled Castes and Scheduled Tribes or OBC in the posts or services under its control on the lines indicated by the Government of India”.

(b) While sanctioning grants-in-aid to Institutions or Organisations referred to in (a) above, the grant sanctioning authority should keep in view the progress made by such Institutions or Organisations in employing Scheduled Castes and Scheduled Tribes or OBC candidates in their services.

(xiii) Central Autonomous Organisations which receive Plan grants as well as Non-Plan grants, should account for expenditure (Capital and Revenue) separately under Plan and Non-plan. The Government of India, Ministry of Finance has formulated standard formats for presentation of final accounts, for all Central Autonomous Organisations. All grant sanctioning authorities should enforce the condition of maintaining and presenting their annual accounts in the standard formats on all Central Autonomous Organisations.

(xiv) The grant sanctioning authorities should not only take into account the internally generated resources while regulating the award of grants but should consider laying down targets for internal resource generation by the grantee Institutions or Organisations every financial year, particularly where grants are given on a recurring basis year after year.

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