GENERAL RULES FOR GRANTS-IN-AID

369-A. The payment of various classes of grants to local bodies and institutions, e.g. contributions to hospitals and dispensaries, educational grants-in-aid, contributions for the maintenance of roads, etc., will be regulated, subject to the following instructions, by the general or special orders of Government sanctioning each class of payment. [See also paragraph 209].

NOTES—(1) Instructions regarding maintenance of a register of grant are contained in the annexure referred to in Note (1) below para 209.

NOTE—(2) (a) The general principle of grant-in-aid is that it can be given to a person or a body which is independent of the Government. One Department of the Government cannot make a grant-in-aid to another Department of the same Government. Similarly, a grant-in-aid should not be given to an organisation set up by the Government by a resolution or an executive order since such an organisation does not have a separate legal status of its own and functions only as a limb of the Government. Either the expenditure of such bodies should be treated as normal Government expenditure and provided for in the budget as such or steps should be taken to secure a separate corporate status for the organisation by getting it registered under the Registration of Societies Act, etc.

(b) It is not permissible for a grantee institution, organisation, etc. to entrust the implementation of the scheme or work for which grant-in-aid is intended, to another institution, organisation, etc. and to divert the grant-in-aid received from Government as assistance to the latter institution, organisation, etc. Such diversion of grants-in-aid, though for utilisation on the same or similar objects, amounts to misutilisation of the grants-in-aid. The sanctioning authority should ensure that a specific condition is laid down in the sanction orders prohibiting the grantee institution from diverting the grant-in-aid and entrusting the execution of the scheme for which the grant is made to another institution or organisation. In cases where after having received the grant-in-aid from Government, the grantee institution itself is not in a position to execute or to complete the assignment, it should be required to refund forthwith to Government, the entire amount of the grant-in-aid received by it. In order to ensure that this condition can be enforced through a Court of Law, in the event of its breach, it should be incorporated in the agreement bond executed by the grantee institution.

Exception—If the grantee institution has branches and their existence has been taken into account while making the grant-in-aid; or if the grant has been given with the specific object that the grantee institution will divert it among other organisations doing similar work in accordance with the rules framed by Government, then there will be no objection to the grant being diverted by the grantee to its branches or such other organisations.

Sitapur Eye Hospital and Kusht Nivaran Sangh are the examples of such institutions.

(c) The Administrative Departments should impress upon institutions / organisations, desiring grants from Government, to submit their requirements with supporting details by the end of October in the year preceding the year for which grant-in-aid is sought. The Departments on their part, should finalise their examination of these requests with the utmost expedition and make the necessary budget provision where it is decided to sanction grants. The institutions/organisations should be informed of the result of their requests early in the succeeding year.

369-B. Grants are of two kinds, viz. (1) conditional and (2) un-conditional. A grant is conditional when it is given for a specific purpose and special conditions are imposed at the time of the grant, regulating the manner in which the grant may be expended.

A grant is unconditional when the only condition attaching to it is the continued active existence of the local body or private institutions to which it is given.

369-C. Administrative departments of Government and subordinate authorities to whom power has been delegated to sanction grants shall specify the conditions which apply in each case or quote the relevant rule or order under which the grant is made. They shall also supply the examiner, Local Fund Accounts, with a copy of the orders sanctioning a grant-in-aid. All grants-in-aid to any authority or body for specific purposes, whether recurring or non-recurring and irrespective of the amount should be subject to a specified condition that the books and accounts of the authority or body receiving the grant shall be open for a check by the Comptroller and Auditor General or such officer of his department as may be authorized by him in this behalf under section 21 of the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 (see Appendix I-A), who shall have right of access to the books and accounts of the body or authority after giving reasonable previous notice. Where the body or authority is substantially financed (for the purpose, see explanation below section 14 of the aforesaid Act given in Appendix I-A) by grants or loan from the Consolidated Fund of the State, all receipts and expenditure of the body or authority shall be audited by the Comptroller and Auditor General or other officer of his department authorized under section 21 of the Act, subject to the provisions of any law for the time being in force applicable to the body or authority.

369-CC. (a) Every conditional recurring grant will require a fresh sanction every year.

(b) in the case of unconditional recurring grants—

(1) if the amount of a grant is fixed for a definite term in the first sanctioning order sanction need not be renewed until the amount is varied or the term ends,

(2) where a definite term is not assigned to the continuance of a grant of a fixed amount, the sanctioning authority, should, as soon as funds have been provided for the purpose intimate the fact to the Accountant General, and

(3) in all other cases, fresh sanction should be accorded every year to the continuance of a grant.

369-D. In the case of both conditional as well as unconditional grants it is the duty of the administrative department or officer sanctioning a grant to see that the instructions mentioned below are carefully observed before any grant is sanctioned :

(a) grants should not be sanctioned to those institutions or individuals who have not submitted utilisation certificates in respect of grants made earlier,

(b) only such grants be proposed for disbursement as are likely to be watched and scrutinised properly;

(c) sanctions to grants-in-aid should be issued in the earlier part of the financial year so as to leave sufficient time for utilisation;

(d) every sanction order should state the period during which the grant or an instalment shall be spent;

(e) only so much of the grant should be paid during any financial year as is likely to be expended during that year. In the case of grants for specific works such as buildings, water supply schemes and the like the sanctioning authority shall use discretion in authorising payments according to needs of the work;

(f) every grant made for a specific object shall be subject to the implied conditions; (i) that the grant shall be spent upon the object within a reasonable time if no time limit has been laid down in the sanction; and (ii) that any portion of the amount which is not ultimately required for expenditure upon the object shall be duly surrendered. The expression 'within a reasonable time’ shall ordinarily mean 'one year from the date of the issue of the letter sanctioning the grant.’ Thus grants may be sanctioned to meet requirements for a year even extending beyond the financial year, but only so much of the grant shall be paid during the financial year as can be spent during that year. The amount remaining unspent in such cases need not be refunded at the close of the financial year. However, immediately on expiry of the period of one year from the date of sanction any unspent balance should be duly surrendered to Government;

NOTE—Transferring grants to Personal Ledger Accounts with a view to avoiding lapse of funds constitutes a financial irregularity and should not be resorted to.

(g) in respect of sanctions which require the grant to be utilised during a financial year, the unspent balance thereof shall be surrendered to Government at the end of the financial year or may be adjusted by the sanctioning authority against the next year’s grant, if any;

(k) when recurring grants are sanctioned to the same institution for the same purpose, a certificate to the effect that the unspent balance of the previous grant has either been surrendered to Government or has been taken into account in sanctioning the subsequent grant shall be incorporated in the sanction letter;

(i) grants should be made available, as far as possible, on the basis of specific schemes drawn up in sufficient detail and duly approved;

(j) before a grant is paid, the sanctioning authority shall as far as possible insist on obtaining an audited statement of the accounts of the public body or institution concerned;

(k) in the case of small institutions which are entirely/mainly fed by recurring grants the requirement of obtaining audited statement of accounts will not be insisted upon for sanctioning the first two instalments, if the statement of accounts are not ready for the close of the financial year. However, such statement of accounts should be obtained before sanctioning the final instalment;

Recurring grants-in-aid to small institutions, which may not have sufficient funds to cover the expenses in the beginning of the financial year, may be paid, if necessary, in three instalments, It has now been decided in modification of this procedure that the facility of release of grants-in-aid in instalments should not be confined only to small institutions. In the case of institutions which have a good record of ugtilisation of grants, the first instalment amounting to one-sixth of the year’s grant may be paid in the month of April to meet their expenses for April and May out of the funds voted on account by Legislature. A second instalment of the grant, not exceeding 50 % of the total annual grant, may be released after the Budget has been passed provided the institution submits to the sanctioning authority at least an unaudited statement showing the expenditure incurred from the previous year’s grant and resources available with it. Subsequent instalments should normally be released only after receiving the audited statements of accounts of the previous year. However, if there are any genuine difficulties in getting the audited statements of accounts in time, these subsequent instalments may also be released in exceptional cases on the basis of the unaudited statements of accounts provided that the total amount of all the instalments released in a financial year without obtaining the audited statement of accounts does not exceed 75 % of the amount provided in the budget of the year.

(l) a certificate should be obtained from the grantee specifying clearly that the institution concerned was not/has not been sanctioned grants-in-aid for the same purpose by another department of the State Government during the period to which the grant relates;

(m) in making grants to non-government or quasi-government bodies or institutions, a condition shall be laid down that assets acquired wholly or substantially out of Government grants would not, without the prior sanction of Government be disposed of, encumbered or utilised for purposes other than those for which the grants were sanctioned;

Explanation—the terms "assets" used in the above paragraph means (i) immovable property and (ii) movable property of a capital nature where the value exceeds Rs. 1,000.

(n) the grantee should furnish to the sanctioning authority at suitable intervals such reports, statements etc. in respect of expenditure from the grant as may be considered necessary by the latter.

369-E. The target dates fixed for submission of audited statements of accounts by the grantee institutions etc. should be at least three months before the prescribed date of furnishing of utilisation certificates or 15 months from the date of sanction of the grant (see paragraph 369-H). The sanctioning authority should make it incumbent upon the grantee institutions to submit the statements within the stipulated period by including a clause to this effect in the sanction letter. This statement should also show whether the unspent balance has been surrendered to Government.

In the case of recurring grants-in-aid exceeding Rs. 25,000, submission of Achivement-cum-Performance Reports by the grantee institutions in receipt of grants should be ensured in all cases except those of grants to statutery bodies or institutions sponsored by Government provided the said bodies/institutions present formal Annual Reports, embodying Inter alia, an account of their general performance for the year. The grantee institutions should be asked to submit the Achievement-cum-Performance Reports within one month after the end of the financial year and these reports should be made available to audit by the sanctioning authority concerned at the time of local audit of such grants-in-aid in the concerned offices or when called for by the Accountant General.

369-F. The administrative department or officer shall then decide what amount, if any, must be surrendered by the receipient of the grant and take steps to have the amount so surrendered.

369-G. Where a grant is an annual one or is paid in instalments the amount to be surrendered to Government (paragraph 369-F) shall be adjusted by short payment of the next instalment or grant.

NOTE—Overdue instalments on account of repayments of loans taken by local bodies may also be recovered by adjustment from the grants payable to them.

369-H. Where a grant is annual or a non-recurring grant has been given for being utilised during a particular financial year only, the administrative department or officer who sanctioned the grant, shall on or before September 30, of the year following that to which the grant related furnish the following certificates to the Accountant General, namely—

(a) in the case of an unconditional grant, that the local body or private institution to which the grant was given, did continue to function actively in the year to which the grant related;

(b) in the case of conditional grant, that the grant was utilised in accordance with the condition of the grant. This certificate should be given in Form no. 42-I. If the conditions of the grant were not fully satisfied the administrative department or officer shall state which conditions were not satisfied and what steps he has taken or proposes to take either to have the conditions satisfied or to have any part or the whole of the grant surrendered to Government.

NOTES—(1) In respect of grants which are expected to be utilised during the next 12 months from the date of sanction the competent authority shall furnish to the Audit the requisite certificates not later than 18 months from the date of sanction of the grant.

(2) In cases in which conditions are attached to the utilisation of a grant on particular objects of expenditure or the time within which the money must be spent or otherwise, the departmental officers on whose signature the grant-in-aid bill is drawn shall be primarily responsible for certifying to the Audit the fulfilment of the condition attaching to the grant unless there is any special rule or order to the contrary.

(3) Utilisation certificates need not be furnished in cases where the grants-in-aid are sanctioned subject to the fulfilment of certain pre-requisite conditions and are in the nature of reimbursement of expenditure already incurred. In such cases the sanctioning letter should specify clearly that utilisation certificates will not be necessary.

369-I. Where a conditional or unconditional grant is given in installments spread over a number of years the administrative department or officer shall give a certificate as prescribed in the foregoing rule in respect of the installment paid within the year to which it related.

369-J. Grants should be shown in the budgets under the heading "recurring" or "non-recurring" and as far as possible the estimates should show the purpose of a grant; for example, educational grants should be divided into maintenance, boarding, furniture, building and so on.

369-K. The Examiner, Local Fund Accounts, shall report in each audit and inspection note on the accounts of local bodies or institutions under his audit whether the grantee is spending or has spent a grant according to the terms attaching to it or on the particular purpose for which it was given. For this purpose Government have allowed him to exercise his discretion in conducting in any case the prescribed test or an extended audit with the object of ascertaining whether the conditions of a grant has been duly observed. He will also bring to the notice of Government in the Finance Department instances of diversion of large unspent balances.

At the end of the year, when all the accounts have been audited, the Examiner will furnish the Accountant General, U.P., with a consolidated certificate for all the accounts under his audit to the effect that he is satisfied, so far as the test audits show, that the grants made to bodies whose accounts came under investigation are being expended on the purpose and in accordance with the conditions of the grant.

Similar action will be taken by the Chief Audit Officer, Co-operative Societies and Panchayats, in respect of audit of grants-in-aid sanctioned to Co-operative Societies.

369-L. The rules relating to discretionary grants placed at the disposal of the Ministers etc., are contained in Appendix X-A. These grants are generally of a non-recurring nature and are to be spent on objects specified in the rules subject to the conditions mentioned therein.