Para 3.16.35 — MSO (Audit)

3.16.35 Any device of rendering grants non-lapsing by withdrawing amounts to a fund is contrary to the strict theory of parliamentary financial control. But if such a course is adopted with the cognisance and approval of the Legislature, Audit cannot demur. Subject to this fundamental condition, the Union and State Governments may constitute Reserves or Reserve Funds under any statutory provision or otherwise. This can be done either by allotment of sums from the Consolidated Fund of India or of a State or of a Union Territory, or from grants or contributions made by other Governments or outside agencies, with the objective of expending the moneys accumulated in the funds on the specific and particular purposes for which they have been constituted. The procedure of accounting for transactions pertaining to such funds will ordinarily be determined by the procedure followed in budgeting for these transactions. It shall, however, be the duty of Audit to see that the procedure adopted in budgeting and accounting for such transactions generally conforms to the principles mentioned in this paragraph and where departures

are made from these principles, to suggest to the Government the desirability of following them. The Reserves or Funds referred to may be classified under the following three categories according to the sources from which they are fed:

(i) Funds accumulated from grants made by another Government and at times aided by public subscriptions: e.g. Fund formed from subventions from the Central Road Fund; Fund for Economic Development and Improvement of Rural Areas.

(ii) Funds accumulated from sums set aside by the Union/State/Union Territory Government from the Consolidated Fund of India or of the State or of the Union Territory, as the case may be, to provide reserves for expenditure to be incurred by themselves on particular purposes. Various Depreciation or Renewals Reserve Funds created in respect of commercial departments and undertakings are examples.

(iii) Funds accumulated from contributions made by outside agencies to the Union, State or Union Territory Governments: e.g., grants made by the Indian Council of Agriculture Research, Indian Central Cotton Committee, etc.

What This Means

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Key Points

• 1Reserve Funds can be created from Consolidated Fund allocations, inter-government grants, or outside agency contributions
• 2Making grants non-lapsing via funds requires legislative approval to override parliamentary control principles
• 3Three categories: (1) grants from other governments, (2) government's own set-asides, (3) outside agency contributions
• 4Audit's duty is to ensure proper budgeting and accounting procedures are followed
• 5Funds must be spent only on the specific purposes for which they were constituted

Practical Example

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.