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System of Financial Control and Budgeting QUESTION #5654
Question 1
Under the principle of 'Allowances Not To Be A Source of Profit' a government servant is granted a travelling allowance that consistently exceeds his actual travel costs making it a net financial gain. Analytically what is the correct regulatory response?
  • The surplus allowance is treated as miscellaneous income and taxed accordingly
  • The allowance must be so regulated that on the whole it is not a source of profit to the recipient — the amounts should be recalibrated to prevent profit✔️
  • The government servant may retain the surplus as it was formally sanctioned
  • The PAO may allow it if the total is within the budget allocation
Correct Answer Explanation
Per GFR Vol. I the amount of allowances such as travelling allowance is so regulated that the allowances are not on the whole a source of profit to the recipient. This is one of the eight core principles the PAO must enforce. The allowances must be recalibrated to ensure they only meet the actual expenditure of a particular type.