BUDGET PREPERATION

• Nature of Budget• It estimates the profit potential of the unit.

• It is stated in monetary terms though non-monetary targets back the same.

• It is a management commitment.

• It is reviewed and approved by an authority higher than the budgetee.

• Once approved it can be changed only under special circumstances.

• Periodical variances of the performance are reviewed and action taken.

USES OF BUDGET• To fine tune the long term plan.• Coordinate the activities of the various units.• Assign responsibility to the managers.• To obtain the commitment from the managers.• Comparing.• Monitoring of the financial position.• Take corrective action

BUDGETARY PROCESS

• TOP DOWN.– Prepared by the higher management and handed

down to the lower units.• Lack of commitment from the managers and the

plan may not succeed.

• BOTTOM UP.– Lower level officers participate in the

budgetary process.• Commitment is ensured.

BEST PROCESS• Blend of Top Down and Bottom up.

– Budgetees prepare the first draft for their area of work.

– Senior managers review and allot necessary budget.• Approval is normally tough to ensure that

budgetees do not “play games”.– This process has influence on the morale of the unit

• Greater acceptance of the budget.• Effective information exchange ( grassroot level

knowledge of the budgetee and the macro view of the senior manager ).

DEGREE OF DIFFICULTY

• An ideal budget is one which is attainable.

• If it is too difficult then managers may taken short term actions that may not be in the long term interests.

• Achievable budget targets reduce the tendency of the managers to manipulate data.

• Meeting the budget leads to a feeling of “winning”.

RAILWAY BUDGET

I - REVENUE BUDGET II - WORKS BUDGET

III - EARNING BUDGET

BUDGETARY CYCLE

I - REVENUE - BUDGET ESTIMATES

GRANT

AUGUST REVIEW

REVISED ESTIMATES

FIRST MODIFICATION

CLOSING OF A/Cs (CASH + FINAL)

APPROPRIATION ACCOUNTS

II - WORKS - (WORKS M + P ROLLING STOCK )

• PRELIMINARY WORKS PROGRAMME

• DISCUSSIONS

• FINAL WORKS PROGRAMME

• PINK BOOK - OUTLAY FOR THE YEAR

BUDGET DOCUMENTS

•BUDGET FOR THE YEAR

• EARNINGS, REVENUE & CAPITAL/WORK/PLAN

• MEMORANDUM OF PROPOSALS FOR ADJUSTMENT OF FARES & FREIGHT

• KEY TO BUDGET DOCUMENTS

CONSTITUTIONAL PROVISIONS REGARDING

BUDGET

. ARTICLE 112

. ANNUAL FINANCIAL STATEMENT TO BE LAID EVERY FINANCIAL YEAR

. ITEMS OF CHARGED EXPENDITURE TO BE SHOWN SEPARATELY

. ARTICLE 113

. CHARGED EXPENDITURE NOT VOTABLE

. POWERS OF THE HOUSE ON VOTABLE EXPENDITURE

. PRESIDENT’s RECOMMENDATION - A MUST

ARTICLE 114APPROPRIATION BILL - A MUST FOR

WITHDRAWALS OF MONEYS OUT OF CONSOLIDATED FUND

. ARTICLE 115SUPPLEMENTARY / EXCESS / ADDL. GRANTS CAN

BE AUTHORIZED BY PARLIAMENT

. ARTICLE 116PARLIAMENT EMPOWERED TO AUTHORIZE

GRANT WITHOUT DETAILS IN EXCEPTIONAL SITUATIONS

. ARTICLE 151REPORT OF CAGI TO BE PLACED BEFORE

PARLIAMENT