Welcome to Short term course in Financial Management

TODAY’S TOPIC IS

Financial Rules: Control over Expenditure & Classification of Expenditure

Venue: ESTC/Lallaguda

Date: 18th August, 2010

By M.Nageswara Rao SO(A)/LGD

Major part of expenditure of Government is incurred in Indian Railways.

Knowledge of financial and cost control measures and systems envisaged in various codes is essential for every staff.

INTRODUCTION

so that scarce financial resources made available to needy works.

And put to optimum use resulting in greater efficiency, higher productivity and profitability to the organization.

INTRODUCTION

It is said in Railways,

you can do anything,

if you have the sanction of competent authority and availability of funds

As a manager,

it is our business to know –

what are the sources of funds for performing a function

And who is the competent authority for sanctioning any desired proposal/work.

Financial Control

Estimates Ordinarily, no expenditure can be incurred

barring a few exceptions,

unless Competent authority sanctions a detailed estimate and necessary funds are allotted.

P –Propriety of the expenditure.

I – Incidence and classification of Charges.

B – Budget Provision.

E - (Freedom from) Errors and omissions.

C – Competency of Sanction.

Checks on Estimates - PIBEC

Para No.116 of Finance Code -

In the exercise of their financial powers, the sanctioning authorities must pay due regard to the following principles :-

  

                                             

Standards of Financial Propriety

Standards of Financial Propriety The expenditure should not prima facie be more

than the occasion demands,

and that every Government servant should exercise' the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of the expenditure of his own money

No authority should exercise its powers of sanctioning expenditure to pass an order which will be directly or indirectly to its own advantage.

Standards of Financial Propriety

. Public moneys should not be utilized for the benefit of a particular person or section of the community unless-

a. the amount of expenditure involved is insignificant ; or

b. a claim for the amount could be enforced in a court of law ; or

c. the expenditure is in pursuance of a recognised policy or custom.

Standards of Financial Propriety

The amount of allowances, such as travelling allowances, granted to meet expenditure of a particular type, should be so regulated that the allowances are not on the whole sources of profit to the recipients.

Standards of Financial Propriety

an exercise through which proposals for additions, renewals and replacements of rolling stock are proposed for inclusion in RSP every year.

Financial justification to the proposals is essence of this exercise duly keeping in view the necessity and utility of the proposals.

R S P – ROLLING STOCK PROGRAMME

to be monitored on both completed works and works in progress.

realize the money from the agencies that proposed the works should be initiated as soon as the works are completed.

be ensured that no money is left unrealized in books of accounts, which is legitimately payable to railways.

Monitoring of expenditure on various works.

BUDGETARY CONTROL

18

Budget (from French bougette, purse) generally refers to a list of all planned expenses and revenues. It is a plan for saving and spending

a budget is an organizational plan stated in monetary terms.

August Review

Revised/Budget Estimates

final Modification.

Monthly Financial Review

through which trends of expenditure can be reported regularly to initiate steps to control the spending within the limits of budget.

Budgetary Reviews

Cost Control

analyzing the same under two headings viz. avoidable idle time and unavoidable idle time.

Avoidable idle time is controllable.

Examples are

idle time due to lack of instructions and lack of tools, which are as a result of poor planning.

Controlling Idle Time

Unavoidable idle time may be due to human reasons like attending nature needs, time taken to switch over from one job to another, breakdown of machines etc.

Percentage on account of these factors can be reduced to some extent by taking preventive steps.

Controlling Idle Time

Insisting approvals at higher levels may reduce such cases.

Unless there is scope to increase turnover based on urgent and unplanned demand of inescapable nature, resorting to OTA needs to be minimized if not avoided.

.Controlling Overtime

24

Budgetary proportions as a tool of expenditure (source: Chapter 5 of I.R.Finance Code Vol.I)

Proportionate Budget allotment:- For the purpose of carrying out a meaningful comparison of the actual working expenses for (and to end of) the month with the budget allotment, it is necessary to distribute the sanctioned allotment for the year over the twelve months after taking all known factors of disturbance or special features into account.

25

Accounts Officer in consultation with the officers responsible for the control of expenditure, the estimated progressive expenditure under each sub head of a grant keeping in view the following factors:

(i) Throw forward from the previous year. (ii) All expenditure whether in cash or by transfer, the

liability for which already exists, but which is not likely to be distributed evenly during the year, whether because it is of a periodical nature, or because it is contingent on the receipt of supplies, or for any other reason.

(iii) Expenditure which is practically fixed and evenly distributed throughout the year.

(iv) Other expenditure which is likely to be incurred during the year but liabilities for which have yet to be incurred.

(v) The need to keep some amount as a reserve for meeting fresh or unanticipated expenditure

26

Railway levelExecutive Funds AvailablityFinance Officer Regulation of expenditureGM OR and Variations

Rly Board MT Carrying CapacityFC Funds MobilisationMR Public Opinion

Public Representatives Sanction of Projects

MOF Impact on General Budget

Planning Comm National Priorities

PMO Managing Contradictions

(A simplistic view)Railway Budget - What it means and To Whom

27

Receipts

PassOther Chg

Goods

Sundry

Misc.Receipts

Subsidy

Safety Surcharge

Receipts

28

Railway expenditure

OperatingExpenses

Appropriation to DRF

Appropriation

to PF

Misc.Exp

Appropriation

to SRSF

OLWRDividend

Appropriation toDF,SF,CF (Excess)

Expenditure

29

28%

2%

63%

3% 4%

PassengerEarnings

Other CoachingEarnings

Goods TrafficEarnings

Sundry OtherEarnings

Misc.Receipts

Where the Rupee came from

30

Where the Rupee went

1%28%

7%

4%

3%

5%7%

8%7%

12%

18%

Miscellaneous

Pension Fund

Fuel

Spl.Rly.SafetyFundStaff Wages &AllowancesCapital Fund

DevelopmentFundLease Charges

Stores

DepreciationReserve FundDividend

31

Financial Reviews MONTHLY FINANCIAL REVIEWS: The Monthly Financial Reviews, should be

prepared by the Divisional / Workshop / Construction Accounts officers concerned for each Division/Workshop/Construction Unit and the Financial Adviser and Chief Accounts Officer should arrange for the consolidation of these reviews into the Monthly Financial Review for the railway, the details of procedure and the due dates being prescribed in consultation with the railway administration.

32

The monthly reviews show the expenditure to the end of the previous month, against the allotment placed at the disposal of the controlling authorities under each sub-head of the grant for which they are responsible. The review should be prepared in Form No. 513 and submitted to the controlling authorities every month, by such date as may be fixed in consultation with them.

33

Monthly Financial Review Proform (Para 513 of I.Rly.Finance

Code vol.I)HeadOf A/c

Budget allotment for 2010-11 Year

Proportionate Budget allotmentto end of June, 2010

Actual Expenditure to end of June, 2010

Actual expenditure to end of June, 2009

Expenditure up to June 2010 more or less (compare to column .3) i.e., 4-3

Expenditure up to June 2010 more or less (compare to column 5) i.e., 4-5

1 2 3 4 5 6 7

X 1500 500 600 450 100 150

Y 3500 800 500 600 (-) 300 (-) 100

Z 3500 1000 950 800 (-) 50 150

34

Thank God, You have stopped