Lecture on financial rules control over expenditure classification of expenditure

1. Welcome to Short term course in Financial Management

2. TODAY’S TOPIC IS Financial Rules: Control over Expenditure & Classification of Expenditure Venue: ESTC/Lallaguda Date: 18th August, 2010 By M.NageswaraRao SO(A)/LGD

3. 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

4. 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

6. you can do anything,

8. Financial Control

9. Estimates Ordinarily, no expenditure can be incurred barring a few exceptions, unless Competent authority sanctions a detailed estimate and necessary funds are allotted.

10. 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

34. Standards of Financial Propriety

35. 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

36. 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

37. . 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

38. 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

40. 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

41. 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.

42. BUDGETARY CONTROL

43. 18 Budget (from Frenchbougette, 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.

45. Revised/Budget Estimates

46. final Modification.

47. Monthly Financial Review

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

49. Cost Control

50. 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

51. 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

52. 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

53. 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.

54. 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

55. 26

56. 27 Receipts Pass Other Chg Receipts Goods Misc. Receipts Subsidy Sundry Safety Surcharge

57. 28 Expenditure Appropriation to DRF Appropriation to PF Railway expenditure Operating Expenses Misc.Exp Appropriation to SRSF Appropriation to DF,SF,CF (Excess) Dividend OLWR

58. 29 Where the Rupee came from

59. 30 Where the Rupee went

60. 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.

61. 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.

62. 33 Monthly Financial Review Proform (Para 513 of I.Rly.Finance Code vol.I)

63. 34 Thank God, You have stopped