Welcome to Lecture on

Financial and Cost control in Railway workshops

Venue: STC/Lallaguda

Date: 9th July, 2010

By M.Nageswara Rao SO(A)

one of the most important areas of functioning of Railways as a major part of expenditure is incurred in this area.

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 workshops.

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

Standards of Financial Proprietyevery 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.

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

1. Control of labour costs. 2.  Utilization of resources. 3. Review of stores balances with a view to

reducing inventory. --Page  4 4.Reduction of overtime and night duty

allowance. 5.Reduction of compensation to workers by

improving safety.

0ther areas where cost control yields substantial results are as under:

6.Conducting proper time study and job study to fix realistic time   

   Allowances to carry out different jobs. 7.Evolving proper costing systems like standard costing and

cost control    Mechanisms. 8.Compilation of standard costs, comparing the same with

actual with a    View to analyse variances and control the same. 9.Continuous efforts should be made to reduce the unit cost

of production    In shops. 10.Identification of idle resources, elimination of redundancies

and Excess capacities leading to better utilisation of assets.

0ther areas where cost control yields substantial results are as under: