STRUCTURED Training Manual On Audit Of Finance and APPROPRIATION ACCOUNTS OF Railways

Regional Training Institute, CGO Complex, (5th Floor, A-Wing), DF Block Salt Lake, Kolkata-70064 June, 2014

Preface Structured Training Manual on Audit of Finance and Appropriation Accounts of Railways

Training Need: In view of Railway organization’s huge net work with multiple activities and procedural diversities in different Departments and units of the the accounting systems and set up are also different. The Railways in are as much as Government concern as well as commercial enterprise as they are engaged in manufacturing and in selling of transport services thus earning profits, maintaining its own assets and paying interest (i.e. dividend) to the General Revenues. The Government Accounts are kept purely on cash basis whereas the accounts of the Railways are kept on accrual basis. While the Railway is required to keep the records, prepare and present the reports in commercial terms it has also to feed the information to Government in the format prescribed for that. Therefore, the Railway has to maintain various accounts and records for meeting the requirements of both. It is, therefore, necessary to equip the Railway Audit offices to conduct audit of Railway finance and Appropriation Accounts with the systematized training documents for continuous training of officers and staff working in Railway Audit. Hence, this Structured Training Manual has been prepared to cope up with the situation.

Aim: The training will equip the participants with adequate knowledge of the Accounting Structure of Railways and various types of accounts/statements and documents prepared to reflect the financial picture of the Railways. It will thus familiarize the participants with key areas of finance and appropriation accounts and enable them to conduct audit of the Railway’s finance and appropriation accounts efficiently and effectively.

Objectives:

At the end of the training, the participants will i) Formulate an overall background of the Indian Railways. ii) Know about the back ground for separation of Railway Finance and Budget from the main budget (i.e. General Budget) of Government of India and formation of separate accounting wing under Railway Finance Commissioner.

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iii) Various duties and functions of Accounts Department. iii) Form an idea about the Accounting structures of the Indian Railways and the basic concepts of the Accounting system of the Indian Railways. iv) Various books of accounts prepared/maintained by the Railway Accounts Offices (Open line, Construction, Stores, Workshops and Traffic) and necessity of preparation of various accounts. v) Acquire an understanding of the basic concept of the Railway Budget, Grants and Appropriation Accounts. vi) Understand the Duties and Powers of the Comptroller and Auditor General of India with reference to Railway Finance and Appropriation Accounts and certificates to be issued by Principal Director of Audit, Zonal Railways. vii) Audit of Railway Finance and Appropriation Accounts in the present environment.

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Contents Page No. 1. List of Abbreviations and Acronyms iv 2. Sessions at a glance v-vi Session 1 Introduction and Organisational Set-up of Indian Railways. Need for separation of Railway Finance 3. and Budget from General Budget of Govt. of India 1 and formation of separate accounting wing of Railway and functions of Accounts Department. Instructor’s Guide 2 Participants’ Note 3-11 Print outs of PowerPoint slides 12-15 Participants’ exercises 16-18 Session 2 Accounting System of Railways and Structure of 4. 20 Railway Accounts. Instructor’s Guide 21 Participants’ Note 22-33 Print outs of PowerPoint slides 34-37 Participants’ exercises 38-40 Session 3 Different kinds of Accounts and records 5. maintained and prepared by Accounts Office 41 (Open line, Construction, Stores, Workshop & Traffic). Instructor’s Guide 42 Participants’ Note 43-61 Print outs of PowerPoint slides 62-65 Participants’ exercises 66-70 Session 4 Compilation of various Important Accounts by the 6. 72 Accounts Office. Instructor’s Guide 73 Participants’ Note 74-81 Print outs of PowerPoint slides 82-86 Participants’ exercises 87-89 7. Session 5 Railway Budget and Appropriation Accounts 90 Instructor’s Guide 91 Participants’ Note 92-103 Print outs of PowerPoint slides 104-108 Participants’ exercises 109-113 Session 6 Audit of Railway Finance And Appropriation 8. 115 Accounts Instructor’s Guide 116-117 Participants’ Note 118-166 Print outs of PowerPoint slides 167-170 Participants’ exercises 171-175

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List of Abbreviations and Acronyms

Sl. Abbreviated Full Form Sl. Abbreviated Full Form No. Form No. Form Research, Designs Department 1 RDSO and Standards Railway Code for Organisation Accounts 12 A 2 GM General Manager Department (Part I Divisional Railway & II) 3 DRM Manager Railway Code for 13 S Financial Advisor Stores Department 4 FA&CAO and Chief Accounts Railway Code for

Officer 14 Mechanical W Principal Director Department 5 PDA of Audit Indian Railway Depreciation 15 F Financial Code, 6 DRF Reserved Fund (Vol. I & II) 7 DF Development Fund Workshop CF Capital Fund 16 WMS Manufacturing Open-Line Works Suspense Account 8 OLWR Workshop General (Revenue) 17 WGR Railway Safety Register 9 RSF Fund 18 SS Stores Suspense Railway Audit 19 DP Demands Payable 10 RAM Manual Railway Code for 11 E the Engineering

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iii Training Objectives & Session at a glance

Regional Training Institute, Kolkata

Training Manual on Audit of Railway Finance and Appropriation Accounts. Training Objective: Familiarization with the conceptual and organizational and accounting frameworks of the Railways, reasons for keeping of various accounts vis-a vis enabling the participants to- (i) understand the Railways accounting system and Structure of Railway Accounts, different heads of accounts maintained. (ii) basic records maintained/kept by the accounts department of Railway, (iii)types of different accounts prepared, (iv) method of compilation of various accounts, (v) why and how annual budget is prepared, (vi) reasons for preparation of Appropriation Accounts, (vii) duties and responsibilities of C & AG in connection with Railway Finance and Appropriation Accounts and different audit checks to be exercised.

Training Method: Interactive lectures, PowerPoint Presentations and exercises

Sessions at a glance

Day 1

Session Time Required Topic Introduction and Organisational Set-up of Indian Railways. Forenoon 1 150 mins Need for separation of Railway Finance and Session Budget from General Budget of Govt. of India and formation of separate accounting wing of Railway and functions of Accounts Department. Accounting System of Railways and Structure Afternoon 2 150 mins of Railway Accounts. Session -do- Day 2 Session Time Required Topic -do-

Forenoon Different kinds of Accounts and records 2 & 3 150 mins Session maintained and prepared by Accounts Office (Open line, Construction, Workshop, Stores & Traffic). -do-

Afternoon 3 150 mins Session -do-

v Training Manual on Audit of Railway Finance and Appropriation Accounts

iii Training Objectives & Session at a glance

Day 3 Session Time Required Topic

-do- Forenoon 3 & 4 150 mins Session Compilation of various Important Accounts by the Accounts Office. -do- Afternoon 4 150 mins Session -do- Day 4 Session Time Required Topic

Railway Budget and Appropriation Accounts. Forenoon 5 150 mins Session -do-

Afternoon -do- 5 150 mins Session -do- Day 5 Session Time Required Topic Audit of Railway Finance Accounts including various Railway books & Accounts, Accounts Forenoon 6 150 mins Current of Open line, Construction, Stores, Session Workshop & Traffic. -do-

-do- Audit of Railway Budget & Appropriation Afternoon 6 150 mins Session Accounts with different schedules/ Annexures /Statements etc., different kinds of Audit objections noticed and discussion of cases studies. Day 6 Session Time Required Topic -do- Forenoon 6 150 mins Session -do-

Afternoon Test 150 mins Session Valediction

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Training Manual on Audit of Railway Finance and Appropriation Accounts

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Session: 1

Introduction and Organizational Set-up of Indian Railways; back ground for separation of Indian Railway finances from General finances and creation of separate finance department of Railways, set up and functions of Accounts Department.

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Instructor’s Guide Session 1

Session Title: Introduction and Organisational Set-up of Session Guide Indian Railways; back ground for separation of Indian Railway finances from General finances and creation of separate finance department of Railways, set up and functions of Accounts Department. Reference Participants’ Instructor’s Guide Response Session Overview Welcome participants to the session and remind Lecture them that their active participation is critical for the success of each session. Learning Objective Inform: Lecture Given the inputs of overall views of Indian Railways through group discussion, lecture and Power Point slide show, the participants will, at the end of the session, be able to grasp the basic concepts of set up of the Indian Railways and accounts’ function which will help them to focus on audit issues in the practical work environment. Basic Concepts Discuss: Lecture with ● Historical back ground of railways in India. Power Point ● Organizational structure of Indian Railways. Slide Show ● Historical background of separation of Session 1 railway accounts from general accounts. INTRODUC- ● Organizational structure of Indian Railways’ TION Accounts Department. ● Functions of Accounts Department.. Summarise: Distribute Participants’ Note Session 1 Tell the participants that during the session, we Participants’ discussed historical perspectives and salient Note features of the Indian Railway, organizational structure of railway and its finance and accounts department, different functions of accounts department. Invite questions on themes discussed. If participants have any doubts/clarifications about themes, clarify the same. Answer participants’ queries. Thank the participants and bring the session to a close. Training Method: Interactive Lecture and Power Point Slide Show. Materials Required: Power Point Slides, Projector, White Board, Marker Pen and Participants’Notes.

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Participants’ Note Session: 1

Session Title: Introduction Northern Sector-192 kms. from Allahabad to Kanpur on 3rd March, 1859, and Organizational Set-up subsequently other sections were opened. of Indian Railways. Extreme East-Dibrugarh Town to Dinjan- was opened on 15th August, 1882. Session Overview The first railways built in India were 1.1. Historical background of constructed and worked by private Railways in India companies who were guaranteed a fixed rate of exchange and a specified return on the The Indian Railways have had a long capital invested by them. During 1854-60 history. A plan for a rail system in India was contracts for construction of railways were first put forward in 1832. The idea of a made by the East India Co. or (after 1858- railway between Bombay and Thana and 60) by the Secretary of States for India, with beyond was conceived first in 1843. The some private Railways. Under these idea took a concrete shape when a new contracts the Railway Companies undertook Company was formed in England under the to construct and manage specified lines, name of Great Indian Peninsula Railway while the East India Company agreed to Company which was incorporated in provide land free of cost along with the England by an Act of Parliament on 1st guaranteed return at specified rate of August, 1849. The Railway Company interests on Capital invested. The companies entered into a contract on 17th August, 1849 were placed under the supervision and with the East India Company. The first train control of the Govt. for standard and details in India became operational on 22nd of construction, standard of maintenance etc. December, 1851 and was used for the and above all, the forms of accounts. In hauling of construction material in Roorkee. 1862 attempts were made to secure the A year and a half later, on 16th April, 1853, construction of Railways on more the first passenger train service was favourable terms than before and to induce inaugurated between Bori Bunder, Bombay private investors to construct Railways at and Thana covering a distance of 34 km (21 their own risk and cost by providing land miles), barely 28 years after the World’s free of cost and a subsidy at a specified rate first train made its successful run between for a given period. But the system did not go Stockton and Darlington in England in 1825. well. After 1869, the capital expenditure on Within a year the line was extended to Railways was mainly incurred direct by the Kalyan and was commissioned on 1st May, Govt. and no fresh contracts were made with 1854. guaranteed companies except for small Subsequently, trains for some other lines extensions. But consequent on severe famine were opened for traffic as follows: in 1878 necessity of rapid extension of Eastern Sector-first passenger train from railways was felt necessary and it was Howrah Station to Hooghly-39 kilometers decided to introduce private enterprises to was opened on 15th August, 1854, the extent possible. A number of companies subsequently extended upto Pundooah (61 were formed between 1881 and 1892 and kms. from Howrah) on 1st September, 1854 the guarantees given to some of these and upto Raniganj on 3rd February, 1855. companies were much more favourable to Southern Sector-first railway line was Govt. than in case of companies formed opened on 1st July, 1856 between prior to 1869. Under the terms negotiated Veyasparpaudy and Walajah Road (Arcot)- with the various guaranteed Railway 101 kms. companies, the contracts were terminated between 1879 and 1907.

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Participants’ Note Session: 1

Some of the Company Railways were Railway- all taken over by Central Govt transferred to Govt. management after from 1.4.1950. purchase. These were the Eastern Bengal, Consequent on nationalization of all the Oudh and Rohilkhand, the Sind-Punjab Indian Railway systems and integration of and Delhi, and the Southern Punjab all the railways in the Indian States into Railways; the last two forming part of the Indian Railways (forty-two separate railway North Western Railway. The management of systems, including thirty-two lines owned by some of the other purchased lines was, the former Indian princely states) and with a however, entrusted to working companies view to securing both efficiency in operation constituted under contracts. and function, improving and standardizing The contracts with the working practices and economy in management, companies [viz. (1) East Indian Railway, (2) different Indian Railway systems were The Great Indian Peninsula Railway, (3) regrouped and formed into the following six The Bombay Baroda and Central India major Zonal Administrative Units:- Railway, (4) , (5) (1) Southern Railway – formed on 14th Oudh and Trihut Railway, (6) The Madras April, 1951 with the constituent railways: and Southern Mahratta Railway, (7) The (a)Madras and Southern Mahratta South Indian Railway, (8) The Bengal Railway, Railway] were, terminated between (b) South Indian Railway, 1925 and 1944 and the management of the (c) Mysore State Railway. companies was taken over directly by the (2) Central Railway- formed on 5th Govt. November, 1951 with the constituent Consequent on independence on 15th railways: August, 1947 two of the existing railways (a) Great Indian Peninsula Railway, (viz. North Western Railway in the West (b) Nizam’s State Railway, and the Bengal Assam Railway in the east) (c) Dholpur State Railway, which fell into both territories had to be (d) Scindia State Railway. divided. The portions of these systems (3) Western Railway formed on 5th falling in India were either partly added to November, 1951 with the constituent the other existing lines or partly formed into railways: separate units. Thus Eastern Punjab Railway (a) Bombay Baroda and Central India and the Assam Railway Administrations Railway (less Delhi-Rewari-Fazilka and came into being as separate units. Kanpur-Achnera Sections) As a result of independence separate (b) Saurashtra Railway, states came under one independent govt. i.e. (c) Jaipur State Railway, Union Govt. Therefore, the following (d) Rajasthan Railway, railways which were owned and managed by (e) Railway, those states came under the control of Union (f) Marwar-Phulad Section of Jopdhpur Govt. in addition to those which were Railway. already being worked by the Indian (4) Eastern Railway formed on 14th April, Railways, viz. 1952 with the constituent railways: (i) Gaekwar’s Baroda State Railway- (a) Bengal Nagpur Railway, taken over by Central Govt. from 1.8.1949, (b) East Indian Railway (except portion (ii) Bikaner State Railway, (iii) Cutch State transferred to Northern Railway). Railway, (iv) Dholpur State Railway, (v) (5) Northern Railway formed on 14th April, Jaipur State Railway, (vi) Jodhpur Railway, 1952 with the constituent railways: (vii) Mysore State Railway, (viii) Nizam’s (a) East Punjab Railway, State Railway, (ix) Rajasthan Railway, (x) (b) Bikaner State Railway, Saurashtra Railway, (xi) Scindia State (c) Jodhpur Railway (except Marwar- Phulad Section)

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Participants’ Note Session: 1

(d) Moradabad, Lucknow and  Each Zonal Railway is headed by one Allahabad Divisions of East India General Manager. Further each Railway has Railway, some divisions under its control for proper (e) Delhi-Rewari-Fazilka Section of operation, control and management of its Bombay Baroda and Central Indian different activities. Each division is headed Railway. by one Divisional Railway Manager. The (6) North Eastern Railway formed on 14th divisional officers of engineering, April, 1952 with the constituent railways: mechanical, electrical, signal & (a) Oudh-Tirhut Railway, telecommunication, accounts, personnel, (b) Assam Railway, operating, commercial and safety branches (c)Kanpur-Achnera Section of report to the respective Divisional Manager Bombay, Baroda and Central India and are in charge of operation and Railway. maintenance of assets.  In addition to the above 16 zones, Due to increase in work load and more (KR) is constituted as a efficient operation and management further separately incorporated railway, with its re-organizations took place from time to Headquarters at Belapur CBD (Navi time as follows: ), although it still comes under the

st control of the Railway Ministry and the From 1 August, 1955- Eastern Railway was Railway Board. divided into Eastern Railway and South Eastern Railway.  The is owned and From 15th January, 1958- North Eastern operated by Indian Railways. It is Railway was divided into Northeast administratively considered to have the Frontier Railway and North Eastern status of a zonal railway headed by a Railway. General Manager. It is the first underground From 2nd October, 1966- South Central rail net work in India. The construction for Railway was formed by carving portions the first phase (between Dumdum and Tollygunj-16.450 Kms.) was started in 1972 from Central and Southern Railway. nd Thus by creation of three new Railways total and ended in 1995. The 2 phase between nine Zonal Railways were formed. Tollygunge (Mahanayak Uttam Kumar) and New Garia (Kavi Nazrul station)- 5.834 1.2. Latest organizational structure Kms. was completed in August, 2009 and and salient features of Indian opened for commercial operation in October Railways. 8, 2010.  The Delhi Metro (Delhi Mass Rapid Further re-organization of the existing nine Transit System (MRTS) is the second Metro Zonal Railways was made in the year 2003, Railways was inaugurated on 24th April and as on 31st March, 2013 there are16 December, 2002. As of to day it has a Zonal Railways, as follows: current operational network covering 156 kms approx. in Delhi and the National 1) Eastern Railway, 2) Western Railway, Capital Region (Gurgaon and Noida). It has 3) Southern Railway, 4) Northern Railway, seven lines viz. (Dilshad Garden- 5) Central Railway, 6) East Central Rly. Rithala)- Red Line completed on 3rd June, 7) East Coast Rly. 8) West Central Rly. 2008. Line 2 (HUDA City Centre- 9) South Eastern Rly. 10) South Central Rly. Jahangirpuri)-Yellow Line completed in two 11) South East Central 12) South Western phases on 3rd September, 2010. Line 3 Rly. Rly. (Dwarka Sector 21 – Noida City Centre)- 13) North Eastern Rly. 14) North East Blue Line completed in two phases on 30th Frontier Rly. October, 2010. Line 4 (Yamuna Bank- 15) North Central Rly. 16)North Western Rly. Training Manual on Audit of Railway Finance and Appropriation Accounts 5

Participants’ Note Session: 1

Anand Vihar ISBT)-Blue Line-operated kms. to be constructed in 3 phases with from 6th January, 2010. Line 5 (Inderlok- expected year of overall completion 2021. Mundka)-Green Line- operated from 2nd Its construction work began in February, April, 2010 (in two phases). Line 6 (Central 2000 and started its first service on 8.6.2014 Secretarait-Badarpur)- Violate Line from Versova Stn. to Ghatkopar (11.4 completed in two phases on 14th January, Kms.). 2011. Airport Metro Express Line (New  Construction of Metro Railways in other Delhi-IGI Airport (T-3)-Dwarka Sector-21 Metropolitan cities is also under rd commenced from 23 February, 2011 (in consideration of the Government of India, two phases). viz. Lucknow, and Hyderabad etc.  Another Metro Railway viz. Bangalore  Apart from above Administrative Zonal Metro Rail Corporation Limited (BMRCL) Railways there are different production and (also christened as Namma Metro), a joint manufacturing units engaged in venture of Govt. of India and Govt. of manufacturing rolling stock, wheels and Karnataka has been undertaken. The latest axles and other ancillary components to project cost was Rs.11, 609 crore. Phase-1 meet Railways’ requirements. (42.3 kilometers long) of Namma Metro These are as follows:- consists of two corridors viz. East West 1. Chittaranjan Locomotive Works, at (from Baidyappanahalli in East to Mysore Chittaranjan (West Bengal)-opened Road in West- 18.10 Kms) & North West on 26th January, 1950. Corridor (from Nagasandra in North & 2. Diesel Locomotive Works at Puttenahalli in Soutth-24.20 Kms). Two Varanasi-opened opened in 1961. stretches (M.G.Road to Baiyappanahalli-6.7 3. Diesel –Loco Modernization Works Kms. & Mantri Square Sampige Road Stn. (formerly known as Diesel were opened for traffic on 20.10.11 & 1.3.14 Component Works) at Patialala- respectively. Entire Phase-I is expected to opened in 1981. complete by March, 2015. 4. (formerly  Govt. of Tamil Nadu approved in referred to as Wheel & Axle Plant) principle the two initial corridors of Chennai at Yelahanka (Near Bangalore)- Metro Railway on 7.11.2007 and Govt. of opened in 1984. India approved Chennai Metro Rail Project 5. Rail Coach Factory at Kapurthala- on 28.1.2009 the estimated cost of which opened in 1987. was about 14,600 crores initially. There are two routes covering a distance of 45 kms. 6. ; Perambur The first one is between Washermanpet to (Near Chennai)-opened in 1955. Chennai Airport and second one between Each Production and Manufacturing unit is Chennai Central Railway Station and St. headed by one General Manager. Thomas Mount. The work between Chennai Vannarapetai-airport and Central-St.  These apart, there are many workshops Thomus mount is in progress. and sheds doing routine maintenance and  is the India’s first metro overhauling of Railway Rolling Stocks viz. Railway project implemented on a public- Liluah, Kanchrapara, Jamalpur, Kharagpur, private partnership model. Companies Mancheswar, Raipur, Motibagh (in Nagpur), involved were Anil Ambani’s Reliance Alambagh, Charbagh, Ajmer, Golden Rock Infrastructure, Veolia Transport & the Workshop at Nagapattinam, Tindharia, Mumbai Metropolitan Region Development Coonoor etc. Authority (MMRDA). The updated cost of  Research, Designs and Standards project as unveiled by MMRDA was Organization (RDSO) is the sole research estimated at Rs.67, 618 crores for 160.90 and development wing of Indian Railways,

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Participants’ Note Session: 1 functioning as the technical adviser and 18. RITES Ltd. – Consulting Division of consultant to the Ministry, Zonal Railways Indian Railways. and Production Units. RDSO has been 19. RITES Infrastructure Services Limited. reorganized with effect from 1.1.2003 by 20. Limited elevating its status from ‘Attached Office’ to ‘Zonal Railway’ to give it greater flexibility 21. SAIL RITES Bengal Wagon Industries and a boost to the research and development Limited. activities. 22. Wagon India Limited.  In addition to this, the Central Organization for Railway Electrification Centre for Railway Information Systems (CORE) is also headed by a GM. This is (CRIS) is an autonomous society under located at Allahabad. This organization Railway Board, which is responsible for undertakes electrification projects of Indian developing the major software required by Railways and monitors the progress of Indian Railways for its operations. various electrification projects all over the There are some Training Institutes also country. under director control of Railway Board for  Apart from these zones and production imparting training to Railway Officers on units, a number of Public Sector various subject matters, viz. Indian Railway Undertakings (PSU) are under the Institute of Civil Engg. (IRICEN/Pune), administrative control of the ministry of Indian Railway Institute of Signal Engg & railways. These PSU's are: Telecommunication(IRISET/Secunderabad), Indian Rly Institute of Electrical 1. Bahruch Dehej Railway Corporation Engineering (IRIEEN/Nasik), Indian Limited. Railway Institute of Transport Management 2. Bharat Wagon and Engineering (IRITM/Lucknow), Indian Railway Institute Company Limited. of Mechanical & Electrical Engineering 3. Braithwaite and Company Limited. (IRIMEE)/Jamalpur, Rly. Staff College/ 4. Limited. Vadodara, CAMTECH/Gwalior. Some 5. Container Corporation of India Ltd. training centers are also there under control of Zonal Railways for imparting training to 6. Dedicated Freight Corridor Corporation the staff of Railways on Signal & Telecom., Limited. Electrical, Carriage & Wagon, Traffic, Civil 7. Fresh and Healthy Enterprises Limited. Engineering, Accounts etc. 8. Hussan Mangalore Rail Development Company Limited. Organisational Structure 9. Indian Railways Catering and Tourism Corporation Limited. 10. Indian Railway Finance Corporation Limited. 11. Ltd. 12. IRCON Infrastructure Limited. 13. Kutch Railway Company limited. 14. Konkan Railway Corporation

15. Mumbai Rail Vikas Corporation. 16. Pipava Railway Corporation Limited. The Headquarters of the Indian Railways 17. Railtel Corporation of India – are located in New Delhi. Telecommunication Networks

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Participants’ Note Session: 1

 Indian Railways is a publicly-owned company controlled by the Government of India, via the Ministry of Railways. Indian Railways has a monopoly on the country's rail transport.  The formation of policy and overall control of the railways is vested in Railway Board comprising the Chairman, Financial Commissioner and other functional Members for Traffic, Engineering, Mechanical, Electrical and Staff matters. The Railway Board, which has six members and a chairman, reporting to the Ministry for functioning of the Railways.

An Organizational Structure of the Indian Railways is shown in the next page.

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Participants’ Note Session: 1

Organisational Structure of Indian Railways

Minister of Railways

Minister of State Minister of State

Chairman, Railway Board

Secretary, Railway Board

Member Member Staff Member Member Member Traffic Finance Electrical Engineering Mechanical Commissioner

Director General, Rly. Health Service Director General, RPF

Secretary, Estt. Matters

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Participants’ Note Session: 1

1.3. Back ground for under the member of Council for Communications there should be 4 separation of Indian commissioners and that out of the 4, one Railway Finances from should be in charge of Finance and the General Finances and organization ..." With these recommendations not only was creation of separate the segregation of Railway Finance clearly finance department of established, but the office of the Financial Railways. Commissioner was envisaged in an embryonic manner, and accordingly, the first Financial Commissioner was It was in the historic year of 1921, when appointed on 1 st April 1923. The large the recommendation of the Acworth financial responsibility of the department Committee ratified through the Resolution is perhaps a sufficient justification in itself for separation in 1924 when for the first for an addition to the organization of a time the Indian Railway finances were member competent to advice on the separated from the General Finances. questions of great financial magnitude. The significant recommendations of the As a result of the inclusion of the Financial Acworth Committee are quoted below: Commissioner, Railways as a Member of "We recommend that the Finance the Railway Board and separation of the Department should cease to control the Railway Finance from the General finance, internal finances of the Railways; that the the Railway Board also exercises the Railways should have a separate Budget of powers of the Government of India in their own, be responsible for earning and regard to Railway Expenditure subject to expending their own income and for the ultimate financial authority of the providing such net revenues as is required Minister of Railways and the Union to meet the interest on debt incurred on or Cabinet. to be incurred by the Government for Railways purposes; and that the Railways 1.4. Structure of Finance Budget should be presented to the Legislative Assembly not by the Finance Department under Finance minister of the council but by the member Commissioner (FC): in charge of the Railways." (Paras 74, 76 and 127 of the Acworth Committee There is one Financial Adviser and Chief report). Accounts Officer (FA & CAO) under the "We recommend that subject to FC, in each Zonal Railway and Production independent audit by Government of India, Units. The F.A. & C.A.O of the Zonal the Railways Department should employ Railways is assisted by Deputy F.A. & its own accounting staff and be responsible C.A.O (s) and Sr. Accounts Officer/ Sr. for its own accounts. We think that the DFM, Accounts Officer /ADFM and other present account and statistics should be subordinate staff. In some Railways thoroughly overhauled and remodeled with separate F.A. & C.A.O also functions for the assistance of experts familiar with Construction Unit. recent practices in other countries." (Paras 129-134 of Acworth Committee Report). It further goes on to recommend that “the title of Railway Board be replaced by the title of Railway Commission and that

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Participants’ Note Session: 1

1.5. Functions of Accounts Department:

Broad functions of the Railway Accounts Department are briefly as follows:

1. Keeping of accounts of Railways in accordance with the prescribed rules, 2. Preparation of various accounts as per rules, 3. Checking of transactions affecting the receipts and expenditure of railways, i.e. internal check, 4. Compilation of budgets in consultation with other departments and monitoring the budgetary control procedures, as may be laid down in the relevant orders and code rules, from time to time, 5.Discharging other management accounting functions such as providing financial data for management reporting, assisting inventory management, participation in purchase/contracting decisions and surveys for major schemes in accordance with the relevant rules and orders, and 6. Advising to the Railway administration whenever required or necessary in all matters involving railway finance, 7. Seeing that there are no financial irregularities in the transactions of the railway, etc. 8. Seeing that allocations shown on the initial documents prepared by the concerned departmental offices are not prima facie incorrect so that expenditure can be booked in correct head and undue variation between the budget and accounts is not occurred. 9. Prompt settlement of proper claims against the railway, etc.

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PPT Slide Session: 1

Slide 1 Slide 4 Historical Perspective of Railways

• The first railways built in India were constructed and worked by private Session: 1 companies who were guaranteed a fixed rate of exchange and a specified return on the capital Introduction invested by them.

& • During 1854-60, contracts for construction of railways were made Organisational Set-up of by the East India Co. or (after 1858- 60) by the Secretary of States for Indian Railways India, with some private Railways.

Training Module on Audit of 4 Railways; Session: 1

Slide 2 Learning Objective Slide 5 Historical Perspective of Railways

• In this session, the participants will • The Railway Companies undertook to be able to understand the basic construct and manage specified lines concepts of the Indian Railways and under these contracts. reasons for separation of Railwaay • The East India Company agreed to Budget from the Main Budget and provide land free of cost alongwith functions of the Accounts the guaranteed return at specified department which will help them to rate of interests on Capital invested. focus on audit issues in the practical work environment.

Training Module on Audit of 2 Training Module on Audit of 5 Railways; Session: 1 Railways; Session: 1

Slide 3 Historical Perspective of Railways Slide 6 Historical Perspective of Railways • The Indian Railways have had a long • Attempts made in 1862 to secure history. the construction of Railways on • A plan for a rail system in India first put more favourable terms and to forward in 1832. The idea of a railway induce private investors to construct between Bombay and Thana conceived Railways at their own risk and cost first in 1843. by providing land free of cost and a • The idea took a concrete shape when a subsidy at a specified rate for a new Company was formed in England given period. under the name of Great Indian • A number of companies were formed Peninsula Railway Company on 1st between 1881 and 1892. August, 1849. • The guarantees given to some of • Contd………………………………………S/4. these companies were much more favourable to Govt.

Training Module on Audit of 3 Training Module on Audit of 6 Railways; Session: 1 Railways; Session: 1

Training Manual on Audit of Railway Finance and Appropriation Accounts 12

PPT Slide Session: 1

Slide 7 Historical Perspective of Railways Slide 10 • The contracts with the working Historical Perspective of Railways companies were, terminated • Consequent on nationalization and with a between 1925 and 1944 and the view to securing both efficiency in management of the companies operation and function, different Indian taken over directly by the Govt. Railway systems were regrouped and • Consequent on independence of formed into the six major Zonal Administrative Units viz. Southern Railway, India two of the existing railways Central Railway, Western Railway, Eastern (viz. North Western Railway in the Railway, Northern Railway, North Eastern West and the Bengal Assam Railway. Railway in the East) fell into both • Each Railway had more than one territories were divided. constituent railways and formed between • Contd…………………………………..S/8 April 1951 & April 1952.

Training Module on Audit of 7 Railways; Session: 1 • Training Module on Audit of 10 Railways; Session: 1

Historical Perspective of Railways Slide 8 Historical Perspective of Railways Slide 11 Due to increase in work load and more efficient operation and management • The portions falling in India were further re-organisations took place from either partly added to the other time to time as follows: existing lines or partly formed into • From 1st August, 1955- Eastern Railway separate units. was divided into Eastern Railway and South Eastern Railway. • Eastern Punjab Railway and the • From 15th January, 1958- North Eastern Assam Railway Administrations came Railway was divided into Northeast into being as separate units. Frontier Railway and North Eastern Railway. • From 2nd October, 1966- South Central Railway was formed by carving portions from Central and Southern Railway. Training Module on Audit of 8 Training Module on Audit of 11 Railways; Session: 1 Railways; Session: 1

Latest organizational structure Slide 9 Historical Perspective of Railways Slide 12 and salient features of Indian • After independence, separate states Railways came under one independent govt. i.e. Union Govt. • After re-organisation of the existing nine Zonal Railways in 2003, April , as on 31st • Eleven railways owned and managed March, 2013 there are 16 Zonal Railways. by those states came under the control of Union Govt. • In addition to the above 16 zones, Konkan • In addition, the existing Indian Railway (KR) is constituted as a Railways were all taken over by separately incorporated railway, although Central Govt. between August 1949 it still comes under the control of the & April 1950. Railway Ministry and the Railway Board.

Training Module on Audit of 9 Training Module on Audit of 12 Railways; Session: 1 Railways; Session: 1

Training Manual on Audit of Railway Finance and Appropriation Accounts 13

PPT Slide Session: 1

Slide 13 Latest organizational structure and Slide 16 Latest organizational structure and salient features of Indian Railways salient features of Indian Railways • There are some other Metro Railways • Centre for Railway Information like Kolkata Metro, Delhi Metro and Systems (CRIS) is an autonomous society under Railway Board, Bangalore Metro Railways & Chennai responsible for developing the major Metro Railways (ongoing projects) also. software required by Indian Railways for its operations. • There are some Training Institutes • Apart from above Zonal Railways there under direct control of Railway Board are different production and for imparting training to Railway manufacturing units, also. Officers on various subject matters. • Each Railway has some Training Institutes to impart training to the Railway employees of various wings.

Training Module on Audit of 13 Training Module on Audit of 16 Railways; Session: 1 Railways; Session: 1

Slide 14 Latest organizational structure and Slide 17 Back ground for separation of salient features of Indian Railways Indian Railway Finances from • There are many workshops and sheds doing General finances & creation of routine maintenance and overhauling of separate Finance Department of Railway Rolling Stocks viz. Liluah, Kanchrapara, Jamalpur, Kharagpur, Railways. Mancheswar, Raipur, Motibagh (in Nagpur), etc. In the historic year of 1921, the • Research, Designs and Standards recommendation of the Acworth Organisation (RDSO) is the sole research Committee was ratified through the and development wing of Indian Railways, Resolution for separation in 1924, functioning as the technical adviser and and the Indian Railway finances consultant to the Ministry, Zonal Railways and Production Units. It has been Zonal were separated from the General Railway status w.e.f. 1.1.2003. Finances and the first Financial Commissioner was appointed on 1 st Training Module on Audit of 14 Railways; Session: 1 April 1923. Training Module on Audit of 17 Railways; Session: 1

Slide 15 Latest organizational structure and Slide 18 Latest organizational structure and Powers of Finance Commissioner salient features of Indian Railways As a result of the inclusion of the • Central Organisation for Railway Financial Commissioner, Railways as Electrification (CORE) located at Allahabad a Member of the Railway Board and is another unit undertaking electrification separation of the Railway Finance projects of Indian Railways and monitoring from the General finance, the Railway the progress of various electrification Board also exercises the powers of projects all over the country. the Government of India in regard to • In addition, there are about 21 Public Railway Expenditure subject to the Sector Undertakings under Railway ultimate financial authority of the Organisation. These PSUs have now come Minister of Railways and the Union under audit control of Railway Audit Cabinet. Deaprtment.

Training Module on Audit of 15 Railways; Session: 1 Training Module on Audit of 18 Railways; Session: 1

Training Manual on Audit of Railway Finance and Appropriation Accounts 14

PPT Slide Session: 1

Slide 19 Structure of Finance & Accounts Slide 22 Structure of Finance & Accounts Functions of Accounts Department Department in Railway assisting inventory management There is one Financial Adviser and Chief participation in purchase/contracting Accounts Officer (FA & CAO) under the decisions and surveys for major F.C, in each Zonal Railway and Production Units. The F.A. & C.A.O of schemes in accordance with the the Zonal Railways is assisted by relevant rules and orders, and Deputy F.A. & C.A.O (s) and Sr. Accounts Officer/ Accounts Officer/ Sr. DFM/ADFM/Sr. AFA/AFA etc. and other 6.Seeing that there are no financial subordinate staff. In some Railways, irregularities in the transactions of separate F.A. & C.A.O also functions for the railway etc. Construction Unit.

Training Module on Audit of 19 Training Module on Audit of 22 Railways; Session: 1 Railways; Session: 1

Slide 20 Functions of Accounts Department

These are- • 1. Keeping of accounts of Railways in accordance with the prescribed rules, • 2. Preparation of various accounts as per rules, • 3. Checking of transactions affecting the receipts and expenditure of railways, i.e. Internal check, Contd…………………………………………………….S/21

Training Module on Audit of 20 Railways; Session: 1

Slide 21 Functions of Accounts Department • 4. Compilation of budgets in consultation with other departments and monitoring the budgetary control procedures, as per relevant orders and codal provisions, from time to time, • 5.Discharging other management accounting functions such as providing financial data for management reporting,

Contd……………………………………………….. S/22

Training Module on Audit of 21 Railways; Session: 1

Training Manual on Audit of Railway Finance and Appropriation Accounts 15

Participants’ Exercises Session 1

Question 1: Question 5:

What was the name of Railway Company Indicate the correct answer of the which was incorporated in England by an following: Act of Parliament on 1st August, 1849. Between April 1951 and April 1952 there Question 2: were following Zonal Railways

Indicate the correct answer of the 1) Six following: 2) Seven 3) Eight The first train in India became operational 4) Nine. for hauling of constructional materials on- Name them. 1. 22.12.1851 Question 6: 2. 22.12.1852 At the end of 1966 how many Zonal 3. 22.12.1853 Railways were formed?

4. 22.12.1954 1) Six, 2) Seven, Question 3: 3) Eight, 4) Nine. The first train in India for passenger service was inaugurated between Bori Question 7: Bunder, Bombay & Thana on- At the end of 31st March, 2013 how many 1) 16.4.1952 Zonal Railways were formed? Name them.

2) 16.4.1853 Question 8:

3) 16.4.1854 How many Production & Manufacturing Units are there at present, name them. 4) 16.4.1855 Question 9: Question 4: How many PSUs are there under the Audit Passenger trains opened for traffic in the control of Railway Audit Department? Sectors in following chronological order- Name them.

1) Eastern Sector

2) Extreme East Sector

3) Southern Sector

4) Northern Sector

Training Manual on Audit of Railway Finance and Appropriation Accounts 16

Participants’ Exercises Session 1

Question 10:

What is the status of RDSO, CORE & CRIS?

Question 11:

Indicate the correct answer- In which year Indian Railway Finance was separated from the General Finance?

1) 1921

2) 1924

3) 1925

4) 1926

Question 12:

Under whose recommendations the Railway Finance was separated from General Finance?

Question 13:

Find out correct answer:

When was the first Finance Commissioner of Railway appointed?

1. 1.4.23

2. 1.4.24

3. 1.4.25

4. 1.4.26

Question 14

What is the structure of the Railway Finance Department?

Question 15:

What are the functions of Accounts Department?

Training Manual on Audit of Railway Finance and Appropriation Accounts 17

Participants’ Exercises Session 1

Answer Sheet:

1. Great Indian Peninsula Railway Company.

2. 22.12.1852

3. 16.4.1853

4. Sl.Nos. 1, 3, 4, 2

5. Six Zonal Railways, viz. Eastern Railway, Western Railway, Southern Railway, Northern Railway, Central Railway & North Eastern Railway.

6. Nine, viz. Eastern Railway, Western Railway, Southern Railway, Northern Railway, Central Railway, North Eastern Railway, North East Frontier Railway, South Eastern Railway, South Central Railway.

7. Sixteen Railways- see Para 1.2 of Participants’ notes - lesson 1 for details.

8. Six manufacturing & Production units- see Para 1.2 of Participants’ notes - Lesson 1 for details.

9. There are 22 units at present- see Para 1.2 of Participants’ notes - Lesson 1 for details.

10. See Para 1.2. Of Participants’ notes- lesson 1.

11. 1924

12. Acwarth Committee

13. 1.4.1923

14. See para 1.4 of Participants’ notes - Lesson 1.

15. See para 1.5 of Participants’ notes - Lesson 1.

Training Manual on Audit of Railway Finance and Appropriation Accounts 18

Training Manual on Audit of Railway Finance and Appropriation Accounts 19

Session: 2

Railway Accounting System and Structure of Railway Accounts

Training Manual on Audit of Railway Finance and Appropriation Accounts 20

Instructor’s Guide Session 2

Session Title: Railway Accounting System and Session Guide Structure of Railway Accounts. Reference Participants’ Instructor’s Guide Response Session Overview Welcome participants to the session and remind Lecture them that their active participation is critical for the success of each session. Learning Objective Inform: Lecture Given the inputs of overall views of structure of Accounts of Indian Railways and Accounting System through group discussion, lecture and Power Point slide show, the participants will, at the end of the session, be able to grasp the basic concepts of the Indian Railways Accounting system and its structure which will help them to focus on audit issues in the practical work environment. Basic Concepts Discuss: Lecture with ● Accounting system of Railways. Power Point ● Accounting structure of Railways. Slide Show Session 2 INTRODUC- TION Summarise: Distribute Participants’ Note Session 2 Tell the participants that during the session, we Participants’ discussed Accounting system and Structure of Note Railway Accounts. Invite questions on themes discussed. If participants have any doubts/clarifications about themes, clarify the same. Answer participants’ queries. Thank the participants and bring the session to a close.

Training Method: Interactive Lecture and Power Point Slide Show. Materials Required: Power Point Slides, Projector, White Board, Marker Pen and Participants’ Note.

Training Manual on Audit of Railway Finance and Appropriation Accounts 21

Participants’ Notes Session 2

1.6. Railway Accounting The format of keeping of Railway accounts is laid down in Appendix IV of System and Structure of Indian Railway Accounts Code, Part-I Railway Accounts. (Extract of appendix appended below). Railway has two sources of receipt - one is The Railways in India are as much a Govt. grant (i.e. grant from General Government concern as a commercial revenue through budgetary support) and enterprise. Most of the capital invested on the other is generation of its own revenue the Indian Railways has been provided by through passenger and goods traffic the Government of India either by loans earnings and other miscellaneous earnings. raised by it or from its own other Basically, Govt. grant is given/utilized for resources. The Railways are also a acquisition of concrete assets and own commercial concern as they are engaged in revenue is utilized for working expenses manufacturing and in sale of transportation (maintenance and operation of activities) services thus earning profits, maintaining of Railway and creation of some funds for its own assets and paying interest (i.e. development works, replacement and dividend) to the General Revenues. renewal of assets. The Government Accounts are kept purely Railway Accounts are maintained under on cash basis while the accounts of the Capital & Revenue Heads to reflect the Railways are kept on liability or accrual Capital and Revenue Income & basis. expenditure. Capital (grant) is financed The accounts which are prepared in from general budgetary support as accordance with the requirements of mentioned above, internal resources and commercial accounting in Railways are share of diesel cess from Central Road commonly known as "Capital and Fund. Revenue grants are financed through Revenue Accounts" and the accounts of internal resources generated by the zonal the Railways maintained in accordance Railway through its earnings. with the requirements of Government accounts are collectively termed as 1.7. Allocation of receipts and "Finance Accounts". For the purpose of expenditure (A 217-218) – The primary reflection of commercial activities the responsibility for the allocation of all Railways also prepare Income and receipts and payments rests with the Expenditure and Block Account including concerned departmental officers. Each bill Capital Statement & Balance Sheet. or voucher received from them should Income and Expenditure show the profit or show the correct allocation of the loss made by the Railways during a year receipt/expenditure in the fullest detail. and Balance Sheet reflects the Assets and The Accounts Department is responsible Liabilities, debtors and creditors and for seeing, to the extent it is possible for various fund balances as well as Cash them to do so, that the allocation shown on balance at the end of the financial year. the initial document is not prima facie The accounts are maintained separately for incorrect. revenue and capital purposes and are Correct classification should be followed divided into three parts as in case of a in recording the expenditure in accounts Govt. accounts. irrespective of whether provision in the budget has been made under correct They are: budget head. In order, however, to avoid  Consolidated Fund of India, undue variation between the budget and accounts figures, changed in accounting  Contingency Fund of India, classification will not ordinarily be  Public Accounts. introduced during the course of the year.

Training Manual on Audit of Railway Finance and Appropriation Accounts 22

Participants’ Notes Session 2

Note:- In the case of works, the expenditure which has to meet the expenditure on passenger and be changed during the course of a year from one head of expenditure to another, classification of expenditure in users amenities, labour welfare works, that year should follow the original allocation. The safety works and unremunerative operative change should be given effect to from the beginning of improvement works not exceeding Rs.1 the next financial year only after making necessary provision in the budget at the Budget stage or at the lakh each. This fund is financed out of the Revised Budget Estimate stage to cover not only the ‘Excess of net revenue surplus’ left after estimated expenditure for the Budget year but also write meeting the dividend liability. Whenever back of the expenditure incurred from the commencement of the work to the end of the previous the ‘Excess’ is not sufficient, the railways year. may temporarily borrow money from general revenues. The money borrowed The Railway expenditure is allocated to together with the interest thereon has to be (i) Capital (P), (ii) Capital Fund (CF) (iii) repaid in subsequent years. This is also Development Fund (DF), (iv) Railway credited with the amount of interest earned Safety fund (RSF), (v) Depreciation on the balance of the Fund. Reserve Fund (DRF), (vi) Open line Works (Revenue) [OLW (R)] and OLW (R) - This is financed from the Ordinary Revenue. Detailed rules revenue of Indian Railway. This was regulating the classifications of created for meeting requirement of transactions under these heads are improvement/replacement whether new or prescribed in Chapter VII of the Indian additional, where cost is less than Rs.1 Railway Finance Code, Vol. I. (F- I) which lakh. are briefly discussed below: RSF - This is a non interest bearing fund Capital (P)- It is not Railway’s own Fund created in the year 2001-02 as per but is a loan account financed by the recommendation of RCC (1999). This is General Revenue. The expenditure met funded by Indian Railway’s share of diesel from this head are mainly for acquisition cess in Central Road Fund. This is utilized of new assets, constructions of new lines, for road safety works like manning of un- addition to assets including Rolling Stock, manned railway crossing and construction Electrification Projects, Plants and of road over/under bridges on cost share machineries, Gauge conversion, doubling basis wherever applicable. and for works costing more than Rs.20 crore under Track Renewal, bridge works DRF - This is created from the amount and signaling and telecommunication etc contributed from Railway revenues i.e and capital suspense a/c. appropriation to DRF is a charge on Railway working expenses (in case of Rly. CF - This was created in 1992-93 on the Production units, contribution to DRF is recommendation of the Railway adjusted by debit to Capital Account- convention committee (RCC) to finance ‘Manufacture Operations’), the amount part of the requirement of work of a capital realized from the disposal of materials nature viz. construction and acquisition of released from a work replaced at the cost new assets. The fund is financed from the of DRF & the amount of interest earned on balance of the Excess revenue after the balance of the Fund. The expenditure providing for appropriation to DF. This is on renewals and replacements of railway also credited with the amount of interest assets etc. is financed from this fund. earned on the balance of the Fund. Special Railway Safety Fund (SRSF) - D.F - Based on the recommendations of This was created during 2001-02 as per the Railway Convention Committee recommendation of the Railway Safety st (RCC), it was created on 1 April, 1950 to Committee (1998) to wipe out the arrears

Training Manual on Audit of Railway Finance and Appropriation Accounts 23

Participants’ Notes Session 2 in renewal of overaged assets such as of the railway incurred, but not actually track, bridges, rolling stocks & signaling discharged, during that month. Demands gears etc. within a fixed time frame of 6 Payable is a suspense head of account years. It was dispensed with from 2008-09 under the Major Head 3002 & 3003 and the balance at credit at the beginning (N Suspense) Indian Railways of the year (i.e. 1.4.2008) was transferred Commercial Lines/Strategic Lines- to DRF. Working Expenses & Minor Head 100/Sub Head/Detailed Head 120 (Demands To give an overall picture of the Payable). Separate account is opened for expenditure of a capital nature incurred by each month. The accounts of a month are the Railways, as distinguished from the generally kept open upto the end of the expenditure actually charged to Capital following calendar month. The journal (loan account), a separate account is entries exhibiting the debits to the working compiled which is called Block Account. expenses (for liability incurred) by credit It exhibits the entire expenditure of capital to the suspense head Demands Payable nature irrespective of the head of account may be made actually in the following to which it has actually been charged. The calendar month but will be adjusted in the Loan Account which is created out of accounts of the relevant (previous) month. general budgetary support, as discussed However, the liability may be discharged earlier, will give only the extent of by payment in the following calendar expenditure actually charged to capital month, and this transaction will be head. accounted for by debit to the head Demands Payable in the accounts for the Unlike Government accounts which record month in which the payment is made. This expenditure only when actually disbursed is because the cash book for the month is or receipts only when actually realized, the closed at the end of the same month, railway accounts maintained on a whereas the ledger and the journal for a commercial basis record the expenditure month are kept open upto the end of the incurred or earnings accrued in a month following month. There are certain irrespective whether they have actually expenditure which are directly charged to been paid or realized. final heads in the accounts of the month in which the payments are made, without Account heads operated for the purpose of operating this Demands payable head. The maintaining a link between Commercial balance under the head Demands Payable Accounts of the railway and the at the end of a year is reflected in the Government accounts are (i) Demands Balance Sheet in the Liability side. Payable, (ii) Labour, (iii) Traffic Labour (221 A) - The wages and Accounts. These are Suspense heads. allowances for a month of workshop staff Demands Payable (220 A)- On are paid to them only in the beginning of Expenditure side, the revenue liabilities of the following month. However, to the railway for a month, which are not ascertain the cost incurred on a job in a payable within the same moth are brought month, it is essential that the value of the to account as working expenses for the labour employed in the shops is charged in month by taking contra credit to this the same month to the specific jobs on Suspense head. When the railway’s which the workshop staff have been liabilities are actually discharged by the engaged. For this and other purposes payments this suspense head is debited therefore, the operation of a suspense head with the amount of the payment so made. similar to “Demands Payable” is Thus the balance at the end of the month in necessary. The total wages and allowances this suspense head will represent liability of staff employed in the shops during any

Training Manual on Audit of Railway Finance and Appropriation Accounts 24

Participants’ Notes Session 2 month will, be credited first to a head (a) Charges the allocation of which is not under the workshop manufacture suspense known or which cannot immediately be (Capital 7210) termed “Labour”. As the adjusted to a final head; Labour Pay Sheets are passed in the (b) Inter-departmental transactions Accounts office for payment, the amount awaiting acceptance. passed will be debited in the General (c) Expenditure incurred for other than Books of the railway to the head “Labour” Government Works in anticipation of by credit to “Transfers Revenue”. The receipt of deposits or pending realization balance of the account “Labour” at the end of the amount expended. of the month will consequently represent (d) Payments made in advance for stores to liabilities on account of the wages and be supplied. allowances charged, but not as yet cleared (e) Payments made in advance to Railway by actual payment to the labour and the officials for local purchases of material balance at the end of financial year is and other purposes pending rendering of reflected in the Balance Sheet in the accounts. liability side. [Note; Capital 7300 Misc. Advances appearing in Traffic Accounts (222 A) – This is a Classification of Capital and Other Works Expenses is a separate head and not to be mixed up suspense head of account under the major with this.]. head 146/147(1002/1003) Indian Railway- 1.8.2. Deposits (225 A.) – Under the major Revenue Receipts-commercial/strategic head 845 (8445) Railway Deposit (in K- lines. This account serves the same Deposit and Advances (b)-Deposits not purpose for earnings as ‘Demands bearing interest), there are separate minor Payable’ does for expenses. This head is heads for Deposits of Branch Line debited with all earnings for the realization companies and unclaimed Provident fund of which a Railway Administration is Deposits. The sub-heads under the Minor responsible, irrespective of whether the head “Other Deposits” are described in the earnings relate to its own traffic or to subsequent paragraphs. traffic inter-charged with other Railways (1) “Unpaid Wages” – Wages and and credited with the realization of all such allowances of staff not paid to them by the earnings. The balance in this account thus Cashier within the stipulated period are represents unrealized earnings either at the taken to the credit of the railway under this stations or in the Accounts Office. The head of account. This head is debited with Balance is reflected in the Balance all subsequent payments made to staff and Sheet, ultimately. Para 3226 A may also is also debited with the amount of unpaid be referred to in this connection. wages transferred to Revenue or Capital heads of account in accordance with para 1.8. Certain other important Heads of 319 A. Accounts are: (2)“Private Companies” – When, under orders of the competent authority, through 1.8.1. Miscellaneous Advances (223 A)– booking is permitted with companies or This is a suspense head of account under other carries who do not bank with a the major head 346/347 (3002/3003)Indian government Treasury moneys due to them Railway-Commercial Lines/Strategic on the apportionment of traffic for the Lines-Working Expenses. This head is month will credited to this sub head of the intended for the booking temporarily, of Deposit account. This credit will be the following classes of transactions cleared by actual payment or by debit (by pending adjustment to final heads of credit to earnings) against moneys account. collected by private companies on behalf of Indian Railways.

Training Manual on Audit of Railway Finance and Appropriation Accounts 25

Participants’ Notes Session 2

(3) “Miscellaneous” – Under this sub-head ---Ledger Balance Adjustment Account. are included Cash Security Deposits, ---Write Off from heads of Accounts earnest money paid by tenderers for closing to balance. contracts, court attachment recoveries, This Account will be used for closing of all deposits by other parties on account of heads of accounts which do not record estimated cost of works to be executed for Railway revenue or expenditure. The them by the railway etc. Unpaid bills of balances, if any, under the debt and contractors will also be credited to this remittance heads, with the exception of sub-head. The debits will consist of the ‘Transfer Railways’ will, however, be refund or repayment of previous credits closed to ‘Balance’. The transaction under and of amounts written-off under the head ‘Transfer Railways’ will be paragraph 321 A. closed to a minor head of “Miscellaneous 1.8.3. Cash (229 A) – This head represents Government Account”, in the books of the the amount held by the Cashier for individual railways and to ‘Balance’ if payment into treasury and the total of cash there is any balance in the books of the imprests with the departmental officers. Railway Board. The transactions under the There is a minor head “Railways” under head ‘Deposits with Reserve Bank the major head 871(old) (8671)(new) - (Railways)’ will be closed to minor head of Departmental Balances under L-Suspense “Miscellaneous Government Account”. and Miscellaneous (c) Other Accounts 1.9. Classification of Railway Revenue, which is debited and credited with all cash Capital & other Works expenditure and transactions as recorded in the General Earnings. Cash Book (A-304) and summarized in the The detailed classification of (a) Revenue General Cash Abstract Book (A-306): the Expenditure is given in Appendix-I, (b) the balance under this account will represent classification of Capital and other Works the amount held by Cashier for payment expenditure is given in Appendix-II and into bank. Similarly, there is a minor head (c) classification of earnings is given in “Railways” under the major head No. Appendix-III of Financial Code, Vol. II. 872(old) 8672(new)- Permanent Cash The list of Major and Minor Heads of Imprest (under L-Suspense and Accounts of Railway Revenue, Capital, miscellaneous (c) Other Accounts) which Debt and Remittance Transactions represents cash imprests held by the adjusted in Railway Books are given in Railway Officers. Appendix-IV of Accounts code, Part-I. 1.8.4. Capital Outlay (230 A) - All The revised classification system Capital transactions under final heads (i.e. envisages a numeric coding scheme with the exception of those under comprising three components indicating Suspense Heads which will be closed to abstract of expenditure, activity of work balances) will be closed to this account. and object of the expenditure respectively. 1.8.5. Net Revenue (231 A) – All revenue Each expenditure is represented by a transactions on account of receipts and distinct numerical code under the Major expenditure under final heads (i. e. with Head, Sub Major Head, Minor head and the exception of those under “Suspense Primary Unit. Heads” which will be closed to balance) 1.9.1. The revenue working expenses of will be closed to this account. Zonal Railways are classified under 13 1.8.6. Miscellaneous Government sub-major heads with a separate Abstract Account (232 A.) – This is a major head for each sub-major head. The Sub-major No. 880(old) 8680(new), under L- heads are divided into minor, sub, and Suspense and miscellaneous (e) detailed heads. The introduction or miscellaneous, and is operated along with abolition or change of nomenclature of any the following minor heads: minor or sub head, the transfer of a sub-

Training Manual on Audit of Railway Finance and Appropriation Accounts 26

Participants’ Notes Session 2 head or detailed head from one minor head 100– General Management including Activity or sub head to another, and any Genl. Management Services (minor head). of arrangement of abstracts are not within the 110– Establishment of the General works. competence of a Railway Administration. Manager (sub head) But the F.A. & C.A.O of a Railway may, 111 –Officers (detailed head) with the approval of the General Manager, 01 –Salary (Primary unit): - Object of introduce a new detailed head within a expenditure. sub-head except when the necessity arises of a new class of expenditure, in which case, the orders of the Railway Board should be obtained as to the sub-head under which the detailed head should appear. When, however, a new detailed head is opened by Railway Administration, the Railway Board should be informed. 1.9.2. The structure of the accounts classification is such that it corresponds to and is in line with the revised classification of the Demands for Grants. While the alpha (i.e. letter of the Abstract) (now two digits number, e.g. ‘A’ or (03) means Demand for ‘General Superintendent & Services’) corresponds to the Demand head, the minor, sub-head and detailed heads of accounts represent classification of the activity from a broad grouping into its details and the last two digits code represent the object of expenditure, called Primary Unit. On computerization of the accounting system the alpha of the abstract classification has been substituted by a numerical code as follows:

A-03, B-04, C-05, D-06, E-07, F-08, G-09, H-10, J-11, K-12, L-13, M-14 & N-12.

Thus, a revenue expenditure is represented by a seven digit number viz. Abstract of expenditure (two digits), Activity of works (Minor Head/Sub Head/Detailed Head) (three digits), Object of expenditure (i.e. what the expenditure is incurred viz. salary, allowances, wages, materials etc.), which is called ‘Primary Unit’ (two digits).

e.g; 03-111-01 represents Salary of Officers in General Manager’s Office. 03 – Abstract ‘A’ i.e. Demand no. 03.

Training Manual on Audit of Railway Finance and Appropriation Accounts 27

Participants’ Notes Session 2

Classification of Revenue Expenditure and Demand for grants of Expenditure

Sl. Demand Group Abstract Name of Demand No. No.

Policy Formulation and 1 Railway Board I Services Common to all Miscellaneous Expenditure (General) Railways 2 (for Zonal Rlys & Metro Rly./Kol.) General Superintendence and General Superintendence and Services on Railways II 3 A Services on Railways (for Zonal Rlys & Metro Rly./Kol.)

Repairs and Maintenance of Permanent Way and 4 B Works. (for Zonal Rlys & Metro Rly./Kol.)

Repairs and Maintenance of Motive Power. 5 C III Repairs and Maintenance (for Zonal Rlys & Metro Rly./Kol.) Repairs and Maintenance of Carriage and Wagons. 6 D (for Zonal Rlys only)

Repairs and Maintenance of Plant and Equipment. 7 E (for Zonal Rlys & Metro Rly./Kol.)

Operating Expenses-Rolling Stock and Equipment. 8 F (for Zonal Rlys & Metro Rly./Kol.)

Operating Expenses-Traffic IV Operation 9 G (for Zonal Rlys & Metro Rly./Kol.) Operating Expenses-Fuel 10 H (for Zonal Rlys & Metro Rly./Kol.) Staff Welfare and Amenities 11 J (for Zonal Rlys & Metro Rly./Kol.)

Miscellaneous Working Expenses. Staff Welfare, Retirement 12 K V (for Zonal Rlys & Metro Rly./Kol.) Benefits and Miscellaneous Provident Fund, Pension and other Retirement 13 L Benefit. (for Zonal Rlys & Metro Rly./Kol. & PUs)

Appropriation to Funds. 14 M (for Zonal Rlys & Metro Rly./Kol.) Railway Funds and Payment VI Dividend to General Revenues, Repayment of loans to General Revenues. taken from General Revenues and Amortization of over 15 Capitalization. (for Railway Board)

N Suspense

Govt. Contribution for Defined Contribution Pension O Scheme.

Training Manual on Audit of Railway Finance and Appropriation Accounts 28

Participants’ Notes Session 2

1..9.3. The Revised Classification of numerical will represent the 2 digits expenditure on works irrespective of corresponding to the sub and detailed head whether they are charged to Capital, DRF, of classification giving the details of the DF, Revenue (OLWR) or RSF have come assets acquired, constructed or replaced. The under a single Demand-16 namely Assets- last Manual which is of two digits will Acquisition, Construction and Replacement indicate the primary unit i.e. objects of (prepared for Zonal Railways/MTPs/PUs expenditure. etc). The Accounting Classification for 1.9.4. For the purpose of link with the works expenditure is in the form of a 7 digit- accounts of the Central Government the Plan 4 Manual alphanumerical code. The first heads will form Minor Heads of Railway Manual which is the alpha indicates the Capital under the Major Heads “546 source of fund viz. Capital, DRF, DF, (presently 5002)-Capital Outlay on Indian Revenue (OLWR) or RSF, as the case may Railway-Commercial lines” and 546 be. The second Manual of 2 digits which is (presently 5003)--Capital Outlay on Indian numerical will represent the standard Plan Railway-Strategic Lines.” The minor Head Heads. The third Manual which is also classifications are as follows:

11 New Lines (Construction) 41 Machinery and Plant 12 Purchase of new lines 42 Workshops including Production units 13 Restoration of dismantled lines 51 Staff Quarters 14 Gauge conversion 52 Amenities for staff 15 Doubling 53 (i) Passenger Amenities (ii) Other Railway user Amenities. 16 Traffic facilities-Yard remodelling 61 Investment in Government Commercial and others under takings –Road services. 21 Rolling Stock 62 Investment in Government Commercial undertaking 31 Track renewals 64 Other specified works 32 Bridge work 71 Stores suspense 33 Signaling and Telecommunication 72 Manufacturing suspense works 34 Taking over of the wires from P&T 73 Miscellaneous Advances Dept. 35 Electrification projects 81 Metropolitan Transport Projects 36 Other Electrical works

1.9.5. The sub and detailed heads give the In a new line construction project, Pay & break up of the expenditure on assets in its allowances of Departmental Establishment details such as Preliminary Expenses, Land, in connection with Structural Engineering Formation, Permanent Way, Bridges, Works Permanent Way-Railways & Stations and Buildings etc. In the fastening is classified as P-1141-01. Where Classification given in Appendix II, of ‘P’ represents Capital (source of financing) Indian Railway Finance Code, Vol. II the 1100 represents Plan Head for new lines details of sub-heads and detailed heads 1140 represents Sub-head - Structural which have been given for minor heads Engineering Works-Permanent Way. 1100-new lines will be adopted for the other 1141 represents Detailed Head- Rails and minor heads depending upon the nature of fastenings. the asset being created or replaced to the 01 is Primary Unit of expenditure - Pay & extent indicated against the respective head. Allowances of Departmental Establishment. e.g; of classification of a Capital That can be easily clarified as follows Expenditure is as follows: through a table:

Training Manual on Audit of Railway Finance and Appropriation Accounts 29

Participants’ Notes Session 2

Minor Head Sub Head Detailed Head 1100-New 1140- 1141-Rails Lines Structural and (Construction) Engineering fastenings Works- Permanent Way.

01- Indicates Primary Unit for Pay & Allowances of Departmental Establishment.

1.9.6. The earnings of Railways are classified under three Sub major Heads with a separate abstract for each Sub major Head, viz:

Earnings from 1 Abstract “X” Coaching traffic Earnings from Goods 2 Abstract “Y” traffic 3 Abstract “Z” Sundry other earnings.

The Sub major Heads are divided into Minor, Sub and detailed heads.

Thus the detailed head “Season and Zone tickets” will be referred to as “X-122” (X- one-two-two).

1.9.7. It is not within the competence of Railway Administration to introduce, abolish, change the nomenclature or re- arrange any of the Sub major, minor and sub-heads. They may, however, introduce or abolish any of the detailed heads under any of the sub-heads. The various heads of classification will be referred to by the numbers allotted to them prefixed by the letter of the Abstract under which they occur.

Training Manual on Audit of Railway Finance and Appropriation Accounts 30

Participants’ Notes Session 2

Structure of Railway Accounts

Part-I- Consolidated Fund of India Revenue

Receipt Expenditure

Major Head A. Tax Revenue Civil Heads Civil Heads. 134-Provisional Extra Ordinary Family Pension (NPS) etc. (a) 0021-Taxes on Income & Expr. 2049-Interest Payment, 01- Interest on other obligations. (social (b) 0049-Interest, Receipt, Dividend & Profit. service (b) Social welfare & Nutrition. (c) 0050-Dividend & Profits. 2210-Medical & Public Health (d) 0071-Contributions & Recoveries towards 2211-Family Welfare (Other services etc.) Pension & Other retirement benefits. 2235-Social Security & Welfare (CGEIS) (e) 0210-Medical & Public Health. Railway Heads (f) 0216-Housing -01-Govt. residential Bldg. (3001-Policy formation, Direction, Research and other (g) 0235- Social Security & Welfare miscellaneous organizations)-Rly. Board item (A) Comml. Lines B.Non Tax Revenue. C.Other Non Tax Rev. (B) Strategic Lines -Deduct amount met from Pension fund. Major Head –Railway Heads. 3002-Indian Rly. Commercial lines- Working expenses} Deduct 1001-Indian Railway Misc. Reciepts-(Comml. & 3003-Indian Rly. Strategic lines- Working expenses) } amount Strategic lines) met from Pension fund 1002– Revenue receipts -(Comml. lines)- Revenue 3004-Indian Rly. (OLWR) .Receipts. 3005- Payment to Genl. Revenues. Suspense 3006-Appropriation from surplus etc (At Rly Board Level) 3007-Repayment of loans taken from Genl.Rev. (At Rly. Board 1003-Indian Rly. Strategic Lines-Rev.Recpts. level) 2016-Audit

Sub Major Head Sub Major Head (3002)- Grant Nos. 3 to 13 (Abstract A to L & M) (under 1002 & 1003) N. Suspense (Abstract X-Coaching Earnings), Abstract Y- Goods Earnings Abstract Z – Sundry Other earnings. Minor Head (100 to….) Under 3001 1.Rly.Board 2. Surveys 3.Research, design & Standard Orgn. Minor Head Under 1001- 4.Statutory Audit etc. (100…800) for each grant Under 3002 & 3003 1. Govt. share of surplus profit.(103) 3003-same as 3002 2. Sale of land of subsidized Cos.(104) 3004- Transfer amount from Major Head 5002 & 3. Receipts from RRB (105) 5003 (OLWR) 4. Misc. Receipts.(200). 3005- Dividend to Genl. Revenue 5. Subsidy from General Revenue towards 3006-Appropriation from Railway Fund (DF, CF, dividend relief.(102) (At Rly.Bd.Level) RSF etc.) Minor Head under 1002 3007-Repayment of loans, Interest on Loans. (100) to……) under X, Y & Z separately. 2016- Railway Audit Offices. Deduct-Refund. Revenue (Traffic) (under Major Head Susp. 1003- Minor Head (100……)

Sub Head (110) to ….

Sub Head (110) to …. Detailed Head (111) to ….

Detailed Head (111) to Primary Unit ….

Training Manual on Audit of Railway Finance and Appropriation Accounts 31

Participants’ Notes Session 2

Capital, Public Debt-Loan etc.

Capital Account of Economic Services Debt Head within Consolidated Fund (Capital Accounts of Railway) (F. Loans and Advances)

Receipt Expenditure Receipt Expenditure

Govt. grants Loan Major Head Major Head - and deductions 5002- Capital outlay on Recoveries made from under same (i) 7475 (Loan for Indian Railway Cooperation), Revenues (Commercial lines) & heads as Revenue (ii) 7610 (loan to Govt. 5003 Capital outlay on servant) Indian Railway (Strategic (iii) 7615 (Misc. Loan) lines) Deduct- Receipts on Capital A/c. Deduct- Amount met from DRF, DF, CF, PF, RSF etc. Transfer- Amount to Major Head 3004 Minor Heads- [OLW(R) ] from where (i) Consumer co operatives. expenditure met. (ii) HBA, purchase of conveyance, festival advance & other advances. (iii) Misc. loans

Sub Major Head- Grant No. 16 (P, Q, R, S, CF, RSF, SRSF)

Minor Heads (PH 1100.)

Sub Head (PH 1110

Detailed Heads (PH 1111.)

Primary Units

Training Manual on Audit of Railway Finance and Appropriation Accounts 32

Participants’ Notes Session 2

Part-II- Contingency Fund. 8000-Contingency Fund-same as under the Consolidated Fund. Expenditure is reimbursed from Consolidated Fund. Part-III Public Accounts of India.

Debt (other than included in Part I), Remittance Deposit & Advances (a-)Money orders, Remittances and adjustments (I-Small Savings, Provident Fund etc, J-Reserve between officers rendering accounts to the same Fund, K-Deposit & Advances, L-Suspense & Accountant General and other Remittances, Miscellaneous) (b) Inter-Government adjustment accounts, (c) Exchange accounts)

Receipt Expenditure Receipt Expenditure

Major Head Major Head (Same heads as in Major Head- (Same heads as in Major Head – Expr. Column) (I) I-Small Savings, Provident Fund Expr. Column) M-Remittances-Money 8005-State PF-Civil, Railways, Other Orders, Remittances and PF adjustments between officers 8011-Central Govt. employees GIS rendering accounts to the J-Reserve Fund (bearing interest) same Accountant General, 8115 DRF, Inter Government adjustments 8117-DF, Minor Head Minor Head account, accounts between 8118-CF, Railways. 8119-RSF 8660/101-PAO (Suspense) 8121-Other Reserve fund 8660/102-AG Suspense 8230-Apprn. to SRSF. 8660/108-Public Sector Bank K)-Deposit & Advances (8337 to 8552) (Suspense) -deposit bearing interest, deposit not 8660-109-Reserve Bank bearing interest, & advances Suspense. L-Suspense & Miscellaneous to - a) 8660/117- Transaction on 8658 Suspense, b) Other accounts behalf of Reserve Bank 8671-Deptt. Balances, 8672-Permanent 8660/125-Accounts with Cash Imprest, 8675-Deposit with Govt. of Pakistan (Rlys). Reserve Bank), c) Accounts with 8660/132-Transaction relating Governments of foreign countries to Bangladesh. (8679), d) miscellaneous Govt. 8660/132-Misc. Suspense. A/cs.(8680). 8670-Cheques & Bills. 8677- Remittance into Bank (Revenue) 8782-Cash remittances and adjustments between officers rendering accounts to the The Minor Head same Accountant I) GPF, SRPF etc, others (under 8005) Minor General/Accounts heads are J)DF, DRF, Pension Fund, CF, Head Officer,(Transfer within the subject to RSF(8115-8117)) 8782- same Railway) K)-Indian Railway deposits etc, changes Transfer 8788- Adjusting A/cs. With Departmental advances.(8337-8552) within the P& T by the L)-Suspense A/c.-Railways, same 8789-Adjusting A/c with Railway Transaction on behalf of Reserve Bank, Railways Defence Transactions with Bangladesh etc., DA Board 8797- C 8790- Adjusting A/c with deposit suspense etc.(8658) A/cs. Between States etc.(Railways). from time (under 8680)-Miscellaneous-Ledger Railways. 8797- Exchange Account C- to time. balance adjustment a/c, write off from Accounts between Railways. heads of account closing to balance.

Training Manual on Audit of Railway Finance and Appropriation Accounts 33

PPT Slide Session 2

Slide 1 Slide 4 Railway Accounting System and Structure of Railway Accounts. • For the purpose of reflection of Session: 2 commercial activities the Railways prepare Profit & Loss Account and Block Account including Capital Statement & Balance Railway Sheet. • Profit & Loss Account show the profit or loss made by the Railways during a year Accounting System and Balance Sheet reflects the Assets and Liabilities, debtors and creditors and and Structure of various fund balances as well as Cash balance at the end of the financial year. Railway Accounts.

Training Module on Audit of 4 Railways; Session: 2

Slide 2 Learning Objective Slide 5 Railway Accounting System and In this session, the participants will Structure of Railway Accounts. be able to understand the basic • The Railway accounts are maintained structure of Accounts of Indian separately for revenue and capital Railways and Accounting System. purposes and divided into three parts The participants will, at the end of as in case of a Govt. accounts. the session, be able to grasp the They are: basic concepts of the Indian • Consolidated Fund of India, Railways Accounting system and its structure which will help them to • Contingency Fund of India, focus on audit issues in the practical • Public Accounts. work environment.

Training Module on Audit of 2 Training Module on Audit of 5 Railways; Session: 2 Railways; Session: 2

Slide 3 Railway Accounting System and Slide 6 Railway Accounting System and Structure of Railway Accounts. Structure of Railway Accounts. • The Government Accounts are kept purely • The format of keeping of Railway on cash basis while the accounts of the Railways are kept on accrual basis. accounts under Major/Sub- • The accounts which are prepared in major/minor/sub-heads/detailed accordance with the requirements of heads, is laid down in Appendix IV of commercial accounting in Railways are Indian Railway Accounts Code, Part-I. commonly known as "Capital and Revenue Accounts“. • Railway Accounts are maintained • The accounts of the Railways maintained under Capital & Revenue Heads to in accordance with the requirements of reflect the Capital and Revenue Government accounts are collectively termed as ‘Finance Accounts’. Income & expenditure.

Training Module on Audit of 3 Training Module on Audit of 6 Railways; Session: 2 Railways; Session: 2

Training Manual on Audit of Railway Finance and Appropriation Accounts 34

PPT Slide Session 2

Slide 7 Railway Accounting System and Slide 10 Railway Accounting System and Structure of Railway Accounts. Structure of Railway Accounts.

• Railway has two sources of receipt viz. (i) Govt. grant (i.e. grant from General revenue • Account heads operated for the through budgetary support) and share of purpose of maintaining a link diesel cess from Central Road Fund and • (ii) Generation of its own revenue through between Commercial Accounts of the passenger and goods traffic earnings and railway and the Government accounts other miscellaneous earnings. are (i) Demands Payable, (ii) Labour, • Govt. grant is meant for acquisition of concrete assets. (iii) Traffic Accounts. These are • Own revenue is meant for working expenses Suspense heads. (maintenance and operation of activities) of Railway and creation of some funds for development works, replacement and renewal of assets.

Training Module on Audit of 7 Training Module on Audit of 10 Railways; Session: 2 Railways; Session: 2

Slide 8 Railway Accounting System and Slide 11 Structure of Railway Accounts. Railway Accounting System and Structure of Railway Accounts. • The Railway expenditure is allocated to (i) Capital (P), (ii) Capital Fund (CF) (iii) Development Fund (DF), (iv) Railway Safety •Various important Heads of Accounts are fund (RSF), (v) Depreciation Reserve Fund (1) Misc. Advances (2) Deposits (including (DRF), (vi) Open line Works (Revenue) deposit on Unpaid wages, deposits from [OLW (R)] and Ordinary Revenue. private companies & Misc. deposits), (3) • Rules regulating the classifications of Cash including amount held by the Cashier transactions under these heads are and the total of cash imprest with the prescribed in Chapter VII of the Indian departmental officers,(4) Capital outlay, Railway Finance Code, Vol. I. (F- I). (5) Net Revenue, (6) Misc. Govt. Account.

Training Module on Audit of 8 Railways; Session: 2 Training Module on Audit of 11 Railways; Session: 2

Slide 12 Slide 9 Railway Accounting System and Railway Accounting System and Structure of Railway Accounts. Structure of Railway Accounts • To give an overall picture of the expenditure of a capital nature •Miscellaneous Government Account incurred by the Railways, separate is a major Head No.8680, under L- account is compiled called Block Suspense and Miscellaneous (e) Account. Miscellaneous and operated along • It exhibits the entire expenditure of with the following minor heads: capital nature irrespective of the head of account to which it has actually ---Ledger Balance Adjustment been charged. Account. • The Loan Account created out of ---Write Off from heads of Accounts general budgetary support gives only closing to balance. the extent of expenditure actually •This is used for closing of all heads charged to capital head. of accounts which do not record Training Module on Audit of 9 Railway revenueTraining Moduleor expenditure.on Audit of 12 Railways; Session: 2 Railways; Session: 2

Training Manual on Audit of Railway Finance and Appropriation Accounts 35

PPT Slide Session 2

Slide 16 Slide 13 Railway Accounting System and Railway Accounting System and Structure of Railway Accounts. Structure of Railway Accounts. • The revised classification system • The transactions under the head Transfer envisages a numeric coding scheme Railways’ are closed to a minor head called comprising three components “Miscellaneous Government Account”, in the indicating abstract of expenditure, books of the individual Railways and to activity of work and object of the ‘Balance’ (if there is any balance) in the expenditure respectively. books of Railway Board. • Each expenditure is represented by a • The transactions under the head ‘Deposits with Reserve Bank (Railways)’ is closed to distinct numerical code under the the same minor head “Miscellaneous Major head, Sub Major head, Minor Government Account”. head and Primary Unit. Contd……………………………………..S/17

Training Module on Audit of 13 Training Module on Audit of 16 Railways; Session: 2 Railways; Session: 2

Slide 14 Railway Accounting System and Railway Accounting System and Structure of Railway Accounts. Slide 17 Structure of Railway Accounts. Classification of Railway Revenue, • The alpha (i.e. letter of the Abstract) Capital & other Works expenditure e.g. ‘A’ (now two digits number) e.g. and Earnings. ‘03’ means Demand for ‘General • The detailed classification of (a) Revenue Superintendent & Services’ Expenditure is given in Appendix-I, corresponds to the Demand head. • (b) the classification of Capital and other • The minor, sub-head and detailed Works expenditure is given in Appendix-II heads of accounts represent and classification of the activity from a • (c) classification of earnings is given in Appendix-III broad grouping into its details. of Indian Rly. Financial Code, Volume- II. • The last two digits code represent the object of expenditure, called Primary Training Module on Audit of 14 Unit. Training Module on Audit of 17 Railways; Session: 2 Railways; Session: 2

Slide 15 Railway Accounting System and Slide 18 Railway Accounting System and Structure of Railway Accounts. Structure of Railway Accounts. • In the revised Accounts classification, the • The structure of the accounts alpha of the abstract classification has classification is such that it been substituted by a numerical code as corresponds to and is in line with the follows: revised classification of the Demands A-03, B-04, C-05, D-06, E-07, F-08, G-09, for Grants. H-10, J-11, K-12, L-13, M-14 & N-12. • The revenue working expenses of • A revenue expenditure is represented by a Zonal Railways are classified under seven digit number viz. Abstract of 13 sub-major heads (total 15 heads expenditure (two digits), Activity of works for Indian Rlys.) with a separate Abstract for each sub-major head. (Minor Head /Sub Head/ Detailed Head) (three digits), Object of expenditure viz. • The Sub-major heads are divided into salary, allowances, wages, materials etc., minor, sub, and detailed heads. (two digits) – also called ‘Primary Unit’. Training Module on Audit of 15 Training Module on Audit of 18 Railways; Session: 2 Railways; Session: 2

Training Manual on Audit of Railway Finance and Appropriation Accounts 36

PPT Slide Session 2

Slide 19 Railway Accounting System and Slide 22 Railway Accounting System and Structure of Railway Accounts. Structure of Railway Accounts. • The Revised Classification of • For the purpose of linking with the accounts of the Central Government expenditure on works irrespective the Plan heads will form Minor Heads of whether they are charged to of Railway Capital under the Major Capital, DRF, DF, Revenue (OLWR) Heads “546 (presently 5002)-Capital or RSF have come under a single Outlay on Indian Railway-Commercial lines” and 546 (presently 5003)-- Demand-16 namely Assets- Capital Outlay on Indian Railway- Acquisition, Construction and Strategic Lines.” Replacement (prepared for Zonal • There are 25 (Plan Heads) Minor Head Railways/MTPs/PUs etc). for classifications of Capital Expenditure.

Training Module on Audit of 19 Training Module on Audit of 22 Railways; Session: 2 Railways; Session: 2

Slide 20 Railway Accounting System and Slide 23 Railway Accounting System and Structure of Railway Accounts. Structure of Railway Accounts. • The Accounting Classification for The earnings of Railways works expenditure is in the form of a • are classified under three Sub major 7 digit - 4 module alphanumerical Heads with a separate abstract for code. each Sub major Head, viz: Abstract “X”- Earnings from Coaching traffic, • The first module which is the alpha Abstract “Y”- Earnings from Goods indicates the source of fund viz. traffic & Abstract “Z”- Sundry other Capital, DRF, DF, Revenue (OLWR) or earnings. RSF, as the case may be. • The Sub major Heads are divided into • The second module of 2 digits which Minor, Sub and detailed heads. is numerical will represent the standard Plan Heads. Training Module on Audit of 20 Training Module on Audit of 23 Contd………………………………………Railways; Session: 2 .S/21 Railways; Session: 2

Slide 24 Slide 21 Railway Accounting System and Railway Accounting System and Structure of Railway Accounts. Structure of Railway Accounts. • The third module which is also numerical will represent the 2 digits • It is not within the competence of corresponding to the sub and detailed Railway Administration to introduce, head of classification giving the abolish, change the nomenclature or details of the assets acquired, re-arrange any of the Sub major, constructed or replaced. minor and sub-heads. • They may, however, introduce or • The last module which is of two digits • The last module which is of two digits abolish any of the detailed heads will indicate the primary unit i.e. under any of the sub-heads. object of expenditure.

Training Module on Audit of 21 Training Module on Audit of 24 Railways; Session: 2 Railways; Session: 2

Training Manual on Audit of Railway Finance and Appropriation Accounts 37

Participants’ exercises Session 2

Questions: (2) Three parts, (3) Four parts 1. Which one of the following 5. What are the two sources of receipts Statements is correct? of Railways?

(i) Govt. accounts are kept on accrual 6. Under which heads Railway basis. expenditure are allocated?

(ii) Railway’s accounts are kept on cash 7. What is the difference between basis. Capital & Capital Fund?

(iii) Govt. accounts are kept on cash 8. What is the difference between basis. Capital (Loan Account) & Block Account? (iv) Railway’s accounts are kept on accrual basis. 9. What are the Account heads maintained in Railway for linking between Commercial Accounts of 2. Which of the following Statements is Railway and Government Account? correct? Mention how they are operated.

(a) Accounts which are prepared in 10. What do the following accounts accordance with the requirements of contain? Commercial accounts in Railways are (i) Miscellaneous Advances, called Capital & Revenue accounts and (ii) Deposits, accounts which are prepared in (iii) Cash, accordance with the requirements of (iv) Misc. Govt. Accounts. Government accounts in Railway are called Finance Accounts. 11. What are the three numerical coding components in revised accounting (b) Accounts which are prepared in classification of Railways? accordance with the requirements of Government accounts in Railways are 12. What are the Heads under which called Capital & Revenue accounts and each expenditure is classified? accounts which are prepared in accordance with the requirements of 13. How Sub Major Heads are divided? Commercial accounts in Railway are called Finance Accounts. 14. Write correct answer-

3. For the purpose of reflection of Revenue Working expenses of a Zonal Commercial activities what are the Railway are classified under – accounts and statements prepared by the Railway Administration? (i) 13 Sub major Heads, (ii) 14 Sub Major Heads 4. Identify the correct answer: (iii) 15 Sub Major Heads Accounts maintained separately for (iv) 16 Sub major Heads. Revenue & Capital purposes are divided into-

(1) Two parts,

Training Manual on Audit of Railway Finance and Appropriation Accounts 38

Participants’ exercises Session 2

15. Write correct answer-

Revenue expenditure is represented by following numerical numbers: (1) 7, (2) 8, (3) 9, (4) 10.

16. A Work expenditure is represented by following number of alphanumerical digit:

1. 6 2. 7 3. 8 4. 9

17. The earnings of Railways are classified under following number of alphanumerical digit:

1. 2 2. 3 3. 4 4. 5

18. Who is competent authority to introduce, abolish, change the nomenclature or re-arrange any of the Subs major, minor and sub-heads?

19. Who is competent to introduce or abolish any of the detailed heads under any of the sub-heads?

Training Manual on Audit of Railway Finance and Appropriation Accounts 39

Participants’ exercises Session 2

Answer Sheet Answer 18- Railway Board.

Answer 1- See Para 1.8 of Session 2 Answer 19- Zonal Railway Administration with the approval of Answer 2- Abstract of Expenditure, Railway Board. Activity of Work & Object of Expenditure.

Answer 3- See Para 1.6 of Session 2

Answer 4 – Three parts, viz: 1.Consolidated Fund of India, 2. Contingency Fund of India, 3. Public Accounts.

Answer 5- (i) Grant from General Revenue, (ii) Own Revenue - through Passenger and Goods traffic & other misc. earnings.

Answer 6- Capital, CF, DF, DRF, RSF, OLWR & Ordinary Revenue.

Answer 7- See Para 1.7 of Session 2.

Answer 8- See Para 1.7 of Session 2.

Answer 9- Demands Payable, Labour & Traffic Accounts. See Para 1.7 of Session 2.

Answer 10- See Para 1.8 of Session 2.

Answer 11- Abstract of Expenditure, Activity of Works and Object of Expenditure [Para 1.9 of Session 2

Answer 12- Major Head, Sub Major Head, Minor Head & Primary Unit.

Answer 13- They are divided into Minor Head, Sub Head and Detailed Head.

Answer 14- Sl.no.1 (13 Sub Major Heads).

Answer 15- Sl.no.1 (7 digits) Answer 16- Sl.no.2 (7 digits)

Answer 17- Sl.no.3 (four digits)

Training Manual on Audit of Railway Finance and Appropriation Accounts 40

Session: 3

Different kinds of Accounts and records maintained and prepared by Accounts Office (Open line, Construction, Stores, Workshop & Traffic)

Training Manual on Audit of Railway Finance and Appropriation Accounts 41

Instructor’s Guide Session - 3

Session Title: Different kinds of Accounts and records Session Guide maintained and prepared by Accounts Office. Reference Participants’ Instructor’s Guide Response Session Overview Welcome participants to the session and remind Lecture them that their active participation is critical for the success of each session. Learning Objective Inform: Lecture Given the inputs of overall views of different kinds of Accounts and records maintained and prepared by the Railway Accounts Offices of different wings, viz. Open line, Construction, Stores, Workshop and Traffic) and necessity for their preparation through group discussion, lecture and Power Point slide show, the participants will, at the end of the session, be able to grasp the basic concepts of the Accounts and records maintained by the Accounts Offices and their necessity, which will help them to focus on audit issues in the practical work environment. Basic Concepts Discuss: Lecture with ● Various Accounts and basic records Power Point maintained and prepared by the Accounts Slide Show Office. Session 3 ● Purpose for preparation of various accounts INTRODUC- and contents of these accounts. TION Summarise: Distribute Participants’ Note Session 3 Tell the participants that during the session, we Participants’ discussed various accounts and records Note maintained by the Accounts and their necessity. Invite questions on themes discussed. If participants have any doubts/clarifications about themes, clarify the same. Answer participants’ queries. Thank the participants and bring the session to a close.

Training Method: Interactive Lecture and Power Point Slide Show. Materials Required: Power Point Slides, Projector, White Board, Marker Pen and Participants’ Note.

Training Manual on Audit of Railway Finance and Appropriation Accounts 42

Participants’ Notes Session 3

3.1. Important Books and Records 5. Subsidiary ledgers/registers- In addition and accounts maintained by to the General Books the following accounts Office. subsidiary books are maintained by a Accounts Office, viz. Accounting transactions fall under two (i) Registers of Earnings, distinct headings, viz. (i) cash receipts and (ii) Revenue Allocation Registers, disbursements and (ii) book adjustments. (iii) Registers of Works, The later present transactions either (iv) Register of works expenditure initially accounted for by another classified under capital, Depreciation Accounts Officer- as in case of transfer Reserve Fund, Development Fund, transactions- or adjustments between one Revenue (Open Line Works-Revenue) and accounting head and another, e.g. for issue Safety Fund. of stores from a Stores Depot for revenue (v) Suspense Registers, maintenance purposes, etc. The initial These books are posted directly from record for cash transaction will be a cash the vouchers or from an allocated voucher or bill. For book adjustment, it is abstract or summary statement of a a journal slip. Cash transactions are group of vouchers containing similar rendered in the Cash Book, while journal allocations immediately after they slips are entered in the journal. For (vouchers) have been passed in compiling the monthly and annual accounts. accounts, certain essential records are maintained by the Accounts Office Suspense registers in the following heads which are called General Books. These are maintained: are as follows: (i) Demands Payable Register, (ii)

Miscellaneous Advance Register, (iii) F. 1. Daily Abstract of Cash Transactions or Loans and Advances Register, (iv) Deposit the General Cash Book, Unpaid Wages Register, (v) Deposit 2. Monthly Classified Abstract of Cash Miscellaneous Register, (vi) Stores Transactions or the General Cash Abstract suspense register & (vii) Workshop and Book, Manufacture suspense Register. Separate 3. Journals, registers for Miscellaneous Advances 4. Ledgers. (Capital), Misc. Advances (Revenue),

Loans and Advances to Govt. Servants are Two sets of Journals and ledgers are also maintained. In Construction maintained, one for Revenue Accounts and organization separate Cash Book is also other for Capital Accounts, since separate maintained. A separate Cash Register in Accounts are maintained for these two Form A 2722 is maintained by the Traffic classes of transactions. Only one Daily Accounts Department, apart from main Abstract and Monthly Abstract of Cash Cash Book maintained by Open Line. Transactions need be maintained Traffic Cash Book is discussed later. subsidiary to the Revenue Ledger. All cash transactions of a capital nature should be The contents of the various books of allocated in the cash accounts of an open accounts are narrated below in brief:- line to “Transfer Railway Capital”, and the detailed allocation to final and Suspense 3.1.1. Daily Abstract of Cash heads of such transactions chargeable to Transactions or General Cash Book Capital, DRF, DF, SF and OLWR should (Form A304) - It records daily all cash be effected in the Capital Account by received from station remittances [(from means of Journal entries in the Capital Cash Check Sheets (A1943)], cheques Books, a per contra debit or credit being drawn on banks [from the Requisition afforded to “Transfer Railway Revenue”. Training Manual on Audit of Railway Finance and Appropriation Accounts 43

Participants’ Notes Session 3 for cheques (A 1111)], receipts from of a group of vouchers containing similar miscellaneous items (from the counter allocations immediately after they (the foils of the cash receipts granted), vouchers) have been passed in accounts. In recoveries made from bills passed for cases where an allocated abstract payments (recorded from the various (summary) is used for posting the credit heads of account as abstracted in subsidiary registers, these will be filed Form A-1109), unpaid amounts remitted along with the group of vouchers which by the Cashier [recorded from the list of have been summarized therein. unpaid wages (A 1957)], in the debit 3.1.5. Revenue Allocation Register side and remittances to Banks [(from the (A312) -Separate Allocation Register is Bank Remittance Receipts (A1942)] & maintained for each Abstract of Revenue payments (from the various debit heads Expenditure under Major Heads 346 & of account as abstracted in Form A 347 (3002 &3003) - Indian Railways- 1109)] in the credit side. Working Expenses. Transactions are 3.1.2. Monthly Classified Abstract of posted separately for expenses, whether by Cash Transactions or the General Cash cash payment or book adjustments. Abstract Book- (Form A 306) - It is 3.1.6. Register of Earnings (A313) - posted daily from the totals in the Daily Separate Register for each Abstract of Abstract of Cash Transactions. It is kept in Revenue Earnings under Major Heads 146 two parts, one part for receipts (debits) and & 147 (1002 & 1003) -Indian Railway other for disbursements (credits). It should Revenue Receipts. The Register of be totaled after the transactions of the last Earnings record the earnings under all the of the month have been posted. detailed heads of classification prescribed 3.1.3. Journals (A308) – These are in Volume II (Appendix-III) of Indian prepared for adjusting Revenue or Capital Railway Financial Code. heads from the journal slips as per form 3.1.7. Works Registers. (E1473) – It is a prescribed in A308 or from the original collective record of expenditure designed: vouchers. One head is debited and another (i) for effecting control of expenditure on head is credited. Detailed particulars of the works with reference to estimates, by adjustment entries and the heads debited facilitating comparison between the and credited are noted in the journals. expenditure incurred on each work and the These are generated by the concerned detailed provision made in the estimate for sections and sent to Accounts for work; incorporation in the accounts. (ii) for effecting budgetary control, by 3.1.4. Subsidiary Accounts Records/ facilitating a comparison between the Registers. budget allotment for the work and the Following subsidiary records/ books/ actual expenditure to the end of the month; registers are maintained in addition to the and General Books mentioned above. (iii) to enable any material modification These records are of the utmost occurring being spotted. importance in as much as they are Single set of Works Register--Detailed designed to exhibit the details of the Register of Works should be kept for all transactions under Revenue, Capital, sanctioned works including those Depreciation Reserve fund, Development chargeable to Revenue, new minor work fund, Revenue (Open line Works- showing the amounts of estimates Revenue), Safety Fund, and Suspense sanctioned. This register is maintained in Heads duly analyzed under the prescribed the Accounts Office both for open line detailed classification. These books are and construction organization. This posted directly from the Vouchers or from register reflects the Name of Work, and an allocated abstract or summary statement the authority that sanctioned the work, the

Training Manual on Audit of Railway Finance and Appropriation Accounts 44

Participants’ Notes Session 3 amount of estimate sanctioned, the budget Registers by debit to 'materials-at-site allotment and details of expenditure on account/final head' and contra credit to each work by heads of accounts. Name of 'value of materials received in advance of the various funds like Capital, DRF, DF, payment to contractors' referred to above. SF, OLW (R), Revenue from where All payments chargeable to this head expenditure being incurred, date of should be made after being posted on the commencement and completion of the debit side in the subsidiary register under works. the initials of the Controlling Officer. The The Register may be arranged by detailed balances in the subsidiary register should heads of classification (for works falling be reconciled monthly with those in the under the demand relating to creation and Works Registers. replacement of assets) separate folios Thus, for stores purchased for specific being set apart for each work. At the close works the transactions will not find a place of every month the Register of Works in the Stores budget under this procedure. should be totalled up and the monthly, Arrangements should, however, be made yearly and 'up-to-date' totals for each work to ensure that the total figures of purchases struck. The Register of Works should be during a year for specific works which do preserved for a period of 10 years. not pass through Stores Account are In posting the Register of Works in the available with the Railways for statistical case of works, the accounts of which are purposes etc. kept by sub-heads, the last column relating 3.1.8. Suspense Registers. to each work will always show the 'total These registers reflect transactions which charges', the last column but one will show cannot immediately be charged to final value of materials received in advance of heads. payment 'to contractors', the last column Rules relating to the maintenance of but two will show the value of the detailed registers for recording the 'materials-at-site' and the last column but transactions pertaining to the suspense three will Show advance payment for heads under Stores and Workshop supply of materials'. Suspense are laid under separate headings Value of materials received in advance for Stores and Workshops. of payment to contractors.--When the materials are received before payments Rules regulating maintenance of other have been made, such transactions should Registers are detailed below: be credited to a separate suspense head 3.1.8.1. Demands Payable Register (315 "Value of materials received in advance of A) – Details in support of the debit to the payment to contractors" in the Register of head Demands Payable in the monthly Works under the head of account that will General Cash Abstract Book are recorded record a major part of the cost of work, the in this register by sub-major heads of credit under the suspense head should be revenue classification. Before closing the cleared as and when payment is made. Revenue Accounts for a month, entries in A Subsidiary Register for all purchase this Register are totaled up and the totals orders for such items should be maintained reconciled with the General Cash Abstract work wise by the Accounts Office and Book as well as with the Cash totals in the entries on credit side should be made Revenue Allocation Register. A journal under the initials of sub-head/Section slip is then prepared crediting the head Officer (Accounts) from the Receipt Note “Demands Payable” and debiting the Part III received duly evaluated from various Abstracts of the Revenue Executive Officers concerned in terms of Accounts. Para 739-S. Receipt Notes should simultaneously be posted in Works

Training Manual on Audit of Railway Finance and Appropriation Accounts 45

Participants’ Notes Session 3

3.1.8.2. Miscellaneous Advance and balance is shown in the register. Register (Capital), Miscellaneous Unpaid item other than unpaid wages of Advance Register (Revenue), Loans Railway staff amounting to more than and Advances to Government Rs.100 each should be allowed to remain Servants (320 A)- Separate suspense the Register of Deposit for a period of registers for above mentioned items are three years or until it is practically maintained in the Format (A320) to certain that no further claim for payment record in details, from original will be made. The sum then is credited to documents, opening balance at the the detailed head “Miscellaneous beginning of a financial year, detailed receipt” or “Traffic Account” according voucher reference together with the to its nature i.e whether works or amount to be Debited or Credited during revenue transaction. the month and Balance to the end of the 3.1.9. Stores Accounts. month., month and year from .which The following heads of Accounts under outstanding amount originated. Monthly Capital & Revenue are generally operated reconciliation of the debits, credits and upon in the Books of Accounts of the balances of these accounts with the Stores Accounts Office: General Books of the Railway should be Capital: made regularly. Major Head- 5002 & 5003 Capital 3.1.8.3. Deposit Unpaid Wages Outlay on Indian Railway-Commercial Register (1959 A) - When bills are Lines & Strategic Lines and Minor Head returned by the Pay Office/Cash Office 7100 –Stores suspense, and to the Accounts Office there may be 7300- Miscellaneous Advances some unpaid items. The amount so followed by Sub heads and sub detailed unpaid are returned by the Pay heads: The figures are ultimately Office/Cash Office along with a reflected under Capital and Revenue statement (in form A1959) called Unpaid Accounts. Wages Statement which is treated as The following are the heads of Accounts Cash Voucher exhibited in the receipt under Revenue: side of the Daily Abstract of Cash o Working Expenses Transactions. The individual item in the o Revenue Abstracts statement is transcribed into an Unpaid o Misc. Advances Wages Register. When the unpaid o Deposit Miscellaneous amount is claimed by the concerned staff o Transfer Divisional subsequently the same is drawn through o Transfer Railways a Pay Order against which payment is The following annual accounts should be made and the amount is cleared from the submitted by the Stores Accounts Office to Unpaid Wages Register, subject to that it the Books Section of Open line on the should be ensured before payment of prescribed date: such amount that the amount was not o Capital & Revenue Accounts paid from the imprest or floating cash of o Finance Accounts the Cashier. o Appropriation Accounts. 3.1.8.4. Deposit Miscellaneous (321 A)- Detailed instructions regarding the This register contains miscellaneous preparation of each of the above accounts deposits received by the Railway appear in the Accounts Department Administration from various accounts, Code. Material in connection with the viz. Contractors’ Earnest Money, preparation of (a) and (b) above is Security Deposit, misc. other deposits. generally obtained from records When payment is made from such maintained in the Stores Accounts Branch deposited amount the amount is cleared itself. Whereas the explanations for

Training Manual on Audit of Railway Finance and Appropriation Accounts 46

Participants’ Notes Session 3 variations between the original grant and of earnest money is refunded or the sales the final grant and between the latter and tax collected is remitted to State the actual expenditure under the various Government the head "Deposits- sub-heads of the Appropriation Accounts, Miscellaneous" is debited by credit to will be framed in consultation with the "Cash (Railway Revenue)". In case in executive, if necessary. These should then which the earnest money/ security be incorporated in the accounts deposit is adjusted towards the sale price submitted to the Book Section. For this the corresponding credit would be to purpose statements showing the figures of "sales". All debit entries, in the register the original grant as compared with the towards refund etc. of Security Deposit final grant and the latter with the actual or earnest money or the sales tax expenditure, should be sent to the payment to the State Government, which Controller of Stores or other executive affect the credits under "Deposits- officer concerned, sufficiently in advance Miscellaneous Stores", should be to admit of the accounts being sent to the initialed by the Accounts Officer Book Section in time. (Stores). To keep accounts on above following 3.1.9.3. Miscellaneous Advances important Records and Registers are Account Register (Capital) (2739.S)- maintained in Stores Accounts Office. The issue notes chargeable to 3.1.9.1. Fund Register: Miscellaneous Advances Account should Budget Allotment - The funds sanctioned be posted into this register sub-detailed each year for Purchases are in respect of: head wise and the clearance of the debits (i) Stores for Capital Works, watched there from. At the end of each (ii) Stores for works chargeable to the month the debits and credits and the Depreciation Reserve Funds, Development balances in each month should be Fund, Open Line Works (Revenue): and reconciled with the General Books and a (iii) Stores required for general purposes. certificate of reconciliation endorsed on The lump-sum allotments are distributed the register on the same lines as in the case by the General Manager between the of the Deposits-Miscellaneous Register. several heads of stores appearing in Form The sub-detailed heads under S. 506. These distributions are intimated to Miscellaneous Advances (Capital) are - the Stores Accounts Office where it should (a) Miscellaneous Advances (Printing), be seen at the time of entering into (b) Miscellaneous Advances (Clothing), commitments, that the expenditure likely (c) Miscellaneous Advances (Ferrous), to be incurred does not exceed the cash (d) Miscellaneous Advances (Others), allotment as distributed over the various (e) Miscellaneous Advances (Risk & heads. Cost/Production Units). A Manuscript register (in the name of Funds Register) is, therefore, maintained The sub-detailed head (Other) should be for the purposes of watching the operated for recording all items of incurrence of liabilities against the expenditure which can not be recorded. budget grant distributed. 3.1.9.2. Deposits Miscellaneous 3.1.9.4.The Stock Adjustment Account Account (Issue) Register (2729 S.)- (2740S)- The Stock Adjustment Account The amounts paid by the purchaser in should be maintained in Form S. 2740 in advance as Security Deposit or Earnest the following parts, each part representing Money or Sales Tax collected for Stores the record of the particular class of sold are credited to the head Deposits - transactions, noted against each. Miscellaneous Accounts (Issue) and posted in this register. When the Security

Training Manual on Audit of Railway Finance and Appropriation Accounts 47

Participants’ Notes Session 3

I. Results of Stock Verification : Clearance of the Balance in the Stock P. 7181-Differences between the Ledger Adjustment Account is done as per instructions provided in Para 2742 S. balances and the ground balances

discovered by the Stock Verifier. After the accounts for March have been P. 7182 -Differences between the Ledger closed, a statement showing the gross surpluses and deficiencies transferred to balances and ground balances discovered Stock Adjustment Account during the year during Departmental Verification. under the headings mentioned in II. P. 7183-Differences arising out of paragraph 2740 and showing also how the revaluation of stores due to market balances under each heading have been fluctuation of purchased stores. adjusted against the several grants of earnings during the year should be P. 7184-Differences arising out of prepared and submitted to the General revaluation of stock due to market Manager for his information fluctuation of shop manufactured stores. 3.1.9.5. Depot Transfers (2746 S)/Register of Stores in Transit. -When III. Miscellaneous Items : the stores issued during a month from a depot are not received in the receiving P. 7185-Differences in book value and depot in the same month, such items value realized in Sales. would not appear in the accounts of the receiving depot. The issuing depot would P. 7186-Losses on classification of new submit summaries of issues to the stores as second hand scrap. receiving depot concerned and that the P. 7187-Other Losses i.e., breakage, receiving depot should note down on the leakage or loses in transfer. summaries the dates of account of each of the items as they are posted in the priced P. 7188-Rounding off. ledgers. At the same time a preformed summary of receipts is prepared for the P. 7191-Miscellaneous items. month by the Accounts section as per guidelines of paragraph 2708 S. At the end P 7192-Value brought on books through of the month, unaccounted items in the depot stock sheets pending receipt of issue summaries should be posted into a voucher. register styled "Register of Stores-in- A Form of Stock Adjustment Account is Transit" and their clearance is watched given below: carefully. When any such item is accounted for later, the credit should be Form S 2740 posted in the register in the column for the STOCK ADJUSTMENT ACCOUNT month of accounted and against the debit entry for the item concerned. Separate registers should be maintained for each Particulars and Amount Month in Reference to reference to (Original entry) which orders depot for documents cleared 3.1.9.6. Stores-in-Transit 'Purchases' originating the debit or credit (2748 S) - The credits to Purchases Account are posted from the Receipt Notes Debit Credit granted by the Stores Depot. In cases where Inspection and Receipt Work is centralized such receipts are granted on behalf of the Stores Department by the Receiving and Inspecting Officer. The

Training Manual on Audit of Railway Finance and Appropriation Accounts 48

Participants’ Notes Session 3 posting of such receipts in the priced Contractors for different works- ledgers as a contra debit entry will appear Miscellaneous Advances. Suspense however only when the material has been Accounts Registers have to be received by the Depots stocking the items maintained sub-detailed head wise in and accounted for by it in its priced connection with transactions of certain ledgers. In such cases the Receipt Notes categories such as sales, issues on granted by the Receiving and Inspecting suspense account, etc. in order to Officer towards the close of a month maintain proper accounts to facilitate would appear as credits to Purchase recovery of dues to the railway or watch Account whereas the complementary clearance of outstanding items. debits would not appear in the same month Total figure of Stores Suspense is in the priced ledgers as the materials reflected under the Major Head 5002 would not have reached the stocking depot & 5003 Capital Outlay on Indian within the month. Railway-Commercial Lines & Strategic 3.1.9.7. Priced ledger. Lines and Minor Head 7100 –Stores Stores Accounts Office maintains a vital suspense followed by following Sub ledger called Priced Ledger. The purpose heads and sub detailed heads: of maintenance of such ledger is to price i.) Capital 7110 Purchases-imported, the receipts and issues of stores as per ii) Capital 7120 Purchase-indigenous principles laid down in Para 2515 S as etc. follows: iii) Capital 7130 Purchase through Either: DGS & D etc. (a) at rates which are already shown on the iv). Capital 7140 Sales (other than fuel), vouchers for such transactions as (Para 2722 S), purchases or at predetermined rates for v) Capital 7150 Sales Fuel, manufactures by Railway Workshops, vi) Capital 7160 Stores-7161-7169 advice notes for return stores/ Depot Stores in stock in Deposit, Stores transfer Receipts; or in Stock-Fuel, Engineering Imprest (b) at book average rates, as in the case of Stores etc receipts under Book Transfers, Department vii) Stores in Transit 7170 –Fuel, and Account Stock Verification Sheets, Purchases, Depot transfer- Other and all vouchers for issue of stores except than Fuel (Para 2746 S as those relating to sale. However, sale issue mentioned above), vouchers relating to sales to other Indian viii) Stock Adjustment Account 7180 Railways and Production Units will be (generally difference between priced at the book average rate. ledger balances and ground 3.1.9.8. Stores Suspense Register (2721 balances, revaluation of stores, S). book value & sale Value, loss etc., Stores when purchased, sold, transfer etc. (Para 2740 S as mentioned etc. unless charged to the final heads are above), treated as Suspense. ix) Stock Adjustment Account 7190 Stores Suspense comprises cost of (other items), physical stocks of stores held at Depots x) Capital 7310 Miscellaneous Advance (as Stores Balance), issues to work sites, (Para 2739 S as mentioned above), purchases, sales, stores in transit, stock xi) Deposit Miscellaneous (Stores), adjustments, Work-in-progress in adjusted through Depot store sheet various Workshops and Production etc, (Para 2729 S). Units – Workshop Manufacturing Suspense and Miscellaneous Advances including the value of stores advanced to

Training Manual on Audit of Railway Finance and Appropriation Accounts 49

Participants’ Notes Session 3

3.1.9.9. Annual Statement of Stores 3.2. Workshop Accounts. Transactions. A statement of the actual balances of Important Ledgers maintained in stores in hand at the end of each Workshop Accounts Office. financial year is prepared by each Railway administration in Form S. 3001 3.2.1. Labour Sub-Ledger (522W- and should reach the Railway Board along with its accompaniments, by the 523W).-The total amount against each 1st November of the year following. work order shown in various Time Stores are categorized under the booking documents of each shop should headings: be summarized in Labour sub-ledger (W. 1. Ordinary Stores, 522). The amount of incentive bonus 2. Surplus Stores, directly chargeable against the work orders 3. Emergency Stores, shall be copied from Incentive bonus 4. Stores obtained for Special Works. allocation statement (W. 514).

The statement (S. 3001) should show the LABOUR SUB-LEDGER money value of the stores in hand in thousands of rupees under each major Form W 522 group of stores, and the figures should be of Shop No…………for the month of ……20. sub-divided and arranged as to distinguish the ordinary stores, from other categories Summary Work Order Nos. of stores viz. No. (a) Stores obtained for special works, i.e. Amount Amount Amount specially, obtained for important works of additions or renewals. The total amount of salary and. Travelling (b) Emergency stores which comprise allowance & c., paid to charge men and items which do not ordinarily wear out or mistries during the month is chargeable to require renewal but for which it is essential shop on cost (vide paragraph W. 706) and to maintain stock to meet emergency is posted from the Register of Labour demand due to breakage or unanticipated Charges (W. 524) at the bottom of the deterioration and which are not readily Labour Sub-ledger under the relevant on available in India. cost work order.

(c) Surplus stores the figures for which 3.2.2. Register of Shops Labour charges should be sub-divided into two classes viz. (524 W) - The amount of all salary, (i) Movable or live surplus i.e. items of travelling allowance and labour bills stores which have not been issued for a chargeable to workshop manufacture period of 24 months but which, it is "Labour Suspense" should be noted in a anticipated, may be utilized in the near manuscript register to be maintained by future; and the accounts Office separately for each shop in Form W. 524 (specimen below). (ii) Dead surplus which comprise items of The total labour charges for each shop as stores, which have not been issued for the arrived at in this form are to be compared past 24 months and which, it is considered with total of such charges distributed are not likely to be utilized on any railway amongst jobs that furnished by Form W. within the next two years. 522.

Training Manual on Audit of Railway Finance and Appropriation Accounts 50

Participants’ Notes Session 3

Form W 524 (3) Contractors on direct supply orders placed by the Deputy Chief Mechanical REGISTER OF LABOUR Engineer or higher authorities; CHARGES (4) Other Divisions or Railways; Shop……..for the month of….20… (5) Workshops. Accou Parti- Gross Fines Sala Materials received from Stores Depots- nts culars amo credit ry Bill of Bills unt able Bill The debits for materials from the Stores No to staff Main Depot attached to workshops, or (AB work No. & from General and other out-station Stores date) Depots will be raised through issue notes 1 2 3 4 5 (S 1523). Bill copies of these issue notes accompanied by Store Debit Summary Muste Suppleme T.A. Net r Roll ntary and Amou there of will be sent monthly by the Stores staff Bills other nt Accounts Officer to the Workshop Allow ance Accounts Officer. 6 7 8 9 Pairing of Issue Notes- Workshop issue notes prepared by the Workshop Stores Depot in the form prescribed in paragraph 1523 of the Indian Railway Code for the 3.2.3. Labour Schedule (525 W). After Stores Department would be received daily the correctness of the Labour sub-ledger in the Workshop Accounts Office, after has been proved in the manner indicated scrutiny by the Officer-in-charge of above (paragraph 524) a summary of workshop or other officer of the Labour Charges or Labour Schedule for Mechanical Department. On receipt of the the whole workshop is made out in Form above issue notes, the Workshop Accounts W. 525 (specimen below) by the 15th of Office is responsible for seeing that: the following month. (1) the shop serial numbers (i.e. Form W 525 Requisition Numbers) of the issue notes for each shop are continuous and that LABOUR SCHEDULE breaks in such continuity if any, are For the month of……………20……. satisfactorily explained; _____1______2______(2) the issue notes are received strictly Shop No. according to schedule i.e., by the evening Amount______of the day following the date of issue; (3) the issue notes have been correctly Section Officer (Accounts) prepared according to the instructions issued for this purpose; and The labour charges incurred on each job (4) The issue notes are 'paired' with the appearing in the Labour Sub-ledger Bill copies with the Store Debit summary (W522) for each shop are then posted in of Issues as laid down in paragraph (606 the Workshop General Register (W1201). W). Workshop Stores. The copies of the issue notes received Sources from which Materials are from Shop Foremen through the Officer- obtained.- Materials for jobs undertaken in-charge of workshop should be sorted in the workshops are obtained from the out and arranged in chronological order. following sources: Each of these issue notes should be paired (1) Workshop Stores Main Depot, attached with the corresponding one received with to workshops; the Store Debit summary from the Stores (2) General Stores Depots; Accounts Office and the former compared with the latter, in respect of allocation Training Manual on Audit of Railway Finance and Appropriation Accounts 51

Participants’ Notes Session 3

(work order number) and quantity of stores 3.2.5. Miscellaneous Stores Sub-ledger shown as having been received in the (626 W) -All bills in connection with the shop. above items should first be got verified 3.2.4. Main Stores Sub-ledger (608.W).- and allocated by the Officer-in-charge of workshop or other Departmental Officer After the pairing referred to in paragraph concerned and thereafter passed for W 606 has been carried out, which should payment, or adjusted in transfer, by debit be completed expeditiously on receipt of to relevant work orders and abstracted in Stores Debit Summary in the Accounts the Miscellaneous Stores Sub-ledger to be office, the value of stores should be maintained in Form W. 608 for each shop abstracted for each shop under the 3.2.6. Summary Sub-ledger (627 W)- In various work orders in the stores sub- addition to the Sub ledgers for different ledger (W. 608). shops, a summary of all Sub-ledgers Adjustment of cost of stores received should be prepared in Form W. 627 from depots. (609 W) - The grand total of showing the total amount under the all sub ledgers shall be struck and agreed various sub-ledgers referred to above. with the totals of the monthly stores Debit summary. After this is done, the debit (W 627) raised by the Stores Accounts Office, shall Shop Charges for Miscellaneo Total Rema No. Stores received us rks be accepted and allocated to "Workshop from the Manufacture Suspense Account." Stores Deptt. General Workshop Stores purchased Direct (610.W)- As Stores Depot 1 2 3 4 5 6 7 8 soon as the stores are received against the Shop orders placed either by the Controller of no.1 Shop Stores or by an Officer of the Mechanical no.2 Department the officer-in-charge of Grand workshop should send a copy of receipt Total note (S. 719) to the Workshop Accounts Officer. Compiled by……

On receipt of the receipt note referred to Checked by… Section Officer (Accounts) above, the Workshop Accounts Officer should price it at the rate quoted therein, The totals of the various columns shown in after verifying the rate with that given in the summary sub-ledger are checked with the Stores Order. The amount of the reference to the following: receipt note should then be journalized by credit to "Purchases" and debit to (1) Store Debit Summary received from "Workshop Manufacture Suspense the Workshop Stores Main Depots as well Account.'' The amount thus debited to the as from General Stores Depots. head "Workshop Manufacture Suspense" (2) Debits raised by divisions and foreign should be summarized by individual work railways, & c. orders in a separate Stores Sub-ledger to (3) Cash Book debits, i.e., payments made be posted for each shop separately in Form for municipal taxes, licence fees and direct (W. 608) from the receipt notes received purchases of stores. from the officer-in-charge of workshop. At (4) Issues from workshop manufacturing the close of the month, this Stores Sub- accounts. ledger should be totalled and summarized (5) Write-back orders. in Form (W. 614). The charges abstracted in the various The grand total of this summary should be Stores Sub-ledgers by shops and by work agreed with the total credits to "Purchases" orders should be transferred to the main during the month. Training Manual on Audit of Railway Finance and Appropriation Accounts 52

Participants’ Notes Session 3 stores sub-ledgers (Paragraph 608) of the Debit side consists of following: respective shops, after the correctness of Col.1). Month, Col.2) Shop No……. the former has been verified. The charges Col.3) Direct Man-Hours. for stores booked on each work order in Credit side consists of: the main Stores Sub-ledgers of different Direct: Col.4) Labour, Col.5) Incentive shops should be posted in the Workshop Bonus, Col.6) Stores, Col.7) Total. General Register (W. 1201), shop by shop, Overheads: in the same way as the charges for Labour. Col.8) FOH, Col.9) AOH, Col.10) TOH, 3.2.7. Workshop General Register (1201 Col.11) SOH, Col.12) Total W) Work On Cost: Col.13) Labour, Col.14) The Labour and Stores Sub-ledgers having Stores, Col.15) Total been totaled, the totals of (a) Labour Proforma On Cost- Col. 16 charges and (b) Stores and Grand Total- Col.17 Miscellaneous charges, for the month Amount Adjusted-Col.19 relating to each work-order are Balance Outstanding- Col.20 transferred to Workshop General Register (W. 1201) and posted under the Note: Cols.8 to 12 related exclusively to relevant work-orders, shop by shop, care Production Units and Cols.13 to 16 relate to Zonal being taken to see that no item is left out in Railway Workshops exclusively. posting. 3.2.8. Workshop Subsidiary Balance Under mechanized system Labour charges Register (1221 W).- The balance under and the Stores and Miscellaneous charges each of the suspense heads operated upon for the month relating to each work-order in the Workshop Accounts Officer (e.g. as produced, by the machine tabulations as Workshop Manufacture Suspense also direct Man-hours should be Account, Labour Suspense Account and transferred to Workshop General Register Development Suspense Account) should (W. 1201) and posted under relevant work- be reconciled and proved with the General orders, shop by shop, care being taken that Books every month. For this purpose a no item is left out in posting. On subsidiary register should be maintained in completion of posting in respect of work- the following form, in which should be orders, the totals for the month as also to shown opening balances, debits and credits the end of the month are struck for each during the month and the closing balances. work-order under element of cost and The debits and credits should be posted direct man-hours. from the Journal (A.1107). Separate pages Review of Workshop General Registers- should be opened in this register, or The Workshop General Registers is to be separate registers maintained if more reviewed monthly to see that all works convenient, for each suspense head of shown therein are current. The work orders account. The correctness of the balances in on which no expenditure has been booked this register should be certified by the for three consecutive months should be Books Section. Any discrepancy found as reported to the Workshop-in-Charge and a result of this reconciliation should be advice completion called for. promptly investigated and the Subsidiary Contents of the Workshop General Balance Register (W. 1221) together with Register are as follows: the result of reconciliation, put up to the

Workshop Accounts Officer within 10 1. W.O.No., 2. Particulars, 3. Estimate days of the close of the Accounts for the Reference, 4. For who executed, 5. month. Authority, 6. Estimated Cost, 7. Head of

Account, 8. Date of commencement, 9. Note. Development Suspense Accounts Date of completion. pertain to Production Units only.

Training Manual on Audit of Railway Finance and Appropriation Accounts 53

Participants’ Notes Session 3

W. 1221 Statement prepared in Form W. 1223 WORKSHOP SUBSIDIARY BALANCE given below. The discrepancies should be REGISTER investigated and necessary adjustments Head of Account...... Month Opening Debits Credits carried out to clear them. Special attention balance Closing should be paid to old discrepancies. The balance Discrepancy Statement together with the Account Current and the Labour Book should be put up to the Workshop Accounts Officer every month. The action 3.2.9. Labour Book (1222.W)- For the taken to clear the discrepancies should be purpose of recording details of the stated in the 'Remarks' column of the outstanding balance under the suspense Discrepancy Statement. head 'Labour' and for effecting a reconciliation with the General Books, a Form W. 1223 register (Labour Book) showing the opening balance, credits during the month, DISCREPANCY STATEMENT OF debits during the month, and the closing WORKSHOP MANUFACTURE SUSPENSE balance under 'Labour Suspense' should be ACCOUNT/LABOUR SUSPENSE ...... Shops...... for the month maintained in the following form. The of...... credits should be posted from the Labour Schedule (W. 525) and the debits should Item Particulars Month in More Less in Remarks be posted from the various abstracts of which the in account bills passed for the month. This register discrepancy account Rs. P. should be posted by individual bills. originates Rs. P

Total...... Form W. 1222 Deduct column less in account...... Net difference……. LABOUR BOOK FOR THE MONTH OF………… 3.2.11. Check sheet (1202.W)- Simultaneously with the posting of (1) Opening balance Workshop General Register, a summary (2) Credits during the month of sub-ledgers (labour and stores) called ...... Check Sheet is prepared in form (W. 1202) (3) Total (specimen given below). This is done (4) Debits during the month. with a view to Checking correctness of (5) Closing balance. the posting of labour and stores, including miscellaneous charges, in 3.2.10. Reconciliation with the General Workshop General Register and to Books (1223.W)- The balance under ensure that the amounts are correctly 'Workshop Manufacture Suspense transferred to the outturn statements Account' and 'Labour Suspense', appearing (W. 1205) Parts I and II against each in the Account Current (W. 1215) and the work order operated upon in the Labour Book (W. 1222) respectively, workshop during the month (C.F. should be compared with the Paragraph 1206). The check-sheet should corresponding balances shown in the be totalled down and cross wise. The Workshop Balance Register (W. 1221) grand total of the check-sheet for the after the balances in the latter have been month under 'labour' should be equal to reconciled with the General Books. The the total of the debits appearing in the differences between the two sets of figures Labour Schedule (W. 525) and that should be analyzed and a Discrepancy under 'Stores' should be equal to the

Training Manual on Audit of Railway Finance and Appropriation Accounts 54

Participants’ Notes Session 3 total debits appearing in the Stores 3.2.12. Out-turn Statement (1204.W) - Summary Sub-ledger (W. 627). The total (debits) for the month, in respect In the case of computerized tabulations, of each work order under labour Stores simultaneously with the posting to and On cost charges and the grand total Workshop General Register, the stores and are struck in the Workshop General labour charges together with on cost/ Register and an Outturn Statement (W. overheads thereon (but excluding direct 1204) should then be prepared showing all man-hours) as available in various the work orders, whether in hand, or tabulations are posted independently in the completed in the workshops, the outlay on check-sheet for each work order in the which is awaiting adjustment; and the same detail as in the Workshop General expenditure that has been incurred on each Register.- of them. This statement is necessary for On completion of posting, the totals for the the purpose of charging the total month are struck for each work order expenditure incurred in the workshops under different element of cost and to the account heads concerned. reconciled with those appearing in the The postings in the Out turn Statement Workshop General Register to ensure (W. 1204) of the charges for the month correctness of the postings. against each work order should be compared with those in the Check-Sheet Format of Check Sheet is appended below: (W. 1202). This comparison will bring out errors, if any, in the posting of the FORM W 1202 Workshop General Registers (W. 1201) from the various sub-ledgers, as also of CHECK SHEET the Outturn Statement from the Workshop General Registers, which SHOP……………………….. should be investigated and rectified. The Outturn Statement (W. 1204) should Direct be prepared in two parts Part I and Part II. Work Labour Incentive Stores Total Part I will show all outlay (separately Order Bonus against each work order) adjustable during No. the month and Part II will show outlay on 1 2 3 4 5 works in progress and completed works

which are awaiting acceptance by the Overhead parties ordering them. FOH AOH TOH SOH Total 6 7 8 9 10 The total of the summary of Part II should be carried over to that of Part I and the Work on Cost grand total of the two parts exhibited in the Labour Stores Total latter. 11 12 13 3.2.13. Workshop Deposit Schedule (1214. W) -With a view to ensure that no Proforma on Grand Total Credit private work is undertaken in the shops Cost etc. without the necessary deposit being charges 14 15 16 received in advance as required under the rules (paragraph 1417) and to watch the progress of expenditure against deposit in Note: Columns 6, 7, 8, 9 relate exclusively to each case, a "Deposit Schedule" in form Production Units and Coluns 11, 12 & 14 relate to W. 1214 should be prepared every month. Zonal Railway Workshops exclusively. The column "Balance of Deposit" of the form should be posted from the closing balance shown in the previous month's

Training Manual on Audit of Railway Finance and Appropriation Accounts 55

Participants’ Notes Session 3

schedule, the column 'Deposit received DF, OLW (R) , Revenue works and during the month' should be filled from the operations, woks done for Stores intimations of deposits received during the Department, works done for Deposit month, care being taken to see that the Account, works done for Home line total of this column agrees with the Divisions and departments (Transfer corresponding credits to 'Deposit Divisional), works done for Foreign Miscellaneous' in respect of 'Debits during Railways Govt. Departments the month' should be posted from the etc.(Transfer Railways), works done for works to be executed in the workshop, and other Workshop (Intershop transfers) etc. the column out-turn Statement Part I. The difference between total debits and credits represent the balance in Form W 1214 Workshop Manufacturing Suspense. All expenditure in connection with the WORKSHOP DEPOSIT SCHEDULE Manufacturing Suspense will be booked FOR THE MONTH OF………20 under the Major Head 5002, 5003 Work Order Particulars By Estimated Balance Capital Outlay on Indian Railway- No. Date whom Cost of Commercial Lines & Strategic Lines and ordered Deposit from Minor Head 7200 Workshop the Manufacturing Suspense with Sub head previous month 7210 and Detailed Heads 7211-7218 for 1 2 3 4 5 6 different workshops viz. Loco Total Workshops, C & W Workshops, Engineering Workshops, and Wheel & Axle Plants etc. Deposit Total Debits to Balance at Remarks 3.3. Traffic Accounts. during deposit credit deposits 3.3.1. Traffic Cash Book (A-2722) - the during at the end of month the the month The 'cash' as acknowledged by the month Cashier in the Cash Remittance Notes 7 8 9 10 11 are posted daily in a Cash Register in Rs.P Rs.P Rs.P Rs.P Rs.P Total Form mentioned above, the "Coaching'' and "Goods" cash of each station being posted separately. For the sake of Workshop Accounts Officer. convenience, the Register may be kept in parts (one part for each week or such 3.2.14. Workshop Manufacturing period as prescribed by each Railway). Suspense Register (E 1215) - This The object of this Register is to provide register is maintained to record total figures, in totals, for the ready check of debit and credit items of WMS Account, Balance Sheets. under the heads provided in the form & Form A-2722 Opening and Closing Balances. The Account is Debited to the heads Labour CASH REGISTER FOR THE MONTH OF...... charges, cash (comprising of the contractors' bills for direct purchases S.No. Station 1st 2nd and Total so on etc., motor licence fee, municipal taxes Rs. P. Rs. P. Rs. P. etc.), Stores, Other charges (Fuel & other 1. Coaching miscellaneous charges), Workshop transfers, freight charges, Proforma on 2. Goods cost charges etc. and Credited by the respective heads for which the works Total (jobs) are done viz. Capital Works, DRF,

Training Manual on Audit of Railway Finance and Appropriation Accounts 56

Participants’ Notes Session 3

Note: Miscellaneous receipts shown in Cash Cash Book should tally with the Cash Remittance Notes should be included under reflected in the General Cash Book and Coaching. the Traffic Balance Sheet. 3.3.2. Traffic Book- A 3201-3237. The entries in the Cash Register for each The Traffic Book is a compilation which day are totalled and the total verified with collects and brings to account, under the the Traffic Cash Check Sheets prepared prescribed heads Coaching, Goods and vides form A1943. For this purpose, it will Sundry Other Earnings, the whole of the be found convenient to maintain the Cash traffic earning of a railway, both Local Registers by sections of line corresponding and Through, whether accrued at to the sections in which the Traffic cash stations or otherwise. It records the Check Sheets are prepared. The postings progress of realization of these earnings, of cash receipts in the Cash Register made the results of apportionment of traffic from day to day should first be interchanged with other Railways and summarized to arrive at the Deposit Private Companies (including weekly/periodically and monthly Out/City Booking Agencies), and the totals. The cash acknowledged by the progress in the settlement of the Cashier after the third of the month balances on these accounts. following that to which it relates should be posted on separate sheets and totalled Parts of the Traffic Book - The Traffic separately to provide figures for 'Cash in Book consists of four distinct parts, viz. Transit' for reconciliation of balances in the Traffic Books with those in the General Books. These figures should be (a) Station Accounts: included in the 'Cash' for the month to (b) Adjustment or Division Sheets; which it relates and not in which it is (c) Ledger account of the Home Line; and received in the Cash Office. The credit Abstract of Earnings and Statement of taken by stations under the head 'Cash' in (d) the Balance Sheet should be checked Balances. with the monthly totals as shown in the Cash Register. If the figures agree, no Traffic Book, Part A (Form A 3203) - further comparison need be made, it being The earning accrued at stations, for the assumed that the total cash for which realization of which the home railway is credit has been taken by the stations has responsible, are consolidated in Traffic been received and remitted into the Book, Part A. It should be maintained in Treasury/Bank. If, however, the figures do Form A. 3203 separately for Coaching-and not agree, a detailed comparison of the Goods traffic. The names of all stations daily entries should be made till the open for traffic (Coaching or Goods, as the difference is located, when the Cash case may be) should preferably be printed Remittance Note of the date should be in convenient groups, generally in the referred to. Excess credits taken by the order of their geographical position on the stations in the Balance Sheet under the railway. head 'Cash' should be acted in the 'List of Traffic Book, Part B (Form A 3219) - Errors' as debits against the The Traffic Book. Part B, deals with the stations. Excess acknowledgements of results of apportionment of all Through 'cash' by the Cashier should be credited to traffic interchanged between the Home Sundry Other Earnings on the debit side of Railway, Other Railways and Deposit the Balance Sheet. They will be refunded Private Companies (including Out/City later, if claimed, provided the title of the Booking Agencies).The Traffic Book, Part claimant to the excess 'cash' is established. B for Coaching traffic is maintained in The total Cash received as per Traffic Form A. 3219 showing Division of Training Manual on Audit of Railway Finance and Appropriation Accounts 57

Participants’ Notes Session 3

Earnings on Coaching Traffic or against each railway worked .out. These interchanged with other Railways and balance represent unadjusted through Deposit Private Companies. The Traffic traffic transactions with other railways and Book, Part B, for Goods traffic is should be susceptible to verification with maintained in Form A. 3220 showing the balance [of unadjusted Account Division of Earnings of Goods Traffic Current (A. 3238)]. interchanged with Other Railways and Deposit Private Companies Account .— Deposit Private Companies. When Through traffic is permitted with 3221 A. The principles of apportionment companies or other carriers who do not of the earnings from traffic carried over bank with a Government Treasury, two or more railways are laid down under moneys due to them on the apportionment this para. of traffic for the month should be credited Traffic Book, Part C- The Traffic Book, to this account. This credit will be Part C, is the ledger of the Home Line for removed by actual payment or debit (by traffic earnings. It is maintained in Form credit to earnings) against moneys A. 3225, separately for coaching and collected by private companies on behalf goods traffic. It contains three ledger of Indian Railways. In cases, however, accounts, viz., (1) the Traffic Account, (2) where moneys due from Private the Other Railways Account and (3) the Companies exceed those due to them, the Deposit Private Companies Account. net amount should be debited to this Traffic Account. —For the purpose of account and cleared when cash is received. recording the traffic earnings in the The balances under this account should be month's account to which they pertain and proved in the same way as those under of watching the progress of their "Other Railways". Para A 224 & 225 in realization, a suspense account Traffic this regard mentioned earlier may also be Account is operated upon in Part C of the referred to. Traffic Book. This account is debtor for Closing of Traffic Book-, Part C.—The all earnings, whether Local or through grand totals under each of the heads and is creditor for all recoveries of such Coaching, Goods and Sundry Other, earnings. The balance therefore, earnings as also under other Railways and represents unrealized earnings. The Deposit Private Companies should be Balance is reflected in the Balance Sheet transcribed to Part D from which the of Open line also. Para A 222 in this monthly Journal Entry is prepared for connection may also be referred to. incorporation in the General Books. Other Railway’s Account.—All Traffic Book Part D - The Traffic Book, transactions regarding division of traffic Part, D, consists of the monthly Journal earnings with ' other railways with which Entry and two statements. It should be the traffic is interchanged and which bank maintained in Form A 3233 separately for with the Government Treasury are passed Coaching and Goods traffic. through this account. The opening balance in favour or against each railway should be brought forward from the Traffic Book, Part C, for the previous month. The results of division of interchanged traffic for the month are transcribed from the Traffic Book, Part B. The payments to and receipts from other railways by "Transfer Railways" should be posted from the extracts of Transfer Certificates and the balances in favour of

Training Manual on Audit of Railway Finance and Appropriation Accounts 58

Participants’ Notes Session 3

Comparison of Traffic Book balances with COACHING/GOODS TRAFFIC BOOK FOR main ledgers.--The balances under "Traffic THE MONTH OF………….20….. Account," "Other Railways" and "Deposit

Part D-Revenue (Earning Journal entry for Private Companies"' as brought out in the the Month of……. …….. Traffic Book should be proved monthly with the corresponding balances in the Debits As per Part Accounts Credits As per main ledgers. For this purpose, the C Of Coaching Part C of balances under each of the accounts /Goods Traffic Coaching/ Goods Book Traffic Book mentioned above in the Coaching Traffic Book should be transferred to the Goods 1,22,500 .. Traffic Account …….. Traffic Book and the total balances ,, .. Coaching/Goods 1,00,000 worked out. These should then be ,, .. Sundry other 2,500 compared with those in General Books. earnings Differences should exist only under ,, .. Other Railways 13,000 Traffic Account due to "Cash in ,, .. Deposit Private 7,000 Transit." Companies 1,22,500 Total 1,22,500 Cash in Transit —Stations take credit in their Balance Sheets for cash realized by them in the month irrespective of whether Statement I shows the details of clearance it is remitted to and acknowledged by the of “Other Railways” and “Deposit Private Cashier in that month or in the subsequent Companies” Accounts by Transfer month. Such station cash for which credit Certificates, Pay Orders, etc. has been allowed to the Stations in one month but, which has been received in the Statement II shows the comparison Cash Office after the third of the following between Traffic Book Balances with those month and consequently included in the appearing the General Books. General Books in the following month, is called Cash in Transit. In the Journal Entry, the transactions for the month are journalized for incorporation 3.3.3. Traffic Accounts Office Balance in the General Books of the railway. Only Sheet)- For the purpose of taking the the debit side of the Traffic Account is Carriage Bills into account and of journalized. The grand total under the watching their realization from the firms column "Total debits excluding balances" or departments concerned, as also for should be posted in the Journal Entry to incorporating in accounts the traffic cash the debit of Traffic Account, but, before received otherwise than through the doing so, the amount of vouchers should Station Balance Sheets (e.g., workshop be excluded as this amount is accounted profit, advertisement fees, sale of grass, for on the debit side twice, once through fares of coupons sold by Tourist Agents, the Station Balance Sheet where the fares represented by Suburban Tickets sold connected Ticket, way-Bill or Invoices in Headquarters Offices, etc. etc.), a Accounted for and again through the Balance Sheet (corresponding to the Bills Accounts Office Balance Sheet. The Receivable Account in Commercial Book- credits to the Earnings heads, Other keeping) is maintained in Form A. 2923 Railways and Deposit Private Companies appended below: should be posted from the respective columns in Part C of the Traffic Book.

Training Manual on Audit of Railway Finance and Appropriation Accounts 59

Participants’ Notes Session 3

Form A. 2923 (ii). Credit entries in the Accounts Accounts Office Balance Sheet Office Balance Sheet -The credit entries For...... 20 in the Accounts Office Balance Sheet as per para 2926 A comprise of following: Parti Debits Credits culars (1) Cash (i.e., direct cash receipts and Commi Freight Total Trans Cash payments on Traffic Account); ssion of Fare fer charges (2) Transfers Railways and adjustments 1 2 3 4 5 6 through the Reserve Bank; Rs. P Rs.P Rs. Rs.P Rs. P P (3) Book Transfers (Transfer credits

afforded through Journal Entries of

Transfers between Traffic and Separate Accounts Office Balance Sheets General Books); and are maintained for Coaching and Goods transactions. (4) Balance Sheet Transfers (Transfer credits from station Balance Sheet (i) Debit entries in the Accounts Office in connection with the bills paid Balance Sheet as per para 2925. A- The through the latter). debit entries in Accounts-Office Balance Sheet comprise of the following: The closing balance of the Accounts Office Balance Sheet consists of the (1) Opening Balance; unrealized amount of Carriage Bills and the amount of vouchers kept pending (2) (2) Amount of Carriage Bills issued (2927A). in connection with Station vouchers

(a) for the current month plus, Posting of the Accounts Office Balance Sheet (2928.A)-: It is necessary, in the (b) kept pending in the previous case of vouchers, to defer the posting of months (Part A). the accounts Office Balance Sheet, till (3) Amount of pending vouchers. Carriage Bills have been made out against the persons, firms or departments (a) for the current month less, concerned, so that only the total of each bill need be catered in the Accounts Office (b) amount of pending vouchers Balance Sheet and the number of postings (station figures) for previous is reduced to a minimum. All bills pending months billed for in the current realization or adjustment should be posted month. in the debit column of the Accounts Office (4) Amount of Miscellaneous Bills Balance Sheet, the amount of fare (or (Part B); and freight) and commission, if any, being posted separately under the sub-columns (5) Direct traffic receipts under: provided for the purposes. The latter (a) Coaching; should be credited to Sundry Other Earnings on the debit side of the Balance (b) Goods; and Sheet. (c) Sundry other earnings.

Training Manual on Audit of Railway Finance and Appropriation Accounts 60

Participants’ Notes Session 3

2929A. From the point of view of realization, the bills fall under three distinct categories, namely

(1) Bills payable in cash,

(2) Those adjustable through "Transfers Railways" and through the Reserve Bank, and (3) Those adjustable in the books of the home railway.

Debits to be cleared by cash recovery will be so cleared on receipt of cash for which the necessary advice will be sent by the Cashier. Those which are adjustable by book entry will be so adjusted on receipt of the transfer acceptances of Other Railways or Government Departments by means of Journal Entries of Transfers between General and Traffic Books, the latter in the case of items adjustable in the books of the home railway. The transfer acceptances will be communicated by the Booking Section. All such credits should be posted in the credit column of the Accounts Office Balance Sheet against the connected debit entries and the months outstanding reduced accordingly

Training Manual on Audit of Railway Finance and Appropriation Accounts 61

PPT Slide Session 3

Slide 1 Important Books and Records and Slide 4 accounts maintained by accounts Important Books and Records and Office. accounts maintained by accounts Office. • Accounting transactions fall under two Subsidiary books maintained by Accounts distinct headings, viz. Office in addition to the General Books are: • (i) cash receipts and disbursements and • (i) Registers of Earnings, • (ii) Revenue Allocation Registers, • (ii) book adjustments. • (iii) Registers of Works, • The later present transactions either • (iv) Register of works expenditure classified under capital, D.R. F, Dev. Fund, Revenue initially accounted for by another (O.L..W-R) and Railway Safety Fund. Accounts Officer - as in case of transfer • (v) Suspense Registers. transactions - or adjustments between one accounting head and another. Training Module on Audit of 1 Training Module on Audit of 4 Railways; Session: 3 Railways; Session: 3

Slide 2 Slide 5 Important Books and Records and Important Books and Records and accounts maintained by accounts accounts maintained by accounts Office. Office. Initial records maintained in Open Line: - • Daily Abstract of Cash Transactions or General Cash Book (A 304) records daily, all cash received from station remittances, • For cash transaction - a cash voucher or bill. cheques drawn on banks, receipts from • For book adjustment-a journal slip. miscellaneous items, recoveries made from • Cash transactions are rendered in the Cash bills passed for payments, unpaid amounts Book, while journal slips are entered in the remitted by the Cashier in the debit side & journal. remittances to Banks & payments in the • Essential records maintained by the credit side. Accounts Office for compiling the monthly • Monthly Classified Abstract of Cash and annual accounts are called General Transactions or the General Cash Abstract Books. Book- is posted daily from the totals in the Daily Abstract of Cash Transactions.

Training Module on Audit of 2 Training Module on Audit of 5 Railways; Session: 3 Railways; Session: 3

Slide 6 Slide 3 Important Books and Records and Important Books and Records and accounts maintained by accounts accounts maintained by accounts Office. Office. Name of the General Books: • Journals– These are prepared for adjusting Revenue or Capital heads • 1. Daily Abstract of Cash Transactions or the from the journal slips from the General Cash Book, original vouchers. One head is debited • 2. Monthly Classified Abstract of Cash and another head is credited. Transactions or the General Cash Abstract Book, • Detailed particulars of the adjustment • 3. Journals, entries and the heads debited and • 4. Ledgers -Two sets of Journals and ledgers credited are noted in the journals. maintained - one for Revenue Accounts and other for Capital Accounts.

Training Module on Audit of 3 Training Module on Audit of 6 Railways; Session: 3 Railways; Session: 3

Training Manual on Audit of Railway Finance and Appropriation Accounts 62

PPT Slide Session 3

Slide 7 Slide 10 Important Books and Records and Important Books and Records and accounts maintained by accounts accounts maintained by Stores Office. accounts Office. Where expenditure can be booked directly under the proper heads of accounts Stores Accounts contd….. available these are entered in the following • Revenue: subsidiary registers: • (1) Revenue Allocation Register, – Working Expenses • (2) Register of Earnings, – Revenue Abstracts • (3) Works Register, • (4) Register of works expenditure classified – Misc. Advances under capital, D.R. F, Dev. Fund, Revenue – Deposit Miscellaneous (O.L..W-R) and Railway Safety Fund. – Transfer Divisional – Transfer Railways Training Module on Audit of 7 Training Module on Audit of 10 Railways; Session: 3 Railways; Session: 3

Slide 8 Slide 11 Important Books and Records and Important Books and Records and accounts maintained by accounts accounts maintained by Stores Office. accounts Office. • Suspense Registers: Reflects • The annual accounts to be submitted transactions which cannot by the Stores Accounts Office to the immediately be charged to final Books Section of Open line – heads. These are:- – Capital & Revenue Accounts • Demands Payable, Misc. Adv. Register – Finance Accounts (Cap.), Misc. Adv. Register (Rev.), – Appropriation Accounts. Loans and Adv. to Government Contd………………………………………..S/12 Servants, Deposit Unpaid Wages Register (1959 A), Deposit MiscellaneousTraining Register Module on Audit of (321 A), etc. 8 Training Module on Audit of 11 Railways; Session: 3 Railways; Session: 3

Slide 9 Important Books and Records and Slide 12 Important Books and Records and accounts maintained by Stores accounts maintained by Stores accounts Office. accounts Office.

• Stores Accounts – The heads of The following registers are main- A/Cs. under Capital & Revenue tained by Stores accounts Office in generally operated upon in the Books of connection with above: A/cs. of the Stores Accounts Office are : • Fund Register, Deposits Misc. Account • Capital: Major Head- 5002 & 5003 Capital (Issue) Register (2729 S), Outlay on Indian Railway-Commercial Lines Miscellaneous Advances Account & Strategic Lines and Minor Head 7100 – Register (Capital) (2739 S), The Stock Stores suspense, and 7300- Miscellaneous Adjustment Account (2740 S), Depot Advances followed by Sub heads and sub Transfers (2746 S)/ Register of Stores in Transit (2748 S), Stores-in- detailed heads. Transit 'Purchases' (2748 S), Priced Contd…………………………………………….S/10 Training Module on Audit of 9 ledger, StoresTraining Module Suspense on Audit of Register12 Railways; Session: 3 (2721 S) etc.Railways; Session: 3

Training Manual on Audit of Railway Finance and Appropriation Accounts 63

PPT Slide Session 3

Important Books and Records and Slide 13 Important Books and Records and Slide 16 accounts maintained by Workshop accounts maintained by Stores accounts Office. accounts Office. • Out-turn Statement (1204.W)-The total Annual Statement of Stores (debits) for the month, in respect of each Transactions (S 3001) – work order under labour Stores and Oncost charges and the grand total are struck in the • This statement is prepared to reflect the Workshop General Register. actual balances of stores in hand with a • Then this Statement is prepared showing all Railway administration, at the end of each the work orders, whether in hand, or financial year under the headings: completed in the workshops, the outlay on • 1. Ordinary Stores, which is awaiting adjustment; and the • 2. Surplus Stores, expenditure incurred on each of them. • 3. Emergency Stores, • 4. Stores obtained for Special Works. .

Training Module on Audit of 13 Training Module on Audit of 16 Railways; Session: 3 Railways; Session: 3

Slide 14 Slide 17 Important Books and Records and Important Books and Records and accounts maintained by Workshop accounts maintained by Workshop accounts Office. accounts Office. • Workshop Manufacturing Suspense These are- Register (E 1215) - This register is maintained to record total debit and credit • Labour Sub-Ledger (522 W), Register of items of WMS Account, under the heads Shops Labour Charges (524 W), Labour provided for & Opening and Closing Schedule (525 W), Main Stores Sub-ledger Balances. (608W), Miscellaneous Stores Sub-ledger (626 W), Summary Sub-ledger (627 W), • The Account is debited to the heads Labour Workshop General Register (1201 W), charges, cash (comprising of the Workshop Subsidiary Balance Register contractors' bills for direct purchases, (1221 W), Labour Book (1222 W), Check municipal taxes etc.), Stores & Other sheet (1202 W), Out-turn Statement (1204 charges (Fuel & other miscellaneous W). charges), Training Module on Audit of 14 Training Module on Audit of 17 Railways; Session: 3 Contd……………………………………………Railways; Session: 3 .S/18. . .

Slide 15 Slide 18 Important Books and Records and Important Books and Records and accounts maintained by Workshop accounts maintained by Workshop accounts Office. accounts Office. Workshop General Register (1201 W) WMS Register………………..contd. • The Labour and Stores Sub-ledgers having • Workshop transfers, freight charges, been totalled, the totals of (a) Labour • Proforma on cost charges etc. charges and (b) Stores and Miscellaneous charges and (b) Stores and Miscellaneous • & credited by the respective heads for which charges, for the month relating to each charges, for the month relating to each the works (jobs) are done viz. Capital work-order are transferred to this Register work-order are transferred to this Register Works, DRF, DF, OLW (R), Revenue works and posted under the relevant work-orders, and posted under the relevant work-orders, and operations, woks done for Stores shop by shop. shop by shop. Department, works done for Deposit • Here the totals for the month as also to the Account, works done for Home line Divisions end of the month are struck for each work- and departments (Transfer Divisional), order under element of cost and direct man- order under element of cost and direct man- Contd…………………………………………….S/19. hours. hours. . Training Module on Audit of 15 Training Module on Audit of 18 Railways; Session: 3 Railways; Session: 3 .

Training Manual on Audit of Railway Finance and Appropriation Accounts 64

PPT Slide Session 3

Slide 19 Slide 22 Important Books and Records and Important Books and Records and accounts maintained by Workshop accounts maintained by Traffic

accounts Office. accounts Office. WMS Register…………………contd. Traffic Book continued…….. • works done for Foreign Railways • Records the progress of realization of Govt. Departments etc. (Transfer these earnings, the results of Railways), works done for other apportionment of traffic interchanged Workshop (Intershop transfers) etc. with other Railways and Deposit Private Companies (including • The difference between total debits Out/City Booking Agencies), and the and credits represent the balance in progress in the settlement of the Workshop Manufacturing Suspense balances on these accounts. Account. Training Module on Audit of 19 Training Module on Audit of 22 Railways; Session: 3 Railways; Session: 3

Slide 20 Slide 23 Important Books and Records and Important Books and Records and accounts maintained by Traffic accounts maintained by Traffic accounts Office. accounts Office. Traffic Cash Book (A-2722)- Traffic Account- a suspense • The object of this Register is to provide account. figures, in totals, for the ready check of account. Balance Sheets. • For the purpose of recording the • The 'cash' as acknowledged by the Cashier traffic earnings in the month's in the Cash Remittance Notes are posted daily in this Register. account to which they pertain and of • The "Coaching'' and "Goods" cash of each watching the progress of their station being posted separately. realization, this account is operated • The total Cash received as per Traffic Cash Book should tally with the Cash reflected in upon in Part C of the Traffic Book. the General Cash Book and the Traffic Balance Sheet. Contd……………………………………S/24 Training Module on Audit of 20 Training Module on Audit of 23 Railways; Session: 3 Railways; Session: 3

Slide 21 Slide 24 Important Books and Records and Important Books and Records and accounts maintained by Traffic accounts maintained by Traffic accounts Office. accounts Office.

Traffic Account contd….. Traffic Book- A 3201-3237. • This account is debtor for all • A compilation which collects and earnings, whether Local or through brings to account, under the and is creditor for all recoveries of prescribed heads Coaching, Goods such earnings. and Sundry Other Earnings, the whole • The balance represents unrealized of the traffic earning of a railway, earnings. both Local and Through, whether accrued at stations or otherwise. • The Balance is reflected in the Contd…………………………………………………………..S/22 Balance Sheet of Open line. Training Module on Audit of 21 Training Module on Audit of 24 Railways; Session: 3 Railways; Session: 3

Training Manual on Audit of Railway Finance and Appropriation Accounts 65

Participants’ exercises Session 3

Questions (iv) At predetermined rate?

1. Which of the following are General 13. Which items are recorded in the Books in Accounts Office of a Zonal Stores Suspense Register? Railway? i) Monthly Cash Book 14. What does the Annual Statement of ii) Journals Stores Transactions record? iii) Ledgers iv) Monthly Accounts Current 15. What are the important ledgers v) Register of Works. maintained in the Workshop Accounts? 2. How many sets of journals & ledgers are maintained? 16. What is difference between Labour 1, 2 or 3? Which are they? Shop Ledger & Register of Shops Labour Charges? 3.Which are the subsidiary registers/ledgers maintained in 17. What does the Workshop General Accounts Office, mention them. Register contain?

4. Which is the Suspense Register? 18. Why Check Sheet is prepared? Mention them. 19. Why Outturn Statement is prepared? 5. Why a Suspense Register maintained? 20. Why the postings in the Out turn 6. Which annual accounts should be Statement of the charges for the submitted by the Stores Accounts Office month against each work order is to the Books Section of the Railway? compared with those in the Check- Sheet? 7. Which are the heads of Accounts under Capital & Revenue are generally operated 21. What does Workshop Manufacturing upon in the Books of Accounts of the Suspense Register record? Stores Accounts Office? 22. What is Workshop Manufacturing 8. What are the sub-detailed heads under Suspense Account? Miscellaneous Advances (Capital)? 23. What is the object of maintaining 9. What does the Stock Adjustment Traffic Cash Book? reflect? 24. What is a Traffic Book? 10. What does mean Stores in Transit Account? 25. What is Traffic Account? What is the nature of this Account? Where 11. What is a priced ledger? For what does this balance reflect in the books purpose it is maintained? of accounts of Railways?

12. At which price the receipts and 26. Where do the Other Railway’s issues are made? Account. & Deposit Private (i) At book average rate? Companies Account reflects finally (ii) At first in first out rate? in the Books of Accounts of (iii) At last in first out rate? Railways?

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Participants’ exercises Session 3

27. What is Cash in Transit, how does it occur?

28. What is Traffic Accounts Office Balance Sheet?

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Participants’ exercises Session 3

Answer Sheet Capital: Major Head- 5002 & 5003 Capital 1. General Books of an Accounts Office Outlay on Indian Railway-Commercial are: Lines & Strategic Lines and Minor Head 7100 –Stores suspense, and i) Monthly Cash Book 7300- Miscellaneous Advances. ii) Journals Revenue: iii) Ledgers Working Expenses Revenue Abstracts 2. 2 sets of journals and ledgers are Misc. Advances maintained: Deposit Miscellaneous Transfer Divisional (i). Capital (ii) Revenue. Transfer Railways.

3. Subsidiary ledgers are: 8. The sub-detailed heads under Miscellaneous Advances (Capital) are: ii) Register of Earnings, iii) Revenue Allocation Register, (a) Miscellaneous Advances (Printing), iv) Register of Works, (b) Miscellaneous Advances (Clothing), v) Register of works expenditure (c) Miscellaneous Advances (Ferrous), under Capital, DRF, DF, OLW (R) (d) Miscellaneous Advances (Others), and Railway Safety Fund. (e) Miscellaneous Advances (Risk & Cost/Production Units). 4. The Suspense Registers maintained in Railway are: 9. The Stock Adjustment shows the gross surpluses and deficiencies in stores i) Demands Payable, transferred to Stock Adjustment Account ii) Misc. Advance Register, during the year under various headings iii) F. Loans and Advances Register, and how the balances under each iv) Deposit unpaid wages Register, heading have been adjusted against the v) Deposit Miscellaneous Register, several grants of earnings during the vi) Stores Suspense Register, year. vii) Workshop Manufacturing Register, 10. When the stores issued during a viii) Misc. Advance (Capital) & Misc. month from a depot are not received in Advance (Revenue) etc. the receiving depot in the same month, such items would not appear in the 5. When transactions cannot immediately accounts of the receiving depot. At the be charged to final heads these are booked end of the month, unaccounted items in in Suspense Register and cleared from the the issue summaries are shown in an Suspense Register as soon as transactions account called Stores-in-Transit A/cs. are charged to final heads. 11. The purpose of maintenance of such 6. (i) Capital and Revenue Accounts, (ii) ledger is to price the receipts and issues of Finance Accounts & (iii) Appropriation stores as per principles laid down in Stores Accounts. Code. 12. Either at the rates which are already 7. Following Heads of Accounts are shown on the vouchers for such operated in the Books of Stores transactions as purchases or at Accounts of a Railway: predetermined rates for manufactures by

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Participants’ exercises Session 3

Railway Workshops, advice notes for for the month relating to each work- return stores/ Depot transfer Receipts; or order shop by shop. (b) at book average rates, as in the case of receipts under Book Transfers, Department 18. Check Sheet is prepared with a view and Account Stock Verification Sheets, to Checking correctness of the posting of and all vouchers for issue of stores except labour and stores, including those relating to sale. However, sale issue miscellaneous charges, in Workshop vouchers relating to sales to other Indian General Register and to ensure that the Railways and Production Units will be amounts are correctly transferred to the priced at the book average rate. outturn statements Parts I and II against each work order operated upon in the 13. Stores when purchased, sold, transfer workshop during the month. etc. unless charged to the final heads are treated as Suspense and booked in the 19. Outturn Statement is prepared to show, Stores Suspense Register. all work orders whether in hand, or completed in the workshops, the outlay on 14. This statement records the actual which is awaiting adjustment; and the balances of stores in hand at the end of expenditure that has been incurred on each each financial year under certain of them. This statement is necessary for categories viz. Ordinary Stores, Surplus the purpose of charging the total Stores, Emergency Stores, Stores expenditure incurred in the workshops to obtained for Special Works. the account heads concerned.

15. Important ledgers/records maintained 20. This comparison is done with a view are: to bring out errors, if any, in the posting of the Workshop General Registers from (i) Labour Sub Ledger, the various sub-ledgers, as also of the (ii) Register of Shops labour, Outturn Statement from the Workshop (iii) Labour Schedule, General Registers. (iv) Main Stores Sub Ledger, (v) Misc. Stores Sub Ledger, 21. This register records the total debit (vi) Summary Sub Ledger, and credit items of WMS Account. (vii) Workshop General Ledger, (viii) Workshop Subsidiary Balance 22. The difference between total debits Register, and credits of the WMS Register (ix) Labour Book, represents the balance in Workshop (x) Check Sheet, Manufacturing Suspense Account. (xi) Out turn Statement. 23. The object of maintaining Traffic Cash 16. The total amount against each work Books is to provide figures, in totals, for order of each shop are summarized in the ready check of Balance Sheets. Labour sub-ledger whereas total labour charges for each shop are summarized in 24. The Traffic Book is a compilation the Register of Shops Labour charges which collects and brings to account, under the prescribed heads Coaching, 17. The Workshop General Ledger Goods and Sundry Other Earnings, the contains the totals of (a) Labour charges whole of the traffic earning of a railway, as appeared in the Labour Sub ledger both Local and Through, whether and (b) Stores as appeared in the Stores accrued at stations or otherwise. Sub ledgers and Miscellaneous charges,

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Participants’ exercises Session 3

25. For the purpose of recording the traffic earnings in the month's account to which they pertain and of watching the progress of their realization, the suspense account operated is called Traffic Account. It is the unrealized earnings of a Railway and is a Suspense Account. The Balance is reflected in the Asset side of the Balance sheet.

26. The Other Railway’s Account. & Deposit Private Companies Account reflects finally in the debit side of the Balance Sheet under the heading ‘Traffic Accounts and other Railways’.

27. Stations take credit in their Balance Sheets for cash realized by them in the month but this is acknowledged by the Cash Office after the third of the following month and consequently included in the General Books in the following month. The difference is called Cash in Transit.

28. For the purpose of taking the Carriage Bills into account and of watching their realization from the firms or departments concerned, as also for incorporating in accounts the traffic cash received otherwise than through the Station Balance Sheets a Balance Sheet (corresponding to the Bills Receivable Account) is prepared called Traffic Accounts Office Balance Sheet.

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Session: 4

Compilation of various Important Accounts by the Accounts Office

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Instructor’s Guide Session 4

Session Title: Compilation of various Important Accounts Session Guide including Accounts Current and Capital and Revenue Accounts by the Accounts Office. Reference Participants’ Instructor’s Guide Response Session Overview Welcome participants to the session and remind them Lecture that their active participation is critical for the success of each session. Learning Objective Inform: Lecture Given the inputs of different kinds of Important Accounts compiled by the Railway Accounts Offices of different wings, viz. Open line, Construction, Stores, Workshop and Traffic through group discussion, lecture and Power Point slide show, the participants will, at the end of the session, be able to grasp the methods of compilation of various Accounts by the Railway Accounts Offices and the purpose of such compilation and the result of reflection in main accounts, which will help them to focus on audit issues in the practical work environment. Basic Concepts Discuss: Lecture with ● Various Accounts compiled by the Accounts Office. Power Point ● Procedure/Method of compilation. Slide Show ● Purpose for compilation of various accounts’ Session 4 ● Concept of Accounts Current, Capital and Revenue INTRODUC Accounts and Finance Accounts, Block Account, -TION Profit and Loss Account & Balance Sheet etc. of Open line, and various accounts pertaining to Workshop, Stores & Traffic departments. Summarise: Distribute Participants’ Note Session 4 Tell the participants that during the session, we Participants’ discussed compilation of various accounts and methods Note of compilation and concept of various accounts. Invite questions on themes discussed. If participants have any doubts/clarifications about themes, clarify the same. Answer participants’ queries. Thank the participants and bring the session to a close. Training Method: Interactive Lecture and Power Point Slide Show. Materials Required: Power Point Slides, Projector, White Board, Marker Pen and Participants’ Note.

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Participants’ Notes Session 4

Session Title: Compilation of Method of preparation/compilation: various Important Accounts Method of compilation of Accounts including Accounts Current and Current varies from Railway to Railway. Some Railway has introduced part Capital and Revenue Accounts computerization and part manual. But full by the Accounts Office. computerization of compilation is yet to be made. Although compilation is done at In the preceding Session various Headquarter of a Railway through Accounts and Records prepared and computerized system, the linking between maintained by the Accounts Offices was the divisional figures and Headquarters’ discussed. In this Session, the method of figures done manually. However, some compilation of Monthly and Annual computerized figures are sent to Railway Accounts will be discussed. Board through computerized system. 4.1. Accounts current (Open Line However, codal provisions in connection and Construction Units). with compilation are detailed below: An Account Current is simply a statement After the General Book for a month have showing the receipts and disbursements of been closed and the Ledgers have been an accounts circle, duly classified under written up the monthly Account Current is the prescribed heads of accounts. Format prepared, for Capital and Revenue of Accounts Current has been prescribed transactions from the ledgers and in Appendices XI (for Revenue Accounts) submitted to the Railway Board together & XII (for Capital Accounts) of the with the supporting schedules. As per Accounts Code, Part I. Prior approval of revised norm a combined Account Current Railway Board is necessary for omission is to be sent to Railway Board although or addition of a major head or a minor Revenue and Capital Portions are to be head in this Form. Railway administration shown separately. may, however, introduce sub and detailed Separate Accounts Current should be heads to meet the local requirements. This prepared for expenditure of a New is prepared Monthly and finally an annual Construction when the accounts are combined Capital and Revenue accounts is maintained by a separate accounts also prepared. Monthly/yearly Account organization. When the accounts of current show the opening balance and expenditure on Construction are transactions during the year and maintained by the Financial Adviser and cumulative figures of receipts and Chief Accounts Officer of an Open Line payments. The principle on which the Administration, separate Accounts Current Account Current is prepared is that all is not necessary, but separate Schedules entries in Accounts current should be (as per Para A 330) of expenditure on such shown in net i.e. after deduction of the Constructions should be prepared. write back adjustments, against each head The monthly accounts of the of account. On no account should minus Divisions/Workshops should be submitted results be transferred as plus result to the by the Divisional/Workshop Accounts opposite side of the account. The column Officer to the Financial Adviser and Chief ‘amount to date’ in the Account Current Accounts Officer by the last day of the forms should show the transactions from following month or on such other day, as the beginning of the financial year. The may be fixed by him so as to enable him to cash balances should be opening balance compile the accounts of the entire railway of the year and the closing balance of the and submit them in time to the Railway month to which account refers. Final Board. When, in exceptional cases, the closing balance reflects the balance at the accounts cannot, in due course, be sent so end of the year. as to reach the Railway Board on the

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Participants’ Notes Session 4 prescribed date, the fact should be reported Suspense heads in Form A 331-B should immediately to the Board with an be appended to these schedules. explanation of the cause of the delay Schedules to accompany the Capital and stating when the accounts may be New Construction Accounts are as expected. follows: The monthly Revenue Account Current 1.Schedule of credits and debits to should be prepared in the form (Appendix Transfer Railways. XI) which should be accompanied by 2. Schedule of Deposits with “Reserve Twenty nine schedules in support of the Bank”. transactions shown against the various 3.Schedule of Expenditure under 5002 & heads in the Account Current. All the 5003-Capital Outlay on Indian Railways- schedules should be in Form A-327 and Commercial and Strategic lines. should exhibit the transactions under each 4.Schedule of Expenditure on New head by the prescribed sub-major heads Constructions which are maintained by and such other details as may be required F.A. & C.A.O of an Open Line Railway- by the Railway Board. In case of schedules separately for each construction with a of debits and credits to Transfer Railways, summary thereof. two separate schedules one for debit and 5.Schedule of Receipt and Expenditure- other for credits, showing the analysis by Deposit of Branch Line Companies. Railways, should be prepared. The Forms 6.Schedule of Expenditure of pre-partition (A-327) of Schedules shows following period. columns- (1) Head of Accounts, (2) Expenditure Note- Separate schedules shall be prepared and submitted during the current month and to the end of for expenditure under Part II-Contingency Fund. the month, 3) Grant for the year. 4.1.1. Statement of Transfer 4.1.2. Annual Closing of Books. – The Transactions - In order that a proper books relating to the financial year should, reconciliation may be effected, in the in every case, be closed by the 28th July Office of the Railway Board, of the following or by on earlier date as fixed by transactions of the various railways under the Railway Board. the head “Transfer Railways”, Statements The accounts of a year are kept open after in Form A-328 should be prepared and the close of the year so that, as far as submitted with Monthly Revenue Account possible all the transactions of the year Current. The figures shown in these may be included therein. For any statements should be the sum total of the expenditure actually incurred but bills for Adjustments made both in Capital, which are not accepted or accounted for by Revenue and Construction Accounts. the executive, provisional adjustments The monthly Capital Accounts Current should be carried out on the basis of of Open Lines and of New Constructions readily available allocation. Such should be prepared as per Appendix- XII provisional adjustments should be noted to AI. The Capital Account Current is down in a manuscript register for prompt accompanied by the following schedules in regularization. It is not essential that support of the transactions shown against transactions relating to earlier years should the various heads in the Accounts Current. be booked in the accounts of the latest year All the Schedules with the exception of the which are still open. If it is impossible to Schedules of Expenditure under 5002 and have any expenditure booked in the 5003 Capital Outlay on Indian Railways- accounts of the year to which it relates Strategic and Commercial Lines (which owing to the fact that the actual incidence should be prepared in Form 331 A) should of the expenditure is under dispute, it be prepared in Form A 327. Details under ought to be charged to the accounts of the

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Participants’ Notes Session 4 year in which the final decision is taken, Current are consolidated are outlined in though at the same time, efforts should be the succeeding paragraphs. made to expedite the decision as far as possible. Adjustments should not be made 4.3. Stores Accounts Current in the accounts of the past year if the No separate Accounts Current for the disbursements could not have been Stores Accounts is prepared. The portion reasonably anticipated in time for a grant of Stores Accounts is incorporated in the being obtained from the proper authority. Accounts Current pertaining to the main In all cases, where the expenditure, could Accounts Current. have reasonably been anticipated as for 4.4. Workshop Account Current example, recurring payment to a State or In the preceding Session, Workshop Department of the Central Government Manufacturing Suspense Account has been and payments which, though not of fixed discussed. An Account Current of amount, are of a fixed character, etc., the transactions pertaining to WMS A/c. is Accounts Officer should make the prepared in the Form E1215 as discussed adjustment in the accounts before they are earlier. In this session the method of finally closed. compilation of this account will be 4.2. Final Accounts Current (A 335) – discussed. After the books for a financial year are For preparing the Account-Current the closed, Final Accounts Current of the following instructions should be observed: Capital and Revenue transactions of the 4.4.1. Posting the Debit Side: railway should be prepared and submitted (i) "Labour" The figures appearing in the to the Railway board so as to reach them Labour Schedule (W. 525) should be not later than the 30th August following. posted against this head These Accounts Current are intended to (ii) "Cash" Debits to Workshop show the transactions of the railway for Manufacturing Suspense Account, which the year under the various final heads of comprise of the contractors' bills for direct account and the opening and closing purchases etc., motor licence fee, balances under the suspense and debt municipal taxes etc., should be posted heads. from the Monthly Classified Abstract of Final Revenue Accounts Current. – Cash Transactions (A. 1106). should be prepared as in Appendix XIII (iii) "Stores" should be posted from the and Daily Summaries of Issue Notes (S. 2702) Final Capital Account Current. –should for the last day of the month received from be prepared as in Appendix XIV. the Stores Accounts Office. 4.2.1. Consolidation of Accounts Current. – On Railways, where the Note: Before posting the stores account debits, they Accounts Officers subordinate to the should be agreed with the corresponding figures in Financial Adviser and Chief Accounts the Stores Summary Sub-Ledger (W. 627). Officer submit compiled accounts to the head office, the Accounts Current (iv) "Other Charges" including Inter shop (whether monthly or final) submitted by transfers should also be posted from the them should be consolidated into one Stores Summary Sub-ledger (W. 627). Account Current for the entire railway. (v) "Freight and Proforma Oncost charges" Similarly, the Accounts Current of should be posted from the schedule to Constructions should be consolidated so Proforma Oncost (W. 1203). that one Account Current for 4.4.2. Posting the Credit Side The credit Constructions may be prepared. The side should be posted from the Summary process by which the various Accounts of Outturn Statement Part I and should be supported by detailed schedules. The

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Participants’ Notes Session 4 closing balance should be worked out by journal entries are necessary in each of deducting total credits during the month these cases (Capital and Revenue). from the total debits including the opening 4.5.2. Credit side of the Account balance and it should agree with the Current. The credit transactions relating balance shown in the Outturn to WMS Account’ should be journalized Statement Part. II.. by per contra debits to the different heads of account appearing on the Note: A register of cumulative Workshop Account credit side of the Account-Current. Care should be maintained in the Production Units should be taken to see that the credits showing the monthly expenditure as appearing in the Month Account Current as also the cumulative already accounted for in the General expenditure for month to month, both for debits as Books e.g. credits for issues of well as credits for a financial year. After the manufactured material and return of Accounts of a financial year is closed the surplus stores to the Stores Department Production Units should prepare Manufacturing which have already been included in the Account and the out-turn statements for the year in their prescribed proforma and submit the same as General Books at the time the credit Annexures to the Appropriation Accounts. transfer certificates received from the Stores Accounts Office are accepted and 4.5. Workshop Manufacture Suspense omitted from the monthly journal Slip of (WMS) Account Journal Entries.(A 'Workshop Manufacture Suspense 1217)- Journal entries (Capital and Account'. Revenue) of all transactions affecting 4.6. Traffic Accounts Current WMS Account should be prepared The settlement of through traffic monthly for the Account-Current (W. transactions among railways takes place 1215) for incorporation in the General monthly and is made on the basis of the Books of the Railway. The following results of apportionment. For this purpose, instructions should be observed in an Account Current should be prepared preparing the journal entries: monthly in Form A. 3238 for each railway 4.5.1. Debit side of the Account-Current. with which traffic is interchanged. An (i) Such of the debits as have already been Account Current is a copy of the ledger incorporated in the General Books of the account of the Other Railway or Deposit Railway through the journal slip of Private Company in the books of the accounts receiving credits e.g. Stores Home Railway. Only one Account Current debits. Fuel and other Miscellaneous should be prepared for both Coaching and Charges including Internship transfers. Goods transactions and the net result in Cash debits, should not be included in the favour of or against the railway worked journal slips of the WMS Account. out. Where the Home Railway is creditor, (ii) The amount on account of Labour the Account Current should be sent to the should be debited to "WMS Account" by debtor railway. In the case of other credit to 'Labour Suspense' through a railways the account current should be Capital Journal entry (The Muster Rolls/ accompanied by a Transfer Certificate for Labour Pay sheets having been passed for acceptance by the debtor railway. The payment and debited already to 'Labour Transfer Certificate will, as a rule, be Suspense'). accepted in full by the debtor railway, any (iii) The amount of freight charges should errors noticed in checking the account be debited to 'Workshop Manufacture being notified to the creditor railway for Suspense Account by minus debit to adjustment in the subsequent month. "Abstract K" and that of Proforma On cost After preparation and consolidation of should be debited to 'Workshop final accounts current other accounts and Manufacture Suspense Account' by credit returns as mentioned below are compiled. to "Traffic Earnings, Abstract Z." Two

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Participants’ Notes Session 4

4.7. Capital and Revenue (vi) Estimate of further expenditure on Accounts (Section II of the Annual Capital Account (Form A 708). Report-Financial Statement): 4.8. Finance Accounts This account is prepared to understand the (Government Accounts): railway finance in commercial term. The Finance accounts are compiled in Capital transactions are broadly described accordance with the requirements of as those which pertain to the acquisition of Government Accounts duly classified in concrete assets while Revenue transactions accordance with the heads of accounts are those which relate to the working of prescribed for Government accounting railways, comprising both earnings and (vide Appendix IV of Indian Rly. working expenses. This Account Accounts Code, Part.I). The transactions comprises of different statements showing brought to accounts in the books of the details of Capital Receipts & Expenditure, railway under the various railway heads of Revenue Earnings & Working Expr., account are, after closing of accounts for Outstanding earnings, Capital at charge each financial year, summarized in the and calculation of Dividend Payable to form of a compilation called the Finance General Revenue, and statement of Accounts. The compilation comprises (i) expenditure charged to DRF, DF, CF, RS Abstract accounts of the various railway funds, etc. heads (Form A 729) together with detailed Capital expenditures are compiled from supported schedules (A to K) and (ii) the ledger and Register of Capital, Appendices A & B (Forms A 743 & Depreciation Reserve Fund, Development A 746). The detailed formats of abstracts, Fund, Railway Safety Fund and Open Line accounts and appendices are laid down in Works (Revenue). Revenue expenditures Paras 729 A to 746 A-I as follows: are compiled from the Revenue These should reach Railway Ministry not Allocation Registers (A 312) and later than 20th September. Abstract Earnings are compiled from Register of Accounts show the booked actual by Earnings (A 313). Following Statement of Major and Minor heads of accounts for the Accounts is included in the Capital and year concerned in juxtaposition with those Revenue Accounts as per forms prescribed for the previous year. The Accounts reflect in Accounts Code, Part I and sent to the total of 146(1002) -Indian Railway Railway Board not later than 15th Commercial Lines Revenue Receipts September each year. (Abstract X-Coaching Earnings, Abst.-Y- (i) Statement of Capital authorities (Form Goods Earnings, Abst.-Z- Sundry A 703) Earnings, Suspense, Traffic Accounts- (ii) Statement of Stock and Share Capital Other Railways Minus 346(3002) -Indian created, showing the proportion received Railways-Commercial Lines-Working (Form A 704). Expenses (Abstract A to N) = Net Traffic (iii) Capital raised by the Loans, Receipts. The total for each Major Head as Debentures and Debenture Stock. (Form per Appendix IV should be shown A705). separately. The figures should be compiled (iv) Receipts and Expenditure on Capital separately for Commercial and Strategic Account (Form A 706). Lines. (v) Details of Capital Expenditure (Form Schedules consist of following: No.A 707) should be for lines opened for Schedule A - Detailed Accounts of traffic and for lines in the course of expenditure under Subsidized Companies, Construction. The figures in this Schedule B- Detailed Accounts of expr. Statement should tally with those shown Under 345 (3001) Policy formation, in Schedule “C” to Finance Accounts. Direction, Research and Other miscellaneous organizations,

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Participants’ Notes Session 4

Schedule C- Detailed Accounts of Capital Audit Certificate is to be given as per Para expenditure (sub & Detailed head wise) on 747 A-I. Construction of Railways outside the 4.9. Debt Head Report: Revenue accounts under Major Head It is a part of Finance Accounts. It is the 5002/5003 Capital Outlay (for the Open report prepared in Form A 749 on analysis line and for lines under Construction the of various debt balances of a Zonal accounts of which have not been closed) Railway at the end of a year (31st March) (for Capital, DRF, DF, SRF & OLWR under the heads F-Loans and Advances- separately), Loans by the Central Government, I-Small Schedule D- Detailed Accounts of expr. on Savings & Provident Fund-Provident Fund Construction of Railways, charged against Balances, K-Deposit & Advances, M- State Govt. and Corporate Body’s Capital, Suspense & remittances- Inter Schedule E- Balances in the Books of Government Adjustment accounts- Accounts Officer of a Railway. A Accounts with States. Separate form is certificate regarding correctness of the prepared for each head. It consists of balances a to be given by the General closing balance of the previous year, prior Manager of the Railway duly vetted by the period adjustments (i.e. TWFA), net Principal Director of Audit of the Railway, receipts and disbursements during the year Schedule F- Account of expenditure under and balances at the end of the year, as Major Head 5002/5003 met from appear in the Account Current for March. Development fund (by Minor Heads of It is to be sent to the Railway Board by Classification-Plan Head), 10th September of each year with Schedule-G- Accounts of expenditure endorsement to Statutory Audit and under Major Head 5002/5003 transferred audited copy is to be sent to Railway to Major Head 348 (3004) Revenue (Open Board by 25th September of the year. An Line Works)(by Minor Heads of Audit Certificate from Principal Director Classification-Plan Head), of Audit of each Zonal Railway, in this Schedule H- Expenditure charged to final regard, is required to be sent as per Para Heads met from Contingency Fund, 752 A. Schedule J- Account of expenditure under 4.10. Final Accounts (Section-II, Part I Major Head 5002/5003 met from & II of Appropriation Accounts): Depreciation fund (by Minor Heads of These Accounts consist of: Classification-Plan Head), 4.10.1. P & L Account (Annexure-IV) (F Schedule K- Account of expenditure under 431 B) Major Head 5002/5003 met from Railway It shows the Gross earnings, Govt. share of Safety Fund (by Minor Heads of surplus profit, Misc. receipts in the Credit Classification-Plan Head). Side and working expenses, other All schedules reflect Outlay during the expenses (like Surveys, Statutory Audit, year, Outlay to the end of the previous Misc. Establishments, Cost of Railway year and Outlay to the end of the Year. Board, OLW-R & Dividend payable to Appendix A consist of Statement of General Revenue, Subsidy from General Indirect charges relating to the Capital and Revenue etc. in the Debit side & profit Revenue Accounts for the year ending 31st made by the Railway during the year. March and Appendix B is a Statement of 4.10.2. Manufacturing Account (F 432) Works undertaken on behalf of Defence together the Out-Turn-Statement for the Ministry on which interest and Chittaranjan Locomotive Works, Diesel maintenance charges are leviable for the Locomotive Works and Integral Coach year ending 31st March. The appendices Factory etc. is also prepared apart from are intended to give information which the Block Account, Capital Statement and compiled accounts do not reveal.

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Participants’ Notes Session 4

Balance Sheet and enclosed to Appropriation Accounts as Annexure. 4.10.3. Capital Statement & Statement of Block Account including Loan Account of Indian Railways (Commercial Lines) [Annexure II (i) & (ii) (F 431)]. Capital Statement shows the Capital raised (Specific and non specific debt) etc. on the liabilities side and purchase price, capital expenditure after purchase and Floating Assets viz. (a) Stores, (b) balance in Manufacturing accounts, (c) Misc. Advances on the Assets side. Block Accounts show the Capital invested and various fund balances like DRF, DF, SRF, OLW(R) etc. and the total assets created out of Capital, CF, DRF, DF, and RSF etc. 4.10.4. Balance Sheet [Annexure-III (F 431 A)] It is prepared with the object of ascertaining the position of various Assets (viz. Cash in hand, Sundry Debtors, Investments, Savings Bank Account with Government, Reserve Fund Investment & Accounts with various States and other Railways) and liabilities (viz. Sundry Creditors, various fund balances of the Railway, Balance due to Central Govt. on account of loans and advances etc. and Balance of amount in account with Government) at the end of a financial year. It exhibits true and fair picture of financial position of the Railway during a year. It is a part of Appropriation Accounts placed before the Parliament.

.

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Different steps in compilation of Monthly Accounts Current, Annual Accounts Current, Capital and Revenue Account, Finance Accounts and Balance Sheet.

STEP-1 STEP-2 STEP-3 Preparation of the Journal slips and journals in respect of Preparation of Monthly Preparation of Daily Abstract transactions which do not involve Abstract of Cash Transactions of Cash Transactions or the the actual receipts and of the General Cash Abstract General Cash Abstract Book. disbursements of cash Book (by 3rd of the following simultaneously. month).

STEP-4 STEP-5 STEP-6 Positing in the Account Current Compilation of ledgers after for Headquarters’ figures are Drawing of Trial Balance closing total of the journals made and figures of Divisional after adding the total debit posted in the ledgers. Journals & other units are compiled at and credit under each head of & ledgers are prepared HQ and incorporated in the account in the Journals and separately for Capital and Accounts Current and after adding up the figures of Revenue Accounts. Approximate Account Current cash transactions. is sent to Railway Board monthly along with required STEP-9 statements (by 8th of the STEP-8 Compilation of Monthly Capital following month). Preparation of Subsidiary and Revenue Accounts Current Accounts records like Registers for Capital and Revenue STEP-7 of earnings, Revenue Allocation Accounts with supporting Register, Suspense Registers in schedules showing receipts & Closure of General Books. respect of transactions which expenditure separately under can not be immediately charged Consolidated Fund -Pt.I, to final head viz. Stores and Contingency Fund-Pt.II and Workshop Suspense Register, Public Accounts of India -Pt.III- Demands payable, Demands major head/sub major head, recoverable etc. minor head wise (to be sent to Rly. Bd. by 6th of the 2nd

STEP-10 following month)

Subsidiary registers are totaled up and reconciled with the General

Books within a week of STEP-11 submission of accounts. Mistakes After closing of all books for a detected during reconciliation are financial year Final Account Current is rectified and intimated to Railway prepared.

Board. STEP-12 Note-The procedure outlined After preparation of Capital & Revenue Account above may slightly vary from Current other Accounts, Reports and statements e.g. a Zonal Railway to other. Finance Accounts, Profit & loss A/c., Block A/c and Balance Sheet etc. are prepared.

Training Manual on Audit of Railway Finance and Appropriation Accounts 81

PPT Slide Session 4

Slide 1 Slide 4 Method of preparation/ Session Title: compilation of Accounts Current:

Compilation of • After the General Book for a month various Important are closed and the Ledgers written up, the monthly Account Current is Accounts and prepared for Capital and Revenue Accounts Current transactions from the ledgers. • As per revised norm a combined by the Accounts Account Current is sent to Railway Offices. Board although Revenue and Capital portions are to be shown separately.

Training Module on Audit of 1 Training Module on Audit of 4 Railways; Session: 1 Railways; Session: 4

Slide 2 Slide 5 Accounts current (Open Line and Construction Units). Method of preparation/ compilation of Accounts Current:

•Is simply a statement showing the • Separate Accounts Current should be prepared for expenditure of a New receipts and disbursements of an Construction when the accounts are accounts circle of a Railway, duly maintained by a separate accounts classified under the prescribed Major organization. or Minor heads of accounts. • When the accounts of expenditure on Construction are maintained by the •Format is prescribed in Appendices XI Financial Adviser and Chief Accounts (for Revenue Accounts) & XII (for Officer of Open Line, separate Capital Accounts) of the Accounts Accounts Current is not necessary, Code, Part I. but separate Schedules of expenditure on such Constructions should be prepared. Training Module on Audit of 2 Training Module on Audit of 5 Railways; Session: 4 Railways; Session: 4

•

Slide 3 Accounts current (Open Line and Slide 6 Construction Units). Method of preparation / •It is prepared Monthly. Finally a compilation of Accounts Current: combined Capital and Revenue accounts at the year end is prepared. •The monthly accounts of the •Monthly/yearly Account current Divisions/Workshops should be shows the opening balance and submitted by the Divisional/Workshop transactions during the month/year Accounts Officer to the Financial Adviser and Chief Accounts Officer by and cumulative figures of receipts and the last day of the following month or payments. on such other day, as may be fixed by •It is Prepared on the principle that all him, for compilation of the accounts of entries in Accounts current should be the entire railway and submit in time shown in net i.e. after deduction of the to the Railway Board. write back adjustments, against each

head of account.Training Module on Audit of 3 Training Module on Audit of 6 Railways; Session: 4 Railways; Session: 4

Training Manual on Audit of Railway Finance and Appropriation Accounts 82

PPT Slide Session 4

Slide 7 Slide 10 Method of preparation / Method of preparation / compilation of Monthly Accounts compilation of Accounts Current: Current

• The monthly Revenue Account Final Revenue Accounts Current –is Current is prepared in the form Final Revenue Accounts Current –is (Appendix XI) to AI duly prepared as per Appendix XIII and accompanied by schedules as Final Capital Account Current –is prescribed in support of the prepared as per Appendix XIV of transactions shown against the prepared as per Appendix XIV of various heads. Accounts Code, Part I. • All the schedules are to exhibit the transactions under each head by the prescribed sub-major heads and such other details as may be required by the Railway Board. Training Module on Audit of 7 Training Module on Audit of 10 Railways; Session: 4 Railways; Session: 4

Slide 8 Slide 11 Method of preparation/ Method of preparation / compilation of Monthly compilation of Accounts Current Accounts Current: Consolidation of Accounts Current On Railways. •The monthly Cap. A/cs. Current of • Where the Accounts Officers Open Lines and of New Constructions subordinate to the Financial Adviser should be prepared as per Appendix- and Chief Accounts Officer submit XII to AI. compiled accounts to the head office, the Accounts Current (whether •The Cap. A/cs. Current is monthly or final) submitted by them accompanied by the nos. of are consolidated into one Account schedules as prescribed in support of Current for the entire railway. the transactions shown against the • Similarly, the Accounts Current of various heads. Constructions is consolidated so that one Account Current for Construction unit is prepared. Training Module on Audit of 8 Training Module on Audit of 11 Railways; Session: 4 Railways; Session: 4

Slide 9 Slide 12 Final Accounts Current (A 335) Method of preparation / compilation of Accounts Current • After the books for a financial year are closed, Final Accounts Current of the Capital and Revenue transactions of the railway is prepared in the same Stores Accouts Current manner as Monthly Accounts Current No separate Accounts Current for the and submitted to the Railway board. Stores Accounts is prepared. The • This Accounts Current intends to show portion pertaining to Stores Accounts is the transactions of the railway for the posted/incorporated in the main year under the various final heads of Accounts Current. account and the opening and closing balances under the suspense and debt heads.

Training Module on Audit of 9 Training Module on Audit of 12 Railways; Session: 4 Railways; Session: 4

Training Manual on Audit of Railway Finance and Appropriation Accounts 83

PPT Slide Session 4

Slide 13 Method of preparation / Slide16 Workshop Manufacture Suspense compilation of (WMS) Account Workshop Account Current Debit side of the WMS Account •Account Current of transactions consists of- pertaining to WMS A/c. is prepared in the Form E1215. (i) Such of the debits as have already been incorporated in the General Books of the •Debit Side is posted with: Railway through the journal slip of (i) "Labour“, as per Labour Schedule accounts receiving credits (Cash debits, not (W 525), (ii) "Cash" Debits comprising included in the journal slips of the WMS of contractors' bills for direct Account), (ii) The amount on account of Labour by purchases, motor licence fee, municipal credit to 'Labour Suspense‘, through a taxes etc., as per Monthly Classified Capital Journal entry. Abstract of Cash Transactions (A Contd…………………………………………..S/17. 1106), Contd………………S/14 Training Module on Audit of 13 Training Module on Audit of 16 Railways; Session: 4 Railways; Session: 4

Slide 14 Slide17 Method of preparation / Workshop Manufacture Suspense compilation of (WMS) Account Workshop Account Current • (iii) The amount of freight charges by minus debit to "Abstract K" and (iii)"Stores" posted from the Daily Summaries of Issue Notes (S 2702) • (iv) Proforma Oncost by credit to for the last day of the month received "Traffic Earnings, Abstract Z“. from the Stores Accounts Office, (iv) • Two journal entries are necessary in "Other Charges" including Inter shop each of these cases (Capital and transfers posted from the Stores Revenue). Summary Sub-ledger(W 627). (v)"Freight and Proforma Oncost • The credit transactions relating to charges" posted from the schedule to WMS Account' should be journalized Proforma Oncost (W 1203). by per contra debits to the different Contd………………………………...... S/15 heads of account appearing on the Training Module on Audit of 14 credit side ofTraining the Module Account on Audit of -Current. 17 Railways; Session: 4 Railways; Session: 4

Slide15 Slide18 Method of preparation / Traffic Accounts Current compilation of Workshop Account Current • The settlement of through traffic transactions among railways takes place monthly and made on the basis of the Workshop Account Current results of apportionment. •The credit side is posted from the Summary • Is prepared monthly for each railway with of Outturn Statement Part I duly supported by which traffic is interchanged. prescribed schedules. •The closing balance is worked out by • It is a copy of the ledger account of the deducting total credits during the month from Other Railway or Deposit Private Company the total debits including the opening in the books of the Home Railway. balance. • Only one Account Current is prepared for •The balance should agree with the balance both Coaching and Goods transactions. shown in the Outturn Statement Part- II..

Training Module on Audit of 15 Training Module on Audit of 18 Railways; Session: 4 Railways; Session: 4

Training Manual on Audit of Railway Finance and Appropriation Accounts 84

PPT Slide Session 4

Slide19 Slide22 Traffic Accounts Current Finance Accounts (Govt. Accounts) • Where the Home Railway is creditor, • Prepared in accordance with the the Account Current should be sent requirements of Govt. A/cs. duly to the debtor railway. • In the case of other railways the classified in accordance with the account current should be heads of accounts prescribed for accompanied by a Transfer Govt. accounting (vide Appendix IV Certificate for acceptance by the of Indian Rly. Accounts Code, Part.I). debtor railway. • The Transfer Certificate will, as a • The transactions brought to accounts rule, be accepted in full by the debtor in the books of the railway under the railway. various railway heads of account are, • Any errors noticed in checking the after closing of accounts for each accounts being notified to the creditor railway for adjustment in financial year, summarized in this the subsequent month. form.

Training Module on Audit of 19 Contd…………………………………Training Module on Audit of .S/23 22 Railways; Session: 4 Railways; Session: 4

Slide20 Slide23 Capital and Revenue Accounts Finance Accounts (Government (Section II of the Annual Report- Accounts) Financial Statement): • This compilation comprises (i) Abstract accounts of the various • It reflects the railway finance in railway heads together with commercial term. supported schedules (A to K) and (ii) • This A/cs. comprise of different statements Appendices A & B as laid down in showing details of Capital Receipts & A-I. Expenditure, Revenue Earnings & Working Expr., Outstanding earnings, Capital at • Abstract Accounts show the booked charge and calculation of Dividend Payable amount by Major and Minor heads of to General Revenue, and statement of accounts for the year concerned in expenditure charged to DRF, DF, CF, juxtaposition with those for the Railway funds, etc. previous year. • Contd………………………………………………S/21 Contd……………………………………………………….Slide24 Training Module on Audit of 20 Training Module on Audit of 23 Railways; Session: 4 Railways; Session: 4

Slide21 Capital and Revenue Accounts Slide24 Finance Accounts (Government (Section II of the Annual Report- Accounts) Financial Statement) • The Accounts reflect the total of 146 (1002) -Indian Railway Commercial Lines •Capital expenditures – are compiled Revenue Receipts (Abstract X-Coaching from the ledger and Register of Capital, Earnings, Abstract Y- Goods Earnings, Depreciation Reserve Fund, Abstract Z- Sundry Earnings, Suspense, Development Fund, Railway Safety Traffic Accounts-Other Railways Minus 346 (3002)-Indian Railways-Commercial Lines- Fund and Open Line Works (Revenue). Working Expenses (Abstract A to N) = Net •Revenue expenditures – are compiled Traffic Receipts. from the Revenue Allocation Registers. • The total for each Major Head as in •Earnings are compiled from Register of Appendix IV should be shown separately. Earnings. • The figures should be compiled separately for Commercial and Strategic Lines.

Training Module on Audit of 21 Training Module on Audit of Railways; Session: 4 Railways; Session: 4 24

Training Manual on Audit of Railway Finance and Appropriation Accounts 85

PPT Slide Session 4

Slide25 Slide28 Debt Head Report Final Accounts (Section-II, Part I & II of Appropriation Accounts). • Is a part of Finance Accounts. • A report prepared on analysis of various debt balances of a Zonal 2.Manufacturing Account (F 432) Railway at the end of a year (31st together the Out-Turn-Statement for March) under the heads F-Loans and the Chittaranjan Locomotive Works, Advances-Loans by the Central Diesel Locomotive Works and Government, I-Small Savings & Integral Coach Factory etc. and Provident Fund-Provident Fund enclosed to Appropriation Accounts Balances, K-Deposit & Advances, M- as Annexures. Suspense & remittances - Inter Government Adjustment accounts- Accounts with States.

Contd……………………………………Training Module on Audit of .S/2625 Training Module on Audit of 28 Railways; Session: 4 Railways; Session: 4

Slide26 Slide29 Final Accounts (Section-II, Part I Debt Head Report & II of Appropriation Accounts).

3.Capital Statement & Statement of Block • Consists of closing balance of the Account including Loan Account of previous year, prior period Indian Railways (Commercial Lines). adjustments (i.e. TWFA), net receipts • Capital Statement shows the Capital raised and disbursements during the year (Specific and non specific debt) etc. in the liabilities side and purchase price, capital and balances at the end of the year, expenditure after purchase and Floating as appear in the Account Current for Assets viz. (a) Stores, (b) balance in Manufacturing accounts, (c) Misc. Advances in March. the Assets side. • Block Account shows all physical assets of Railway whether financed from loan capital or the Railway’s own generation of funds like DRF, DF, SRF, OLW(R) etc. • Maintained separately for Commercial and Training Module on Audit of 29 Strategic lines. Railways; Session: 4 Training Module on Audit of 26 Railways; Session: 4

Slide27 Slide30 Final Accounts (Section-II, Part I Final Accounts (Section-II, Part I & II of Appropriation Accounts) & II of Appropriation Accounts). • 4. Balance Sheet [Annexure-III (F 431 A)] These Accounts consist of : • Is prepared to ascertain the position of various Assets (viz. Cash in hand, Sundry Debtors, Investments, Savings Bank 1.P & L Account (Annexure-IV) showing the Gross earnings, Govt. share of surplus Account with Government, Reserve Fund profit, Misc. receipts, loss, if any, during the Investment & Accounts with various States year, in the Credit Side, and and other Railways) and liabilities (viz. Working expenses, other expenses (like Sundry Creditors, various fund balances of Surveys, Statutory Audit, Misc. the Railway, Balance due to Central Govt. on Establishments, Cost of Railway Board, OLW-R & Dividend payable to General Revenue, account of loans and advances etc. and Subsidy from General Revenue etc. & profit (if Balance of amount in account with any) made by the Railway during the year, in Government) and balance in transfer, at the the Debit side . end of a financial year.

Training Module on Audit of 27 Training Module on Audit of 30 Railways; Session: 4 Railways; Session: 4

Training Manual on Audit of Railway Finance and Appropriation Accounts 86

Participants’ exercises Session 4

Questions: 10. How Consolidation of various Accounts Current is done? 1. What is an Account Current? 11. How Workshop Account Current is 2. In which principle an Account prepared? Current is prepared? 12. What is a Traffic Accounts Current? 3. What does the Monthly Accounts Current show? 13. What is Capital and Revenue Accounts? How it is compiled? 4. What are the steps in preparation/ compilation of Accounts Current? 14. What is a Finance Accounts of the Railway? What picture does it show? 5. Why the accounts of a year are kept open for some months even after 15. What is a Debt Head Report? closing of the year? 16. Where do the balances under various 6. Write whether following action taken Debt Heads finally reflect? by the Railway Administration was right? 17. What are the final accounts of a Railway? Adjustments were made in the What do they reflect? accounts of the past year, during the current year, as the disbursements could not be anticipated in time for a grant being obtained from the proper authority.

7. Mention whether following statement is true or false: For any expenditure actually incurred but bills for which are not accepted or accounted for by the executive, provisional adjustments should not be carried out on the basis of readily available allocation.

8. Mention whether the Accounts Officer should make the adjustment in the accounts before they are finally closed in cases, where the expenditure, could have reasonably been anticipated and payments which, though not of fixed amount, are of a fixed character, etc..

9. When is the Final Accounts Current prepared? What does this Account contain?

Training Manual on Audit of Railway Finance and Appropriation Accounts 87

Participants’ exercises Session 4

Answer Sheet Capital and Revenue transactions of the railway are prepared. 1. An Account Current is simply a This Accounts Current show the statement showing the receipts and transactions of the railway for the year disbursements of an accounts circle, duly under the various final heads of account classified under the prescribed heads of and the opening and closing balances accounts. An Account Current is under the suspense and debt heads. prepared for both Revenue & Capital Accounts. 10. See Para 4.2.1 of Participants’ notes -Session 4. 2. The principle on which the Account Current is prepared is that all entries in 11. See Para 4.4.2 of Participants’ notes Accounts current should be shown in net -Session 4. i.e. after deduction of the write back adjustments, against each head of 12. A Traffic Account Current is a copy account. On no account should minus of the ledger account of the Other results be transferred as plus result to the Railway or Deposit Private Company in opposite side of the account. the books of the Home Railway.

3. A Monthly Accounts current show the 13. This account is prepared to opening balance and transactions (both understand the railway finance in Capital and Revenue) during the month commercial term. and cumulative figures of receipts and See Para 4.7 of Participants’ notes payments and closing balance at the end Session 4. of month. 14. The Finance accounts are compiled in 4. See Para 4.1 of Participants’ notes - accordance with the requirements of Lesson 4. Government Accounts duly classified in accordance with the heads of accounts 5. The Accounts of a year are kept open prescribed for Government accounting, for some months even after the close of the year so that, as far as possible all the For compilation see para 4.8 of transactions of the year may be included Participants’ notes -Session 4. therein. For any expenditure actually incurred but bills for which are not 15. It is the report on analysis of various accepted or accounted for by the debt balances of a Zonal Railway at the executive, provisional adjustments are end of a year (31st March) under the carried out on the basis of readily heads F-Loans and Advances-Loans by available allocation. the Central Government, I-Small Savings & Provident Fund-Provident 6. The action was not correct. Fund Balances, K-Deposit & Advances, M-Suspense & remittances- Inter 7. Statement is false. Government Adjustment accounts- Accounts with States. 8. The Accounts Officer should make the adjustment in the accounts before they are 16. The balances under various Debt finally closed. Heads finally reflect in the Balance sheet. 9. After the books for a financial year are closed, Final Accounts Current of the

Training Manual on Audit of Railway Finance and Appropriation Accounts 88

Participants’ exercises Session 4

17. Final Accounts of a Railway are Profit & Loss Account, Manufacturing Account, Capital Statement & Statement of Block Account including Loan Account of Indian Railways (Commercial Lines) & Balance Sheet.

See paras 4.10.1.-4.10.4 of Participants’ notes -Session 4.

Training Manual on Audit of Railway Finance and Appropriation Accounts 89

Session: 5

Railway Budget and Appropriation Accounts

Training Manual on Audit of Railway Finance and Appropriation Accounts 90

Instructor’s Guide Session: 5

Session Title: Railway Budget and Appropriation Accounts Session Guide Reference Participants’ Instructor’s Guide Response Session Overview Welcome participants to the session and remind them Lecture that their active participation is critical for the success of each session. Learning Objective Inform: Lecture Given the inputs of Budgetary System of Indian Railways through group discussion, lecture and PowerPoint slide show, the participants will, at the end of the session, acquire an understanding of the basic concepts of the Indian Railway Budget which will help them to focus on audit issues in the practical job scenario. Basic Concepts Discuss: Lecture with ● Introduction to the Railway Budget- Its Preparation, Power Point Compilation, Scrutiny and Allotment. Slide Show ● Distribution of Funds. Session 5 ● Powers of the Railway Board and the Railway AUDIT OF Administration in respect of Budget Allotments. RAILWAY ● Parliamentary Financial Control on Appropriation BUDGET Accounts. Summarise: Distribute Participants Note Session 5 Tell the participants that during the session, we Participants’ discussed introduction of the Railway Budget-its Note preparation, compilation etc., Distribution of funds, and Parliamentary financial control on Appropriation Accounts. Invite questions on themes discussed. If participants have any doubts/clarifications about themes, clarify the same. Answer participants queries. Thank the participants and bring the session to a close.

Training Method: Interactive Lecture and Power Point Slide Show.

Materials Required: Power Point Slides, Projector, White Board, Marker Pen and Participants’ Note.

Training Manual on Audit of Railway Finance and Appropriation Accounts 91

Participants’ Notes Session: 5

Session Title: Railway o A review of the preceding year, including the actual receipts and Budget and Appropriation expenditure in that year; Accounts. o An estimate of the receipts and expenditure of the coming year; and Session Overview: o Proposals, if any, for meeting the 5.0. Rail Budget and requirements of the coming year.  Article 112(2) of the Constitution Finances prescribes that the estimates of expenditure embodied in the Annual Financial Statement Para 301 of the Indian Railway Financial shall separately show: code Vol. I state that the Budget is a o The sums required to meet Constitutional and Management document. expenditure charged upon the Article 112 (1) of the Constitution of India Consolidated Fund of India; and prescribes that ‘The President shall in o The sums required to meet other respect of every financial year cause to be expenditure proposed to be made from laid before both the Houses of Parliament a the Consolidated Fund of India. statement of the estimated receipts and —thus the expenditure proposed in the expenditure of the Government of India for Budget is either (i) voted or (ii) charged. the year’ referred to as ‘Annual Financial  Article 113(1) of the Constitution Statement’ and popularly called as the provides that ‘the estimates of expenditure ‘Annual Budget’. charged upon the Consolidated Fund of  As per the Separation Convention 1924, India shall not be submitted to the vote of the Railway Budget is presented to the Parliament’. Parliament by the Union Railway Minister,  Article 113(2) requires that estimates of generally two days prior to the General voted expenditure shall be submitted to the Budget, usually around 26 February. Lok Sabha in the form of demands for grants Though the Railway Budget is separately and the House shall have power to assent, or presented to the Parliament, the figures refuse to assent to any demand, or to assent relating to the receipt and expenditure of the subject to a reduction of the amount Railways are also shown in the General specified therein. Budget, since they are the part and parcel of  The Article 113(3) enjoins that no the total receipts and expenditure of the demand for a grant shall be made except on Government of India. the recommendation of the President.  The Parliament discusses the policies  In respect of Railways the following and allocations proposed in the budget. expenditure is ‘Charged’ on the Based on the anticipated traffic and the Consolidated Fund of India: projected tariff, the level of resources o The salary, allowances and the required for railway's capital and revenue pensions payable to or in respect of expenditure is worked out. While the C&AG of India; revenue expenditure is met entirely by o Any sums required to satisfy any railways itself, the shortfall in the capital judgement, decree or award of any Court (plan) expenditure is met partly from or awards by Arbitrators where made borrowings (raised by Indian Railway into rule of court; and Finance Corporation) and the rest from o Any other expenditure declared by budgetary support from the Central the Constitution or by Parliament by law Government. to be so charged.  Every budget contains three elements: 5.1. The Railway Budget Process  The following are the annual budget processes: Training Manual on Audit of Railway Finance and Appropriation Accounts 92

Participants’ Notes Session: 5

o The Annual Budget forwarded to the Railway Board and two o Budget Allotment copies thereof furnished to this office. o August Review and Revised  The requirements of funds under the Estimates several Sub-Heads of demands for grants in o Supplementary Grants respect of the various departments will be o Final Modifications advised by the Budget Officer of the o Final Grant Division and by the Departmental Officers. 5.1.1. The Annual Budget In the case of other Branch Offices, the  Based on the time table, issued by the advice will be sent to the respective Heads Railway Board the Financial Adviser and of the Departments and the Local Accounts Chief Accounts Officer will draw up a Officer. detailed programme laying down the dates  The Accounts Officer will vet these by which the various Divisional/Branch estimates and forward his remarks, if any, to Offices (Executive) should furnish the the Heads of the Departments concerned and accounts/returns relating to them to their endorse a copy to the Financial Adviser and Accounts Officer. Chief Accounts Officer (Budget) along with  The time table will also indicate the a copy of the estimates vetted by him. dates by which the Accounts Officer should  The Heads of the Departments will vet the same and forward them to the Head consolidate the requirements of their of the Department, Financial Adviser and departments under each of the Sub-Heads of Chief Accounts Officer (Budget) and Local demands, etc., for the Railway as a whole Audit Officers. The dates by which the and forward to the Budget Section of the Heads of the Departments should furnish the Financial Adviser and Chief Accounts accounts of the relevant Sub heads of the Officer’s Office. several grants to the Financial Adviser and  These will be scrutinized by the Chief Accounts Officer for the Railway as a Financial Adviser and Chief Accounts whole will also be laid down. Officer and modifications, if any, necessary,  In so far as the amounts allotted to the will be discussed with the Heads of the Headquarters Offices are concerned, the Departments and the final requirements position of the Head of the Department who advised to the Railway Board in the is the Controlling Officer for such amounts, prescribed form. will correspond to that of the  For this purpose, the various Branch/Divisional Executive Officers in sub-Detailed heads of account which fall regard to the submission of the under the several sub-heads of the Demands Appropriation Accounts for this portion of for Grants are available in the Printed forms the allotment to the concerned internal sent by the Railway Board to all the checking section of the Financial Adviser Railways, in which the Revised Estimates and Chief Accounts Officer’s Office for for the current year and the Budget purposes of scrutiny. Estimates for the ensuing year have to be  The Headquarters Books and Budget furnished. Section will forward copies of these 5.1.2. Demands for Grants (F 305- programmes to all the Divisional/Branch 307) - The proposals of Government in Audit Offices. respect of sums required to meet expenditure  Based on the Accounts, prepared by the from the Consolidated Fund of India are to Heads of the Departments from the ones be submitted to the Lok Sabha in the form of furnished by the several Executive Offices “Demands for Grants”. The Demands shall in the Divisions/Branches, the advance be for gross expenditure, the credits or copies of the Accounts will be compiled by recoveries being shown in the form of foot the Budget Section of the Financial Adviser notes to Demands. and Chief Accounts Officer’s Office and Training Manual on Audit of Railway Finance and Appropriation Accounts 93

Participants’ Notes Session: 5

 At present, there are 16 heads of Demand are contained in paragraphs 309 to 353 of for grants. Ordinary Working Expenses the Indian Railway Financial Code Vol.-I. including Pensionary Charges are included 5.1.3. Preparation of Budget by under Grant Nos. 3 to 13 (for all Railways). Railway Administration (F - 309). Miscellaneous Expenditure and Misc.  Preparation of the revised and budget Expenditure (General) are included under estimates should commence at the ‘grass Grant nos.1 (for Railway Board) & 2 (for root level’ i.e. Divisions, Construction Railway Board & Railway Admn. etc. to Departments, Workshops, Stores Depots, whom grants are made). There is a single Traffic Department etc.; head for Demand for Grants for all Works  The entire responsibility for framing the Expenditure – (including Assets- estimates devolves upon the Acquisition, Construction and spending/earning authorities concerned Replacement), under the Grant No.16 (for though the actual work of compilation and all Railways and Railway Board). Grant scrutiny would rest with the FA&CAO who No.14 is for Appropriation to Funds (for all would also draw the attention of the GM to Railways and Rly. Board) and Grant No.15 matters of purely financial impact; is for Dividend to General Revenues,  The estimates should be as accurate as Repayment of Loans taken from General possible; Revenues and Amortization of over  Care should be taken to see that the data Capitalization (for Railway Board). on which the forecast is based is adequate  The Demands for Grants are presented in and reliable and that the conclusions arrived two parts. Part I is for all Railways and Part at from the data can be sustained by past II is for Individual Railways. Each part will experience and future expectations of likely have 3 sub divisions- events; (a) Sub-heads of the Demands  No stereotyped method should be representing major adopted for forecasting the estimates. function/activities, (b) Detailed Heads representing a further  The revised and budget estimate should break-up of the activity of be framed by various concerned authorities classification, for the following heads (F 312): (c) Primary Units (Objects of o Gross Receipts i.e. Coaching Expenditure) identifying ‘what’ the Earnings-passenger & parcel traffic, expenditure denotes i.e Salary, Goods Earnings-Goods traffic, Sundry Wages, Allowances etc. Other Earnings-Telegraphs, Rents &  For the preparation of the Budget by the tolls, caterings etc. etc., Receipts of Railway Board, the Railway Worked Lines, Refunds of Revenue-to Administrations and other authorities be deducted from the estimated receipts empowered to incur expenditure are under each sub head etc.; required to submit to the Railway Board o Ordinary Working Expenses i.e. their revised estimates for the current year Demand 3 to Demand 14. These are so and budget estimates for the following year, arranged that sub-heads of the demands within the dates fixed by the Railway Board are in alignment with minor heads of for the following heads: Accounting Classification under i) Estimate of Earnings, Annexure A to N. Separate estimate is ii) Estimate for Revenue Demands 2 to required for each demand. 15 While working out the estimates, list of iii) Civil Estimates Credits or Recoveries to be excluded from iv) Estimate for Works Demand 16. the scope of the demands and the items to be The detailed procedures for the preparation taken in reduction of demands presented for of budgets by the Railway Administration

Training Manual on Audit of Railway Finance and Appropriation Accounts 94

Participants’ Notes Session: 5 vote of Parliament shall be taken into and Advances, by the Central account (F335). Government. (Annex. V), Summaries of Ordinary Working Expenses (4) Remittance Transactions (Annex. and Revenue Receipts and Expenses are also VI). prepared and submitted to the Railway The estimates are based on the actuals of the Board (F 336 & F 337). first 7 months and expectations for the last 5 o Payments to Worked Lines; months of the current year. Explanations for o Appropriation to and Expenditure significant variations should be given to be met out of Railway Funds appropriately and must be accompanied (Demand no.14) – Appropriation in along with the estimates. respect of DRF, DF, Pension Fund, 5.1.4. Compilation and Scrutiny of RSF & CF are charged here. Budget in the Railway Board (F354- Detailed guidelines for making F356) estimate have been laid down in  The estimates of working expenses F338 to F343. submitted by the individual railways are o Payment to General Revenues- The subjected to a critical examination by the payments for the items included Railway Board and, after taking all the under this head are budgeted for relevant factors into consideration, the under Demand No.15 (F344-345); Railway Board frames its own estimate to o Works Expenditure (Works the expenditure likely to be incurred during Machinery and Rolling Stock Budget) the year. F346-347. The revised and budget  The procedure adopted by the Railway estimates for expenditure on Board in fixing the allotment for each construction, acquisition, and railway is- replacement of assets are prepared in o The revised estimate for the current the form of the Works Machinery year is first fixed under each demand for and Rolling Stock Programme. each railway, after taking into account Detailed instructions for the the expenditure for the preceding year preparation of the Rolling Stock and and comparing the expenditure during the Machinery and Plant Programme the first seven months of the current year are contained in Indian Railway with the corresponding period of the Code for Mechanical Department previous year; (Chapter XV). The Budget is o Having thus fixed the revised prepared under one single Demand estimate for the current year, the budget Head No.16; estimate for the next year is prepared on o Civil Estimates (F349)- To enable a consideration of the special the Ministry of Finance to circumstances so far as known of both incorporate the requirement of and/or years; information relating to the Ministry o The estimates of expenditure on of Railways regarding staff advances rolling stock, plant & machinery, and other transactions which form structural and other engineering works part of the General Budget following submitted by the railways are examined estimates are prepared: (1) Income to see the necessity and justification and tax, Interest on advances by Central are discussed with the railway Government and Interest on Debt administrations before fixing the works and other Obligations, (Annex. III), to be undertaken during the budget year. (2) Debt Heads and K-Deposits and o The programmes as finally settled Advances (Annex. IV), (3) K- after discussion form the budget Deposits and Advances and F-Loans estimates of the railways for expenditure

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Participants’ Notes Session: 5

to be incurred during the following year grants so made by the Lok Sabha and the on new constructions and open line Expenditure, if any, charged on the works chargeable to Capital, Consolidated Fund of India. The Depreciation Reserve Fund, Appropriation Bill as passed by the Development Fund, Open-line Works Parliament and assented to by the President (Revenue) and & Railway Safety Fund. forms the basis for budgetary allocations to 5.1.5. Submission to the Minister. the Railways. o The estimated amount required for plan  The Budget Allotments for the Railway expenditure during the next year is intimated under the various sub-heads of the several to the Planning Commission/Ministry of grants, as approved by the Parliament are Finance for necessary provision being made found in the Book of Demands for grants in in the “Ways and Means” budget of the the case of Railway Grants and in the Government of India and after it has been Budget Orders in case of civil grants. ascertained from Planning 5.1.8. Distribution of Funds by the Commission/Finance Ministry that funds Railway Board (F361-F364). will be available to meet the estimated  The grants as voted by the Parliament expenditure, the programmes are submitted and the appropriation for the charged to the Minister for approval. expenditure as sanctioned by the President, o The rolling stock and plant and are distributed by the Railway Board among machinery programmes approved by the the railway administrations and other Minister are subject to further modifications authorities subordinate to them, as soon as if so required due to certain reasons. Of the possible after the Budget is sanctioned. proposed modifications, the important ones  The sums so distributed are called are brought to the notice of the Minister. ‘Allotments’ and the orders by means of o All estimates are consolidated under the which the allotments are made are called respective “Demand for Grants” and ‘Budget Orders’. The allotments made out submitted to the Minister before of funds voted by the Parliament are shown presentation of the budget to the Parliament. as ‘Voted’ and those fixed by the President 5.1.6. Presentation to the are shown as ‘Charged’. Parliament.  The budget orders are accompanied by The complete Budget, that is, the demands the final issues of ‘Demands for grants’ and for grants and other Budget papers, viz. the ‘Works, Machinery and Rolling Stock explanatory memorandum to the Budget and Programmes’ containing the detailed the detailed estimates of each railway distribution of the Budget Allotment made (known as the Works, Machinery and to the railway administrations for working Rolling Stock Programme) along with a expenses and Capital, DRF, DF, OLWR and summary are presented to the Lok Sabha RSF expenditure. and the Rajya Sabha with the  The budget allotment made to a railway recommendation of the President (to be administration is intended to cover all obtained under Article 113 (3) of the charges, including the liabilities for past Constitution. years. It shall be operative until the close of 5.1.7. Appropriation Bill/Budget the financial year. Under the ‘doctrine of Allotment (F360) lapse’, any unspent balance shall lapse and  Pursuant to Article 114(1) of the shall not be available for utilization in the Constitution, after the Demands for Grants following year. have been voted by the Lok Sabha, there  In the event of the Budget Order of the shall be introduced a Bill to provide for the Railway Board not being received before the Appropriation out of the Consolidated Fund commencement of the financial year, the of India of all moneys required to meet the railway administrations are empowered to

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Participants’ Notes Session: 5 incur expenditure on works which were in  No expenditure shall be incurred by an progress at the end of the previous financial authority without the allotment of necessary year. All expenditure incurred under this funds. rule must be treated as a charge against the  The authorities, to whom the funds are allotments eventually made for such works. allotted, shall be responsible to report at  In case of any reduction in the estimates once to the next higher authority. In originally submitted to Railway Board exceptional cases, where expenditure is prompt measures should be taken by the authorized in anticipation of the allotment of railway administrations to limit the funds, or in excess of the existing provision expenditure to the amounts allotted/ the authorization should be followed by a distributed by the Railway Board. formal allotment of funds to the extent 5.1.9. Distribution of Funds by a required. General Manager to the  The expenditure on each work shall be Subordinate Authorities (F 365-F limited to the sum allotted for it. 368).  If for exceptional reasons, expenditure in excess of budget allotment has to be  GM of individual Railways should take incurred and if the authority incurring the steps immediately to distribute the funds, expenditure is either not in a position to find placed at his disposal to authorities funds by re-appropriation or is not subordinate to him in such manner as he empowered to sanction a re-appropriation may consider most suitable, provided that thereof, application for additional funds the total of the sums so allocated does not shall be made to the next higher authority exceed the total of the grant placed at his stating how the expenditure is proposed to disposal. be made together with the explanation as to  In making this initial distribution, he why the expenditure could not be foreseen may, at his discretion keep a sum un-allotted in time for inclusion in the Budget and why as a reserve for emergencies that may arise it cannot be postponed to the next financial in future. year.  With respect to expenditure on works, 5.1.10. Re appropriations (F 375). the allotment made by the GM to lower The Transfer of funds originally assigned for authorities shall, as far as possible, follow expenditure on a specific object to the lines of the Works, Machinery and supplement the funds sanctioned for another Rolling Stock Programmes issued by the object is called Re appropriation. Railway Board some of which are-  The condition under which and the 5.1.11. Powers of Railway Board in extent upto which the authorities may respect of Budget Allotment and re sanction re-appropriations between the sums appropriations (F 376). allotted for individual works shall be  Within the amount of a grant as voted by specified by GM in making the allotment. the Parliament, the Railway Board has full  Any re-appropriation in excess of that powers, of transferring the provision from admissible from the sum allotted for an one subhead to another by a formal order of individual work or re-appropriation from re-appropriation; but re-appropriations from and to the lump sum allotted shall require one grant to another are not permissible. the prior sanction of the GM.  Under Grant No.-16 no re-appropriation  The authorities to whom funds are of fund is permissible between Capital, distributed by the General Manager may, Railway Funds and Revenue even though re- subject to any general or special instructions appropriation is permissible between the issued by him, redistribute the funds placed various sub-heads of grants viz. the various at their disposal to the authorities under plan heads. them.

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 As regards ‘Charged’ expenditure, there “expenditure orders” as distinct from Budget are no restrictions on the powers of the Orders”. Railway Board to transfer provision from 5.1.12. Unforeseen Expenditure- one sub-head to another by a formal order of Operation of the Contingency Fund re-appropriation, but no re-appropriation is of India. permissible from one grant to another or Unforeseen Expenditure which cannot be from ‘Charged’ heads to ‘Voted’ heads or met by re appropriation from the existing vice versa. grant and expenditure on a “New 5.1.12. Powers of Railway Services/New Instrument of Services” not Administration in respect of Budget contemplated in the budget shall be met out Allotment and re-appropriations of the balance in the Contingency Fund of (F 377). India. Supplementary estimates for all  No re-appropriation is permissible expenditure so financed shall be presented to between ‘Voted’ and ‘Charged’ allotments the Parliament at the first session, meeting or between allotments made under one grant immediately after the advance is sanctioned. and another. As soon as Parliament has authorized the  In the case of Grant No. 16 no re- additional expenditure by including it in any appropriation is permissible between the Supplementary Appropriation Act, the Capital, Railway Funds and Revenue. advance made from the fund shall be  The re appropriation (i) to and from the resumed to the fund. provision for the plan Heads (a) New lines 5.2. Review of Expenditure (Construction), (b) Gauge Conversion, (c) Railway Administration should review their Electrification projects, (d) Track renewals, expenditure in August to see whether any (e) Staff quarters, (f) Amenities for staff and modifications are necessary in the Passenger amenities etc. under Grant No.16 allotments placed at their disposal. This is (ii) to and from the provision for ‘Payments also called August Review. The review in to other railways’ in Grant No.9 and (iii) to respect of each grant should be submitted to and from the provision for ‘Suspense’ in the Railway Board so as to reach them not st Grant No.12 require the prior approval of later than 1 September each year. The Railway Board. Administrations should review the position  The amount allotted to the railway in as much detail as possible at the time, and administrations under Civil Grant for if there is any new expenditure which was “Interest on debt and other obligations and definitely not anticipated in the budget and reduction or avoidance of debt” is which cannot be postponed, they should distributed under the units of re examine whether such expenditure can be appropriations as mentioned in Para 378 of met by savings in expenditure provided for F-I. in the Budget when such savings can be  No re appropriations are permissible foreseen or can be achieved without serious after the close of the financial year (31st damage. The review should show whether March). such examination discloses the necessity of additional grants or the possibilities of net  All proposals for re appropriation of savings, in order to enable the Board to set fund which are beyond the General Manager’s powers shall be submitted to the off savings on one railway against excesses Railway Board sufficiently early. on another and to arrive at one estimate of the net additional grant required.  When orders are issued by the Railway Board authorizing the railway 5.3. Revised Estimates administrations to incur expenditure to a  This is mainly intended for the Railway certain extent over and above the allotment Board to enable them to obtain a sanctioned for them, they should be taken as supplementary grant duly voted by the

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Legislature, after taking into account the  The Railway Board presents the position on all the Railways. Supplementary demand to the Parliament for  The revised estimates for each year will their vote based on the August Reviews be submitted by the Railway Administration and/or Revised Estimates of the individual along with the Budget Estimates in the Railways. After the same is voted by the ensuing year. Based on the requirements Parliament, copies of the Book of advised through the Revised Estimates and Supplementary demands will be forwarded further clarifications obtained from the to the Railway Administrations. The amount Railway Administrations as a result of allocated to the Individual Railways in scrutiny of the estimates by the Railway respect of each grant out of the Board, the Railway Board will advise the supplementary grants voted by the Railways on the amount fixed by them as Parliament will also be advised separately the Revised Estimate under each of the by the Railway Board to the Railway grants. While in the Book of Demands, the Administrations. The funds so allotted to the amount fixed under each of the Sub-Heads Railway will be distributed in the same of grant is prescribed in the advice regarding manner as the Original Grant. The checks the Revised Estimates, the amount for the exercised on the distribution statements of grant as a whole and for the particular Sub- the Original Grant will apply mutatis Heads from and to which re-appropriation is mutandis to the above distribution not within the powers of the Administration, statements also. are laid down. Based on the amounts so 5.5. Final Modifications advised, the distribution of funds to the The Railway Administration will furnish to various Heads of the Departments is made the Railway Board for each grant separately, by the Accounts Office in the same manner so as to reach the latter not later than the as the distribution of Original Grant. A copy 21st February of each year, statements of this distribution statement is also received showing the additional allotments required by the Principal Director’s of Railway Audit (both Voted and Charged) or surrenders to office and will be scrutinized generally on be made, during the current financial year the same lines as the distribution statements under each head of re-appropriation, as of Original Grant. prescribed in the Budget Orders and require 5.4. Supplementary and Excess the sanction of the President, with adequate Grants. explanations for surrender/allotment. The Notwithstanding the provisions as railways should, however, continue to mentioned in the paragraph for Unforeseen review the budgetary position further on Expenditure and operation of Contingency submission of the Final Modification Fund above, when the amount of a statements and any modification that may be grant/appropriation in the budget is found to considered necessary should be advised be insufficient for the purpose of the current telegraphically to the Board so as to reach year, an estimate for the supplementary them on the 1st March each year or any grant/appropriation, is submitted by the other date in March or any other date in Railway Board to the vote of March that may be advised by the Railway Parliament/sanction of the President in the Board. Any important changes subsequently same way as the Original “demands for found necessary should be intimated to the Grants/Appropriations” except that the Railway Board before 20th March of the recommendation of the President has to be year, telegraphically to enable the President obtained for supplementary Demands not to accord sanction to them where possible, only under Article 113(3) but also under so that the Railway Administration may Article 115(1)(a) and 115(2) of the sanction in time, before the 31st March of Constitution. the year, any re-appropriation to cover the anticipated excess over allotments.

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5.6. Final Grant sanctioned by the Parliament in the form of Based on the above advises, the Railway Budget and Appropriations. Board will advise the Railway  The General Manager of each railway Administration before the close of the sends to the Railway Board the financial year the amount fixed as Final Appropriation Accounts for his railway in Grant in respect of the several Demands for Form F 403 for each grant under the Grants. In such advises, the total amount for columns Major Head and sub-head, Final each grant and the amounts fixed in respect Grant or Appropriation, Actual Expenditure of some of the Sub-Heads of the grant from & Excess/Savings. The figures of Original and to which re-appropriation of funds is not Grant or Appropriation exhibited in the within the competence of the Railway Appropriation Accounts should be those Administration, only will be advised. The shown against the railway in the Book of funds so allotted will be distributed to the Demands for Grant as Voted by the various authorities in the same manner as Parliament in the case of ‘Voted’ grant and the Original Grant. The checks exercised on sanctioned by the President in case of the statements showing the distribution of ‘Charged’ expenditure. The figures of Final the Original Grant will apply mutatis Grant or Appropriation should be those as mutandis to the above statements. In finally sanctioned by the Railway Board addition, it should be seen that the before the close of the financial year. The distribution of the Final Grant is made figures of actual expenditure as shown in the before the close of the financial year. Appropriation Accounts should agree with 5.7. Appropriation Accounts those shown in the Annual Accounts and 5.7.1. Forms and Parliamentary Financial against the appropriate detailed head of Control on these accounts. Grant, irrespective of the detailed head of Parliamentary Financial Control is secured the grant under which provision for such by the fact that all ‘Voted’ expenditure must expenditure was made in the budget. In case receive Parliament’s prior approval and by of Grant no.16-Assets-Acquisition, the system of reporting back to it, through Construction and Replacements, separate the Public Accounts Committee, the actual figures of Capital, DRF, and DF as the case expenditure incurred against the Grant voted may be, should be shown under the various by Parliament and appropriations sanctioned sub -heads. The figures of Supplementary by the President. Grants in case of Voted expenditure to be  The statements which are prepared for shown in Column I of the Appropriation presentation to the Public Accounts Accounts should be those which are voted Committee, comparing the amount of actual by the Parliament for each sub-head of expenditure with the amount of grant voted Demands for Grants. These figures are by Parliament and Appropriation sanctioned specifically mentioned in the letters by the President, are called the sanctioning modified allotment and should ‘Appropriation Accounts’. be exhibited as such in the Appropriation  Detailed programme giving the dates for Accounts against the sub-heads concerned. submission of advance and audited copies of  The Accounts Department monitors the the Appropriation Accounts and connected expenditure incurred on the Railways statements is circulated every year by the through internal check. At the end of the Railway Board in consultation with the C & year i.e. after the March Account Current is AG, for compliance by the Zonal Railways. finalized, the Accounts Department prepares  The form of Appropriation Accounts has statement of actual expenditure against the been fixed by the Public Accounts allotments and after obtaining the remarks of Committee in such a way that they would the spending authorities for variations, exhibit the variations from the amounts consolidate the same by different Grants. These statements are called Appropriation

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Accounts and are prepared and sent to Appropriation and also between the Final Railway Board/ Pr. Director of Audit of the Grant or Appropriation and the actual Railway Audit Department. The Pr. Director expenditure of the year. Cases where of Audit after scrutinizing the Accounts explanations for variations are to be given certifies the accounts with his remarks and is and the monetary limit therefore have been presented to the Parliament. Then the Public mentioned in Para 409 of FI. In other words Accounts Committee examines the same on it is the explanation for the residual behalf of the Parliament. modification sanctioned by the competent  These statements are signed both by the authority other than the Parliament. Chairman Railway Board, as a Principal 5.7.2. Subsidiary Statements and Secretary to the Government of India, Accounts Ministry of Railways and by the Financial The Appropriation accounts should be Commissioner, Railways, as Secretary to the supported by a Block Account, Capital Government of India, Ministry of Railways Statement, a Balance Sheet and a Profit and in financial matters, and transmitted to the Loss Account of the railway. These Principal Director of Railway Audit who has statements should be prepared separately for been entrusted by the Comptroller And Commercial and Strategic lines (F 427). Auditor General of India with the duty of 5.7.3. Accounts of Production Units (F reporting these Accounts. 432)  The Original Grant and the In respect of Production Units like CLW, Supplementary Grant are both sanctioned by DLW, ICF), in addition to Block Account, the Parliament. The Railway Board has been Capital Statement and Balance Sheet a authorized to re-appropriate within the Grant Manufacturing Account with a Statement of to the extent of the Grant as voted by the Outturn should also be submitted as Parliament by transferring the provisions Annexure V & VI. from one Subhead to another by a formal 5.7.4. Other Accounts, Annexures and order of re-appropriation. However, re- Subsidiary Statements accompanied with appropriation from one grant to another is Appropriation Accounts not permissible. Other accounts, annexure and subsidiary  The Appropriation Accounts should be statements, which should accompany the prepared separately for each grant. Appropriation Accounts of individual Comparison is made between the Original Railways and Production Units, are: Grant/Appropriations and Final Grant and o Annexure.1 Various Demands for between the Final Grant and actual Grants expenditure as booked in the accounts of the o DRF Account, (Annexure-VII) Railway. The various grants and what o DF Account, (Annexure-VIII) functional group they represent are given in o Pension Fund Account, (Annexure- the Annexure. IX)  These are otherwise known as Column I o Railway Safety Fund Account, and Column IV statements. (Annexure-X)  Then comes the Col. IV variation, which is o Stores Account (including Statement the variation between the actual and the of Stores Transactions), Stock Final Grant. It is this statement with the Adjustment Account (Annexure- explanation for variations, which is called XI), the Statement of Appropriation Accounts. o Stock Verification and Revaluation  Under the Sub-heads of the Account, (Annexure-XII), Appropriation Accounts of each Grant, o Statement of balances outstanding explanations should be furnished for the under Suspense (Annexure-XIII). variations between the Original Grant or o Profit & Loss Accounts of Catering Appropriation and the Final Grant or department (Annexure-XIV),

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o Statement of expenditure held under 5.7.5. Appropriation Accounts of Civil objection and not regularized by Grants or Appropriations. competent authority (Annexure-A), Every F.A. & C.A.O of Railway should o Statement of Undercharges detected furnish to the Railway Board, so as to reach by Accounts and Audit etc them by the prescribed dates, advance copy (Annexure-B), of the Appropriation Accounts of the o Statement showing Remissions and following Civil Grants in Form No. F 403- Abandonment of Claims to Revenue (i) Interest free Advances, (Annexure-C), (ii) Loans and Advances bearing o Statement of Expenditure of interest, important Open line Works & New (iii) Interest on debt and obligations Construction (Annexure-D), and reduction or avoidance of o Statement Showing Revenue And debt-charged, Capital Expenditure Relating to (iv) Pre-partition payments. Strategic Lines (Annexure E) The Appropriation should be prepared under o Statement of Estimated & Actual sub-heads as shown in the relevant Budget Credits and Recoveries (Annexure- Orders of the year. F) 5.7.6. Settlements of audit observations on o Block Accounts including Capital Finance and Appropriation Accounts. Statement Comprising The Loan  On receipt of Advance copies of the Accounts) Balance Sheet And Profit grants in audit these are scrutinized And Loss Account (Annexure G ) expeditiously and the points, if any which o Statement of Losses etc. and Ex could not be got finalized informally, are Gratia payments above Rs.50,000/- forwarded to the Financial Adviser and (Annexure-H), Chief Accounts Officer/HQ taking into o Statement showing irregular Re- account the points raised by the appropriation (Annexure-I), Branch/Divisional Audit Offices. At o Statement showing important Divisional/Branch Unit level audit points are Misclassifications and other mistakes issued to Divisional Accounts/Branch Unit in accounting etc. (Annexure-J). Accounts Officer(s) first and attempts are o Statement of Defects in Budgeting made to finalize the same at (Annexure-K). Divisional/Branch Unit Level. Points Some other statements enclosed to unsettled are forwarded to F.A. & Appropriation Accounts are: C.A.O/HQ. 1. Statement showing the percentage of  The points so raised will be discussed Working Expenses to Earnings, i.e. with the designated Financial Adviser Operating Ratio. (Budget) and settled. 2. Statements of Credit to Capital for  In the case of a difference of opinion Retired Assets. between the Audit and Accounts Officers A Summary of Appropriation Accounts is while discussing the points, such points will compiled by each Zonal Railway in the form be arranged for discussion at higher levels. mentioned in F 440.  After settling the points, the draft of the A Statement of Annual Expenditure final copy of the Accounts will be prepared showing the reconciliation of figures in the by the Accounts Office, duly taking into Account Current with those in the account the results of discussions and sent to Appropriation for the year should be Audit office for concurrence. prepared in Form 441F. The figures of  After the issue of the proposed final “Voted” expenditure should be shown as copy is agreed to by Audit Office, the final distinct from “Charged” expenditure. copy will be got signed by the General

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Manager and sent to the Railway Board duly for examination. The printed copies are endorsing two copies to Audit office. signed by the Financial Commissioner & Ex  In case Zonal Railway Audit office Officio Secretary to the Govt. of India agrees to the issue of the final copy with (Ministry of Railways), Chairman, Railway certain reservations/qualifications, the Board & Ex Officio Principal Secretary to Railway Board will be apprised of the fact the Govt. of India (Ministry of Railways) & enclosing a copy of the letter, wherever Dy. Comptroller and Auditor General of necessary, while forwarding the final copy. India (Railways) on behalf of C&AG. One of the copies will be forwarded to the The Appropriation Accounts are published Deputy Comptroller and Auditor General in Book form in the name “Appropriation (Railways) along with audit’s remarks, if Accounts of Railways in India- Part II- any. There may be a few cases, where there Detailed Appropriations Accounts” are disagreements between the Audit and accompanied by a review by the Railway Accounts. In such cases, the Audit Board to be titled as “Appropriation Certificates along with observations, if any, Accounts of Railways in India-Part I- are issued by the respective Principal Review”. This review consists of following Director of Audit of the Zonal Railway and topics: sent to the respective General Manager of (i) Financial results of the year. the Railway, with a copy to the Railway (ii) Changes in the procedure, form and Board and also to the C&AG. classification of accounts during the year  Consolidation is made at Railway (iii) Detailed review of the receipts and Board’s level and it is named as expenditure of the year, the figures of the Appropriation Accounts of the Railways in different Grants being considered in suitable India. The Consolidated Appropriation groups as well as individually, Accounts should be prepared by sub-heads (iv) Results of Appropriation Audit showing under which the demands for Grants were excess over Grants, irregular Re- presented to the Parliament and the figures appropriations etc. requiring a report to or of Original Grant or Appropriation to be ratification by the Parliament. exhibited in these accounts should be the (v) Block Accounts, Capital Statement, same as those entered in the Books of Balance Sheet, Stores Balances, Capital Demands for Grants. Fund, Depreciation Reserve Fund,  The Consolidated Appropriation Development Fund, Investments etc. Accounts consist of a Grand Summary of 5.7.7. Examination by the Public the Appropriation Accounts by Grants and Accounts Committee. Appropriations in Form No. F 440, an The examination of the Appropriation Appropriation Account for each Grant in Accounts and of the Audit Report thereon, Form No. F 403, together with brief notes on behalf of Parliament, is conducted by the giving under each sub-head explanation of Public Accounts Committee. The variations between final Grants or Committee’s findings are recorded in a Appropriations and actual expenditure. report presented to the Parliament. Other consolidated Statements/Annexure are Government examines each of its also accompanied with the Consolidated recommendations with a view to Appropriation Accounts. In addition to the implementing them and report to it on the Appropriation Accounts Consolidated action taken when the next year’s Accounts Accounts of Civil Grant is also prepared by come up for examination. In the exceptional the Railway Board. After being compiled cases in which Government are not in a these are sent to C&AG for certification. position to implement a recommendation,  After being checked at C&AG’s Office they place their views before the committee the Appropriation Accounts are printed and to enable it to present a further report to the presented to the Public Accounts Committee Parliament.

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PPT Slide Session 5

Slide 1 Slide 4 Basic Concepts

• As per the Separation Convention 1924, the Railway Budget is Session 5 presented to the Parliament by the Session 5 Union Railway Minister, prior to the General Budget. • It is presented to both Houses of Railway Budget Parliament separately. Railway Budget • Figures relating to the receipts and expenditures of the Railways are & Appropriation shown in the General Budget as they are the part of the total receipts and Accounts expenditure of the Government of Accounts India.

Training Module on Audit of 4 Railways; Session: 5

Slide 2 Learning Objective Slide 5 Basic Concepts  Every budget contains three elements: – 1. A review of the preceding year, including  In this session, the participants will the actual receipts and expenditure in that be able to understand the basic year; concepts of the Budgetary System of – 2. An estimate of the receipts and expenditure of the coming year; and the Indian Railway, its preparation, compilation, scrutiny etc. and – 3.Proposals, if any, for meeting the requirements of the coming year. parliamentary control over it, which • The estimates of expenditure embodied in the will help them to focus on audit Annual Budget separately shows: issues in the practical job scenario. 1.The sums required to meet expenditure charged upon the Consolidated Fund of India; and 2.The sums required to meet other expenditure proposed to be made from the Training Module on Audit of 2 Training Module on Audit of 5 Railways; Session: 5 Consolidated FundRailways; of India.Session: 5

Slide 3 Basic Concepts Slide 6 Basic Concepts • Expenditure ‘Chargeable’ on the • Budget is a Constitutional and Management Consolidated Fund of India are: document. – Salary, allowances and the pensions • Article 112 (1) of the Constitution of India prescribes, ‘The President shall in respect of payable to or in respect of C&AG of every financial year cause to be laid before India; both the Houses of Parliament a statement – Any sums required to satisfy any of the estimated receipts and expenditure of the Government of India for the year’ judgement, decree or award of any referred to as ‘Annual Financial Statement’ Court or awards by Arbitrators where popularly called as the ‘Annual Budget’ and made into rule of court; and is placed before Parliament. – Any other expenditure declared by the Constitution or by Parliament by law to be so charged. Training Module on Audit of 3 Training Module on Audit of 6 Railways; Session: 5 Railways; Session: 5

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PPT Slide Session 5

Slide 7 Budget process Slide 10 Preparation of Budget • The processes of Annual Budget: – Payments to Worked Lines; – Appropriation to and Expenditure to be met out – The Annual Budget of Railway Funds; – Budget Allotment – Payment to General Revenues i.e. Dividend on – August Review and Revised Capital-at-Charge, Contribution for Grants to Estimates States in lieu of Passenger Fare Tax, Contribution for Assisting the States for – Supplementary Grants financing Safety Works etc. – Final Modifications – Works Expenditure; and – Final Grant – Civil Estimates The estimates are based on the actuals of the first 7 months and expectations for the last 5 months of the current year .

Training Module on Audit of 7 Training Module on Audit of 10 Railways; Session: 5 Railways; Session: 5

Slide 8 Preparation of Budget Slide 11 Compilation and Scrutiny of – Based on the time table issued by the Railway Budget in the Railway Executives Board, the Financial Adviser and Chief Accounts & Accounts Offices. Officer draws up a detailed programme laying down the dates by which the various • Budget Officers of the Divisional units and the Divisional/Branch Offices (Executive) should Departmental Officers send the requirements of furnish the accounts/returns relating to them, their funds to the respective Heads of the to their Accounts Officers. Departments and the Local Accounts Officers who vet and forward the same to the Heads of – Preparation of the Revised and Budget the Departments concerned endorsing a copy to estimates commences at the ‘grassroots level’ the FA&CAO (Budget) along with the copies of the i.e. Division, Workshop, Stores Depot etc etc. estimates vetted. • After consolidation of the requirements of their – Care taken for preparation of Budget: departments the Heads of the Departments – (i) Estimates should be as accurate as forward these estimates to the FA & CAO / possible; Budget. – (ii) The data on which the forecast is based is • FA & CAO / Budget in turn advises the final adequate and reliable. Training Module on Audit of 8 requirements to theTraining Railway Module on Audit Board. of 11 Railways; Session: 5 Railways; Session: 5

Slide 9 Slide 12 Compilation and Scrutiny of Preparation of Budget Budget in Railway Board Office. • The estimates of expenses submitted by the • The Revised and Budget estimates are framed individual railways are subjected to a critical by various concerned authorities for the examination by the Railway Board. following categories: • The Railway Board frames its own estimate of the – Gross Receipts i.e. expenditure likely to be incurred during the • Coaching Earnings, Goods Earnings, current year (for Revised Estimate) and during Sundry Other Earnings, Receipts of the next year (for Budget Estimate). Worked Lines, Refunds of Revenue etc.; • All estimates are consolidated under the respective “Demand for Grants” and submitted to – Ordinary Working Expenses i.e. the Minister. • Demand 3 to Demand 14, Estimate of • The complete Budget, with all Budget papers, Cost of Establishments, Suspense Heads, alongwith a summary are presented to the Lok Repairs & Maintenance Expenditure of Sabha and the Rajya Sabha with the Rolling Stock, Cost of Fuel, etc.; recommendation of the President to be obtained under Article 113 (3) of the Constitution. Training Module on Audit of 9 Training Module on Audit of 12 Contd………………………………………Railways; Session: 5 S/10 Railways; Session: 5

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PPT Slide Session 5

Slide 13 Budget Allotment Slide 16 Powers of Railway Board on budget • After the Demands for Grants are voted by the allotment & re-appropriation Lok Sabha, there shall be introduced a Bill to provide for the Appropriation out of the  The Transfer of funds, originally assigned for Consolidated Fund of India of all moneys required expenditure on a specific object to supplement the to meet the grants so made by the Lok Sabha and funds sanctioned for another object is called Re- the Expenditure, if any, charged on the appropriation. Consolidated Fund of India.  In respect of Budget Allotment- • The Appropriation Bill as passed by the  Within the amount of a Voted grant the Railway Parliament and assented to by the President Board has full powers of transferring the provision from one subhead to another by a formal order of forms the basis for budgetary allocations to the re-appropriation; and Railways.  As regards ‘Charged’ expenditure, Railway Board • The Budget Allotments for the Railway as has full power to transfer provision from one sub- approved by the Parliament are found in the Book head to another by a formal order of re- of Demands for grants in the case of Railway appropriation, but no re-appropriation is Grants and in the Budget Orders in case of civil permissible from one grant to another or

grants. Training Module on Audit of 13 Contd……………………………………………………………Training Module on Audit of Railways; Session: S/17 16 5 Railways; Session: 5

Slide 14 Distribution of Funds by the Slide 17 Powers of Railway Board and Railway Railway Board Administration on budget allotment & re-appropriation • Grants as Voted by the Parliament and the appropriation for the Charged expenditure as from ‘Charged’ heads to ‘Voted’ heads or vice sanctioned by the President, are distributed by versa. the Railway Board among the Railway  Under Grant No.-16 no re-appropriation of fund is Administrations as soon as the Budget is permissible between Capital, Railway Funds and sanctioned. Revenue. • Budget allotment is intended to cover all charges, liabilities for past years, to be paid  In respect of Zonal Railways – In addition to the during the year. restrictions on Railway Board, all proposals for re- appropriation of fund which are beyond the General • Any unspent balance shall lapse and shall not Manager’s powers shall be submitted to the Railway be available for utilisation in the following year under the ‘doctrine of lapse’. Board sufficiently early.  No re- appropriations are permissible after the close of the financial year (31st March). Training Module on Audit of 14 Railways; Session: 5 Training Module on Audit of Railways; Session: 17 5

Slide 15 Distribution of Funds by GM to Slide 18 Revised Estimates the Subordinate Authorities

• GM of individual Railway is to • It is mainly intended for the Railway distribute the funds placed at his Board to enable them to obtain a disposal to authorities subordinate to supplementary grant duly voted by the him. Legislature, after taking into account • GM follows the following basic the position on all the Railways. guidelines while distributing funds to lower authorities: • Based on the requirements advised – A specific sum shall be allotted for each of through the Revised Estimates the rolling stock and for each individual work Railway Board advises the Railways on estimated to cost over Rupees One Lakh. the amount fixed by them as the – A lump sum shall be allotted for all works Revised Estimate under each of the which are estimated to cost less than the minimum limit prescribed by him. grants.

Training Module on Audit of 15 Training Module on Audit of 18 Railways; Session: 5 Railways; Session: 5

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PPT Slide Session 5

Slide 19 Supplementary and Excess Slide 22 Appropriation Accounts Grants. • These are the statements prepared for • When the amount of a grant/ presentation to the Public Accounts appropriation in the budget is found to Committee, comparing the amount of actual be insufficient for the purpose of the expenditure with the amount of grant voted current year, an estimate for the by Parliament and Appropriation sanctioned supplementary grant/appropriation, is submitted by the Railway Board to the by the President. vote of Parliament/for sanction of the • Detailed programme giving the dates for President. submission of advance and audited copies of • After the same is voted by the the Appropriation Accounts and connected Parliament, copies of the Book of statements is circulated every year by the Supplementary demands are Railway Board in consultation with the C & forwarded to the Railway AG, for compliance by the Zonal Railways. Administrations by the Railway Board Contd……………………………………………….S/23

for further allocationTraining Module on toAudit differentof units.19 Training Module on Audit of 22 Railways; Session: 5 Railways; Session: 5

Slide 20 Final Modification of Budget Slide 23 Appropriation Accounts

• Railway Administration furnishes to Railway • The form of Appropriation Accounts has been fixed by the Public Accounts Committee in Board, statements showing the additional such a way that they would exhibit the allotments required or surrenders to be variations of actuals from the amounts made, for each grant separately, not later sanctioned by the Parliament in the form of than the 21st February each year, with the Budget and Appropriations. explanations for variations between the final • The General Manager of each railway sends to the Railway Board the Appropriation Accounts modified allotments required and the revised for his railway, for each grant, under the estimates as fixed by the Board. columns Major head and sub-head, Final • Any important changes subsequently found Grant or Appropriation, Actual Expenditure incurred and variations (Excess or Savings) necessary should be intimated before 20th between the two and explanations for March of the year, to enable the President to variations where required. accord sanction to them. • Contd……………………………………………….S/24

Training Module on Audit of 20 Training Module on Audit of 23 Railways; Session: 5 Railways; Session: 5

Slide 21 Final Grant Slide 24 Appropriation Accounts

• The Railway Board advises the Railway  These are supported by a Block Account, Capital Administration before the close of the Statement, a Balance Sheet and a Profit and Loss financial year, the amount fixed as Account of the railway.  These are prepared separately for Commercial and Final Grant in respect of the several Strategic lines. Demands for Grants.  In respect of Production Units like CLW, DLW, • The total amount for each grant and ICF), in addition to above Accounts, a the amounts fixed in respect of some Manufacturing Account with a Statement of of the Sub-Heads of the grant from and Outturn are also be submitted. to which re-appropriation of funds is  Some other accounts, annexures and subsidiary not within the competence of the statements, as prescribed also accompany the Railway Administration, only are Appropriation Accounts of individual Railways and advised. Production Units.

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PPT Slide Session 5

Slide 25 Settlements of audit observations Slide 28 Examination by the Public on Finance and Appropriation Accounts Committee. Accounts.  The examination of the Appropriation • On receipt of advance copy of the Appropriation Accounts by the Divisional/Branch Unit Audit Accounts and of the Audit Report thereon, on Offices from the Divisional/Branch Unit behalf of Parliament, is conducted by the Accounts Offices, Audit points are first Public Accounts Committee. The Committee’s discussed at local level. • Unsettled audit points are issued to findings are recorded in a report presented to Divisional/Branch Unit Accounts Officers with a the Parliament. Government examines each of copy to F.A. & C.A.O/HQ/Budget. its recommendations with a view to • Consolidated Audit points are raised to F.A. & implementing them and report to it on the C.A.O/HQ/Budget by the Principal Director of Audit of Zonal Railway, after scrutiny at HQ’s action taken when the next year’s Accounts level. come up for examination. • Unsettled audit points are raised and incorporated in the Audit certificates issued by

Principal Director of Audit and forwarded to Training Module on Audit of Railways; Session: 28 General ManagerTraining of Module Railway on Audit of with copy 25 to 5 Railway Board & Dy.CRailways;& Session: AG (Railways).5

Slide 26 Consolidation of Appropriation Accounts at Railway Board. • Consolidation is made at Railway Board’s level and named as Appropriation Accounts of the Railways in India. • The Consolidated Appropriation Accounts is prepared by sub-heads under which the demands for Grants were presented to the Parliament and the figures of Original Grant or Appropriation to be exhibited in these accounts should be the same as those entered in the Books of Demands for Grants. • The Consolidated Appropriation Accounts consist of a Grand Summary of the Appropriation Accounts by Grants and Appropriations together with brief notes giving under each sub-head, explanations of variations between final Grants or Training Module on Audit of Railways; Session: 26 Appropriations and actual5 expenditure.

Slide 27 Checking at C & AG’s Office and printing of Appropriation A/cs.

 After being compiled these are sent to C&AG for certification.  After being checked at C&AG’s Office the Appropriation Accounts together with comments, if any, on above are printed and presented to the P. A. C. for examination duly signed by the Financial Commissioner & Ex Officio Secretary to the Govt. of India (Ministry of Railways), Chairman, Railway Board & Ex Officio Principal Secretary to the Govt. of India (Ministry of Railways) & Dy. Comptroller and Auditor General of India (Railways) on behalf of C&AG.

Training Module on Audit of Railways; Session: 27 5

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Participants’ Notes Session: 5

Questions: 14. What instrument is introduced to provide for the Appropriation out of the 1. Under which Article of the Constitution Consolidated Fund of India after the of India budget of Union Govt. is placed Demands for Grants have been voted by the before the Parliament? Lok Sabha? Under which Article it is introduced? 2. After which Railway Convention Railway Budget is presented to the 15. In which documents of Railways the Parliament by the Union Railway Budget Allotments for the Railways and Minister? Civil grant as approved by the Parliament are reflected? 3. How the Railways’ revenue and Capital expenditure is met? 16. How Distribution of Funds by the Railway Board to Zonal Railway and 4. How many elements contain in a Budget? distribution of fund by the Railway to the different expending units under its control 5. What are the Articles of the Indian are made? Constitution those give guidelines on framing the budget? 17. What is called Re appropriations?

6. What is the Railways’ Charged 18. State whether following Expenditure on Consolidated Fund of India? Re-appropriations made by the Zonal Railway are permissible or not. 7. What are the Annual Railway Budget (i) Re-appropriation between ‘Voted’ and Processes? ‘Charged’ allotments (ii) Re-appropriation between allotments 8Which authority issues the time table for made less than one grant and another. preparation of budget? (iii) Re-appropriation between the Capital, Railway Funds and Revenue in the case of 9. What is the detailed procedure adopted Grant No. 16. by a Railway in preparation of Annual (iv) Re-appropriation to and from the budget? provision for the plan Heads (a) New lines (Construction), (b) Gauge Conversion, (c) 10. How many Demands for grants are Electrification projects, (d) Track there for which budget estimate is renewals, (e) Staff quarters, (f) Amenities prepared? How many are for Railways and for staff and Passenger amenities etc. how many for Railway Board/Railway under Grant No.16 Administration? (v) Re-appropriation to and from the provision for ‘Payments to other railways’ 11. Which are the heads for which revised in Grant No.9 estimates for the current year and budget (vi) Re-appropriation to and from the estimates for the following year, are provision for ‘Suspense’ in Grant No.12 required to submit to the Railway Board? (vii) Re appropriations after the close of the financial year (31st March). 12. What care should be taken while preparing a budget estimate or revised 19. What is the difference between Budget budget estimate? Order & Expenditure Order?

13. What does a Civil Estimate cover? 20. Under what circumstances unforeseen expenditure & expenditure on “New

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Participants’ Notes Session: 5

Services/New Instrument of Services” not and what they do on them? What is the contemplated in the budget, are met from fate of their report? Contingency Fund of India and how these are regularized? But, Supplementary estimates for all expenditure so financed shall be presented to the Parliament at the first session, meeting immediately after the advance is sanctioned. As soon as Parliament has authorized the additional expenditure by including it in any Supplementary Appropriation Act, the advance made from the fund shall be resumed to the fund.

21. What is called August Review?

22. What is Revised Estimate? Why is it prepared?

23. What is called Supplementary and Excess Estimate/ grant? What are the relevant provisions for dealing with this estimate/grant?

24. What are the relevant provisions regarding Final Modification?

25. What is Final grant? What are the relevant provisions regarding Final grant?

26. What are called Appropriation Accounts? Mention detailed programmes and procedures in connection with Appropriation Accounts.

27. What are the important Subsidiary Statements and Accounts annexed to Appropriation Accounts?

28. For which Civil Grants Appropriation for Civil Grant are prepared?

29. How Appropriation Accounts are checked, observations raised and audit observations on Finance and Appropriation Accounts are settled?

30. Which Committee examines the Appropriation Accounts and of the Audit Report thereon, on behalf of Parliament

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Participants’ Notes Session: 5

Answer Sheet: o Supplementary Grants o Final Modifications 1. Article 112 (1) of the Constitution of o Final Grant India. 8. The Railway Board issues the Time 2. In terms of Separation Convention table for preparing the budget and the 1924, the Railway Budget is presented to Financial Adviser and Chief Accounts the Parliament by Union Railway Officer draws up the detailed programme Minister. for preparation of budget.

3. The revenue expenditure is met entirely 9. See Para 5.1.1 & 5.1.3 of Participants’ by railways itself; the shortfall in the capital notes Session 5. (plan) expenditure is met partly from borrowings (raised by Indian Railway 10. There are 16 heads of Demand for Finance Corporation) and the rest from grants. budgetary support from the Central Grant Nos. 3 to 13 is for all Railways, Government. Grant nos.1 for Railway Board & 2 for Railway Board & Railway Admn. etc. to 4. A budget contains three elements, viz.: whom grants are made, Grant No.16 for o A review of the preceding year, including all Railways and Railway Board, Grant the actual receipts and expenditure in that No.14 is for all Railways and Rly. Board year; and Grant No.15 is for Railway Board. o An estimate of the receipts and expenditure of the coming year; and 11. Estimates are required to be sent to o Proposals, if any, for meeting the Railway Board for Following Heads: requirements of the coming year. i) Estimate of Earnings, 5. Articles 112 (1) & (2) & Articles 113 (1) ii) Estimate for Revenue Demands 2 to 15 to (3) of the Constitution. iii) Civil Estimates iv) Estimate for Works Demand 16. 6. The following expenditure is ‘Charged’ on the Consolidated Fund of India in respect 12. Following care should be taken while of Railways: preparing budget estimate and revised o The salary, allowances and the pensions budget estimate: payable to or in respect of C&AG of  That the data on which the forecast is India; based is adequate and reliable and that the o Any sums required to satisfy any conclusions arrived at from the data can be judgement, decree or award of any Court sustained by past experience and future or awards by Arbitrators where made expectations of likely events; into rule of court; and  The estimates should be as accurate as o Any other expenditure declared by the possible; Constitution or by Parliament by law to  No stereotyped method should be adopted be so charged. for forecasting the estimates.

7. The following are the annual budget 13. A Civil Estimates covers following areas: processes: (i) Income tax, Interest on advances by o The Annual Budget Central Government and Interest on Debt o Budget Allotment and other Obligations, (ii) Debt Heads and o August Review and Revised K-Deposits and Advances, (iii) K-Deposits Estimates and Advances and F-Loans and Advances,

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Participants’ Notes Session: 5 by the Central Government, (iv) Remittance contemplated in the budget shall be met out Transactions. of the balance in the Contingency Fund of India. 14. A Bill in the name of Appropriation Bill is introduced to provide for the 21. Railway Administration review their Appropriation out of the Consolidated Fund expenditure in August to see whether any of India modifications are necessary in the This is introduced in terms of Article 114(1) allotments placed at their disposal. This is of the Constitution of India. called August Review.

15. The Budget Allotments for the Railway 22. The Revised Estimate is mainly intended under the various sub-heads of the several for the Railway Board to enable them to grants, as approved by the Parliament are obtain a supplementary grant duly voted by found in the Book of Demands for grants in the Legislature, after taking into account the the case of Railway Grants and in the position on all the Railways. Budget Orders in case of civil grants. 23. When the amount of a 16. See Paras 5.1.8 & 5.1.9 of grant/appropriation in the budget is found to Participants’ notes -Session 5. be insufficient for the purpose of the current year, an estimate for1. the supplementary 17. The Transfer of funds originally grant/appropriation is submitted by the assigned for expenditure on a specific object Railway Board to the vote of to supplement the funds sanctioned for Parliament/sanction of the President. This is another object is called Re appropriation. called Supplementary Estimate. The estimate when sanctioned is called 18. (i) No Supplementary grant. (ii) No For relevant provisions see Para 5.4 of (iii) No Participants’ notes -session 5. . (iv) Requires prior approval of Railway Board. 24. See Para 5.5 of Participants’ notes - (v) Requires prior approval of Railway Session 5. Board. (vi) Require the prior approval of 25.Based on the advises from the respective Railway Board. Railways, the Railway Board will advise the (vii) No Railway Administration before the close of the financial year the amount fixed as Final 19. When orders are issued by the Railway Grant in respect of the several Demands for Board authorizing the railway Grants. administrations to incur expenditure to a For relevant provisions see Para 5.6 of certain extent over and above the allotment Participants’ notes -Session 5. sanctioned for them, they should be taken as “expenditure orders” whereas the orders by 26. The statements which are prepared for means of which the allotments are made by presentation to the Public Accounts the Railway Board are called ‘Budget Committee, comparing the amount of actual Orders’. expenditure with the amount of grant voted by Parliament and Appropriation sanctioned 20. Unforeseen Expenditure which cannot by the President, are called the be met by re appropriation from the existing ‘Appropriation Accounts’. grant and expenditure on a “New See Para 5.7 of Participants’ notes - Session Services/New Instrument of Services” not 5.for detailed programmes and procedures.

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Participants’ Notes Session: 5

27. Block Account, Capital Statement, a Balance Sheet and a Profit and Loss Account of the railway etc. are annexed to the Appropriation accounts. For other various Annexure, Statements etc. see Para 5.7.4 of Participants’ notes -Session 5.

28. Appropriation Accounts of Civil Grants or Appropriations are prepared for the following Civil Grants:

(i) Interest free Advances, (ii) Loans and Advances bearing interest, (iii) Interest on debt and obligations and reduction or avoidance of debt-charged, (iv) Pre-partition payments.

29. See 5.7.6 of Participants’ notes Session- 5.

30. The examination of the Appropriation Accounts and of the Audit Report thereon, on behalf of Parliament, is conducted by the Public Accounts Committee. The Committee’s findings are recorded in a report presented to the Parliament. Then Government examines each of its recommendations with a view to implementing them and report to it on the action taken when the next year’s Accounts come up for examination. In the exceptional cases in which Government are not in a position to implement a recommendation, they place their views before the committee to enable it to present a further report to the Parliament.

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.

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Session: 6

Audit of Railway Finance and Appropriation Accounts

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Instructor’s Guide Session 6

Session Title: Audit of Railway Finance and Appropriation Session Guide Accounts. Reference Participants’ Instructor’s Guide Response Session Overview Welcome participants to the session and remind them that Lecture their active participation is critical for the success of each session. Learning Objective Inform: Lecture Given the inputs of Audit procedure in connection with Audit of Finance & Appropriation Accounts of Railway and various points to be seen during audit of Finance & Appropriation Accounts and Audit Certificates to be issued and PowerPoint slide show, the participants will, at the end of the session, acquire an understanding of the different audit checks to be exercised during audit of Finance and Appropriation accounts finally, which will help them to focus on audit issues in the work context and to raise different types of audit observations in connection with Finance and Appropriation Accounts.. Basic Concepts Discuss: Lecture  Audit procedure: Audit Planning-preparation of detailed with Power audit programme-risk analysis etc.-selection of sample Point Slide vouchers etc.-preparation of Matrix-Information Sheet- Show Entry conference & Exit conference, Audit Execution, Session 6 Audit Reporting and Documentation- assertions of AUDIT OF completeness, measurement, regularity, occurrence and FINANCE AND disclosure. APPROPRIA ● Points to be seen during audit of various Railway TION Accounts. ACCOUNTS ● Points to be seen during audit of Appropriation Accounts OF of the Railway. RAILWAYS.  Issue of Audit Certificates and Management letter. ● Types of possible irregularities noticed on Mis- classification and mistakes in Accounting, Defects in Budgeting, Unsanctioned expenditure etc. with illustrations. Summarise: Distribute Participants’ Note. Session 6 Tell the participants that during the session, we discussed Participants’ Audit procedure in connection with Audit of Finance & Note Appropriation Accounts of Railway and various points to be seen during audit of Finance & Appropriation Accounts, Audit Certificates to be issued and different nature of observations can be issued. Invite questions on themes discussed. If participants have any doubts/clarifications about themes, clarify the same. Answer participants’ queries.

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Instructor’s Guide Session 6

Session Title: Audit of Railway Finance and Appropriation Session Guide Accounts. Reference Participants’ Instructor’s Guide Response Thank the participants and bring the session to a close.

Training Method: Interactive Lecture and Power Point Slide Show.

Materials Required: Power Point Slides, Projector, White Board, Marker Pen and Participants’ Note.

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Participants’ Notes Session 6

Session Title: be exercised in various types of vouchers Operationalization of Finance and accounts. Audit should follow accordingly as per guidelines. Attest Audit. The Finance Attest Audit Manual of Indian Audit & Accounts Department lays 6.0. Session Overview: down the framework for the process of Different financial ratios/indices/ financial audit within the Indian Audit & parameters are prepared by the Railway Accounts Department which gives audit administration e.g. operating ratio, return tools. These can be exercised during Audit on Capital (percentage of (revenue) of Finance & Appropriation Accounts of surplus to Capital at Charge), percentage Railways also. of net receipts to capital at charge, Current A Task Force was constituted in 2011 by assets/liabilities [Work in process the Headquarters (C & AG) for (workshop) as a percentage of the value of operationalisation of the Financial Attest workshop out turn, stores inventory as Audit Manual in respect of audit of percentage of the total issue of stores, Finance Accounts of the State unrealized earnings at the year end in Governments and the Task Force terms of number of days, earnings], to recommended to convert the financial judge the financial performance of the attest audit of Finance & Appropriation Railway. Therefore, audit has a great role Accounts to an assertion (objective) based to check the accuracy of the figures and audit providing reasonable assurance that compilation of various accounts the accounts are free from material meticulously as any mistakes in misstatement and irregularity. Apart from accounting/compilation may lead to detailed instructions on planning the audit, incorrect reflection of the performance of the recommendations and tools also Railway. Detailed checks in Audit to be contain audit checks to prove the exercised in connection with audit of assertions in audit through substantive general books and accounts and audit tests and tests of control that have Appropriation Accounts have been laid been developed separately for scrutiny of down in Railway Audit Manual (Chapter vouchers, monthly accounts, monthly XIX and XX- Paras 366 to 422) and audit appropriation accounts, finance accounts of earnings, catering Audit, stores & and annual accounts and appropriation workshop audit have been laid down in accounts. Chapters XII, XIII, XIV, XVII & XVIII The audit procedures prescribed in respectively. These apart, rules and Financial Attest Audit Manual are closely regulations as laid down in Indian Railway linked to the provisions of Financial Audit Accounts Code, Part I (Chapter II to VIII), Guidelines forming part of International Part II and Indian Railway Finance Code Standards of Supreme Audit Institutions Vol. I & II are also to be followed. Internal (ISSAI). checks by the Railway Accounts have also Taking into the recommendations been laid down in Chapter VII of Indian prescribed by the Task Force and the Railway Accounts code, Part-I. Audit has existing audit instructions as prescribed in the responsibility to review the efficiency the books on Railway Accounts and Audit of internal checks. Further, C & AG issues and instructions issued by the C & AG special instructions every year on checking from time to time the best practices for of Appropriation Accounts of Railway carrying out systematic and effective facilitating Audit of Finance & Audit in Railway Audit Department are Appropriation Accounts of Railways. The discussed here. Before proceeding to next, Secret Memorandum of Instructions of the idea of completeness, occurrence, Audit also lay down the extent of check to

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Participants’ Notes Session 6 measurement, disclosure and regularity 6.1. Audit Plans: should be made clear: These are- Audit Plan includes detailed instructions for audit of Finance & Appropriation Completeness: ‘Completeness’ means that Accounts categorized as follows: all transactions relevant to the year of a) Audit Planning account have been recorded. It implies that b) Audit Execution no transaction has been overlooked. This c) Audit Reporting and Documentation assertion directly tests for potential d) Integration with central audit understatement of figures in accounts. For e) Integration with inspection of treasuries example, if the accounts are prepared for (F.A. & C.A.O) the financial year 2013-14 and an item of f) Integration with audit of departmental expenditure which takes place during accounts rendering units 2013-14 is omitted from accounts, the The detailed audit checks to be carried out ‘completeness’ objective is not fulfilled. on the Vouchers, Monthly Accounts Occurrence: ‘Occurrence’ means that all Current, Monthly Appropriation Accounts, recorded transactions occurred and were Finance Accounts and Annual relevant to the year of account, for e.g. if Appropriation Accounts are separately an item of receipt was booked in the discussed. Method of selection of sample accounts for the financial year 2013-14, to of vouchers and other inputs of the satisfy the ‘occurrence’ objective, the item accounts for substantive audit test are also should properly relate to only 2013-14 and discussed separately. not to any other financial year. This 6.1.1. Audit Planning: assertion directly tests for potential (i) Time Lines for audit. overstatement of figures in the accounts. The audit of Finance & Appropriation Measurement: ‘Measurement’ means that Accounts of Railway commences with the the recorded transactions have been issue of a time schedule by the Railway correctly valued, properly calculated, or Board in consultation with C& AG of measured in accordance with established India. The schedule consists of datelines accounting policies, on an acceptable and for the following activities connected with consistent basis. This involves much more preparation and audit of Finance & than clerical accuracy as it requires the Appropriation Accounts: auditor to check the conformity with the (ii) Activities at Railway Accounts established accounting policies and Offices. standards and the consistency in the  Completion and submission of Monthly measurement. Accounts Current to Audit, Disclosure: ‘Disclosure’ means that the  Completion and submission of Monthly recorded transactions have been properly Accounts for the month of March, classified and disclosed where appropriate.  Submission of Annual Accounts This implies that the receipts and Current to Audit, expenditure were booked into the proper  Submission of Finance Accounts & account head and the disclosures in the Appropriation Accounts and other notes and foot notes in the accounts are Statements to Audit Department, for appropriate and adequate. audit as per schedule; Regularity: ‘Regularity’ is a unique  Finalization of Finance & Appropriation requirement for Government/Railway Accounts after considering the Accounts. This requires that the recorded observations in audit. transactions are in accordance with the primary and secondary legislation and  Instructions are also issued to the other specific authorities required by them. Divisional Units and other Accounting

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Participants’ Notes Session 6

units fixing the internal deadlines for Several of the audit checks of Finance & the following activities: Appropriation Accounts can be exercised  Submission of initial accounts by all on the Database though Computer Aided Accounts Rendering Units; Audit Techniques. It can be done using  Fixing of cut-off date for acceptance of any CAAT tool like IDEA. The audit re-appropriations orders. checks required in various substantive (iii) Activities at Railway Audit Offices: audit tests can be listed out to facilitate . Issue of intimation to all auditing units easy development and adoption of IDEA including Divisions about the date in such audits by the Railway Audit lines fixed by the C & AG’s Office Offices. The query to be used is dependent and fixing of internal date lines about on the nature of Master Tables in the submission of Advance of Audited Application in use in the Railway Statements, Accounts Offices. However, percentage . Return of audited Statements to test check has been prescribed in CAG’s Railway Accounts Offices together Secret Memorandum of Instructions for with observations, if any thereon. Audit. . Discussion with respective F.A. & 6.1.3. Preparation of detailed audit C.A.O of the Railway for finalizing the program. observations. The planning for financial attest audit of . Sending of each Audited Statements to Finance & Appropriation accounts should C & AG’s Office along with the audit be integrated with the preparation of observations thereon remaining Annual Audit Plan of the Railway Audit unsettled. Office. Planning will be the responsibility . Approval of the Audit Certificate in of FAAAT in Financial Attest Group. The respect of Finance & Appropriation planning activities to be carried out will Accounts by Accountant General include: (Audit) for final Certification of Conduct risk analysis of ‘account areas, accounts by C&AG of India. accounting information, accounts 6.1.2. Responsibility Centre for audit of rendering units, expenditure incurring Finance and Appropriation Accounts. units and revenue collection units’. The The best practice for conducting efficient decisions on materiality levels and risk audit of Finance and Appropriation parameters may be left to the professional Accounts would be to create a dedicated judgment of the Principal Director of Section for conducting this audit through a Audit of the Zonal Railway or the person year-long process and not merely a year- nominated by him/her. end exercise. In fact, some of the Railway It may, however, be ensured that risk Audit Offices are also having such a analysis of account areas, accounting separate Section. This may be named as information, accounts rendering units, ‘Financial Attest Audit Group’. The expenditure incurring units and revenue responsibility of the Finance and collection units are decided prior to Appropriation Accounts Audit Team commencement of audit and should be an (FAAAT) should include all activities input for preparation of the Annual Audit connected with the Planning, execution, Plan of the Office. In carrying out the risk reporting and documentation of audit of analysis, the Principal Director of Audit Finance and Appropriation Accounts as may assess the controls that exist in the well as coordination with other sections of Railway Accounts Office. Financial Attest Audit Group dealing with The following indicative sources of scrutiny of vouchers etc. during Central information are suggested for various Audit, Local Audit Parties and Inspection account/accounting information/accounts Teams of the Office. rendering units. Past experiences and

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Participants’ Notes Session 6 review of previous audit observations give head of accounts with full details- wider scope in identifying Risk Areas. misclassification and mistakes in 6.1.3 (i) Accounts Areas and Accounting accounting. Information.  Correct treatment of booking of Sources of information for Risk expenditure under Capital, CF, DF, Analysis: DRF, OLW (R) and revenue etc. as per  Comments from audit of Finance and principles laid down in Indian Railway Accounts of previous year. Finance Code, Accounts Code.  Important Notes to Accounts and Foot  Negative balances in various funds e.g. notes included in current and previous Capital, CF, DF, DRF, SRF etc. year’s Finance & Appropriation  Demands payable, Demands Accounts. recoverable registers.  Monthly Accounts Current and  Suspense Registers- Any negative and Appropriation Accounts. inefficient balance in suspense heads  Budget allocations and actual (viz. Misc. deposit, Traffic A/cs., expenditure of previous year. Misc. Advance)-debit and credit items.  Availability of budget grant/  Sanctions and Estimates especially in supplementary grant/final grant connection with the heads of account  Comments on savings and excesses in under which the expenditure is Grants appearing in current and proposed to be met. previous year’s appropriation  Sanctions Register maintained by accounts. Central Audit wing of Railway Audit  Defects in budgeting (discussed and the Railway Accounts Office. separately in Audit of Appropriation  Divisional Advices of Transfer Accounts). (DATs).  Report on review of balances carried  Transfer Entries passed before the out by Railway Accountant Offices. accounts for the year are closed. Differences between the figures  Transfer Entry passed after the furnished by the divisional/field units accounts of the financial year are and compiled figures at HQ. closed.  Entries in ‘Objection books’  Serialization of All Transfer maintained in compilation sections Certificates. of Accounts Offices of Railway and in  Debit/Credit and their acceptance and the ‘Register of Points to be watched at account. Headquarter Office of the PDA in  Reconciliation of bank entries in the connection with Appropriation Bank Statements with party ledgers to Accounts’ and ‘Observations raised by avoid risk of improper debit/credit to Audit during routine Audit of the party’s accounts. Accounts’, maintained by the Central  Account cheques/drafts in the cheque Audit Parties of Railway Audit. register before depositing into Bank.  Assurances given by the F.A. &  Trend of bulk/rush booking of C.A.Os of Railways and the Finance expenditure at the fag end of the Commissioner of the Railway on financial year to avoid defects in correction of accounts, if any, in the budgeting leading to a chance of entry and exit conferences. misappropriation or misclassification.  Reports of Public Accounts Committee  Existence of good Internal Control/ on regularization of excesses in Internal check system. previous years.  Existence of regular reconciliation  Correct treatment of booking of system between various accounts and receipts and expenditure under proper schedules.

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6.1.3 (ii) Accounts Rendering Units Context. The sampling may, therefore, be  Report of inspection of the various done on transactions other than following units including divisional units transactions listed below for which 100% rendering accounts. checking is desirable:  Inspection Reports of local audits. . Transactions relating to Loans and 6.1.3 (Iii) Drawing and Disbursing Advances under Major Heads 7610 & Officers 7615;  Reports of local inspection parties. . Transactions relating to Public Debt  Audit notes of central audit parties. under Major Heads 8005; 6.1.4. Selection of sample vouchers. . Transactions pertaining to Contingency This part will prescribe the planning Fund under Major Head 8000; materiality levels in the form of monetary . Transactions relating to Reserve Funds thresholds and other criteria for selection booked under Major Heads 8115 to of sample vouchers, sample account areas 8121; and sample transactions for substantive . 8658 – Suspense Accounts testing. On Railway Audit a separate book . Transactions relating to Cash in the name of ‘Secret Memorandum of Remittances and adjustments with Instructions of Audit’ has been prescribed other Departments States booked by the C & AG, wherein the selection under Major Heads 8782 to 8790. criteria (monetary limit and percentage to . Transactions under deposits and be test checked) have been laid down. But Advances of Railways under Major the selection of sample vouchers and other Head 8337 to 8552– K-Deposits and accounting inputs like grants, vouchers, Advances. challans, classified abstracts, consolidated 6.1.5. Prepare a ‘Matrix’ showing the abstracts, transfer entries, settlement assertions sought to be proved, samples of accounts and different transactions transactions and vouchers selected for forming part of the accounts may be done carrying out the test, substantive audit tests by the Principal Director of Audit to be carried out and the responsibility adopting the Monetary Unit Sampling centre for the substantive audit test. The method through the IDEA Software. The results of the audit tests carried out may be Principal Director of Audit using his/her noted in the ‘Information Sheet’ showing professional judgment may also select the the nature of substantive audit test, the items to be audited. units/account area/account information on It will be the responsibility of FAAAT to which the test was carried out and results apply the IDEA Application, draw the of the substantive audit tests carried out by sample transactions and communicate the Financial Attest Audit Group, Local Audit same to the Financial Attest Audit Group, Parties and Inspection units. Divisional units, Field Audit Parties and 6.1.6. Monitor receipt of ‘Information Inspection Teams. The sampling is to be Sheet’ based on the ‘Matrix’ supplied to done after stratifying the VLC data of the entire audit teams involved in the transactions into Revenue Receipts, financial attest audit of Finance & Capital Receipts, Revenue Expenditure, Appropriation Accounts. While this Capital Expenditure, Deposits & Advances Information Sheet should be received from and Remittances. The IDEA application is financial attest Audit Group on a monthly to be applied on the VLC Database. basis, the local inspection parties should However following transactions forming attach this Information Sheet as a separate part of the Monthly Accounts Current and appendix to the regular inspection reports. Monthly Appropriation Accounts of the The Information Sheets will be forwarded Railways are recommended to be to FAAAT after vetting by the concerned considered Material by Nature and headquarters section.

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Participants’ Notes Session 6

6.1.6. Make arrangements for Entry transactions for substantial audit test on Conference in connection with financial scientific sampling principles, the same attest audit of Finance & Appropriation transactions can be selected for audit both Accounts between F.A. & C.AOs/other in central and local audits. The local audit Executive Heads, where necessary, and the parties will carry out the audit with Principal Director of Audit with the reference to records available in the agenda notes/presentations. While sending audited entity and the Financial Attest communication to the members for the Audit Group with reference to entry conference an audit engagement vouchers/records available along with the letter may be issued also. vouchers sent to Audit Office of Railway 6.1.7. On conclusion of audit, FAAAT Audit and copies of sanction orders shall also arrange for holding an Exit received separately from the Railway Conference and prepare the agenda and Board. presentations for the same. They will also 6.2.1. Scope of Audit prepare Management Letter, if any, to be 6.2.1 (i). Scope of Audit in Phase I. issued to the F.A. & C.A.O, with a copy to Phase I of the audit execution will Railway Board and/or to any Account commence immediately after the Vote-on- Rendering Units. Account on the budget for the financial 6.2. Audit Execution year has been approved by the Central The audit of Finance and Appropriation legislature and will end after scrutiny of accounts may be carried out in three the budget by the FAAAT. The scope of phases- Phase I of audit which commences audit at this stage consists of scrutiny of after approval of the budget will involve the budget and the state of readiness of the development of detailed audit program and Book Section in the Office of F.A. & preliminary audit activities. Phase II and C.A.O of the Railway for compilation of Phase III are intended exclusively for accounts pertaining to transactions flowing execution of audit. Reporting will also be from the new budget. Some of the part of Phase III. While the respective mandatory audit checks those may be Principal Director of Audit can decide on exercised by the team at this stage are the commencement date of Phase II, it is following: better that Phase II commences after the a. Verify the Grants and Appropriations submission of the monthly civil accounts in the Schedule to the Appropriation for the month of September by which Accounts and check whether all the month the half-yearly expenditure figures Sectors, Sub-Sectors, Major and Minor are available. Phase III will commence Head codes and Nomenclature are as after the Grant Statements/Appendixes of per the List of Major & Minor Heads. the Finance and Appropriation Accounts b. Verify whether the VLC section/Book are received in the Office of Principal section has captured all the Director of Audit from the Office of F.A. information on the Unit of & C.A.Os of the Railway. Appropriation and Original The contributions of Local Audit Parties, Appropriation required to be captured Financial Attest Audit Group to the in the Grant/Appropriation Check financial attest audit of Finance & Register from the new Appropriation Appropriation Accounts and the rules/instructions. Inspection Parties should be a year-long c. Flag the expenditure met out of the activity commencing soon after the Advances from the Contingency Fund annual audit plan is received and in the previous financial year ending after the accounts for March are remaining to be recouped. closed. Since the Financial Attest Audit d. Identify the mandatory contributions Section will be selecting the sample of to be made during the year to the

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Participants’ Notes Session 6

Funds constituted in the Railway for of September since this would provide specific purposes. half-yearly figures of expenditure and e. Verify the maintenance of ‘Sanctions receipts. Subject to the professional Database’, ‘Subsidiary Loans judgment of the Principal Director of Register’ by the Office of the F.A & Audit, detailed audit of the Monthly C.A.O & Ministry of Railways Accounts Current and the Monthly granting loans and maintaining their Appropriation Accounts may be carried detailed accounts and Financial Attest out for the months as selected by the Audit Group in Office of Principal PDAs. However, as per Secret Director of Audit. Memorandum of Instructions of Audit f. Obtain the following details/ issued by the C & AG the Monthly information from F.A. & C.A.O for Accounts Current is checked as per verification of settlement / percentage prescribed in this Book. reconciliation / analysis during central The objective of the audit checks in Phase audit and/or field inspection carried II are to identify errors, unauthorized out during the course of the financial expenditure etc. if any in Monthly year: Accounts and Monthly Appropriation o Statement of differences in cash Accounts sufficiently early so that balance worked out by Office of the corrections can be carried out before the F.A. & C.A.O and those reported by Accounts for the year are closed finally. Reserve Bank of India and remaining FAAAT will also test check transactions to be reconciled as on 31 March of indicated in the ‘Verified Date-wise previous year. Monthly Statement’ for each month. The o List of Abstract Contingency bills audit checks to be carried out at this stage pending settlement as on 31 March are indicated in ‘Audit Checks for audit of of the previous year for watching Monthly Accounts Current’ as discussed receipt of Detailed Countersigned later. The audit checks to be carried out at bills during the current year. Phase II on Monthly Appropriation o List of unencashed cheques pending Accounts are indicated in the ‘Audit for more than six months. Checks for audit of Monthly o List of reconciliation certificates Appropriation Accounts’ as discussed pending. later. o List of items pending under the Even though audit of accounts for the Major Head ‘8658 Suspense A/c months are selected for detailed scrutiny, with Railways, Transaction on behalf substantive audit checks on individual of the Reserve Bank etc.’ vouchers and transactions should be g. Check of IT Controls in the VLC system carried out by Financial Attest Audit and where possible in the Cash Group and local audit immediately after Information System. the annual audit plan is approved and 6.2.1 (ii). Scope of audit in Phase II should end only after the accounts for Phase II of audit execution focuses on the March are closed. The audit checks to be audit of Monthly Accounts Current, carried out at this stage are indicated in the Monthly Appropriation Accounts and their ‘Audit Checks for audit of Vouchers’ as underlying transactions and vouchers. The discussed later. month of commencement of Phase II is The month for which the accounts and left to the professional judgment of the transactions are checked is dependent on Principal Director of Audit. It is, however, the compilation of accounts. Normally the desirable that Phase II be scheduled accounts for the month of April should be immediately after the submission of available for audit in the month of July. Monthly Accounts Current for the month The audit of monthly accounts should

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Participants’ Notes Session 6 therefore commence in July for the new scrutinized to assess adequacy of budget financial year. However during the months controls and monitoring. of March to June the audit schedule will A separate Register may be maintained in have to be fast tracked to cover audit of all section responsible for audit to record the months of accounts prior to audit of errors and omissions noticed during audit the Finance Accounts and Appropriation of Monthly Appropriation Accounts for Accounts for the year. follow up action. The unsettled cases The audit of vouchers during local audit which may have impact on accuracy or should cover the month for which completeness of Finance & Appropriation expenditure has been incurred at the time Accounts should be considered for audit of audit and for which the records are comments and for qualification of available with the audited entity. The accounts. selection for the purpose of financial attest 6.2.1 (iii). Scope of audit in Phase III audit need not therefore linked with the Phase III of audit will commence after the selection of year of account and F.A. & C.A.O starts submitting the Grant transactions for compliance audit being Statements. The audit checks during the carried out by the audit team. This need Phase III will be similar to the checks not cause any difficulty since limited presently being carried out for certification number of transactions is likely to be of the Finance & Appropriation Accounts. communicated by FAAAT for scrutiny by In addition, review of compliance with individual local audit teams as part of the audit observations pointed out during financial attest audit. Phase I and Phase II of audit will also be The present practice of selecting a number part of the scope of audit of this phase. It of Grants for detailed scrutiny during audit should also be verified that there are no of Finance & Appropriation Accounts corrections to the database on which audit should be integrated with the audit of in Phases I and Phase II was conducted. In Monthly Accounts, Monthly case there are corrections carried out on Appropriation Accounts and the Finance monthly accounts current already audited & Appropriation Accounts. This scrutiny in subsequent months these corrections will be the responsibility of FAAAT. The should be compulsorily scrutinized and team may conduct a comprehensive their impact on accounts assessed. The review of five to ten Grants every year but detailed audit checks to be carried out on not less than two during the second phase each Statement and Appendix of Finance of audit. The results of this audit and the Accounts are indicated in the ‘Audit findings of audit of Monthly Accounts, Checks for audit of Finance Accounts’ , as Monthly Appropriation Accounts and the discussed later. The detailed audit checks Finance & Appropriation Accounts should to be carried out on Appropriation be used for reporting on the Accounts are also indicated in ‘Audit implementation of the Grant. Grants for Checks for audit of Appropriation such review should be selected using the Accounts’. professional judgement of the PDA on the During Phase III the audit team may also basis of persistent savings disclosed in examine independently the reasons for past Appropriation Accounts. The scope of excesses and savings in at some this review should inter alia include departments, as may deem fit, where compliance with budgetary procedures and substantial excess expenditure or savings expenditure control exercised in respect of might have taken place. Such detailed provisions made in the budget/ appropriation audit should provide an supplementary demands. The expenditure insight not only into the nature of and incurred to the date of review should be reasons for the excess expenditure or savings in relation to the budgeted grants

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Participants’ Notes Session 6 but also focus attention, more importantly, re-appropriation orders. The findings of on the control failures and deficiencies, Phase II discussed above relating to audit delays in decision-making, etc., that might of Monthly Accounts and Monthly have facilitated the excesses/savings and Appropriation Accounts should aid the on the failure of superior authorities to audit process during this stage. detect and rectify them. The points/aspects The third Sub-Stage commences after the require special attention and probe with final appropriation accounts are received reference to the failure of the controlling from the F.A. & C.AO’s Office. The audit and drawing and disbursing officers to checks at this stage are contained in the restrict their expenditure within the Audit checks for audit of Appropriation allotted amounts. Selection of these Accounts, as discussed below. departments is left to the professional Majority of the audit checks prescribed are judgement of the PDA of the respective amenable to execution through use of Railway. IDEA. In fact, if the controls of database The audit of Annual Appropriation system are audited effectively and the F.A. Accounts forming part of Phase III should & C.A.O is of the opinion that reliance can further be split into three sub-stages. The be placed on the System, it is advisable to first Sub-Stage commences as soon as execute through IDEA the checks of Head-wise Appropriation Accounts verification of Major Head-wise/Minor containing information relating to Grant Head-wise figures in the number and Nomenclature of the Heads of Statements/Appendix with those in the Accounts up to Sub-head level forming system, and checks of consistency of part of the particular Grant are received figures between different Statements/ from F.A. & C.A.O. The correctness of Appendix in Finance Accounts and Grant number and Nomenclature of Heads between those in different of Account should be checked at this stage Statements/Appendix of the Finance with reference to those in Detailed Accounts and corresponding figures in Demands for Grants and any corrigendum Appropriation Accounts. Where the F.A. issued thereof. Further, information & C.A.O has a unique System even though relating to the sanctioned provision there are similarities, each Office of (Original and Supplementary) and the net Principal Director of Audit should develop effect of re-appropriation orders issued processes for the above checks using during the year up to sub-head level IDEA keeping the table structure of the available in this version of the statement System to be checked. may also be checked for correctness. The 6.3. Audit Documentation and findings of Phase I of audit relating to Reporting: budgetary processes discussed above The draft report consisting of the Audit should aid the audit process during this Certificate and Management Letter should stage. be prepared by FAAAT after conclusion Sub-Stage II commences as soon as of audit. As required in Financial Attest second version of the Head-wise Audit Manual, assertion based Appropriation Accounts showing figures documentation should be done for of expenditure are received from the F.A. financial attest audit of Finance & & C.A.O. The audit check at this stage Appropriation Accounts. The audit checks should be focussed on verifying whether of Vouchers, Monthly Accounts, and the expenditure incurred is within the Monthly Appropriation Accounts are sanctioned provision. In case of prepared for the assertions of expenditure exceeding the original completeness, measurement, regularity, provision, it should be verified whether the occurrence and disclosure relating to each excess fund is provided through authorized of the above accounts. The audit checks

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Participants’ Notes Session 6 for each item of account in the Finance equivalent in Offices of Pr. Director of Accounts and the Grants in the Audit is to identify deficiencies that may Appropriation Accounts as discussed later affect the accuracy and reliability of ensure that the assertions are checked for Finance and Appropriation Accounts. It is its correctness. started right from the receipt of the copy Documentation should include completion of the sanction from the Railway of ‘Matrix’ and should show specific Administration. If there is any mistake in accounts, accounts areas, nature of the allocation head of Income or transactions chosen for proving the Expenditure the entire booking different assertions, samples of subsequently made against the sanction vouchers/documents chosen for would be wrong. The percentage of substantive audit tests relating to each voucher to be checked has already been assertion, results of the substantive audit laid down in SMI. The sample of vouchers tests done and the overall conclusion to be selected for scrutiny in central audit drawn with cross referencing of audit for purpose of the audit of Finance & evidence collected. Appropriation Accounts will be While the serious observations in audit of communicated by FAAAT to the Financial Finance & Appropriation Accounts are to Attest Audit Group for distributing the be embedded in the audit certificate itself, responsibility for audit to individual audit it is desirable that a ‘Management Letter’ teams within the group. be issued as a result of the audit to the The following points should specifically departmental heads in charge of the be looked into by individual audit teams accounts rendering units pointing out those within Financial Attest Audit Group while audit findings which though not material auditing sanctions and the results of audit enough to qualify the accounts needs to be communicated to FAAAT. The audit addressed to improve the quality of checks of sanctions required to be carried accounts. A similar letter can also be out by the individual audit teams while issued to F.A. & C.A.O for matters auditing sanctions for the purpose of audit relating to compilation of accounts. of Finance and Appropriation Accounts FAAAT should prepare the draft and send are the following: the same to all concerned prior to the Exit . Check the sanction has the approval of Conference. The Principal Director of the authority competent to do so. Audit can decide on whether any of the . Check whether the classification of audit findings qualify for inclusion in the heads of account indicated in the Report of the C&AG of India. sanction is correct. 6.4. Integration of Financial Attest . Verify whether the sanction issued Audit with Central Audit: complies with provisions of Railway Central audit in the Department is Accounting Rules with regard to presently carried out as a stand-alone classification into Revenue and activity with certain outputs from the audit Capital expenditure. being marked for verification in local . Verify whether the sanction order audit. To broad-base the audit of Finance correctly classifies the sanctioned & Appropriation Accounts, the results of expenditure into Voted/Charged central audit has to be programmed to categories. serve as input for audit of Finance & . Verify whether the sanction is Appropriation Accounts. Central audit is indicative of drawal of budgeted funds presently carried out in two streams – merely to avoid lapsing of budget sanction audit and voucher audit. The provision. objective of sanction audit carried out by . Check whether the financial sanctions Integrated Audit Units (IAU) or its are issued by the competent authority

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and where required with the approval Memorandum of Instructions and audit of Railway Board/Ministry of should generally keep a watch over the Railways. progress of work in Accounts Office and . Check whether write-off sanctions are efficiency of internal check. A separate issued after following prescribed local inspection of Accounts Office is not procedures. Sanctions to the write off necessary as the initial records are of losses should be completely available for scrutiny at the time of audit investigated and traced into the of relevant vouchers and documents. The Register of losses or the Register of programme of Audit provides for test- serious irregularities. Whether the audit of some records which are usually write-off losses above Rs.50, 000 were checked during local inspection of other reported to the Railway Board. offices. However, an Annual review of the . All sanctions of payments arising out working of Accounts Office will be of Arbitration awards should be carried out in the form prescribed in the thoroughly scrutinized with reference Secret Memorandum. But, the Cash and to the circumstances for which such Pay department should be inspected as per payments had to be made. Para 370 of Railway Audit Manual to see The individual audit teams within that- Financial Attest Audit Group may i) The system of receipts and disbursement maintain a Register showing the of cash and the check on the work of the irregularities noticed during audit of subordinates are sound and leave no sanctions which may have a bearing on the loophole for frauds or temporary accuracy of accounts and send a list of misappropriations, unsettled cases to FAAAT on 30th ii) moneys received by the railway are September and at the end of January, paid promptly into Government treasuries February and March with copies of and that funds required for payments are correspondence exchanged in the matter. obtained from Government treasuries by FAAAT will analyze their resolution and cheques drawn by the Accounts Officer or take appropriate decision while preparing his/her authorized representative, the report on audit accounts at the end of iii) the cash book and supporting Phase III of audit. documents are checked daily by an The results of audit of vouchers and Accounts Officer, and Challans selected for scrutiny in central iv) the system of providing funds to pay audit for the sake of audit of Financial clerks/cashier and receiving unpaid Attest Audit of Finance & Appropriation amounts is satisfactory. Accounts should be communicated on a In addition to above, the audit will be monthly basis to FAAAT in the form of more fruitful if the results of the following ‘information sheet’ referred to earlier. audit checks on the financial controls in 6.5. Integration with Inspection of the F.A. & C.A.O’s Office and on the Treasuries (F.A. & C.A.O). selected transactions are passed on to Since treasury is the nodal point through FAAAT. which all transactions of Government 1. Verify fact of checking entries in money are carried out, it is necessary to register of daily receipts and payments include the audit of the treasury in a by the treasury officer (F.A. & C.A.O) program for audit of the Finance & for transactions of two days in a month Appropriation Accounts. In Railway F.A. selected at random. & C.A.O does the function of Treasury. 2. Verify enfacement of challans by As per Para 135 of Railway Audit Manual treasury officer before crediting to audit of vouchers and documents are done government account for sample to the extent as laid down in Secret transactions selected.

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3. Verify posting of receipts and payments rather than relying on local audit parties. from daily account to the cash book The results of the central and local audits directly or through subsidiary should be communicated to FAAAT in the registers at least for transactions of Office of the PDA by the audit teams in two days in a month selected at the Information Sheet prepared as random. suggested earlier. 4. Verify posting of net difference between 6.7. Audit Checks for audit of Vouchers receipts and payments of the day into Although audit of vouchers are done at Register of Reserve Bank Deposits at Central Audit as per instructions and least for transactions of two days in a extent of check laid down in Secret month selected at random. Memorandum of Instructions on Audit, 5. Verify the proper maintenance of vouching is an integral part of any following Registers: financial attest audit. While audit of a. Register for Reserve bank Deposits, expenditure vouchers is the major function b. Registers for revenue deposits class- of Central Audit Parties, the results of wise, these audits are not being used for arriving c. Registers of bill passing branch at an opinion on the true and fair view of consisting of register of token, the Finance and Appropriation Accounts. register of pay orders and register of In operationalisation of the Financial objected bills, Attest Audit Manual vouching will be d. Register of Abstract Contingent Bills carried out both by Central Audit Parties and adjustment thereof, and Field Audit Parties. Vouching will e. Register of lapsed deposits. primarily be the responsibility of Central 6. Verify controls for watching Audit Parties. The role of Field Audit expenditure against budget allotment. Parties/ Teams in this regard will be 7. Check effectiveness of controls on limited primarily to the following: receipt and issue of cheque books and 1. Selective review Receipt Challans receipt books. which are not sent to Office of the F.A. & 6.6 Integration of audit of Accounts C.A.O. Rendering Units: 2. Selective review by Field Audit Parties The audit checks to be exercised while of Sub-Vouchers which are not submitted auditing the accounts rendering units like to Office of the F.A. & C.A.O. along with Construction, Engineering, Signal & Monthly Accounts. Telecom., Mechanical, Workshop, Stores 3. Review by Field Audit Parties of & Traffic Departments etc. are indicated expenditure incurred on Abstract in the Guidelines for audit of Monthly Contingent Bills where the Detailed Accounts. The selection of sample Contingent Bills have not been sent within transactions to be checked in local audit the specified period. will be communicated by FAAAT in the 4. Review by Field Audit Parties of those Office of Principal Director of Audit to the vouchers intimated by Central Audit local audit parties through the respective Parties for verification with reference to headquarters section. The audit of the original records during local audit. monthly accounts received from these The following checks on assertions on Accounts Rendering Units is to be done by measurement, completeness, regularity, the Financial Attest Audit Group. occurrence and disclosure will be Alternatively the PDA may decide to mandatorily exercised on all vouchers entrust verification of original record selected for audit by both the Field Audit pertaining to any audit finding noticed in Parties and Central Audit Parties: central audit carried out by Financial Attest Audit Group to the Group itself

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6.7.1. Assertions on Measurement:  Check whether the expenditure in the  Verify whether the amount accounted in voucher is sanctioned by appropriate the List of payment is same as the amount authority and the actual expenditure is for actually paid as per Voucher. the amount sanctioned.  Verify whether the amount actually paid  Check whether the expenditure is incurred as per Voucher is same as per the receipt with proper budget allocation and that the signed by the recipient. expenditure is not on a new service or new  Verify whether the amount accounted in instrument of service. the Schedule of Receipts is same as the  Verify whether the vouchers contain order amount actually received as per Challan. of payment by the concerned Accounts  Verify whether the totaling in the Officer with the seal of payment stamped vouchers and challans are correctly arrived on the voucher. at.  Check whether the expenditure is correctly  Verify whether the total of sub-vouchers classified as revenue or capital based on equal the paid amount as per main principles applicable for classification into voucher. revenue or capital.  Check whether the sub-vouchers retained  Check whether in respect of bookings by Drawing & Disbursing Officer and under PAO Suspense & Reserve Bank Countersigning Authority are within the Suspense under Major Head 8658- the limits prescribed by Government. expenditure is adjustable with Government  Verify whether the total of Detailed of India and Reserve Bank of India action Contingent Bills equal the amount drawn has been taken for adjustment. as per Abstract Contingent Bills.  Check whether in respect of bookings  Check whether the deducted amounts under Major Head 8658 Suspense Account from bills are correctly booked in (Railways), the classification is justified corresponding Revenue Receipt/Capital based on the circumstances and action Receipt/Public Account Major Head. taken to collect wanting 6.7.2. Assertion on Completeness: information/documents and adjust the  Verify whether the bills/challans are in same through minus debit or minus credit. the prescribed format and contains all  Check whether in respect of any cash documents required to be attached to the written off due to theft/embezzlement etc bill/challans. after the same has reached the government  Check whether all adjustments for servant, the amount is entered in Railway affording interests to deposits, reserve account as a receipt and then shown as funds have been carried out by expenditure under appropriate head of Departments on the basis of master list of account and that only net loss after such obtained from F.A. & C.A.O. recovery of any dues is shown as such 6.7.3. Assertion on Regularity: loss.  Verify whether certificate of Payments or  Check in respect of offices having cheque Certificate of Receipts for Missing drawing powers whether the transactions Vouchers/Challans are properly authorized pertain only to their offices. and accepted by F.A. & C.A.O. 6.7.4. Assertion on Occurrence:  Verify whether the classification of  Check all Nil Payment Vouchers of month vouchers and challans are correctly done. of March to verify whether they have been  Check whether expenditure booked as paid to avoid lapsing of budget allocation. charged expenditure is eligible for such  Check whether in respect of refund of classification under provisions of deposits, the original deposits have been constitution and as per provisions in the credited to Railway account. budget.

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 Check whether in respect of adjustment or  Whether the transfer entry involves more refund of advances, the advance had than one Railway/ government originally been paid and booked under the department. If so, verify from the Transfer correct head of account. Entry Form whether the correct Head of  Check whether in respect of expenditure Account which should have been incurred through Contingency Fund action originally debited or credited has been to recoup the same through supplementary given a Debit or Credit and whether the demands have been taken. Head of Account originally given wrong  Check whether Detailed Contingency debit or credit is given a ‘minus debit or Bill has been received within the specified minus credit’. period for amounts drawn on Abstract  That only a ‘Note of the Error’ is made countersigned Bill. and no transfer entry made when the 6.7.5. Assertion on Disclosure: corresponding head of account relates to a  Check whether the classification shown revenue receipt head of account or revenue in the Bill/Challan is correct. expenditure head of account on both sides.  Check fund availability certificate is  If the Transfer entry relates to a Debt, disclosed on the voucher. Deposit, Remittance Head of Account  Check whether the designation of the confirm whether the correct Head of competent authority sanctioning the Account which should have been expenditure is disclosed on the vouchers. originally debited or credited has been 6.7.6. Vouchers other than Bills and given a Debit or Credit and whether the Challans Head of Account originally given wrong In Railways Accounting vouchers include debit or credit is given a ‘minus debit or not only Bills and Challans but other minus credit’. documents like Transfer Entry Documents,  If the Transfer entry relates to Reserve Bank of India Advice rectification of short/nil credit to a Debt, Memorandum, Inward Settlement Deposit, Remittance Head of Account Accounts, Outward Settlement Accounts which should have been given but instead and Approvals and Authorizations granted wrongly credited to a revenue receipt head by F.A. & C.A.OS. The following audit of account confirm whether the correct checks should be carried out by Central DDR Head of Account which should have Audit Parties as part of financial attest been originally credited has been given a audit function on these documents: Credit and whether the Revenue Receipt 6.7.7. Transfer Entry Documents: Head of Account originally given wrong Identify whether the Transfer Entry is credit is given a ‘debit- deduct refunds’. passed before closure of the accounts for  If the Transfer entry relates to the financial year or after closure of rectification of short/nil debit to a Debt, financial year. Deposit, Remittance Head of Account If Transfer Entry passed before the which should have been given but instead accounts for the year are closed: wrongly debited to a revenue expenditure  Check whether the correct head of head of account, confirm whether the account which should have been originally correct Debt Deposit Remittance Head of debited or credited has been given a debit Account which should have been or credit in the Transfer Entry Form and originally debited has been given a Debit whether the Head of Account given wrong and whether the Revenue Expenditure debit or credit is given a ‘minus debit or Head of Account originally given wrong credit’. debit is given a ‘credit’. If the Transfer Entry passed after the  Check whether in respect of transfer accounts of the financial year are closed: entries pertaining to transfer of tax Verify the following: revenue from the union to states covered

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under Major Heads 0020- Corporation etc. have been included in the monthly Tax, 0021- Taxes on income other than accounts current. Corporation Tax, are correctly booked by . Check whether all clearance memos of Office of the F.A. & C.A.O. Reserve Bank of India/Inward Approvals and Authorizations granted Settlement Accounts/Outward by F.A. & C.A.O. Settlement Accounts are included in the . Check approval given for crediting of monthly accounts. interest to GPF Account to ensure that the . Check if the totals of Abstract of Major calculations are correctly made on the Head Totals tally with corresponding outstanding balances under the Fund and figures in Disburser’s Account. are subject to budget provisions. . Check if the figures under Abstract of . Check approvals given for repayment of Major Head Totals tally with totals of loans to central government and interest Consolidated Abstracts of Debt/ Deposit/ thereon to ensure completeness of Remittance Heads and those of payments due. Departmental Abstracts.  Check correctness of approvals given for . Check if in selected Compilation Sheets proforma correction of closing balances of and Consolidated Abstracts the bookings previous year’s accounts. of expenditure are supported by  Check approvals given for write off of vouchers/schedules/suspense balances due to government but have slips/transfer entries. become irrecoverable for appropriateness . Check if in selected Compilation Sheets of such write off. and Consolidated Abstracts the bookings  Check approvals given for crediting to of receipts are supported by Schedule of Revenue Head of account any deposits receipts/deduction sheets/transfer remaining unclaimed. entries.  Check approvals given for writing off . Check whether there are any differences any amount due to book keeping errors to between totals of List of Payments and Major Head 8680- Miscellaneous Schedules and differences if any are Government Accounts for correctness of booked under Major Head 8658 – procedure followed and amounts written Suspense Accounts (Railways). off. . Check whether there are any differences  Check all transactions of the nature of between schedules and accompanying periodical adjustments carried out by the Vouchers and differences if any are Office of Accountant General (A&E). booked under Major Head 8658 – 6.8. Audit Checks for Monthly Accounts Suspense Accounts (Railways). & Accounts Current. . Verify whether all the Outward Audit checks to be exercised are detailed Settlement Accounts for the month have in Para 372 of Railway Audit Manual. been sent. However, methods of check in the . Verify whether all the Inward Settlement systematic manner are as follows: Accounts have been properly acted 6.8.1. Assertions on Completeness: upon. . It should be ensured that the accounts are . Check if the crediting of funds (sinking rendered complete in all respect. Check fund) created for amortization due for whether all the accounts of Treasury the month has been done as per (F.A. & C.A.O) for the month have been requirement. included in the monthly accounts . Check whether all periodical current. adjustments due for the month/quarter . Check whether all Accounts from and year have been carried out and Divisional units and other accounting include all adjustments which ought to units like Workshop, Stores and Traffic

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be included in the Accounts for the year correct interest rates applicable for such in terms of Para 333-AI.. loans have been adopted for calculation. . Check whether the transfer entries in . Check differences if any between respect of rectification of mistakes balances in the Loans Broadsheet and necessitated by the reconciliation of Ledger and the reasons for the same. accounts by departmental heads are . Check correctness of calculation of carried out under intimation to the interest paid, if any, on General departments concerned. Provident Funds /Sinking Funds and . Check if recoupment Transfer Entries for whether correct rates applicable for such recoupment of Contingency Fund funds have been adopted for calculation. necessitated by the passing of any . Check in respect of Provident Funds Supplementary Budget during the month under trustee whether the balances in the is effected. account match the corresponding . Check specifically if the Transfer Entries balance in the accounts sent by the for recoupment of Contingency Fund are trustee. only for the value of actual transactions . Check if the cash balances reported by and not for the entire sanctioned Central Account Section of Reserve amounts. Bank of India in Statement of Balances . Check whether the entire balance under equal the cash balance figure compiled Major Head ‘8782 - Cash Balance, by the F.A. & C.A.O and also the total Remittances etc.-Cash Remittances and of figures in cash accounts of treasuries Adjustments between Officers rendering for net transaction in district treasuries, accounts to the same Accountant transactions in Headquarters and General/Accounts Officers’-Transfer adjustment transactions made by Central within the same Railway leaves no Accounts Section of Reserve Bank of balance under the former head.. India. In case of differences check 6.8.2. Assertions on Measurement: whether the difference is being pursued . Check whether the previous month’s for correction. figures are correctly carried forward to . Check differences between balances in current month for all heads of accounts the Departmental Adjusting Account in the Monthly Accounts. The opening Broadsheet and Ledger, if any, and the balance should be compared with the reasons for the same. closing balance of the previous month’s . Check that the prescribed schedules have account and the closing balance with the been correctly prepared and that their General Cash Book. totals agree with the respective entries in . Check whether the cash transactions as the Account Current. per Co7 register are correctly posted in . Check that debits and credits to the head the Accounts Current; entries should be ‘Reserve Bank Deposits’ (Railways) and traced from the General Books also. The the various Deposit and Remittance entries in the column “current month” heads connected with the same as shown and the schedules of ‘Receipt’ and in the Account Current are tallied with ‘Expenditure’ should be checked with the details in the schedules of the ledgers. transactions under ‘Reserve Bank . Check the arithmetical accuracy of the Deposits’. selected Consolidated Abstracts. . Check whether net receipts or payments . Check the arithmetical accuracy of under the head ‘Reserve Bank of India selected List of Payments and Schedule Remittances’ as in the Detail Book agree of Receipts. with the corresponding adjustment for . Check correctness of calculation of the month made by the Reserve Bank of interest paid if any on loans and whether

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India against the balance of the Controlling Officers have been Government concerned. incorporated in Accounts. . Check whether the bookings under Major . Check whether all the capital Heads ‘8671-Departmental Balances’ expenditure incurred qualifies to be and ‘8672-Permanent Cash Imprest’ are booked as capital as per norms for for authorized amounts. treating an expenditure as capital. 6.8.3. Assertions on Regularity: . Check whether selected revenue . Check whether all Major Heads, Sub expenditure incurred qualifies to be Major Heads, Minor Heads, Sub Heads, booked as revenue and not capital as per Detailed Heads and Object Heads norms for treating expenditure as operated are authorized and that all revenue or capital. receipts and expenditure are reflected . Check whether bookkeeping differences Minor head wise written off if any like difference between . Check whether there is adequate budget Ledger and Broadsheet booked to Major provision either through original Head ‘8680 – Miscellaneous estimates, supplementary estimates or Government Accounts’ are correctly re-appropriations for the total done following procedures prescribed in expenditure booked under various Heads Rules. of Account. . Check whether the reasons for minus . Check separately whether there is entries are explained in the Annexure to adequate budget provision either through the Account current indicating (i) Head original estimates, supplementary of Accounts, (ii) the amount, (iii) the estimates or re-appropriations for the reasons for “minus entry” and (iv) year expenditure treated as charged on the to which the minus transaction pertains. Consolidated Fund of India booked These should be critically examined. under various Heads of Account and . Check new item of receipt and their eligibility for booking as charged expenditure appearing in Misc. Receipts expenditure. and Expenditure. Expenditure under . Check if the limits prescribed for Major Head 2016 should contain the guarantees given by the Central Govt. expenditure figures of establishment on have not been exceeded. audit department and should not include . Check if unadjusted balances in expenditure on account New Pension Suspense Accounts represent assets in Scheme. Receipts/ Expenditure are the form of receivables either through shown duly bifurcated under cash/adjustment or liabilities in the form Commercial Lines/Strategic Lines in the of payables through cash/adjustment. Account Current for March. . Check selected expenditure to ensure 6.8.4. Assertions on Occurrence: that there are no unauthorized cases of . Verify that there are no unauthorized expenditure on New Service/New rectifications of balances of previous Instrument of Service. year’s account closing to government . Verify that transactions involving annual account. adjustments are appearing only in the . In respect of the accounts for the month accounts of March (Final). of March, check whether the unspent . Check whether the annual adjustments balances of Deposits of Railway proposed by the compilation sections in Accounts have been transferred to F.A. & C.A.O’s Office are correct and appropriate Major Heads especially justified. Major Heads 8337, 8342 & 8445, etc. . Check whether proposals for annual from which they were created. adjustment received from Chief . Check the debits under Major heads dealing with Deposits to verify whether

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any unspent balances of previous years’ under 1601 – Grants-in-aid from Central Railway Deposit Accounts have wrongly Government, 6004 – Loans & Advances been treated as revenue receipts during from the Central Government may be the current year. checked with relevant sanctions, grant . Check whether the reconciliation of registers, clearance memos etc. expenditure by Departmental Heads available in Books sections. have been carried out with the F.A. & 6.8.5. Assertions on Disclosure: C.A.O. and whether the adjustments  Examine whether bookings under Minor required on the basis of reconciliation of Head of Other Receipts is justified or expenditure by Departmental Heads with whether they should be booked under F.A. & C.A.O. have been carried out. some other Minor Head under a Major . Check in respect of specific Funds Head already existing for such booking. created out of Consolidated Fund or  Examine whether bookings under Minor from any Grants received and booked as Head Other Expenditure is justified or Receipts under Minor Head, whether the should be booked under some other corresponding transfer to/from Reserve Minor Head under a Major Head already Funds under the concerned functional existing for such booking. Major Head has been made.  Check whether the Grants booked under . Check whether the accounting entries to the head ‘Other Grants’ are only those transfer expenditure incurred to be grants which are general purpose grants. ultimately transferred to Reserve Funds/  Check if all the deposit holders have Sinking Funds (DRF) have been carried independently confirmed the balances out to ensure that the expenditure has in outstanding against them as per their fact been met from the Reserve Fund accounts. concerned.  Check if the Loanees have independently . Check in audit of treasuries (F.A.& confirmed the balances outstanding C.A.O): against loans availed by them. o That the total of payments reported by  Verify the Suspense Register to ensure treasuries in daily schedules relating to that no expenditure is debitable to the Reserve Bank of India Remittances is Consolidated Fund is kept under debited to Reserve Bank of India A/C. suspense. o That the total of issues reported by  Check whether the un-recouped treasuries in daily schedules relating to expenditure incurred from Contingency RBI Remittances is credited to Reserve Fund is not booked to the Consolidated Bank of India A/C. Fund. o That daily schedules of RBI  Check whether expenditure booked Remittances are supported by under ‘Contingency Fund’ by treasury vouchers. (F.A. & C.A.O) is with proper sanction. o That deduction in Plus and Minus 6.9. Audit checks for audit of Capital Memoranda are equal to receipts in and Revenue Accounts (Section II of the accounts. Annual Report-Financial Statement). . Receipts under Civil Major Heads of Tax Detailed audit checks in respect of Capital Revenue under 0021 – Taxes on income and Revenue accounts have been laid other than Corporation tax, 0049- down in Para 374 of Railway Audit Interest Receipt, 0050-Dividend & Manual. However, it may be mentioned Profit, 0071-Contributions & Recoveries here that most of the checks can be towards Pension & other retirement exercised from the Account Current for benefits, 0210 –Medical & Public March. In all cases, amount to the end of Health, etc., Non Tax Revenue & Other the previous year should be checked with Non Tax Revenue and receipts booked the previous year’s statements. Some of Training Manual on Audit of Railway Finance and Appropriation Accounts 135

Participants’ Notes Session 6 the important checks are also detailed and register of Bills Recoverable in regard below: to other outstanding. Receipts and Expenditure on Capital Dividend Accounts (Statement No.XVII Account (Statement No.IV A.706)-The A-719) – This will be checked with the column showing the amount to the end of previous year’s final copy of the accounts the previous year should be checked with and Statement No.XVI of the current year. the previous year’s statement as usual and The calculation in respect of Dividend the other column showing transactions payable to General Revenue should be during the year with the Statement No.V made as per formula prescribed in mentioned below. Statement No.XVII-A. This is revised by Details of Capital Expenditure (Statement the Railway Board from time to time and No. V-A 707) should be checked with the format is circulated to all Railways ‘total-to-date’ column of the detailed along with the instructions, every year. expenditure schedules attached to Capital Further discussions have been made also, Account Current for March. It may seen in the later part of the Audit of other that expenditure is shown in net i.e. after Accounts deducting receipts on capital account and Depreciation Reserve Fund Account that all credit entries due to special (Statement No.XVIII A-720) - During adjustments, etc. are explained in checking of the Opening Balance the footnotes. statement sowing transfers effected Estimates of further Expenditure on without financial adjustment during the Capital Account (Statement No.VI A.708) year should be checked.. The amount of - The figures in the 2nd column only need replacement and renewals expenditure and be checked to see if they are equal to the credits for released materials will be figures shown in the Statement of the checked with the schedules of working previous year plus the expenditure for the expenses accompanying the Accounts current year as shown by Statement V. Current for the month of March. The Statement No. VI, VIII & V have relation amount of appropriation to DRF and with each other. Closing Balance will be verified with the In case of Capital Account (Statement No. consolidated Revenue ledger. The figure VIII A-710) – the expenditure on final of interest charges should be the same heads should be checked with Statement amount as shown in the Transfer No. VI and Capital Ledgers. The figures Certificates sent to the Railway Board. under suspense account and cash should Railway Pension Fund & Railway Safety be checked with those in the accounts for Fund (Statement No.XVIII-B – A720 B & March. XVIII-C-A 720-C) - The process of check In respect of Revenue Account (Statement of this statement is similar to the one No.IX- A-711) - The earnings and adopted for statement No.XVIII A. The expenditure under the various heads appropriation to the fund in respect of should be checked with the Revenue Railway Audit staff should be checked Account Current for March and its with reference to the amount shown in the schedules. The details of earnings under Schedule of expenditure under other Misc. the various abstracts should be checked Expenditure accompanying the Account with the respective registers maintained in Current for March. the Traffic Accounts Branch. The Expenditure charged to Development statement of outstanding (A-716) should Fund/Open Line Works – Revenue be checked with the Station Balance (Statement No. XX A-722 and XXI A- Sheets as regards station outstanding and 723-A)- (i) The details of outlay to the end with the Accounts Office Balance Sheet of the year should be checked with reference to the end of the year to the

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Participants’ Notes Session 6 audited statements of the previous year (ii) in the Indian Railway Code for audited copy of the statement of TWFA Accounts Department, Part-I. and (iii) the statements indicating the b) Check whether the figures are given in details of expenditure during the year. It ‘Crore of Rupees’, in ‘Lakh of should be seen that the figures of outlay Rupees,’ or in Unit of Rupees in for the year under each minor heads agree Schedules & Appendices , as required. with the net figures appearing against the c) Check whether the figures for the same concerned items in the relevant schedules item depicted across different to the Revenue account Current for March schedules and appendices are the same and the differences, if any, due to and if there are any differences due to rectification through Capital and Revenue rounding off or otherwise, suitable Accounts in terms of paras 707, 711-FI are foot-notes are given to explain the suitably explained through foot notes in differences. the statements. d) Check whether details of the source of Expenditure charged to Railway Safety data are indicated as foot-note in Fund (Statement No.XXII-A 724) & respect of facts and figures included in Expenditure charged to DRF (Statement the Finance Accounts from sources No.XXIII – A 725)- Similar checks may other than that accounts or accounting be adopted as in case of DF & OLW(R). records maintained by the F.A. & C.A.O’s Office. Check whether In addition to above, the audit procedures reconciliation of expenditure figures as outlined in respect of Accounts Current has been carried out with i.e. Assertions on completeness, corresponding expenditure figures in Assertions on Measurement, Assertions on Appropriation Accounts. Regularity, Assertions on occurrence and e) Check correctness of figures for Assertion on Disclosure may be followed previous years wherever indicated with to have detailed examination successfully. corresponding figures in the Finance Accounts of that particular year and A table showing the initial/subsidiary check whether variations if any are records and other related accounts/ explained through appropriate foot- records/statements from where the notes. accounts/statements are compiled and f) Check correctness of all the figures and cross checking can be made for references given in ‘Notes to ascertaining the accuracy of the figures Accounts’. incorporated in the accounts is prepared g) Check if the charged expenditure is and shown in a separate statement in indicated in italics. this chapter. h) Check whether irregularities if any 6.10. Audit Checks for audit of Finance pointed out by Central Audit team Accounts. during the year while doing the audit 6.10.1. General checks for all Schedules of vouchers in the Loan, Book, and Appendices. Deposit and Account Current in F.A. In terms of Para 380 of Railway Audit & C.A.O’s Office have been complied Manual, rules as laid down in paras 729 to with. 746 A should be followed while checking i) Check whether provisions of Indian the Finance Accounts of Railways. Government Accounting Standards Following general checks may, however, issued so far have been complied with be exercised for all Schedules and or not. Appendices: j) Check whether there are no abnormal a) Check whether the format of various transactions of receipts/disbursements Schedules/Appendices is as prescribed

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requiring investigation, rectification or (January, February & March). The insertion of suitable footnotes. objective of this audit check is to identify k) Check whether Per contra adjustments errors, unauthorized expenditure etc., if wherever carried out have been linked any; sufficiently early so that corrections at different places. can be carried out before the Accounts are l) Check correctness of the totals and closed finally. calculations of percentages in A separate Register may be maintained in statements. section responsible for audit to record m) Check ‘adverse’ balances under errors and omissions noticed during audit Suspense heads. of Monthly Appropriation Accounts for 6.10.2. In may, however, be borne in mind follow up action. The unsettled cases that in order to exercise a complete check which may have impact on accuracy or of Completeness, Measurement, completeness of Finance Accounts could Regularity, Occurrences & Disclosures the be considered for audit comments or procedure as mentioned in the previous qualification of accounts paras in respect of other accounts all the Annual Appropriation Accounts are to be Schedules/Appendices & Annexure audited for correctness of provisions, appended to the Finance Accounts should expenditure, savings/excess and be checked thoroughly and cross verified disclosures required as per law. In terms of with the Accounts Current & Capital & Para 389 Railway Audit Manual audit Revenue Accounts’ figures. A Statement against grants and appropriations will be showing the items of Accounts Current & conducted according to the general Finance Accounts to be cross verified is principles and rules laid down in para appended to this Manual. 2.2.5-2.2.10 of MSO (Audit). Audit 6. 11. Audit Checks for audit of instructions are also laid down in paras Appropriation Accounts. 390, 393-415 of RAM. However, for 6. 11.1.Introduction systematic audit following procedures may F.A. & C.A.O’s Offices of Railway be adopted. The audit checks are to prove prepare Monthly/Yearly Appropriation the different assertions. Accounts showing sub-head wise 6.11.2. Assertions for Audit. provision and expenditure together with 6.11.2(i) Assertions on completeness. savings/excess over provision and the 1. Check whether the appropriation percentage of excess. The Monthly accounts include all the grants. Appropriation Accounts are sent to the 2. Check whether the appropriation Finance Department every month. Copy of accounts include the original grant or the Appropriation Accounts is also given appropriation, supplementary grant or to Office of the Principal Director of appropriation and re-appropriations, Audit. This Account gives an overall view withdrawals or surrenders in respect of of the sub-head wise expenditure up to the all the grants. month in the Consolidated Fund against 3. Check whether the expenditure met out available budget provision and helps to of advance from Contingency Fund but identify errors in classification, excessive not yet recouped to the Fund are expenditure, cases of shortfall in shown in proper Appendix/Annexure. expenditure, operation of unauthorized 4. Check whether details of estimates and heads etc. actual in respect of recoveries adjusted A detailed examination of the Accounts in the accounts in reduction of should be carried out by the PDA’s Office expenditure are shown in proper for months as selected by the PDA. The Appendix/Annexure. months suggested are September (mid- 5. In respect of Grants operated by more year) and every month of the last quarter than one department of Railway verify

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whether the expenditure figures in the and Loan wise) with corresponding Grant includes the total expenditure figures in Abstracts/Appendices of incurred by all departments authorized the Finance Accounts as far as to incur expenditure from the grant. expenditure from Consolidated Fund is 6. Check whether the appropriation and concerned. the related expenditure are given upto 5. Check whether the figures in Summary the level of subheads in a Grant. of Appropriation Accounts are 7. Check whether the format of reconciled with corresponding figures Appropriation Accounts is as in respective Abstract/Appendix of prescribed and shows the following Finance Accounts. details correctly: 6. Check whether all the re-appropriations a. Number and nomenclature of the orders issued up to 31 March and Grant and those of the Heads of received till the prescribed cut off date account up to Subhead; have been taken into account in b. Separate details of appropriation and preparation of the appropriation expenditure for voted and charged accounts and only such orders have items; been considered. c. Separate exhibition of revenue and 7. Check whether all the appropriation, capital items and display of expenditure, savings and excess appropriation in the sequence of figures are indicated in thousands of Original, Supplementary, Re- rupees. appropriation and Surrenders; 8. Check whether the amounts shown in d. The minus sign for re- the Grant Summary of Appropriation appropriations/ surrenders from Accounts agree with those in the subhead is indicated. individual Grants and Grant-wise e. Savings and excess are mentioned in details of recoveries. the descending order of the quantum 9. Check whether reconciliation of the of savings/excess. expenditure in the Appropriation 8. Check whether the scope of the Accounts with that reflected in the subhead adopted in demand for grants Finance Accounts has been worked out is sufficiently broad as to cover only correctly in the Grant Summary. items of appreciable size. 10. Check whether the deviations of 6.11.2(ii) Assertions on Measurement expenditure from appropriation have 1. Verify whether the expenditure been correctly worked in respect of indicated in the appropriation accounts voted-revenue, Voted-capital, tally with corresponding figures in Charged-revenue, Charged-capital Appropriation Accounts Register of items. the F.A. & C.A.O’s Office. 11. Check whether the figures of 2. Verify whether the expenditure ‘Provision/Expenditure/Excess/ indicated in the appropriation accounts Saving’ as given under ‘Summary of register tally with corresponding Appropriation Accounts’ tally with figures in consolidated abstracts. those given under individual ‘Grant/ 3. Check whether the figures in ‘Summary Appropriation-wise Accounts’. of Appropriation Accounts’ are on 12. Check whether in respect of fund gross basis after including the accounts the opening balances recoveries adjusted and not on net indicated in the Notes agree with basis. closing balances of previous years. 4. Check whether the figures in Detailed 13. Check whether in respect of Fund Appropriation Accounts are reconciled accounts the receipts indicated in the (Major head-wise, Minor head-wise Notes agree with figures under the

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head ‘transfers’ in the detailed the necessary amounts for the appropriation accounts. expenditure are placed before the 14. Check whether in respect of Fund Parliament, whether suitable accounts the disbursements agree with provision have been made for figures indicated in ‘statement of anticipated liabilities. recoveries adjusted in accounts as h. Check the provision in paragraph reduction of expenditure’. 333 AI that adjustment should not be 6.11.2 (iii) Assertions on Regularity made in the previous year’s accounts 1. Check whether the Classification in certain circumstances should not adopted in the budget is as per the List be used to cover the results of of Major and Minor Heads of Account defective budgeting. The onus of up to Minor Heads of Accounts. proving that the disbursements could 2. Check whether new Sub-heads, not have reasonably been anticipated Detailed heads and Object Heads have should lie on the Controlling Officer. been opened and operated with the 6. The following checks should be carried prior concurrence of Railway Board. out on re-appropriations of funds with 3. Check whether the appropriation reference to original records in the accounts adopt the same heads of Ministry where felt necessary: account as in Part II of Demands for a. Check whether re-appropriation Grants. orders issued are authorised in terms 4. Check whether all expenditure incurred of relevant Rules Governing the is with adequate budgetary provision Delegation of Financial Powers of approved by the Legislature. the Railway concerned. 5. The following checks on the budget b. Check whether re-appropriation may also be carried out: orders have been issued before the a. Check whether provisions in the close of the financial year. budget have been obtained under c. Check the re-appropriation orders to existing schemes. verify whether any such order has b. Check whether provisions have been been issued to meet expenditure made under capital section for which has not been sanctioned by an expenditure which falls under authority competent to sanction it. revenue section. d. Check the nature of re-appropriation c. Check whether provisions have been to ensure that there are no re- made under revenue section for appropriations from charged to expenditure which falls under capital voted, revenue to capital/loan section. categories and from one grant to d. Check whether there are any cases another grant. of misclassification of provisions at e. Check whether the re-appropriations the object head level. are intended to cover only those e. Check whether provisions for types of expenditure which are expenditures treated as charged on normally under the scope or the Consolidated Fund are as per intention of the Grant. provisions of Article 202(3) of the f. Check whether the General Manager Constitution of India. of the Railway or Railway Board (in f. Check whether lump-sum provision case it is beyond the power of the is not sought in supplementary G.M.) has approved the re- demands without showing the appropriation/ surrender. scheme-wise requirement. g. Check whether adequate reasons have g. Check when demands (original or been given for the increase/decrease supplementary) for appropriation of in provision.

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Participants’ Notes Session 6

7. The following checks should be 3. Check whether the expenditure met out carried out to ensure due compliance of advance from Contingency Fund but with legislative powers: not yet recouped to the Fund in the a. Verify whether there is any previous year but recouped in the unauthorised transfer/appropriation current year is shown as expenditure of funds from the Consolidated Fund from consolidated fund during the to the Public Account. current year b. Check whether proceeds from any 4. Check whether are instances of cess collected for specific purpose by postponement to a later year of the Railway as per the relevant Cess payments or adjustments which should Act is correctly transferred to the have been made during the year under concerned designated Fund in the report are brought out appropriately or Public Account and the utilization is not in the explanations. as per relevant rules. 5. Where re-appropriation has been made c. Check whether the corresponding to provide for additional funds over figures in Appropriation Accounts, and above the sanctioned provision, Statement of State Transactions and check whether they have been issued Finance Accounts are consistent. before incurring the actual expenditure d. Check whether there are significant beyond the sanctioned provision. re-appropriations made for meeting 6.11.2 (V) Assertions on Disclosure expenditure on new service or new 1. Check whether the comments on instrument of service. savings and excess required to be 8. Check the nil payment vouchers to made as per instructions laid down by verify whether they are merely cases Public Accounts Committee have been of transfer to Railway made in the Appropriation Accounts. deposits/Railway Advances-K- 2. Check whether the reasons indicated by Deposits and Advances (Major Heads the department for excess/savings are 8445 & 8552) at the fag-end of the included in the appropriation accounts. financial year from functional major 3. Check whether all charged heads to avoid lapse of grants. appropriations and expenditure have 9. Check whether there is budget been shown in the appropriation provision in the concerned grant for accounts in italics and a note to this is conversion of loans to equity. given in the introductory portion of the 10. Check whether specific Notes on accounts. Reserve Funds involving transfer of 4. Check whether there are adequate funds from/to the Consolidated Fund disclosures in the appropriation are included. accounts in respect of the following: 6.11.2 (IV) Assertions on Occurrence a. Substantial amounts paid by the 1. Check whether expenditure transferable Railway as subsidies. to funds or other heads of account have b. Large items of expenditure been transferred. recoverable from other 2. Check whether the expenditure met out Governments, outside parties, etc. of advance from Contingency Fund but c. Instances of large payments or not yet recouped to the Fund are not adjustments carried over from a shown as expenditure from previous year. consolidated fund and note to this d. Cases of recurring excesses/savings effect is kept under the concerned over the past few years. Major Head in the Appropriation e. Cases where additions made by re- Accounts. appropriation to meet expenditure

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are found to be less than the ultimate 12. Check whether there is a note to the savings. effect that expenditure met out of f. Cases where expenditure in excess of advance from Contingency Fund but deposited amount in respect of not yet recouped to the Fund in the deposit works is met from any previous year but recouped in the appropriation of Grant. current year is shown as expenditure g. Cases where the project remained from consolidated fund during the incomplete despite adequate budget current year under the concerned Grant allocation for sufficient period. of which the Major Head is part of. 5. Check whether in respect of 13. Check in respect of Grants from which expenditure debited to ‘Suspense’ Funds are created, whether there is an heads of account there are appropriate indication of the specific Major Head explanatory notes given in the and Grant where activities permissible appropriation accounts. to be incurred from the Fund are likely 6. Check whether there are appropriate to be depicted. narrations under the grant concerned 6.11.3. Explanations in the given for deviations with regard to Accounts: expenditure which was met out of the  It should be seen that the explanations grants, subventions, etc, received from for variations between the Original Grant other Government, outside bodies, and Final Grant (Column 1) and between organizations etc., and for expenditure the Final Grant and Actual Expenditure from various reserve funds. (Column 4) are lucid, self-explanatory, 7. Check in local audit whether there are illuminating and in unambiguous terms. any systems in place for monitoring The following points should also be borne the actual expenditure against in mind:- appropriation particularly where a o In all cases, definite reasons for the lump sum allotment is placed at the excess or saving should be given, disposal of a single higher authority bringing out clearly why the particular but several officers are authorized to event leading to the variation could not incur expenditure. be foreseen at the time of the 8. Check whether explanation for preparation of the Budget and the variation does not include trivial cases Revised Estimates; and what of variation below levels prescribed by circumstances arose subsequently Public Accounts Committee. leading to the variation. 9. Check whether explanation for o In the case of an excess, it should variations is clear, complete and be mentioned as to why the incurrence conclusive and also states cases where of the liability could not be postponed; no explanation has been provided by and if for any reason (to be specified), the Railway Administration. it could not be postponed, and these 10. Check whether reclassification of explanation would bring out why expenditure to adopt correct necessary provisions could not be classification due to post budget made in the Final Estimates. decision is separately mentioned with o The explanations also should details. elucidate- 11. Check whether all cases of overall . In case of surrenders/lapses on account excess expenditure over the Grant of non-receipt of bills or debits for requiring regularisation are mentioned Stores (i) the sources of supply and (ii) under the Grant and in the Summary whether the suppliers were consulted and the actual amount of excess is in the matter, and, if so, at what stages, indicated in brackets. and

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Participants’ Notes Session 6

. In case of increases/excesses on account excess of the permissible limits. The of receipt of more debits or payments for explanations for Column 1 should be Stores (i) when those debits etc. were correlated with those furnished by the received and (ii) at what stages of the Administration at the time of Revised estimates the suppliers were consulted. Estimates, Final Modification and latest  Variations arising out of changes in Modifications. procedure, allocation, further  In so far as the Divisional consideration of schemes, plans, etc. Appropriation Accounts are concerned, the during the course of the year, should be explanations will continue to be furnished reflected in the explanations relating to all by Sub-heads of the Grant both in respect the concerned Sub-Heads of the grant or of column 1 and column 4. grants.  Further the limits below which  In the case of variations arising out of explanations are not required to be defects in estimating, it should be clearly furnished, laid down in the Indian Railway brought out at what stage the liability of Financial Code, is applicable for the Sub- the expenditure arose, how the errors of head of the grant as a whole and is not omission or commission occur, why they intended to apply to each individual could not be set right before the close of Department, District or Divisional Units. the year, whether the question of  The explanations furnished in the individual responsibility has been audited copies of the Accounts received considered and if so, with what results and from the various units will be consolidated what steps have been taken to avoid a in the Headquarters Books and Budget recurrence of such errors. Section to verify the explanations  In the case of variations caused by furnished in the consolidated accounts misclassifications and other mistakes in received from the Financial Adviser and accounting, the explanations should bring Chief Accounts Officer. out when the errors occurred and why they 6.11.4. Some other common checks as could not be detected in the course of well as special checks to be applied by review of expenditure during the year and audit in connection with Audit of set right before the final closing of the Finance & Appropriation Accounts. year’s accounts. (i) It is reiterated that various  Whenever, reference to some letters of irregularities noticed during regular audit the Railway Board is quoted in support of i.e. transaction audit, local audit, thematic the explanations, copy of the same should audit, performance audit etc. those have a invariably be appended. bearing on financial implications should  In the case of points referred to in be recorded in a register ‘points to be seen items (ii), (iii) and (IV) above, it should be during finance and appropriation audit’ ensured that the fact that the items will be invariably which can help as monitoring included in the relevant mechanism while doing financial attest Annexure/Statements is mentioned in the audit. explanations themselves. (ii) The primary responsibility for the  It should be noted that the explanations allocation of all receipts and payments for variations in Column 1 are required to rests with the concerned departmental be furnished for the grant as a whole and officers. Each bill voucher received from not by each Sub-Head. Further in regard to them should show the correct allocation of Column 1, the explanations are required to the receipt/expenditure in the fullest detail. be furnished only when the variation for Accounts Department is responsible for the grant as a whole is in excess of the seeing to the extent it is possible for them permissible limits or when the variation in to do so, that the allocation shown on the respect of any of the Sub-heads is in initial document is not prima facie

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Participants’ Notes Session 6 incorrect. Classification and booking of (viii) JVs especially transfer between one expenditure can be watched in audit from head and other, between capital and the initial documents i.e. sanctions, revenue, open line and construction estimates. Allocation heads under which (Project) should be critically checked with the expenditure will be booked are a view to see that no fake paper transfer recorded on the sanctions. So justification was made without transaction actually for booking under these heads may be taken place or without physical movement checked initially. This is the most vital of stores, to avoid the reflection of lapse of duty in a routine audit. fund. (iii) In case of works, where the allocation 6.11.5. Types of objections generally has to be changed during the course of a noticed during audit of Appropriation year from one expenditure to another, Accounts: the classification of expenditure in that Types of objections that could come up year should follow original allocation. during the check of Appropriation (iv) It is to be seen that the changes have accounts are: been given effect to from the beginning of o Misclassification between one the next financial year only after making Grant and another. necessary budget provisions at the Budget o Mistakes in booking of voted and stage or at the Revised Estimate stage. charged expenditure. (v) Irregularities in the classification o Double booking. expenditure and booked against the o Mistakes in Accounting. sanction/estimate leads to overstatement of o Booking of expenditure without one head of accounts and understatement budget allotment or without of another head say overstating one sanction of competent authority. revenue head and understating another o Defects in budgeting. revenue head or vice versa and overstating o Irregular re-appropriation or one revenue head and understating one defective re-appropriation. capital head or vice versa. Hence such o Financial Transfer without physical items reflected in the Statement of transfers of materials and vice Misclassification and mistakes in versa. accounting (annexure-J) should be traced o Undercharges detected by in the affected head. Accounts and Audit etc (vi) Misclassification between voted and o Remissions and Abandonment of charged expenditure should be seen very Claims to Revenue, etc. carefully. The expenditure of Revenue To scrutinize such cases the following nature charged to Capital with the tools will be useful: intention to reduce the working expenses o The various budget orders should for reflection of a favourable operating be linked to the Appropriation ratio should be carefully examined. Accounts of the various grants to see Impact in each accounts head for wrong that the Budget Allotments and the classification should be clearly brought Supplementary Grants have been out in audit. indicated correctly. (vii) All the JVs should be supported by o The actual expenditure exhibited in the initial records/documents. i.e. the Appropriation Accounts should be adjustment memo. Important JVs to be checked with reference to the figures checked with all supporting documents in the Account Current and the details and Adjustment Memo with a view to see of grant-wise actual. that no adjustments are made to cover o It should be ensured that the defects in budgeting. This is done to Appropriation Accounts for the ensure completeness.

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Participants’ Notes Session 6

revenue grants are being rendered Sub- the Central Government) or Capital Head wise. Fund (Provided by borrowings). o It should be ensured that in cases Railway Board has clearly laid down where there was no Budget Allotment which are the Plan Heads which have or Supplementary Grant against a to be booked under Capital and which particular head, no expenditure is are the Plan Heads which have to be incurred and also that there is no met from Capital fund. There are no residual modification as this is not Plan Heads, which can be booked permissible. In other words, residual against both the above sources. modification is possible where there o It should also be ensured that no was either a budget allotment or a expenditure can be incurred on a work supplementary grant. for which there is no Budget o Supplementary grants are being Allotment. proposed and sanctioned for a grant as o It should also be ensured that a whole instead of Sub-head wise as in credits on Capital account are booked the case of Budget grant. However, as to Capital and not to Revenue when it Supplementary grants are sanctioned exceeds the limits prescribed. based on the proposals submitted by 6.11.6. Procedure for inclusion of the individual Railways, it should be Defects in Budgeting in Annexure ‘K’ reviewed to see that the distribution of (Statement of Defects in Budgeting)- Supplementary grants are done as per After the scrutiny of the accounts as the proposals submitted by the described earlier, the points, if any, which Railway for its sanction. require further clarification/elucidation or o It should be ensured that the limits cases, which require inclusion in of variation specified in the codes are Annexure ‘K’ or the Statements of Defects not applied by the individual Railways in Budgeting should be drawn out and sent and that the explanations are invariably to the Financial Adviser and Chief given for all variations irrespective of Accounts Officer with the approval of the the amount involved. Branch Officer. o The explanations for variations  In preparing the notes, the points should be verifiable in Audit. raised by the Divisions will also be taken o All cases of defects in budgeting into account. If felt necessary the should be thoroughly scrutinized to statement may be finalized after discussion prove that at every stage of the between Audit and Accounts. budgetary exercise proper control was  The draft final copy should be not exercised. approved by this Office before the final o The Appropriation Accounts in copy is prepared by the Administration respect of Works Grants should be and the signature of the General Manager rendered work-wise as the budget obtained thereon. allotment is made work-wise only as  The final copy received from the appearing in the Rolling Stock Works Administration will be compared with the and Machinery programme. checked draft final copy and one copy o It should be ensured that the works forwarded to the Deputy Comptroller and included in the Pink Book have been Auditor General (Railways) after ensuring classified correctly depending on the that the same has been signed by the nature of the work and the correct General Manager personally. source of funding.  The facts regarding the reservations o With the introduction of Capital with which the Accounts have been Fund, Capital Expenditure could be certified will be brought to the specific met from either Capital (Provided by notice of the Deputy Comptroller and

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Participants’ Notes Session 6

Auditor General (Railways) to enable the therefore necessary to see that the matter being pursued with the Railway accuracy of the Debt Head Report is Board. strictly maintained. It may be ensured that  If any delay in obtaining the General the balances are worked out by taking into Manager’s signature is anticipated, the account the closing balance of the Administration may send one unsigned previous year and prior period adjustments copy to the Railway Board to avoid delay i.e. T.W.F.A. as on opening date of the in the finalization of the accounts in the current financial year to which accounts Railway Board’s Office. relate. The balances at the end of the year  This office also will obtain one agree with general books balances and unsigned copy from the Financial Adviser are supported by details. The explanations and Chief Accounts Officer and forward for balances having significant variations the same to the Deputy Comptroller and from the previous years’ balances, if any, Auditor General (Railways). should also be examined. The differences After the accounts are signed by the between the figures furnished by field units General Manager, copies will be should be tallied with compiled figures at forwarded to the Railway Board/ HQ Office. Comptroller and Auditor General of India In case of Provident Fund Balances-the by the Administration/this Office. balances at the end of the year, as per Certain other important Accounts/ general books agree with the total of statements/reports related to Finance balances of the individual members, as and Appropriation Accounts to be personal ledgers. The balances in the Debt checked more meticulously. Head Report and Final Account Current should not be worked out under F. Loans 6.12. Debt Head Report. & Advances for the total but the same The Report on the balances under the should be worked out and reflected ‘Debt Heads’ is called the Debt Head separately under various categories of Report. This report is prepared duly advances i.e. House Building Advance, analyzing the various balances in separate Motor Car Advance, Advance for forms prepared for F-Loans and Advances, purchase of other Motor Conveyance, I-Small Savings, Provident Fund, K- other Conveyances and other Advances. Deposit & Advances, M-Remittances Inter Balances have been analyzed regularly Govt. Adjustment accounts-Accounts with and there is no case of write off suspense States. It consists of closing balance of the or doubtful assets in the balances. There is previous year, prior period adjustments no case of remission of interest, grant of (i.e. TWFA) & net receipts and loans without or a nominal rate of interest, disbursements as appear in the Account grant of loans without necessary Current for March of a financial year. safeguard for recovery and unusually In audit it may be seen that the balances large loan to an individual. In case of K- shown against the various heads of Deposits and Advances-clearance of items accounts in the Debt Head Report tally outstanding more than three months is with those appearing in the Final Accounts done. In case M-Remittances-Inter Govt. Current with opening and closing balance adjustments-outstanding balance for the particular year and the balance represents the amount for which settlement under one Head of account is not clubbed could not be effected in the Reserve Bank with the other Head of Accounts either in Account during the year. Therefore, the debt Head Report or in Final Accounts Reserve Bank Balances under this head Current. The balances appearing in the should be tallied. Debt Head Report should also be The balances shown against the various exhibited in the Balance Sheet. It is heads of Accounts in the Debt Head report

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Participants’ Notes Session 6 should reconcile with those appearing in and then transfer to revenue for the Final accounts Current also. maintenance purposes should be critically 6.13. Audit check on Audit of F. Loans examined and defects pointed out. This and Advances: leads to defects in budgeting as well as It should be seen that debits for the year on misclassification. the outgoing side of accounts represent (b) It should be seen that before closing only payments of advances made during of March Account, reconciliation of the the year. As the figures of outgoing side transactions both intra & inter- Railways are taken as actual expenditure in the is completed with NIL difference. Appropriation Account of Civil Grants- Adjustments such as for diversion of Loans to Govt. servants etc. requiring traffic, compensation claims should be submission to Ministry of Finance, it proposed by the Railways only in should be ensured that account is done as accordance with the codal provisions and aforesaid and errors in accounting, if any, latest instructions from Railway Board. are rectified before closing of March The figures (debits & credits) as finally Accounts. reconciled with other Railways shall only 6.14. Audit checks in respect of Income be shown in the March Account under Tax recovered & credited to Major “Transfer between Railways”. It should be Head 0021. seen that on no account amount of transfer The return is furnished by the zonal certificates is adjusted against the Railway to Railway Board as per Format suspense heads such as Miscellaneous laid down by JD of Accounts, Railway Advances/Deposits Miscellaneous. Inter Board. Railway transfer for Bulk orders and Tax on Income other than Corporation Tax adjustments therefore may be critically etc. may be reconciled with the figures of examined. Further, heads 8782 and 8797 Account Current under the Major Head should tally as per monthly list of ‘e-recon 0021. Figures recorded in the Separate software’. ledgers maintained in this regard may be 6.16. Statements of Transfer Without reconciled also. Timely remittance of the Financial Adjustment (TWFA): Income Tax recovered may be seen from These are prepared separately for Capital, the ledger. CF, DRF, DF, OLWR & other 6.15. Intra Railway and Inter Railway transactions. Items involving adjustments transfer transactions: in terms of para 780 FI, should be included (a) Two heads viz. ‘Transfer, Railway in this statement after obtaining Revenue’ and ‘Transfer, Railway Capital’ confirmation that contra adjustment has are operated for transfer between Capital been taken into account by other Railway and Revenue and vice versa for Intra concerned so that the net result on the over Railway transfer. Therefore, it should be all balance in the Books of Railway Board checked that the transactions are taken is NIL. The figures of TWFA should be place under the above heads. In case of adopted in DH Report & Final Accounts stores transaction, it should be seen that Current on the basis of Statement of the transaction is invariably accounted for TWFA sent to Railway Board separately. in the accounts for the month proposed by Adjustments of balances under CSRPF & the originating Accounts Officer so that “Govt. contribution to CSRPF” to nothing in respect of stores transactions is NCSRPF & Pension Fund respectively in left outstanding under Intra Railway case of pension optees, if any, should also transfers at the close of a month’s be included in this statement. For accounts. Intra Railway adjustments from rectification of mistakes in the balances Capital to Revenue as a result of excess affecting two or more heads of accounts, procurement of materials under Capital instructions under para 922 FI should be

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Participants’ Notes Session 6 followed. It is to be seen that TWFA Accounts current and the same are statement includes accepted items only of reflected in the statement of Central both the Railways to avoid dispute at later Transactions to be sent by the Railway stage. The adjustment entries should be Board to the Controller General of linked with JVs, Transfer Vouchers and Accounts, Ministry of Finance and the C acceptance advices.. & AG. (xi) That interest calculation on DRF & 6.19. Major Head 8342 New Pension Pension fund is made as per prescribed Fund (NPS): format of Railway Board. In the Schedule to the Account Current shows calculation sheet relating to Pension Fund, the contribution recovered from the besides the total contribution to the Fund, employee and matching contribution by the break up thereof under (i) Railway (ii) the Railway to be transferred to Trustee Audit (iii) other Misc. Establishments & Bank. Amount lying under Major Head Transfers from SRPF (contributory) 8342 yet to be transferred to Trustee should also be given. Bank to be identified & pointed out. 6.17. Dividend payable to General 6.20. Traffic Book and accounts Office Revenue: Balance Sheet: The format for calculation of Dividend The Traffic Balance Sheet is prepared payable to General Revenue and subsidy manually and sent to Accounts with the due from General Revenue is circulated by system generated monthly statements. the Railway Board every year with Therefore, the entries in the Balance Sheet detailed guidelines. The rate of dividend should be checked from these statements. on the Capital at charge and relief in The reconciliation of the figures with dividend are based on the those in the General Books and the recommendations of Railway Convention correctness of the amount shown under Committee (2009). Hence calculation of “Cash in transit” should be checked. In Dividend payable to General Revenue case of Accounts Office Balance sheet, a should be examined with reference to the review should be conducted especially of format and guidelines with special items not coming otherwise under test emphasis on the investment on New Line audit. construction and Unremunerative Branch 6.21. Profit & Loss A/c of Catering unit Line. These are to be excluded from the – To see that principles laid down for amount for dividend calculation during preparation of P & L A/c have been moratorium period. Incorrect claim of followed. Losses incurred on a particular subsidy on new lines/branch line etc. by unit for a continuous period may be the zonal railway pointed out by Audit in investigated thoroughly. previous year not adjusted in current year 6.22.Audit Check of Suspense Accounts may be pointed out.  The accuracy of the balances shown in Statement showing calculation of the register should be checked first; Dividend on Capital at charge & subsidy  Several records showing the details of due from General Revenue - The Dividend debits and credits to the suspense heads is calculated as per guidelines issued by should be checked in accordance with the the Railway Board from time to time. This rules laid down in the Indian Railway code is calculated as per Form A 719 (A) for the Accounts Department; (Statement No. XVIIA) as amended from  It should be seen that proper action is time to time. being taken to expedite the clearance of 6.18. Contingency fund: outstanding items and that no item which To see that withdrawals from the prima facie could be debited or credited to Contingency fund, recoupment to the fund final head is allowed to stand over in the are brought out in a foot note to the books-a tendency to do, which some times

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Participants’ Notes Session 6 manifests itself during the closing months Department-wise and Sub-head-wise of the year in order to avoid excesses over actuals already audited by them. allotments. 6.23. Audit Check of Stores & 6.25. Contents of Annexure:- Workshop Manufacturing Suspense Audit Certificates: The various Audit Accounts Certificates to be signed by the Principal It is to be seen that Chronic outstanding in Directors of Audit of each Zonal Railways the Stores Suspense (viz. Stock adjustment are as follows: A/c) is not on the increase and all out efforts have been made to clear old 1) Certificate of audit in respect of the outstanding. To see that all debit items are Review of Balances (Debt Head adjusted against working expenses and Report), credit items against earnings. 2) Certificate of audit in respect of the Suspense balances on Workshop appropriation accounts, Manufacturing Suspense (WMS) accounts 3) Certificate of audit in respect of should be critically examined to see Balance Sheet, whether negative balance reflects; if so, 4) Certificate of Audit in respect of (a) the detailed reasons investigated. Finance Accounts and (b) Capital and Reconciliation of balance under WMS A/c Revenue Accounts, as per General Books and Out-turn 5) Certificate of Income Tax credited to Statement has been made and there is no Major Head 0021. difference between the two balances

6.24. Civil Grant: Loans and Advances by the Central Government

 The actual expenditure will be compared with the totals of the expenditure relating to the various units as well as with the figures shown in the

Account Current for March.

 In respect of the Civil Grant-Interest on debt and other obligations, the figures of actual expenditure will be compared with the totals of the expenditure relating to the various units as shown in their accounts as well as with the figures advised to the Railway Board, while passing on the debits for March, wherein the figures for the whole year is also indicated, to the Railway Board.  In so far as the Appropriation Accounts of the various Departments in each of the units are concerned, the figures of Budget Grant, Final Grant etc., will be verified with reference to the Division wise distribution of the Budget and Final Grant communicated by the various Heads of Departments.  The figures of actual expenditure will be verified with reference to the

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Participants’ Notes Session 6

Audit checks to be exercised during audit of Annexures to Consolidated Appropriation Accounts. Annexure A (Source: Para 406 of the Railway Audit Manual and Para 442 to 448 of the Indian Railway Financial Code Vol.I) Statement of unsanctioned Expenditure  In terms of para 442 of the Indian Railway Financial Code Vol- I each Railway Administration has to furnish a certificate to the Railway Board by the date as laid down in the programme, to the effect that all expenditure included in the Appropriation Accounts has been sanctioned by Competent Authority with the exception of items detailed in the statement of unsanctioned expenditure.  The following instructions may be borne in mind while checking the above statement: o Whether the total amount of expenditure placed under objection to end of the year has been categorized under ‘amounting to Rs.1 lakh or more’ or ‘below Rs.1 lakh’. o Whether the total amount placed under objection to end of the year is shown under three divisions, viz.: (i) relating to earlier than previous year; (ii) relating to the previous year; and (iii) relating to the year concerned.  The amount to be shown against each year will be the amount of expenditure incurred during that year, but not cleared up to the 1st July (i.e. remaining unsanctioned/not regularized up to 1st July) of the year following the year to which the statement relates.  The information to be shown under the column ‘Previous Year’ should be the same as shown in the current year column of the statement relating to the previous year.  The amount of total expenditure audited for the purpose of the percentage given in the footnote to the statement of unsanctioned expenditure should be the total expenditure as shown in the summary of the Appropriation Accounts.  For the purpose of working out figures, to be exhibited in this statement the minus expenditure resulting from certain credit adjustments should be taken as plus, but the amount of expenditure should be correctly shown in Annexure A(i) as minus figures.  The Statement of Unsanctioned Expenditure is accompanied by two subsidiary statements [viz.Annexure A(i) & Annexure A(ii) to Consolidated Appropriation Accounts], showing the detailed information in respect of items remaining unsanctioned.  The statements received from the various auditing units form the basis for the check of Annexure A prepared by the Financial Adviser and Chief Accounts Officer for submission to the Railway Board.  That the information furnished by the Railway Administration tally with the figures recorded by Audit in their own register.

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Participants’ Notes Session 6

Annexure B (Source: Para 433 of Financial Code Vol.I) Statement of Undercharges Detected By Accounts and Audit. The following points may be borne in mind while checking this statement

 For the purpose of this statement, amounts withdrawn, written off, cleared by overcharge sheets and recovered during the year concerned should be shown irrespective of the fact whether any portion thereto related to previous years.  The gross amount of earnings excluding refunds should be shown and not the net earnings;  The figures should exclude amount of debits for non-accounting and delayed accounting of invoices and Parcel Way Bills.  The figures should also exclude figures of stations from where returns have not been received and checked.  Individual items of undercharges amounting to Rs.2/- and below in the case of Goods earnings and 50 paisa in the case of coaching earnings which are not debited to stations are excluded from the statement and suitable foot note in this connection is given.  The amount of undercharges detected by Audit and recovered should be advised along with this Annexure to the Deputy Comptroller & Auditor General (Railways). The particulars should be furnished in the same form as Annexure B

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Participants’ Notes Session 6

Annexure- C (Source: Para 433 of Indian Railway Financial code Vol. I and Para 407 of RAM) Statement of Remission and Abandonment of Claims to Revenue.  That Annexure contains items, amount of wharfage and demurrage charges, total earnings audited, total demurrage & wharfage charges recovered and total outstanding Wharfage & Demurrage separately (1) for Wharfage and Demurrage charges and (2) for Other items. Items amounting to Rs.25, 000 each or more and items amounting to below Rs.25, 000 each are shown separately.  Any remission or abandonment of considerable magnitude or of unusual nature should be suitably explained in the remark column.  In respect of each item of Rs.25,000/- and over falling under the group ‘Other Items’, full details of the case, the circumstances under which recovery should not be made, action taken against the person responsible and steps taken to avoid recurrence of such remission or abandonment of claims should be furnished in the form of a note.  The amount of undercharges foregone on account of ticket less travel, included in the total amount under ‘other items’ below Rs.25,000/- should also be shown in the note to the statement.  All cases relating to the financial year concerned in connection with the charging of lower rates than those prescribed for tourists’ cars and saloons and waiving of the charges for empty haulage and hire should be included in the statement.  Total amount of wharfage and demurrage charges accrued during the year should be advised to the Deputy Comptroller & Auditor General of India (Railways) while forwarding the audited copy of the Annexure.  The break up of the wharfage and demurrage charges should also be ascertained and furnished to the Deputy Comptroller & Auditor General (Railways) along with the audited copy of the Annexure. (Source: Addl. Deputy Comptroller & Auditor General of India (Railways) letter Nos.3593- RR/1-28/67 dated 18-9-1967 & No.3123- RR/2-31/68 dated 31-7-1968). It should be seen that a note in the above statement is appended as under:  The figures exclude undercharges of Rs.2/- and below in case of Goods Earnings and 50 paisa and below in the case of Coaching Earnings; not debited to the station.  The figures include amount due from ticket-less passengers and not recovered by Court or station records.  The figures exclude undercharges of Rs.2/- and below, not adjusted with Defence Department and Foreign Railways.  The figures exclude all items of losses of cash.  The figures exclude all items of refund of demurrage and wharfage arising out of charges on account of error in rate calculation etc.  If the items above Rs.1 lakh are there, these should be listed individually and brief particulars supplied for each item.

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Participants’ Notes Session 6

Annexure -D (Source: Para 433 of Financial Code, Vol. I) Review of Expenditure on Important Open Line Works and New Constructions (Covers review of Open Line Works and New Constructions detailing important works which were undertaken during the year without budget provision and works which were not undertaken although funds had been provided for the same; this review also compares the actual expenditure on the works physically completed during the year with the original estimate.).

Part 1 (A) exhibits the list of Works Costing Rs.20 lakhs and over which were undertaken without Budget Provision & Part 1(B) reflects the list of Works costing Rs.20 lakh and over previous year on which expenditure was booked during the year without Budget provision, in the following form: (Figures in thousands of Rupees) Railway Name Estimated Date of Expenditure Total expenditure Remarks of Cost commence during the incurred up to the work -ment year end of the year

Part II exhibits the list of Works costing Rs.50 lakhs or more for which budget provision existed but were not under taken during the course of the year, in the following form: (Figures in thousands of Rupees) Railway Name of the work Estimated Cost Budget Provision Remarks

Statement of Expenditure on Open Line Works and New Constructions costing not less than Rs.50 lakhs each. Part III exhibits the Variation between Original Estimate and Expenditure in respect of Works completed during the year ……….. (Figures in thousands of Rupees) Railway Description Original Final Cost Excess(+) Remarks of Works Estimate Savings(-)

The Statement of variation between Original Estimate and Expenditure in respect of Works completed during the year is checked with reference to the Pink Book and Works Registers. The statement prepared by the Financial Adviser & Chief Accounts Officer is checked with reference to the audited copies received from units.

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Participants’ Notes Session 6

Annexure -E (Source: Para 433 of Financial Code, Vol. I) Statement Showing Revenue and Capital Expenditure Relating To Strategic Lines. ______Statement of Expenditure on strategic lines is to be appended to the Appropriation Accounts. It is prepared in two parts, one showing Working Expenditure and Other Revenue Charges grant wise (Grant Nos.2 to 14) and the other showing Expenditure on Open Line Works and New Constructions from Capital, Development Fund, DRF, Capital Fund, Railway Safety Fund and Open Line Works (Revenue). The figures of expenditure shown in these statements should be compared with the relevant figures appearing in the Account current for March.

Annexure F (Source: Para 433 of Financial Code, Vol. I) Statement of Estimate and Actual Credits or Recoveries ______The information provided in this Annexure is Budget Estimate, Revised Budget Estimate, Actuals & variation between Actuals and Revised Estimate. The figures of Estimated and Actual Credits or Recoveries as shown in the accounts of all Grants should tally with the similar figures appearing in Annexure F appended to the Appropriation Accounts.

Annexure G (Source: Para 429 of Financial Code, Vol. I) (Block Accounts, Including Capital Statement Comprising Loan Accounts) Balance Sheet and Profit And Loss Account (prepared as per specimen entries in Annexure II to IV F 431, F 431A & B). ______The figures in various statements comprising Annexure G may be checked from Capital/Works Ledger and Revenue Allocation Ledger, Cash Book and Account Current for March and with reference to the audited copies received from various units. Itemwise check of P & L A/c, Block Account & Capital Statement and Balance Sheet and source of document from which to be check are shown in a separate Statement is appended to this STM.

Annexure - H (Source: Para 433 of Financial Code, Vol. I) Statement of Losses. ______The statement of losses should be checked with the register of losses and write off sanctions received from competent authorities from time to time.

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Participants’ Notes Session 6

 It may be ensured that losses that have not been written off are not inadvertently included in this statement.  Whenever, the amount in respect of any item is more than Rs.50,000/- full details of the case are given, when the loss is not due to natural calamities like flood etc. Railway Board is to be informed about such losses.  When loss is due to natural calamities, lump sum amount is exhibited indicating the details briefly.  The statement compiled by the Railway Administration is to be checked with the audited copies received from the various audit units and register of losses maintained by Audit in this regard. The detailed information on the write off sanctions received in Audit from the Railway Administration are recorded in this register (register of losses).

Annexure -I (Source: Para 433 of Financial Code, Vol. I) Statement of Irregular Reappropriations. ______This statement may be checked with reference to Budget Orders/Re-appropriation Statements.  It should be seen that the Powers of Railway Administration in respect of Budget Allotment and re appropriations as envisaged under rules are strictly followed.  It may be ensured that re-appropriations have been sanctioned by the competent authorities.  Re-appropriations made after the close of year are irregular and are to be included in this Annexure.  Cases of defective re-appropriations should be distinguished from those of irregular re- appropriations. The former represent unnecessary or insufficient re-appropriations or those made wrongly, while the latter comprise of re-appropriations made in contravention of the orders on the subject, which are beyond the powers of the sanctioning authorities.  Details rules and regulations already explained in the Paras 5.1.10 to 5.1.12 of the Railway Budget and Appropriation chapter of this STM may be followed while checking this Statement.

Annexure J Types of possible Mis-classification (Source: Para 433 of Financial Code, Vol. I & Para 405 of RAM)

Various cases of Misclassifications and mistakes in accounting are given in a separate Statement attached to this STM. These apart, points discussed in para 6.11.4 of this STM may be followed while checking the Misclassifications & mistakes in accounting.

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Participants’ Notes Session 6

Annexure K Statement of Defects in Budgeting (Source Para 433 FI & 409 of RAM)

Items of defects in estimating and expenditure classified in the budget differently from the accounts, whether noticed by Accounts or Audit, should be arranged to be included in the statements submitted by the Administration to the Railway Board. Individual comments on these items may, be sent by the Principal Directors of Audit only when they are important and the Administration is not prepared to include the in the statement specified above. Items amounting to less than Rs.10 lakhs in case of woks grants and Rs.5 lakhs in case of other grants which do not present any special feature need not be considered important. In this connection, points as discussed in para 6.11.6 of this STM may be borne in mind, before checking of this statement.

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Participants’ Notes Session 6

Statement showing the various examples of misclassification and mistakes in accounting, noticed during check of Finance & Appropriation A/cs. and impacts in accounts.

Sl. Brief observations A/cs./ Impact in accounts. Sources from where no. statement/ such observations grant can be located. affected Mistakes in Accounts and Misclassification 1 Pay &allowances of staff of Survey Unit 2 & 16 (Cap Revenue Expr. deflated & Statement of Grant Nos. 2 wrongly booked to Grant No.16 Capital & CF) Capital Expr. inflated. & 16. Payment vouchers and Capital Fund instead of Grant No.2. Over statement of Profit. as well as Revenue Operating ratio deflated. Allocation Register & Works Register. 2 Payment of Pay & Allowances under 3 &4 (V & C) Voted expr. inflated and Payment vouchers as well Arbitration Award & Court Order charged expr. deflated. as Revenue Allocation wrongly booked as voted instead of Register. charged expenditure Grant No.3 and Grant No.4. 3 POH cost of locos of Grant No.5, C &W 5, 6, 7 & 16 Revenue expr. Deflated & WMS A/c. –Grant No.6 and Plant & Equipment- (Cap) Capital Suspense inflated. Grant No.7 respectively not transferred to Overstatement of Profit. respective Grants and remained in WMS Operating ratio deflated. A/C. 4 Expr. relating to Capital booked under 16 (Capital & DRF & Capital Suspense Both DRF & Capital- DRF and expenditure relating to DRF DRF) inflated/deflated & vice WMS A/c. booked under Capital-WMS account. versa. 5 Expr. towards repair to main roads, 04 & 11 Expr. Of Gt.4 inflated & Payment vouchers as well approach roads and foot paths of staff Gt.11 deflated. as Revenue Allocation quarters, construction of boundary wall Regr. This is common surrounding staff quarter, sinking and mistake done by the fitting of deep tube well in Rly. Colony Railways. wrongly charged to Grant No.4 instead of Grant No.11. 6 Cost of P.Way materials wrongly charged 04 & 16 Revenue Expr. Inflated & Statement of Grant Nos. 4 to Gt. No.4 instead of Gt.no.16 (Capital) (Capital) Capital Expr. Deflated. & 16. Payment vouchers Under statement of Profit. as well as Revenue Operating Ratio inflated. Allocation Register & Works Register. 7 Cost of salary of work charged post 06 & 16 Revenue Expr. inflated & Statement of Grant Nos. 6 charged to Gt. No.6 instead of Gt.no.16- (DRF) Capital Expr. (DRF) & 16. Payment vouchers DRF. deflated. Under statement as well as Revenue of Profit. Operating Ratio Allocation Register & inflated. Works Register. 8 Expenditure towards cost of rails was 16 – Expr. On DRF head DRF A/c & WMS A/C. & wrongly booked to Gt.No.16-DRF Cap.(WMS) inflated and Cap Susp vouchers & invoices. (without physical receipt of the materials) & DRF (WMS) deflated. instead of Gt.No.16 (WMS). 9 Expr. towards cost of electric energy 08 & Cap.16 Revenue expr. deflated & WMS A/c. wrongly booked to Gt.no.16 (WMS) (WMS) Capital Suspense inflated. instead of Gt.no.8 Over statement of Profit. Operating ratio deflated. 10 Expr. towards cost of HSD Oil wrongly 10 & Misc. Revenue expr. deflated & Voucher & Misc. Adv. booked to Misc. Adv (Susp) instead of Adv.(Susp) Misc. Adv (Suspense) Register. Gt.no.10. inflated. Over statement of Profit. Operating ratio deflated. 11 Repairs and maintenance expenditure of 4 & 11 Expr. Of Gt.4 deflated. & Payment vouchers as well office and welfare buildings and cost of Gt.11 inflated. as Revenue Allocation boulder wrongly booked to Gt.no.11 Regr. instead of Gt.no.4

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Participants’ Notes Session 6

12 Expr. towards conversion work by 4 & 16 Revenue Expr. Inflated & Revenue Allocation Regr. Construction Orgn. wrongly charged to Capital Expr. deflated. and Works Register. Gt. no.4 instead of Gt.no.16 Under statement of Profit. Operating Ratio inflated. 13 Recoveries of Pay & Allowances wrongly Respective Separate budget for Credit Statements of different booked under “Credit or recoveries” grant heads & or recoveries under budget grants. instead of minus debit to the respective Credit or different grant heads are minor heads of some revenue grants. recoveries affected. under the respective grants. 14 Arbitration awards booked under Voted DRF & DF More/less expr. Shown Payment vouchers in instead of Charged expenditure under (V & C) under V & C and vice connection with DRF and DF. versa. Arbitration award. 15 Sale proceeds of unserviceable revenue 4 & Earnings. Earnings deflated & expr. Cash Receipt vouchers & scrap booked to Demand 4 instead of Of gt.no.4 deflated. Statement of demand Earnings. no.4. 16 Cost of training, expenditure on Pay & 4 & 12 Expr. Of Gt.12 deflated. Payment vouchers and Allowances on Rly. Engg. Mech, Optg. & Gt. 4 inflated. other grant statements. Trg. Schools booked to Gt.no.4 instead of Gt.no.12 17 Expenditure on Construction of RCC 16-Cap. & DF Capital expenditure Payment vouchers & overhead tank and cushion seats in inflated and DF works register. general coaches wrongly booked to expenditure deflated. Capital instead of DF under Grant no.16. Extra liability on Dividend payable to Genl. Revenue. 18 Expr. Under different Plan Heads of 16-Cap. & CF Capital expenditure Payment vouchers & Capital wrongly booked to Capital Fund deflated and CF works register. instead of Capital. expenditure inflated. Less liability on Dividend payable to Genl. Revenue. 19 Traffic earnings kept under Traffic Susp. & Traffic Suspense inflated Traffic Suspense A/c and Suspense Account and not cleared in final Abst.X and Traffic Earnings Traffic Earnings Register. head within the year. deflated. 20 Irregular booking of interest received on 16 Cap. Capital & Railway Capital ledger and Capital works as Railway earnings. Works & Earning-Abst.Z. Statement of earnings Abst.Z. (Abst.Z) 21 Inefficient balances showing as store in Stores A/cs. Stores balances over Detailed review of Stores stock are irregular balances. burdened. ledgers. 22 Expr. booked to a work called Rails debit DRF A/c. DRF a/c. overstated Debit Acceptance Memo. without any budget allotment. Jvs. 23 Non adjustment of cost of stores materials Cap.16 Stores A/c of Stores ledger/DMTR issued by the Construction Orgn. to Open Construction unit inflated ledger and Adjustment line authority. and that of Open line A/c memo. deflated. 24 Incorrect booking of Track Machine and Deposit and Deposit head inflated and Deposit ledger and Traffic facilities under Deposit work Capital Fund. Capital Fund deflated. Capital Fund ledger. instead of Capital Fund. 25 Write back adjustment for materials DRF & DRF head inflated and Stores ledger, DRF, drawn from stores for Revenue works different Revenue heads deflated revenue ledger & transferred to RSP works was not carried Revenue Adjustment memo. to be out between DRF & different Revenue heads checked. heads 26 Expenditure incurred on pay & 2 & Misc. Misc. Deposit A/c Paid vouchers and Misc. allowances of staff working under Survey Deposit. deflated & Demand 2 Deposit regr. Department debited to Misc. Deposit. inflated. 27 Wrong crediting of sale proceeds of Abstract Z & Abstract Z inflated & Cap Sale vouchers, Statement capital scrap to Abstract Z (Earnings) Cap.16. 16 inflated. of Abstract Z. (abandoned quarters) instead of Grant no.16

28 Cheques and Credit notes awaiting Cash & Closing balance of cash Details of Cheques and clearance shown as closing balance under remittance inflated and closing Credit notes awaiting cash instead of under remittance. balance of remittance clearance and details of deflated. closing cash balance. Training Manual on Audit of Railway Finance and Appropriation Accounts 158

Participants’ Notes Session 6

29 Irregular claim of Subsidy in respect of Dividend Overstatement of Profit Enclosure to Dividend to New lines/projects beyond the payable to and Less payment of Genl. Revenue-Lines moratorium period (during the period Genl. Dividend. opened to traffic to be of construction and 5 years after opening Revenue & P checked. to traffic). & L A/c. 30 Non inclusion of value of assets TWFA A/C. Overstatement/understate TWFA Statement and transferred from one Railway to other ment of Capital-at-charge transfer advice to be Railway, through TWFA. of one Zonal Railways checked carefully. and other. Calculation for payment of Dividend to Genl. Revenue, P&L account, Block Account and Balance Sheet of the Zonal Railways concerned are also affected. Defects in budgeting and Control over expenditure. 1 Excess provision of fund resulted in Minor head of Savings. respective Grant affected 2 Short provision of fund resulted in Excess Minor head of Expenditure. respective Grant affected 3 Irregular re appropriation of fund. Minor head of respective Grant affected

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Participants’ Notes Session 6

Table showing the initial/subsidiary records and other related accounts/records/ statements from where the accounts/statements are compiled and cross checking can be made for ascertaining the accuracy of the figures incorporated in the accounts. Sl. Item Head Head of Initial/subsidiary Other linked No. Accounts records/register accounts/records/ Statements/ annexures for cross checking of accuracy. 1 Cash Book - (i) In respect of Remittance Bank Remittance to Bank- Bank Remittance receipts, Register. Bank Statements. (ii) Cash check sheet – for station remittances (iii) Counterfoils of Cash receipts for misc. Cash receipts. (iv) In respect of recoveries Various schedules made from bills passed for prepared. payment- from various credit heads of account (Form A- 1109) (v) In respect of unpaid amount remitted by the Cashier-List of unpaid wages. (vi) In respect of payments (i) CO 6 & CO 7 from various debit heads Registers, (Form A 1109)- Original (ii) Cheques & Bills voucher (for payment). registers. (iii) Bills/vouchers for detailed check.

(vii) Cheque Register/ Cheques & Bills counterfoils of cheque for registers. cheque issued. (2) Journals Journal Register/Book/Slips. Adjustment Memo with other related records. (3) Subsidiary Register- (a) Revenue Cash Vouchers in case of Grant No.3 to 13 & Cap. Allocation cash payments; JVs in case 16 of Appropriation Register, Works of payments through A/cs. Register, Register Demands Payable/Summary statement of a group of of Works vouchers/allocated abstracts. expenditure. (b) Register of Cash Vouchers in case of Abstract X, Y & Z of Earnings direct receipts/JVs in case of Appropriation Accounts. transfer credit. (4) Suspense Register (a) Demands Payable General Cash Abstract Book, Outstanding bill amount, Register Revenue Allocation Register if any, not passed during the year can be checked from the cheques & bills register.

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Participants’ Notes Session 6

(b) (i) Misc. Advance General Book Debt Head Report (Capital) (ii) Misc. Advance Debt Head Report (Revenue) (c ) Loans and Debt Head Report Advances to Govt. servants & (d) Deposit Debt Head Report Miscellaneous (Unpaid wages) (e) Deposit Debt Head Report (Miscellaneous) for other misc. items like Cash security deposit, earnest money, unpaid bills of contractors etc. (f) Stores Suspense Stores Inventory Ledger, Purchase, Sales, Accounts. Computerized Stores ledger, Materials issued to General Books of Accounts. contractors, Stores-in- transit register (g) Workshop Workshop General ledger Manufacturing Suspense Accounts. (h) Traffic Account Traffic Book/Cash Abstract Balance Sheet of the Book. Station and Traffic Account Balance sheet. (i) Demands General Book Debt Head Report. recoverable Outstanding amount receivable from any register (for source to be checked misc. items) from the receivable register. 5 Capital and Revenue Account Part –I Consolidated Fund, Part-II Contingency Fund, Part-III Public Fund (i) Capital Receipts Stock & Share Capital Reconciliation of figures Regrs., Loans raised, all of different statements receipts shown in deduct as mentioned in Para from Expenditure, Genl. 702 AI. Reconciliation Cash Book, Stores & of figures of the Suspense Register. Accounts Current with (ii) Capital Genl. Cash Book, Register of Appropriation Accounts. Expenditure Capital, Capital Fund, Development Fund, Depreciation Reserve Fund, Safety Fund & Revenue (OLWR), Suspense (Adjustment) Register. (iii) Revenue Daily/Monthly Abstract of Receipts Cash transactions- Genl. Cash Book, Journals, Ledgers, Register of Earnings, Suspense Register. (iv) Revenue Daily/Monthly Abstract of Expenditure Cash transactions- Genl. Cash Book, Journals,

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Participants’ Notes Session 6

Ledgers, Revenue Allocation Register, Suspense Register. (v) (a) Debt, (a)Receipt- Loans Schedule F- Loans and (b) Deposit & recovery. Advances, (c) Remittances Expenditure-Loans Schedule of given. RB deposit, Schedule of (b) Deposit Transfer Railway, received & Schedule of Closing Cash. disbursed (c) Remittances made and received.

6 Finance All debit and credit entries Link between Capital Accounts are to be checked from and Revenue Accounts Capital and Revenue and Finance Accounts is Accounts and schedules there furnished in a separate under. statement.

7 Profit and Loss Account Debit (i) Working Expenses Expr. Under Major Revenue Allocation Register Appropriation Accounts Head 3002-Indian (Grant Nos. 3 to 13) Railway Commercial lines- Working expenses.(A/c. Current) (Deduct ) Amount met from Fund (ii) Payment to worked Expr. Under Major Revenue Allocation Register Appropriation Accounts lines Head- 3001-Indian – (Grant No. 2) - Indian Railways-Policy Railways-Policy Formation, Formation, Direction, Direction & Research & other misc. Research etc. (of organisations. A/c. Current) (Deduct ) Amount met from Fund (iii) Surveys -do- -do- -do- (iv) Statutory Audit -do- Railway Boards Orders (v) Govt. Inspection Railway Boards Orders (vi) Misc. establishment -do- Railway Boards Orders Appropriation Accounts – (Grant No. 2) - Indian Railways-Policy Formation, Direction, Research & other misc. organisations. (vii) Misc. charges -do- Railway Boards Orders -do- (viiii) Cost of Railway Railway Boards Orders Appropriation Accounts Board – (Grant No. 1)-Railway Board. (ix) Open line Works Expr. Under Major Works Register Grant No.16 of (Revenue) Head- Outlay on Appropriation Accounts.

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Participants’ Notes Session 6

works 3004-Indian Rly. (OLWR) of Account Current (x) Dividend Payable Railway Board’s orders -- to Genl. Revenue Credit (i) Gross Earnings Earnings under Traffic Book Annexure X, Y & Z of Major Head Appropriation Accounts. Earnings under Indian Rly. Commercial lines- Revenue Receipts Head-1002-Indian Rly. Commercial lines- Revenue Receipts of (Account Current). (ii) Misc. Receipts 1001-Indian Rlys Misc. Cash Receipts/Cash Misc. Receipts-Sale Book of land, Spl. Surcharge on passenger fares, RRB Exam. fees & Sale of appl. Forms. (iii) Govt. share of 1001-Indian Rlys surplus profit Misc. Receipts- Govt. share of surplus profit from subsidiaries Cos. (Account Current). (iv) Subsidy from Railway Board’s orders. General Revenue towards Dividend relief and other concessions. Capital a) Loan Register (i)Statement of Capital Statement (Statement III of Capital & at charge Revenue A/c) Form A 705. (ii) TWFA Statement (comprising b) Works Register (iii) Statement of Grant Loan Account) No.16 to Appropriation & Statement of Accounts. Block Accounts (iv) Balance Sheet. (Including Loan Account) 8 Balance Sheet Assets (i) Fixed & Floating (i)Contra item No.1 (i)Works Register. (i)Statement of Capital Asset(as in Block of liabilities (ii)Block Account at charge A/c Statement) (ii) 5002 & 5003- (ii) TWFA Statement Capital outlay on (iii) Statement of Grant Indian Railway No.16 to Appropriation Commercial and Accounts. Strategic Railways (of Account Current) (ii) Cash in hand (8671 & 8672) General Cash Book department

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Participants’ Notes Session 6

balances & Permanent Cash imprest (Rlys) of Account Current ). (iii) Sundry Debtors: (a) Loans & Advances (i)Contra item 2(a) Suspense Register-Loans & Debt Head Report of liabilities Advances to Govt. servants (ii)7610, 7615 of Account Current (b) Traffic Accounts & 1001 – Indian Rly. Traffic Suspense Register. Abstract X, Y & Z Other Railways Revenue Receipts- Comml./Strategic Lines. (c) Demands Contra item 2(a) of Demands recoverable Debt Head Report recoverable liabilities register (d) Misc. Advance Major Head 3002- Misc. Advance Revenue Debt Head Report (Revenue) Indian Rly. Comml. Register Lines/Strategic lines-Working Expenses. (e) Sundry Deposit Item 2(b) of liability (iv) Investments (a)PF ledger (a)PF (b) Misc. Deposit (b) Misc. Deposit (c) Others (c) Other fund (v) Savings Bank Item 2(a) (PF), Account with Govt. 3(other funds viz. DF, DRF, PF, CF & RSF) per contra Fewer Items (iv) (Investment) above. (vi) Accounts with Inter Govt. General ledger Debt Head Report States adjustment –A./cs, with States (8790 of Account Current) (vii) Accounts with Accounts with General ledger Debt Head Report central (Civil) central (Civil) (8790 of Account Current) (viii) Adjusting A/c with Accounts with General ledger Debt Head Report P & T P & T (8788 of Account Current) (ix) Adjusting A/c with Accounts with General ledger Debt Head Report Defence Defence (8789 of Account Current) Liabilities (i) Total investment as Loan Account as 1)Works Register 1)Capital at charge in the Block A/c per Capital 2) Register of works statement statement Statement & other expenditure classified under 2) TWFA Statement funds from which Capital, DRF, DF, Revenue 3) Grant 16 Stt. to assets are financed. (OLWR), RSF & SRSF. Apprn. A/c. (ii) Sundry Creditors (a)PF-Small (a) PF ledger (a) Debt Head Report Savings PF etc. (b) Deposit Register, (b) Debt Head Report 8005 of Account Suspense Regr, General (c) Grant No.13- Current Book- viz. journal & ledger. Abstract N (Suspense) (b) Misc. Deposit- (c) General Book -viz. to Appropriation A/cs. K Deposit & journal & ledger Advances- 8445 of Training Manual on Audit of Railway Finance and Appropriation Accounts 164

Participants’ Notes Session 6

Accounts Current. (c) Demands Payable-Register of Demands Payable (iii) Railway Fund viz. 8115-8121- DRF Railway Board’s orders & (a) Debt Head Report DRF, DF, CF, and other funds of other statements attached to (b) Grant No.14 to Pension, RSF, Accounts Current Accounts. Appropriation Accounts. SRSF (iv) Balance due to Item iii (a) per Suspense Ledgers- Loans and (a) Debt Head Report Central Govt. for contra of Asset. Advances to Govt. Servants. (b) Statement of Civil loans and advances 7610 of Accounts grants- Loans and to Rly. Employees. Current. Advances to appropriation A/c.

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Participants’ Notes Session 6

Statement of Linkage between Capital and Revenue Account and Finance Account (Heads for tally)

Sl.No. Capital and Revenue Account Finance Account 1 Receipts: Receipts: Statement XIII- Detailed Accounts 1001- Indian Railway of Revenue Earnings. Commercial/Strategic lines-Revenue Receipts- Abstract X, Y, Z. 2 (i) Expenditure: Expenditure: (i) Statement V-Details of Capital Schedule C –Detailed Accounts of Expenditure Capital and other works expenditure outside the Revenue Accounts. 2(ii) (a) Statement IX- Statement of Abstract A to N (under Major Head Revenue Account 3002- Indian Railways-Commercial (b) Statement XI- Summary of lines-Working Expenses. working expenses (Grant wise and Primary Unit wise) (c ) Statement XII- Detailed Accounts of Revenue Working Expenses 2(iii) Statement No. XIX-Detailed Schedule B-Detailed Accounts of Accounts of Expenditure under Expenditure under Major Head 3001- Major Head 3001-Policy Policy Formulation Direction, Research Formulation Direction, Research & & other Misc. Organization other Misc. Organization Commercial/Strategic, for the year Commercial/Strategic, for the year ending 31st March…….. ending 31st March…….. 2(iv) Statement No.XX - Expenditure Schedule F- Expenditure under Major charged to Development Fund for the Head 5002/5003 met from year ending….(Minor Head & Sub Development Fund by Minor Heads of Head wise) classification (Plan Head) for the year ending….. 2(v) Statement No.XXI-Expenditure to Schedule G- Expenditure under Major Revenue (OLWR) for the year Head 5002/5003 transferred to Major ending….. (Minor and Sub Head Head 5004 Revenue OLWR by Minor wise) Heads of classification (Plan Head) for the year ending…… 2(vi) Statement No.XVIII A- Depreciation Schedule J- Expenditure under Major Reserve Fund Account, as on 31st Head 5002/5003 met from DRF by March….[Appropriation Minor Head of classification (Plan (Expenditure) from DRF] Head) for the year ending……. 2(vii) Statement No.XVIIIC-Railway Schedule K- Expenditure under Major Safety Fund Account, as on 31st Head 5002/5003 met from Railway March….[Appropriation Safety Fund. (Expenditure) from RSF]

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PPT Slides Session 6

Slide 1 Slide 4 Audit Plans

• Time Lines for audit. • The audit of Finance & Appropriation Session 6 Accounts of Railway commences with the issue of a time schedule by the Railway Board in consultation with Audit of Railway Finance C& AG of India. The schedule consists of datelines for the following activities and Appropriation connected with preparation and audit Accounts. of Finance & Appropriation Accounts: • Activities at Railway Accounts Offices & Activities at Railway Audit Offices.

Training Module on Audit of 4 Railways; Session: 6

Slide 2 Slide 5 Responsibility Centre for audit of Learning Objective Finance and Appropriation  In this session, the participants will be able Accounts to understand the Audit procedure in connection with Audit of Finance & • It should be created in the name of Financial Appropriation Accounts of Railway and Attest Audit Group whose functions include various points to be seen during audit of all activities connected with the Planning, Finance & Appropriation Accounts, different execution, reporting and documentation of Audit Certificates to be issued and duties of audit of Finance and Appropriation Accounts Audit in connection thereto, which will help as well as coordination with other sections of them to focus on audit issues in the work Financial Attest Audit Group dealing with scrutiny of vouchers etc. during Central Audit, context and to raise different types of audit Local Audit Parties and Inspection Teams of observations in connection with Finance and the Office. Its functions should be through Appropriation Accounts. out the year and not seasonal.

Training Module on Audit of 2 Training Module on Audit of 5 Railways; Session: 6 Railways; Session: 6

Slide 3 Audit Plans Slide 6 Preparation of detailed audit program • Audit Plan includes detailed instructions for audit of Finance & • The planning for financial attest audit Appropriation Accounts categorised as of Finance & Appropriation accounts follows: should be integrated with the – Audit Planning preparation of Annual Audit Plan. – Audit Execution • The planning activities to be carried – Audit Reporting and Documentation out includes: – Integration with central audit – Conduct of risk analysis in ‘account areas, accounting information, accounts rendering – Integration with inspection of treasuries units, expenditure incurring units and (F.A. & C.A.O) revenue collection units’. – Integration with audit of departmental – Selection and Sampling of vouchers, and accounts rendering units. – Preparation of a Matrix and an Information Sheet. Training Module on Audit of 3 Training Module on Audit of 6 Railways; Session: 6 Railways; Session: 6

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Slide 7 Slide 10 Audit Execution Audit Documentation and Reporting • The audit of Finance and Appropriation  Documentation should include completion of accounts may be carried out in three phases: ‘Matrix’ and should show specific accounts, • Phase I of audit commences after approval of accounts areas, nature of transactions chosen for the budget involving development of detailed proving the different assertions, samples of audit program and preliminary audit vouchers/documents chosen for substantive audit activities. tests relating to each assertion, results of the • Phase II and Phase III are intended substantive audit tests done and the overall exclusively for execution of audit. Reporting conclusion drawn with cross referencing of audit will also be part of Phase III. Principal evidence collected. Director of Audit can decide on  While the serious observations in audit of Finance commencement date of Phase II. & Appropriation Accounts are to be embedded in • Phase III will commence after the Grant the audit certificate itself, it is also desirable that a Statements/ Appendixes of the Finance and ‘Management Letter’ be issued to the departmental Appropriation Accounts are received in the heads in charge of the accounts rendering units Office of Principal Director of Audit from the pointing out those audit findings. Office of F.A. & C.A.O of the Railway.  A similar letter can also be issued to F.A. & C.A.O for matters relating to compilation of accounts. Training Module on Audit of 7 Training Module on Audit of Railways; Session: 10 6 Railways; Session: 6

Slide 8 Scope of Audit Slide 11 Three stages of conducting - Scope of Audit in Phase I. Financial Attest Audit • Phase I of the audit execution will commence immediately after the Vote-on-Account on the These are: budget for the financial year has been approved by the Central legislature and will • Integration of Financial Attest Audit end after scrutiny of the budget by the with Central Audit. FAAAT. • Integration with Inspection of - Scope of Audit in Phase II. Treasuries (F.A. & C.A.O). • Phase II of audit execution focuses on the audit of Monthly Accounts Current, Monthly • Integration of audit of Accounts Appropriation Accounts and their underlying Rendering Units. transactions and vouchers. - Scope of Audit in Phase III. • Phase III of audit will commence after the F.A. & C.A.O starts submitting the Grant Statements. Training Module on Audit of 8 Training Module on Audit of 11 Railways; Session: 6 Railways; Session: 6

Slide 9 Slide 12 Audit of Vouchers & Vouchers Audit Documentation and other than Bills and Challans Reporting  Checks on assertions on measurement,  Assertion based documentation should be done completeness, regularity, occurrence and for financial attest audit of Finance & disclosure will be exercised mandatorily on Appropriation Accounts. all vouchers selected for audit by both the  The audit checks of Vouchers, Monthly Accounts, Monthly Appropriation Accounts are conducted Field Audit Parties and Central Audit Parties. for the assertions of completeness,  Concentration on Transfer Entry Documents measurement, regularity, occurrence and disclosure relating to each of the above should be given especially to see whether accounts. the Transfer Entry is passed before closure  The audit checks for each item of account in the of the accounts for the financial year or after Finance Accounts and the Grants in the Appropriation Accounts ensure that the closure of financial year while checking assertions are checked for its correctness. vouchers other than bills and challans.

 Contd……………………………………………… ……………………………………………...... S/10 Training Module on Audit of Railways; Session: 12 Training Module on Audit of Railways; Session: 9 6 6

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Slide 13 Audit Checks for Monthly Slide 16 Audit Checks for audit of Accounts & Accounts Current. Appropriation Accounts.  In terms of Para 389 Railway Audit Manual audit against grants and appropriations are to be conducted according to the general  Audit checks are detailed in Para 372 of principles and rules laid down in para 2.2.5- Railway Audit Manual. 2.2.10 of MSO (Audit).  However, Checks on assertions on  Audit instructions are also laid down in measurement, completeness, regularity, paras 390, 393-415 of RAM. occurrence and disclosure will be exercised  However, for systematic audit different mandatorily. assertions i.e. Assertions on completeness, measurement, regularity, occurrence & disclosure etc. are to be kept in mind.

Training Module on Audit of Railways; Session: 13 Training Module on Audit of Railways; Session: 16 6 6

Slide 14 Audit checks for audit of Capital Slide 17 Certain other important Accounts and Revenue Accounts (Section II / statements / reports related to of the Annual Report-Financial Finance and Appropriation Statement) Accounts to be checked  Detailed audit checks in respect of Capital and Revenue accounts have been laid down in Para  Annexure J & K. 374 of Railway Audit Manual. However most of  Debt Head Report. the checks can be exercised from the Account  F. Loans and Advances. Current for March.  Income Tax recovered & credited to Major Head  In addition to above, the audit procedures as outlined in respect of Accounts Current i.e. 0021. Assertions on completeness, Assertions on  Intra Railway and Inter Railway transfer Measurement, Assertions on Regularity, transactions. Assertions on occurrence and Assertion on Disclosure may be followed, to have detailed  Statements of Transfer Without Financial examination successfully. Adjustment (TWFA).  Contingency Fund. Contd……………………………………………………..S/18 Training Module on Audit of Railways; Session: 14 6 Training Module on Audit of Railways; Session: 17 6

Slide 15 Slide 18 .Certain other important Accounts / Audit Checks for audit of Finance statements / reports related to Accounts. Finance and Appropriation Accounts to be checked in Audit.  As per Para 380 of Railway Audit Manual, rules laid down in paras 729 to 746 A should be followed *M. H. 8342 New Pension Fund. while checking the Finance Accounts of Railways. *Traffic Book & Accounts office Balance  Certain general checks for all Schedules and Sheet. Appendices are to be exercised in addition. *Profit & Loss A/cs. Of Catering Unit. *Audit of Suspense Account.  The audit procedures i.e. Assertions on *Stores & Workshop & Manufacturing completeness, Assertions on Measurement, *Suspense Account. Assertions on Regularity, Assertions on occurrence *Civil Grants-Loans & Advances by the and Assertion on Disclosure may also be followed Central Govt. to have detailed examination successfully.

Training Module on Audit of Railways; Session: 18 6 Training Module on Audit of Railways; Session: 15 6

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PPT Slides Session 6

Slide 19 Types of objections generally noticed during audit of Appropriation Accounts Types of objections that could come up during the check of Appropriation accounts are:  Misclassification between one Grant and another.  Mistake in booking of Charged Expenditure and voted expenditure.  Mistakes in booking of Capital Expenditure as Revenue Expenditure or vice versa.  Double booking of expenditure.  Mistakes in Accounting.  Unsanctioned expenditure.  Booking of expenditure without budget allotment or without sanction of competent authority.  Financial Transactions done without physical transfers of materials and vice versa. Training Module on Audit of Railways; Session: 19 6

Slide 20 Audit Certificates

 The various Audit Certificates to be signed by the Principal Directors of Audit of each Zonal Railways are as follows:  1) Certificate of audit in respect of the Review of Balances (Debt Head Report),  Certificate of audit in respect of the appropriation accounts,  Certificate of audit in respect of Balance Sheet,  Certificate of Audit in respect of (a) Finance Accounts and (b) Capital and Revenue Accounts,  Certificate of Income Tax credited to Major Head 0021. Training Module on Audit of Railways; Session: 20 6

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Questions: 15. What are the Audit checks to be exercised during audit of sanctions? 1. What does the Audit Plan for audit of Finance & Appropriation Accounts 16. How Financial Attest Audit is include? integrated with Inspection of Treasuries (F.A. & C.A.O)? 2. What does Audit Planning include? 17. How Financial Attest Audit is 3. What are the responsibilities of integrated with Accounts Rendering Finance and Appropriation Accounts Units? Audit Team (FAAAT)? 18. What are the audit checks to be 4. What may be the probable areas of exercised during audit of Vouchers? Finance and Appropriation Accounts Mention some important items on Audit where Risk Analysis can be done? on assertions of completeness, measurement, regularity, occurrence and 5. Mention some of the sources of disclosure. information for Risk Analysis in Accounts Areas and Accounting Information. 19. What are the audit checks to be exercised during audit of Monthly 6. What is Matrix and Information Sheet in Accounts & Accounts Current? Mention connection with checking of Vouchers? some important items on Audit on assertions of completeness, 7. In how many Phases audit of Finance measurement, regularity, occurrence and and Appropriation accounts are disclosure. executed/carried out? 20. What Audit checks are to be 8. When does the Phase I of the audit exercised during audit of Capital and execution commence? Revenue Accounts, especially in respect of different Statements & Annexure? 9. Mention some of the mandatory audit checks those may be exercised during 21. What audit checks should be exercised Phase I of the audit execution. during audit of Finance Accounts especially with reference to General 10. What is the scope of Audit in Phase checks for all Schedules and Appendices? II & III? 22. What audit checks should be 11. When does the Audit of Phase III exercised during audit of Appropriation commence? Accounts? Mention some important items on Audit on assertions of 12. When the draft report consisting of completeness, measurement, regularity, the Audit Certificate and Management occurrence and disclosure. Letter is issued? 23. What types of objections are generally 13. Which type of documentation should noticed during audit of Appropriation be done for framing of Audit comments? Accounts?

14. How Financial Attest Audit is 24. What are the audit points to be integrated with Central Audit? checked in audit of Debt Head Report?

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25. What are the audit checks to be exercised in audit of Income Tax recovered & credited to Major Head 0021?

26. What audit checks are to be exercised in audit of Intra Railway and Inter Railway transfer transactions?

27. What audit checks are to be exercised in audit of Transfer without Financial Adjustment?

28. What are audit checks to be exercised during audit of Dividend Payable to General Revenue?

29. What audit checks are to be exercised during audit of Major Head 8342 New Pension Fund (NPS)?

30. What audit checks are to be exercised during audit of Stores & Workshop Manufacturing Suspense Accounts?

31. What audit checks are to be exercised during audit of Civil Grant: Loans and Advances by the Central Government

32. What are the Audit Certificates to be issued by the Principal Director of Audit of a Zonal Railway?

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Answer Sheet: the nature of substantive audit test, the units/account area/account information on 1. Audit Plan includes detailed instructions which the test was carried out and results for audit of Finance & Appropriation of the substantive audit tests carried out by Accounts categorized as follows: Financial Attest Audit Group, Local Audit a) Audit Planning Parties and Inspection units. b) Audit Execution c) Audit Reporting and Documentation 7. The audit of Finance and Appropriation d) Integration with central audit accounts may be executed/carried out in e) Integration with inspection of treasuries three phases. Phase I of audit which (F.A. & C.A.O) commences after approval of the budget f) Integration with audit of departmental will involve development of detailed audit accounts rendering units program and preliminary audit activities. Phase II and Phase III are intended 2. Audit Planning includes: exclusively for execution of audit. (i) Time Lines for audit. Reporting will also be part of Phase III. (ii) Activities at Railway Accounts Offices. 8. Phase I of the audit execution will (iii) Activities at Railway Audit Offices. commence immediately after the Vote- on-Account on the budget for the 3. The responsibility of the Finance and financial year has been approved by the Appropriation Accounts Audit Team Central legislature and will end after (FAAAT) should include all activities scrutiny of the budget by the FAAAT. connected with the Planning, execution, reporting and documentation of audit of 9. See Para 6.2.1 (i) of Participants’ Finance and Appropriation Accounts as Notes - Session 6. well as coordination with other sections of Financial Attest Audit Group dealing with 10. See Para 6.2.1(ii) & (iii) of scrutiny of vouchers etc. during Central Participants’ Notes -Session-6 Audit, Local Audit Parties and Inspection Teams of the Office. 11. Phase III of audit will commence after the F.A. & C.A.O starts submitting 4. Probable areas of risk analysis in the Grant Statements. Finance and Appropriation Accounts are ‘account areas, accounting information, 12. The draft report consisting of the accounts rendering units, expenditure Audit Certificate and Management incurring units and revenue collection Letter should be prepared by FAAAT units’. after conclusion of audit.

5. See Para 6.1.3(i) of Participants’ 13. Assertion (viz. assertions of Notes - Session 6. completeness, measurement, regularity, occurrence and disclosure) based 6. ‘Matrix’ shows the assertions sought to documentation should be done for be proved, samples of transactions and financial attest audit of Finance & vouchers selected for carrying out the test, Appropriation Accounts. substantive audit tests to be carried out and the responsibility centre for the substantive 14. See Para 6.4 of Participants’ Notes - audit test and Session 6. The results of the audit tests carried out are noted in the ‘Information Sheet’ showing

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15. See Para 6.4 of Participants’ Notes - with those appearing in the Final Accounts Session 6. Current with opening and closing balance for the particular year and the balance 16. See Para 6.5 of Participants’ Notes - under one Head of account is not clubbed Session 6. with the other Head of Accounts either in the debt Head Report or in Final Accounts 17. See Para 6.6 of Participants’ Notes - Current. The balances appearing in the Session 6. Debt Head Report should also be exhibited in the Balance Sheet. 18. See Para 6.7 of Participants’ Notes - For further details see Para 6.12 of Session 6. Participants’ notes-Session 6.

19. See Para 6.8 of Participants’ Notes - 25. See para 6.14 of Participants’ notes- Session 6. Session 6.

20. See Para 6.9 of Participants’ Notes - 26. See para 6.15 of Participants’ notes- Session 6. Session 6.

21. See Para 6.10 of Participants’ Notes 27. See para 6.16 of Participants’ notes- -Session 6. Session 6. 28. See Para 6.17 of Participants’ notes- 22. See Para 6.11 & 6.2.1 of Session 6. Participants’ Notes -Session 6. 29. See Para 6.19 of Participants’ notes- 23. Types of objections that could come up Session 6. during the check of Appropriation accounts are: 30. It is to be seen that Chronic o Misclassification between one outstanding in the Stores Suspense (viz. Grant and another. Stock adjustment A/c) is not on the o Mistakes in booking of voted and increase and all out efforts have been made charged expenditure. to clear old outstanding. To see that all o Double booking. debit items are adjusted against working o Mistakes in Accounting. expenses and credit items against o Booking of expenditure without earnings. budget allotment or without For further details see Para 6.23 of sanction of competent authority. Participants’ notes-Session 6. o Defects in budgeting. o Irregular re-appropriation or 31. See Para 6.24 of Participants’ notes- defective re-appropriation. Session 6. o Financial Transfer without physical transfers of materials and vice 32. The various Audit Certificates to be versa. issued by the Principal Directors of Audit o Undercharges detected by of each Zonal Railways are as follows: Accounts and Audit etc o Remissions and Abandonment of 1) Certificate of audit in respect of the Claims to Revenue, etc. Review of Balances (Debt Head Report).

24. In audit it may be seen that the 2) Certificate of audit in respect of the balances shown against the various heads appropriation accounts. of accounts in the Debt Head Report tally

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3) Certificate of audit in respect of Balance Sheet.

4) Certificate of Audit in respect of (a) Finance Accounts and (b) Capital and Revenue Accounts.

5) Certificate of Income Tax credited to Major Head 0021.

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