1. Overview of Railway Accounts A. Gopinath Retd, FA&CAO, S.C.Rly

2. Objectives of the Accounting system of Indian Railways: To fully incorporate data relating to all the receipt and disbursement transactions, all the transfer transactions and all adjustments of all the accounting units ensuring that there is no double/multiple impact within any demand, on summing up of the accounts of the various accounting units. Mechanism to achieve this objective: Inter-unit and Inter-railway adjustments Suspense Transactions Deduct/Contra entries.

5. Financing Plan Expenditure – 2016-17

6. Financing Plan Expenditure 2011-12 2016-17

7. Railway Accounts vis-a-vis Commercial Accounts  IR EXHIBITS “OPERATING RATIO” AS THE PARAMETER OF EFFICIENCY AND THAT TOO ONLY AT THE ZONAL RAILWAY LEVEL.  THE SAME NOT COMPARABLE WITH NET PROFIT (PBIT OR PAT) IN DEPICTING TRANSPARENTLY ITS FINANCIAL HEALTH AND FOR BENCH MARKING.  ’DIVIDEND’ TO EXCHEQUER ON IR IS A MISNOMER AS IT IS PAYABLE IRRESPECTIVE OF PROFIT OR LOSS.THIS IS MORE LIKE INTEREST ON DEBT IN PERPETUITY WHICH IS BOOKED TO ORDINARY EXPENSES.  SIMILARLY ‘EXCESS/SHORTFALL’ IS A MISNOMER.  ON THE SAME LOGIC, PLB IS NOT BONUS TO EMPLOYEES.  DESPITE BEING A COMMERCIAL ORGANISATION, A TRANSPARENT, TRUE AND FAIR PICTURE OF PROFITABILITY IS NOT AVAILABLE IN THE ABSENCE OF OBSERVANCE OF STANDARD COMMERCIAL ACCOUNTING PRACTICES.

8. Railway Accounts vis-a-vis Commercial Accounts  THE BALANCE SHEET OF IR DEPICTS BLOCK ASSETS AT THEIR ORIGINAL COST AND NOT AT DEPRECIATED VALUE (WDV). AS PER PRACTICE FOLLOWED IN GOVERNMENT ACCOUNTING, IR DOES NOT DEPRECATE ITS ASSETS IN ITS FINANCIAL STATEMENTS. HOWEVER, IT DEPRECIATES ITS ACCOUNT AT THE TIME OF REPLACEMENT/RENEWAL OR CONDEMNATION WITHOUT REPLACEMENT.  THE SYSTEM FOLLOWED IS TO SET APART AD-HOC AMOUNTS TO THE DRF BASED ON THE RECOMMENDATIONS OF THE RAILWAY CONVENTION COMMITTEE.  THE AMOUNT DECIDED UPON NEED CUM AVAILABLITY BASIS AND NOT ON ANY SCIENTIFIC BASIS RELATED TO THE INDIVIDUAL OR GROUPS OF ASSETS.  THIS GIVES OPPORTUNITY TO THE UNDERSTATE OR OVERSTATE THE NER REVENUE.  CONSEQUENTLY, REPAIRS AND RENEWALS FALLINTO AREARS, NECESSIATING PERIODICAL BAIL OUT BY THE GOVERNMENT.

9. Total Receipts Passengers Other Coaching Goods Sundry Misc. Receipts Subsidy Safety Surcharge

10. Total Outgo Operating Expenses Appropriation to DRF Appropriation to Pension Fund Misc Expd Appropriation to RSF OLWR Dividend Appropriation to DF Appropriation to Capital Fund

11. Where the Rupee came from 2014-15

12. Where the Rupee went 14-15

13. Structure of Railway’s Accounts  PRESENT ACCOUNTING SYSTEM ON IR IS CASH AND NOT ACCRUAL BASED.  THIS IS IN CONSONANCE WITH GOVT. ACCOUNTING RULES.  BUT, FOR A COMMERCIAL ENTITY :  IT DOES NOT GIVE CLEAR PICTURE OF CURRENT LIABILITIES AND ASSETS.  IT IS NIETHER TRANSPARENT NOR MEANINGFUL TO OUTSIDERS LIKE MULTILATERAL LENDING AGENCIES, CREDIT RATING AGENCIES, FINANCIAL INSTITUTIONS ETC  FURTHER, PRESENT ACCOUNTING REPORTS ARE NOT MEANIGFUL TO RLY MANAGERS AT VARIOUS LEVELS.

14. Structure of Government Accounts and Railway’s position in overall structure  IR DOES NOT FOLLOW A SYSTEM OF DISCLOSING THE SIGNIFICANT ACCOUNTING POLICIES WHICH SHOUD FORM THE VERY BASIS OF PREPARATION OF ANY FINANCIAL STATEMENTS (EG., ACCOUNTING OF FIXED ASSETS, PROVISION FOR DEPRECIATION AND LIABILITY FOR PENSION)  INDIAN RAILWAYS BEING A DEPARTMENTAL COMMERCIAL UNDERTAKING, PREPARE A PROFORMA BALANCE SHEET AND A PROFIT AND LOSS ACCOUNT IN SUPPORT OF THEIR APPROPRIATION ACCOUNTS.

15. Separate budget for the Railways Budget Documents Speech of the Hon’ble Railway Minister (Part-I & II) Key to the Budget Documents. Budget statement showing Revenue and Expenditure in respect of Railways expressed under Heads of Expenditure of the Central Budget. Demands for Grants Works, Machinery and Rolling Stock Programme Performance and Outcome Budget Indian Railways Safety Performance Indian Railways - Year Book Indian Railways - Annual Report and Accounts Explanatory Memorandum

16. Demands for Grants Brief outline of Revenue Demands, Part-I of the Railways as a whole (Page 1) Demands 1 & 2 supported by –Annexure showing Primary Unit-wise breakup. Demands 3 to 12 showing Minor-Head-wise distribution Demand 13 by Minor Heads of Demands Demand 14 showing details of Appropriations to various Funds under Minor Heads of Demand Demand 15 - Dividend to General Revenues. Demand 16 - Distribution by Plan Heads.

17. Demands for Grants Part-II showing details Railway-wise (Page 2) Railway wise details of Demands 3 to 12 –the Demands for Grants and also –Staff Statements & –Performance Units for Expenditure

18. Demands for Grants Part-II showing details Railway-wise (Page 3) Demand 16 – Plan-Head-wise and Source-wise breakup separately in respect of each of the –16 Zonal Railways, –the six Production Units, –RE, –RDSO, –MTP/Chennai, –Metro Railway/Kolkata and –Railway Board and also –a Grand Total summary in the same Plan-Head-wise and Source-wise format.

19. Demands for Grants Capital Demand No.16 Part-II of the Railways as a whole (Page 4) Works, Machinery and Rolling Stock Programme –Part-I showing Overall distribution of Plan Outlay by Plan Heads, Brief justification for important New Works, Expenditure on Rolling Stock, Machinery & Plant and Inventories in Stores and Manufacturing Accounts. –Part-II (A&B) containing details of Railway wise Expenditure on New Works and Works-in-Progress and Analysis of Stores and Manufacturing Accounts.

20. Classification by Demands for Grants Railway Board Miscellaneous Expenditure (General) General Superintendence and Services on Railways. Repairs and Maintenance of Permanent Way and Works. Repairs and Maintenance of Motive Power. Repairs and Maintenance of Carriages and Wagons. Repairs and Maintenance of plant and Equipment Operating Expenses-Rolling Stock and Equipment. Operating Expenses-Traffic. Operating Expenses-Fuel. Staff Welfare and Amenities. Miscellaneous Working Expenses. Provident Fund, Pension and other Retirement Benefits. Appropriation to Funds. Dividend to General Revenues Works Expenditure.

21. Ordinary Working Expenses 3A General Superintendence & Services on Railways. 4B Repairs and Maintenance of P.Way and Works. 5C Repairs and Maintenance of Motive Power. 6D Repairs and Maintenance of C and W. 7E Repairs and Maintenance of Plant and Equipment 8F Operating Expenses-Rolling Stock and Equipment. 9G Operating Expenses-Traffic. 10H Operating Expenses-Fuel. 11J Staff Welfare and Amenities. 12K Miscellaneous Working Expenses. 13L Provident Fund, Pension and other Retirement Benefits.

22. Planheads 11.New Lines (Construction). 13.Restoration of dismantled lines. 14.Gauge conversion. 15.Doubling. 16.Traffic facilities 17Computerisation 18Railway Research 21.Rolling Stock. 22 Leased Assets – Payment of Capital Component 29.Road Safety work 30Road Safety work 31.Track renewals. 32.Bridge work. 33.Signalling and Telecommunication works.

23. Planheads 35.Electrification projects. 36.Other Electrical works excluding 37.Traction Distribution Works (TRD) 41 Machinery and Plant. 42Workshops including Production Units 51Staff Quarters 52Staff Amenities 53Passenger Amenities 62 Investment in Government PSUs 64Other Specified Works 71Stores Suspense 72Manufacture Suspense 73Miscellaneous Advances 81Metropolitan Transport Projects

24. Account Current An Account Current is a statement of Receipts and disbursements of an accounts circle under prescribed heads of Account. Monthly Revenue Account current is accompanied by the Schedules in the form in support of the transactions shown against various heads of Account. The monthly Account Currents of all the divisions are sent to HQrs office Book Section where these are consolidated as Account Current for the entire Railway and sent to Board.

25. Final Account Current Final Account Current of the Capital and Revenue transactions of the Railway is prepared after the books for a financial year are closed and submitted to the Railway Board not later than 30th August. These account currents are intended to show the transactions of the Railway for the financial year under the various final heads of Account and the opening and closing balances under suspense and debits heads.

26. Appropriation Accounts. The statements, which are prepared for presentation to Parliament, comparing the amount of actual expenditure with the amount of Grants voted by Parliament and Appropriations sanctioned by the President, are called the “Appropriation Accounts”. The Appropriation Accounts are signed both by the Chairman, Railway Board and by the Financial Commissioner, Railways and transmitted to the Comptroller and Auditor General of India for audit by the Comptroller and Auditor General of India to ascertain whether the expenditure actually incurred under various grants is within the authorization given under the Appropriation Act and also whether the expenditure so incurred is in conformity with the law, relevant rules, regulations and instructions.

27. Appropriation Accounts. Appropriation Accounts detail the accounts related to expenditure of IR for a particular year as compared to the appropriations for different purposes as specified in the schedules appended to the Appropriation Act passed by Parliament. These Accounts list the original budget allocation, supplementary grants, surrenders and re-appropriations distinctly and indicate the actual capital and revenue expenditure on various specified services vis-à-vis those authorized by the Appropriation Act in respect of both charged and voted items of budget. Appropriation Accounts thus facilitate management of finances and monitoring of budgetary provisions and are therefore complementary to Finance Accounts.

28. Role of CAG The Comptroller and Auditor General of India is the most important instrument of accountability. The C&AG has a dual role a). to function on behalf of the Legislature to ensure that the executive complies with the various laws passed by the Legislature in letter and spirit, and b). to function on behalf of the Executive to ensure compliance by subordinate authorities with the rules and orders issued by it.

29. Role of CAG The Comptroller and Auditor General of India is the head of the Indian Audit and Accounts Department. The C&AG is neither a part of the Legislature nor the Executive but is an institution created by the Constitution. The C&AG is a distinct constitutional authority like the Election Commissioner and UPSC Chairman. The C&AG has to see that diverse authorities act in regard to all financial matters in accordance with the Constitution and the laws and rules framed there under.

30. Role of PAC The Committee on Public Accounts is constituted by Parliament each year for examination of accounts showing the appropriation of sums granted by Parliament for expenditure of Government of India. The Committee consists of not more than 22 members comprising 15 members elected by Lok Sabha and not more than 7 members. The Chairman is appointed by the Speaker from amongst its members of Lok Sabha.

31. Role of PAC However, the functions of the Committee extend “beyond, the formality of expenditure to its wisdom, faithfulness and economy”. The Committee thus examines cases involving losses, avoidable expenditure and financial irregularities. While scrutinising the Reports of the Comptroller and Auditor-General, the Committee examines misclassifications etc., identifies the loopholes in the procedures and makes suitable recommendations in this regard.

32. Role of PAC In scrutinising the Appropriation Accounts and the Reports of the Comptroller and Auditor-General thereon, it is the duty of the Committee to satisfy itself: (a) that the money shown in the accounts as having been disbursed were legally available for and applicable to the service or purpose to which they have been applied or charged; (b) that the expenditure conforms to the authority which governs it; and (c) that every re-appropriation has been made in accordance with the provisions made in this behalf under rules framed by competent authority.

33. Role of PAC One of the duties of the Committee is to ascertain that money granted by Parliament has been spent by Government within the scope of the demand. It considers the justification for spending more or less than the amount originally sanctioned. If any money has been spent on a service in excess of the amount granted by the House for the purpose, the Committee examines with reference to the facts of each case, the circumstances leading to such an excess and makes such recommendations as it may deem fit.

34. Transfer transactions - Revenue Initial payments made by one division/one Zone but the materials delivered/transferred/ultimately consumed other divisions/zones. Materials (say fuel) used by one accounting unit for operation of assets (say locos) of other accounting units. Services (like repairs/maintenance) rendered by one accounting unit for assets (say locos/coaches) of other accounting units. All such cases necessarily involves multiple accounting of basically same transaction leading to transfer transactions.

35. Transfer transactions – Capital Railway Budgeting involves seeking separate appropriation for each demand on ‘gross’ basis leading to concepts like ‘minus debits’ instead of ‘credits’ in some cases and ‘deduct/contra entries’ in the statements of the same unit for issues within the same demand as in the case of WMS Transactions.

36. Suspense Transactions Transactions in the suspense heads are held temporarily, pending clearance by payment or recovery or adjustment to the final heads of account. By and large, the following types of transactions are booked to suspense heads on the Railways:-  inventory accounts such as Stores Suspense, Purchase, Sales, Stores in transit, and Workshop manufacture Suspense, etc.  cash advances made to various parties in terms of relevant contracts, pending recovery/adjustment;  materials issued to contractors in terms of relevant contracts, pending adjustment through the contractor's bills;  to accommodate a transaction temporarily, when detailed particulars or allocation are not known or when final acceptance of a party to the claim is awaited;  for serving as link between Commercial and Government systems of accounting vide paras 220 to 222 for instant accountal of accrued earnings and expenses till these are realised, paid or adjusted.

37. Suspense Heads – Earnings and Expenditure  Bills Payable – to ensure that expenditure is booked to the relevant period  Bills Receivable – to ensure that earnings yet to be realised are also accounted for.  Cash-in-Transit  Remittance into Bank

38. Capital and Revenue Accounts The expenditure incurred on acquiring concrete assets, financed from the Development Fund. (OLWR) accounted for separately in connection with (i) un remunerative projects, (ii) amenities to passengers and other railway users, (iii) amenities to staff, and (iv) safety works. The expenditure on renewals and replacements of railway assets is financed from the DRF accounted separately.

39. Capital and Revenue Accounts Expenditure of a capital nature incurred on railway assets is classified under various heads like, Capital, DRF and DF. Block Account exhibits expenditure of a capital nature, irrespective of the head of account, which has actually been charged, incurred by the Railways as distinguished from the expenditure actually charged to Capital (loan account). Loan Account gives only the expenditure actually charged to capital.

40. Thank You