Exchequer Control

Finance Code - 1 Chapter 5

EXCHEQUER CONTROL 540  Exchequer Control is a mechanism for concurrent regulation of cash outgo by each Disbursing Officer against the cash content of the budget allotment.  Railway expenditure falls into two categories viz., cash and adjustments.  The former covers all transactions completed through cash-payments or issue of cheques and broadly comprises disbursements to staff and outsiders as also settlement of bills/claims for supplies and services.  Adjustments represent inter or intra accounting unit book keeping transactions which entail no cash outgo.  The object of Exchequer Control is to establish a system for correct estimation of cash outgo and to monitor disbursements.  It is thus an important tool of budgetary control. 

541  Importance and limitations of Exchequer Control --Para. 539 requires the compilation of a 'Financial Review' wherein the earnings and expenses of each Railway Administration up to the end of every month are compared to the proportionate sanctioned budget and variances explained.  However, as the figures of actual receipts and expenses for a month are available only in the first or second week of the second following month, there is a time lag of 6 to 8 weeks between incurrence of expenditure or realization of earnings and their review with the proportionate budget.  The reason for the time lag is that while cash disbursements and receipts are accounted for immediately, book adjustments between one accounting unit/Railway Administration and another take a great deal more time ; the books of account for a month are, therefore, kept open for a longer period to accommodate such 'book adjustments'.  As 'cash' forms, on an average about 70% of the total expenditure of a Railway,  Exchequer Control has the merit of providing an effective means of monitoring a substantial part of the expenditure on a day-to-day basis. 542 Since the budgetary allocations are sanctioned only for expenditure, Exchequer Control mechanism is necessarily limited in scope to the control of cash outgo.  Railway earnings are thus excluded from the purview of Exchequer Control but are subject to usual examination through the monthly financial reviews as well as the recurring scrutiny of cash remittances from stations and of Bank advices. 543  Even though Exchequer Control was originally envisaged as control of cash outgo by instituting drawing limits on the banks, it has been considered neither necessary nor practicable to introduce such a measure.  Each Railway Administration operates a large number of bank accounts (in some cases as many as 100 or more) for facilitating payments.  Further, these drawing accounts are operated by a large number of disbursing officers.  It would, therefore, not be feasible to prescribe drawing limits for each bank account in favour of each disbursing officer.  Exchequer Control, therefore, implies a self-imposed expenditure discipline by means of a system of day-to-day monitoring to ensure that the cash content of the budgetary allocations is not exceeded. 544 Railway budgetting is on 'gross' basis. i. e., Parliamentary approval is obtained for gross' expenditure, ignoring the credits/recoveries which are outside the scope of the Demands for Grants.  The actual cash against each budget Demand is also ‘gross', since credits/recoveries are usually effected through 'book adjustments' or receipts of cash.  Further, the sanctioned budget grants involve a certain amount of overlap, e. g., funds for purchase of stores are sanctioned under Demand 16, but when the purchased stores are utilized for (say) maintenance and operation, budget allocations are also provided under  Demands 4 to 10 etc.  Cash outgo is, however, involved only at the first point of activity, i. e., when stores are purchased and paid for, and the 'overlap' is represented in railway accounts through 'book  adjustments'. 

545 Implementation of Exchequer Control.- Implementation of Exchequer Control involves the following steps.- 

(i) Correct assessment of the 'Cash' and 'adjustment' portions of the sanctioned annual budget under each Demand by each Disbursing Officer, and also the cash disbursement in respect of 'non-budget' items e. g. refund of fares and freight. (ii)   As accurate an assessment as possible of the quarterly requirement of cash, (iii)  Issue of quarterly/monthly cash authorization to Disbursing Officers, and  (iv) Concurrent control of cash outgo by each Disbursing Officer. 

Engg. Code

CHAPTER XV

EXPENDITURE AND BUDGETARY CONTROL
Responsibility with regard to expenditure

1510. Exchequer Control.- Exchequer Control is an important tool for budgetary control, and functions as a mechanism for concurrent of cash outgo by each disbursing officer against the cash content of the budget allotment. The regulation of cash disbursements will be made by disbursing officer separately under each grant and executive officers should assist the disbursing officer in framing the data as indicated in para 1512. (cf. 540-F).

1511. Implementation of Exchequer Control.- Implementation of Exchequer Control involves the following steps

• (i) Correct assessment of the `cash' and `adjustment' portions of the sanctioned annual budget under each demand by cash disbursing officer;

• (ii) As accurate an assessment  as possible of the quarterly requirement of cash.

• (iii) Issue of quarterly/monthly cash authorisation to disbursing officer, and

• (iv) Concurrent control of cash outgo by each disbursing officer (c f. 545-F).

1512. Information to be furnished by Executive Officers.-Executive officers, should assist the disbursing officer in making a correct assessment of `cash' and `adjustment' portions of the sanctioned annual budget under each Demand, keeping the guidelines indicated in para 546-F in view. They should also make an assessment of quarterly forecast of expenditure under the categories 'cash' and 'adjustment' and finish the data to the disbursing officer for exercising control of cash outgo.

1513. Limitation of Exchequer Control.-Exchequer Control is a self imposed expenditure disciplirie by means of a system of day to day monitoring. to ensure that the cash contents of the budgetary allocation is not exceeded (cf. 543-F).