22-10 Finance Induction Training Project Costing, Mgt & Payments

8/6/2019 22-10 Finance Induction Training Project Costing, Mgt & Payments

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PROJECT & BUSINESS PROCESS

IDENTIFICATION(national priorities, incorporation in plans)

PREPERATION

(Assessment of technical, financial, Economicviability, specification Of parameter)

NEGOTIATION

(Agreement between funding agency& borrower on

measures req. for Success of project, loan approval)

IMPLEMENTATION(Project execution & commissioning,

Preparation of project completion report)

EVALUATION(Reassessment, audit, feedback)

Sectoral studies, industry analysisDemand forecast

Feasibility studies, environmental

Impact Downstream analysis

Techno economic & financial appraisal,

Assistance to appraisal mission of

Funding agency

Advice on packaging of procurement &On co-financing

APPRAISAL

Project monitoring & supervision.

Supply of goods under procurement module

Contract for turnkey module & civil cons.

Project evaluation, project audit;

downstream evaluation

PROJECT CYCLE

STAGE

BUSINESS

OPPORTUNITY


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RITES BUSINESS OPERATIONS

Consultancy - Expert Manpower

Export - Material Mgt, Shipment, LC, Foreign Currency

Lease - Dry Lease, Wet Lease, Period of Lease

Inspection - Voluminous Billing

Operation and Management - manpower allocation,material Purchase

Project Management - JVs, Civil Design, MaterialManagement

Construction Revenue recognition, BOQ

Preparation, Inventory management Concession Business Advisory Services, Equity

Participation/JV/PPP, Revenue recognition

Training Abroad and India, liaison with Institute, feebased on participation


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MAJOR COSTS IN BUSINESS OPERATIONS

S

No

Revenue Segment Major Costs

1 Consultancy Technical Expert Cost, Travel Cost

2 Export Material Cost & Transportation Cost

3 Lease Material Cost & Transportation Cost

4 Inspection Manpower Cost, Testing Charges,

Travel Cost

5 Operation and

Management

Skilled Labor Cost, Spare part Cost &

Transportation Cost

6 Project

Management

Technical Expert Cost & other

reimbursable cost.

7 Construction Material Cost, Labor Cost,

Transportation Cost

8 Concession

Business

Technical Expert Cost.

9 Training Technical Expert Cost. Travel &

Accommodation Cost.


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PREPARATION & VETTING OF

PROJECT ESTIMATES

Purposes

Submission of offer toclients

Project costing

Project monitoring

Project control


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PREPARATION & VETTING OF PROJECT ESTIMATES

EstimatesChecklist

Estimates for both domestic & international projects.

Expected fee / income under category like fee, sale,lease/hire, business ventures, misc internal services etc.

Direct Expenditure - Expenses directly identifiable .

Travel Expenses- latest rates for TA/DA, hotel charges, PDA etc

Estimate exp for procurement of Services

Expotech division : cost of sales= purchase costs of loco,coaches, spare parts etc.

Turnkey projects, cost= supplies/services costs

Capital items

Cost of equipment foruse on other projects

also

Cost of equipmentused solely for the

project

Normal Exceptional Expenditure for calculatingDivisional & SBU overheads.


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PROJECT COST

Expenses

Direct Indirect( O/H)

SBU O/H-SBU

Divisional O/H-ED

Corporate O/H-Top Mgt


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DIRECT EXPENSE

CONSULTANCY BUSINESS:

Direct Manpower Cost

Travelling Expenses

Survey Expenses/ Supplies & Services

Fee for Services obtained for outsourced work

Printing and stationery of Reports

Vehicle Running & Maintenance charges

Office/ site rent, maintenance & communication

expenses Bank Guarantee charges- Mobilization advance,

Performance guarantee


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EXPORT:

Cost of Rolling Stock & cost of Spares

Freight and Insurance Inwards

Other Procurement Expenses

After Sales services

Freight Outwards

INSPECTION DIVISION:

Manpower, Lab Testing

Travel and tour expenses

TURNKEY PROJECT:

Outsourced Expenditure

Efforts should be made to identify maximum projects related

expenses as direct cost.

DIRECT EXPENSE


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INDIRECT EXPENSE

1. SBU Overheads

Office Rent & Maintenance

Manpower Cost -GGMs, GMs & supporting staff

Vehicle Running & Maintenance costs

Business Development & marketing Expenses Manpower, Travel, Entertainment & Gift expense

Expenses-Management group, Supporting division

Training Expenditure

Stationery & Printing expenses

F & A and P & A Staff costs, if any posted

Communication expenses


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INDIRECT EXPENSE

2. Divisional Overheads

Communication expenses

Business Development Expenditure

Manpower costs

Travel Expenses

Entertainment/ Gift


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3. Corporate Overheads :

Expenditure of following cost centers :

Mgt Service Group-Directors etc.

F & A and P & A, Other than posted with divisions/ SBU

IT Centre

S & T Centre

Training

Vigilance, ISO Division etc

Corporate Services Division

Market & Client Services

Estate & Maintenance costs for cost center services

Library

Hindi Cell

Legal Cell

INDIRECT EXPENSE


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OTHER IMPORTANT ASPECTS IN PROJECT COSTING

Financial Accounts = Project Cost Accounts

Few SBUs are cost + profit centre

Inspection Offices job job/client type accounting

Inter departmental charges/Joint Project

WIP- to ensure matching concept

Commitment charges provision for known liabilities

Other issues

1. Salary - Estimated cost allocation system

2. Office Rent - Financial charges as notional charges


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OTHER EXPENSES

EXCEPTIONAL EXPENDITURE & NORMALISED

EXPENDITURE for charging overheads

Exceptional expenditure expenses to be identifiedincurred on items solely for trading/ turnkey projects orany other expenditure of exceptional nature which

warrants similar treatment. Maximum 10% of such expenditure is treated as

normalised expenditure for calculating overheads.

For turnkey projects, 1% of value of work outsourced isconsidered as normalised expenditure.

Management approval required for inclusion of exceptional expenditure in any project estimate other thanturnkey projects & projects of Expotech division.

For allocation of overheads, Normalised expenditure =Total expenditure Less Exceptional expenditure


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SBU Overheads code 9999,9998,9997,9996-Normalised Direct Costs of a Project X SBU O/H

Normalised Total Direct Costs of SBU

Division Overheads 95/ 1000 to 1600

-Normalised Total Cost of SBU X D. O/HTotal cost of all SBUs under that division

-Normalised Direct Costs of a Project X Share of D O/H

Normalised Total Direct Costs of SBU

Corporate Overheads- 9500 seriesNormalisedTotal Cost of respective SBU X Cor. O/H

Total cost of all SBUs

-Normalised Direct Costs of a Project X Share of Corp. O/H

NormalisedTotal Direct Costs of respective SBU

BASIS OF ALLOCATION


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FORMAT FOR THE INPUT ESTIMATE IN RITES

INPUT

ESTIMATES

UPTO

LAST

YEAR

FOR THE

MONTH

CUMULATIVE

FOR THE

YEAR

CUMULATIVE

TILL DATE

VARIANCE

A)INCOME

B)DIRECT

EXPENDITURE

STAFF COST

TRAVEL

EXTERNAL

SERV/PRO

OTHERS

EXTRA ORDINARY

EXP

TOTAL

C)INDIRECT

EXPENDITURE

DEPRECIATION

SBU OH

DIVISIONAL OH

CORPORATE OH

TOTAL

D)TOTAL EXPENDITURE

E)OPERATING RATIOF)CONTRIBUTION


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OTHER ASPECTS IN OVERHEADS ALLOCATION

Standard Rate Manpower

Usage, period, medical, leave, LTC, Transfer

Level of experience

Accountal not feasible

Salary not true cost

Office maintenance

Required

Offers

Control-match with accounting Strategic Planning new field, client

Absorption of fixed cost

Repeat order

Efforts should be made to keep overheads to minimum


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ACTIVITIES IN A PROJECT

The activities performed by finance officers are :

Resource Planning & project estimate.

Dealing with tenders & work award.

Vetting & Raising of Client bills.

Passing and making records of suppliers, contractors andstaff bills.

Making records of receipts pertaining to projects.

Preparation of Budget MIS

Receipt, Monitoring and Custody of bank guarantee.


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CONTRACTCONTRACT

MANAGEMENT

Contract = agreement +

Enforceable by law

Agreement:

Offer communicationacceptance - b/w 2/+prsn.

Enforceable by Law

Free consentlawful consideration

Lawful objects

Not void

To ensure execution, smooth& efficient way of the

objective


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CONTRACT PLANNING & EXECUTION:

Project organization set-up

Preparation of estimates/rate analysis

Finalization of tender documents

Issue, receipt & acceptance of tenders

Evaluation of tenders & work award

Execution supervision

Quality control & documentation

Payment , accountal & finalization

Handover & project closure


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CONTRACTMANAGEMENT PROCESS

Relation

with

Client Partner Contractor own project Others

Stages PreProject

Activities

Project

Definition ,

Planning and

Budgeting

Project

Control and

Execution

Project

Completion

and

Closure

Post Project

Completion &Maintenance

Basis ofaward ofwork

Singletender

Open tender Limited Nomination MOU

Basis ofcharges

Man-month

Activity Lump sum Cost Plus Other aspects

Profitplanning

FinancialMgt

Accounting Projectcosting

Legal Admin &others


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IMPORTANT CLAUSES OF CONTRACT

ROLE OF PARTIES

SELECTION CRETERIA

ACCOUNTING AND REPORTING

DISPUTE RESOLUTION

BASIS OF FEE, WORKS COST& BILLING AND PAYMENT

STATUTORY COMPLIANCE

PRICE ESCALATION

DEVIATION AND EXTRA WORK

TIME LINE, PERFORMANCE AND

SECURITY ISSUES

BOQ AND TECHNICHAL ISSUES

LABOUR LAWS

PLANNING AND ESTIMATION

BIDDING PROCESS FOR

CONTRACTING AGENCIES

SUSPENSION & TERMINATION OF

CONTRACT


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TENDER

Salient Features of Tender:

i) Brief Scope of Work

ii) Estimated Cost

iii)Type of Tender - Item Rate or Percentage Rate or Lump

Sum

iv)Stipulated Period of Completion

v) Names of News Papers and dates when NIT publishedvi)Date of Pre-Bid Conference

vii)Date and Time When tenders opened

viii)Date upto which tender offers are valid


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TENDER OPENING PROCEDURE

Tender Opening Committeeformed by SBU Head :

-One member from SBU

-One from Finance

Take out tenders fromTender Box at stipulatedtime in the presence of

tenderers

initial and date onevery envelope by

Tender Officers

Serial No. ofeach Tenderreceived. eg1/6, 2/6 etc.

Return of late or delayedtenders without opening &

mention in TenderOpening Register and in

briefing note.

Entry & sign Tenderby officers in Register& sign by all tenderers

In case of Two Packet System,Technical Bids are opened firstand after Technical evaluation

Financial Bid of technicallysuitable bidders are opened & is

read out.

Sign with date on allpages ofTechnicalBid & Financial Bid

by Officers

Hand over of tenderdocuments along with

EMD to ProjectCoordinator.


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VETTING OF PROPOSAL TO CALL TENDER

Proposals prepared by SBU covering background of project, estimate,quotation, client approval etc. is submitted to finance for vetting.

Check the following during vetting:

Approval of competent authority to outsource the work as perSOP of RITES.

Estimated cost of the work verified with reference to budgetestimate/ administrative approval/ client sanction /Expenditure

Sanction.

Reasons to call for single tender/ Limited tender

Calling of Quotation in cases of one time delivery only withina short period or any emergent /immediate requirement or

small items costing more than Rs. 20,000/-.

No repeat order case of work undertaken on quotation basis


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Vetting of Briefing notes & Comparative Statements

Comparative Statement (CS)

statement prepared to facilitate bids evaluation and bid processmanagement.

Comprises information of financial and commercial offers for (BOQ), rebates& other financial terms/conditions affecting financial evaluations of bidders

This procedure extends to all types of tender process viz: single, limited andopen

Briefing Committee members one from the concerned SBU and other fromFinance. Prepares briefing note after tender examination

The Briefing Note scrutinized by Project Coordinator before putting up to the

nominated Tender Committee


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Vetting of Briefing notes & Comparative Statements

BriefingNote

TenderReference

EstimatedCost

Bidsreceived

Bidderdetails

EMD details

Specialconditions

General

Liquidity

Solvencycertificate

Financial Status

Turnover/profit

Experience

Past & Similarprojects

Documentsattached

Qualifications

BOQ items

Rates,Rebates

Correction/overwriting/arithmetical

accuracy

Variation inwords/figures

Comparativestatement

Qualification

More

focus by

finance

Technical Financial


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It shall beensured

that

Registrationwith Tax deptt. Sign by thepreparer &

Finance officerwho vetted it.

Special

conditionsduly broughtout.

Comparison ofthe offers

clearly

indicated.

Discounts andother

conditionscorrectlyloadedTotal of each

tender

correctlyrecorded in CS

The rates andamounts

initialed by thetender opening

officials.

over-writing/addition

/alteration

/correctionattested

All the offers

receivedincluded in thestatement .

Rates for eachitem correctly

copied instatement

Vetting of Comparative Statement


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MISC. BILLS INCLUDES

Telephone bills,

Bills for outsourcing of works consultants/sub-consultants' feebills, man-power agencies, consulting and other agencies,

Bills of various suppliers - stationary/office supplies, officemaintenance,

Bills for AMCs, office/guest house/residential accommodationtaken on rent etc and

Other payments of similar nature to external agencies.


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PAYMENT PROCEDURE OF MISC. BILLS

Original bills sent by SBUs/Service Deptt. to F&A Division.

Entry in 'Misc. Bills Register' & allotment of Regn. No.

Regn. No. & date of receipt recorded on each bill.

Copy of the Agreement/LOI/LOA/PO/Works Order with the concernedagency sent by SBUs/Service Deptt. to F & A concerned Division.

Verification of all bills to ensure that bills are correct, due & approvedby competent authority as per SOP.

Recording approved cost estimate of the work in project file of F&ADivision, which is referred at the time of making payment.

In case a bill is returned to SBU, indicate reasons on the bill.


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PAYMENT PROCEDURE OFMISC. BILLS

Bills are checked to ensure that:-

Bills are in the name of RITES Ltd.,

Duly signed by the authorized representatives of the agencies/supplies/ consultantetc.

PAN / Service Tax No are indicated in the invoices sanctioned by the competentauthority.

The Claims are as per the terms and conditions of the Agreement.

Bills are accompanied by the certificate from the Concerned Division regardingsatisfactory completion of the job as per terms and conditions of the Agreement.

Bills bear a project code to which expenditure is to be booked.

Deduct taxes and record in relevant register.

Release of Security Deposit, Performance guarantee only if approved by competentauthority.

Payment through Cheque in favour of concerned agency or through ECS/RTGS/.

Payment entry in Misc. Bills Register.

Issue of TDS Certificate in Form 16 A to all agencies


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PAYMENT OF TELEPHONE & TELEFAX BILLS

Includes office telephone bills, bills for residential lines provided by RITES &reimbursable official telephone bills.

Bills sent by S & T division to F & A Division & entry in Telephone Register.Separate page for every Ph. No. for office telephone / fax in the register.

Ensure certification of all official calls by Controlling Officers. Personalcalls charges intimated to Estb. section of the F&A Division to recover

from salary of employee. Bill to be checked wrt. billing cycle / callcharges cycle/trend of billing amounts. In case of abnormally high bill,

obtain sanction of competent authority (concerned directors)

Bills for Company residential telephone checked with reference to entitlementof calls, billing/call charges cycle, special sanction of calls, if any.

Bills for personal residential telephones in the name of self and spousereimbursed according to entitlement of calls for the employee.


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PAYMENT OF TELEPHONE & TELEFAX BILLS

If the calls are in excess of entitlement, bill is passed for payment butsimultaneously intimation is sent to employee for obtaining approval of the

competent authority.

Where no residential telephone is provided , a fixed amount is paid tocertain employees as telephone allowance through salary bill whereall such employees are required to submit copy of telephone bills as

proof of expenses . In case no proof is received, the telephoneallowance so paid stands disallowed to the employee.

Details of payment are entered in the Telephone Register.

Ensure that all telephone bills are paid before the due date in order to avoidpayment of penalty charges or disconnection.

Provision for Telephone charges are made based on the informationavailable in register for quarterly/yearly closing of accounts

Accounting Treatment - Dr. Account Code - 0608 for TelephoneCharges

- Dr. Account Code - 0500 for Service Tax

Input Services


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PAYMENT OF CONSULTANTS FEES

Individual consultants Consulting agencies

Payment to individual consultant, ensure that

In case engagement on monthly basis, approved engagement / extensionletter is kept in consultant file & make payments at approved rates .

In case of payment on deliverable basis, keep a copy of the LOA /Agreement with the consultant in his individual file & pay all bills as per

terms & conditions in LOA/ Agreement.

SBU shall send Consultants fee bill along with a covering note, dulycertifying the satisfactory completion of work during the concerned period.Ensure that the payment has been verified & approved .

Deduct Income tax and pay service tax as per applicable rates.

Details of payments are in Consultants Register .


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Payment to consulting agencies ensure that

Administrative approval for outsourcing of work, necessary provision in the working costestimate & award of work by following tender procedures.

Copy of the contract agreement, PAN, service tax Regn. bank details etc kept in agencyfile.& details entered in FMIS.

Original Invoice certified for satisfactory completion by competent authority submitted to F&ADivision.

Indication of service tax number & amount claimed on invoice .

In case work is awarded to sub consultant on back to back basis, payment is made only afterRITES has realized the corresponding fee from the client.

Record payment details in the Consultants Ledger on the folio allotted to the Agency.

At the end of each quarter, information with regard to bills received but not paid or estimatedthereof may be ascertained from the concerned SBU and provided in books of accounts.

Deduction of taxes

Deduction for liquidated damages in case of delay and approval to extension of time by thecompetent authority is also linked before passing bills.


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While passing the fee bill for these agencies, ensure that:

Copy of Agreement with the agency is available in the Consultant Agreement File.

Consultants engaged by manpower agencies. are paid monthly fees at approved rates

Fee for the services obtained is paid on the completion of activity specified in theLOI/Agreement

Bill is accompanied by Attendance Sheet showing Designation, Pay Scale & date-wiseattendance for each consultant, duly certified by competent authority.

Statement showing actual working days, Gross & Net amount payable for eachconsultant and Agency commission submitted duly verified and sanctioned .

Activity completion certificate by SBU on Fee bills & provisions exist in original estimate

TDS deduction as per Income Tax Act.

Record details of payment in Consultants Ledger on the folio allotted to the Agency.

Bill is passed for payment in favour of the agency who in turn shall pay to the individualconsultants.

Accounting Treatment:

Dr. Account Code - 0401 for Fee for services obtained Payments to consultingagencies / sub-consultants

Dr. Account head - 0402 for Fee to consultants - Payments to ConsultantsDr. Account Code - 0502 for Service Tax - Service Tax for input services.

PAYMENT TOMANPOWER PROVIDING AGENCIES


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PAYMENT OF SUPPLIERS BILLS

While passingsuppliers bills,ensure that:

Items quantities, rates in the bill are as per PO.

Certification that materials received is as perspecification of the PO.

Page No. of Stock Receipt Register is indicatedon the bill.

Materials are received within delivery period. Incase delay - extension of delivery period or else

recovery of liquidated damages

Recoveries for SD or submission of BG towardsSD & confirmation of BG from issuing bank.

Submission of warranty certificates by Supplier

PO received along with Bill is kept in supplier fileby F&A Division. Payment details recorded on the

PO to avoid duplicate payment.

PAYMENT OF OFFICIAL & RESIDENTIAL ACCOMODATION


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PAYMENT OF OFFICIAL & RESIDENTIAL ACCOMODATION

Types of leases for accommodation :

Staff self lease of own accommodation

Company lease for staff through third party

Office/Guest house accommodation taken lease by the companyWhile making lease payments, Ensure:

Receipt of copy of lease agreement with approval in standard format

Entry & Updation of lease particulars.

No security deposit for hiring of office accommodation on lease.

Advance Rent= max 2 months rent, period of recoveries = max twice the no. of months

& check approval If accommodation is arranged through broker, max brokerage = 15 days rent. Claim

should be accompanied by printed bill / receipt from the broker.

Payment of All Municipal taxes by Lessor.

Approval from GM(P&A) for any any deviation in lease agreement .

No repair & maintenance expenses in case of residential lease.

Accounting Treatment for lease rent

Dr. Account Code 0103 for Staff House rent & Dr. Account head - 0611 for Office Rent

Generate monthly rental statement to check:-

Validity and terms of agreements for payments.

Amounts & Period of rent.

Recovery of advances, if any, and the amounts of installments. Deduction of TDS


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PAYMENT OF WATER & ELECTRICITY BILLS

W

ater and Electricity bills are received by F&ASection from Estate Section for payment.

Ensure proper scrutiny of bills before payment in

same line as indicated above.

Separate register is maintained for water/electricity bills. Separate folio is given for each

meter.

Accounting Treatment Water / Electricity Charges

Dr. Account Code 0614 forWater Charges

Dr. Account Code 0613 for Power & Fuel Charges


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PAYMENT FOR GIFTS

While makingpayments for

expenditure on gifts,Check:

Approval ofcompetent authorityon expenditure on Giftitems for Foreign &Local Projects .

Supporting oforiginal bills forexpenditure.

Accounting Treatmentfor payments of

expenditure on gifts

Dr. Account Code 0631 for Gifts


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22-10 Finance Induction Training Project Costing, Mgt & Payments

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Transcript of 22-10 Finance Induction Training Project Costing, Mgt & Payments