Circular No. 218/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance providing the financial management of programs and projects funded with official development assistance (ODA) and concessional loans of foreign donors

CIRCULAR

Providing the financial management of programs and
projects funded with official development assistance (ODA) and concessional loans of foreign donors[1]

Pursuant to December 16, 2002 Law No. 01/2002/QH11 on the State Budget;

Pursuant to June 17, 2009 Law No. 29/2009/QH12 on Management of Public Debts;

Pursuant to the Government’s Decree No. 60/2003/ND-CP of June 6, 2003, detailing and guiding the Law on the State Budget;

Pursuant to the Government’s Decree No. 78/2010/ND-CP of July 14, 2010, on on-lending of the Government’s foreign loans;

Pursuant to the Government’s Decree No. 79/2010/ND-CP of July 14, 2010, on professional operations of public debt management;

Pursuant to the Government’s Decree No. 38/2013/ND-CP of April 23, 2013, on management and use of official development assistance (ODA) and concessional loans of donors;

Pursuant to the Government’s Decree No. 215/2013/ND-CP of December 23, 2013, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the proposal of the Director of the Department of Debt Management and External Finance;

The Minister of Finance promulgates the Circular providing financial management of programs and projects funded with official development assistance (ODA) and concessional loans of foreign donors.

Chapter I

GENERAL PROVISIONS

Article 1.Scope of regulation

1. This Circular guides financial management regimes applicable to programs and projects funded with official development assistance (ODA) and concessional loans of foreign donors prescribed in the Government’s Decree No. 38/2013/ND-CP of April 23, 2013, on management and use of official development assistance (ODA) and concessional loans provided by donors.

2. For ODA loan- or concessional loan-funded programs and projects which have specific characteristics, depending on management requirements, the Ministry of Finance or the Ministry of Finance and line ministries shall provide guidance on the financial management regime applicable to each specific program or project.

3. This Circular does not regulate non-refundable ODA amounts disbursed separately for independent projects/component projects under an ODA loan- or a concessional loan-funded project which are governed under the Ministry of Finance’s Circular No. 225/2010/TT-BTC of December 31, 2010, guiding the state financial management regime applicable to foreign non-refundable aid constituting state budget revenues and documents amending, supplementing or replacing that Circular.

4. This Circular does not regulate government-guaranteed foreign loans which are governed by the Government’s Decree No. 15/2011/ND-CP of February 16, 2011, on grant and management of government guarantees and documents guiding that Decree.

5. In case the provisions on financial management in this Circular are different from those of treaties on ODA or concessional loans, the provisions of such treaties shall apply.

6. Terms used in this Circular are construed in accordance with Articles 3 and 4 of the Government’s Decree No. 38/2013/ND-CP of April 23, 2013.

Article 2.Subjects of application

This Circular applies to agencies, organizations and individuals responsible for or engaged in the management and use of ODA and concessional loans provided by foreign donors.

Chapter II

DOMESTIC FINANCIAL MECHANISMS

Article 3.Domestic financial mechanisms applicable to programs and projects funded with ODA or foreign concessional loans

1. Principles of determining financial mechanisms (allocation or on-lending)

a/ The mechanism of allocation of ODA or foreign concessional loans from the state budget applies to infrastructure investment or social security programs and projects and programs and projects in other fields which cannot directly recover capital and are included in state budget expenditures in accordance with the Law on the State Budget.

b/ The mechanism of on-lending of the whole or part of ODA or foreign concessional loans applies to:

- Investment programs and projects which are capable of recovering the whole or part of ODA or concessional loans, including also infrastructure construction projects in conformity with the national socio-economic development orientations approved by competent authorities;

- Programs and projects not included in state budget expenditures;

- Programs and projects with provincial-level People’s Committees acting as managing agencies which are subject to on-lending of ODA loans or the Government’s concessional loans.

c/ For programs and projects with special disbursement and capital recovery mechanisms which require application of specific financial mechanisms (projects for which capital is disbursed according to implementation results or schedules, PPP projects or projects financed by different funding sources), the Ministry of Finance shall assume the prime responsibility for, and coordinate with the Ministry of Planning and Investment, managing agencies and project owners in, studying and reporting separate financial mechanisms applicable to each program or project to the Prime Minister for consideration and decision.

d/ In case draft treaties on ODA or concessional loans to be signed with donors contain different provisions on financial mechanisms applicable to programs or projects, the Ministry of Finance shall coordinate with the Ministry of Planning and Investment and agencies in charge of the negotiation in reporting such to the Prime Minister for consideration and decision.

2. The capital use characteristics of projects shall be identified based on the following types of projects:

a/ Capital construction project means an investment project related to the construction, expansion or upgrading of a construction work with a view to maintaining, developing or improving the quality of such work;

b/ Non-business administrative project means an investment project having non-business administrative expenses, which falls outside the scope of investment projects defined at Item a of this Clause;

c/ On-lent project means an investment project funded with capital on-lent from the source of the Government’s foreign loans;

d/ Mixed project means a project with expenses covered by at least 2 of the three types of capital sources: capital construction, non-business administrative or on-lent (including capital on-lent under credit programs or limits).

For mixed projects, project owners shall clearly identify components or expenses funded with capital construction or non-business administrative capital. In special cases, if the owner of a mixed project proposes application of the mechanism applicable to capital construction or non-business administrative projects, the project owner shall clearly explain its proposal to the managing agency for consideration and decision right in the stage of project preparation and approval.

3. Process of determining domestic financial mechanisms

a/ Managing agencies and project owners shall coordinate with donors in elaborating program or project outlines according to the model outline provided in Article 16 of the Government’s Decree No. 38/2013/ND-CP of April 23, 2013, on management and use of official development assistance (ODA) and concessional loans.

- A program or project outline must contain information on the total ODA capital, concessional loan and domestic capital, enclosed with the domestic financial mechanism proposed for application to ODA and concessional loans, specifying debt repayment capacity and plans (for on-lent programs and projects) determined according to the principles specified in Clause 1 of this Article.

- The Ministry of Finance shall give in-principle opinions on the domestic financial mechanism proposed in the outline of the ODA or concessional loan-funded program or project. The Ministry of Planning and Investment shall sum up and propose the Prime Minister to approve the funding list (in case the funding list is to be approved by the Prime Minister).

- The Ministry of Planning and Investment shall give in-principle opinions on the domestic financial mechanism proposed in the outline of the ODA or concessional loan-funded program or project.  The managing agency shall consider and approve the funding list (in case the funding list is to be approved by managing agencies).

b/ At the stage of making and approving the funding list mentioned at Point a above, if the grounds and detailed information used as a basis for proposing the specific financial mechanism to be applied to the project are unavailable, the managing agency and project owner shall further study and consult the Ministry of Finance and related agencies on the domestic financial mechanism to be applied to the project before submitting it to the authority competent to approve the program or project document/investment project’s feasibility study report.

c/ In the course of negotiation on the loan/financing agreement, if there arise new contents for which the applicable financial mechanisms have not yet been identified at the stage of approving the program or project document/investment project’s feasibility study report or objective elements which require supplementation or modification of the financial mechanism already stated in the approved program or project document/investment project’s feasibility study report, the managing agency and project owner shall report such to the Ministry of Finance for the latter to consider and propose the Prime Minister to approve the financial mechanism to be officially applied to the ODA or concessional loan-funded program or project before the loan/financing agreement is signed.

4. Determination of specific on-lending terms and conditions applicable to ODA and concessional loan-funded programs and projects

a/ Based on the results of appraisal of the financial plan of an on-lent program or project as well as the financial capacity of the project owner, the Ministry of Finance shall apply the on-lending terms and conditions prescribed in the Government’s Decree No. 78/2010/ND-CP of July 14, 2010, and specific provisions of this Circular to such program or project.

The time limit for appraisal and notification of on-lending conditions is prescribed in Article 19 of the Government’s Decree No. 78/2010/ND-CP of July 14, 2010.

b/ In special cases, including cases in which foreign lenders request application of on-lending terms and conditions different from those provided in the Government’s Decree No. 78/2010/ND-CP of July 14, 2010, the Ministry of Finance shall study these cases and consult related agencies for reporting to the Prime Minister for consideration and decision on a case-by-case basis.

5. The Ministry of Finance or on-lending agencies authorized by the Ministry of Finance shall sign on-lending/sub-lending agreements with sub-borrowers and base itself/themselves on specific on-lending terms and conditions determined according to Clauses 3 and 4 of this Article to manage the use and recovery of on-lent capital.

Article 4.Domestic financial mechanisms applicable to local programs and projects

1. Allocation of capital from the sources of ODA and foreign concessional loans to localities

The central budget shall allocate capital from the sources of ODA and foreign concessional loans to local budgets in the form of targeted support for implementation of infrastructure investment or social security projects or projects in other fields which cannot directly recover capital and are included the state budget’s expenditures in accordance with the Law on the State Budget.

2. On-lending of the whole or part of the Government’s ODA capital:

a/ Socio-economic development investment projects included in local budgets’ expenditures for which investment procedures have been completed and local budgets are capable of repaying debts.

b/ Component projects of umbrella programs or projects with ministries acting as managing agencies and project owners, which are capable of recovering debts and implemented in localities by project owners belonging to provincial-level People’s Committees.

3. Based on the use purpose of each loan, the Ministry of Finance shall propose the Prime Minister to decide on specific on-lending mechanisms applicable to each project.

4. Provincial-level People’s Committees are eligible for on-lending of ODA and foreign concessional loans when fully meeting the following conditions:

a/ Being permitted by competent authorities to sub-borrow capital from the source of the Government’s foreign loans;

b/ Having socio-economic development investment projects included in local budgets’ expenditures, for which investment procedures have been completed in accordance with the investment law and relevant laws;

c/ Local budgets are assessed as being capable of repaying debts.

5. The Ministry of Finance shall appraise provincial-level budgets’ debt repayment capacity according to the Government’s Decree No. 78/2010/ND-CP of July 14, 2010, and relevant laws and propose the Prime Minister to decide on the domestic financial mechanisms applicable to each source of ODA and concessional loans of localities.

Article 5.On-lending conditions applicable to financial and credit institutions eligible for on-lending under credit programs or limits

1. On-lending conditions applicable to financial and credit institutions:

a/ Having programs or projects for which the use of loans are permitted by competent authorities and approved by foreign lenders;

b/ Being capable of repaying debts according to financial plans which are appraised in accordance with law.

2. Conditions for on-lending from the Ministry of Finance to financial and credit institutions participating in credit programs or limits

a/ On-lending interest rates must comply with the Government’s Decree No. 78/2010/ND-CP of July 14, 2010;

b/ The maximum lending and grace periods for financial and credit institutions must not exceed the lending and grace periods of the foreign principal loans;

c/ In special cases, including cases in which foreign lenders require application of on-lending conditions different from those provided in the Government’s Decree No. 78/2010/ND-CP of July 14, 2010, the Ministry of Finance shall study these cases and consult related agencies for reporting to the Prime Minister for consideration and decision on a case-by-case basis.

3. Appraisal and selection of financial and credit institutions participating in credit programs and limits

a/ For on-lending of ODA loans: The Ministry of Finance shall directly appraise plans on use of loans and repayment of debts of financial or credit institutions participating in programs before signing on-lending/sub-borrowing agreements;

b/ For on-lending of concessional loans: The State Bank of Vietnam shall appraise financial capacity and plans on use of loans and repayment of debts of financial or credit institutions participating in credit programs and limits and notify appraisal results to the Ministry of Finance before signing on-lending/sub-borrowing agreements;

c/ Financial and credit institutions providing loans to end users shall appraise projects and select end users in conformity with credit programs agreed with donors and bear all risks arising from the on-lending.

Article 6.Domestic financial mechanisms applicable to the private sector having access to ODA and foreign concessional loans

1. The private sector may access ODA and foreign concessional loans through the mechanism of on-lending, specifically as follows:

a/ Private-sector entities are eligible for on-lending of ODA and concessional loans when implementing investment projects in the fields for which ODA and the Government’s concessional loans are prioritized for use under the domestic financial mechanisms specified in Article 3 of this Circular;

b/ Private-sector entities are eligible for on-lending of ODA and concessional loans from domestic financial and credit institutions through credit programs and limits and may apply the domestic financial mechanisms specified in Article 5 of this Circular;

c/ Private-sector entities implementing investment projects in the form of public-private partnership (PPP) are eligible for on-lending of the Government’s concessional loans with the conditions similar to those applicable to the Government when acquiring loans from foreign parties;

d/ Private-sector entities participating in programs and projects with the objective of supporting the private economic sector: Project managing agencies shall appraise projects of private-sector entities participating in their programs or projects on the basis of the common financial mechanisms approved by competent authorities.

In case common financial mechanisms of programs or projects have not yet been approved, managing agencies shall propose domestic financial mechanisms applicable to each program or project to the Ministry of Finance for consideration and submission to the Prime Minister for decision.

2. Conditions for being considered for accessing ODA or concessional loans and appraisal requirements for project owners:

a/ Conditions for a project owner being a private-sector enterprise to be considered for accessing ODA or concessional loans:

- In case of implementing an investment project, the project owner being a private-sector enterprise must have its own capital account for at least 20% of the approved total investment level (after subtracting own capital amounts for implementation of other ongoing investment projects, if any). The project owner shall make a list of its ongoing investment projects to the appraisal agency or organization, clearly stating investment capital amounts, investment schedules and plans on use of own capital and mobilized capital to implement such projects, for use as a basis for examination of the conditions for accessing ODA and concessional loans, and shall take responsibility for the accuracy of its report.

- The enterprise has a sound financial status and suffers no loss during 3 consecutive years preceding the year of applying for ODA or concessional loans, has no accumulated loss and ensures the safety debt and payment ratios; at the time of applying for ODA or concessional loans, it owes no overdue debts related to government-guaranteed loans or loans on-lent from the Government’s foreign loans or the state budget. If the enterprise has been operating for just less than 3 consecutive years, its owner or parent company shall issue a written commitment to repay debts on behalf of the enterprise in case the latter is unable to repay debts on-lent by the Government. If the enterprise does not have an owner or a parent company, it shall obtain debt repayment guarantee from a commercial bank or guarantee in another form accepted by the Ministry of Finance.

- The on-lent enterprise shall take loan security measures in accordance with law so as to offset credit risks and other possible risks. Collaterals include assets to be formed from the Government’s loans and other assets in accordance with law.

b/ Appraisal and selection of project owners being private-sector enterprises:

- For credit programs and limits: Financial and credit institutions shall appraise and select project owners being private-sector enterprises according to Point c, Clause 3 of Article 5 above.

- For investment projects in the fields in which ODA and the Government’s concessional loans are prioritized for use stated at Point c, Clause 1 of this Article, after investment procedures are completed in accordance with the investment law and the investment policy is appraised and decided by competent authorities, the Ministry of Finance may authorize on-lending agencies or hire independent consultancy organizations to appraise project owners’ financial capacity and debt repayment plans. Appraisal organizations shall take responsibility for appraisal results. Project owners shall bear appraisal expenses and may include such expenses into projects’ total investment capital (in cases of eligibility to receive ODA or concessional loans) or their enterprises’ production and business costs.

c/ Conditions for receiving ODA and concessional loans under credit programs or limits applicable to private-sector project owners being natural persons like households or individuals shall be prescribed and appraised by financial and credit institutions on a case-by-case basis.

Chapter III

ANNUAL CAPITAL PLANS

Article 7.Elaboration of annual capital plans

1. Annual capital plans of an ODA or a concessional loan-funded program or project include an ODA or concessional loan disbursement plan and domestic capital plan prescribed in Articles 61 and 62 of the Government’s Decree No. 38/2013/ND-CP of April 23, 2013. The forms of ODA disbursement plan, concessional loan disbursement plan and domestic capital plan must comply with the Ministry of Planning and Investment’s Circular guiding the Government’s Decree No. 38/2013/ND-CP of April 23, 2013.

2. Based on the overall plan for program or project implementation approved by the managing agency under Article 37 of the Government’s Decree No. 38/2013/ND-CP, the project owner shall elaborate annual plans for program or project implementation which serve as a basis for the managing agency to approve annual capital allocation plans as prescribed in Article 38 of the Government’s Decree No. 38/2013/ND-CP of April 23, 2013, as follows:

a/ Annual plans on ODA or concessional loan disbursement shall be elaborated based on each donor and allocated according to the nature of capital (capital construction, non-business administrative, on-lent or budget support);

b/ Annual plans on disbursement of domestic capital shall be elaborated based on each managing agency and allocated according to capital sources (central budget, local budget, capital of project owners and other capital sources);

The contents of plans on domestic capital for preparation and implementation of ODA and concessional loan-funded programs and projects are specified in Article 43 of the Government’s Decree No. 38/2013/ND-CP of April 23, 2013. Managing agencies shall prioritize the allocation of domestic capital within their annual budget estimates so as to implement the commitments stated in treaties on ODA and concessional loans in conformity with the program’s or projects’ disbursement capacity in each year.

3. Managing agencies shall summarize and approve annual capital allocation plans of programs and projects as prescribed in Article 37 of the Government’s Decree No. 38/2013/ND-CP of April 23, 2013, and send such plans to the Ministry of Planning and Investment, the Ministry of Finance and other relevant agencies (spending control agencies, on-lending agencies and serving banks).

4. For projects eligible for allocation of capital from the state budget, the Ministry of Planning and Investment shall elaborate and summarize annual ODA or concessional loan disbursement plans and domestic capital plans as prescribed in Article 61 of the Government’s Decree No. 38/2013/ND-CP and send such plans to the Ministry of Finance for inclusion in annual state budget estimates.

5. For projects eligible for on-lending of ODA or the Government’s concessional loans and for which domestic capital is arranged by project owners, project owners shall take charge of elaborating and approving annual capital plans.

Article 8.Process of elaborating annual capital plans

1. For projects eligible for allocation of capital from the state budget

a/ Annually, at the time of elaborating and submitting for approval state budget estimates according to current regulations, project owners shall, based on project implementation schedules, elaborate projects’ investment capital or non-business capital plans and submit them to managing agencies for the latter to include them in their budget plans to be sent to the Ministry of Finance and the Ministry of Planning and Investment for submission to the Prime Minister and the National Assembly for approval;

b/ The process of approving, allocating and notifying capital plans must comply with current regulations on estimation and execution of the state budget. Managing agencies’ decisions approving annual capital allocation plans must be sent to finance agencies of the same level and spending control agencies;

c/ In case the treaty on a project has been signed but not yet come into force or has come into force but domestic investment procedures have not yet been completed, within the time limit for elaborating annual budget estimates, the managing agency shall report the project’s demands for domestic capital and advanced capital to the Ministry of Planning and Investment and the Ministry of Finance for the latter to promptly allocate capital or propose competent authorities to decide on capital allocation (for projects for which domestic capital shall be allocated from the central budget); or the project owner shall report the project’s domestic capital or advanced capital demands to the local managing agency for submission to competent authorities for allocation of capital or decision (in case domestic capital shall be allocated from local budgets);

d/ For projects formulated after the time of elaborating annual budget estimates, managing agencies shall elaborate supplementary financial plans or plans on advance of capital from the subsequent year’s budget and send such plans to finance agencies and planning and investment agencies for handling in accordance with the Law on the State Budget and guiding documents.

2. For on-lent projects

Annually, at the time of elaborating state budget estimates prescribed by current regulations, project owners shall elaborate annual capital plans, clearly stating the sources of ODA, concessional loans and domestic capital, and send such plans to the Ministry of Finance and the Ministry of Planning and Investment. Project owners shall arrange sufficient domestic capital according to project implementation schedules.

3. For programs and projects funded with both allocated and on-lent capital:

Depending on whether the financial mechanism applicable to each project component is allocation or on-lending, project owners shall apply the process of elaborating and approving capital allocation plans for their projects corresponding to each component according to Clause 1 or 2 of this Article.

Chapter IV

SERVING BANKS

Article 9.Selection of serving banks

1. Serving bank means a commercial bank selected from the list of commercial banks qualified to conduct external transactions and provide banking services to ODA and concessional loan-funded programs or projects. The list of qualified commercial banks shall be made and announced by the State Bank of Vietnam.

2. Criteria for selection of a serving bank for a specific program or project:

a/ Fully complying with the State Bank of Vietnam’s regulations on financial safety ratios applicable to credit institutions;

b/ Operating in the same area with the ODA or concessional loan-funded program or project;

c/ Complying or committing to comply with the ODA and concessional loan management regulations of the Government, the Ministry of Finance and donors.

Article 10.Accounts at serving banks

1. Except projects eligible for state budget support which must open accounts at state treasuries so as to facilitate the spending control, capital withdrawal and state budget accounting, project owners or the Ministry of Finance may open transaction accounts (advance account/special account) at serving banks in conformity with the projects’ payment requirements prescribed in the loan/financing agreements.

Projects funded with capital from different sources shall open separate accounts to monitor capital withdrawn from each source.

For a project subject to multiple-tier management for which the agreement signed with the donor provides for level-2 advance accounts, the project owner shall open level-2 advance accounts at branches of the serving bank.

2. Interests on advance accounts/special accounts opened by project owners must be separately accounted and may only be used to pay banking charges to serving banks in the course of project implementation.

Before February 15 every year, project owners shall report to the Ministry of Finance the use of interests on advance accounts/special accounts in the preceding year.

3. Handling of credit balance of interests on advance accounts/special accounts:

a/ For projects eligible for allocation of capital from the state budget: When the projects are completed, project owners shall pay the whole amount of interests left on advance account/special account, if any, to the state budget;

b/ For on-lent projects for which project owners acknowledge debts as soon as capital is withdrawn to advance accounts/special accounts, interests arising on advance accounts/special accounts at serving banks constitute revenues of project owners or credit institutions sub-borrowing the Government’s loans;

c/ For credit limits or components implemented by financial or credit institutions that sub-borrow the Government’s loans for which credit risks are borne by such financial or credit institutions, interests arising on deposit accounts at serving banks constitute revenues of such financial or credit institutions and shall be settled in accordance with the Law on the Credit Institutions and relevant laws.

Chapter V

PROCEDURES FOR AND MANAGEMENT OF CAPITAL WITHDRAWAL

Article 11.Modes of capital withdrawal

The modes of withdrawal of ODA loans or concessional loans are specified in financing treaties or agreements, including:

1. For cases in which loans are provided as budget support:

a/ One-off withdrawal of capital to the state budget: To be applied to programs eligible for direct support from the state budget or regional or global cooperation programs or projects implemented directly by the Government;

b/ Multiple withdrawals of capital to the state budget: To be applied to programs accompanied with policy frameworks; credit programs and limits; umbrella programs and projects; or applied according to the result-based financing of the World Bank (WB).

2. For cases of program- or project-based financing: To comply with one or several of the following capital withdrawal modes:

a/ Direct payment/Transfer payment

- Direct payment means the mode under which the donor, at the borrower’s request, agrees to transfer money to pay directly to the project’s contractor/supplier.

- Transfer payment means the mode of direct payment and/or reimbursement stated at Point c below using Vietnam dong.

b/ Payment under a letter of commitment means the mode of payment under which, the donor, at the borrower’s request, issues a letter of commitment to repay to commercial banks amounts the latter has paid to contractors/suppliers by letter of credit via the system of commercial banks (lending banks, serving banks).

c/ Reimbursement means the mode under which the donor transfers money from the loan account to an account designated by the borrower to reimburse lawful expenditures already made by the borrower/project owner for the project. Lawful expenditures may arise before or after the signing of the foreign loan agreement and must comply with specific terms of the agreement.

d/ Advance account/special account:

The mode of advance account means the mode under which the donor, at the borrower’s request, advances an amount of money to a special account opened for the project at the borrower’s serving bank so that the borrower can take the initiative in making payment for regular and lawful expenses for the project and reduce the number of capital withdrawals while the donor may still closely control the payment from this special account for the project’s activities.

Article 12.Order of, and procedures for, withdrawal of ODA and concessional loans by the mode of budget support

1. For programs accompanied with policy framework, managing agencies shall assume the prime responsibility for, and coordinate with the Ministry of Finance/State Bank of Vietnam and related agencies in, implementing their commitments as agreed with donors so as to meet prerequisite conditions on capital withdrawal stated in loan agreements.

2. For projects/programs eligible for state budget support disbursed based on output results, project owners and managing agencies shall assume the prime responsibility for, and coordinate with related agencies in, implementing disbursement targets as agreed with donors so as to obtain grounds for capital withdrawal. Project owners may receive advanced capital as prescribed by donors so as to implement works as agreed to achieve disbursement target-related commitments.

3. Project owners and managing agencies shall assume the prime responsibility for, and coordinate with related agencies in, making reports or providing documents to prove the fulfillment of framework commitments on policies and disbursement targets prescribed in project documents or financing agreements for submission to donors and the Ministry of Finance to serve capital withdrawal.

4. The Ministry of Finance shall summarize and send capital withdrawal dossiers and requests to donors and, at the same time, coordinate with the State Bank, serving banks and project owners in, transferring withdrawn capital amounts to the state budget for use as agreed with donors.

5. For state budget supports for implementation of national target programs

a/ Program- and project-managing agencies shall reach agreement with the Ministry of Finance on the time of capital withdrawal, to-be-withdrawn capital amounts and accounts for receiving ODA and concessional loans and, at the same time, coordinate with the Ministry of Finance in, elaborating plans on allocation and transfer of capital to component projects;

b/ ODA capital and concessional loans withdrawn to the state budget for spending on objectives and contents of programs must comply with the process of control of state budget expenditures and allocation and payment of state budget capital applicable to national target programs or sectoral programs eligible for state budget support according to current regulations.

6. Capital withdrawal dossiers: To comply with regulations and agreements with donors.

Article 13.Order of, and procedures for, withdrawal of ODA and concessional loans provided by the mode of project-based financing

1. After donors announce that the prerequisite conditions for capital withdrawal under loan/financing agreements have been satisfied, project owners or project management units shall elaborate and send a dossier of request for capital withdrawal to the Ministry of Finance.

2. Dossiers of request for capital withdrawal shall be made according to the forms provided by donors and the guidance for each mode of capital withdrawal specified in Articles 14 and 15 of this Circular, including the following types:

a/ The legal dossier to be sent only once;

b/ The dossier to be sent upon each withdrawal.

3. Within 5 working days after receiving a complete and valid capital withdrawal dossier, the Ministry of Finance shall sign the capital withdrawal request for sending to the donor.

4. In case the donor requests additional documents or accepts only part of the capital withdrawal request, the Ministry of Finance shall notify such to the project owner for complying with reasonable requests of donors.

Article 14.Legal dossiers to be sent only once

1. Project owners shall send legal dossiers to the Ministry of Finance and the spending control agency to serve as a legal basis for management of the withdrawal of ODA and concessional loans for each program and project. A dossier comprises the following basic documents:

a/ The financing agreement signed between the Vietnamese Government and the donor (the Vietnamese translation with the signature and seal of the project owner to be sent to the spending control agency);

b/ The investment project (feasibility study report) and/or project document approved by a competent authority, enclosed with the project investment decision issued by a competent authority (copy); decision approving total estimates (if any);

c/ The contract between the project owner and contractor and enclosed documents on payment conditions, except drawings, design and technical documents (copies); for contracts signed in foreign languages, the Vietnamese translations of contractual terms on payment conditions with the project owner’s signature and seal are required;

d/ Agreements, letters or no-objection statements of the donor; agreements with contractors on project implementation (lists of valid expenses, contracts, contract performance security); approved cost estimates for each project item, bidding package and project (for cases of appointment of contractors or jobs for which contracts are not required) and other related project documents (if any);

dd/ Annual capital allocation plans approved by competent authorities;

e/ The on-lending agreement signed between the project owner and on-lending agency (if any).

2. The project owner shall send to the Ministry of Finance copies of these documents only once when elaborating the dossier for first-time capital withdrawal. The project owner shall take responsibility before law for the authenticity of copies provided to the Ministry of Finance. Particularly, it shall send the original annual financial plans to the Ministry of Finance and spending control agency.

Article 15.Dossier for each capital withdrawal

In addition to the legal dossier sent only once under Article 14 above, for each withdrawn capital amount/capital withdrawal, the project owner shall make and send to the Ministry of Finance a capital withdrawal dossier which is specified for each mode of capital withdrawal as follows:

1. Direct payment/transfer payment (JICA)

a/ A written request for capital withdrawal together with a capital withdrawal application, statements made according to a set form and necessary documents according to the donor’s regulations;

b/ Invoice/payment request of the contractor/supplier;

c/ Payment request (original) certified by the spending control agency;

d/ For post-spending control, the project owner should note the handling of capital withdrawal according to each payment period as follows:

- For mid-term payment, if the value of the spending control agency’s payment certificate is different from the actual expenditure paid in the previous period, the project owner shall adjust this difference into the payment value of the subsequent period.

- For final payment: The project owner shall send a payment request certified by the spending control agency for the previous payment period and the final payment period to ensure that the whole volume to be paid under the project contract is controlled.

2.  Letter of commitment/special commitment procedures

a/ The project owner shall send to the Ministry of Finance a dossier which comprises:

- A written request for the donor to issue a letter of commitment;

- A dossier of issuance of a letter of commitment made according to the form set by the donor and a copy of the opened L/C.

b/ Procedures for L/C payment without a letter of commitment: If the commercial contract contains provisions on L/C payment without a letter of commitment, the project owner shall send a written request for L/C opening together with a copy of the commercial contract and related documents to the Ministry of Finance for consideration and sending its opinion about the L/C opening to the project management unit and the service bank and concurrently sending a notice of irrevocable payment authorization to the bank authorized by the donor for L/C payment.

For withdrawal of JICA capital subject to post-spending control, after each signing for approval of payment to the contractor/consultant, the project owner shall send a payment dossier to the spending control agency for controlling such spending. After having the spending control result, the project owner shall send a claim for payment and a payment request (original) certified by the spending control agency to the Ministry of Finance for monitoring and comparison of capital withdrawal data with JICA.

3. Procedures for capital reimbursement/retrospective payment

a/ The project owner shall send to the Ministry of Finance a capital withdrawal dossier which comprises:

- A written request for capital withdrawal, a capital withdrawal application and statements made according to a set form;

The capital withdrawal application must specify the name and account number of each unit which has advanced capital. For amounts advanced by the state budget (capital for project preparation, domestic fund advanced for project implementation), it is required to specify the name and number of the account of the state budget level from which capital has been advanced.

- A fund transfer document proving that payment has been made to the contractor/beneficiary and/or the contractor’s/beneficiary’s certification of receipt of payment;

- The investment capital payment request (original) certified by the spending control agency.

In special cases, the Ministry of Finance may request additional documents at the request of donors.

b/ For withdrawal of JICA capital: The project owner shall send to the Ministry of Finance a capital withdrawal dossier which comprises:

- A contract signed between the investor and contractor and documents approving the contract of the Vietnamese party and JICA accompanied with Vietnamese translations signed and affixed with the seal of the project owner;

- A written request for capital withdrawal and necessary documents according to the donor’s regulations;

- A payment request (original) certified by the spending control agency.

4. Advance account/special account

a/ First withdrawal of capital to the advance account

The first capital withdrawal to the advance account shall be conducted on the basis of the limit (or cap) of the advance account provided in the loan agreement/financing agreement. The limit of the advance account may be set for 2 levels (for projects implemented at both central and local levels) but the withdrawn capital must be transferred to the level-1 advance account.

Once the loan agreement/financing agreement is effective for capital withdrawal, the project owner shall send: (i) a written request for capital withdrawal, (ii) a capital withdrawal application accompanied with statements made according to the form set by the donor, and (iii) a detailed spending plan for the next 3 months according to the donor’s regulations, to the Ministry of Finance for consideration and signing of the capital withdrawal application for submission to the donor.

b/ Spending from the advance account is prescribed in Article 16 of this Circular.

Particularly for JICA loans, the project owner shall send to the Ministry of Finance the following documents:

- A written request for capital payment of the program or project owner;

- A payment request of the contractor/supplier/beneficiary;

- A payment request (original) certified by the spending control agency for each payment (for pre-spending control). For payment of an advanced amount, it is required to provide bank guarantee documents for the advanced amount under regulations.

c/ Additional transfer to the advance account:

For additional capital withdrawal to the advance account (level 1), the project owner shall send to the Ministry of Finance the following documents:

- A written request for additional capital withdrawal to the advance account;

- A detailed plan on spending from the advance account for the next 3 months;

- A capital withdrawal application and statements made according to the form set by the donor;

- A statement made by the project owner which specifies each expenditure from the advance account with the following details: payment date, amount in original currency, equivalent amount in VND, exchange rate of the foreign currency against VND, payment content and beneficiary;

- An investment capital payment request (original) certified by the spending control agency;

- The service bank’s statements of the advance account (and statements of the level-2 advance account, if any). For JICA loans, it is required to provide documents proving the service bank’s transfer of payment to the beneficiary.

The Ministry of Finance shall consider signing/jointly signing the capital withdrawal application for submission to the donor for additional fund transfer to the advance account.

Article 16.Management of withdrawal and use of ODA capital and concessional loans

1. Spending control purposes

In order to ensure proper and effective use of ODA capital and concessional loans of the Government, the capital withdrawal, spending and payment of projects funded with ODA capital and concessional loans of the Government shall be examined and supervised as for spending and use of the state budget at budget estimation agencies and units through the control of expenditures and payments (below referred to as spending control) from ODA capital and concessional loans of projects. Spending control aims to ensure expenditures of projects conformable with signed agreements/project documents/contracts on use of ODA capital and concessional loans and with current domestic regulations on financial management.

2. Spending control principles

a/ Spending control applies to all spending activities of a project;

b/ Spending control for payment request dossiers for withdrawal of ODA capital and concessional loans must be based on the approved annual plan on disbursement of foreign capital. In case the capital amount actually withdrawn in a year exceeds the approved amount planned for foreign capital disbursement in that year (even in case due to exchange rate differences), on December 30 at the latest, the project owner shall make and submit to the managing agency a plan on addition of the increased capital in the year on the principle that the total value of disbursement and accumulative payment must not exceed the foreign capital limit for the entire project. For domestic fund, the spending control agency shall conduct control and certification within the assigned domestic fund plan;

c/ On the basis of the project owner’s payment request dossier, the spending control agency shall, based on payment terms of the contract (payment numbers, periods, times and conditions) or capital estimates, for payments not based on the contract and value of each payment, control expenditures and payments to the project owner. The project owner rather than the spending control agency shall take responsibility for the accuracy and lawfulness of implemented volumes, norms, unit prices and estimates of jobs and work quality;

d/ The spending control agency shall control expenditures or refuse to certify spending control within 5 working days after receiving a complete dossier with valid documents.

3. Spending control agencies:

a/ State Treasuries at all levels shall control payment dossiers of projects/project components entitled to state budget allocation;

b/ The Vietnam Development Bank or other onlending agencies authorized by the Ministry of Finance shall control payment dossiers of projects/project components entitled to onlending;

c/ Credit limit/credit component programs:

- Financial and credit institutions authorized by the Ministry of Finance to be onlending agencies without taking credit risks shall control expenditures for capital withdrawal and payment requests of borrowers.

- Financial and credit institutions being borrowers under credit programs and credit limits and taking credit risks shall control expenditures when providing onlending to final borrowers.

d/ The Ministry of Finance shall determine relevant spending control agencies for programs and projects other than those specified at Points a, b and c above, according to the principle of disallowing two spending control agencies controlling the same spending activity of a project.

4. Forms of spending control

a/ Pre-spending control means a spending control agency’s examination and certification of the validity of an expenditure before the project owner withdraws capital for payment to a contractor/beneficiary;

b/ Post-spending control means a spending control agency’s examination and certification of the validity of an expenditure after the project owner withdraws capital for payment to a contractor/beneficiary.

Post-spending control applies to all payment requests, except in the following cases when pre-spending control must be applied:

- Direct payment to contractors/suppliers for projects or component projects entitled to allocation, except projects borrowing JICA loans.

- Direct payment to contractors/suppliers for contracts with one-off payment or final payment of contracts with multi-payment.

- Payment from the level-2 account, for projects with advance account of 2 levels.

5. Spending control dossiers and procedures

a/ For projects/component projects on construction investment entitled to state budget allocation

- The spending control dossier and procedures are prescribed in the Finance Ministry’s Circular No. 86/2011/TT-BTC of June 17, 2011, on management and payment of investment capital and non-business capital of investment from the state budget and documents amending, supplementing and replacing this Circular (if any), but are not subject to the deadline for approving project investment decisions, which is before October 31 of the year preceding the planning year.

- The dossier and documents on certification of advanced capital: In addition to legal dossiers and documents sent at the first time, the project owner shall send to the spending control agency the following documents:

+ Guarantee of the advance with a value equal to that of the request for advance and a term ensuring full retrieval of the advanced amount under the contract;

+ Investment capital payment request; investment capital withdrawal document (for advance of domestic capital).

- Dossier submitted for each capital withdrawal: For work maintenance amounts certified by the spending control agency for each payment, certification is not required when transferring these amounts. The investor shall take responsibility for maintenance amounts paid to the contractor.

b/ For projects or activities with administrative and non-business capital allocated from the state budget: To comply with spending control principles prescribed in the Finance Ministry’s Circular No. 161/2012/TT-BTC of October 2, 2012, on control and payment regimes for state budget expenditures through the State Treasury, documents amending and supplementing the Circular and provisions of the Circular, and on the basis of the dossier for withdrawal of ODA capital and concessional loans prescribed in this Circular. In case the loan agreement/financing agreement or the donor provides otherwise, such agreement or provision shall apply.

c/ Dossiers and procedures for control of spending of onlent projects:

- For credit limit:

The dossier and procedures for spending control of projects/project components onlent at the credit limit must comply with regulations of credit institutions using onlent ODA capital, provisions of the financing agreement and regulations of the project. Credit institutions borrowing ODA capital shall take responsibility before law for the properness and validity of credit loans and non-credit expenditures in spending statements sent to the Ministry of Finance before making and sending overseas capital withdrawal dossiers.

- The dossier and procedures for spending control of other onlent projects/components are as for construction investment projects/component projects entitled to state budget allocation.

Chapter VI

ACCOUNTING OF STATE BUDGET

Article 17.Opening of accounts at the state treasury system

1. Accounts of ODA capital and concessional loans:

Pursuant to provisions of Clause 1, Article 10 of this Circular on opening of program/project accounts, to meet the requirements for program/project implementation and under written agreement with the donor, the project owner shall open the project’s accounts of ODA capital and concessional loans at the state treasury system to receive advanced ODA capital and concessional loans and make payment for the project after the state treasury’s spending control.

2. Domestic fund accounts: The project owner shall open an account at the state treasury where it makes transactions for the latter to control payments for the project’s expenditures and concurrently monitor the allocation of domestic fund for the project.

Article 18.Principles of accounting of state budget

1. ODA capital and foreign concessional loans must be fully and promptly accounted into the state budget. State budget shall be accounted by finance agencies at all levels.

2. Accounting of state budget revenues and expenditures shall be made on the basis of the value of ODA capital and foreign concessional loans which have been disbursed and transferred to agencies, organizations and units and converted into Vietnam dong at the accounting exchange rate monthly announced by the Ministry of Finance (in case the Ministry of Finance makes foreign currency transfers to projects) or at the disbursement value in Vietnam dong to projects (in case of disbursement in Vietnam dong). The state budget accounting for onlent amounts is prescribed in Article 4 of the Government’s Decree No. 78/2010/ND-CP.

3. Data of state budget revenues and expenditures serve as a basis for agencies, organizations and units permitted to use or borrow ODA capital and foreign concessional loans of the Government to make state budget accounting and settlement under current regulations.

Article 19.State budget accounting process

After receiving a notice of withdrawal of capital borrowed from the donor or a document on payment from an advance account/special account of the service bank, the Ministry of Finance shall send a revenue or expenditure order to the State Treasury for state budget accounting. Depending on the purpose and user/beneficiary, the order and procedures for state budget revenue and expenditure accounting are specified as follows:

1. For monetary loans in the form of budget support in general: Based on the money receipt/credit advice of the service bank, the State Treasury shall account state budget revenues from ODA capital and concessional loans under regulations (for transfer of foreign currencies to the centralized foreign currency fund, accounting shall be made according to regulations on state budget revenues in foreign currencies).

2. For monetary loans in the form of budget support by sector or field: Based on the signed financing agreement and estimates assigned to users/beneficiaries, the State Treasury shall make payments, control expenditures and account state budget expenditures from ODA capital and concessional loans according to regulations applicable to state budget capital.

3. For foreign loans allocated to non-business and construction investment projects of ministries and central agencies: Based on the donor’s disbursement notice or document on payment from the advance account/special account of the service bank, the Ministry of Finance shall account state budget revenues from ODA capital and concessional loans and expenditures for allocation of construction investment and administrative and non-business capital to ministries and central agencies according to the current state budget index.

4. For foreign loans allocated to provinces and centrally run cities: Based on the donor’s disbursement notice, the Ministry of Finance shall account state budget revenues from ODA capital and concessional loans and additional target expenditures from the central budget to the local budget through the provincial-level Finance Department. Based on documents and dossiers sent by the Ministry of Finance, the provincial-level Finance Department shall make and send an order of payment to local units using loans to the provincial-level State Treasury for budget allocation in accordance with the State Budget Law.

5. For the Government’s foreign loans which are onlent directly by the Ministry of Finance to provincial-level People’s Committees and the private sector: Based on the donor’s disbursement notice, the Ministry of Finance shall account state budget revenues from ODA capital and concessional loans and expenditures for onlending, for onlending agencies authorized by the Ministry of Finance.

6. For the Government’s foreign loans which are onlent to investment programs and projects by a financial or credit institution authorized by the Ministry of Finance: Based on the donor’s disbursement notice, the Ministry of Finance shall account state budget revenues from ODA capital and concessional loans and expenditures for onlending for the onlending agency. Regardless of the time of accounting state budget revenues and expenditures, the onlending agency and the owner of the onlent project shall carry out debt receipt procedures immediately after receiving a copy of the donor’s disbursement notice sent by the Ministry of Finance.

Article 20.Adjustment of state budget accounting data

1. Adjustment of state budget accounting data aims to handle differences between state budget revenue and expenditure data and data of actual withdrawal and use of ODA capital and foreign concessional loans, which may arise in the following cases:

a/ Withdrawn capital has not been used up or has been spent improperly and must be repaid to the donor under the financing agreement;

b/ The project owner is transferred under a competent agency’s decision;

c/ The domestic financial mechanism changes under a competent authority’s decision (for example: change from onlending to state budget allocation of part or all ODA capital and concessional loans of the project);

d/ Errors or mistakes made in state budget accounting are corrected on the basis of comparing data of state treasuries of all levels with those of project investors.

2. Adjustment order and process:

a/ Based on the adjustment request of the managing agency and project owner together with specific supporting documents and records, the Ministry of Finance (the Department of Debt Management and External Finance) shall check and compare them with accounted state budget data and make and send a budget statistic adjustment slip to the State Treasury;

b/ Based on the budget data adjustment slip, the State Treasury shall account the adjustment of accounted budget data and send copies of the budget data adjustment slip to the managing agency and project owner for adjustment of corresponding data on the reports on accounting and settlement of foreign capital.

Chapter VII

ARRANGEMENT OF DOMESTIC FUND AND MECHANISM FOR ADVANCE OF STATE BUDGET CAPITAL

Article 21.Responsibility for arrangement of domestic fund

1. The central budget shall arrange domestic fund for projects/component projects entitled to central budget allocation under the State Budget Law which are managed and implemented by central agencies in the capacity as project/component project owners. The Ministry of Planning and Investment and the Ministry of Finance shall fully and promptly arrange domestic fund by state budget capital source (capital construction, administrative-non-business) under annual funding plans as specifically assigned in the Government’s Decree No. 38/2013/ND-CP of April 23, 2013.

2. Local budgets shall arrange domestic fund for:

a/ Projects/component projects within the spending tasks of local budgets under the State Budget Law which are managed and implemented by local agencies in the capacity as project/component project owners;

b/ Projects for which provincial-level People’s Committees borrow ODA capital and concessional loans of the Government.

3. Financial and credit institutions and enterprises of all economic sectors shall arrange domestic fund for:

a/ Projects/component projects managed and implemented by financial and credit institutions and enterprises in the capacity as project/component project owners;

b/ Projects/component projects for which financial and credit institutions and enterprises borrow ODA capital and concessional loans of the Government.

4. Beneficiaries shall contribute domestic fund (in cash, in kind or labor) under the design of each program or project.

Article 22.Capital advance mechanism

Advance of state budget (central budget) capital for implementation of a number of items of a program or project entitled to state budget allocation in case the commitment to finance ODA capital and concessional loans has been made and included in the annual state budget estimate decided by the National Assembly for which capital has not been withdrawn, under Article 44 of the Government’s Decree No. 38/2013/ND-CP of April 23, 2013:

On the basis of the managing agency’s request, the Ministry of Planning and Investment shall assume the prime responsibility for, and coordinate with the Ministry of Finance in, considering and deciding to advance state budget capital for program or project implementation. These advanced amounts must be retrieved for repayment to the state budget immediately after ODA capital and concessional loans are disbursed by the donor.

Chapter VIII

ONLENDING ORGANIZATIONS

Article 23.Onlending order and procedures

1. Signing of onlending contracts/agreements:

a/ The Ministry of Finance shall directly provide onlending to financial and credit institutions (for onlending of credit limit/credit components and financial and credit institutions taking credit risks) or to project owners and enterprises of all economic sectors (for onlending to specific investment programs and projects other than lending to production households and individuals) by signing an onlending agreement or a supplementary lending agreement between the Ministry of Finance and these organizations and units;

b/ The Ministry of Finance shall directly provide onlending to provincial-level People’s Committee by signing an onlending memorandum of understanding or a supplementary lending agreement between the Ministry of Finance and provincial-level People’s Committees.

The onlending memorandum of understanding or supplementary lending agreement specified at Points a and b above shall be made for each specific program or project receiving onlending according to a set form agreed with the donor (if any).

c/ The Ministry of Finance shall authorize financial or credit institutions to act as onlending organizations for implementation of specific investment programs or projects (in case financial or credit institutions not taking credit risks) by signing an onlending authorization contract with the onlending agency.

The onlending authorization contract shall be made according to the form provided in Appendix 2 to the Government’s Decree No. 78/2010/ND-CP of July 14, 2010.

2. Planning of collection of debts from onlending:

a/ For loans directly onlent by the Ministry of Finance: The Ministry of Finance shall make quarterly and annual debt collection and onlending charge collection plans based on signed onlending agreements or supplementary lending agreements;

b/ For loans to be collected by the onlending agency under the Ministry of Finance’s authorization: The onlending agency shall make quarterly and annual plans on collection of onlent capital and onlending charge based on signed onlending authorization contracts and submit them to the Ministry of Finance for summarization.

3. Organization of debt collection:

a/ Debt collection account: Amounts collected from onlent loans (principal, interest, onlending charge) shall be repaid to the debt payment accumulation fund’s transaction accounts in foreign currencies and Vietnam dong opened at the operation centers of the State Treasury;

b/ In June and December every year, agencies, organizations, enterprises and provincial-level People’s Committees being direct borrowers of the Government’s foreign loans shall report and compare debt payment data of onlent programs and projects with the Ministry of Finance (the debt payment accumulation fund);

c/ The onlending agency shall quarterly and annually send to the Ministry of Finance (the debt payment accumulation fund) reports on the implementation of the plans on collection of onlent capital and onlending charge and on the repayment to the debt payment accumulation fund according to each onlent program and project. The deadline for submitting quarterly reports and annual reports is respectively the 15^thof the first month of the following quarter and before January 31 of the following year. Annual reports on collection of principal and interests of onlent loans and onlending charges which are made and summarized by the onlending agency for each onlent program and project serve as the basis for the Ministry of Finance (the debt payment accumulation fund) to compare and certify data of annually collected amounts of onlent loans with the onlending agency.

Article 24.Handling of onlending risks

The order, procedures and competence to handle onlending risks are specified in Article 23 of the Government’s Decree No. 78/2010/ND-CP of July 14, 2010.

Managing agencies shall coordinate with the Ministry of Finance and onlending agencies in assessing, rating and classifying debts at risk according to the Regulation on management and handling of risks for the public debt list promulgated together with the Prime Minister’s Decision No. 56/2012/QD-TTg of December 21, 2012.

Chapter IX

ACCOUNTING, AUDIT, REPORTING AND EXAMINATION REGIMES

Article 25.Accounting of projects funded with ODA and concessional loans

1. Accounting principles:

Users of ODA capital and concessional loans shall:

a/ Comply with provisions of the Accounting Law, Vietnamese Accounting Standards and current accounting regimes of Vietnam;

b/ Comply with donors’ accounting regulations provided in loan agreements, financing agreements or project documents (if any).

2. Organization of accounting apparatus

The accounting apparatus shall be organized based on the project size and the form of project management.

a/ For projects without a project management unit or with a project management unit without organizing an accounting apparatus: The project owner may use the unit’s accounting apparatus and make accounting on the same accounting books of the unit, the unit’s accounting section shall concurrently make accounting for the project but shall separate accounts, capital sources and revenues and expenditures of the project;

b/ For large-sized projects with a project management unit (which has independent legal person status and seal): The project management unit shall decide on the formation of a separate accounting division or section and appoint a chief accountant (or hire a chief accountant) or a person responsible for accounting under current regulations.

3. Applicable accounting regimes

a/ For the case specified at Point a, Clause 2 of this Article: To apply the accounting regime currently applied by the unit (corporate accounting, administrative-non-business accounting or other relevant accounting regimes);

b/ For the case specified at Point b, Clause 2 of this Article: To apply an appropriate accounting regime on the basis of the nature of capital use, the form of project management and the type of the unit using the capital.

Article 26.Audit of financial statements

1. Audit of annual financial statements of projects funded with ODA capital and concessional loans aims to check and certify the truthfulness and reasonability of projects’ financial statements in a fiscal year.

2. Annual financial statements of projects funded with ODA capital and concessional loans must be audited by the State Audit Office or independent auditors under agreements with donors. In case projects funded with ODA and concessional loans are included in the State Audit Office’s annual audit plan and with donors’ approval, financial statements of that year are not required for independent audit.

3. Audit of financial statements must comply with current law unless otherwise provided by agreements between the Government and donors.

4. Audit firms eligible for audit of projects are independent audit businesses which lawfully operate in Vietnam and possess a certificate of eligibility for audit service business granted by the Ministry of Finance.

5. If provided by donors, audit of financial statements for each work item, work or finished job may be hired.

6. Project owners shall send independent audit units’ reports on audit of annual financial statements of projects to the State Audit Office.

Article 27.Settlement

1. Annual settlement:

a/ Annual settlement of non-business capital projects using ODA capital and concessional loans is prescribed in the Finance Ministry’s Circular No. 01/2007/TT-BTC of January 2, 2007, guiding the approval, appraisal and notification of annual settlement for administrative agencies, non-business units, state budget-funded organizations and budgets of all levels, and documents supplementing, amending or replacing the Circular;

b/ Annual settlement of construction investment projects using ODA capital and concessional loans is prescribed in the Finance Ministry’s Circular No. 210/2010/TT-BTC of December 20, 2010, on settlement of capital construction investment capital from the state budget source by budget year, and documents supplementing, amending or replacing the Circular.

2. Project completion settlement:

a/ Investment projects using ODA capital and concessional loans must be settled upon completion in accordance with the Finance Ministry’s Circular No. 19/2011/TT-BTC of February 14, 2011, on settlement of completion of state budget-funded projects, and documents amending, supplementing or replacing the Circular;

b/ For a project terminating operation or being dissolved or merged in a budget year under a decision, the project director and person responsible for accounting may be transferred to another work only after settling the project completion as of the time of operation termination, dissolution or merger, and shall take responsibility before law for violations (if any) committed during the time of performing their job;

c/ For an umbrella program/project with independent component projects, the project owner shall carry out procedures for submission and approval of settlements of component projects under regulations and send the results to the agency managing the umbrella program/project for summarization and reporting on the settlement of the whole program.

Article 28.Reporting on disbursement

1. When carrying out procedures for foreign loan withdrawal in the forms provided in Article 15 of this Circular, the project owner shall make and send to the Ministry of Finance a statement on withdrawal of foreign loans, made according to the form provided in Appendix 1 to this Circular(not translated), as a basis for accounting state budget revenues and expenditures.

2. Within 30 days after closing the loan or financial amount, the project owner shall send to the Ministry of Finance a report on program/project disbursement completion to the Ministry of Finance, made according to the form provided in Appendix 2 to this Circular(not translated), as a basis for project settlement.

3. The project owner shall make and send financial statements according to the project document and signed loan/financing agreement to the donor and concurrently to the managing agency and the finance agency of the same level for monitoring and prompt direction in the financial management of the project.

4. The managing agency shall make, summarize and provide the Ministry of Finance with biannual and annual reports on public debts, made according to the form provided in the Finance Ministry’s Circular No. 53/2011/TT-BTC of April 27, 2011, guiding report forms and disclosure of information on public debts and foreign debts of the nation.

Article 29.Examination

Finance agencies at all levels and project managing agencies may independently or in coordination with related agencies periodically or irregularly examine projects using ODA capital and foreign concessional loans in their observation of this Circular’s provisions on financial management.

Chapter X

OTHER PROVISIONS

Article 30.Asset management

The management, use and handling of assets invested and furnished from projects using ODA capital and concessional loans of donors must comply with the Prime Minister’s current regulations and the Ministry of Finance’s guidance on management and use of assets of state-funded projects.

Article 31.Tax policies

1. Tax policies for programs and projects using ODA capital and concessional loans of donors shall be separately guided by the Ministry of Finance.

2. Tax policies applicable to the private sector’s programs and projects using ODA capital and foreign concessional loans of donors: Agencies managing programs or projects with the objective of supporting the private sector, financial and credit institutions onlending credit programs or limits to the private sector, or agencies competent to permit the private sector’s access to ODA capital and foreign concessional loans of the Government, shall notify or certify the form of providing ODA capital and concessional loans for each specific program or project to tax agencies for application of tax policies for the private sector’s programs and projects using ODA capital and concessional loans of donors.

Article 32.Financial management handbooks

In addition to provisions of this Circular, the Ministry of Finance shall coordinate with donors (upon request) in publishing financial management handbooks. These handbooks may be used as a reference document on professional operations and assist organizations and individuals involved in the management and implementation of programs and projects using ODA capital and concessional loans.

Chapter XI

ORGANIZATION OF IMPLEMENTATION

Article 33.Effect

1. This Circular takes effect on February 15, 2013, and replaces the Finance Ministry’s Circular No. 108/2007/TT-BTC of September 7, 2007, guiding the regime for state management of finance for ODA programs and projects; Circular No. 40/2011/TT-BTC of March 22, 2011, amending and supplementing a number of points of Circular No. 108/2007/TT-BTC of September 7, 2007, and Circular No. 107/2011/TT-BTC of July 20, 2011, amending Article 1 of Circular No. 40/2011/TT-BTC of March 22, 2011.

2. In the course of implementation, if legal documents invoked for application in this Circular are amended, supplemented or replaced with new documents, those new documents prevail.

3. Any problems arising in the course of implementation or matters not guided in this Circular should be promptly reported to the Ministry of Finance for guidance and coordinated settlement.-

For the Minister of Finance
Deputy Minister
TRUONG CHI TRUNG