Circular No. 22 TC/VT dated March 20, 1995 of the Ministry of Finance guiding the implementation of the regime of state financial management over the official development assistance

CIRCULAR

GUIDING THE IMPLEMENTATION OF THE REGIME OF STATE FINANCIAL MANAGEMENT OVER THE OFFICIAL DEVELOPMENT ASSISTANCE

The Government issued Decree No.20-CP on 15th March 1994 on the Regulations for the Management and Use of the Official Development Assistance, and Decree No.177-CP on the 20th of October 1994 on the Regulations on the Management of Investment and Construction. The Official Development Assistance in the form of refundable aid shall conform with the Regulations on the Management of Foreign Loans and Payment of Foreign Debts issued attached to Decree No.58-CP on the 30th of August 1993 of the Government and the guiding Circulars No.17-TC/TCDN and 18-TC/TCDN on the 5th of March 1994 of the Ministry of Finance. For the Official Development Assistance in the form of non-refundable aid, the Ministry of Finance provides the following guidance:

I. GENERAL PRINCIPLES

1. The Official Development Assistance - hereafter referred to as ODA supplied by foreign countries to our country is a source of revenue of the State Budget. It must be planned, fully accounted for in the State budget, and managed according to the current regime of management of the State Budget.

2. The non-refundable ODA shall be used in the form of State Budget allocations or State credits.

The State budget allocations (for capital construction or for public services expenditures) shall be used chiefly to fund socio-economic programs and projects assigned to the objects and areas covered by the State budget.

The ODA intended for projects and constructions capable of capital recovery shall be reloaned by the State through the General Department for Development Investment directly under the Ministry of Finance, or the Bank assigned by the Government. The financial mechanism of the relending shall be concretely determined by the Ministry of Finance in consultation with related agencies to conform with the nature and characteristics of production and business of each unit.

3. The Ministry of Finance shall exert unified State financial management over all ODA, from consultancy in the decision on how to use the ODA and the ratification of the projects and allocation of the construction capital to the projects, the suggestion of the mechanism of financial management, the payment through the State budget to the financial management of the whole process of utilization of the fund, to the control and the financial accounts settlement of the project.

The Director of the Finance and Price Service of the provinces or cities directly under the Central Government shall assist the Minister of Finance and the People's Committee of the province and city to exert financial management over the ODA directly allocated to the locality or allocated to the locality by the ministries or central services.

4. The heads of the ministries and branches, the Presidents of the People's Committees of the provinces and cities, and the Presidents of associations, mass and social organizations are responsible before law for the financial management and effective use of the ODA to the programs and projects under their jurisdiction.

5. The managers of programs, the directors of projects and the investors in the projects using ODA shall have to ensure strict observance of the objectives, targets, and other commitments written in the programs and projects. They must repay to the State budget the loans fully and on schedule, and in conformity with the regulations. They must seriously comply with all financial regulations, the Ordinance on Accountancy and Statistics, the Regulations on the Organization of Accountancy and the Regime of Accountancy Accounting, together with the current audit regime of the State.

II. CONCRETE STIPULATIONS

A. PLANNING

Each year, on the basis of the written commitments or agreements, on the implementation programs, on the notice of the controlling agency's allocation to the unit, on the basis of the situation of the implementation of the project in the year, the unit shall draw up its plan for collection and use of the ODA together with its economic, financial and budget plans, and send to the project controlling agency and the financial agency of the same level (the projects of the ministries shall be sent to the controlling ministry and the Ministry of Finance; the projects of which the controlling agencies are the provinces and cities shall be sent to the Finance and Price Service).

The ministries, the central branches and the Finance and Price Services shall integrate this plan with their annual financial and State budget plans, and report to the Ministry of Finance which shall synthetize them into a common plan to report to the Government which shall submit it to the National Assembly for ratification.

The plan for the collection and use of the ODA must fully explain the following contents:

- The planned value (foreign currencies converted into Vietnamese currency) to be received and used. This must be specified for each kind of goods and currency, and detailed for each purpose and object of use.

- The plan for counterpart capital in the country taking part in the project (if any) specified for each objective and each kind of capital (capital construction, administrative and public service capital...).

- Expenditures for the drafting and management of the project, including all expenditures spent from the time the project is drafted to the reception, transportation and storing of goods and equipment, expenditures in managing the implementation of the project..., and the capital source to cover this work. For the projects in the production or business sector, the project owner shall use his self-procured capital or loan capital. For the projects in the administrative or public service sector or capital construction to be funded by the State budget, the project owner must draft the plan together with his State budget expenditure plan.

B. RECEIPT AND MANAGEMENT OF ODA

There are many forms and modalities for the transfer of ODA, for which each country or aid organization has its own regulations, procedures and objectives. That is why, basing itself on the contents of the documents signed with these countries and aid organizations, the Ministry of Finance shall submit to the Government for approval the financial mechanism and provide concrete guidance for each type of ODA.

1. Certification of ODA:

- The aid money and goods brought from abroad for use in the country (including the goods ordered by the foreign countries and delivered to the unit for use in the country) must have aid certificates.

- The objects which must have aid certificates are the units or project owners receiving foreign aid money or goods.

If the foreign party orders goods in the country, the project owner shall fill the procedures for certification not later than 30 days after receiving the goods.

- Upon receiving the arrival notice of the aid money or goods, the unit must call immediately at the Commission for Management and Reception of International Aid under the Ministry of Finance (or the Representative Office of the Commission for Aid Management and Reception in Ho Chi Minh City and Da Nang City) to fill the procedures of aid certification.

- The certificate of aid money or goods is the basis to complete the procedures for goods reception and money withdrawal and payment through the State Budget. The certificate of aid money or goods shall be issued in a uniform way by the Ministry of Finance.

2. Necessary documents to certify the aid:

a/ With regard to goods:

- Ratification documents of the program or project by an authorized agency.

- Document on the project, program, agreement, decree, or other agreements officially signed with the foreign partner with specifications of the list and value of the different kinds of goods already ratified.

- Documents ratifying the commercial contract as currently stipulated.

- Bill of Lading, or Airway Bill.

- Packing List.

- Invoice.

- Insurance Certificate.

b/ With regard to aid money:

- Document ratifying the program or project by the authorized agency.

- Document of the project, program, agreement, decree or other agreements officially signed, together with attached appendices with specifications as to the amounts of foreign currencies or Vietnam Dong under the budget sections of the program or project.

- An explanation of the plan for use of the aid money, and the notice of the Bank or the money transfer communique from the foreign party about the amount of money to be received in Vietnam.

c/ Cases in which additional documents are needed:

- With regard to the long-term national programs, there must be the text of officially signed annual documents, with specifications as to the list and quantities of goods, or the amounts of money as described above.

- In case there is no specification of the list of goods, the unit must have a document detailing the quantity or weight, and the value of the aid goods within the total cost of the project. This must be certified by the head of the controlling agency. With regard to the items banned from import, there must be a written agreement of the Prime Minister.

- In case of a modification in the list or kinds of aid goods, or a modification of the expenditures for the different budget items of the project, there must be a ratifying document of the Prime Minister or an agency empowered by the Prime Minister.

- In case there are foreign aid goods or money not included in the project or program or in the signed documents, there must be written permission of use from the Prime Minister, the explanation of their origins and the purpose of their use.

- In case a unit receives the goods or money for redistribution to many other units, it must have a concrete plan of allocation to each object, and a delegation of powers from the units entitled to use the aid.

- In case the foreign partner orders goods in Vietnam to be assigned to a unit for use, this unit must have the original copy of the invoice together with the issue order of the seller promulgated in a uniform form by the Ministry of Finance.

- In case there are no immediate bill of lading, airway bill, invoice and packing list for reception of the goods (delayed arrival of documents), the unit must have a notice of the airport or the transportation agency. Fifteen days at the latest from the date of certification, the unit must send the documents related to the consignment of goods already received as stipulated above to the Commission for Management and Reception of International Aid, or the place which has issued the certificate.

3. Procedures of reception:

In its relations with the agencies in the country for the reception of aid in foreign currency and goods, the unit must comply with procedures in the following order:

- If it receives foreign currencies, it shall have:

+ To obtain a certification of the amount of money.

+ To go to the Bank and produce the certificate in order to fill the procedure for money withdrawal.

+ To make a report on the actual reception of the money (foreign currencies and Vietnamese Dong) to the Commission for Management and Reception of International Aid.

- If it receives goods from abroad, it shall have:

+ To obtain a certificate of reception of aid goods;

+ To apply for a permit to import goods at the import-export permit issuing department of the Ministry of Trade;

+ To fill the customs procedures for goods reception;

+ To report the actual result of the goods reception to the Commission for Management and Reception of International Aid.

4. Payment through the State budget:

a/ The aid goods or money certificate issued by the Commission for Management and Reception of International Aid under the Ministry of Finance is an important paper for the realization of payment through the State Budget.

b/ The value of payment through the State Budget is the value in foreign currency of the goods and amount of money which the unit has received after conversion into Vietnam Dong at the buying rate announced by the Foreign Trade Bank at the time of certification. For the goods ordered by the foreign party in the country and assigned to the unit for use, the value of payment is the issue price written in the invoice which is also an issue card.

In case the amount of goods actually received is above or below that written in the declaration and certification, or does not correspond in kinds or prices with the declaration or certificates, or the amount of money actually received is higher or lower than that already declared, the unit must within no more than 45 days after the first certification, send an expertise report (or a report on the actual receipt of the money) to the agency certifying aid for examination of and modification to the certificate.

In case of receipt of aid goods that do not carry the value in the currency of origin for conversion into Vietnam Dong, the certification price shall be temporarily set by the Commission for Management and Reception of International Aid. Within 45 days after the first certification of aid, the unit must send the repricing minutes to the certifying agency in order to readjust the certificate for the unit. The Pricing Council set up by the controlling agency of the unit with the participation of the representatives of the financial and pricing agencies of the same level shall decide on the readjustment. Past this time limit, if the unit does not send the minutes on repricing, the Ministry of Finance shall regard the first certificate and the temporarily set price as the legal voucher for payment through the State Budget.

c/ The Ministry of Finance (the Commission for Management and Reception of International Aid) shall fill the procedures for payment through the State budget for the value of the goods and money for the receiving unit on the following principles:

- With regard to the items which are to be allocated by the State budget:

+ To be recorded as State Budget revenue: Chapter 99A, Type 14, Item 01, Category 5 (or 6), Section 42.

+ To be recorded as State budget expenditures according to the chapter, type, item, category and section of the unit, and the use purpose.

- With regard to the item defined as reloans from the State:

+ To be recorded as State Budget revenue as prescribed above, at the same time to be accounted for as extra-budget expenditures with a view to separate monitoring. When the loan is recovered, the principal shall be left out in the accounts for loans, and the interest shall be recorded as budget income.

5. Management and accountancy:

a/ In the process of use of the aid money and goods, the unit must record timely and fully all the money and goods already received on the vouchers and books of accounts under current regulations of the State and under the Ordinance on Accountancy and Statistics and the current regime of accounting and accountancy.

In case of an adjustment of the value of the aid goods and money, basing itself on the official notice on adjustment by the aid certifying agency or the financial agency, the unit shall carry out writing accounts on the adjustment of the value of the reception or use value of the aid on their books of accounts.

b/ The financial management of the reception and use of the ODA (including foreign capital and the counterpart capital in the country, the expenditures on drafting and management of the project) must comply with the current regime of financial management of the State.

The management of the ODA distributed in the form of allocation of infrastructure construction capital shall have to comply with the regimes on the use of infrastructure construction capital of the State budget.

The management of the ODA allocated in the form of public service capital must comply with the regimes of management of the public service expenditures allocated by the State budget.

In the case of receipt and use of the ODA in the form of reloans from the State, the unit must fully carry out the investment procedures and the conditions on borrowing and repayment as prescribed.

The Finance and Accountancy Departments of the ministries and branches shall have to assist the Heads of the ministries and branches to sum up and carry out financial management over all the sources of aid from foreign countries under the jurisdiction of the ministries and branches according to the current regimes of State financial management.

The financial agencies at all levels shall have to inspect and supervise the process of receiving and using all the foreign aid for the projects under their responsibility of financial management.

In the process of financial control and supervision, it is necessary to resolutely handle, or make timely proposals to the Ministry of Finance and the law enforcement agencies to handle, all the violations of the regime of financial management.

C. REPORTING, MAKING THE FINAL STATEMENT OF ACCOUNTS, AND DELIVERY OF PROJECT

1. Each year, the owners of projects using ODA shall have to draw up a report on the situation of the receipt and use of the ODA, and send it to the controlling agency of the project and the financial agency managing the project (for the projects under the ministries and central branches, it shall be sent to the Ministry of Finance (the Commission for Management and Reception of International Aid); for the local projects, it shall be sent to the Finance-Pricing Service).

The controlling agency of the project shall have to sum up the whole situation of the receipt and use of the aid in all projects under the purview of its management, and report to the financial agency of the same level (at the Ministry of Finance, it is the department of financial management of the branch).

The report on the situation of management and use of the aid must comprise the following main contents:

- Results of the reception of the ODA (quantity, value in foreign currencies converted into Vietnam Dong for each type).

- The situation of the use for each recipient and for each work according to the purpose of the project.

- The situation of the use of the different kinds of expenditures in drafting, receiving and managing the project.

- The observance of the regimes of financial management.

- The efficiency and results of the use of the ODA; and relevant suggestions for solution.

2. On completion of the project:

- The owner of the project shall have to draw up a report on final settlement of accounts for the receipt and use of the ODA (including those in the form of State budget allocation or reloans), settle the accounts of the counterpart funds, the expenditures involved in drafting, receiving and managing the project, and send them to the controlling agency of the project and the financial agency of the same level.

- The order and requirement of the drafting of the final settlement of accounts and the contents of the report on the settlement must comply with the current guidance of the Ministry of Finance.

- In case the project is financed by different sources of capital, the report on the settlement of accounts must analyze the situation of receiving and using each source of capital.

- In case the project investment spreads over many years, in making the settlement of accounts, the project owner shall base himself on the guidance of the Ministry of Construction in order to convert the investment capital already achieved on the price platform at the time of the delivery and putting into operation of the project, as basis to determine the value of the delivered properties.

- If on completion of the project there is still capital left over, the project owner must report it immediately to the controlling agency and the financial agency managing the project. The financial agency shall examine and decide on the direction for use of the left-over. All the uses of this capital pending the documents ratifying the orientation for its use by the financial agency are violations of the regime of management of the State budget expenditures, and shall be dealt with according to law.

- Before the final settlement of accounts on completion is ratified, the project must be inspected by the audit agency which shall make known its opinion by an official document, or shall inspect according to current regulations: the Ministry of Finance (presided over by the Commission for Management and Reception of International Aid, and with the participation of the Financial Management Sector) shall have to inspect and give its opinion in writing before the authorized level ratifies the projects under the jurisdiction of the ministries and the central services. The Finance-Pricing Service shall have to inspect and give its opinion in writing with regard to the projects under local management.

- The ratification of the settlement of accounts of the project on completion must comply with the current stipulations of the Ministry of Finance.

3. The report on the final settlement of accounts of the project is the basis for the financial hand-over of the project on completion and to be put into operation.

- With regard to the project conducted in the form of State budget allocation for public service expenditures, the delivery and reception for putting into operation shall conform to the regime of use of the capital and property allocated by the State budget to the administrative and public service agencies.

- With regard to the projects carried out in the form of State budget allocation for infrastructure construction, the delivery and reception for putting into operation shall comply with the current regime on assignment of infrastructure construction capital allocated by the State budget.

- With regard to the projects carried out in the form of loans from the State budget, the borrowing unit shall have to look after the source for repayment of principal and interest to the State budget in conformity with the stipulations in the debt acknowledgement contract.

III. IMPLEMENTATION PROVISIONS:

1. This Circular takes effect on the date of its signing. Circular No.45-TC/VT on the 15th of August 1991 of the Ministry of Finance is now annulled.

2. The ministries, branches and localities have the responsibility to guide and inspect the project owners under their jurisdiction to implement this Circular.

3. In the process of implementation, if any problems arise the ministries, branches, localities, units and the project owners shall report in time to the Ministry of Finance (the Commission for Management and Reception of International Aid) for study and settlement.