Circular No. 40/2011/TT-BTC of March 22, 2011, amending and supplementing a number of articles of the Ministry of Finance’s Circular No. 108/2007/TT-BTC of September 7, 2007, guiding the financial management mechanism applicable to official development assistance (ODA) programs and projects

THE MINISTRY OF FINANCE

Circular No. 40/2011/TT-BTC of  March 22, 2011, amending and supplementing a number of articles of the Ministry of Finance’s Circular No. 108/2007/TT-BTC of September 7, 2007, guiding the financial management mechanism applicable to official development assistance (ODA) programs and projects

Pursuant to the Public Debt Management Law;

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

Pursuant to the Government’s Decree No. 131/2006/ND-CP of November 9, 2006, promulgating the Regulation on management and use of official development assistance (ODA) sources;

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

Pursuant to the Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance,

The Ministry of Finance amends and supplements a number of points of the Finance Ministry’s Circular No. 108/2007/TT-BTC of September 7, 2007, guides the financial management mechanism applicable to ODA programs and projects, as follows:

Article 1.

1. To amend the sixth paragraph, Point 1, Section IV of Part I as follows:

“Annual financial plans of projects entitled to state budget allocation already approved or notified by competent agencies serve as the basis for payment control and withdrawal of domestic contributed capital and ODA capital for the projects. After these financial plans are approved, the project management units shall send them to the expenditure control agency.”

2. To amend Point 1, Section V of Part I as follows:

“1. Service bank:

a/ Service bank means a commercial bank selected from the list of commercial banks qualified for authorization to conduct external transactions, payment and provision of banking services for ODA projects. The list of qualified commercial banks shall be prepared and announced by the State Bank of Vietnam in coordination with the Ministry of Finance.

b/ Criteria for selection of service banks

- Complying with all regulations of the State Bank of Vietnam on financial safety ratios applicable to credit institutions;

- Operating in geographical areas suitable to ODA projects’ areas;

- Making a commitment to comply with regulations of the Government, the Ministry of Finance and donors on ODA capital management;

c/ Selection of service banks:

- On the basis of the list of banks qualified for acting as service banks announced by the State Bank of Vietnam and the Ministry of Finance and the written requests of commercial banks, the Ministry of Finance shall consider and approve the selection of service banks for ODA projects.

- In case more than one qualified commercial bank request to serve a single ODA project, priority shall be given to the following: banks experienced in serving ODA projects; state-owned commercial banks; and joint-stock commercial banks in which the State holds dominant shares.

- If the State Bank of Vietnam and the Ministry of Finance have not yet announced the list of commercial banks qualified to act as service banks, on the basis of the requests of commercial banks, the Ministry of Finance shall consult the State Bank of Vietnam and donors to select service banks.

3. To add the following sixth paragraph to Point 2, Section V of Part I:

“In case the ODA project applies the method of payment through a special account, the transaction of converting foreign-currency amounts on the special account into VND or another foreign currency for payment shall be conducted at the service bank. In all cases of buying foreign-currency amounts by the service bank from the project, the exchange rate applied by the service bank at the time of buying foreign-currency amounts will apply.”

4. To amend the first em rule, Point 1 e/, Section I of Part II as follows:

- Payment from the advance account/special account, for projects with only one advance account level, or payment from level-1 advance accounts, for projects with many advance account levels.”

5. To amend and supplement Points a, b, c and d and annul Point e, Clause 3, Section I of Part II, as follows:

“a/ Expenditure control dossiers and procedures applicable to construction investment projects entitled to state budget allocation:

Expenditure control dossiers and procedures applicable to construction investment projects entitled to state budget allocation comply with the provisions of the Ministry of Finance’s Circular No. 27/2007/TT-BTC of April 3, 2007, guiding the management and payment of investment capital and non-business capital of investment and construction nature, which belong to the state budget capital source, and documents amending, supplementing or replacing Circular No. 27/2007/TT-BTC (if any). A dossier (one set) is specified as follows:

- Dossiers and documents sent for the first time (or supplemented or revised documents in case of supplementation or revision):

+ The financial assistance agreement signed between the Vietnamese Government and the donor (the Vietnamese translation bearing the signature and seal of the project owner);

+ The work construction investment project (or techno-economic report, for projects only requiring techno-economic reports), enclosed with the investment decision issued by a competent authority (a copy);

+ The document on contractor selection as provided by the Bidding Law, including bidding, contractor appointment, direct procurement, competitive offer, self-implementation and contractor selection in special cases (a copy);

+ The contract between the project owner and contractor and enclosed documents concerning payment conditions, excluding drawings, designing and technical documents (copies); the Vietnamese translation of the contractual payment part, bearing the signature and seal of the project owner, for contracts signed in a foreign language; no-objection letter of the donor (if applicable);

+ The detailed cost estimate and estimate-approving decision issued by a competent authority for each job or work item, for bid packages with appointed contractors and self-implemented (copies);

+ For projects belonging to specialized credit programs of the Japanese International Cooperation Agency (JICA), ODA projects with sub-projects or component projects implemented in many provinces, the project owners are not required to send the lending/financial assistance agreements, but shall send to the provincial- and district-level expenditure control agencies dossiers and documents determining the financial assistance rates of the projects.

- Dossiers and documents confirming advance capital amounts: When making advance amounts, in addition to dossiers and documents sent for the first time, the project owners shall send to the expenditure control agency the following documents: advance guarantee involving a value equal to the requested advance amount. The advance guarantee must have a validity term ensuring full recovery of the advanced amount according to the contractual terms, written request for payment of investment capital; and the paper on withdrawal of investment capital (in case of advance of domestic capital).

The advance capital level and recovery of advance amounts shall be stipulated in the contract in accordance with domestic current regulations and treaties. The project owner shall recover all capital amounts advanced under contracts and complete the recovery when payment reaches 80% of the contractual value.

- Dossiers and documents confirming payment for completed volumes:

+ In case of payment under contract: The original statement of the value of completed work volume under contract; when arises a volume outside contract, the project owner shall send the original statement of the value of work volume arising outside contract; the payment request of the contractor/supplier, containing the certification of the representatives of the principal and consultant (if any) and contractor; written request for payment of investment capital; written request for advance payment of investment capital (if any);

+ In case of payment without contract: original written request for payment of investment capital; written request for advance payment of investment capital (if any); a list of payment documents;

+ In case the project owner hires contractual employees, a list of wages and labor contracts must be enclosed; in case of organizing meetings, workshops and training courses under contracts, the project owner shall provide such contracts and a list of payment documents, etc. The project owner shall take full responsibility for the requested payment value and, as a result, is not required to send invoices and payment documents to the expenditure control agency.

- For works and bid packages which people are allowed to self-implement:

+ Dossiers and document on advance and payment for completed construction volume are similar to those stated in the item above (regarding dossiers and documents confirming advance capital amounts and payment for completed volumes), including the contract signed between the investor and the construction group or team.

- Dossier of payment for the package consultancy contract based on the product being the consultant’s report:

+ The project owner’s official letter on the product take-over test with regard to the foreign-language report of the consultant enclosed with the contract’s product (for product-based payment); a brief statement of the progress-based payment value, certified by the project owner/project management unit (for progress-based payment).

b/ Expenditure control dossier and procedures for administrative non-business projects entitled to state budget allocation:

- Expenditure items entitled to advance allocation or eligible for payment allocation comply with the guidance of the Ministry of Finance on allocation and payment of state budget expenditures via state treasury. In case a treaty or donor has specific regulations, such regulations will apply. In addition, for ODA projects, in order to control expenditures, project owners shall send to the expenditure control agency the following documents:

+ Dossiers and documents sent for the first time (supplemented or revised documents, for cases of supplementation or revision): financial assistance agreement signed between the Vietnamese Government and the donor (Vietnamese translation bearing the signature and seal of the project owner/project management unit); no-objection letter of the donor with regard to the contract (if applicable).

c/ Expenditure control dossiers and procedures for on-lending projects, those subject to credit limit:

Comply with Point 3.a above.

d/ Expenditure dossiers and procedures for on-lending projects subject to credit limit:

Expenditure control dossier and procedures for credit projects or credit components of projects comply with regulations of credit institutions using on-lent ODA capital and of financial assistance agreements and the projects. Credit institutions using on-lent ODA capital shall take responsibility before law for the accuracy and validity of credits and non-credit expenditures in the statement of expenditures sent to the Ministry of Finance when requesting withdrawal of foreign capital.”

6. To amend Point 4.c, Section I of Part II as follows:

“Expenditure control agencies shall control expenditures or refuse payment within 7 working days, for pre-control of expenditures, or within 4 working days, for post-control of expenditures, after receiving complete and valid dossiers.”

7. To amend the second em rule, third paragraph, Point 6, Section III of Part II as follows:

“- Statement of money transfer documents proving payments made to the contractors/beneficiaries or payment receipt certifications of the contractors/beneficiaries;”

8. To amend Point 2, Section II of Part III as follows:

“All programs and projects using on-lent ODA capital must be audited by the state audit office or an independent audit firm. Audits must comply with domestic regulations and donors’ regulations.”

9. To add the following Point 6 to Section II of Part III:

“6. The project owner shall provide the audit report to the project-managing agency, donor and finance agency. For a project not audited by the state audit office, the project owner shall also send the audit report to the state audit office.”

10. To amend and supplement Section III of Part III as follows:

“1. Administrative non-business projects using ODA capital shall make annual financial settlement according to the provisions of the Ministry of Finance’s Circular No. 01/2007/TT-BTC of January 2, 2007, guiding the approval, appraisal and notification of annual financial settlement of administrative agencies, non-business units, organizations receiving state budget supports and funds of budgets of different levels, and its supplementing, adding or replacing documents (if any).

2. Construction investment projects using ODA capital shall make annual financial settlement according to the provisions of the Ministry of Finance’s Circular No. 210/2010/TT-BTC of December 20, 2010, in the settlement of capital construction investment capital belonging to the state budget capital source according to the budgetary year, and settle completed projects according to the provisions of the Ministry of Finance’s Circular No. 19/2011/TT-BTC of February 14, 2011, on the settlement of completed projects belonging to the state capital source and their supplementing, adding or replacing documents (if any).”

11. To amend and supplement Points 1 and 2, Section I of Part IV as follows:

1. ODA project management units set up under Clauses 1 and 2, Article 25 of the Regulation on management and use of ODA capital sources, promulgated together with the Government’s Decree No. 131/ND-CP of November 9, 2006, and provided with assets, shall manage and use assets under the Government’s Decree No. 52/2009/ND-CP of June 3, 2009, detailing and guiding a number of articles of the Law on Management and Use of State Assets and the Prime Minister’s Directive No. 17/2007/CT-TTg of July 25, 2007, on enhancing the management of assets of management units of projects using state capital, and the guidance of this Circular.

2. Contractors, consultants and supervisors of ODA projects shall themselves use their own assets or hire assets for consultancy, supervision or construction. Project management units may neither invest in nor procure assets for supply to contractors, consultants and supervisors nor arrange funds for asset procurement in consultancy, supervision or construction contracts.”

12. To amend Point 2, Section III of Part IV as follows:

“ 2. For cars used for work purposes, including specialized vehicles (if necessary): Program- or project-implementing agencies shall arrange some among their existing cars for project management units’ managerial tasks. If they cannot arrange cars, project management units may purchase or rent cars under the provisions of Vietnamese law and signed ODA treaties.”

13. To amend Section VI of Part IV as follows:

“The handling of assets of a project upon completion of the project or assets no longer used in the process of project management must comply with the provisions of the Ministry of Finance’s circular on the management and handling of assets of projects using state capital upon completion of projects and relevant legal documents.”

Article 2.

1. This Circular takes effect on June 1, 2011.

2. Any problems arising in the course of implementation should be promptly reported to the Ministry of Finance for guidance and coordinated settlement.-

For the Minister of Finance
Deputy Minister
TRAN XUAN HA