CIRCULAR

GUIDING THE STATE FINANCIAL MANAGEMENT APPLICABLE TO FOREIGN NON-REFUNDABLE AID BEING STATE BUDGET REVENUES

Pursuant to the Government’s Decree 60/2003/ND-CP of June 6, 2003, detailing and guiding the implementation of the Law on State Budget;

Pursuant to the Government’s Decree 131/2006/ND-CP of November 9, 2006, promulgating the Regulation on management and use of official development assistance (ODA);

Pursuant to the Prime Minister’s Decision 64/2001/QD-TTg of April 26, 2001, promulgating the Regulation on management and use of foreign non-governmental aid;

Pursuant to the Government’s Decree 77/2003/ND-CP of July 1, 2003, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

The Ministry of Finance guides the state financial management applicable to foreign non-refundable aid (referred to as foreign aid) being state budget revenues as follows:

Part I

GENERAL PROVISIONS

I. GOVERNING SCOPE:

1. This Circular guides the financial management applicable foreign aid being state budget revenues, including:

1.1. Foreign aid being central budget revenues:

1.1.1. Foreign aid (of foreign governments, international organizations and transnational organizations) for the State or the Government of the Socialist Republic of Vietnam within the framework of official development assistance (ODA) cooperative activities between Vietnam and foreign donors (referred to as non-refundable ODA for short).

1.1.2. Aid of foreign non-governmental organizations, other organizations and foreign individuals which falls under the approving competence of the Prime Minister, ministers, heads of ministerial-level agencies and government-attached agencies or central agencies of mass organizations (specified at Points 1 and 2, Article 6, of the Prime Minister’s Decision 64/2001/QD-TTg of April 26, 2001, promulgating the Regulation on management and use of foreign non-governmental aid) and is provided directly or through Vietnamese non-governmental organizations to the following agencies:

a/ Government agencies (ministries, ministerial-level agencies and government-attached agencies);

b/ Central agencies of political organizations, socio-political organizations and socio-professional organizations;

c/ The National Assembly, the Supreme People’s Court, the Supreme People’s Procuracy;

d/ People’s Committees of provinces and centrally run cities;

e/ Agencies and units under and attached to above-said agencies;

1.2. Aid being local budget revenues, including:

1.2.1. Aid of foreign non-governmental organizations, other organizations and foreign individuals which is provided directly or through Vietnamese non-governmental organizations to localities and falls under the approving competence of provincial/municipal People’s Committee presidents (specified at Point 2, Article 6, of the Prime Minister’s Decision 64/2001/QD-TTg of April 26, 2001, promulgating the Regulation on management and use of foreign non-governmental aid).

1.2.2. Aid amounts within the framework of bilateral cooperation between domestic localities and foreign localities.

2. Aid amounts of non-governmental organizations, other organizations and foreign individuals which are provided directly for, and fall under the approving competence of, Vietnamese non-state organizations (including unions, general federations, associations, socio-political organizations, socio-professional organizations, social funds, charity funds and legal entities set up by unions, general federations and associations) constitute revenues of these organizations, are not state budget revenues and governed by this Circular

II. SUBJECTS OF APPLICATION:

This Circular applies to central agencies of the State or the Government of the Socialist Republic of Vietnam (ministries, ministerial-level agencies, government-attached agencies; the National Assembly, the Supreme People’s Court and the Supreme People’s Procuracy); local People’s Committees; political organizations, socio-political organizations, socio-professional organizations and units and organizations under and attached to above-said agencies.

III. FORMS OF NON-REFUNDABLE AID:

1. Non-refundable aid in kind:

1.1. Non-refundable aid in kind includes:

a/ Capital construction works built in turn-key form (including perennial forests) within the framework of foreign-aid programs and projects;

b/ Equipment, machinery, supplies, raw materials, utensils and goods.

1.2. Non-refundable aid in kind may be supplied under specific programs and projects or as non-project aid (separate aid, humanitarian aid, emergency relief in response to natural disasters, epidemics or wars).

2. Non-refundable aid in cash:

2.1. Non-refundable aid in cash means aid money or monetized aid goods. Non-refundable aid in cash may be in a foreign currency or Vietnam dong, in cash or account transfer.

2.2. Non-refundable aid in cash may be used for the execution of a specific program or project or transferred directly into the Vietnamese Government’s budget as budget support for the implementation of national target programs or socio-economic development programs of the Vietnamese Government.

3. Immaterial non-refundable aid:

Immaterial non-refundable aid means the free-of-charge transfer of intellectual property assets (copyright, work ownership, industrial property rights and technology transfer) by foreign parties or the payment of expenses for training, visits, surveys, seminars and specialists) by foreign parties with foreign aid funds under their direct management and spending.

IV. CONTENTS OF STATE FINANCIAL MANAGEMENT:

1. Owners of all programs and projects funded with non-refundable aid which are governed by this Circular shall abide by the state financial management.

When foreign aid treaties signed between the Vietnamese Government and donors contain commitments on financial management different from the provisions and guidance in this Circular, commitments of the Vietnamese Government in these treaties prevail.

2. Contents of state financial management include:

2.1. Elaboration and summing-up of state budget revenue-expenditure estimates for programs and projects funded with non-refundable aid;

2.2. Aid certification;

2.3. Spending control and state budget accounting of non-refundable aid;

2.4. Procurement regulations and spending levels applicable to non-refundable programs and projects;

2.5. Reporting, accounting, audit and settlement of non-refundable aid;

2.6. Management of capital and assets formed from non-refundable aid.

V. PROJECT-MANAGING AGENCIES AND PROJECT OWNERS/AID-BENEFITING UNITS:

1. Project-managing agencies are ministries, ministerial-level agencies, government-attached agencies, central agencies of socio-political organizations and socio-professional organizations, agencies attached to the National Assembly, the Supreme People’s Court, the Supreme People’s Procuracy and provincial/municipal People’s Committees which are assigned by the Government to manage foreign-aid programs and projects.

2. Project owners are units which are assigned by the Prime Minister or project-managing agencies to directly manage and use foreign aid capital and domestic capital for the implementation of programs or projects already approved by competent authorities and to manage and use works after foreign-aid projects or programs are completed.

Depending on the scope and characteristics of each specific program or project, the project-managing agency (for technical assistance programs and projects) or project owner (for investment programs and projects) may set up a project management unit which will assist these agencies in performing professional tasks, including aid certification declaration, procurement and spending, accounting, audit, settlement and reporting work specified in this Circular. In this case, the project-managing agency or project owner shall make an official authorization document or sign a work-assignment contract with the project management unit and send that document to the finance agency of the same level for the latter to guide and apply financial management applicable to the project management unit.

3. Aid-benefiting units:

3.1. For separate aid projects: Aid-benefiting units are also project owners.

3.2. For aid provided under a national program or a branch program: The project owner is a unit under the government agency which acts as the coordinating agency for the implementation of the program while the aid-benefiting unit may be a unit under another government agency or a provincial/municipal People’s Committee agency. In this case, the combined phrase “project owner/aid-benefiting unit” used in this Circular refers to either or both of these two units or organizations.

VI. ASSIGNMENT OF RESPONSIBILITIES FOR STATE FINANCIAL MANAGEMENT OF FOREIGN AID BEING STATE BUDGET REVENUES:

1. Responsibilities of finance agencies:

1.1. The Ministry of Finance: To perform the state financial management of foreign aid being central budget revenues (specified at Point 1.1, Section I, Part I, of this Circular) and have the following major tasks:

a/ To guide the implementation of financial management regulations applicable to foreign aid; to inspect the implementation of financial management regulations by central and local agencies which act as managing agencies of foreign aid programs and projects for the State or the Government of the Socialist Republic of Vietnam.

b/ To give aid certification and make budget accounting of foreign aid amounts being central budget revenues.

1.2. Provincial/municipal Finance Services: To perform the state financial management of foreign aid provided directly to localities and being local budget revenues (specified at Point 1.2, Section I, Part I, of this Circular) and have the following major tasks:

a/ To guide and inspect the implementation of financial management regulations applicable to foreign aid amounts provided directly to localities.

b/ To give aid certification and make budget accounting of foreign aid provided directly to localities.

c/ To coordinate with the Finance Ministry in making budget accounting of foreign aid being to central budget revenues which are targetedly allocated to local budgets.

2. Responsibilities of project-managing agencies and project owners/aid-benefiting units:

2.1. Project-managing agencies:

a/ To coordinate with finance agencies in directing, guiding and inspecting the implementation of financial management regulations and the use of foreign aid by their attached units.

b/ To elaborate and sum up aid revenue and expenditure estimates; to appraise, approve and notify the approval of aid settlement to subordinate estimating units.

2.2. Project owners/aid-benefiting units:

a/ To take the prime responsibility before law for the implementation of foreign-aid programs and projects in accordance with commitments in agreements on or documents of foreign-aid projects.

b/ To fill in and apply for finance agencies’ certification in aid certification declaration forms under the guidance in Section II, Part II of this Circular.

c/ To abide by financial management regulations under the guidance in this Circular.

Part II

SPECIFIC PROVISIONS

I. ELABORATION AND SUMMING-UP OF FOREIGN AID REVENUE AND EXPENDITURE ESTIMATES:

1. For non-refundable ODA: To comply with the procedures for elaboration, approval and assignment of financial plans of programs and projects specified in the Finance Ministry’s documents guiding the elaboration of annual state budget estimates and Joint Circular 02/2003/TTLT-BKH-BTC of March 17, 2003, of the Planning and Investment Ministry and the Finance Ministry, guiding the elaboration of financial plans for programs and projects funded with official development assistance (ODA) and documents amending, supplementing or replacing this Joint Circular.

Financial plans (including ODA capital and domestic capital), after being incorporated in annual state budget estimates, will serve as a basis for the planning and investment agency and finance agency to assign state budget estimates to project-managing agencies of the same level. Based on the assigned estimates, a project-managing agency shall make specific allocations to its attached project owners/aid-benefiting units for each program and project and, at the same time, send allocation documents to the finance agency of the same level and state treasuries where transactions are conducted for spending control or state budget accounting according to current regulations.

2. For non-governmental aid under programs and projects, especially those funded with domestic capital allocated from the budget, it is also required to elaborate annual financial plans according to the procedures for elaboration, approval and allocation of financial plans of ODA programs and projects specified in Joint Circular 02/2003/TTLT-BKH-BTC of March 17, 2003, of the Planning and Investment Ministry and the Finance Ministry and documents amending and supplementing or replacing this Joint Circular.

3. For small and non-project foreign aid amounts, aid-benefiting units shall elaborate aid revenue-expenditure estimates (including domestic capital, if any) for submission to project-managing agencies for the latter to additionally approve and send financial plans to the finance agency of the same level and state treasuries where transactions are conducted for spending control and state budget accounting according to current regulations.

II. AID CERTIFICATION:

1. Aid certification means the certification made by finance agencies of all level (the Finance Ministry or provincial/municipal Finance Services) in aid certification declaration forms already filled in by project owners/aid-benefiting units.

2. The aid certification duty of the Finance Ministry and provincial/municipal Finance Services is specified in Section VI, Part I, of this Circular.

3. Aid certification declarations are made:

3.1. For finance agencies to keep track of the situation of and data on the receipt of foreign non-refundable aid and, at the same time, to obtain grounds for state budget accounting and appraisal of the aid-use settlement for project owners/aid-benefiting units according to the Law on State Budget.

3.2. Aid certification declarations also constitute a legal ground for:

a/ Customs agencies to effect the exemption of import tax and export tax, special consumption tax (if any) and value added tax at the import stage for equipment, machinery, supplies, utensils and goods imported with foreign aid money, or for tax agencies to refund value added tax for goods and services procured domestically with foreign aid money.

b/ Project owners/aid-benefiting units to make reports on aid receipt and use as prescribed in this Circular.

4. Aid certification declaration forms are specified in Appendix 1 to this Circular, including:

4.1. Form C1-HD/XNVT: “Declaration for certification of aid being imported goods” (Appendix 1a) is used for making declaration for certification of aid being equipment, machinery, supplies, raw materials, utensils and other goods imported from foreign countries.

4.2. Form C2-HD/XNVT: “Declaration for certification of aid being domestic goods and services” (Appendix 1b) is used for making declaration for certification of aid being equipment, machinery, supplies, raw materials, utensil and goods purchased domestically (including service charges) with foreign aid money.

4.3. Form C3-HD/XNVT: “Declaration for certification of aid in cash” (Appendix 1c) is used in making declaration for certification of foreign aid in cash.

4.4. Points to which attention must be paid in filling in the above aid certification declaration forms:

a/ For foreign aid under national programs, branch programs or inter-branch or inter-regional programs: Project owners shall clearly declare in aid certification declarations the names, addresses and identification numbers of state budget-funded units (according to current regulations in the Finance Ministry’s Decision 172/2000/QD-BTC of November 1, 2000) and the money amount allocated to each aid-benefiting unit so that finance agencies at all levels can carry out state budget accounting.

b/ In case foreign parties provide aid in goods, separate equipment and cash for the construction of a capital construction work which, after being completed, will be transferred to the Vietnamese party in the turn-key form (referred to as aid for work construction): Project owners/aid-benefiting units shall also use forms C1, C2 and C3-HD/XNVT mentioned above to make aid certification declaration, however, they must mark in the section “Aid for work construction” and, at the same time, provide additional information on the work (name, location, expected time of construction and transfer) on the other side of the aid certification declaration form. After the work is completed and transferred to by donors to Vietnamese parties, project owners/aid-benefiting units shall sum up these aid certification declarations and make a list of aid certification declarations for work construction (made according to the form set in Appendix 2 to this Circular). This list of aid certification declarations for work construction, together with the report on take-over test and transfer of the work, will serve as legal grounds for project owners/aid-benefiting units to make settlement reports to competent agencies for appraisal and approval of capital settlement and serve as a basis for finance agencies at all levels to make state budget mutual ceasing of the value of the whole work.

5. An aid certification declaration must be made in at least six originals, of which:

5.1. The finance agency shall keep two originals (one original for state budget accounting and another for filing in the aid certification register);

5.2. The customs office/tax agency each shall keep one original for processing and filing in the tax exemption/tax refund dossier;

5.3. The project-managing agency shall keep one original for management and making of sum-up reports on foreign aid;

5.4. The project owner/aid-benefiting unit shall keep one original for making reports on the receipt, payment and settlement of the aid program or project.

Where aid goods are means of transport (motorbikes, automobiles, etc.), the project owner/aid-benefiting unit shall make one more original for making circulation registration.

6. Subjects obliged to make aid certification declarations:

Aid certification declarations made by project owners/aid-benefiting units will be entered in aid certification registers of finance agencies at all levels and signed for certification by competent officials of these agencies.

7. Time of making aid certification declarations:

7.1. Form C1-HD/XNVT: “Declaration for certification of aid being imported goods” is filled in right after project owners/aid-benefiting units receive import documents (invoice, bill of lading, airway bill and/or other transport documents, if any);

7.2. Form C2-HD/XNVT: “Declaration for certification of aid being home-made goods or services” is filled in monthly at the time project owners/aid-benefiting units make a detailed list of decisions on value added tax refund for aid programs or projects;

7.3. Form C3-HD/XNVT: “Declaration for certification of aid in cash” is filled in right after receiving foreign parties’ documents on remittance of money into Vietnam.

8. Dossiers enclosed with aid certification declarations:

8.1. For aid certification declarations submitted for the first time, project owners/aid-benefiting units shall supply to finance agencies at all levels the following documents:

a/ The legal dossier of the aid program or project, consisting of the following principal documents:

- The program’s or project’s documents and approval documents of competent authorities;

- International agreements or commitments on aid;

- Financial plans, budget estimates or notices on aid allocation (if these documents not yet included in the approved program’s or project’s documents).

For non-governmental aid, project owners/aid-benefiting units shall coordinate with functional agencies in further supplying information on licenses and operation of concerned non-governmental organizations.

b/ Specific documents and vouchers proving aid goods, services or works such as import documents, disbursement notices or money remittance vouchers of donors, vouchers on domestic purchase of goods or service, sale/purchase contracts, written records of the take-over and settlement of construction works built with foreign aid in the turn-key form and other relevant documents.

8.2. For aid amounts for the Government which are provided through an organization or unit attached to a government agency but aid-benefiting units are local organizations or units, upon the making of aid certification declarations for the first time, it is required to send several copies (the number of copies depends on the number of local aid-benefiting units) of the legal dossier of the aid program or project to the Finance Ministry for transfer to concerned provincial/municipal Finance Services for coordinated management and state budget accounting.

For subsequent aid certification declarations: Project owners/aid-benefiting units are required to provide specific documents defined at Point 8.1 b/ above.

8.3. Project owners/aid-benefiting units shall fully declare the above documents in aid certification declarations and bear responsibility before law for the accuracy of declared data and contents.

9. Places of aid certification:

9.1. The Ministry of Finance: At the Finance Ministry’s External Finance Department in Hanoi or international aid goods management and receipt sections within the External Finance Departments of Ho Chi Minh City and Da Nang city.

9.2. Provincial/municipal Finance Services: Depending on the practical situation in each locality, a specialized section may be organized or a functional section of the provincial/municipal Finance Service may be assigned to perform this task.

10. Some contents to which attention must be paid when filling in aid certification declaration forms:

10.1. Prices:

a/ Form C1-HD/XNVT: “Declarations for certification of aid being imported goods”: To fill in the actual foreign-currency purchase price stated in the imported goods invoice (FOB, CIF, C&F).

b/ Form C2-HD/XNVT: “Declarations for certification of aid being home-made goods or services”: To fill in the tax-free price stated in the contract signed between contractor/supplier and project owner.

10.2. Exchange rates between foreign currencies and Vietnam dong: To fill in the foreign exchange accounting rate announced monthly by the Finance Ministry on its website (http://www.mof.gov.vn).

10.3. In order to facilitate the process of tax settlement and state budget accounting for non-refundable aid, the section reserved for declaration of project owners/aid-benefiting units in the aid certification declaration forms must be filled in with the following:

a/ Full and accurate names and contact addresses of aid-benefiting units, project owners and project-managing agencies.

b/ State budget-using unit’s identification numbers of project owners/aid-benefiting units; aid-benefiting units which are enterprises or non-business units shall declare their tax identification numbers for the tax refund purposes.

III. GUIDANCE ON SPENDING CONTROL AND STATE BUDGET ACCOUNTING OF NON-REFUNDABLE AID:

1. General principles:

1.1. The spending control and state budget accounting for domestic capital of non-refundable aid programs and projects must be compliant with regulations on the elaboration and adjustment of financial plans, transfer of domestic capital and handling of unexpected circumstances guided in Joint Circular 02/2003/TTLT-BKH-BTC of March 17, 2003, of the Planning and Investment Ministry and the Finance Ministry and documents supplementing, amending or replacing this Joint Circular.

1.2. The spending control and state budget accounting for non-refundable aid capital of a non-refundable aid program or project are not be restricted within their financial plans (as specified in Section I, Part II of this Circular) in the following cases:

a/ The program or project has not yet been included in the approved financial plan but the project-managing agency has sent to the finance agency of the same level and the spending control agency an official letter stating its commitment to approve the financial plan of the program or project within two (2) months after the date of signing the official letter.

b/ The program or project has withdrawn a non-refundable ODA capital amount exceeding the approved financial plan, but the project-managing agency has sent to the finance agency of the same level and spending control agency an official letter stating its commitment to additionally approve the non-refundable ODA capital plan for the program or project within one month after the date of signing the official letter.

2. Spending control:

2.1. Spending control means the inspection and certification by spending control agencies (state treasuries/authorized sub-lending agencies) of aid spending items and payment dossiers of project owners/aid-benefiting units in accordance with regulations on management of state budget expenditures. Spending limits which serve as grounds for spending control agencies to carry out spending control are guided at Point 2, Section IV, Part II, of this Circular.

2.2. Spending control agencies shall carry out spending control only for aid in cash (transferred by donors to Vietnamese parties for procurement of goods and equipment at home, construction of works or implementation of non-credit components of credit programs) according to the following capital withdrawal procedures: procedures for direct payment/money transfer, procedures for capital reimbursement/retrospection, procedures for special accounts/deposit accounts. The spending control shall be carried out according to the Finance Ministry’s circulars guiding dossiers and procedures for spending control, including Circular 27/2007/TT-BTC of April 3, 2007, for expenditures for capital construction investment; Circular 79/2003/TT-BTC of August 13, 2003, for administrative and non-business expenditures, and documents amending and supplementing these circulars. Project owners/aid-benefiting units shall send legal dossiers of aid programs or projects (specified at Point 8.1.a, Section II, Part II, of this Circular) to spending control agencies for use as a basis for spending control.

For other capital withdrawal procedures such as procedures for direct payment under letters of authorization, procedures for issuance of letters of undertaking, procedures for payment via L/C without letters of undertaking: In this case, spending control agencies do not carry out spending control but project owners shall send an application for L/C opening and/or an application for issuance of a letter of undertaking (capital withdrawal application), together with relevant documents, to finance agencies for the latter to consider and approve the capital withdrawal and, at the same time, notify such to the serving bank (bank where the L/C is opened) for capital withdrawal according to specific regulations in the Finance Ministry’s Circular 78/2004/TT-BTC of August 10, 2004, guiding the management of capital withdrawal for official development assistance (ODA) and documents amending, supplementing or replacing this Circular.

2.3. The spending control is not applicable to aid in kind. Heads of project-managing agencies and project owners shall receive, manage and use aid in kind according to current regulations on accounting and management of state assets and relevant legal documents.

2.4. Project owners/aid-benefiting units which are also budget-estimating units, state administrative agencies, non-business units with revenues, political organizations, socio-political organizations, socio-professional organizations and other organizations using state budget funds shall open source accounts at state treasuries for receipt of aid money and be subject to the sending control of state treasuries during the process of payment and use of aid funds. State treasuries at all levels shall guide and facilitate the procedures for opening of these accounts for project owners/aid-benefiting units.

2.5. In special cases where it is so agreed or committed with foreign parties, project owners/aid-benefiting units may open a deposit account at a commercial bank for receipt and use of aid amounts for programs or projects, but aid spending vouchers and payment dossiers must also be sent to spending control agencies for spending control.

2.6. Depending on the mode of remittance of aid money by donors to the Vietnamese parties, spending control is carried out as follows:

a/ If the donors directly manage or administer the spending for programs or projects, spending control shall be carried out according to the project agreements or documents already signed with donors.

b/ If donors remit money in the form of budget support in which aid money is not associated with one or several specific projects but directly remitted into the central budget and managed and used according to budgetary regulations and procedures of Vietnam:

The Finance Ministry shall transfer money to program-implementing agencies, units and localities through state treasuries in a way similar to the current mode of allocation of state budget capital. State treasuries shall carry out spending control according to the Finance Ministry’s circulars guiding dossiers of and procedures for spending control, including Circular 27/2007/TT-BTC of April 3, 2007, for expenditures for capital construction investment, and Circular 79/2003/TT-BTC of August 13, 2003, for administrative and non-business expenditures, and documents amending, supplementing or replacing these circulars.

c/ If aid agreements signed with donors require the opening of accounts at commercial banks or state treasuries for receipt of aid money:

State treasuries shall carry out spending control under the guidance in the Finance Ministry’s Circular 78/2004/TT-BTC of August 10, 2004, guiding the management of capital withdrawal for official development assistance (ODA) and documents amending, supplementing or replacing this Circular.

d/ For foreign aid amounts remitted to Vietnamese parties in the form of revolving credit funds or sub-lending to specific projects:

Sub-lending agencies shall be authorized by finance agencies to carry out spending control under the guidance in the Finance Ministry’s Circular 78/2004/TT-BTC of August 10, 2004, guiding the management of capital withdrawal for official development assistance (ODA) and documents amending, supplementing or replacing this Circular.

e/ For aid programs and projects subject to the mechanism of lump-sum allocation and sub-lending from the state budget which are carried out by a single project owner/aid-benefiting unit: Finance agencies shall identify a proper spending-control agency, depending on the nature of the projects and ensuring the principle that there should be no more than one spending control agency for a program or project.

3. State budget accounting:

3.1. Non-refundable aid in kind or in cash being state budget revenues shall be fully accounted into the state budget according to the following regulations:

a/ For aid amounts for which aid-benefiting units have been identified, finance agencies at all levels shall carry out procedures for state budget mutual ceasing.

b/ For aid amounts for which aid-benefiting units have not yet been identified, finance agencies at all levels shall certify, monitor and manage aid amounts and, at the same time, coordinate with project-managing agencies or project owners in working out use plans in strict accordance with commitments and targets already agreed with donors and submit these plans to competent authorities for decision on the allocation of goods or money to aid-benefiting units, which serve as a basis for state budget mutual ceasing.

If donors remit aid money in a lump sum for spending in several years, expenditure items of the previous year’s state budget estimates which have not yet been spent shall be automatically carried forward to the subsequent year for spending.

c/ All expenditure items from non-refundable aid in cash must be included in the annual budget revenue and expenditure estimates and accounted into this year’s budget. Expenditure items included in the previous year’s budget estimates which are spent during the time of adjusting the final settlement of each budgetary level (by the end of March 31 of the subsequent year for provincial-level budgets and May 31 of the subsequent year for the central budget) shall be accounted into previous year’s budget. For aid amounts in the form of targeted allocations from the central budget to local budgets, state budget mutual ceasing shall be carried out no later than the expiration of the duration for adjustment of local budget settlement.

d/ The Finance Ministry shall carry out the mutual ceasing of the central budget for aid amounts being central budget revenues.

Provincial/municipal Finance Services shall carry out the mutual ceasing of local budget budgets for aid amounts being local budget revenues and aid amounts provided in the form of targeted allocations from the central budget to local budgets.

State treasuries at all levels shall carry out state budget revenue and expenditure accounting for foreign aid. Annually, together with the making of periodical reports on the realization of state budget estimates, state treasuries at all levels shall report to finance agencies of the same level and superior state treasuries on the use of aid funds and credit balances of aid accounts opened by project owners/aid-benefiting units at state treasuries where transactions are conducted. These reports shall be made according to forms defined at the Finance Ministry’s Circular 101/2005/TT-BTC of November 17, 2005, guiding the year-end closing of accounting books and making of annual state budget finalization reports.

3.2. State budget accounting is not required for the following aid amounts:

a/ Immaterial aid: The procedures for aid certification and state budget accounting are not required to be carried out for immaterial non-refundable aid (specified at Point 3, Section III, Part I, of this Circular. Heads of agencies and units receiving immaterial non-refundable aid shall monitor and manage the use of aid.

b/ Money amounts spent or paid by donors or donors’ representatives to beneficiaries being “non-resident” organizations and individuals (expenses for hiring consultancy organizations and foreign specialists to work for a long term in Vietnam; expenses for foreign specialists’ travel to conduct project surveys, appraisal and assessment in Vietnam from the source of foreign aid).

3.3. Process of state budget accounting:

a/ For aid being imported goods (form C1-HD/XNVT) and aid being home-made goods and services (form C2-HD/XNVT):

Monthly, finance agencies shall sum up aid certificate declarations of each aid-benefiting unit in a list of declarations for certification of aid being imported goods/domestically purchased goods and services (according to the form in Appendix 3 to this Circular) of each grade-I budget-estimating unit (units to which annual budget estimates are assigned directly by the Prime Minister or provincial/municipal People’s Committee presidents) and, on that basis, carry out procedures for state budget accounting.

After making state budget accounting, finance agencies shall send a notice to project-managing agencies which are grade-I budget-estimating units, together with a state budget accounting dossier, comprising:

- A cost estimate-approving notification (clearly stating the serial number and date of the budget spending order under that Circular);

- The list of declarations for aid certification of the project owner/aid-benefiting unit;

- Copies of aid certification declarations of the project owner/aid-benefiting unit;

This dossier set constitutes a basis for grade-I budget-estimating units to carry out procedures for allocation of aid capital to subordinate budget-estimating units which are aid-benefiting units.

b/ For aid in cash (form C3-HD/XNVT):

After each time of aid certification, finance agencies may not carry out the state budget mutual ceasing but shall only send a notice to project-managing agencies which are grade-I budget-estimating units, enclosed with an aid certification dossier, comprising:

- A detailed list of aid-benefiting units (if the aid amount is divided to many aid-benefiting units which are subordinate budget-estimating units)

- Copies of aid certification declarations of aid-certifying units;

After receiving these dossier sets, grade-I budget-estimating units shall send a written notice to aid-benefiting units which are subordinate budget-estimating units and, at the same time, to state treasuries where aid-benefiting units conduct transactions, enclosed with copies of these dossier sets for use as a basis for monitoring and effecting spending control.

Monthly, aid-benefiting units which are subordinate budget-estimating units shall sum up vouchers on spending and payment from non-refundable aid and on that basis, draw up sum-up lists of expenditures and payments made with foreign aid in cash according to each declaration for certification of aid in cash and send these lists to state treasuries where transactions are conducted for the latter to make certification of the total expenditures made with aid money in the lists and then send these documents to grade-I budget-estimating units. Grade-I budget-estimating units shall sum up and send these lists to finance agencies of the same level for state budget accounting in the proper expenditure items of the current state budget index.

“Sum-up lists of expenditures and payments made from aid in cash” are made according to a form specified in Appendix 4 to this Circular. These lists shall also be sent by project owners/aid-benefiting units to tax agencies for use as one of the grounds for value added tax refund for aid programs or projects.

c/ For aid money and goods for construction of works (including money amounts converted from loans to aid for construction of works in Vietnam):

After making aid certification on a quarterly basis, finance agencies at all levels shall sum up aid certification declarations, forms C1, C2 and C3-HD/XNVT, which are marked with “aid for construction of works” and send these declarations to project-managing agencies and state treasuries where project owners/aid-benefiting units conduct transactions for coordinated management of spending, payment and investment capital settlement after the aid projects or work items are completed and transferred to Vietnamese parties.

After works are completed, project-managing agencies shall send to finance agencies of the same level capital settlement reports and competent authorities’ decisions approving settlement reports for the latter to carry out procedures for state budget accounting.

d/ For amounts of humanitarian aid, emergency relief aid and non-governmental aid which are disbursed under aid agreements for the Government but aid-receiving and -benefiting subjects are local organizations or individuals having no links with the state budget (for example, orphanages, private schools, religious establishments): The Finance Ministry shall record these amounts as state budget revenues targetedly allocated to local budgets (provincial or municipal budgets).

3.4. The book-keeping accounting of foreign aid according to the current state budget index is carried out as follows:

a/ Revenues are recorded in Chapter 160, Category 10, Clause 08 or 09, Items 73 thru 76, and Sub-items corresponding to the aid-providing organization (government, international organization, non-governmental organization, etc).

b/ Expenditures are recorded in the Chapter, Category, Clause and Item corresponding to expenditure contents, specifically:

- Item 100: Wages

- Item 101: Remuneration

- Item 102: Wage-based allowances

- Item 112: Conference expenses

- Item 119: Expenses for professional operations of each branch

- Item 145: Expenses for procurement of assets for professional operations

- Item 147: Construction and installation expenses

- Item 149: Other expenses

c/ For foreign aid amounts provided in the form of budget support:

- If the foreign-currency aid amounts are sold to the State Bank of Vietnam: State treasuries shall calculate these aid amounts at the actual purchase exchange rate of the Vietnam State Bank’s transactions office and record them as central budget revenues in the state budget index’s Chapter 160, Category 10, Clause 08 or 09, Items 73 thru 76 and Sub-items corresponding to the donor. Vouchers for state treasuries to carry out procedures for state budget revenue recording are foreign-currency aid “credit” advices of foreign banks and transfer slips of the Vietnam State Bank’s transaction office.

- If the foreign-currency aid amounts are transferred to the State’s concentrated foreign currency funds: State treasuries shall calculate these aid amounts at the monthly accounting foreign exchange rate announced by the Finance Ministry and record them as central budget revenues in the state budget index’s Chapter 160, Category 10, Clause 08 or 09, Items 73 thru 76 and Sub-items corresponding to the donor. Vouchers for state treasuries to carry out procedures for state budget revenue recording are foreign-currency “credit” advices of foreign banks and account transfer slips of the Vietnam State Bank’s transaction office.

3.5. The time limits for state budget mutual ceasing of foreign aid comply with the Finance Ministry’s Decision 19/2007/QD-BTC of March 27, 2007, promulgating the Regulation on state budget mutual ceasing of foreign loans and aid, specifically:

a/ The time limit for making estimate-approving notifications for state budget mutual ceasing of foreign aid is 10 days from the receipt of all valid vouchers.

b/ The time limit for making state budget revenue-recording orders and spending orders is five (5) days from the receipt of estimate-approving notifications.

c/ The time limit for mutual ceasing is five days from the receipt of state budget revenue-recording orders and spending orders.

3.6. Adjustment of state budget accounting data:

a/ State budget accounting data shall be adjusted regularly within the budgetary year in order to handle the difference between the recorded data of state budget revenues and expenditures and the actual data on settlement of foreign aid use which may occur in the following cases:

- After conducting list and re-valuation, there arises an increase or decrease in terms of quantity or value of aid assets, goods and money amounts as compared with aid data already certified and used for state budget accounting (including cases of re-adjusting the actual purchase prices in foreign currency according to imported goods invoices declared in aid certification declarations, form C1-HD/XNVT, so as to match domestic market prices);

- Aid amounts which are not yet spent up are returned to donors;

- Aid money and goods which have been recorded as the previous year’s budget revenues but are carried forwarded to the subsequent year for further use (according to projects’ design or agreements with donors);

- Competent state agencies decide to change the applicable financial mechanisms (for example, changes from the mechanism of sub-lending to the mechanism of state budget allocation).

b/ The adjustment is carried out as follows:

- On the basis of reports on the practical use of aid capital and decisions on adjustment at financial data and mechanisms of competent state agencies, finance agencies of all levels shall review data and make and send slips on adjustment of budget data to project owners/aid-benefiting units and state treasuries for use as a basis for accounting the increase or decrease of revenues or expenditures of state budgets of all levels.

State treasuries shall account the adjusted budget data in strict accordance with the contents stated in the adjustment slips. Project owners/aid-benefiting units shall base themselves on the adjustment notices of state treasuries to adjust reports on foreign aid capital accounting and settlement.

Annual state budget accounting data (if any) shall be adjusted during the time of adjusting budgets of all levels. When necessary to adjust budget accounting data after making the annual budget settlement, project-managing agencies which are grade-I budget-estimating units shall report such to the Finance Ministry (for aid amounts being central budget revenues) or provincial/municipal People’s Committees (for aid amounts being local budget revenues) for decision on specific handling measures.

- For balances of aid accounts which have been recorded as the previous year’s revenues but are forwarded for use in the subsequent year: If the above-said credit balances are spent up within the time of adjusting the settlement of budgets of all levels, such amounts will be settled into previous year’s state budget. Past the time limit for settlement adjustment, if these credit balances are not yet spent up, they may be carried forward to the subsequent year for use and settlement in the subsequent year’s state budget. In this case, project owners/aid-benefiting units shall make reports to the state treasuries where transactions are conducted (according to specific chapter, category, clause, item and sub-item) for the latter to sum up data for each grade-I budget-estimating unit and send them to finance agencies of the same level for carrying out procedures for the decrease of the previous year’s expenditures and transfer to the subsequent year (within 45 days after the expiration of the time limit for adjustment of settlement of each budgetary level).

Particularly for aid goods and supplies left in stock which have been settled as previous year’s expenditures, if they will be continuously used in the subsequent year, project owners/aid-benefiting units shall monitor and use them for proper purposes and make separate reports to state treasures where they conduct transactions and finance agencies of the same level. State budget accounting data are not adjusted in this case.

IV. PROCUREMENT REGULATIONS AND SPENDING LEVELS APPLICABLE TO FOREIGN-AID PROGRAMS AND PROJECTS:

1. Procurement regulations:

1.1. Project-managing agencies, project owners/aid-benefiting units shall strictly abide by the Bidding Law and current regulations on procurement of Vietnam during the process of implementing foreign-aid programs and projects.

In case the application of procurement regulations different from current regulations of Vietnam is required by donors and agreed in treaties signed with donors, the provisions of these treaties prevail. During the process of negotiation and conclusion of treaties, agencies and units which are authorized to negotiate and conclude treaties shall report to project-managing agencies and finance agencies of the same level on the above-said differences for the latter to consider and decide to permit the application of international practices or to amend or supplement Vietnam’s procurement regulations as appropriate.

1.2. Unless specific agreements are concluded with donors, expenditures and procurements made with aid money of aid programs and projects, especially those made in Vietnam, must be decided by Vietnamese parties. During the process of preparing project documents or negotiating on foreign aid agreements with foreign donors, project-managing agencies and project owners shall follow this principle so as to ensure that Vietnamese parties have the right to autonomy in spending and facilitate the implementation of the spending control regimes.

2. Spending levels

2.1. Spending levels for domestic capital of foreign-aid programs and projects comply with the Finance Minister’s Decision 61/2006/QD-BTC of November 2, 2006, promulgating some spending levels applicable to programs/projects funded with official development assistance (ODA) capital sources and documents amending, supplementing or replacing this Decision.

2.2. Spending levels for foreign-aid capital comply with foreign aid agreements signed with donors or the spending levels specified by donors’ representatives, the Finance Ministry and project-managing agencies (aid agreements provide no specific regulations). Project-managing agencies, project owners/aid-benefiting units shall supply documents and agreements on spending levels, budget estimates and aid capital use plans signed with donors to spending control agencies for the latter to carry out proper spending control without affecting project implementation schedules or violating commitments with donors.

V. ACCOUNTING AND SETTLEMENT, AUDIT AND REPORTING:

1. Accounting and settlement:

1.1. Project owners/aid-benefiting units shall arrange an accounting staff to carry out book-keeping accounting of foreign non-refundable aid according to current accounting systems of Vietnam. Accountants shall open books to keep track of expenditures made from each capital source (aid capital and domestic capital) and according to expenditure items stated in the approved estimates. It is not allowed to carry out accounting of aid funds together with administrative and non-business budget funds allocated to their units.

1.2. In case donors request application of an accounting system different from the current accounting system of Vietnam, project owners/aid-benefiting units shall immediately report such to project-managing agencies and the Finance Ministry for the latter to provide implementation guidance in accordance with current regulations of Vietnam. If donors agree to apply the Vietnam’s accounting system but have specific requests for the use of other report forms, project owners/aid-benefiting units shall report such to the Finance Ministry for the latter to permit and guide the use of proper software for making of reports at donors’ requests.

1.3. Annually, project owners/aid-benefiting units which are grade-I budget-estimating units shall sum up and make annual settlement reports for sending to finance agencies of the same level for approval, verification and announcement of annual settlement:

a/ For capital construction investment capital: To comply with the Finance Ministry’s Circular 53/2005/TT-BTC of June 23, 2005, guiding the elaboration and appraisal of reports on settlement capital construction investment capital from the state budget according to fiscal years and documents amending, supplementing or replacing that Circular

b/ For non-business capital: To comply with the Finance Ministry’s circulars guiding the approval, appraisal and notification of annual settlements of administrative and non-business units and organizations funded with state budget supports.

1.4. Upon the completion of projects, project owners/aid-benefiting units shall make reports on settlement of investment capital (for capital construction projects) and reports on settlement of administrative and non-business capital (for projects with administrative and non-business expenditures) and submit them to project-managing agencies for consideration and approval according to current accounting regulations.

a/ Reports on settlement of investment capital are made according to regulations of the Finance Ministry’s Circular 33/2007/TT-BTC of April 9, 2007, guiding the settlement of investment capital and documents amending, supplementing or replacing that Circular

b/ Reports on settlement of administrative and non-business capital are made according to regulations of the Finance Minister’s Decision 19/2007/QD-BTC of March 30, 2006, promulgating administrative and non-business accounting regimes and documents amending, supplementing or replacing this Decision.

2. Audit

2.1. In case independent auditors are annually hired by donors: Project-managing agencies and project owners shall send or propose donors to send annual independent audit reports to finance agencies at all levels. Independent audit reports, together with financial statements made by auditors of the Vietnamese parties, are considered official grounds for finance agencies to appraise and approve settlement reports for project owners/aid-benefiting units.

2.2. If the audit is carried out by Vietnamese parties: If project agreements or documents require project owners/aid-benefiting units to send independent audit reports, project owners/aid-benefiting units shall propose project-managing agencies and finance agencies of the same level to permit them to hire independent auditors. This audit report shall be sent to finance agencies and serve as one of legal grounds for finance agencies to approve reports on settlement of investment capital and administrative and non-business capital of aid programs and projects.

3. Reporting:

3.1. Project owners/aid-benefiting units shall make and send reports on aid receipt and use to project-managing agencies and finance agencies of the same level as follows:

a/ Quarterly reports are sent no later than the 15th of the first month of the subsequent quarter;

b/ Annual reports are sent no later than January 31 of the subsequent year;

c/ Reports on the completion of aid programs and projects are sent within six months after programs and projects are completed;

3.2. Quarterly and annual reports are made on the basis of aid certification declarations and the practical situation of aid receipt and use of project owners/aid-benefiting units according to a form in Appendix 5 to this Circular. Particularly, project completion reports are made according to the form set for investment capital settlement reports (for capital construction projects) or reports on the settlement of administrative and non-business capital (for projects implemented by administrative and non-business units) according to current regulations. Particularly, immaterial non-refundable aid will be included in the above-said reports only if it can be monetized and all supporting documents are available.

3.3. A hard copy of the report of project owners/aid-benefiting units being grade-I budget-estimating units under central budget shall be sent to the Finance Ministry (the External Finance Department) and, at the same time, a soft copy of this report will be e-mailed to the Finance Ministry at [email protected].

VI. MANAGEMENT OF CAPITAL AND ASSETS FORMED FROM NON-REFUNDABLE AID:

1. Assets formed from foreign non-refundable aid being state budget revenues are those over which state ownership is established. Therefore, the registration, reporting, management, use and processing of these assets comply with the Government’s Decree 14/1998/ND-CP of March 6, 1998, on state asset management; Decree 137/2006/ND-CP of November 14, 2006, stipulating the decentralization of state management of state assets at administrative agencies and public non-business units and documents amending, supplementing or replacing the above-said documents.

2. The management and handling of assets of aid programs and projects after these projects are completed, for project owners being administrative agencies, non-business units and other organizations, comply with the Finance Ministry’s Circular 116/2005/TT-BTC of December 19, 2005, guiding the management and handling of assets of projects funded with state budget after these projects are completed.

For aid programs and projects implemented by enterprises, after the projects are completed, enterprises shall make and send reports on the settlement of completed projects to the Finance Ministry (for projects funded by central budget revenues) or provincial/municipal Finance Services (for projects funded by local budget revenues). The Finance Ministry and provincial/municipal Finance Services shall base on the practical situation of the projects to allocate capital and assets to enterprises for management and use.

3. Interests on aid deposit accounts: Interests on aid deposit accounts must be separately accounted and used in strict accordance with commitments on agreements signed with donors. In case donors permit the use of these interest amounts as additional donation for activities within signed programs and projects or for new projects, project owners/aid-benefiting units shall report such to project-managing agencies and finance agencies of the same level for consideration and decision on specific use and, at the same time, carry out procedures for certification of these interest amounts as new aid amounts.

If no agreement or commitment is made with donors on the use of interests on aid deposit accounts, project owners/aid-benefiting units shall remit all interest amounts into the state budget; if these units fail to remit interest amounts within the prescribed time limit, state treasuries or commercial banks where projects open transaction accounts shall automatically transfer the arising interest amounts into the state budget.

4. For credit components of aid programs and projects: After the programs and projects are completed, depending on specific agreements with donors, credit components may be recovered to the state budget or further allocated to credit institutions for lending in the form of revolving credit funds. After the programs or projects are completed, based on agreements or commitments with donors, finance agencies at all levels shall coordinate with project-managing agencies in guiding the recovery to the state budget or reallocation to revolving credit funds for continued lending.

VII. COMMENDATION, REWARD AND HANDLING OF VIOLATIONS:

1. Project owners/aid-benefiting units that record outstanding achievements in reporting and making aid certification declaration specified in this Circular shall be proposed by finance agencies at all levels for commendation and/or reward according to legal provisions on emulation and commendation.

2. For project owners/aid-benefiting units that fail to comply or strictly comply with regulations on financial management specified in this Circular (especially those on aid certification and reports on aid receipt and use to finance agencies at all levels), depending on the seriousness of their violations, finance agencies at all levels shall apply one or several penalties:

- Issuing decisions temporarily suspending the budget spending (including the spending of domestic capital of aid projects) by violating units and notifying such to state treasuries of the same levels for compliance, and at the same time, to the managing agencies of violating units;

- Suspending procedures for capital settlement and assignment for aid amounts for which aid certification declarations have not yet been made upon appraisal and approval of annual settlement reports;

- Proposing competent agencies not to allocate future aid amounts to violating units;

- If considering that violations are serious, finance agencies at all levels may propose superior competent agencies or concerned functional agencies to carry out examination or inspection or transfer the cases to competent agencies for criminal investigation of violating units.

Part III

ORGANIZATION OF IMPLEMENTATION

This Circular replaces the Finance Ministry’s Circular 70/2001/TT-BTC of August 24, 2001, and takes effect 15 days after its publication in “CONG BAO.”

Problems arising in the course of implementation or new matters not yet guided in this Circular should be reported by concerned units and agencies to the Finance Ministry for amendment and supplementation.