Circular No. 108/2007/TT-BTC of September 7, 2007, guiding the financial management mechanism applicable to ODA programs and projects

THE MINISTRY OF FINANCE

SOCIALIST REPUBLIC OF VIET NAM
Independence Freedom Happiness

 

No. 108/2007/TT-BTC

Hanoi, September 7, 2007

 

CIRCULAR

GUIDING THE FINANCIAL MANAGEMENT MECHANISM APPLICABLE TO ODA PROGRAMS AND PROJECTS

Pursuant to the Governments 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 Governments Decree No. 134/2005/ND-CP of November 1, 2005, promulgating the Regulation on management of foreign loans and debt payment;
Pursuant to the Governments Decree No. 60/2003/ND-CP of June 6, 2003, detailing and guiding the implementation of the State Budget Law;
Pursuant to the Governments Decree No. 77/ 2003/ND-CP of July 1, 2003, defining the function, tasks and powers of the Ministry of Finance.
The Ministry of Finance guides the financial management applicable to ODA programs and projects as follows:

Part 1

GENERAL PROVISIONS

I. SCOPE OF APPLICATION

1. This Circular applies to the preparation and implementation of programs and projects (below referred to as projects for short) financed with concessional ODA loans; non-refundable ODA (non-refundable aid) and mixed ODA loans.

2. For a number of particular ODA projects, depending on the management requirements and at the request of project-managing agencies, the Ministry of Finance may issue specific guidance applicable separately to these projects.

3. Non-refundable ODA projects implemented independently (not jointly financed with concessional ODA loan projects) subject to the application of the circular guiding the state financial management regime applicable to foreign non-refundable aid sources belonging to the state budget comply with the guidance of the Ministry of Finance.

II. MANAGEMENT PRINCIPLES:

1. ODA capital sources invested in projects are state budget capital sources, which must be fully accounted into the budget, managed and used under the provisions of the State Budget Law and the existing documents guiding the implementation of the Law.

2. The Ministry of Finance shall perform the function of state financial management of ODA projects according to current regulations.

3. Project managers and project owners shall take responsibility before law for the implementation of projects in strict accordance with the commitments in international treaties, state regulations on implementation of programs and projects, financial management, and regimes of financial plan formulation, accounting, auditing, final settlement, project asset management and reporting according to current state regulations and the provisions of this Circular.

III. DOMESTIC FINANCIAL MECHANISMS APPLICABLE TO ODA-FUNDED PROJECTS

1. Project owners and managing agencies, when making ODA-calling lists, must propose domestic financial mechanisms (allocation from the state budget, re-lending from the state budget or partial allocation and partial re-lending from the state budget) to the Ministry of Planning and Investment which shall, together with the Ministry of Finance, submit them to the Prime Minister for approval in strict accordance with the provisions of Decree No. 131/2006/ND-CP.

2. After the Ministry of Planning and Investment informs the official financing list, competent agencies, managing agencies and project owners shall elaborate and approve documents on ODA programs and projects. In relation to financial issues, project documents and project approval decisions should clearly state:

a/ Domestic financial mechanisms applicable to the use of ODA capital sources invested in projects (allocation from the state budget, re-lending from the state budget, or partial allocation or partial re-lending from the state budget with regard to ODA capital sources).

b/ The nature of project capital use (capital construction projects, non-business administrative projects; re-lent loan/credit projects; or mixed projects).

c/ Responsibilities to arrange domestic contributed capital (of various budget levels and project participants such as enterprises, credit institutions and project beneficiaries).

3. For projects subject to the mechanism of re-lending from the state budget, project documents and project approval decisions should clearly identify the re-lending conditions according to the Governments Regulation on re-lending of foreign loans. Otherwise, project- managing agencies shall obtain written agreement from the Ministry of Finance before approving the projects.

4. For projects with specific designing contents somewhat inconsistent with contents of the detailed outlines already submitted together with the proposed lists of projects, before approving the projects, project-managing agencies shall report to the Ministry of Planning and Investment and the Ministry of Finance for further submission to the Prime Minister on domestic financial mechanisms applicable to the projects.

5. Domestic financial mechanisms on the use of ODA capital sources for projects are as follows:

a/ ODA projects entitled to budget allocation are investment projects on public infrastructure, social welfare and projects in other domains which are incapable of directly recovering capital and entitled to state budget funds under the provisions of the State Budget Law, including cases in which local budgets are re-lent foreign loans from the central budget for allocation to projects. They are allocated ODA capital under the state budget capital allocation mechanism.

Contributed domestic capital for projects entitled to budget allocation is provided from the state budget (central or local) and included in annual slate budget estimates according to capital construction or non-business and administrative capital sources corresponding to spending contents of projects.

b/ ODA projects entitled to full or partial re-lending are those which can fully or partially recover capital, including credit projects. They comply with the mechanism of full re-lending, partial re-lending or partial allocation of ODA capital, depending on the projects capability to refund the capital.

The specific conditions on re-lending of ODA capital sources (full re-lending or partial re-lending, recipients of re-lent loans, re-lent loan currency, re-lent loan value, re-lending duration, re-lending interest rates, charges under regulations of donors, domestic sub-lending charges, etc.) shall be identified in the course of preparing, appraising and approving the projects according to the Governments Regulation on re-lending foreign loans and/or agreements with donors.

Owners of ODA projects entitled to full re-lending and owners of ODA projects entitled to partial allocation or partial re-lending shall themselves fully arrange contributed domestic capital amounts and, at the same time, explain the capability and plans to ensure adequate contributed domestic capital before signing re-lending contracts.

Re-lent ODA loan project owners shall prepare and send to concerned agencies (the Ministry of Finance and sub-lending agencies) project dossiers including the projects financial plans in accordance with current regulations on re-lending of the Governments foreign loans.

6. The nature of project capital use is identified based on the following types of project:

a/ Capital construction projects, which are investment projects related to the construction, expansion or renovation of construction works for the purposes of development, maintenance and quality improvement of works or their accompanied services and equipment;

b/ Non-business administrative projects, which are investment projects with spending contents being of non-business administrative nature as specified in the state budget classification;

c/ Mixed projects involving capital construction, non-business administrative and re-lending contents, which are combined projects with at least two of three spending contents, namely, capital construction, non-business administrative and re-lending nature (including re-lent loan to credit projects or credit components).

For mixed projects, project owners should clearly identify their components or spending contents belonging to the sources of capital construction capital and non-business administrative capital. In special cases, if the projects spending contents are of mixed nature but the project owners wish to apply one spending nature only, either capital construction or non-business administrative, they shall give explicit explanations in the course of project preparation and submission for approval.

7. Responsibilities to arrange domestic contributed capital are clearly determined in both content and level according to the following principles:

a/ The central budget shall arrange domestic capital contributed to projects or project components falling under the spending tasks of the central budget (according to Article 31 of the 2002 State Budget Law), which is directly managed and implemented by central agencies that are owners of projects/project components.

b/ Local budgets shall arrange domestic capital contributed to projects or project components falling under the spending tasks of local budgets (according to Article 33 of the 2002 State Budget Law), which is directly managed and implemented by local agencies that are owners of projects/project components;

c/ Enterprises and banks/credit organizations shall arrange domestic capital contributed to projects or project components with owners being enterprises, banks or credit institutions;

d/ Beneficiaries shall contribute domestic capital portions (in cash, kind or labor) as designed by the projects.

8. Financial management applicable to programs and projects accompanied with policy frameworks and budget supports (general budget supports or target budget supports):

a/ ODA capital sources of programs and projects accompanied with policy frameworks and budgetary supports constitute sources of capital directly supported for the state budget, which are used for common national socio-economic development goals or specific objectives of the state budget as agreed with donors. The use of these ODA capital sources must fully comply with the State Budget Laws provisions on expenditure management, without being subject to donors regulations on spending procedures (unless it is so provided for in the financing agreement).

b/ For target programs or budget supports, program owners shall consult the Ministry of Planning and Investment, the Ministry of Finance and concerned agencies on specific mechanisms for the use of ODA capital sources of the programs or budget supports and submit them to the Prime Minister for decision.

IV. FINANCIAL PLANS OF ODA PROJECTS

1. Principles for making of financial plans for ODA projects:

Financial plan mean an investment capital plan (for capital construction projects) or non-business administrative capital plan (for non-business administrative projects) or credit lending plan (for credit projects). A financial plan covers plans on ODA capital (loan, non-refundable aid capital, classified by donor country or organization), domestic contributed capital (central budget capital, local budget capital, investors own capital, contributed capital of project beneficiaries, capital sources from VAT refund (if any) and other capital sources as prescribed by Vietnamese law).

For mixed capital construction and non-business administrative projects, project owners shall make and submit for approval specific financial plans for every spending content of the projects.

For projects involving many owners, every project owner shall make a financial plan for the project component he/she/it implements. When a project involves many owners and one agency coordinating project implementation, such coordinating agency shall make a financial plan for its activities and, at the same time, sum up a general financial plan of the entire project.

Project-managing agencies shall prioritize the arrangement of domestic contributed capital in their annual budget estimates with a view to realizing the commitments in international treaties on ODA and according to the actual annual capital- disbursing capability of ODA projects.

The projects annual financial plans must express the spending contents detailed by project component and activity, and source of capital: donated capital, domestic contributed capital, contributed capital of beneficiaries and credit capital (if any), and must be enclosed with reports clearly explaining the basis and grounds for calculation of every expenditure.

The projects annual financial plans already approved or notified by competent agencies serve as the basis for payment control and withdrawal of domestic contributed capital and ODA capital for projects. After the financial plans are approved. protect management units shall send them to the Ministry of Finance (the External Finance Department) and the Expenditure Control Agency.

The form of annual financial plan of ODA projects is included in Appendix 1 (not printed herein).

2. Making of financial plans for budget-allocated projects

a/ Annually, at the time of elaborating, submitting, examining and approving state budget estimates under current regulations, project owners shall base on the project implementation progress to make investment capital plans for the projects (for capital construction investment projects) or non-business administrative capital plans (for non-business administrative projects) and send them to their managing ministries (if projects are centrally managed) or provincial/ municipal Peoples Committees (if projects are locally managed) for inclusion in general budgetary plans of ministries or provinces, which will be sent to the Ministry of Finance and the Ministry of Planning and Investment for synthesis into the state budget to be submitted to the Government and the National Assembly for approval.

b/ The process of approving, allocating and notifying investment capital plans and non-business administrative capital plans for projects must strictly comply with current domestic regulations on state budget formulation and implementation. Decisions of managing ministries or provincial/municipal Peoples Committees on investment capital or non-business administrative capital plans for projects must be addressed to the Finance Ministry/provincial/municipal Finance Services and state treasuries in charge of controlling expenditures.

c/ For ODA projects on which international treaties have been signed but not yet taken effect or have already taken effect but domestic investment procedures have not yet been completed, project-managing agencies shall report such to the Ministry of Planning and Investment and the Ministry of Finance (within the budget estimation duration) for arrangement in capital construction expenditure or non-business administrative expenditure reserves and submit them to competent authorities for decision (if the central budget is responsible for arrangement of domestic contributed capital) or project owners shall report such to the project-managing agencies (within the budget estimation duration) for arrangement in local budget reserves and submit them to competent authorities for decision (if the local budget is responsible for arranging domestic contributed capital).

d/ For projects arising after budget plans are elaborated, project-managing agencies shall prepare additional plans at the time of supplementation of annual budget plans or report them to the Ministry of Planning and Investment and the Ministry of Finance for handling on a case-by-case basis.

3. Making of financial plans for re-lending projects and credit projects

Annually, at the time of elaborating, submitting, examining and approving state budget estimates under current regulations, project owners shall make annual financial plans for the projects, clearly stating sources of ODA capital and domestic contributed capital, and send them to the Ministry of Finance and the Ministry of Planning and Investment. Project owners shall themselves arrange adequate domestic contributed capital according to project implementation progress.

4. Making of financial plans for combined allocation-re-lent loan projects

Depending on the nature of each project component, which is allocation or re-lent loan, project owners shall apply the process of elaborating, submitting and approving projects financial plans corresponding to each project component under the provisions of Clauses 1, 2 and 3 above.

V. SERVICE BANKS AND PROJECT ACCOUNTS

1. Service bank means a commercial bank selected from the list of commercial banks qualified for authorization to conduct external transactions in service of projects, which is prepared and announced by the State Bank in coordination with the Ministry of Finance or under the agreement between the Government and the donors in signed international treaties.

2. Responsibilities of service banks

The service bank, at the request of project owners or agencies tasked to act as account holders under the project design, shall open relevant accounts for projects and perform payment and capital withdrawal transactions under current regulations.

The service bank shall guide and supply projects with all information on the performance of domestic and overseas payment transactions through the bank system.

Monthly or upon request, the service bank shall send reports listing advanced amounts to account holders.

Monthly or upon account holders request, the service bank shall notify account holders of interests arising on the projects advance accounts; service charge amounts collected by the service bank; the difference between interest and charge; and the period-start and period-end balances.

Within 2 working days after the receipt of notices on amounts withdrawn from foreign banks, the service bank shall credit the projects accounts and notify the project owners thereof.

3. ODA capital accounts

a/ Service bank accounts

Project owners or agencies tasked to act as account holders under the project designs shall open transaction accounts; advance accounts/special accounts at the service bank according to the projects payment requirements, current domestic regulations and the provisions of financing agreements.

Projects with various financing sources must open separate accounts for monitoring every source of withdrawn capital.

For projects which are implemented by various management levels and grade-2 advance accounts are designed under the agreement with donors, project owners at relevant levels shall open grade-2 advance accounts at service bank branche .

The balances on advance accounts enjoy interests at the rates set by the service bank or the rate agreed between the service bank and the account holders. Interests arising on these accounts constitute a state budget revenue, for projects using state budget allocations; or a project owner revenue, for projects using loans re-lent from the state budget.

For mixed projects involving components using state budget allocations and components using loans re-lent from the state budget which share an advance/special account (the time of re-lending from the state budget is the time of withdrawing capital from the advance/special account), interests arising on the account constitute a state budget revenue.

Project owners shall request the service bank to open a separate account for monitoring arising interests.

Interests arising on the advance accounts of projects using state budget allocations can be used for payment of service charges to the service bank. When a project is completed, the unused arising interest amount must be remitted into the state budget. If the arising interest cannot fully cover bank service charges, project owners shall draw up a plan asking for domestic contributed capital for payment.

Annually, project owners shall report to the Ministry of Finance on the use of interests arising on the advance account balances.

b/ State treasury accounts

Depending on the requirements of project implementation and written agreements with donors, project owners shall open ODA capital accounts for the projects at state treasuries to receive advance ODA capital amounts and make payments for the projects after expenditures are controlled by state treasuries.

4. Bank service charges

The service bank may collect charges for services provided for the projects according to current regulations on collection of charges.

Bank service charges are accounted into total expenditures of the projects.

Part 2

EXPENDITURE CONTROL AND DISBURSEMENT MANAGEMENT

I. EXPENDITURE CONTROL

1. Expenditure control principles

a/ Expenditure control aims to ensure that project expenditures comply with agreements/project documents (spending contents, modes of procurement and support rates must conform to the agreements or contracts which have been duly concluded and approved, ensuring donors prior examination, if any), and current domestic regulations on financial management. When it is otherwise provided for by international treaties or duly approved contracts, expenditure control and payment shall be conducted in accordance with these international treaties or approved contracts. Then expenditure control agencies may request competent authorities that have approved the international treaties or contracts to re-consider the approved international treaties or contracts.

b/ Expenditure control applies to all spending activities of projects and is conducted by expenditure control agencies specified in Clause 2 below, corresponding to each type of project.

For payment in the form of letter of credit (L/C) or direct payment in the form of irrevocable letter of payment authorization, the control of payment dossiers and documents made by banks in the form of L/C complies with international payment practices. For payment for construction and installation contracts or consultancy contracts of a number of donors with the application of the form of L/C-based payment, the payment dossiers of these contracts must also be forward to expenditure control agencies for subsequent expenditure control.

c/ The control of dossiers of request for payment for withdrawal of ODA projects overseas capital is not restricted by the projects annual financial plans but must not exceed the general financial plans of the whole projects.

d/ Pre-expenditure control means examination and certification by expenditure control agencies of the validity of expenditures before project management units withdraw capital for payment to beneficiaries. Pre-expenditure control applies to all payment requests, except for cases specified in Item e below.

dd/ Post-expenditure control means examination and certification by expenditure control agencies of the validity of expenditures after project management units have withdrawn capital for payment to beneficiaries. Post-expenditure control applies to the following cases:

– Payment from advance accounts/special accounts, for projects with only one advance account level, or payment from grade-1 advance accounts, for projects with many advance account levels, based on the project owners written requests sent to the Ministry of Finance and the expenditure control agencies.

– Direct payment to re-lent loan projects (excluding last payments for contracts or contracts involving a lump-sum payment, which are subject to pre-expenditure control).

– Post-expenditure control of projects financed by JBIC complies with the instructions in Appendix 2 (not printed herein).

2. Expenditure control agencies:

a/ State treasures at all levels (according to the decentralization of implementation of each project) shall control payment dossiers of projects fully entitled state budget allocations or components entitled to state budget allocations, including credit projects non-credit components entitled to state budget allocations.

b/ The Vietnam Development Bank or other re-lending agencies authorized by the Ministry of Finance to re-lend loans shall control payment dossiers of projects fully entitled to re-lent loans.

c/ For projects using both state budget allocations and re-lent loans, if these components are independently implemented with separate sources of capital. the Ministry of Finance may, at the request of the project owners, identify appropriate expenditure control agencies, ensuring the principle that two expenditure control agencies must not control the same spending activities of projects.

d/ For credit projects or credit components in mixed projects, credit institutions receiving re-lent loans are responsible for the expenditure control of credit lending activities and non-credit components financed with re-lent ODA loans.

3. Expenditure control dossiers and procedures

a/ Expenditure control dossiers and procedures applicable to capital construction projects or capital construction components in mixed projects (including re-lent loan projects i must comply with the provisions of the Finance Ministrys 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 relevant amending, supplementing or replacing documents (if any) and the provisions of this Circular.

b/ Expenditure control dossiers and procedures applicable to administrative non-business projects or administrative non-business components in mixed projects (including re-lent loan projects) must comply with the Finance Ministrys Circular No.79/2003/TT-BTC of August 13, 2003, guiding the regimes of management, allocation and payment of state budget expenditures via state treasuries and relevant amending, supplementing or replacing documents (if any) and the provisions of this Circular.

c/ Expenditure control dossiers and procedures applicable to credit projects or credit components of projects must comply with the regulations of credit institutions using re-lent ODA loans and the provisions of financing agreements and projects. Re-lent ODA loan-using credit institutions shall take responsibility before law for the validity and regularity of credit loans and non-credit expenditures in the lists of expenditures sent to the Ministry of Finance together with their written requests for overseas capital withdrawal.

d/ In addition to the dossiers specified at Points a, b and c above, the following should be added:

– The international treaty on ODA signed between Vietnam and the donor and other relevant project documents (copies signed and scaled by copying units).

– Documents related to the projects financing rate (adjustments, supplements, written instructions of competent authorities or central project management units, non-objection letters of donors…).

– When a group-A project comprises many component projects or sub-projects, which can be operated independently or phased for investment as stated in the written approvals of competent authorities (investment decisions), the dossiers sent to expenditure control agencies are total estimates of component projects or sub-projects, but not total estimates of the whole projects.

dd/ Payment request dossiers sent to expenditure control agencies, if in a foreign language, must be translated into Vietnamese. The Vietnamese translations must be signed and scaled by project owners who shall take responsibility before law for the validity and accuracy of the contents of these Vietnamese translations. Documents to be translated include those related to payment modes, financing rates of projects, successful bids, summarized contracts (including supplementary or revised contracts), donors no-objection letters related to payment contents. Expenditure control agencies shall provide uniform guidance to project owners on to be-translated documents in the spirit of maximum simplification of administrative procedures.

e/ Where projects owners opt to sign package contracts (package prices for the whole contract or for a contractual job), payment control shall be conducted upon request of project owners, in accordance w ith the contract performance progress and payment conditions indicated in the signed contracts already approved by competent authorities. Expenditure control agencies may not request project owners to supply specific expenditure documents related to the payment at such package prices.

4. Expenditure control certification

a/ After controlling expenditures, expenditure control agencies shall give certification in the written requests for investment capital payment (for capital construction projects/components) according to the Finance Ministrys 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 or in the written requests for certification of ODA capital advance/payment (for non-business administrative projects/components according to the value of currency indicated in the signed contracts.

The form of written request for certification of ODA capital advance/payment is included in Appendix 3 (not primed herein).

The value of requested advance or the value of completed work volume qualified for payment, which is certified by expenditure control agencies, must clearly identify the capital amounts to be paid from the ODA capital source and the domestic contributed capital source in conformity with the financing rate for each component or work.

If a contract contains a lump-sum work volume, payment shall be made as for lump-sum contracts.

For work items or contracts wholly financed with ODA grants, the work volume value certified by expenditure control agencies as being qualified for payment in order to withdraw ODA capital is the VAT-exclusive value. The VAT (if any) shall be written on a separate line in the written requests for investment capital payment. If, under the financing agreement or in the course of project implementation, the donors agree in writing to provide a grant covering also VAT, the work volume value certified by expenditure control agencies to be qualified for payment in order to withdraw ODA capital is the VAT-inclusive value.

For work items or contracts with ODA grants accounting for less than 100, the total work value certified by expenditure control agencies as being qualified for payment is the VAT-inclusive value, on which the value of ODA grants can be calculated and determined according to the financing rate indicated in the financing agreement.

In case the contracting parties comply with FIDIC-compiled guidelines, if the arising volume is below 10 of the bidding package value and its cost estimate is not yet approved by competent authorities, expenditure control agencies may give certification according to the requests of project owners with the certification of supervision consultants; if the arising value is above 10 of the bidding package value and its cost estimate is not yet approved by competent authorities, expenditure control agencies may certify 80 of the arising volume value.

b/ Investment capital payment requests (original), containing the certification of the expenditure control agency, serve as a basis for requesting ODA capital withdrawal. An investment capital payment request can be used only once for ODA capital withdrawal.

c/ Expenditure control agencies shall control expenditures or refuse to make payment within 5 working days after the receipt of complete and valid payment dossiers and documents.

II. DOMESTIC CONTRIBUTED CAPITAL PAYMENT

1. For state budget-allocated projects or components: Based on expenditure control results certified on the written requests for investment capital payment, state treasuries at all levels shall pay domestic contributed capital amounts allocated to the projects from the state budget in accordance with the approved annual domestic contributed capital plans.

2. For re-lent loan projects, credit projects or mixed allocation- re-lent loan/credit projects: Enterprises/credit institutions shall pay domestic contributed capital amounts to projects in proportion to the capital amounts falling under their domestic contributed capital arrangement responsibility.

3. For projects with project beneficiaries contributions: Project owners shall themsehes organize the collection and payment of project beneficiaries contributions in accordance with the provisions or agreements in the financing agreements and current domestic regulations (if any).

III. REGULATIONS ON ODA CAPITAL DISBURSEMENT AND PAYMENT APPLICABLE TO PROJECTS

1. Forms of capital disbursement applicable to projects

Depending on the provisions of financing treaties or agreements and each payment request, the ODA capital withdrawal and payment by mode of project financing shall be effected in one or a number of the following forms: capital withdrawal for direct payment/ or money transfer, capital withdrawal for payment in the form of letter of commitment/or special commitment, capital withdrawal for capital recovery, retrospective capital withdrawal, payment via special accounts/advance accounts and a number of other special forms of capital withdrawal under separate agreements with donors.

For projects financed by JBIC, capital disbursement for payment must comply with Appendix 2 (not printed herein).

2. Dossiers of first-time withdrawal of deposited capital

Project management units shall send preliminary dossiers for use as grounds for ODA capital management to the Ministry of Finance (the External Finance Department). Such a dossier comprises the following documents:

– The project investment decision of a competent authority;

– The ODA international treaty signed between Vietnam and the donor and other relevant project documents (except for international treaties directly concluded by the Ministry of Finance);

– The annual financial plan already approved by a competent authority;

– The re-lending agreement between the investor and the authorized re-lending agency (in case of re-lent loan projects);

– A competent authoritys decision recognizing the contract winner (or contractor appointment decision);

– The contract (engineering, procurement, consultancy,etc.,) between the investor and the contractor or the approved expenditure estimate (if spending is no effected on a contractual basis), in case the Ministry of Finance is obliged to supply contracts to donors.

– Where contracts require prior opinions of donors, there should also be no objection opinion of the donor;

– Performance guarantee of the contractors bank;

Project management units shall send the above documents only once for the whole projects, except the investment capital plan/financial plan, which must be sent annually. Only copies of the above documents are required. Project management units shall take responsibility before law for the truthfulness of the copies supplied to the Ministry of Finance.

Dossiers for capital withdrawal from the second time on are specified for each form of capital withdrawal below;

3. Direct payment/money transfer procedures:

a/ Direct payment/or money transfer is a form of payment thereby at the borrowers request, the donor shall transfer money for direct payment to contractors/goods or services suppliers.

When wishing to withdraw capital for payment according to direct payment/money transfer procedures, project management units shall send the following documents to the Ministry of Finance (the External Finance Department):

– Written request for capital withdrawal, enclosed with a capital withdrawal application and lists, made according to set forms, and necessary documents as required by the donor;

– Invoice/ payment requests of contractors;

– Written request (original) for payment with the certification of the expenditure control agency, for cases of application of pre-expenditure control procedures;

– In special cases, the Ministry of Finance may request project management units to supply additional documents proving the validity of capital withdrawal.

Within 5 working days after the receipt or complete and valid dossiers, the Ministry of Finance (the External Finance Department) shall consider and sign or agree with the capital withdrawal applications to be sent to donors for consideration; if the donors accept, money shall be transferred directly into contractors accounts.

b/ Procedures for direct payment under irrevocable letters of capital withdrawal authorization (usually applicable to contracts on equipment purchase in a number of projects of bilateral donors).

On the basis of commercial contracts signed and approved under current regulations, project management units shall send to the Ministry of Finance (the External Finance Department) written requests for capital withdrawal and relevant dossiers.

Within 5 working days after the receipt of complete and valid dossiers, the Ministry of Finance (the External Finance Department) shall consider and send the irrevocable letter of capital withdrawal authorization to agencies authorized by donors to manage the capital withdrawal for payment to contractors/suppliers/consultants according to the contracts.

4. Procedural letters of commitment/special commitment

The procedures for payment through letters of commitment constitute a payment form thereby at the borrowers request, the donor issues an irrevocable letter of commitment/or special commitment ensuring payment to commercial banks, for payments already made or to be made to suppliers under a letter of credit (L/C).

When wishing to withdraw capital for payment according to the procedures of letter of commitment/or special commitment, project management units shall send to the Ministry of Finance written requests for donors to issue letters of commitment/and applications for issuance of letter of commitment (capital withdrawal applications) according to the form set by donors (if necessary) together with lists, made according to forms set by donors, and a draft L/C or a copy of the opened L/C.

Within 5 working days after the receipt of complete and valid dossiers, the Ministry of Finance shall consider and sign/or agree with the capital withdrawal applications requesting donors to issue a letter of commitment, and send notices to the service bank.

5. Procedures for payment by L/C without letter of commitment (applicable to a number of cases where bilateral donors authorize a bank to represent them in managing ODA capital and concurrently act as the seller bank).

When commercial contracts contain provisions on L/C payment without letter of commitment, project management units shall send to the Ministry of Finance (the External Finance Department) written request for L/C opening, enclosed with copies of the commercial contract and relevant documents.

Within 5 working days after the receipt of complete and valid dossiers, the Ministry of Finance shall consider and send its opinions on L/C opening to the project management units and the service bank, and send notices on irrevocable payment authorization to the donors authorized banks for LC-based payment.

6. Procedures for capital reimbursement/retrospective payment

The capital reimbursement procedures constitute a mode by which donors pay money from loan accounts into the designated borrowers accounts to reimburse money amounts which the borrower/project-implementing agency has paid from their own funds for valid expenditures financed by loan capital.

A special case of capital reimbursement payment procedures is retrospective payment, which is a payment mode by which the donors pay valid expenditures of projects which arise before the effective time of the projects and were paid by the borrowers with their own funds. Retrospective payment applies only when there is agreement w ith donors, and is provided for in financing agreements which clearly state the duration for application of retrospective payment procedures and the limits of money amounts eligible for retrospective payment.

When wishing to withdraw money for payment according to capital reimbursement procedures, project management units shall send to the Ministry of Finance (the External Finance Department) the following documents:

– The capital withdrawal request, the capital withdrawal application and the prescribed lists;

– The contractor/beneficiarys certification of receipt of payment amounts.

– The capital withdrawal application, which must clearly state the name and number of the account of each unit, which has advanced the capital. For amounts advanced by the state budget for payment, the name and number of the account of the state budget level from which the capital amount was advanced should be clearly stated. The name and account of the capital-advancing state budget level must be certified by the expenditure control agency:

– The investment capital payment request (original) with the certification of the expenditure control agency;

– In special cases, the Ministry of Finance may request additional written explanations.

– Within 5 working days after the receipt of complete and valid dossiers, the Ministry of Finance shall consider and sign/agree with the capital withdrawal applications to be sent to donors.

Withdrawn amounts for reimbursement/retrospective payment to the state budget at all levels, which have advanced the capital (or sources of state budget origin) must be immediately paid into the state budgets which have advanced the capital.

7. Advance account/special account procedures

The advance account procedures means a form of advancing a sum of money by donors to the borrowers into their advance accounts opened at the service bank so that the borrowers can proactively pay valid regular expenditures of projects, reducing the number of times asking for capital withdrawal from donors and speeding up the payment for project activities.

Depending on the project requirements and agreements with donors, a project may be organized after a multi-level model with the grade-1 advance account held by the central project management unit and the grade-2 advance account held by the local/component project management unit (for projects managed by the central and local/branch levels); or the grade-1 advance account held by the provincial project management unit and the grade-2 advance account held by the district/commune project management unit i for projects managed by provincial and district/commune levels).

The limits of amounts advanced by donors into grade-1 advance accounts and/or grade-2 advance accounts of projects depend on the size, characteristics and specific spending needs of each project. The advance account limits are usually specified in financing agreements or letters of capital disbursement and can be adjusted in the course of project implementation, based on the situation of project implementation and payment demands.

7.1. First-time capital withdrawal into advance accounts

The first-time withdrawal of capital into advance accounts is carried out based on the advance accounts limits (or ceiling limits) prescribed in loan agreements or aid agreements. For ODA loan projects eligible for state budget allocation, the Ministry of Finance may refuse the capital withdrawal equal to 100 of the limit on the basis of taking into account the practical spending demands within three coming months of the projects, expenses for interest payment to foreign countries and arising interests paid by the service bank.

To withdraw capital, project management units shall send to the Ministry of Finance (the External Finance Department) written requests for capital withdrawal, capital withdrawal applications and enclosed lists, made according to forms set by donors.

Within 5 working days after the receipt of complete and valid dossiers, based on the concluded international treaties, the Ministry of Finance (the External Finance Department) shall consider and sign/co-sign the capital withdrawal applications to be sent to donors.

For projects with grade-2 advance accounts, depending on the grade-2 advance accounts limits and the practical payment demands of projects, project management units that are grade-2 advance account holders shall request transfer of capital from grade-1 advance accounts into grade-2 advance accounts. Within 3 working days after the receipt of requests for the first-time transfer of capital into grade-2 advance accounts, grade-1 advance account holders shall transfer money from grade-1 advance accounts into grade-2 advance accounts.

7.2. Expenditures from advance accounts

Expenditures from advance accounts can be made in accordance with the pre-expenditure control or post-expenditure control process, concretely as follows:

a/ The pre-expenditure control process means a process whereby all payments from advance accounts must be controlled in advance by expenditure control agencies. This process applies to projects subject to multi-level management (central, provincial/district/commune) or particularly complicated projects and applies to payment for lump-sum payment contracts or final payment to contracts. The process of withdrawing capital from advance accounts is as follows:

– For projects subject to multi-level management:

To withdraw capital from advance accounts, local/component, district/commune project management units shall send payment requests enclosed with the expenditure control agencys certification to central/ provincial project management units.

Based on the requests of local/component/district/commune project management units, central/provincial project management units shall send payment requests enclosed with the expenditure control agencys certification to the service bank for capital disbursement from advance accounts to beneficiaries.

For projects with grade-2 advance accounts, project management units that are grade-2 advance account holders shall directly send payment requests enclosed with the expenditure control agencys certification to the service bank for capital disbursement from grade-2 advance accounts for payment to beneficiaries.

– For projects subject to single-level management:

Project management units shall send payment requests enclosed with the expenditure control agencys certification to the service bank for capital disbursement from advance accounts for payment to beneficiaries.

The service bank may disburse capital from advance accounts only when the projects payment requests are enclosed with the expenditure control agencys payment proposal and certification of full satisfaction of payment conditions.

b/ Post-expenditure control process:

Upon receipt of requests for payment to contractors/suppliers/consultants from advance accounts, project management units shall check the dossiers of payment request and accept payments in strict accordance with current regulations, calculate amounts to be paid from ODA capital sources strictly according to the rate prescribed in the project documents, then request the service bank to deduct money from advance accounts for payment to beneficiaries.

Within 5 working days after the withdrawal of capital from advance accounts for payment, project management units shall send payment dossiers and documents according to current regulations to expenditure control agencies for expenditure control according to current regulations. Within 5 working days, based on the results of examination of dossiers and vouchers, expenditure control agencies shall give certification of the value qualified for payment according to the form of payment request (and at the same time with the payment of domestic contributed amounts, if any).

Written payment requests with the expenditure control agencys certification serve as a basis for project management units to carry out procedures for subsequent capital withdrawal for addition to advance accounts.

7.3. Addition to advance accounts

To withdraw capital for addition to advance accounts (grade-1), project management units shall send the following documents to the Ministry of Finance (the External Finance Department):

– Written request for withdrawal of capital for addition to advance account, capital withdrawal application and lists, made according to forms set by the donor:

– The list made by the project management unit, listing all spending items from advance accounts, detailed by payment date, amount in the original currency converted into the USD and VND, the USD/ VND exchange rate, payment content, beneficiary, expenditure control agency, number/date of the written certification of the expenditure control agency for each spending item. This list serves as a basis for the Ministry of Finance to carry out mutual ceasing procedures.

– The written investment capital payment request containing the expenditure control agencys certification (original). The paid amounts on the list must match the amounts certified by the expenditure control agency on the written investment capital payment request. A written investment capital payment request containing the expenditure control agencys certification can be used only once. For credit projects, the list must express the re-lent amounts. The Ministry of Finance may request supply of detailed documents evidencing the re-lending (if necessary).

– The advance account list of the service bank, which clearly expresses all transactions on the account during the period for which the request for withdrawal of capital for supplementation of spent amounts is made and the payment details matching the amounts on the lists of expenditures and the amount indicated on the written investment capital payment request already certified by the expenditure control agency.

– Debt acknowledgement contract/minutes signed between the borrower and the re-lending agency (for re-lent loan projects).

Within 5 working days after the receipt of complete and valid dossiers, the Ministry of Finance (the External Finance Department) shall consider and sign/co-sign the capital withdrawal applications to be sent to donors for consideration; if the donors accept them, they shall transfer money for addition to advance accounts.

For projects with grade-2 advance accounts, capital withdrawal for addition to grade- 2 advance accounts is carried out by local project management units that are account holders. Local project management units shall send requests for addition to grade-2 advance accounts to the central/provincial project management units (grade-1 advance account holders) together with dossiers and documents required for the addition to grade-1 advance accounts as mentioned above. Central/provincial project management units shall base on the valid dossiers and documents of request to transfer money from grade-1 advance accounts for addition to grade-2 advance accounts. The dossiers and documents of local project management units requesting addition to grade-2 advance accounts are also documents to be sent by central/provincial project management units to the Ministry of Finance and donors when proposing the addition to grade-1 advance accounts.

8. Capital withdrawal process applicable to credit projects or credit components of projects:

The withdrawal of capital for credit projects or credit components of projects is effected as follows: Based on the continued lending requirements and spending requirements for the project contents, credit institutions accepting re-lent loans shall prepare dossiers for withdrawal of capital from donors for continued lending or expenditures for project activities in strict accordance with the provisions of the loan agreements or project agreements (if any) and current regulations on credit, bidding, procurement, etc.

A dossier of capital withdrawal request sent to the Ministry of Finance comprises:

– Written capital withdrawal request.

– Capital withdrawal application enclosed with a list of amounts already re-lent under donor regulations (re-lent loan-accepting credit institutions are responsible for the legality, truthfulness and accuracy of subsequent loans), certified by a competent authority.

– Documents proving the legality and regularity of expenditures on project activities as requested by donors.

Within 5 working days after the receipt of complete and valid dossiers, the Ministry of Finance (the External Finance Department) shall consider and sign/co-sign the capital withdrawal applications to be sent to donors.

IV. DISBURSEMENT OF ODA CAPITAL FOR PROGRAM-BASED LOANS, BUDGET SUPPORT LOANS

1. Responsibilities of agencies in the disbursement of ODA capital for program-based loans and budget support loans

a/ Program managers shall assume the prime responsibility for, and coordinate with concerned agencies in. realizing the commitments as agreed with donors to satisfy the capital withdrawal conditions.

b/ Program managers shall prepare or coordinate with concerned agencies in preparing documents/ reports or documents on the implementation of commitments and regulations according to program requirements, and send them to donors and the Ministry of Finance in service of capital withdrawal requests.

c/ The Ministry of Finance shall prepare capital withdrawal applications and send them to donors for capital withdrawal according to each drive as agreed with donors.

d/ Where the State Bank or the program manager withdraws capital under a financing agreement, capital withdrawal is effected on the basis of agreement with the Ministry of Finance on the capital withdrawal time, the withdrawn amount and account receiving ODA capital.

2. Provisions on capital disbursement

a/ For target budget support programs: ODA capital already withdrawn into the state budget for spending on program objectives and contents must comply with the process of expenditure control and state budget capital allocation for payment according to current regulations applicable to relevant national target programs.

b/ For general budget support programs for the performance of the policy or institutional reform tasks of a branch or domain, etc., under the policy framework agreed with donors but not binding on the specific spending contents for withdrawn capital amount: ODA capital withdrawn into the state budget is used for the common objectives of the state budget. In special cases, withdrawn capital can be used for specific objectives and contents as decided by the Prime Minister.

Part 3

ACCOUNTING, AUDIT, SETTLEMENT, REPORTING INSPECTION

I. ACCOUNTING

ODA capital-using units shall abide by the provisions of the Accounting Law, accounting standards and the current accounting regimes of Vietnam, properly apply them to various types of project and. at the same time, abide by donor regulations in financing agreements or project documents (if any).

1. Organization of accounting work, organization of accounting apparatus

1.1. Organization of accounting work

ODA capital-using units shall organize accounting work in order to fully reflect and report on the situation and results of projects according to the following contents: compilation and handling of accounting documents; selection and application of accounts; opening and recording of accounting books; compilation and submission of financial reports, etc., according to the provisions of the Accounting Law, accounting standards and the current accounting regimes of Vietnam and donor regulations mentioned in the financing agreements or project documents (if any).

1.2. Organization of the accounting apparatus

ODA capital-using units must base on the characteristics and form of implementation management of ODA projects in order to organize a proper accounting apparatus according to the following regulations:

a/ Using their accounting apparatuses for the performance of accounting tasks of the projects in the following cases:

– Small-scale and simple projects with a small accounting work volume and without project management unit; however, project capital sources and project expenditures must be separately accounted, without including ODA capital sources into capital sources of the units.

– Projects with a project management unit but without a separate accounting apparatus. For this case, project capital sources and project expenditures must also be separately accounted, without including ODA capital sources into capital sources of the units.

b/ Organizing a separate accounting apparatus and making separate financial reports for large-scale and complicated projects with a large accounting work volume and a project management unit which has an independent legal person status and own seal.

2. Accounting regimes applicable to various types of project

2.1. For capital construction investment projects:

a/ For the cases specified in Item a, Point 1.2 above, the current accounting regime suitable to each type of project-implementing unit (enterprise, non-business administrative unit, commune or ward, etc.) will apply.

b/ For the cases specified in Item b, Point 1.2 above, the current accounting regime of investors will apply.

2.2. For projects of non-business administrative nature:

a/ For the cases specified in Item a, Point 1.2 above, the current accounting regime suitable to each type of project-implementing unit (enterprise; non-business administrative unit, commune or ward, etc.) will apply.

b/ For the cases specified in Item b, Point 1.2 above, the current accounting regime of non-business administrative units will apply.

2.3. For credit projects:

a/ For the cases specified in Item a, Point 1.2 above, the current accounting regime suitable to each type of project-implementing unit (credit institution; non-business administrative unit; etc.) will apply.

b/ For the cases specified in Item b, Point 1.2 above, the current accounting regime of credit institutions will apply.

2.4. For mixed projects

In principle, ODA capital of mixed projects must be separately accounted according to each type of capital (investment capital, capital of non-business administrative nature, credit capital,…). The application of a accounting regime to mixed projects complies with the following regulations:

a/ For the cases specified in Item a, Point 1.2 above, the current accounting regime suitable to each type of project-implementing unit (enterprise, credit institution; non-business administrative unit:…) will apply.

b/ For the cases specified in Item b, Point 1.2 above, the use of ODA capital must be based on the following criteria for selection of a proper applicable accounting regime:

– Spending nature of the project;

– Form of project management;

– Type of the ODA capital-using unit.

When applying an accounting regime to this case, if wishing to amend and supplement the accounting contents and methods, project management units shall send a written request to the Ministry of Finance and do so only when obtaining the latters written approval.

II. AUDIT OF FINANCIAL REPORTS

1. The audit of annual financial reports of ODA projects aims to examine and certify the truthfulness and reasonability of the projects financial reports in one fiscal year in terms of financial management and management of assets and equipment of the projects under the commitment between the donors and the Government and, at the same time, certify the projects resources already used by project owners in accordance with the procedures, regulations, policies, financial and accounting regimes, which are agreed upon between the Government and the donors for application within the project framework.

2. The audit of annual financial reports of ODA projects applies to projects upon audit requests defined in international treaties/financing agreements; in donor policies and procedures or at the audit requests of Vietnamese functional bodies in accordance with current domestic regulations.

3. In the course of auditing annual financial reports of ODA projects, auditing companies, auditors and project owners shall abide by current regulations on audit, auditing standards and auditors professional ethics.

4. Auditing companies selected for the audit of ODA projects must be those operating lawfully in Vietnam and having their names on the list of companies qualified for auditing work, which is announced annually by the Ministry of Finance (or a professional organization authorized by the Ministry of Finance), unless otherwise provided for in the commitment between the Government and the donors.

5. Apart from the audit of annual financial reports, ODA projects may hire the audit of each completed construction item, work, job (of special nature large scale and large fund), if wishing for separate audit.

III. SETTLEMENT

1. Settlement of ODA projects financed with capital construction investment capital

Capital construction investment capital-financed ODA projects are settled under the Finance Ministrys Circular No. 33/2007ATT-BTC of April 9, 2007, guiding the settlement of completed state budget-funded projects and Circular No. 98/2007/TT-BTC of August 9, 2007, amending and supplementing a number of points of Circular No. 33/2007ATT-BTC of April 9, 2007, concretely as follows:

1.1. General provisions:

a/ For important national ODA projects, group-A projects composed of many component projects or sub-projects, where every component project or sub-project is operated independently or phased for investment as stated in the document approving the pre-feasibility study report or investment report, this component project or sub-project will have its investment capital settled like an independent investment project.

b/ For ODA projects involving many work items, depending on the size, nature and construction duration of works, investors may settle the construction investment capital for each work item or the entire work immediately after such work item or work is completed and put to use at the request of investment deciders. The value proposed for settlement of each work item covers construction cost, equipment cost, consultancy expenses and other expenditures directly related to that item. After the whole project is completed, the investor shall make a general settlement of the whole project and submit it to a competent person for approval and allocate common expenditures of the project for each of its work items.

1.2. Competence to approve, and agencies dimming the settlement of ODA projects

a/ Competence to approve the settlement:

– The Finance Minister shall approve the settlement of ODA projects in which investment has been ratified and permitted by the National Assembly and has been decided by the Prime Minister.

– Ministers, heads of ministerial-level agencies, heads of government-attached agencies, central bodies of mass organizations or presidents of provincial/municipal Peoples Committees shall approve the settlement of state budget- financed ODA projects of groups A, B and C; may authorize or decentralize the approval of settlement of group-A and group-B ODA projects to their immediate subordinate agencies.

– For the remaining ODA projects, investment deciders are competent to approve the settlement of completed projects.

b/ Agencies examining the settlement of completed projects

– For ODA projects in which investment has been ratified and permitted by the National Assembly and has been decided by the Prime Minister, the Ministry of Finance shall conduct the examination;

– For state budget-financed ODA projects managed by central agencies, persons competent to approve the settlement shall assign the functional units under their management to organize the examination.

– For state budget-financed ODA projects managed by provinces or centrally run cities, provincial/ municipal Finance Services shall conduct the. examination.

– For state budget-financed ODA projects managed by districts or provincial towns, district-level Finance Sections shall organize the examination.

– For the remaining ODA projects, persons competent to approve the settlement shall assign their functional units to organize the examination.

In case of necessity, persons competent to approve the settlement may decide to set up examination teams to conduct the examination before approving the settlement; an examination team is composed of members of related units.

1.3. Audit of the settlement of completed ODA projects:

a/ All important national ODA projects. group-A ODA projects, group-B ODA projects financed with state capital, when completed, must have their settlement audited before submission to competent authorities for examination and approval of the settlement; the remaining ODA projects have their settlement audited at the request of competent authorities.

b/ Investors shall organize the selection of auditing contractors according to the law on bidding and conclude contracts for audit of the settlement of completed projects according to the provisions of the ordinance on contracts.

c/ Settlement-auditing contractors must be auditing enterprises set up and operating under the provisions of law on establishment and operation of enterprises in Vietnam and the provisions of the Governments Decree No. 105/2004/ND-CP of March 30, 2004. on independent audit.

d/ Auditing contractors auditing the settlement of completed projects and making auditing reports shall abide by the standards on audit of completed investment capital settlement reports, promulgated by the Ministry of Finance.

1.4. Examination of the settlement of completed ODA projects:

a/ For audited ODA projects:

On the basis of reports on results of audit of completed projects, agencies (units) in charge of examination of project settlement shall conduct the examination regarding:

– The compliance with the standards on audit of completed investment capital settlement reports and the specific contents guided in Circular No. 33/2007/TT-BTC and Circular No. 98/2007/TT-BTC; in case of failure to meet the prescribed requirements, the examination agency may request the auditing contractors to conduct re-examination or additional audit.

– The application of regulations and legal grounds to the audit of projects by auditors.

– Proposals and disparities between the investors settlement report and auditing contractors report on audit of the completed project.

– The investors and relevant units compliance with the conclusions of state investigation, examination and audit agencies (if any).

b/ For ODA projects not subject to settlement audit: Examination agencies shall conduct the examination and make reports on results of examination of the settlement of completed projects strictly according to the procedures and contents guided in Circular No. 33/2007/TT-BTC and Circular No. 98/2007/TT-BTC.

c/ Expenses for examination and approval of settlement and audit expenses comply with Circular No. 33/2007/TT-BTC and Circular No. 98/2007/TT-BTC.

d/ Time limits for settlement of ODA projects:

The time for making reports on settlement of a completed ODA project is counted from the date the minutes on the hand-over of the project for putting to use is signed; the auditing time is counted from the date the auditing contract lakes effect; the time for examination and approval of settlement is counted from the date of receipt of complete settlement dossiers. The maximum time limits are specified as follows:

– Important national ODA projects: The lime for making a settlement report is 12 months; the auditing time is 10 months; the settlement examination and approval time is 10 months.

– Group-A projects: The lime for making a settlement report is 12 months; the auditing time is 8 months; the settlement examination and approval time is 7 months.

– Group-B projects: The time for making a settlement report is 9 months; the auditing time is 6 months; the settlement examination and approval time is 5 months.

– Group-C projects: The time for making a settlement report is 6 months; the auditing time is 4 months; the settlement examination and approval time is 4 months.

1.5. Responsibilities of settlement-examining and-approving agencies:

a/ To guide, examine and urge investors to make the settlement of completed projects in time and with all prescribed contents.

b/ To guide investors to settle problems arising in the course of settlement of completed projects.

c/ To organize the examination of reports on settlement of completed projects with prescribed contents and requirements.

d/ To take responsibility before law for their examination results.

dd/ To guide, urge and create legal conditions for investors to complete the settlement of debts and final settlement of accounts of projects after approving the settlement.

e/ In cases where projects arc approved by central agencies that are owners of ODA projects with many component projects or sub-projects, the authorities that approve component projects or sub-projects shall examine and approve the settlement of completed component projects or sub-projects as independent projects; project-approving authorities shall examine and approve the settlement of completed projects according to current regulations.

1.6. Principles for allocation of expenditures to common activities of ODA projects: The allocation of common expenditures is effected in the following two cases:

a/ Case 1: Expenditures for common project activities which are expenditures of component projects or sub-projects independent from other component projects or sub-projects are settled like for independent investment projects and are not allocated to other component projects or mini-projects.

b/ Case 2: Expenditures for common activities are not expenditures of independent component projects or sub-projects:

– Expenditures not directly related to other independent component projects or sub-projects are settled separately.

– Expenditures directly related to other independent component projects or independent sub-projects are allocated to component projects or sub-projects on the following principles:

Annually, investors shall allocate expenditures on common activities to component projects of sub-projects as follows:

+ Expenditures directly related to any component projects or sub-projects are allocated to those projects;

+ The remaining expenditures are allocated in proportion to the ratio between the total investment of a component project or sub-project and the total investment of the whole project.

+ The allocated value of annual expenditures for common activities of a project will be incorporated into the value of settlement of investment capital of each component project or sub-project when the investment capital of the completed project is settled.

1.7. Besides, when central agencies are in charge of coordinating ODA projects impiemented in various localities, they are responsible for performing fully the functions of project investor and manager according to state regulations.

– If component projects or sub-projects are in localities, localities shall manage and implement component projects or sub-projects while the central agency shall implement the project.

– If component projects or sub-projects are not in localities, the central agency acting as investor shall implement the project in localities.

2. Settlement of ODA projects of non-business administrative nature (including non-business administrative capital portions of mixed projects):

2.1. The forms and time for making reports on settlement of funds of projects comply with the Finance Ministers Decision No. 19/2006/QD-BTC of March 30, 2006. enclosed with detailed explanations on the funds settled by capital source ( loan capital, aid, domestic contributed capital….). The examination, approval, appraisal and notification of settlement comply with the provisions of the Finance Ministrys Circular No. 01/2007/TT-BTC of January 2, 2007, guiding the examination, approval, appraisal and notification of annual settlement for administrative agencies, non-business units, state budget-supported organizations and state budgets of all levels.

The annual settlement of projects is incorporated into the general settlement of ministries, branches or localities according to current budget decentralization.

2.2. Within 60 days after the project completion, component project management units shall make reports on the whole projects (detailed by ODA capital and domestic contributed capital) and send them to superior project management units. Superior project management units shall sum up the financial reports of the whole projects, detailed by component project, ODA capital and domestic contributed capital, and send them to project managers for report to the Prime Minister. The financial reports of the whole projects are synthesized on each project management units annual settlement report already examined and notified by a competent authority. Before addressing them to the Prime Minister, the financial reports of the whole projects must be audited by independent auditing bodies. Audit expenses are included in the expenses of superior project management units.

IV. REPORTING REGIME

1. Quarterly, on the 10th of the first month of a quarter, project owners shall make reports listing amounts already disbursed by donors in the previous quarter, detailed by capital-withdrawing unit, nature of capital use (capital construction capital, non- business administrative capital, budget support, re-lent loan), capital user and expenditure control agency, and send them to the Ministry of Finance (the External Finance Department) in service of budget settlement.

The report forms and lists of withdrawn ODA capital amounts comply with Appendix 4 (not printed herein).

2. Project owners shall make quarterly/annual reports on implementation of investment capital plans or non-business administrative capital expenditure settlement and reports on settlement of completed works. Accounting reports and settlement reports must comply with current regulations.

3. For projects with capital sources from VAT refund, project owners shall report them to their managing agencies, asking for approval of plans on the use of refunded tax amounts strictly according to current regulations.

V. EXAMINATION WORK

Finance agencies at all levels and project-managing agencies may conduct regular or extraordinary examination and inspection of ODA projects independently or in coordination with concerned bodies regarding financial management issues according to the provisions of this Circular.

Part 4

PROPERTY MANAGEMENT

I. SCOPE OF APPLICATION

1. ODA project management units set up under the provisions of Clauses 1, 2 of Article 25 of the Regulation on management and use of ODA capital sources, promulgated together with the Governments Decree No. 131/ND-CP of November 9, 2006, and provided with property, shall manage and use the property under the guidance of this Circular.

2. Contractors, consultants, ODA project supervisors shall themselves ensure the property in service of consultancy, supervision or construction. Project management units may not invest nor procure property for supply to contractors, consultants and supervisors.

3. If consultancy, supervision or construction contracts which were signed before the effective date of this Circular contain provisions on provision of property to contractors, consultants or supervisors, they are still performed. When projects are completed or the property is no longer used in the course of project implementation, the property will be handled under the provisions of the Finance Ministrys Circular No. 116/2005/TT-BTC of December 19, 2005, guiding the management and use of property of projects not financed with state budget capital upon completion of projects, and relevant legal documents.

II. PROPERLY MANAGEMENT PRINCIPLES

1. The provision of property for the operation of project management units must conform to the requirements of the assigned tasks, the criteria and norms set by the state, ensuring thrift practice and waste combat.

2. Property provided to project management units must be used for proper purposes, fully accounted and monitored according to regulations.

3. Where specific ODA international treaties contain provisions different from Vietnams current provisions on provision and management of property of project management units, project owners shall report such to the Prime Minister for opinions before signing those treaties or procuring property under those treaties.

III. FROMS OF PROPERTY PROVISION

1. For property being working offices: Program-or project-implementing agencies shall arrange places within their existing working offices for project management units managerial tasks. In case they cannot arrange such places, project management units may rent working offices.

2. For cars in service of work, 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 hire them.

3. For communication equipment, working equipment and other fixed assets: Project management units may receive them under decisions of competent authorities: buy or hire with their funds such equipment from other organizations or individuals.

IV. COMPETENCE TO DECIDE ON, AND FUNDS FOR PROPERTY PROVISION

1. Property (hired or purchased) for managerial work of ODA project management units will be decided by agencies competent to decide on the establishment of project management units according to regulations. When the agency competent to decide on the establishment of a project management unit is other than the agency competent to decide on the investment or approve the project, the former must consult the latter before deciding on the rent or purchase of property.

2. Funds for property rent or purchase come from the funds for managerial work of project management units within the total funds of the projects.

V. MANAGEMENT AND USE OF PROPERTY IN THE COURSE OF PROJECT IMPLEMENTATION

1. Monitoring accounting books, calculating property wear

a/ For property purchased or received under decisions of competent authorities, project management units shall monitor and account them according to current accounting regulations.

b/The calculation of property wear complies with the regime prescribed for public non-business units.

2. Use management

a/ All properties purchased or received under decisions of competent authorities and properties hired for project activities must be used for proper purposes, in strict accordance with the criteria and norms set by the State; it is absolutely forbidden to:

– Sell, exchange, assign, donate or lend them without decisions of competent authorities;

– Let organizations or individuals hire, borrow or use them;

– Use them for personal purposes.

b/ Project management units directly assigned to manage and use properties must issue regulations on property management and use. and regulations on gasoline and oil consumption norms for vehicles.

3. Property maintenance and repair

Properties purchased or receded for project activities must be maintained and repaired according to state regulations on technical management applicable to each kind of property Funds for property maintenance and repair are taken from the funds of project management units.

VI. DISPOSAL OF PROPERTIES AFTER PROJECT COMPLETION

1. The disposal of project properties when the projects are completed or they are no longer in use in the course of project management must comply with the provisions of the Finance Ministrys Circular No. 116/2005/TT-BTC of December 19, 2005, guiding the management and management of properties of state budget-financed projects upon project completion, and relevant legal documents.

2. For temporarily imported duty-free properties of foreign consultants, if they arc transferred to the Vietnamese Government after the project completion, project management units or the agencies assigned to dispose of these properties shall carry out procedures on behalf of the projects and pay tax (if any) according to law.

3. When selling and liquidating properties of project management units upon project completion, the agencies assigned to dispose of these properties shall issue property sale invoices published by the Ministry of Finance to property buyers.

Part 5

ORGANIZATION OF IMPLEMENTATION

This Circular takes effect 15 days after its publication in CONG BAO and replaces the Finance Ministrys Circular No. 78/2004/TT/BTC of August 10, 2004, guiding the management of capital withdrawal applicable to ODA capital sources.

Normative documents guiding the financial management according to requirements of projects/project groups, which are promulgated by the Ministry of Finance before the effective date of this Circular, remain valid.

Any problems arise in the course of implementation should be reported to the Ministry of Finance for guidance and coordinated settlement.

 

FOR THE MINISTER OF FINANCE
VICE MINISTER

Train Xuan Ha

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