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THE
MINISTRY OF FINANCE -
THE MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT
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SOCIALIST
REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
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No.
90/1997/TTLT/TC-NN
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Hanoi,
December 19, 1997
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JOINT CIRCULAR
GUIDING THE REGIME OF FINANCIAL MANAGEMENT AT THE STATE
ENTERPRISES ENGAGED IN PUBLIC UTILITY ACTIVITIES IN THE EXPLOITATION AND
PROTECTION OF WATER CONSERVANCY PROJECTS
Pursuant to the Law on State
Enterprises adopted by the National Assembly on April 20, 1995; the
Ordinance on the Exploitation and Protection of Water Conservancy Projects of
August 31, 1994, Decree No.56-CP of October 2, 1996 of the Government on the
State Enterprises Engaged in Public Utility Activities, the Ministry of Finance
has issued Circular No.06-TC/TCDN of February 24, 1997 to guide the financial
management regime at State enterprises engaged in public utility activities
according to the provisions of Decree No.56-CP of October 2, 1996 of the
Government.
In view of the characteristic nature of the activities and the mechanism of
financial management at the enterprises engaged in the exploitation and
protection of water conservancy works, aside from implementing the provisions
in Circular No.06-TC/TCDN of February 24, 1997 of the Ministry of Finance, the
Ministry of Finance and the Ministry of Agriculture and Rural Development now
jointly issue the following guidance on some concrete questions regarding the
regime of financial management at the State enterprises engaged in public
utility activities in the exploitation and protection of water conservancy
projects:
I. GENERAL
PROVISIONS
1. Subject to the regulation of
this Circular are the State enterprises engaged in public utility activities in
the exploitation and protection of water conservancy projects (commonly called
agro-hydraulic enterprises) comprising the independent accounting enterprises
founded by decision of the Minister of Agriculture and Rural Development or the
Presidents of the People's Committees of the provinces and cities directly
under the Central Government according to the criteria provided for in Articles
1 and 2 of Decree No.56-CP of October 2, 1996 of the Government.
2. The agro-hydraulic
enterprises conducting irrigation and drainage services according to the
assigned tasks or on orders are entitled to collect water conservancy fees and
a number of other charges provided for by the State. The agro-hydraulic
enterprises which are assigned capital, natural resources, land and other
resources, shall have to use effectively, preserve and develop the assigned
capital, have civil rights and obligations, take on themselves the
responsibility for their activities as assigned by the State within the limit
of the capital and resources managed by the enterprises through the mode of
using revenues to cover expenditures and receiving financial support from the
State in the cases stipulated in Article 11 of the Ordinance on the
Exploitation and Protection of Water Conservancy Projects.
3. In addition to implementing
the irrigation and drainage task, an agro-hydraulic enterprise is allowed to
make the most of the land, landscape, State capital and property managed by the
enterprise to organize business in supplementary occupations and trades
suitable to the capabilities of the enterprise and the demands of the market on
the following conditions:
- It must get the written
consent of the agency which decides to found the enterprise;
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- It must register the
supplementary businesses as currently prescribed.
- It must make separate
accounting of the supplementary businesses.
- It must fulfil the obligation
of paying taxes on the supplementary businesses as prescribed by law.
4. An agro-hydraulic enterprise
is entitled to the following financial policies:
- It is given preference in
capital investment, supplied with part or the whole of the regulatory capital,
given preferential loans or support from the official aid to the projects and
programs in the exploitation of the water conservancy works.
- It is exempted from capital
depreciation deduction for the projects built up or cast or made of earth,
pumping stations with capacity of 8,000 m3/hour upward as currently stipulated,
together with the property and architectural objects associated with the use
and operation of these pumps and a number of other properties as defined in
Decision No. 1062/TC/QD/CSTC of November 14, 1996 of the Ministry of Finance.
- It is exempted from land use tax
on the area assigned by the State for the construction and protection of water
conservancy projects (including the house for the management of the stations
and the group of main projects, workshops, and storehouses in service of the
exploitation and protection of water conservancy projects). In case the
agro-hydraulic enterprise uses this land for service businesses, it has to pay
the land rent as provided for in Decree No.85-CP of December 17, 1996 of the
Government.
- It is exempted from income tax
on the income made up of the water conservancy fees collected from the
activities in direct service of agricultural production.
- It does not have to pay tax on
the use of State budgetary capital.
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II.
MANAGEMENT AND USE OF CAPITAL AND PROPERTY
1. Capital investment:
1.1. A newly founded
agro-hydraulic enterprise shall be given priority in investment of part or the
whole of the initial regulatory capital, not lower than the prescribed capital
provided for in Decree No. 50-CP of August 28, 1996 of the Government,
consistent with the size and assigned task of irrigation and drainage. The
enterprise has the duty to continually preserve and develop the capital from
the results of its business activities. An agro-hydraulic enterprise shall
receive State investments in projects, property, machinery and equipment of the
categories not subject to depreciation cost accounting in the process of
construction, purchase, renovation or upgrading when these properties are no
longer usable. It is also entitled to supplementary capital allocation if the
State deems it necessary to make additional investment in order to carry out
the supplementary task assigned by the State or if it really falls short of
capital compared to the assigned task of irrigation and drainage (after full
mobilization of the existing sources of capital at the enterprise). The
supplementary capital sources for an operating enterprise comprise:
- A profitable enterprise shall
be considered for profit tax relief in order to supplement the capital of the
enterprise as prescribed by law.
- An enterprise which does not
make profit in business or which still runs short of capital after enjoying
profit tax relief shall be considered for supplementary allocation of capital
by the State.
1.2. The agency which decides to
found the agro-hydraulic enterprise and the financial agency of the same level
have the responsibility to assure the regulatory capital at the time of the
founding of the enterprise as stipulated in Article 2 of Decree No.50-CP of
August 28, 1996 of the Government and to allocate supplementary capital to the
enterprise.
1.3. Procedures for capital
investment:
a/ For investment in
construction: The agro-hydraulic enterprise shall be allocated investment by
the State to upgrade or build new constructions, expand the scope of its
activities, conduct major repairs of its constructions, machinery and equipment
and restore its projects. It shall not have to deduct its depreciation cost
with the sources of investment capital for basic construction as provided for
in the current Regulation on the Management of Construction Investment.
b/ In case of supplementary
investment for business capital, the enterprise must file a dossier proposing
allocation of supplementary capital including:
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- The certificate of business
registration;
- The decision of the head of
the agency which decides the founding on the assignment of the public utility
task;
- The production and financial
plan of the enterprise already ratified by the competent authority;
- The public financial report of
the enterprise in the previous year (if the enterprise is still operating).
1.4. The process of allocating
capital to the enterprise shall comply with the decision of the Ministry of
Finance.
2. Assigning, selling, leasing,
mortgaging and pawning property:
- An agro-hydraulic enterprise
may assign or sell unnecessary or technically obsolete properties in order to
recover capital after the agency deciding to found the enterprise decides to
that effect. Before assigning or selling the enterprise must set up a Price
Setting Council and conduct a public bidding as prescribed by law. The Council
must be composed at least of the representatives of the Board of Directors, a
technically knowledgeable person, the chief accountant and the person directly
managing the property of the enterprise... The difference between the selling
or assignment of the property and the remaining value on the book of accounts
as well as the fee of sale or assignment shall be accounted into the business result
of the enterprise.
For the properties not subject
to deduction of depreciation cost the assignment or sale shall be accounted as
reduction of the business capital of the enterprise, and the income from the
sale or assignment (after deduction of the cost of assignment or sale) shall be
wholly remitted to the State budget (or accounted as increase of business
capital if the State reinvests in the enterprise).
- For the important fixed assets
and the main production lines, before the assignment or sale, the enterprise
must get the written consent of the agency which decides to found the
enterprise after receiving the written agreement of the agency managing State
capital and properties at the enterprise.
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- The enterprise is entitled to
pawn and mortgage properties in order to borrow capital from the credit
organizations according to provisions of law. The enterprise is not allowed to
pawn or mortgage properties which it borrows or hires or is asked to keep nor
accept pawns and mortgages from individuals or another enterprise without the
consent of the owners of these properties.
3. Liquidation of properties:
An agro-hydraulic enterprise is
allowed to liquidate properties which are not necessary or are obsolete
technically and cannot be used, are out of order or substandard.
Important equipment and
properties, the main production lines of a decisive character for the operation
of the enterprise such as the mechanical pumps or canals... must get the
written consent of the agency which decides to found the enterprise and the
agency managing the State capital and properties at the enterprise before their
liquidation.
Before the liquidation, a
Property Liquidation Council must be set up, composed of at least the
representative of the enterprise leadership, a technician, the chief accountant
and the manager of properties... In case the spare parts, discarded materials
and other properties resulting from the liquidation are used for production and
business purposes, the enterprise shall have to organize the evaluation and
organize bidding as required by law if these properties are put on sale. The
difference between the income resulting from the liquidation (including the
value of the part used for investment in business) and the value remaining on
the book of accounts of the liquidated properties as well as the liquidation
fees shall be accounted in the business results of the enterprise. In
particular, for those properties not subject to deduction of the deprecation
cost, they shall be accounted as reduction of business capital of the
enterprise. The income from the liquidation, after deduction of the liquidation
expenditures, shall have to be remitted wholly to the State budget (or
accounted as increase of the business capital if the State reinvests it in the
enterprise).
4. The agro-hydraulic
enterprises shall carry out the regime of deduction and use of the fixed asset
depreciation cost as provided for by the Ministry of Finance. The following
assets shall not be subject to deduction of depreciation cost:
- The cast-built or earth works.
- Mechanical pumps with capacity
of 8,000 m3/h upward as currently provided for together with architectural
objects used in the operation of the works.
- Fixed assets coming from the
welfare fund of the enterprise and not directly serving the production and
business activities of the enterprise.
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- Fixed assets still in use
though having exhausted their depreciation time.
- Fixed assets which are not
necessary, wait removal or have been kept for more than a year and have been
registered with the financial agency.
The whole depreciation cost of
the fixed assets shall be left at the enterprise for reinvestment in renovation
and replacement of fixed assets and for use to meet the business requirements
as provided for by the Ministry of Finance.
With regard to the properties
not subject to depreciation dedication, the enterprise still have to open the
book of accounts to monitor and record the depreciated value as prescribed.
5. The agro-hydraulic enterprise
shall reevaluate its properties in the following cases:
- Inventorizing and reevaluating
properties as decided by the State.
- Using its properties to
contribute to the capital of joint ventures, to the stock companies as required
by law.
The handling of the results of
the inventory and revaluation of properties must comply with the regulations of
the State.
III.
TURNOVER, EXPENDITURES AND DISTRIBUTION OF PROFITS
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1.1. Revenue from irrigation and
drainage service is the money collected as water conservancy fee and tested on
completion according to the contract. The level of this fee shall be set by the
People's Committees of the provinces and cities directly under the Central
Government.
For the inter-provincial
agro-hydraulic enterprises, the income is the remittances from the
agro-hydraulic enterprises in the system determined by the System Management Council.
1.2. The income from the
business operations in the integrated exploitation of the water conservancy
works such as: aquaculture and fisheries, leasing of water locks, tourist
services, electricity and water supply for industrial production, supply of
living water for the industrial zones and other business activities.
1.3. Income from allowances of
the State as prescribed.
1.4. Other incomes such as
recovery of bad debts, incomes from liquidation and sale or assignment of
properties, from joint ventures and cooperation, financial leases and other
incomes...
2. The expenditures of an
agro-hydraulic enterprise comprise:
2.1. Expenditures on irrigation
and drainage:
1. Wages and wage subsidies.
2. Remittances based on wages
such as social insurance, health insurance, trade union fee of the laborers
directly paid by the enterprise.
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4. Materials and fuel for
operating and maintaining constructions, machinery and equipment used in
irrigation and drainage service.
5. Major repairs of fixed
assets.
6. Regular repair of fixed
assets.
7. Electricity cost of pumping
at irrigation and drainage stations.
8. Pay to the water supply
sources (if any).
9. Managerial cost of the
enterprise (including the charges on computerized telephone to regulate the
water level in service of production).
10. Expenditures in service of
the prevention and fight against storms, floods and droughts.
11. Contributions to the fund
for prevention and fight against storms and floods.
12. Expenditures on training,
scientific research, application of new technologies and elaboration of
economic and technical criteria and norms .
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14. Expenditures on the
collection of water conservancy fee.
15. Other expenditures...
2.2. The expenditures on the
business activities in the integrated exploitation are the expenditures in the
raising of aquaproducts, fisheries, guard and other businesses...
2.3. The expenditures on other
activities include expenditures on the recovery of bad debts which have been
written off, expenditures on the collection of fines, expenditures on the
assignment, sale and liquidation of fixed assets.
In addition to the above
expenditures, the enterprise is entitled to put into its expenditure accounts
the severance allowances for laborers as stipulated in Decree No. 198-CP of
December 31, 1994 of the Government guiding a number of provisions in the Labor
Code.
All expenditures must be
provided with the necessary legal vouchers as currently prescribed.
3. The agro-hydraulic
enterprises are entitled to use their incomes to make up for their expenditures
including:
- Income from service activities
in irrigation and drainage used to make up for the expenditures in this area,
tax and other payments to the State as prescribed by law (except profit tax).
- Income from business
activities in the integrated exploitation used to make up for the expenditures in
the business activities for integrated exploitation, taxes and other payments
to the State as prescribed by law (except profit tax).
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An agro-hydraulic enterprise
conducting supplementary business activities must ensure that these activities
are profitable and it must not use the profit in public utility activities to
make up for the losses in other businesses.
3. Distribution of profits:
1. The profits achieved by an
agro-hydraulic enterprise in the year (including profit from businesses and
other activities) shall be distributed in the following order:
a/ Paying profit tax as
prescribed by law.
b/ Deducting the fines for
violations of the contract, for overdue debts, and other reasonable
expenditures not yet deducted when determining the taxable profits.
c/ Deducting losses not yet
deducted when determining the taxable profits.
d/ After making deductions as in
Items a, b, and c, the enterprise may establish its funds according to the
following proportions and ceilings:
+ Development investment fund:
minimum 50%.
+ Financial reserve fund: 10%,
but the balance of this fund must not exceed 25% of the statutory capital.
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After making deduction defined
in Items a, b and c, of the development investment fund and the financial
reserve fund, if the profit fund is not exhausted, the difference shall be
transferred wholly to the development investment fund. If the remainder is not
enough to set up the reward and welfare funds equivalent to the real wages of
two months, the State shall make up for the shortfall.
2. For the agro-hydraulic enterprises
with income not enough to make up for the reasonable expenditures, after
spending 50% of the profits from business and other activities (if any) to
cover the expenditures, the shortfall shall be made up for by the State as
follows:
- To provide enough to make up
for the remaining losses.
- To allocate support equivalent
to the real wages at the enterprises in two months for the reward and welfare
funds.
- The remainder of the income
from the activities in the integrated exploitation and other activities (if
any) shall be put into the development investment fund (80%) and the financial
reserve fund (20%).
* The sources of allocation of
the financial subsidies shall derive from the following:
- The agro-hydraulic enterprises
whose founding is decided by the President of the People's Committees of the
provinces and cities shall be subsidized by the local budget.
- For the agro-hydraulic
enterprises whose founding is decided by the Ministry of Agriculture and Rural
Development, the Ministry of Agriculture and Rural Development shall take the
initiative and discuss with the Ministry of Finance to suggest the level of
subsidy from the Central Budget.
In case of unexpected natural
calamities such as storms and floods, if the enterprise is still unable to make
up for the losses even after having mobilized all the existing lawful sources
of capital and received subsidies from the sources of capital in the plans of
the various budget levels, the enterprise shall be allowed a specific solution
decided by the Government.
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3. The procedures and time for
founding and the objective of use of the fund of the enterprises shall follow
the same pattern as for an enterprise engaged in business activities.
Within the limit of the total
that can be contributed to the reward and welfare funds, the Director of the
enterprise is entitled to decide the rate of this contribution to each fund
after consulting the trade union of the enterprise.
An agro-hydraulic enterprise
shall not set up the reserve fund for job severance. In particular cases where
it is necessary to scale down the activities in irrigation and drainage, the
agency that decides to found the enterprise and the financial agency of the
same level shall consider giving allowances to the laborers who have lost their
jobs according to the prescribed regime.
4. With regard to the
agro-hydraulic enterprises in deep lying, remote and border areas or on islands
or a strategic area with exceptionally difficult conditions, the State shall
consider and give subsidies for the following expenditures:
- Expenditures on kindergartens
and other educational facilities in the places where the schools and classes of
the official educational system are still non- existent.
- Expenditures on health care in
the places where hospitals or medical stations are still maintained due to
special conditions.
IV- FINANCIAL
PLAN
1. Each year, basing itself on
the prescriptions and guidance of the agency which decides to found the
enterprise and the financial agency, the agro-hydraulic enterprise shall draw
up the plan of production and service in irrigation and drainage, the financial
revenue and expenditure plan (including the plan of subsidies) and submit it to
the agency which decides to found the enterprise and the financial agency of
the same level. The agency which decides to found the enterprise shall have to
ratify the plan and submit a general report to the financial agency and the
related agencies.
2. Within the limit of the ratified
annual financial revenue and expenditure plan, the Head of the agency which
decides to found the enterprise shall assign the plan for irrigation and
drainage and the financial plan to the agro-hydraulic enterprise and send the
plan to the financial agency of the same level for coordination. The State
Budget shall provide subsidies only within the limit of the budgetary plan
already ratified.
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V- INSPECTION
OF ACCOUNTANCY, FINANCIAL REPORT AND FINANCIAL TRANSPARENCY
1. Drawing up the financial
report:
- Each quarter and each year,
the agro-hydraulic enterprise shall have to make a financial report as
currently prescribed. The Director of the enterprise is answerable to the State
and law for the accuracy and truthfulness of the financial report.
- The quarterly and annual
financial report shall be sent to the agency which decides to found the enterprise,
the tax agency, the agency managing the State capital and properties at the
enterprise, and the statistical agency.
2. Accountancy check, financial
report:
- Each quarter and each year,
the agro-hydraulic enterprise shall have to check its own accountancy and
financial report.
- The agency which decides to
found the enterprise shall assume the main responsibility and together with the
agency of the same level managing the State capital and properties at the
enterprise organize the checking and ratification of the annual financial
report of the enterprise.
- The financial agency shall
inspect the observance of the financial and accounting regimes, the discipline
in budget collection and remittance and the accurancy and truthfulness of the
financial report.
- The violations of the
accountancy regime, the financial collection and remittance regime, the budget
collection and remittance regime, the regime of establishment and use of the
funds of the enterprise shall be subject to administrative sanctions and economic
sanctions according to the prescriptions of law.
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- Basing itself on the annual
financial report ratified by the competent agency, the enterprise shall
publicly announce a number of financial criteria as prescribed by the Ministry
of Finance.
- The contents of the criteria
to be publicly announced shall conform with the forms attached to this
Circular.
VI-
IMPLEMENTATION PROVISIONS
1. Apart from specific
provisions for the agro-hydraulic enterprises laid down in this Circular, the
agro-hydraulic enterprises shall have to carry out other provisions of law
regarding State enterprises.
2. This Circular takes effect
from the date of its promulgation. All earlier provisions on financial
management at the agro-hydraulic enterprises which are contrary to this
Circular are now annulled.
3. In the process of
implementation should any question arise the enterprises would report to the
Ministry of Agriculture and Rural Development and the Ministry of Finance for
study, modification and amendment in order to make the Circular more
appropriate.
THE
MINISTRY OF FINANCE
VICE MINISTER
Pham Van Trong
THE
MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT
VICE MINISTER
Vu Trong Hong
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