THE
MINISTRY OF FINANCE
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SOCIALIST
REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
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No:
80/2006/TT-BTC
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Hanoi,
August 30, 2006
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CIRCULAR
GUIDING THE FINANCIAL MANAGEMENT MECHANISM APPLICABLE TO THE
FORESTRY SECTOR DEVELOPMENT PROJECT
Pursuant to Development Credit Agreement No.
3953-VN signed on April 4, 2005, between the Vietnamese Government and the
International Development Association (IDA) on the forestry sector development project;
Pursuant to Agreement No. TF 053397 signed on April 4, 2005, between the
Vietnamese Government and IDA on the amount co-financed by the Global
Environmental Facility (GEF) and entrusted to IDA for executing the forestry
sector development project;
Pursuant to Agreements No. TF 054523 and No. TF 054524 signed on April
4, 2005, between the Vietnamese Government and IDA, on the co-financing
(through the Multi-Donor Trust Fund – MTDF) by the Dutch Government and the
Finnish Government trusted through IDA for the execution of the forestry sector
development project;
Pursuant to the Government's Decree No. 77/2003/ND-CP of July 1, 2003, defining
the functions, tasks and organizational apparatus of the Ministry of Finance;
Pursuant to the Government's Decree No. 17/2001/ND-CP of May 4, 2001,
promulgating the Regulation on management and use of official development
assistance;
Pursuant to the Prime Minister's Decision No. 332/QD-TTg of April 6, 2004,
approving the prefeasibility study report of the forestry sector development
project;
Pursuant to Decision No. 1067/QD-BNN-LN of April 27, 2004, of the Minister of
Agriculture and Rural Development approving the feasibility study report of the
forestry sector development project;
After consulting the Ministry of Agriculture and Rural Development, the
Ministry of Finance hereby guides the financial management mechanism applicable
to the forestry sector development project as follows:
Section I: GENERAL PROVISIONS
1. Scope of application: This Circular provides
guidance on matters of state financial management of the forestry sector
development project, specifically the opening of accounts, making of financial
plans, administrative expense norms, capital withdrawal procedures,
supervision, reporting, audit and tax policy applicable to the project and the
management of assets formed from the project, and responsibilities of related
agencies in the financial state management of the project.
2. Interpretation of terms: In this Circular,
the following terms shall be construed as follows:
a/ Project shall refer to the forestry sector
development project approved under the Prime Minister's Decision No. 332/QD-TTg
of April 6, 2004, approving the prefeasibility study report of the forestry
sector development project.
b/ Project management agency shall refer to the
Ministry of Agriculture and Rural Development as designated in the Prime
Minister's Decision No. 332/QD-TTg.
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d/ Non-credit components shall refer to the
project's components which shall be directly executed by the Ministry of
Agriculture and Rural Development and the People's Committees of the four
provinces to provide services in support of the planting of production forests
under the project.
e/ Credit component shall refer to part of the
project's component 2 which shall be executed by the Social Policy Bank to
grant credit to organizations and individuals that wish to borrow loans for
developing production forests in the project-covered regions, as stipulated in
the Prime Minister's Decision No. 332/QD-TTg.
f/ Central project coordination committee shall
refer to the unit set up by the Ministry of Agriculture and Rural Development
to uniformly coordinate activities of the project, directly manage non-credit
components, and have functions, tasks and powers defined in its establishment
decision.
g/ The Vietnam Conservation Fund management unit
shall refer to the unit set up by the Ministry of Agriculture and Rural
Development to manage the Conservation Fund component project, and have the
functions, tasks and powers defined in its establishment decision.
h/ Credit component project management unit
shall refer to the unit set up by the Social Policy Bank to manage the credit
component of the project, and have the functions, tasks and powers defined in
its establishment decision.
i/ Provincial project management units (of four
provinces) shall be set up by the People's Committees of the project-covered
provinces, and have the functions, tasks and powers defined in their respective
establishment decisions.
j/ District project execution units and commune
task forces shall refer to project execution units set up under decisions of
the district or commune People's Committees, and have the functions, tasks and
powers defined in their respective establishment decisions.
k/ Expenditure control bodies shall refer to the
system of state treasuries, for non-credit components, the Ministry of Finance
(the External Finance Department), for the credit component.
l/ Domestic contributed capital shall refer to
the source of capital contributed by the Vietnamese Government and included in
annual state budget expenditure estimates of the Ministry of Agriculture and
Rural Development and the project-covered provinces according to the current
state budget decentralization, and the portion of capital contributed by the
Social Policy Bank to the project.
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n/ Service bank shall refer to the Bank for
Agriculture and Rural Development of Vietnam.
o/ Special account(s) shall refer to US dollar
account(s) opened by the central project coordination committee, the
Conservation Fund management unit and credit component project management units
at the service bank to receive capital advanced from the loan and donation
capital sources for the project.
p/ Project management units entitled to withdraw
foreign capital shall refer to the central project coordination committee, the
Conservation Fund management unit and the credit component project management
unit which are authorized to conduct transactions of withdrawing loan and aid
capital from foreign countries and have introduced their specimen signatures to
the Ministry of Finance (the External Finance Department).
2. Management principles:
a/ The project's financing sources of loan and
aid capital shall constitute a source of the state budget and be managed in
accordance with regulations on management of state budget capital and donors'
regulations.
b/ The system of state treasuries which allocate
grants to the project shall be responsible for controlling expenditure,
checking and certifying the value of capital eligible for payment/advance so
that the project execution units can withdraw foreign capital, and at the same
time directly allocating domestic contributed capital to the project (excluding
the credit components executed by the re-borrowing bank).
c/ The project shall receive fundings from two
sources: domestic capital and foreign capital. Domestic capital shall be
allocated according to current state regulations. Foreign capital shall be
allocated/re-lent to beneficiary units according to the provisions of this
Circular and regulations of Vietnam and donors.
d/ The Ministry of Agriculture and Rural
Development, the project-covered provinces and the re-borrowing bank shall be
responsible for using capital for proper purposes and the approved project
contents and in conformity with the conditions committed in the agreements, and
relevant documents enclosed thereto.
e/ The Ministry of Agriculture and Rural
Development, the project-covered provinces and the re-borrowing bank shall be
responsible for managing and supervising assets of the project and their
attached project management units according to current state regulations.
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Section II: SPECIFIC
PROVISIONS
1. Opening of accounts:
a/ At the service bank:
- The central project coordination committee
shall open one special account for receiving IDA capital for non-credit components
and one special account for receiving aid capital under Agreement TF 054523 for
technical assistance activities for non-credit components;
- The Conservation Fund management unit shall
open two special accounts, one for the GEF aid capital and the other for aid
capital under Agreement TF 054524;
- The re-borrowing bank shall open one special
account for receiving IDA capital for the project's credit component.
b/ At provincial state treasuries, the
provincial project management units shall open capital allocation accounts for
receiving and allocating domestic contributed capital and monitor the payment,
advance and refund of foreign capital to the project in their respective
provinces.
c/ Project management units may open deposit
accounts at state treasuries according to current domestic regulations for
receiving capital amounts paid for their reasonable expenses.
2. Making of financial plans
for the project (not applicable to the credit component)
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b/ Annual financial plans shall be made
according to Joint Circular No. 02/2003/TTLT-BKH-BTC of March 17, 2003, of the
Ministry of Planning and Investment and the Ministry of Finance, guiding the
making of financial plans for ODA-funded programs and projects.
c/ On the basis of the notified annual budget
estimates, the Ministry of Agriculture and Rural Development/provincial
People's Committees shall allocate funds to the project/project part executed
in the provinces as specified at Point a of this Clause.
d/ After the annual financial plan has been
approved, the central project coordination committee/the Conservation Fund
management unit shall register the plan with the Ministry of Finance (the
External Finance Department) and the state treasury which control the project's
expenditure for verification, monitoring and control of expenditure, and
allocation of capital. The provincial project management units and the
conservation zone project management units shall register their financial plans
with the state treasury which controls expenditure for monitoring and
allocation of capital.
e/ For the credit component executed through the
re-borrowing bank, the re-borrowing bank shall take initiative in making and
approving financial plans and arrange domestic contributed capital suitable to
the schedule of withdrawal of loan capital.
3. Norms and price units of
payment in the use of loan, aid and domestic contributed capital:
a/ Administrative expense norms
- To apply norms specified in the Finance
Minister's Decision No. 112/2001/QD-BTC of November 9, 2001, promulgating some
expenditure norms applicable to projects funded with ODA loans; the Ministry
Finance's Circular No. 118/2004/TT-BTC of December 8, 2004, stipulating working
mission allowances and meeting expenses for administrative agencies and public
non-business units nationwide (payment for lodging at the place of the working
mission and working mission allowances); and Circular No. 91/2005/TT-BTC of
October 18, 2005, stipulating working mission allowances for state cadres and
employees going on short-term working missions abroad which are funded with the
state budget, and documents on amendments and supplements to such decision and
circulars.
- Particularly for activities wholly funded with
aid capital, the Ministry of Agriculture and Rural Development shall, after
reaching agreement with the donor and consulting the Ministry of Finance,
promulgate these norms.
b/ Economic and technical norms
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- In case relevant norms or unit prices are not
available, the project management units in charge of different project
components shall submit those norms and unit prices to the Ministry of
Agriculture and Rural Development (or the re-borrowing bank, for the credit
component) for promulgation and application to the project, after consulting
the Ministry of Finance.
c/ Norms of expenditure for consultants
- The selection of consultants shall comply with
domestic regulations and donors' regulations. The results of bidding,
contractor designation and contract signing shall be subject to approval of
competent authorities on a case-by-case basis regarding appropriate performance
schedule, contract payment clauses, etc., in accordance with domestic
regulations and donors' regulations.
- Domestic consultants: In case of hiring
individual consultants with the use of loan or aid capital combined with
domestic contributed capital, to apply the provisions of Decision No.
112/2001/QD-BTC and the decision amending this decision. In case of hiring
individual consultants with the use of aid capital only (without domestic
contributed capital), the project management units in charge of relevant
components shall submit norms of expenditure to the Ministry of Agriculture and
Rural Development (or the re-borrowing bank, for the credit component) for
promulgation and application to the project, after consulting the Ministry of
Finance.
d/ Norms of credit capital: To apply regulations
in the credit manual of the re-borrowing bank on the basis of the principles
laid down in this Part.
4. Procedures for withdrawal,
advance and payment of foreign capital:
The withdrawal, advance and payment of foreign
capital shall comply with the provisions of the Finance Ministry's Circular No.
78/2004/TT-BTC of August 10, 2004, guiding the management of capital withdrawal
with regard to official development assistance, and the following specific
regulations applicable to the project:
a/ Withdrawal of foreign capital: This procedure
shall be carried out at the central level by the project management units
permitted to open and manage special accounts under the project documents
(including the central project coordination committee, the Conservation Fund
management unit and the credit component project management unit).
For the credit component, in order to withdraw
capital into its special accounts, the credit component project management unit
shall send to the Ministry of Finance (the External Finance Department) the
following documents:
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- List of loans already granted to individuals/units
engaged in forestation, compiled by the re-borrowing banks and certified by the
central re-borrowing bank;
- Account notice, made according to the form set
by the donor.
b/ Allocation of capital from special accounts,
for non-credit components
- Allocations from special accounts shall be
effected on the basis of valid expenses, which were paid for project
activities, included in the approved financial plan and registered according to
the project's rules on expenditure management decentralization and control.
- Certification of payments made to the project
at the central level (payment for expenses of the central project coordination
committee or the Conservation Fund management unit) shall be effected through
the state treasuries where such units open capital allocation accounts.
- Certification of payments made to the project
at the provincial level shall be effected at provincial state treasuries. In
this case, after checking the work volume eligible for payment or advance, the
state treasuries shall issue a written certification of the valid payment
request and send it to the provincial project management unit. The provincial
project management unit shall then send the payment/advance request certified
by the state treasury to the central project coordination committee for
withdrawing payment capital from the project's special account. Within two
working days after receiving such request, the central project coordination
committee shall transfer payment/advance money for project activities in the
provinces.
- In case the provincial People's Committees may
arrange advance capital for project activities in their provinces, on the basis
of the detailed notices of the provincial People's Committees on the source of
advance capital, the Ministry of Finance shall provide guidance on the process
of checking, capital advance and refund in a separate document.
5. Allocation and payment of
capital for the conservation zone management units:
To disburse capital for conservation activities,
the conservation zone management units shall open accounts for receiving
capital at a state-owned commercial bank in their respective locality, and send
capital advance requests to the Conservation Fund management unit.
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For sub-projects of the conservation zone
management units which have been approved by competent authorities and donors
and have an execution period of over one year, on the basis of the conservation
zone management units' capital advance requests, the Conservation Fund
management unit shall advance capital twice from the special account of the
Conservation Fund component into the accounts of the conservation zone
management units, 50% for the first-time advance and 40% for the second-time of
the advance of the foreign-capital budget of each sub-project.
The conservation zone management units shall
manage the advanced capital amounts and effect expenditure according to the
current financial regulations (on unit prices, expenditure norms and items, and
ratio of foreign-funded capital). The allocation of the remaining budget shall
be based on the approved annual financial plans and the project's actual work
progress as well as the validity of expenses from the advanced capital amounts.
The control by the state treasuries of
expenditures effected by the conservation zone management units shall be
pre-control of expenditures.
In order to receive the remaining budget capital
according to the approved annual financial plans, the conservation zone
management units shall send to the Conservation Fund management unit the following
documents:
- Request for additional capital;
- List of paid expenses, with the certification
of the state treasury of the same level;
- Report on the progress of on-going activities
and projected execution schedule for the subsequent period, specifying the time
for each activity. For activities carried out under contracts each valued at
USD 20,000 or higher, the conservation zone management unit shall enclose
copies of such contracts. For activities carried out under contracts each
valued at under USD 20,000, the conservation zone management unit shall only
have to supply a list of details of such contracts.
After examining the above-said documents, the
Conservation Fund management unit shall request the service bank to transfer
money from the special account into the accounts of the conservation zone
management units for further allocation to the sub-projects of the conservation
zone management units.
Within two months following the completion of
sub-projects, any unspent foreign capital shall be transferred back into the
special account of the Conservation Fund component, except for cases the time
limit for disbursement is prolonged with the permission of the donors and the
Ministry of Finance.
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On the basis of the approved annual domestic
contributed capital plan (for the central and local levels) of the project,
state treasuries shall manage and allocate domestic contributed capital based
on the project execution schedule in accordance with current capital management
and allocation regulations.
7. Account notices of the
service bank, deposit interests:
a/ Monthly, the service bank shall send to the
Ministry of Finance (the External Finance Department) shall send notices on the
project's special account opened at the bank, listing amounts withdrawn in the
month; number of each expense and exchange rate; bank charge, interests, and
month-end balance.
b/ For deposit interests accrued on the unused
amount of loan and aid capital in the special account (at the non-term interest
rate), annually, within six months after the end of the fiscal year, the
service bank shall remit the interest amount (after subtracting the bank charge
payable in the period) on the account to the State Bank (the account of the State's
centralized foreign currency account at the Vietnam State Bank's Transaction
Office, numbered 331.213.020.1, or another account as notified by the Ministry
of Finance).
- Particularly for the special account for IDA
capital of the credit component, interest accruing from the account shall
constitute a revenue of the re-borrowing bank.
8. Accounting, supervision,
auditing, reporting and settlement:
a/ Accounting
- The project management units shall open
separate books to monitor the project's capital sources and implement
cost-accounting and statistical work according to the State's current
regulations.
- Local state treasuries shall implement
cost-accounting and statistical work under the guidance of the central State
Treasury.
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- The superior agency of the project, the
central and local functional management agencies and state treasuries shall be
responsible for supervising the implementation of financial plans and financial
management regime as well as the actual project execution work of the projects,
and problems in the management process to the Ministry of Finance and the
Ministry of Planning and Investment for settlement.
- Wrong-doings (if any) which are detected in
the process of inspection and supervision shall be handled according to current
regulations.
- Any project grants which are detected through
inspection and supervision to have been used for improper purposes or at
variance with regulations shall be recovered and remitted into the state
budget.
c/ Audit
Annually, the special accounts, financial
statements, accounting books and files of the project must be audited by an
independent audit agency in accordance with state regulations and agreements.
One of the major contents of such audit shall be inspection of the observance
by the project management units of the current financial management regulations
of the State, including the provisions of this Circular. Audit documents shall
be sent to the Ministry of Finance and constitute a basis for the consideration
of the withdrawal of additional capital for the special accounts or the
withdrawal of capital from the special accounts for payment, as well as a basis
for the evaluation of the project's execution.
The Ministry of Agriculture and Rural
Development shall select audit companies to generally audit financial
activities of all non-credit components according to current regulations.
d/ Reporting regime
- Monthly, the provincial project management
units and conservation zone management units shall make and send execution reports
and financial statements to the provincial Finance Services, the provincial
state treasuries which allocate capital and the central project coordination
committee; the conservation zone management units shall make and send execution
reports to the provincial Finance Services, the provincial or district state
treasuries which allocate capital, and the Conservation Fund management unit.
Such a report should clearly state the project execution situation, the number
of signed contracts, the situation of payment for contracts, sources and use of
capital, the situation of procurement and management of project assets, and
other issues according to current regulations.
- Provincial state treasuries, which allocate
capital, shall review and report to the central State Treasury and the
provincial Finance Services the situation of capital allocation and advance in
the localities. Quarterly, on the basis of the reports of the provincial state
treasuries, the central State Treasury shall make a sum-up report and send it
to the Ministry of Finance.
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- The central project coordination committee
shall discuss with the project management units to reach agreement on detailed
guidance for the project's report forms.
e/ Annual capital settlement and financial
settlement upon the completion of the project (not applicable to the credit
component)
- The provincial project management units shall
make financial settlement reports according to current regulations for expenses
made in the localities, with the certification of the provincial state treasury
which allocates capital, and send them to the provincial People's Committees
for consideration and approval, and also to the central project coordination
committee.
- The central project coordination committee
shall make financial settlement reports according to current regulations for
expenses made at the central level on non-credit components, with the
certification of the capital-allocating agency, and submit them to the Ministry
of Agriculture and Rural Development for consideration and approval; the
Ministry of Agriculture and Rural Development shall make financial settlement
of implemented funds and upon the completion of the project with the Ministry
of Finance, and at the same time sum up all financial settlements of the
project for working with related agencies when necessary.
f/ Financial settlement for the credit
component: shall comply with current regulations of the State.
9. Tax policies applicable to
the project:
Tax policies applicable to the project shall be
implemented in accordance with current legal provisions on taxation. The
project shall be eligible for the following tax preferences:
- Goods imported with non-refundable ODA capital
shall not be liable to value added tax, special consumption tax and import
duty.
- Goods imported for the project with ODA
capital shall be considered for exemption from import and export duties under
the provisions of Clauses 6, 10 and 18, Section I, Part D of the Finance
Ministry's Circular No. 113/2005/TT-BTC of December 15, 2005, providing
guidance on import and export duties.
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10. Management of assets
formed from the project:
The Ministry of Agriculture and Rural
Development and the re-borrowing bank shall be responsible for managing,
declaring and registering assets formed from the project according to current
regulations. The management and disposal of the project's assets upon its
completion shall comply with the Finance Ministry's Circular No.
116/2005/TT-BTC of December 19, 2005, guiding the management and disposal of
state budget-funded projects upon their completion.
Section III: ORGANIZATION OF
IMPLEMENTATION
This Circular shall take effect 15 days after
its publication in "CONG BAO". Any problems arising in the course of
implementation should be promptly reported by the Ministry of Agriculture and
Rural Development, the re-borrowing capital and related agencies to the
Ministry of Finance for study and revision.