Circular No. 02-TC/VP stipulates the financial regime for State-owned enterprise federations.

CIRCULAR

Regulations on the financial regime of state-owned enterprise federations

Implementing Decree No. 302/CP dated December 1, 1978 of the Council of Ministers promulgating the charter of state-owned enterprise federations, the Ministry of Finance stipulates the financial regime of state-owned enterprise federations as follows:

I/ TASKS AND POWERS OF THE ENTERPRISE FEDERATIONS

IN THE FIELD OF FINANCE

The tasks and powers of enterprise federations in the field of finance have been prescribed in Decree No. 302/CP dated December 1, 1978 of the Council of Ministers in Articles 24, 25, 26, 27, and 28. The Ministry of Finance guides the implementation of those tasks and powers as follows:

1/ The tasks of the enterprise federations (hereinafter referred to as "LHCXN") in the field of finance are:

1.1- To ensure financial support for the concentrated production and business activities of LHCXN such as new basic construction investment, scientific and technological research and application of new technology, supply of technical materials and product sales... excluding the part of production and business activities that enterprises bear responsibility for themselves.

- To organize the preservation and utilization of all types of assets and capital assigned by the State to achieve the highest economic efficiency, in accordance with the State's financial policies and regulations, aiming to complete and exceed the State plan for the entire federation.

1.2- To implement measures to consolidate and expand the economic accounting of enterprises and organizations with independent balance sheets directly under LHCXN, respecting the financial autonomy of enterprises; to assist and help enterprises resolve issues beyond their capacity or issues that, if resolved by subordinate enterprises themselves, would not yield high economic efficiency.

1.3- To supervise and inspect the management and use of assets and capital of subordinate enterprises including fixed capital, circulating capital, bank loans, wage funds, retained funds for enterprises, and other types of capital, promoting the increase in profits and accumulation of subordinate enterprises within LHCXN.

- To inspect and urge subordinate enterprises to complete the State plan for production and business operations, submit accumulations, and other payments.

2/ In order to fulfill the above tasks of LHCXN in the field of finance, the General Director of LHCXN has specific powers and responsibilities as follows:

2.1- To organize and direct the establishment and review of financial plans of subordinate enterprises together with production and business operation plans, mobilizing all available potential resources, rationally allocating tasks, leveraging the strengths of the federation's activities to ensure higher efficiency in the production and business operations of the entire federation compared to individual enterprises; using financial tools to monitor and promote the implementation of plans, ensuring the State's thrift policy, material responsibility system, and material incentive system.

2.2- Regarding assets, the General Director of LHCXN may:

- Decide on the transfer of fixed assets between subordinate enterprises and ensure payment settlement among units according to the State's regulations.

- According to the current State regulations, examine and decide on the liquidation of equipment and machinery, transportation means that are obsolete, worn out and unusable, factories that need to be demolished due to the construction of new facilities or because they are too old according to State regulations. Subordinate enterprises are responsible for settling the difference from the usage standard.

- Decide on the handling and liquidation of surplus materials within the delegated authority within 60 days from the date of the enterprise's report, ensuring that the materials and assets of the federation are not lost beyond the specified limit.

2.3- Regarding labor and wages, for the benefit of production development and increased labor productivity, the General Director of LHCXN has the right to examine and decide on the allocation of wage funds corresponding to the tasks and results of production and business operations of each subordinate enterprise.

2.4- The General Director of LHCXN is authorized to establish and use the federation's monetary funds such as the basic construction investment fund, the scientific and technological research and new technology application fund, the management fund, the reward fund, the welfare fund, the major repair fund, the reserve fund, and receive training costs from the budget.

2.5- The General Director of LHCXN has the right to request banking agencies to promptly transfer from the accounts of subordinate enterprises to the account of LHCXN the following amounts:

- Capital required to be centralized into the federation's monetary funds as prescribed.

- Capital required to be withdrawn due to reallocation of financial plans (self-owned circulating capital reported annually, or changes in self-owned circulating capital standards due to changes in production plans).

- Capital received by LHCXN's subordinate enterprises from centralized funds with the condition of repayment but not repaid on time.

2.6- To ensure the preservation and effective use of socialist assets entrusted, the General Director of LHCXN is responsible for compensating for shortages in fixed capital, circulating capital, or profits caused by LHCXN's management (such as inaccurate planning causing capital shortages, failure to comply with warehouse and material goods storage regulations leading to loss and damage of fixed assets, materials, goods...) through the effectiveness of organizational and technical management improvements or by reducing up to 30% of the federation's reward and welfare fund contributions.

2.7- The General Director of LHCXN is responsible for settling accounts with the State Budget regarding the implementation of the federation's financial plan, payments to and disbursements from the State Budget, and the federation's funds.

2.8- In accordance with the State's accounting and statistical regulations, the General Director of LHCXN organizes accounting and statistical work, conducts inspections of accounting at subordinate enterprises using the most advanced accounting methods, ensuring timely and accurate settlement of the implementation of the federation's financial plan.

2.9- In cases where LHCXN needs to conduct transactions in foreign currency, the General Director of LHCXN must prepare a plan for approval by the Government, convert it into domestic currency, and incorporate it into the federation's financial plan structure.

II/ FUNDS OF LHCXN AND TRAINING COSTS.

The LHCXN establishes financial funds for the LHCXN to concentrate a portion of the value of products from its production process to create a financial basis for the LHCXN to be proactive in fulfilling its tasks.

During the use of funds such as investment funds, scientific research and technology application funds... the LHCXN is also provided with additional state budget allocations or loans from banks according to current regulations.

1. Investment fund for basic construction of the LHCXN.

To implement the investment plan for basic construction, the LHCXN uses its own capital, state budget allocations, and bank loans.

For construction projects funded by the state budget (as per Circular Joint No. 21-LB/TT dated February 17, 1978 of the State Bank - Ministry of Finance - National Economic Council), the LHCXN establishes an investment fund from its own capital and state budget allocations.

The source of capital for establishing the basic construction investment fund of the LHCXN is extracted from the depreciation expenses payable to the state budget of affiliated enterprises and the entire depreciation expenses of fixed assets directly managed by the LHCXN.

The amount extracted is the full or partial depreciation expenses mentioned above of the affiliated enterprises depending on the investment needs based on the approved annual design budget for basic construction projects of the LHCXN.

In cases where the self-raised capital for establishing the investment fund is insufficient, the state budget provides additional allocations according to the approved plan for these projects.

Annually, the LHCXN settles and finalizes accounts with the state budget for the surplus and deficit of the basic construction investment fund.

Additionally, the LHCXN can borrow from banks to invest in projects within the scope of bank investment loans according to current regulations.

2. Scientific research and new technology application fund used for:

- Expenditure for implementing scientific research projects and new technology applications directly carried out by the LHCXN.

- Expenditure for cooperation in advancing science and technology between enterprises and organizations under the LHCXN's management.

Sources forming this fund include:

- Up to 20% of the development incentive fund from enterprises and organizations under the LHCXN calculated based on the cooperative progress in science and technology.

- Revenue from the results of scientific research and new technology applications according to economic contracts. In cases where these sources are insufficient, the state budget supplements based on:

a- The budgeted costs for scientific research topics at the ministry or national level approved by the State Science and Technology Commission.

b- The difference between the actual expenditure and the budgeted amount of research institutes.

Additionally, the LHCXN can borrow for new technology applications according to current credit regulations.

3. Management fund of the LHCXN, used to meet the expenditure needs of the LHCXN's administrative apparatus:

- Payment of salaries and allowances for staff of the LHCXN's administrative body.

- Office expenses and postal fees of the LHCXN's administrative body.

- Expenses for industry production council activities.

- Travel expenses for LHCXN staff.

- Expenses for purchasing furniture, equipment, hosting guests, and conferences.

- Depreciation expenses allocated to the investment fund and large-scale repair funds for fixed assets directly managed by the LHCXN.

- Other management expenses.

The source of the management fund is calculated as a percentage of the wage fund of workers and officials of enterprises and economic accounting units under the LHCXN, the main department determines an appropriate percentage based on the characteristics of each industry and the budget of the LHCXN after consulting with the Ministry of Finance.

Each enterprise bases its contribution to the management fund on its own wage fund and the prescribed percentage, monthly deducting the amount into the LHCXN's management fund and recording it as non-production cost in the product cost.

Within the annual fund allocation limit, the LHCXN prepares a budget based on the approved staffing and according to the administrative expenditure standards of central government agencies, submits it for approval by the main department, and organizes its implementation according to state financial management regulations.

At the end of the year, if the management fund is not fully utilized, the LHCXN may carry over the balance to the next year for use, but the amount carried over (including inventory materials and cash) must not exceed one month's planned expenditure. Any remaining amount must be remitted to the state budget.

4. Reward fund of the LHCXN used for:

- Rewarding staff of functional departments of the LHCXN's administrative body, including LHCXN leaders with outstanding achievements - excluding those in independent economic accounting units, public service units rewarded according to their unit's reward system, and canteen staff, childcare staff... rewarded by the welfare fund according to unified levels across industries, - combining year-end commendation awards.

- Awarding exceptional rewards during the year to units and individuals under the LHCXN's administrative body who have made contributions to improving management and enhancing work quality, including heads of affiliated economic accounting units. The portion for exceptional rewards is applied according to Circular No. 165/TTg dated March 21, 1978 of the Prime Minister and Point 1, Section IV of Circular No. 03-TC/CNXD dated March 28, 1978 of the Ministry of Finance.

The source for establishing the reward fund is a percentage of the profits payable to the state budget of affiliated enterprises.

The establishment rate of the LHCXN's reward fund depends on the completion of state plans by affiliated enterprises within the LHCXN, decided by the main department after consulting with the Ministry of Finance, specifically as follows:

a- If all affiliated enterprises complete their state plans, the reward fund establishment rate of the LHCXN is determined by the average individual reward of the enterprise with the highest reward multiplied by the number of people in the LHCXN's functional department wage fund.

b- If more than 50% of the enterprises within the State-Owned Enterprise (SOE) Joint Venture (LHCXN) complete the state plan, the level of establishment of the incentive fund for the management body of the LHCXN shall be determined by the average weighted incentive level of the directly affiliated enterprises multiplied by (x) with the number of people under the salary fund of the functional agency of the LHCXN.

c- If less than 50% of the enterprises within the LHCXN complete the state plan, the LHCXN shall only establish two incentive and welfare funds at the minimum rate of 10 dong per capita for workers and staff of the functional agency of the Joint Venture.

The aforementioned levels of establishment may be increased or decreased proportionally to the percentage of achievement of the two main indicators set forth in the state plan assigned to the LHCXN; however, the maximum level of establishment of the incentive fund shall not exceed one month's average actual grade salary per person for cadres, workers, and staff under the salary fund of the functional agency of the LHCXN. Any amount exceeding this limit will be supplemented to the welfare fund of the LHCXN but shall not exceed twice the amount established for the welfare fund.

5/ Welfare Fund of the LHCXN.

The LHCXN shall apply Circular No. 165/TTg dated March 21, 1978, issued by the Prime Minister, and Circular No. 03-TC/CNXD dated March 28, 1978, issued by the Ministry of Finance, in the use of the welfare fund for cadres, workers, and staff of the LHCXN.

The source for establishing the welfare fund, as well as the source for establishing the incentive fund mentioned above, the level of establishment of the welfare fund of the LHCXN shall be equal to the level of establishment of the incentive fund. In addition, the LHCXN may transfer into the welfare fund any excess bonus amounts over the maximum stipulated in the incentive fund up to twice the amount established for the welfare fund.

In cases where the LHCXN must jointly manage certain welfare activities for the entire industry, the affiliated enterprises must contribute from their own welfare funds; the contribution level shall be determined by the General Director of the LHCXN after negotiating with the enterprises.

6/ Major Repair Fund of the LHCXN, used for:

Major repairs of fixed assets managed directly by the LHCXN including fixed assets of the LHCXN's management body and fixed assets of dependent production and business units that have not been independently accounted for economically.

- The source for establishing the major repair fund is taken from the management fund of the LHCXN.

The level of establishment is based on the depreciation rate for major repairs of the aforementioned types of fixed assets.

The LHCXN organizes the management and use of the major repair fund and borrows capital from the Bank for major repairs when necessary according to current regulations.

7/ Reserve Fund

The LHCXN is allowed to establish a reserve fund to support and assist affiliated enterprises in cases of difficulty or urgent needs that have not yet been financed by the State Bank or the State Budget.

The reserve fund must be used according to the principle of ensuring repayment.

The source for establishing the reserve fund is a portion of the profit that must be paid to the State Budget by the affiliated enterprises.

The level of establishment is 5% of the total difference in profit to be paid to the budget of the planning year compared to the previous year.

The maximum level of the reserve fund is agreed upon by the principal ministry and the Ministry of Finance based on the proposal of the General Director of the LHCXN.

In cases where the LHCXN has excess reserve fund beyond the maximum level prescribed, the LHCXN must pay the excess amount into the State Budget.

8/ Training Costs:

The LHCXN is responsible for preparing budgets and managing expenditures for training needs for the entire industry carried out directly by the LHCXN.

The budget for training costs must be based on the state plan for centralized training at schools and classes according to the general system of the state.

Training costs of the LHCXN are funded and settled by the State Budget according to the current system for public expenditure.

III/ FINANCIAL RELATIONSHIP BETWEEN THE SOEs AND

THE PRINCIPAL MINISTRY AND THE STATE FINANCIAL AGENCY.

1/ Financial relationship between the LHCXN and the Principal Ministry

- The LHCXN receives, studies, and implements financial norms and standards, reviews the financial plans of the Principal Ministry, and submits the financial plan of the LHCXN to the Principal Ministry for approval.

- The LHCXN is reviewed and approved by the Principal Ministry for its financial plan, which includes the plan for centralized activities of the LHCXN and the plan for affiliated enterprises within the scope of the State Budget allocated to the Principal Ministry.

- The LHCXN is subject to inspection and audit by the Principal Ministry regarding the use of financial resources, and reports to the Principal Ministry on quarterly and annual settlements of its activities (of the LHCXN's management body and of the affiliated enterprises) that have been approved.

- The Principal Ministry decides on the material responsibility of the General Director of the LHCXN and approves the LHCXN's establishment of incentive and welfare funds after consulting with the Ministry of Finance according to the current reward system and material responsibility system.

2/ Relationship between the LHCXN and the State Financial Agency

- According to the financial plan approved by the Principal Ministry (including the financial plan of the LHCXN and the financial plan of the affiliated enterprises), the State Budget directly allocates various types of capital and expenses for centralized activities carried out directly by the LHCXN such as basic construction, scientific research and technical development costs, worker training...

- The LHCXN sends accounting and financial reports to the Ministry of Finance and is responsible for the accuracy of these reports. The Ministry of Finance checks these reports and determines the settlement results with the State Budget regarding amounts payable to the State Budget and amounts allocated to the LHCXN by the State Budget.

Each LHCXN negotiates with the Ministry of Finance about the allocation and collection relationships of the affiliated enterprises with agencies under the state financial system to inform the affiliated enterprises to uniformly implement, ensuring the financial rights and responsibilities of the enterprise as stipulated in the enterprise charter and ensuring local authorities' implementation of supervisory responsibilities over central sector enterprises located in their areas according to Resolution 108/CP dated May 13, 1978, of the Council of Ministers.

IV/ ORGANIZATION OF THE FINANCIAL DEPARTMENT OF THE SOEs

The LHCXN is organized with a Department or Office of Finance to assist the General Director of the LHCXN in performing the financial tasks of the LHCXN.

In cases where the conditions for establishing a separate financial authority are not met, the LHCXN must organize a financial team within the accounting - statistics - finance department of the LHCXN, headed by a deputy director.

The financial authority (department, division, or financial team) shall perform specific tasks as follows:

- Prepare financial plans and budget estimates for activities managed by the LHCXN: construction, supply of technical materials, scientific and technological research, worker training, and implement the financial income and expenditure plan of the LHCXN to ensure capital requirements for its activities, and monitor the effectiveness of the use of assets and funds of the Union.

- Approve financial plans for subordinate enterprises.

- Consolidate the financial plan for the entire Union.

- Strictly enforce state financial management regulations and procedures.

- Prepare reports on payments and final accounts for the state budget regarding the income and expenditure of the LHCXN's agency, and of subordinate enterprises.

- Propose requirements for accountants to ensure the fulfillment of the LHCXN's financial tasks.

V/ SCOPE OF IMPLEMENTATION:

This Circular shall take effect immediately upon issuance for LHCXNs under the agricultural industry, construction sector, established pursuant to the Prime Minister's Decision. As for rewards, it shall only apply to those Unions that have been genuinely operating for at least one year and meet two conditions stipulated in Point 1 of Circular No. 165/TTg dated March 21, 1978: having approved production - technical - financial plans and implementing economic accounting systems.

For other LHCXNs, relevant Ministries and General Departments shall base their studies on this Circular to formulate appropriate systems and agree with the Ministry of Finance to issue and uniformly apply them nationwide.