Circular No. 03 TC/CNXD guiding the implementation of profit distribution and establishment of enterprise funds to be applied nationwide from 1977 onwards.

CIRCULAR

Guidelines for Implementing the Profit Distribution System and Establishing Enterprise Funds to be Applied Nationwide from 1977 Onwards

The remaining proceeds from product sales (or provision of labor services) after paying state revenue (or tax) and replenishing the capital previously advanced constitute profit. Given that prices and state revenue (or tax) levels are set by the State, enterprises must strive to increase the quantity of products sold and reduce production costs and circulation expenses to contribute more value and net income to the State, while also enhancing the income of enterprise workers and staff.

To leverage the economic lever of profit, the State has established reasonable profit levels (when setting policies and prices) and defined the profit distribution system.

The profit distribution system for state-owned enterprises began implementation in 1970 according to Decrees No. 235-CP dated December 4, 1969, No. 236-CP dated December 10, 1970, and Circular No. 165-TTg dated March 21, 1978, aiming to:

- Encourage enterprises to take responsibility and foster collective ownership spirit in building and implementing national plans; on this basis, further expand the autonomy of enterprises in production and business operations and financial self-management under centralized State management.

- Incentivize enterprises to develop positive plans, ensuring comprehensive completion of national plan targets, linking the establishment of enterprise funds with the degree of success in achieving national plan targets.

- Closely integrate planning work with economic accounting systems and the application of economic levers, motivating workers and staff to care about both national interests and enterprise and personal benefits, thereby tapping into all potential capabilities of the enterprise to exceed national plan targets.

I. CLEARLY DETERMINE PLANNED AND ACTUAL PROFITS:

1/ Planned profits of enterprises include:

- Expected profits from basic business activities based on national plan indicators.

- Expected profits from non-basic business activities, such as providing external labor services and activities of dependent units (such as leasing organizations, transportation, construction...) included in the enterprise's income and expenditure statement.

- Profits from producing secondary products using waste materials, which enterprises tap into their potential capabilities.

- Interest from bank deposits and other regular profits that enterprises can plan and relevant authorities consider necessary to include in the planned targets assigned to enterprises.

2/ Actual profits of enterprises are the total profits after deducting losses recorded in monthly, quarterly, and annual settlement reports.

To achieve planned profits, besides striving to lower production costs and circulation expenses, enterprises must pay attention to costs not included in production costs and circulation expenses but directly recorded as enterprise losses. Therefore, enterprises must implement measures to reduce production costs and minimize losses arising during the plan year, such as damage from natural disasters, theft of materials and goods, overdue interest, etc.

3/ If changes in prices during the plan period result in increased profit revenues, enterprises must submit the entire additional amount due to price changes to the State budget.

If price changes lead to reduced profit revenues and cannot adjust state revenue levels, the planned profit of the enterprise will be reduced by that amount.

Generally speaking, enterprises should not exclude external factors when determining the achievement of planned profit targets and excess profits.

4/ For enterprises approved as unprofitable or having planned losses (due to state pricing policy or other recognized reasons), the determination of planned profit targets and excess profits is as follows:

- The reduction in planned production costs (or circulation fees) compared to actual production costs (or circulation fees) of the previous year is considered planned profit.

- The savings achieved through actual reductions in production costs (or circulation fees) exceeding planned levels are considered excess profit.

II. DISTRIBUTION OF ENTERPRISE PROFITS:

Depending on the level of achievement of enterprises in completing national plans, profit distribution is differentiated as follows:

1/ In cases where enterprises only complete two key indicators of the plan (not comprehensively, without high registration), profit distribution is as follows:

- Establish a fund for encouraging production development at a certain percentage of the total fixed asset value of the enterprise.

- Establish a reward and welfare fund at a basic rate based on the average actual annual wage of workers and staff included in the cost or circulation fee of the enterprise, including those in non-core business departments not yet independently accounted for, in accordance with current regulations in Circular 88-CP.

- Participate in fixed asset investment and supplement required incremental working capital based on specific needs of the approved annual plan.

- Submit to the State budget. After calculating the above deductions, the remaining profit is submitted entirely to the State budget.

If the enterprise still owes the State Bank for basic investment loans, after allocating the predetermined portions to the three funds, the remaining profit from the effective use of borrowed funds will be used to repay the Bank (if the enterprise has already paid state revenue to the State budget, it may use up to 50% of the remaining profit for Bank repayment).

2/ In case the enterprise fully completes all the targets set forth in the State's plan, it shall establish a bonus fund and welfare fund at a higher incentive level than the basic deduction rate (as stipulated in Section IV below).

3/ In cases where enterprises register high targets - The State encourages enterprises to develop positive, accurate plans and register higher figures than those assigned by the State mainly by tapping potential capabilities within the enterprise. The period for registering high targets must be conducted before officially assigning the main plan to the enterprise.

Specifically in 1978, the Government allowed enterprises to register higher figures than the State’s initial plan for the year (in accordance with Directive No. 09-TTg dated January 12, 1978 of the Prime Minister).

The content of the high target registration plan includes the following indicators:

- Additional primary product output (including major export products) sold according to the State plan, which must comply with prescribed quality standards.

- Increased profit contributions to the State budget.

In cases where the plan is reviewed as a high target plan, profits will be distributed as follows:

- If the enterprise completes the plan based on the assigned inspection figures, this portion of the profit will be distributed according to the basic deduction rate mentioned above.

The portion of increased profit from high target registration will be allocated to more funds:

- For every percentage point achieved against the registered indicators mentioned above, the enterprise will be entitled to additional deductions into the bonus fund and welfare fund, each fund receiving 0.1% of the increased profit (a total of 0.2% for both funds combined).

For enterprises with approved high target registrations, the high target plan becomes the official State plan assigned to the enterprise and serves as the basis for reviewing comprehensive plan completion and exceeding the plan; however, only the basic deduction rate will be applied to the enterprise funds, using the plan based on inspection figures as the reference.

4/ The portion of profit exceeding the general plan will be distributed as follows: additional deductions into the bonus fund and welfare fund, each fund receiving 5% of the excess profit.

Example:

The average actual grade wage fund of the enterprise is 175,000 dong.

a) In case the enterprise completes 100% of the plan (with high target registration):

b) In case the enterprise exceeds the plan (with high target registration):

c) In case the enterprise does not complete the plan (with high target registration), but still achieves a higher figure than the plan based on inspection figures.

d) In case the enterprise registers high targets but fails to meet the plan based on inspection figures, the plan based on inspection figures will serve as the basis for calculating the reduction rate as stipulated in Section IV Point 3b below:

Note: - If the plan involves multiple items, an additional "analysis table of main item plan completion status" as stipulated below (Section IV) must be prepared.

- In 1978, the Government allowed registration of higher figures than the initial State plan for that year, which will be used as the basis for calculating the basic deduction rate, as well as for calculating the reduction rate in case d above.

In all cases above (completing the high target plan, exceeding profit plan), any increase in actual profit will be additionally allocated to the development encouragement fund as stipulated in Section III below.

After allocating the predetermined portions to the three funds, the remaining profit will be fully contributed to the State budget.

5/ In cases where enterprises produce secondary goods from scrap materials - Enterprises complete the basic business plan and beyond; fulfill the national revenue collection (or tax) task for secondary goods; comply with the State regulations on scrap material usage; and organize clear accounting without mixing production and business activities with secondary goods production, then the actual profit from selling these goods will be distributed at a high rate as stipulated in Circular No. 13-TC/CNXD dated July 30, 1976 of the Ministry of Finance:

- Contributed to the State budget 20%

- Allocated to the development encouragement fund 40%

- Allocated to the bonus fund 20%

- Allocated to the welfare fund 20%

III. ESTABLISHMENT AND USE OF THE DEVELOPMENT ENCOURAGEMENT FUND:

1/ The development encouragement fund is used for rationalizing production and improving technology aimed at the following specific economic benefits:

- Improving part of machinery and equipment, replacing old equipment and purchasing additional spare parts; making minor process improvements, rearranging production and business chains; increasing machine and equipment capacity, meeting advanced standards and processes, and enhancing production and business efficiency; reinforcing and expanding floor space, constructing small facilities serving rational production and technological improvement.

- Purchasing, manufacturing, changing, and supplementing parts of machinery and equipment or construction projects and other expenses related to raw materials, wages, etc., within the scope of research to test new products or to produce secondary goods from scrap materials.

- Purchasing, manufacturing, altering, constructing supplementary parts of machinery and equipment or works to improve working conditions, ensure industrial hygiene, and protect occupational safety.

2/ Uniformly apply to enterprises in all production, circulation, distribution, and service sectors the basic annual extraction rate based on a percentage of the total value of existing fixed assets at the enterprise according to their original cost (excluding fixed assets that are exempt from depreciation such as land and fixed assets for which the competent authority has decided to temporarily transfer to the enterprise for pending reallocation).

The supervising ministry agrees with the Ministry of Finance to determine the minimum and maximum extraction rates for each industry's enterprises to be applied nationwide as follows: higher-level supervisory agencies will decide specific extraction rates for subordinate enterprises within these minimum and maximum limits.

- Trading enterprises, material supply enterprises, service enterprises, cultural sector enterprises, gas supply enterprises from 0.8% to 1.2%

- Chemical enterprises, fertilizer enterprises, agricultural farms from 0.6% to 1.0%

- Household goods enterprises, pharmaceutical enterprises, food processing enterprises, forestry and fishery product exploitation and processing enterprises, textile enterprises, construction materials enterprises, construction installation enterprises, metallurgical enterprises, mining enterprises, power enterprises, postal enterprises, transportation enterprises from 0.4% to 0.8%.

For industries not specified with a basic extraction rate or those requiring special provisions, the supervising ministry shall develop a plan and agree with the Ministry of Finance to establish such provisions.

3/ From now on, the aforementioned basic extraction rate will not be adjusted according to the profit margin increase or decrease annually; this ratio is only used to check the effectiveness and quality of implementation of the production-technical-financial plan of the enterprise. However, to encourage enterprises to set positive plans and strive to exceed them, it is now stipulated that enterprises with increased profits (due to completing registered plans or exceeding profit plans) may allocate 40% of the additional profit to supplement the development promotion fund.

4/ The sources of capital for establishing the development promotion fund include:

- The first source is the profit extracted by the enterprise according to the regulations mentioned in points 2 and 3 above.

- The second source is the proceeds from selling obsolete fixed assets (also known as the residual value of fixed assets), or the proceeds from selling fixed assets for more than their remaining value.

- The third source is the basic depreciation of still usable fixed assets, but the enterprise has already fulfilled its obligation to pay the basic depreciation to the state budget (as well as repaying the basic depreciation for fixed assets belonging to loans from the State Bank).

If the above sources of funds are insufficient during the planning year, the enterprise will borrow from the State Bank for technological improvement and production rationalization according to the prescribed regulations. Conversely, if sufficient funds have been used for technological improvement and production rationalization and there is a surplus, the enterprise can use it as self-invested capital to participate in fixed asset investment according to the state plan.

5/ Establishing the development promotion fund expands the enterprise's autonomy to meet its own regular needs for technological improvement and production rationalization. However, if the enterprise cannot plan this fund, it will face difficulties in using it: the enterprise may want to purchase additional new equipment or construct additional works that should have been planned and approved and required basic investment loans; or the enterprise may want to use the entire development promotion fund to purchase additional work tools such as computers, typewriters, fans, etc., thus lacking capital for direct production and business needs that yield practical economic results.

Therefore, when preparing the production-technical-financial plan each year, the enterprise must prepare a plan and budget for the use of the development promotion fund (including detailed lists of tasks, costs for each task, completion deadlines, and economic benefits), and must register the plan and budget for the use of the development promotion fund with the higher-level supervisory agency.

6/ The development promotion fund is extracted monthly (or quarterly) after the enterprise has submitted the final settlement report (balance sheet).

If the enterprise completes or exceeds the profit plan for the month (quarter), it will be allocated according to the planned allocation rate for the development promotion fund for that month (quarter).

If the enterprise fails to achieve the profit plan, it will only be allocated according to the actual achievement of the profit plan, meaning: multiplying the percentage of the profit plan achieved in that month (quarter) by (x) the planned allocation amount for the development promotion fund for that month (quarter).

Each month, each quarter, the enterprise temporarily allocates as described above; at the end of the year, it must recalculate based on actual figures; if overallocated, it must repay the excess to the budget, and if underallocated, it must make up the difference.

7/ In cases where the enterprise has a profit plan but upon implementation does not achieve a profit or incurs a loss, thereby losing the source for allocating the development promotion fund, the enterprise will not allocate but must borrow from the State Bank, if necessary, to finance the development plan and will use next year's development promotion fund to repay.

8/ In cases where the enterprise does not achieve a profit or incurs a planned loss (due to state price policy or other objective reasons recognized by the state), the budget will provide the necessary capital according to the approved development plan. This provision is based on the actual ability to implement the plan, but the maximum amount provided will not exceed the basic extraction rate based on the value of fixed assets under this system.

9/ After completing each item of expenditure from the development promotion fund, the enterprise must settle accounts and record an increase in the value of fixed assets or an increase in working capital.

10/ The production encouragement fund belongs to the management of the enterprise. In cases where enterprises within the same industry (within a company, an enterprise association) need to mobilize this fund for joint use in organizing cooperation to improve technology and rationalize production, the higher-level managing authority may adjust from surplus enterprises to those with shortages, but such adjustment must be agreed upon by the enterprises and the amount mobilized shall not exceed 20% of the production encouragement fund of each enterprise.

11/ Annually, during the process of planning as well as when analyzing the efficiency of using the production encouragement fund, the grassroots trade union must participate, especially regarding opinions on expenditures for labor safety protection.

IV. ALLOCATION AND USE OF THE INCENTIVE FUND AND WELFARE FUND:

1/ The incentive fund is used for

- Year-end awards for workers and staff who have achieved results in completing state plans, including combining with awarding commendation titles.

- Unexpected awards during the year for outstanding examples of improving production and management that benefit the enterprise.

To implement the state's incentive policy correctly, the enterprise must organize accounting of business achievements of individuals and teams so that those with more achievements receive more rewards than those with fewer achievements, and those without achievements receive no reward, avoiding equal distribution. Therefore, the majority of the award money (at least 90%) should be allocated for year-end awards based on achievement levels (according to guidelines from the Ministry of Labor, in coordination with the Central Propaganda and Mobilization Committee and the General Trade Union, concerning the use and distribution of regular bonuses within salaries).

The remaining portion of the fund (up to 10%) is reserved for the enterprise director to proactively award outstanding examples in sudden campaigns during the year, aimed at promptly addressing weaknesses in production and business management.

For the Director, Deputy Directors, Chief Accountant, and specialized Party, Trade Union, and Youth League cadres at the enterprise, the decision to award these cadres rests with the higher-level authority, which must also consult the financial department at the equivalent level.

2/ The welfare fund is used for:

- Awarding bonuses to the staff of the canteen, nursery, clinic, and hospital of the enterprise according to the general award system.

- Building, expanding, repairing housing, clubs, rest houses, health camps, nurseries, canteens, sports facilities, wells, kitchens, etc., and performing other tasks serving the life of workers and staff.

- Improving cultural living conditions and caring for the health of workers and staff, purchasing additional medical equipment and medicines for the enterprise's treatment facilities; equipping dining halls, canteens, treatment facilities, clubs, nurseries with equipment; purchasing sports equipment and paying costs for rest and recuperation.

- Providing loans for increased production capital to improve the living conditions of workers and staff.

- Additional expenses for supplementary education and vocational training in technical skills at the enterprise.

- Additional assistance for unexpected difficulties faced by workers and staff.

The welfare fund belongs to the management of the enterprise, and the enterprise can contribute capital to build housing and other welfare facilities for workers and staff according to the guidance of the General Confederation in coordination with the Ministry of Labor regarding the use of this fund.

3/ The examination and allocation of these two incentive and welfare funds must be based on the final report of the enterprise and the results of reviewing whether the enterprise has completed state plan targets, distinguishing appropriately the material incentives between enterprises with different levels of achievement.

The rate of allocation for these incentive and welfare funds is applied:

- A unified rate for central state-owned enterprises and local state-owned enterprises. Enterprises that comprehensively complete all plan targets under laws will be allocated at a higher rate than those that only complete the main targets.

- There is a distinction between state-owned enterprises in production industries and state-owned enterprises in circulation, distribution, and service industries, with the spirit of encouraging enterprises in production industries more.

The basis for allocation is the wage fund calculated based on the actual average annual wage grade of the number of workers and staff whose wages are included in the cost price (or circulation fee) of the enterprise, including workers and staff of non-core business departments that have not yet been independently accounted for, in accordance with current regulations stipulated in Circular 88 of the Government. Circular 88 of the Government specifies the basis for allocation for industrial enterprises as the actual average annual state wage grade of the number of production workers, apprentices, economic managers, technical managers, administrative managers, and medical personnel in the enterprise's production wage fund (from the clinic down, excluding hospitals and clinics); workers and staff of transportation, procurement, construction and installation units that have not yet been independently economically accounted for...

Workers and staff in construction, transportation, and procurement units that have independent economic accounting enjoy the incentive and welfare fund allocation rates prescribed for these sectors (workers and staff in procurement and dedicated supply material sectors also follow the regulations for these sectors). Specifically, the unified allocation rate for the incentive and welfare funds for enterprises in all sectors nationwide is as follows:

a) In the case where enterprises complete the plan targets:

(*) Two main indicators include:

First, the volume of primary products (including primary export products) sold according to the State plan, which must meet the prescribed quality standards. The production volume target for each industry varies according to the State plan regulations.

Second, profit and payments to the State budget.

b) In the case where the enterprise fails to complete the State plan targets:

The amount allocated to the two basic funds calculated at point a column 2 above will be reduced as follows:

- Not completing from 1% to 10% of the aforementioned main targets: for every percentage point not completed regarding one target, 2.5% of the amount allocated according to the basic level of each fund (for both targets, 5% must be deducted each quarter).

- Not completing 10% or more of the aforementioned main targets: for every percentage point not completed regarding one target, 3% of the amount allocated according to the basic level of each fund (for both targets, 6% must be deducted from each fund).

c) To strengthen collective responsibility and socialist rule of law, in both cases of completing or failing to complete the State plan targets, if the enterprise violates economic and financial management systems and policies of the State as listed below, for each violation depending on the degree of violation, an additional deduction of between 2% and 5% of the amount allocated according to the basic level of each fund will be applied:

- Causing damage to assets, materials, and capital.

- Causing fatal accidents due to management deficiencies or lack of responsibility.

- Violating economic contracts, distribution systems, purchase prices, and state-set prices.

- Violating reporting, accounting, statistical, settlement, and tax payment systems.

Regarding the targets and reduction levels mentioned above, all industries must uniformly implement them.

4/ After calculating the allocation levels for the two reward and welfare funds, the source of capital extracted from the enterprise's profits:

In the case where the enterprise's implementation of the State plan is very low, the combined allocation for the two reward and welfare funds averages less than 10 dong per person (of the number of workers and officials as stipulated in Circular 88-CP mentioned above), then the enterprise can extract additional funds to bring the combined allocation for these two funds up to an average of 10 dong per person to ensure rewards and incentives for certain groups or individuals with achievements, and to guarantee minimum annual welfare expenses.

In the case where the enterprise has no profit or incurs a planned loss (due to state pricing policy or other objective reasons recognized by the State), the level of extraction for the reward and welfare funds will be determined based on the effort to reduce production costs and circulation fees, the effort to reduce losses, and the completion rate of primary product sales targets according to the State plan, as reviewed and approved by the superior management authority and the finance department. The amount extracted will be provided by the State budget.

5/ In the case where the enterprise earns profit due to high registration plans approved and exceeds the plan, the additional profit will be distributed to supplement the reward and welfare funds according to the provisions in Section II, Points 3 and 4 above.

6/ In principle, the reward fund and the welfare fund are separate funds and cannot be adjusted between each other.quarantine upon import.

Enterprises that perform well and are entitled to additional rewards at the basic level plus the high incentive level in one, two, or all three of the following situations:

- Completing the full plan.

- Completing the high registration plan.

- Having surplus profit from producing secondary products from waste materials.

Then, the total reward fund will be increased to a maximum of one and a half months' worth of the actual average rank-based salary fund of the number of workers and officials as stipulated in Circular 88-CP mentioned above.

Apart from the three situations above, in all other cases (including exceeding profit targets), the reward fund remains at the maximum level of one month's salary as before.

Any amounts exceeding the maximum level will be supplemented to the welfare fund: this amount is specifically allocated for building housing and other welfare facilities for the enterprise's workers and officials.

7/ By the end of the year, enterprises prepare reports according to the State-defined indicators for completing the annual plan.

Based on these reports (including both plans and implementations), the superior management authority establishes a review and preliminary approval scheme for subordinate enterprises to allocate the reward and welfare funds (with agreement from the finance, statistics, planning, and supply bank departments). After preliminary approval, the management authority notifies the enterprise to temporarily allocate 75% of the preliminarily approved amount to timely pay year-end bonuses (usually during the Tet holiday).

At the beginning of the next year, when the enterprise's annual settlement report is officially approved by the management authority (after agreement with the supplying finance department on the accuracy of the settlement reports), the enterprise will base its allocation of the officially approved reward and welfare funds to settle the temporarily allocated amount, adding any shortfall and returning any excess to the State budget.

To determine the level of completion of the main product output plan according to the prescribed quality standards, the products must be those that have been consumed or submitted according to the state's report form. The enterprise must base its analysis and determination of the completion status of the main product output plan on statistical reports regarding "production and inventory of main products" and "product consumption," following the principle that over-reported items cannot offset under-reported items, and excesses over the plan cannot compensate for shortages in the plan; excesses over the plan are only considered as meeting the plan.

Example:

Analysis table for determining the completion status of the main product output plan:

The above table shows that the enterprise only meets 85.5% of the main product output plan (and not 106% of the main product output plan).

V. USE OF PROFITS TO PARTICIPATE IN FIXED CAPITAL INVESTMENTS AND SUPPLEMENTARY FLOWS OF CAPITAL AT A REQUIRED LEVEL ACCORDING TO THE STATE PLAN:

1/ Participate in fixed capital investments according to the State plan:

Each year, enterprises with basic construction investment plans for projects approved by the State and funded from the State budget (as per Joint Circular No. 21-LB/TT dated February 17, 1978 issued by the State Bank, Ministry of Finance, and the State Planning Commission) shall be entitled to:

- Utilize enterprise profits and self-raised funds from the production development incentive fund and the enterprise welfare fund if, during the year, the enterprise's profits are insufficient to contribute at least 30% of the required investment amount from the State budget. In such cases, profits shall not be used for investment.

These sources of funding are determined in the enterprise's financial plan.

The enterprise will deposit the designated investment funds into the bank serving it according to the plan.

If the enterprise fails to deposit the funds according to the plan or does not achieve the profit plan or the self-raised investment fund plan relative to the needs, resulting in insufficient funds to implement the investment plan, the enterprise will borrow from the State Bank according to the Bank's regulations to cover the shortfall. The next year, the enterprise must include in its financial plan the amount to repay the State Bank loan. The Ministry of Finance will jointly with the State Bank specify the procedures for settling the State Bank debt for basic investment funds from the State budget.

2/ Supplement the required additional working capital quota according to the approved plan:

Each year, enterprises with requirements to increase working capital quotas and approved plans to supplement this capital shall:

- For the portion of the working capital quota funded from the State budget that remains short, the enterprise may draw from planned profits to make up the difference. If the planned profit is insufficient (or there is no planned profit), the State budget will provide additional funding.

- The financial plan of the enterprise must clearly state the amount of working capital quota that the enterprise can draw from profits to supplement (and the additional State budget funding if applicable).

If the enterprise has an approved plan to draw profits to supplement working capital but fails to do so in time or does not achieve the profit plan, resulting in insufficient funds to supplement working capital according to the plan, the enterprise will borrow from the State Bank according to the Bank's regulations to cover the shortfall, and the State budget will not provide additional funding. The next year, the enterprise must include in its financial plan the amount to repay the State Bank loan.

VI. CONTRIBUTION OF ENTERPRISE PROFITS TO THE STATE BUDGET:

1/ All central and local state-owned enterprises, regardless of whether they pay pure income under the state-owned form or not, are obligated to contribute profits to the State budget, except in cases of objective reasons accepted.

2/ Profit contributions are made monthly based on actual profits achieved, based on the approved settlement (or balance sheet).

Until the actual figures are determined, enterprises must contribute profits to the budget according to the plan and settle according to the actual figures to ensure timely revenue into the budget and prevent the use of funds outside the plan that should be paid to the budget.

Enterprises must proactively contribute profits to the budget according to the regulations by the due date.

3/ Enterprises that fail to contribute profits to the State budget by the due date must pay a penalty of 0.1% of the overdue amount for each day of delay.

VII. IMPLEMENTATION PROVISIONS

1/ The General Director of the enterprise is responsible for properly implementing the provisions regarding profit distribution and setting up enterprise funds as stipulated in this Circular.

Six months and annually, the General Director of the enterprise must report on the implementation of the plan and the use of enterprise funds before the workers' congress.

The Chief Accountant is responsible for assisting the General Director in accurately accounting and checking the implementation of State plan indicators, profit distributions, and uses, and preparing reports in accordance with State regulations.

If the supervisory authority finds that the enterprise has violated regulations, improperly set aside funds, the enterprise must reimburse the Company for the improperly set aside amounts. Relevant personnel involved in the violation, including the General Director and the Chief Accountant, will lose their bonuses and be subject to disciplinary action according to State regulations.

2/ State-owned enterprises (and joint ventures) in production sectors, as well as circulation, distribution, and service sectors nationwide, apply the profit distribution system and establishment of enterprise funds for basic production and business units with the following conditions:y:

- Having approved production-technical-financial plans. When approving plans for basic units, Ministries, General Departments, and Local People's Committees must ensure adequate allocation of State plans assigned to the sector or locality.

- Implementing economic accounting systems, calculating costs and circulation fees based on approved economic and technical norms.

The Ministries, General Departments, and Provincial People's Committees shall decide, after consulting the financial authorities at the same level, that enterprises in the South which have met all the required conditions may establish enterprise funds according to the general system throughout the country.

For enterprises that have not yet met all the aforementioned conditions, the reward system implemented in 1976 (allowing the establishment of reward and welfare funds based on the calculation bases and rates applied in 1976) shall be temporarily continued.

For companies and industrial joint ventures with affiliated units that operate under economic accounting, these companies and industrial joint ventures shall be considered as higher-level accounting organizations, not basic units, and shall apply the fund establishment regulations stipulated in the Joint Venture Charter; temporarily, the competent ministry shall negotiate with the Ministry of Finance to determine appropriate reward levels for higher-level accounting organizations, which should not exceed the average per capita rewards of the affiliated basic units.

For economic public service units or newly established production and business units with state budget revenue and expenditure plans but not yet reviewed and recognized to switch to economic accounting systems, this regulation shall not be applied; instead, they shall follow the provisions of Government Decree No. 80 dated May 13, 1964, issued by the Council of Ministers regarding rewards and competitions.

Based on current regulations and new supplementary provisions in the Circular of the Prime Minister, the Ministry of Finance will unify and issue this document to provide detailed guidance for implementation nationwide, starting immediately with the establishment of enterprise funds for the year 1977.

Any previous regulations of the Ministry of Finance in Circulars No. 14-TC/CNXD dated August 1, 1974, No. 10-TC/TNGI dated April 29, 1975, and No. 07-TC/NLTL dated April 20, 1976, which conflict with this Circular, are hereby abolished.

Related Documents: