Joint Circular No. 04-TTLB-TLTC on Strengthening Management of Basic Construction Funds for Irrigation Projects in Localities

 JOINT CIRCULAR

On Strengthening the Management of Construction Investment Funds for Water Conservancy Projects in Local Areas

----------------------

Currently, water resources work is developing increasingly, with more investment capital being allocated to water conservancy projects.

In each province, there are usually the following sources of funds:

- Capital invested by the Central Government (large-scale water conservancy projects);

- Capital subsidized by the Central Government to the provinces (medium-scale water conservancy projects);

- Capital invested by localities (medium and small-scale water conservancy projects).

Additionally, there are some projects carried out by the people themselves.

All these sources of funds are interrelated and support each other to ensure sufficient financial resources for the construction of a complete water conservancy network serving agricultural production in the locality, thus falling within the scope of responsibility of the locality.

To ensure close and timely management, to promote the completion and overfulfillment of the State plan, the two Ministries decide on the following methods:

A. FOR PROJECTS FUNDED BY THE CENTRAL GOVERNMENT

Projects funded by the Central Government are naturally managed by the Ministry of Water Resources for construction activities, including fund management, but the Construction Company under the Ministry of Water Resources may be responsible for constructing key sites or may entrust the construction to the provinces (either entirely or partially). In the case where construction is entrusted to the provinces, after the design and budget for the entire project or parts of the project to be constructed in the planned year have been approved by the competent authority, and the project has been included in the basic construction plan and state budget, the Ministry of Water Resources will base on these documents, the construction period, and the completion time recorded in the basic construction plan, to sign contracts with each province, and each province will be responsible not only for construction but also for the use of funds before the Ministry.

Thus, during the construction process, the Provincial People's Committee is responsible for leading and directing the entire construction site; the Ministry of Water Resources assigns technical staff to guide and assist. If the locality organizes construction reasonably, promotes innovation, increases labor productivity, reduces construction costs, thereby saving state funds (i.e., spending less than the approved budget) while ensuring quantity, quality, and technical standards of the project, and ensuring its timely entry into operation as stipulated, the saved capital (i.e., the difference between the approved budget price and the actual cost) shall be considered as profit of the contracting team; if this team belongs to the province, the profit must be deposited into the provincial budget and can be used for local water resources development according to the approved plan (of course, in the case where the Construction Company under the Ministry of Water Resources undertakes the project, the profit must be deposited into the central government budget according to current state regulations).

Strict management is required, no overrun of the budget is allowed; if unusual situations occur during construction (such as encountering water veins, soft soil layers, etc.) requiring changes to the design, additional volume, etc., then a record must be established with representatives from the Ministry of Water Resources, the Construction Site Command, and the Local Construction Fund Office signing it, and submitted to the Ministry for decision, or submitted to the Government for decision (if the change exceeds the authority of the supervising ministry).

Conversely, if the locality organizes the construction site improperly, fails to comply with the basic construction procedures, or makes subjective mistakes causing waste and exceeding the budget, the Provincial People's Committee will bear the responsibility, and cannot claim compensation.

Upon completion of the project, the Provincial People's Committee is responsible for urging the Construction Site Command to settle accounts comprehensively with the Ministry of Water Resources strictly in accordance with current regulations.

B. FOR PROJECTS FUNDED BY FULL OR PARTIAL SUBSIDIES FROM THE CENTRAL GOVERNMENT

For such types of projects, the Provincial People's Committee reviews and approves the design tasks and preliminary designs; the Ministry of Water Resources participates in providing opinions and technical assistance when difficulties arise during construction.

This type of funding must also be managed strictly according to the system of managing construction investment funds: full compliance with all procedures of basic construction, clear organization of A and B groups, distribution through the Local Construction Fund Office, and the Ministry of Water Resources overseeing and managing, closely monitoring the use of this type of funding.

If for any reason the project cannot be implemented or completed as planned, the entire subsidy or remaining subsidy must be returned to the Central Government, and the locality must not use it for other purposes without the agreement of the Central Government.

Annually, the Construction Site Commands must settle accounts fully with the Provincial People's Committee, and the province must report to the two Ministries on the situation of using subsidies and their economic effectiveness. If there is surplus capital due to savings as mentioned in Section A above after completing the planned volume, it should be handled as stated in Section A.

C. FOR PROJECTS LISTED IN THE LOCAL BASIC CONSTRUCTION PLAN AND FUNDED BY LOCALITIES

The Provincial People's Committees clearly assign responsibilities to the Provincial Water Resources Departments, Finance Departments, and Local Construction Fund Offices for managing this capital, and must fully comply with the systems and regulations on construction investment funds issued by the State.

Annually, the Provincial People's Committee reports to the two Ministries on the implementation of the provincial water resources basic construction plan for projects funded by the locality and included in the comprehensive water resources plan, which are closely related to central government investment, requiring centralized and unified leadership.

D. ISSUES REGARDING THE USE OF WATER CONSERVANCY FEES IN RURAL IRRIGATION SYSTEMS

The principle of management is that localities must concentrate the revenue from water conservancy fees on management and maintenance of rural irrigation systems, and not use them for other purposes.

The tasks of the Water Resources Departments and Finance Departments

Up to now, the Departments and Offices of Water Resources have not paid sufficient attention to managing the central investment capital at the local level and often fully delegated the construction site command boards. For investments in dike, embankment, and sluice projects, they usually fully delegate to the districts and communes. Many Finance Departments have not genuinely assisted the Water Resources Departments and Offices in implementing financial regulations and have not focused on providing professional guidance to financial and accounting staff. As for the construction site command boards of water resources projects, local financial agencies have also not closely monitored and strictly supervised the use of funds.

To remedy this situation, the Ministries jointly propose to the Administrative Committee:

1. Assign clear responsibilities to the Departments and Offices of Water Resources to monitor the implementation of basic construction plans of the entire sector at the local level, including: the part invested by the Central Government, the part invested by the locality, and the part done by the people. Quarterly and annually, the Departments and Offices of Water Resources must report on the construction situation as well as the expenditure of all projects under each type of capital to the Administrative Committee and send copies to the joint Ministries. Each report should not only focus on the economic aspect and the relationship between large, medium, and small-scale irrigation and hydropower projects but also include comments and recommendations on the use of capital.

2. Create conditions for the Finance Departments to assist local sectors in implementing financial regulations, as well as in training and enhancing accounting and financial skills, particularly for the construction site command boards of water resources projects which are units actually assigned tasks to undertake contracts (B) for projects funded by the Central Government.

The tasks of the Construction Investment Banks are:

a) Timely and accurately allocate basic construction capital according to regulations, assist units in resolving difficulties to ensure timely and accurate allocation within the prescribed time frame and according to regulations.

b) Provide short-term loans when necessary according to the short-term loan regulations for basic construction.

c) Supervise all economic and financial activities of units to:

- Ensure the sequence of basic construction;

- Promote economic accounting, enforce thrift;

- Promote the efficiency of capital;

- Promote the completion of basic construction plans in terms of volume and quality;

- Contribute opinions to build and adjust investment plans and annual and quarterly financial construction plans.

d) In addition to regular reports to the Central Construction Investment Bank, quarterly and whenever necessary, they must report to the Ministry of Finance (Department of Financial Affairs for Agriculture, Forestry, and Water Resources) on the situation of water resources construction (central and local) such as construction speed, value of completed volume, capital usage, capital effectiveness, production area put into operation, etc., and the suggestions of the Construction Investment Bank.

The above are specific measures aimed at gradually strengthening the management of basic construction investment capital to contribute to accelerating the pace of water resources project construction.

During the implementation process, if there are any points that need supplementation or further explanation, it is recommended that localities promptly reflect them to the joint Ministries for study and resolution.

This Circular takes effect from the date of signature.