Decision No. 08/2004/QD-TTg Approves the Program for Reforming Financial Management Mechanisms for State Administrative Agencies and Public Service Units for the Period 2004-2005

 

Pursuant to …;

Approving the Program on Reforming Financial Management Mechanisms for State Administrative Agencies and Public Service Units for the Period 2004-2005

 of the State and Public Service Units for the Period 2004-2005

PRIME MINISTER

Pursuant to the Law on Organization of the Government dated December 25, 2001;
Pursuant to Decision No. 136/2001/QĐ-TTg dated September 17, 2001 of the Government approving the Overall Program on Administrative Reform of the State for the Period 2001-2010;
At the proposal of the Minister of Finance,

Pursuant to …;

Article 1. Approves the Program on Reforming Financial Management Mechanisms for State Administrative Agencies and Public Service Units for the Period 2004-2005.

Article 2. The Ministry of Finance shall take the lead and coordinate with relevant ministries, sectors, and agencies in implementing this Program.

Article 3. This Decision takes effect fifteen days from the date of publication in the Official Gazette.

The Minister of Finance, ministers, heads of ministerial-level agencies, heads of government-affiliated agencies, and chairpersons of provincial people's committees directly under the central government are responsible for enforcing this Decision.

 

PROGRAM ON REFORMING FINANCIAL MANAGEMENT MECHANISMS FOR STATE ADMINISTRATIVE AGENCIES AND PUBLIC SERVICE UNITS FOR THE PERIOD 2004-2005
(Annexed to Decision No. 08/2004/QĐ-TTg dated January 15, 2004 of the Government).

Part I
OVERALL CONTEXT OF THE PROGRAM

According to preliminary statistics, there are approximately 106,500 state administrative agencies and public service units nationwide.

State administrative agencies have their operational costs fully covered by the state budget based on the authorized staffing quota.

Public service units operate in various fields such as education, science and technology, environment, health, culture and art, physical education and sports, economic services, employment services, etc., established by competent state authorities. These units are provided with material infrastructure by the state to ensure regular operational expenses for fulfilling assigned political and professional tasks. Additionally, these units are permitted to collect certain fees and charges as prescribed by the state and generate revenue through diverse production and service activities across almost all sectors. Currently, public service units are categorized into three types: self-financing units that cover all operational costs, partially self-financing units, and low-revenue or non-revenue generating units.

State administrative management and public service activities hold a particularly important position in the national economy. In recent years, state administrative agencies and public service units at both central and local levels have made significant contributions to the stability and development of the country's socio-economic conditions. There have been many changes in the financial mechanisms and policies of the state towards these two areas, gradually creating favorable conditions for state administrative agencies and public service units to enhance the quality and effectiveness of their operations.

However, in light of the requirements of the reform process and the completion of the economic system as stipulated in the Resolution of the Ninth National Congress of the Party, the management mechanism for state administrative agencies and public service units has revealed significant limitations that need to be addressed, especially in financial management. For this reason, one of the four major components of the Overall Program on Administrative Reform of the State for the Period 2001-2010 is the reform of public finance. Among these, the program on reforming financial management mechanisms for state administrative agencies and public service units is a key action program, with its main contents being: establishing new criteria for budget construction and allocation for state administrative agencies based on output results and activity quality, and the degree of task completion; implementing a cost-sharing system within state administrative agencies; developing appropriate financial mechanisms for organizations performing public service functions and public service units to ensure relative independence and autonomy in their operations, gradually reducing state budget funding and moving towards a self-management financial system.

1. Achievements:

a) Regarding the preparation and allocation of state budget estimates:

The preparation and allocation of state budget estimates over time have been carried out in accordance with the development orientation of the socio-economic policies of the Party and the State during each period. Through adjustments to the budget structure, it contributes to adjusting the economic structure. Additionally, the gradual implementation of budget estimate preparation and allocation according to the state budget classification (inputs) as prescribed by the State Budget Law has contributed to better control over state budget expenditures.

b) Regarding the financial mechanisms for state administrative agencies and public service units:

With the aim of granting autonomy and accountability to state administrative agencies and public service units in organizing work, utilizing labor and financial resources, and clearly distinguishing the financial management mechanisms for state administrative agencies and public service units, the Prime Minister issued Decision No. 192/2001/QĐ-TTg on December 17, 2001, expanding the pilot program of staffing quotas and administrative management costs for state administrative agencies, and the Government issued Decree No. 10/2002/NĐ-CP on January 16, 2002, regarding the financial regime applicable to revenue-generating public service units.

After nearly two years of implementing Decree No. 10/2002/NĐ-CP and Decision No. 192/2001/QĐ-TTg, initial implementation has achieved positive results.

- For state administrative agencies:

Many ministries, sectors, localities, and state administrative agencies have correctly understood the objectives of Decision No. 192/2001/QĐ-TTg of the Prime Minister, taken responsibility for completing tasks well without increasing staffing quotas and administrative management costs compared to before the implementation of the cost-sharing system, actively reorganized cadres and civil servants, reasonably, practically, effectively, and economically utilized allocated funds, ensured transparency, democracy, and legitimate rights of cadres and civil servants.

The agencies implementing the pilot scheme of allocating personnel quotas and administrative management budgets have proactively reorganized their organizational structures towards being leaner, multi-sectoral, and multi-disciplinary, in conjunction with administrative reform under the one-stop-shop model. They have established functions and tasks for each department and each civil servant position to reasonably allocate labor, reduce personnel quotas while improving work quality and efficiency. The state administration activities of government agencies have been enhanced both in quantity and quality. The procedures for handling tasks have been revised or newly established in a more rational and scientific manner and made public to the people. In addition, these agencies have saved costs (approximately 3-15%, some agencies saving up to 26% of the allocated budget), creating funds to increase income for officials and civil servants.

- For public service units:

After transitioning to the self-financing mechanism according to Decree No. 10/2002/NĐ-CP of the Government, the relationship between revenue-generating public service units and state management agencies has fundamentally changed. Revenue-generating public service units have proactively organized their organizational structure and workforce based on job requirements, established internal expenditure regulations, allocated financial resources, and evaluated the effectiveness of their operations based on outcomes rather than inputs, reducing direct intervention from supervising agencies and financial authorities. At the same time, they have actively organized service activities, attracting many participants to enjoy high-quality public services at reasonable costs. Ministries, sectors, and localities have reviewed the functions and tasks of state administrative agencies and public service units, distinguishing between administrative agencies responsible for state management and public service units providing public services to establish appropriate management mechanisms and eliminate the administrativeization of public service activities.

c) Regarding expenditure control:

Implementing the State Budget Law, financial management agencies strictly monitor budget expenditures to ensure that state budgets are used for their intended purposes and recipients, strengthen cash usage oversight, and contribute to stabilizing monetary circulation. Simultaneously, the responsibilities and authorities of heads of budget-using agencies and units are clearly defined, enhancing the effectiveness of state budget utilization.

2. Existing issues and difficulties:

a) Regarding the preparation and allocation of state budget estimates:

Budget planning and allocation based on available or mobilized input resources to meet spending needs have not sufficiently focused on output results. Additionally, budget allocation lacks flexibility, hindering budget-using agencies and units in fulfilling assigned tasks.

b) Regarding the financial mechanisms for state administrative agencies and public service units:

- For state administrative agencies:

While many ministries, sectors, and localities have thoroughly implemented the spirit of expanding the pilot scheme of allocating personnel quotas and administrative management budgets, some ministries, sectors, and agencies remain hesitant, confused, waiting, and do not recognize the necessity of piloting this mechanism, thus failing to instruct its implementation.

For state administrative agencies implementing the pilot scheme of allocating personnel quotas and administrative management budgets, in addition to achieved results, there are still the following issues:

+ Some state administrative agencies have not fully grasped the objectives of piloting the allocation of personnel quotas and administrative management budgets, have not improved work efficiency, and the restructuring of organizational structures and reduction of personnel quotas are limited; they are confused about establishing internal expenditure regulations and salary systems for officials and civil servants; democratic, transparent, and open mechanisms have not been fully implemented.

+ The relationship between central agencies and local agencies, comprehensive management agencies (managing personnel quotas, plans, finance) and pilot agencies remains somewhat intrusive into the internal operations of each agency, with pilot agencies not yet truly autonomous.

- For public service units:

There is currently no regulation on the financial autonomy mechanism for public service units with low or no revenue sources. For revenue-generating public service units, the progress of classification and delegation of financial autonomy rights is slow and inconsistent among ministries, central agencies, localities, and sectors. To date, 11 ministries, agencies equivalent to ministries, and 25 localities have not delegated financial autonomy rights to revenue-generating public service units, while many such units meeting conditions and willing to implement the new financial mechanism since 2002.

Additionally, one of the weaknesses in financial management, including for state administrative agencies and public service units, is information exchange. Current information is inaccurate, outdated, and inconsistent. Information has not become a sensitive tool for macro and micro financial management by agencies and units.

c) Regarding financial inspection and supervision of state administrative agencies and public service units:

Financial supervision still follows a centralized, paternalistic model, excessively intervening in the details of state budgets allocated to state administrative agencies and public service units. These agencies are passive, dependent, and in many cases, untruthful in accounting and documentation.

There are too many inspection, audit, and review bodies targeting state administrative agencies and public service units. The functions, tasks, and targets of the State Audit Agency, Financial Inspection Agency, National Audit Office, Public Prosecutor's Office, Police... overlap, causing difficulties and inconveniences for state administrative agencies and public service units.

3. Causes:

The above situation is caused by multiple factors, but mainly due to:

a) Regarding the preparation and allocation of state budget estimates:

The preparation and allocation of state budget estimates have not adequately focused on output results. Budget allocations are not flexible enough, mainly based on input factors, which impedes agencies and units using the budget in carrying out their assigned tasks.

b) Regarding the financial mechanisms for state administrative agencies and public service units:

- For state administrative agencies:

Some agencies and officials' understanding of the goals and requirements for staffing quotas and administrative management expenses does not align with the spirit of Decision No. 192/2001/QĐ-TTg of the Government's Prime Minister. They merely view the implementation of quotas as increasing income for officials and civil servants without emphasizing the need for reforming management mechanisms, enhancing autonomy and responsibility of agencies in organizing personnel structures, implementing thrift, combating waste, improving work efficiency, and enhancing job performance.

Mechanisms and policies facilitating the implementation of quota systems are not synchronized. Standards for allocating budgets and administrative expenditure regulations are incomplete. Functions, tasks, and the scope of state administration of some government agencies have not been promptly issued by competent authorities.

- For public service units:

Ministries, sectors, and localities have not fully grasped the purpose, significance, and content of Decree No. 10/2002/NĐ-CP of the Government. Some leaders still maintain and cling to old management mechanisms, unwilling to delegate autonomy to revenue-generating public service units. There remains skepticism and concern that financial self-management will reduce state budget funding for units, leading to a decline in activity quality or the emergence of unfair income distribution.

Regulations on financial self-management mechanisms for public service units with low or no revenue sources and related guidance documents for Decree No. 10/2002/NĐ-CP concerning special-purpose activities (economic services, healthcare, culture, sports, credit borrowing, labor reduction benefits...) have been delayed, causing difficulties for public service units during implementation.

c) Regarding financial inspection and supervision work for government agencies and public service units:

- Legal documents on financial control for government agencies and public service units are incomplete; the budget allocation process has many unreasonable aspects and lacks strictness; the method of budget allocation is outdated and inefficient.

- Legal provisions regarding the functions, tasks, inspection, audit, and oversight objects of the State Inspectorate, Financial Inspectorate, National Audit Office, Prosecutor's Office, and Police are inappropriate, overlapping, and repetitive.

- Financial inspection, audit, and oversight procedures are not specific and have not been timely updated to match the financial mechanism and policy system.

Part II
OBJECTIVES, REQUIREMENTS, AND SCOPE OF THE PROGRAM

1. Objectives:

Implementing the Program for Reforming Financial Management Mechanisms for Government Agencies and Public Service Units during the 2004-2005 period aims to achieve the following objectives:

First, to allocate and utilize financial resources efficiently, transparently, fairly, and democratically; clearly and specifically delineate financial management decentralization between central and local levels, and between the state and other economic sectors.

Second, to contribute to improving operational methods and quality, strengthening financial autonomy and accountability of government agencies and public service units; fostering healthy competition and equality in service provision to meet increasingly high demands of the people.

Third, to diversify financial sources (from state budget and non-state budget, domestic and foreign), ensuring the operational needs of public service units.

Fourth, to facilitate government agencies and public service units in rationalizing organizational structures, reducing state staff quotas, implementing labor contracts, and increasing income for state officials and employees.

Fifth, to eliminate overlapping and redundant activities in inspection and auditing; improve administrative procedures and inspection processes, ensuring scientificity and effectiveness.

2. The remaining 60% shall be used to supplement the operating funds of units directly responsible for public debt management at the Ministry of Finance (outside the regular state budget allocation for ongoing operations as currently provided) for the purposes specified in Article 4 of this Decision.

- Clearly define criteria and models for preparing and allocating state budget estimates based on output results and operational quality of government agencies and public service units.

- Develop and perfect the quota and administrative management expense mechanism for government agencies.

- Develop and perfect financial management mechanisms to implement the delegation of autonomy and accountability to public service units in organizing work, utilizing labor, and financial resources; distinguish clearly between financial management mechanisms for government agencies and those for public service units, thereby enabling public service units to proactively manage finances, organize work, arrange labor, and increase income for workers.

3. Scope:

The program is implemented for the recurrent expenditures of administrative state agencies and public service units.

Part III
CONTENT OF THE PROGRAM

The financial management reform program for administrative state agencies and public service units during the period of 2004-2005 is carried out through the following three specific projects:

Project 1: Preparing and allocating the state budget estimate based on outputs.

1. Objectives:

- Establishing the scientific basis for fundamentally changing the method of preparing and allocating the state budget estimate based on outputs, quality of activities, and level of completion of assigned tasks.

- Strengthening the decentralization of state budget management, enhancing the capacity and responsibility of financial agencies at all levels and budgetary units in managing the state budget.

2. Content:

a) Surveying, analyzing, and evaluating the current status of budget estimate preparation and allocation; researching, determining requirements, and proposing recommendations on mechanisms and models for preparing and allocating the state budget estimate based on outputs.

b) Researching and establishing bases for preparing and allocating the state budget estimate based on outputs, including systems of standards for allocating the state budget estimate, standards for state budget expenditure, and criteria for assessing outputs in each field (administrative management, educational services, health services...).

c) Researching and establishing medium-term expenditure plans based on outputs of certain sectors and fields.

3. Assignment of Implementation:

- Lead: Ministry of Finance.

- Coordinate: Ministries, sectors, localities.

4. Products of the Project:

a) Report on evaluating the current status of budget estimate preparation and allocation and specific recommendations on preparing and allocating the state budget estimate based on outputs (in the fourth quarter of 2004);

b) Draft pilot project to establish a medium-term financial framework and medium-term expenditure plan to be submitted to the Government (in the first quarter of 2005).

c) Draft normative legal document of the Government, Prime Minister, and Ministry of Finance on state budget expenditure standards (in the third quarter of 2004);

d) Draft Decision of the Prime Minister promulgating the system of standards for allocating the state budget estimate based on criteria linked to outputs (in the fourth quarter of 2005).

Project 2: Continuing to improve the financial management mechanism for administrative state agencies and public service units.

1. Objectives:

To enable administrative state agencies and public service units to proactively manage their operations, make autonomous financial decisions, and take responsibility for their finances and assets, rationally organize their structures and staff, and enhance the quality and effectiveness of their work. Creating conditions for public service units to develop, diversify types of activities, diversify sources of finance, implement cost-saving measures, exploit non-state revenue sources, and distribute income to employees based on labor results, thereby gradually improving the quality of public services and the effectiveness of state management.

By 2005, all administrative state agencies will operate under the administrative expense quota mechanism, and all public service units will operate under a new financial management mechanism.

2. Content:

a) Studying, analyzing, and evaluating the current status of financial management for administrative state agencies. On this basis, continue to improve the administrative expense quota mechanism.

b) Studying, analyzing, and evaluating the current status of financial management for public service units that have not yet implemented the autonomous financial management mechanism and those that have implemented it according to Decree No. 10/2002/NĐ-CP dated January 16, 2002, of the Government on financial regulations applicable to public service units with revenue. Continue to improve the autonomous financial management mechanism for revenue-generating public service units, build the autonomous financial management mechanism for revenue-generating public service units in each field (education and training, health, culture and information, scientific research, sports, economic services), and build the autonomous financial management mechanism for public service units with low or no revenue.

c) Analyzing and evaluating the current status of financial reporting systems for administrative state agencies and public service units; researching and building high-reliability financial reporting systems that provide timely information from central to local levels, from financial agencies and state treasuries to sectors and vice versa, linking specialized indicators with financial indicators, serving macro financial policy planning and financial management for administrative state agencies and public service units.

3. Assignment of Implementation:

- Lead: Ministry of Finance.

- Coordinate: Ministries, sectors, localities.

4. Products of the Project:

a) Report on evaluating the financial management mechanism for administrative state agencies and proposals for further improvement (in the third quarter of 2004);

b) Report on evaluating the financial management mechanism for public service units and proposals for further improvement (in the second quarter of 2004);

c) Draft Decree of the Government stipulating the mechanism for allocating personnel quotas and administrative management expenses for administrative state agencies (in the fourth quarter of 2004);

d) Draft Decree of the Government stipulating the autonomous financial management mechanism for public service units (in the third quarter of 2004);

đ) Draft Circulars jointly issued by the Ministry of Finance, the Ministry of Home Affairs, and sectoral ministries guiding the mechanism for allocating personnel quotas and administrative management expenses for administrative state agencies according to the new Decree (in the first quarter of 2005);

e) Draft normative legal document of the Ministry of Finance guiding administrative state agencies and public service units in establishing internal expenditure regulations (in the first quarter of 2004);

g) Draft normative legal document of the Ministry of Finance guiding the autonomous financial management mechanism for public service units (in the third quarter of 2004);

h) Draft normative legal documents of the Prime Minister and the Ministry of Finance on financial reporting systems for administrative state agencies and public service units (in the fourth quarter of 2004).

Proposal 3: Reforming inspection and financial supervision work for state administrative agencies and public service units.

1. Objectives:

- Ensuring comprehensiveness regarding scope, subjects, and level of control in accordance with the State Budget Law; ensuring that all budget expenditures are strictly inspected and supervised.

- Enhancing proactivity and accountability of state administrative agencies and public service units in managing and utilizing financial resources effectively.

2. Content:

Studying, analyzing, and evaluating the current status of financial inspection and supervision work for state administrative agencies and public service units, including the control of expenditures by the National Treasury, financial inspections and audits conducted by the State Inspectorate and the State Audit Office, supervisory checks by higher-level management agencies, and financial oversight by financial agencies over state administrative agencies and public service units. On this basis, reforming the mechanism for financial inspection and supervision work for state administrative agencies and public service units. Improving the expenditure control mechanism of the National Treasury system, the inspection and audit mechanism of the Financial Inspectorate and the State Inspectorate, and the auditing mechanism of the State Audit Office.

3. Assignment of Implementation:

- Lead: Ministry of Finance.

- Coordinate: Ministries, sectors, localities.

4. Products of the Project:

a) Report on the evaluation of the current status of financial inspection and supervision work for state administrative agencies and public service units, along with specific recommendations (by the third quarter of 2004);

b) Draft Decree of the Government stipulating the tasks, powers, and responsibilities of the Financial Inspectorate (by the first quarter of 2004);

c) Draft Decree of the Government promulgating the Regulation on coordination in financial inspection, examination, and auditing work for state administrative agencies and public service units (by the fourth quarter of 2004);

d) Draft regulatory documents of the Ministry of Finance concerning expenditure control work for state administrative agencies and public service units (by the second quarter of 2004);

đ) Draft regulatory documents of the Ministry of Finance concerning the inspection mechanism and procedures of the Financial Inspectorate for state administrative agencies and public service units (by the second quarter of 2004).

Part IV
IMPLEMENTATION OF THE PROGRAM

1. Assignment of responsibility

- Lead agency: Ministry of Finance.

- Coordinating agencies:

+ Agencies: Ministry of Home Affairs, Government Office, Ministry of Planning and Investment, Ministry of Education and Training, Ministry of Health, Ministry of Culture, Sports and Tourism, Ministry of Science and Technology, Sports Committee, State Audit Office.

+ Some localities representing regions and areas in cities, rural areas, mountainous regions, and plains.

2. Implementation Schedule

The implementation time for the Program has been determined in each proposal. By the end of 2005, organize a comprehensive review and evaluation of the Program's results.

3. Human Resources and Funding

a) Regarding human resources:

The Ministry of Finance, Ministry of Home Affairs, Government Office, Ministry of Planning and Investment, Ministry of Education and Training, Ministry of Health, Ministry of Culture, Sports and Tourism, Ministry of Science and Technology, Sports Committee, State Audit Office, and provincial people's committees need to allocate staff with professional qualifications to participate in the Program; combining to seek support from domestic and foreign consultants when implementing the proposals of the Program.

b) Regarding funding:

Based on the Program approved by the Prime Minister, the Ministry of Finance will coordinate with the Ministry of Planning and Investment and the Ministry of Home Affairs to calculate and develop a budget plan to ensure the implementation of this Program.

4. Steering Committee of the Program

Establish the Steering Committee for the Program to reform the financial management mechanism for state administrative agencies and public service units during the period of 2004-2005.

The Steering Committee operates on a part-time basis, headed by a Deputy Minister of the Ministry of Finance, with a member being a Deputy Minister of the Ministry of Home Affairs, and the Director of the Administrative and Public Service Financial Department of the Ministry of Finance serving as a secretary member.

The Steering Committee has an Advisory Team. The Advisory Team consists of some officials and experts from the Administrative Reform Department of the Ministry of Home Affairs, the Administrative Reform Department of the Government Office, the Financial Department (or the Department performing financial tasks) of the following agencies: Ministry of Finance, Ministry of Planning and Investment, Ministry of Education and Training, Ministry of Health, Ministry of Culture, Sports and Tourism, Ministry of Science and Technology, Sports Committee, State Audit Office.

The operational regulations and specific organization of the Steering Committee shall be issued by the Chairman after reaching consensus with relevant ministries and sectors.

The Steering Committee is responsible to the Prime Minister and the Minister of Finance for organizing and implementing the Program to reform the financial management mechanism for state administrative agencies and public service units during the period of 2004-2005.

During the implementation of the Program, if there are difficulties, ministries, ministerial-level agencies, government agencies, and provincial people's committees need to promptly report to the Ministry of Finance for consolidation and reporting, proposing solutions to the Government's Administrative Reform Steering Committee and the Prime Minister for consideration and guidance.