Circular No. 119/2015/TT-BTC guides the financial management mechanism for the Small and Medium Enterprise Development Fund.

CIRCULAR

Guidelines for the financial management mechanism for the Small and Medium Enterprise Development Fund

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Pursuant to the Law on State Budget Management dated December 16, 2002;

Pursuant to the Law on Credit Institutions dated June 16, 2010;

Pursuant to the Enterprise Law dated November 29, 2005;

Pursuant to Decree No. 215/2013/NĐ-CP dated December 23, 2013, promulgated by the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decree No. 56/2009/NĐ-CP dated June 30, 2009 of the Government on assistance for the development of small and medium enterprises;

Implementing Decision No. 601/QĐ-TTg dated April 17, 2013 of the Prime Minister on the establishment of the Small and Medium Enterprise Development Fund;

At the proposal of the Director of the Department of Financial Institutions and Financial Organizations;

The Minister of Finance issues this Circular guiding the financial management mechanism for the Small and Medium Enterprise Development Fund.

CChapter I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular guides the financial management mechanism for the Small and Medium Enterprise Development Fund (hereinafter referred to as the Fund), established pursuant to Decision No. 601/QĐ-TTg dated April 17, 2013 of the Prime Minister on the establishment of the Small and Medium Enterprise Development Fund (hereinafter referred to as Decision No. 601/QĐ-TTg).

Article 2. Scope of Application

1. The Small and Medium Enterprise Development Fund.

2. The Vietnam Development Bank and commercial banks meeting the conditions to be entrusted with lending from the Fund (hereinafter referred to as the entrusted party) in accordance with Article 6 of Decision No. 601/QĐ-TTg.

3. Small and medium enterprises as defined by law.

4. Other relevant agencies, organizations, and individuals.

Article 3. Principles of financial management

1. The Fund is a state financial organization operating without profit objectives, performing the function of providing financial support to the subjects specified in Article 3 of Decision No. 601/QĐ-TTg, and carrying out activities stipulated in the Charter of the Fund's organization and operation.

2. The Fund operates independently in terms of finance, bears responsibility for its own operations in accordance with the law, ensures the preservation and development of capital, compensates for costs and risks in operations, and operates according to principles of transparency, economy, and efficiency as prescribed by current laws and this Circular.

3. The Fund maintains a separate balance sheet and opens accounts at the State Treasury or domestic commercial banks in accordance with the law. The Fund is exempted from taxes and other payments to the state budget as prescribed by current laws.

Chapter II

MANAGEMENT OF CAPITAL AND ASSETS

Article 4. Operating Capital of the Fund

1. Subscribed Capital

a) The charter capital of the Fund provided by the state budget is 2,000 (two thousand) billion VND. The schedule for supplementing the charter capital of the Fund shall be implemented in accordance with Clause 1, Article 5 of Decision No. 601/QĐ-TTg;

b) The charter capital of the Fund is supplemented from the following sources:

- State budget allocation as prescribed by law;

- Development fund.

2. Additional annual operating capital from the following sources:

a) Voluntary non-repayable donations, sponsorships, and contributions from organizations and individuals both within and outside the country for the Fund;

b) Grants, entrusted loans for investment from organizations and individuals both within and outside the country for the Fund.

3. Other legitimate sources of capital raising as prescribed by law.

Article 5. Provisions on Ensuring the Safety of Operating Capital

The Fund is responsible for implementing regulations on ensuring the safety of operating capital, including:

1. Managing and using capital for the intended purpose effectively.

2. Purchasing insurance for assets and other insurances as prescribed by law.

3. Establishing a risk reserve fund as prescribed in Article 6 of this Circular.

4. Adhering to limits set for loan amounts, terms, and interest rates as stipulated in Article 8 of Decision No. 601/QĐ-TTg and detailed provisions in this Circular.

5. Not to raise funds through: Accepting deposits from organizations and individuals; issuing promissory notes, bills of exchange, bonds; borrowing commercially from organizations and individuals.

6. Not to use operating capital for purposes such as money trading, securities investment, real estate business, financial investment, and other business activities.

7. To use idle capital to deposit in commercial banks with good operational quality classified by the State Bank of Vietnam.

8. Implementing other measures to ensure the safety of capital in accordance with the law.

Article 6. Establishment of a risk reserve fund and risk management

1. Principles for establishing a risk reserve fund:

a) To compensate for unrecoverable losses from entrusted capital to the trustee of the Fund;

b) The level of the risk reserve fund shall be determined at 0.75% per year based on the actual total outstanding balance at the end of the year;

c) The amount allocated to the risk reserve fund shall be included in the Fund's expenses. At the end of the year, if the risk reserve fund is not fully utilized, the remaining balance shall be carried over to the next year.

Any recovered amounts from entrusted loans that have been risk-managed shall be recorded as other income of the Fund according to accounting regulations;

d) The timing for establishing the risk reserve fund is at the end of the annual accounting period.

2. The Management Board of the Fund shall issue regulations on the establishment, management, and utilization of the risk reserve fund to ensure uniform implementation.

Article 7. Management of assets

1. The Fund shall establish a regulation on managing investment construction, procurement, and fixed asset management activities, to be submitted to the Fund's Management Board for approval in accordance with the Charter of the Fund's organization and operation and relevant laws.

2. Investment, construction, and procurement of fixed assets by the Fund:

a) The authority to decide on investment, construction, and procurement projects of fixed assets of the Fund is stipulated in the Charter of the Fund's organization and operation;

b) Procedures and formalities for investment, construction, procurement, and repair of fixed assets, the Fund shall implement in accordance with the provisions of a limited liability company wholly owned by the State. The Fund has the responsibility to purchase insurance for assets in accordance with the law;

c) Procurement of means of transportation for the Fund's operations shall be applied according to the prescribed standards as for a limited liability company wholly owned by the State;

d) The Fund shall carry out investment and procurement of assets serving its operations within the scope of its available funds.

3. Principles for depreciation, management, utilization, and time of depreciation of fixed assets: The Fund shall implement in accordance with the provisions on depreciation of fixed assets applicable to a limited liability company wholly owned by the State.

4. Leasing, mortgaging, pledging fixed assets:

a) The Fund has the right to lease, mortgage, or pledge fixed assets according to the principle of efficiency, preservation, and development of capital in accordance with the law applicable to a limited liability company wholly owned by the State;

b) The competent authority approving the investment, construction, and procurement project of fixed assets of the Fund is the authority deciding on leasing, mortgaging, or pledging fixed assets.

5. Liquidation, transfer, sale of fixed assets:

a) The Fund has the right to proactively transfer or liquidate fixed assets that are damaged, technologically obsolete, or no longer needed or usable;

b) The competent authority approving the investment, construction, and procurement project of fixed assets of the Fund is the authority deciding on the liquidation, transfer, or sale of fixed assets;

c) The procedures and formalities for the liquidation and transfer of fixed assets of the Fund shall be implemented in accordance with the law applicable to a limited liability company wholly owned by the State.

6. Inventory and revaluation of fixed assets:

a) The Fund must organize periodic or ad hoc inventory to determine the quantity of fixed assets in the following cases: When closing the books to prepare the annual financial report; after natural disasters, enemy attacks, or other reasons causing changes in the Fund's assets; as required by authorized state agencies;

b) For surplus or missing assets, the cause and responsibility of related organizations and individuals must be clearly identified, and material compensation levels shall be determined in accordance with Clause 8 of this Circular;

c) The Fund shall revalue fixed assets according to the decision of the authorized state agency or other cases as prescribed by law;

d) The revaluation of fixed assets and the accounting treatment of differences in value due to revaluation shall be implemented in accordance with the provisions applicable to a limited liability company wholly owned by the State.

Article 8. Handling Losses of Fund Assets

When suffering asset losses, the Fund must determine the cause, responsibility, and handle it as follows:

1. Clearly identify both objective reasons (natural disasters, epidemics, fires, unexpected accidents, political risks) and subjective reasons.

2. If the cause is subjective, the person causing the loss must compensate; the Management Board of the Fund decides or authorizes the Director of the Fund to decide on the compensation amount according to the provisions of the law and bears responsibility for their decision.

3. If the assets have been insured, they shall be handled according to the provisions of the insurance law.

4. The value of the loss, after being offset by personal, collective, and insurance organization compensation, if insufficient, shall be recorded as expenses in the Fund's period.

Chapter III

INTEREST RATE FOR LOANS AND COMMISSION FOR TRUSTED LOANS

Article 9. Interest Rate for Loans of the Fund

1. The interest rate for loans of the Fund shall not exceed 90% of the commercial loan interest rate of the same term of the Vietnam Joint Stock Commercial Bank for Foreign Trade, Vietnam Joint Stock Commercial Bank for Industry and Trade, Vietnam Joint Stock Commercial Bank for Investment and Development, and Vietnam Agricultural and Rural Development Bank in Hanoi City.

2. The commercial loan interest rate for each term is determined based on the arithmetic average of the loan interest rates of the same term for enterprises in priority sectors of the four commercial banks specified in Clause 1 of this Article.

3. The Ministry of Finance announces the loan interest rate of the Fund during each period in accordance with market interest rate trends. In case there is a significant fluctuation in the commercial loan interest rate of the same term mentioned in Clause 2 of this Article, the Management Board of the Fund reports to the Ministry of Finance for consideration and adjustment of the interest rate accordingly.

4. The loan interest rate is recorded in the credit contract. The loan interest rate for each disbursement is applied according to the announced loan interest rate at the nearest time point and does not change during the loan period.

5. Adjustments to increase or decrease the interest rate for some disbursed loans are decided by the Management Board of the Fund based on the opinion of the Ministry of Finance.

6. The overdue interest rate for each disbursement is 150% of the interest rate for loans within the term for that disbursement.

Article 10. Commission for the Entrusted Party

1. When receiving entrustment from the Fund, the entrusted party receives commission according to the regulations of the State Bank of Vietnam on entrustment and acceptance of entrustment by credit organizations.

2. The commission for the entrusted party is agreed upon by the Fund with the entrusted party according to the regulations of the State Bank of Vietnam on entrustment and acceptance of entrustment by credit organizations.

Chapter IV

MANAGEMENT OF INCOME, EXPENSES, AND DISTRIBUTION

FINANCIAL RESULTS

Article 11. Income of the Fund

The revenue of the fund includes receivables arising during the period, including:

1. Interest income from entrusted loan activities.

2. Income from financial activities.

a) Interest from deposits;

b) Income from management fees of aid, support, sponsorship, and contributions (if any).

3. Other income

a) Income from the liquidation and sale of assets;

b) Insurance compensation income (the remaining part after offsetting the occurred losses);

c) Penalties for breach of economic contracts;

d) Income from debts written off using the risk reserve fund now recovered;

đ) Income from exchange rate differences (if any);

e) Income from capacity enhancement activities, supporting small and medium-sized enterprises within the tasks and powers of the Fund as stipulated in the Charter of the Fund's organization and operation;

g) Other lawful income as prescribed by law.

4. The Fund has the responsibility to collect all income items accurately, fully, and promptly according to the prescribed regulations.

Article 12. Fund Expenses

Fund expenses are the necessary costs incurred during the period for the operation of the Fund, complying with the principle of appropriateness between revenue and expenditure, having valid invoices and legitimate supporting documents as prescribed by law, including:

1. Operational business expenses

a) Costs for mobilizing capital and receiving donations from organizations and individuals both domestically and internationally (if applicable);

b) Service fees paid under the agency agreement;

c) Provision for credit risk reserves as stipulated in this Circular;

d) Insurance costs as prescribed by law;

đ) Exchange rate differences (if applicable);

e) Other operational business expenses.

2. Financial activity expenses: Expenses related to depositing funds at commercial banks and other costs.

3. Expenses for staff: Expenses implemented according to the regulations of the State for a Limited Liability Company wholly owned by the State with respect to salaries, wages, and other allowances for employees of the Fund:

a) Salaries, wages, and other allowances of a salary or wage nature for Fund employees;

b) Social insurance, health insurance, unemployment insurance for Fund employees;

c) Remuneration for non-executive members participating in the Fund Management Board;

d) Expenses for meal allowances, female employee allowances, labor protection expenses, transaction attire expenses, severance pay for employees;

đ) Travel expenses for Fund officials, civil servants, and employees traveling domestically and internationally;

e) Other expenses for Fund employees as prescribed by law.

3. Fund management expenses

a) Depreciation expenses for fixed assets as prescribed by law; insurance expenses for assets; repair and maintenance expenses for assets; purchase expenses for tools and equipment (for assets under the Fund's management);

b) Expenses to compensate for asset losses as prescribed;

c) Rental expenses for assets and equipment serving the Fund's activities;

d) Expenses for conferences, seminars, training, and cadre development as prescribed by the State for a Limited Liability Company wholly owned by the State with respect to 100% of the charter capital. The Fund may cover meal expenses, accommodation rental expenses, travel expenses for delegates attending according to the State's regulations;

đ) Expenses for publicity, printing materials, reception, transactions, external relations, hospitality, conferences, advertising as prescribed by law;

e) Expenses for inspection, supervision, and auditing of Fund activities;

g) Expenses to support the activities of the Party organization and mass organizations of the Small and Medium Enterprise Development Fund;

h) Expenses for electricity, water, office sanitation, environmental protection, and office healthcare;

i) Other management expenses as prescribed by law.

4. Other expenses as prescribed by law.

5. Expense standards specified in Clause 1, 2, 3, and 4 of this Article shall be implemented according to the regulations of the State for a Limited Liability Company wholly owned by the State with respect to 100% of the charter capital. In cases where there are no legal provisions, the Fund shall base its expense standards on its financial capacity, ensuring appropriate and effective spending, and bear responsibility before the law.

Article 13. Expenses Not to Be Recorded as Fund Operating Expenses

1. Losses that have been supported by the State or compensated by insurance agencies, the party causing damage.

2. Administrative fines, including traffic law violations; accounting and statistics law violations, and other administrative fines as prescribed by law.

3. Expenses without valid and legal invoices and supporting documents.

4. Expenses from other funding sources.

Article 14. Financial Results

1. The financial results of the Fund are determined as the difference between total income and reasonable, lawful expenses incurred during the fiscal year.

2. The financial result for a profitable year occurs when the difference between total income and total expenses incurred during the fiscal year yields a positive result (+).

3. The financial result for a loss-making year occurs when the difference between total income and total expenses incurred during the fiscal year yields a negative result (-).

Article 15. Distribution of Financial Results and Transfer of Losses

1. When the financial result for the year is profitable, after paying fines for violations of laws and compensating losses from previous years (if any), the remaining amount shall be distributed as follows:

a) Allocate 30% to the Development Investment Fund;

b) Allocate to the Welfare Fund and the Reward Fund:

- In cases where the annual operational plan approved by the Management Board at the beginning of the year is completed, the Fund may allocate up to three months' salary to both the Welfare Fund and the Reward Fund;

- In cases where the annual operational plan approved by the Management Board at the beginning of the year is not completed, the Fund may allocate up to two months' salary to both the Welfare Fund and the Reward Fund;

c) The remaining amount after setting aside funds above will be allocated further to the Development Investment Fund.

2. When the financial result for the year is a loss, the Fund may transfer the loss to the following year, with the transfer period continuously not exceeding five years from the year following the year in which the loss occurred. If after five years the Fund has not transferred all losses, the Management Board must report to the Ministry of Planning and Investment for submission to the Prime Minister for consideration and decision.

Article 16. Purpose of Using Funds

1. The Development Investment Fund is used to supplement the registered capital of the Fund.

2. The Reward Fund:

a) The Reward Fund is used to award regular or special rewards to individuals or groups within the Fund who have innovative ideas or improvements in technical processes or business procedures that significantly enhance the Fund's operations; rewards for groups or individuals inside or outside the Fund who effectively contribute to the Fund's operations;

b) The Management Board guides the expenditure limits for rewards for each recipient group so that the Fund can implement them.

3. The Welfare Fund:

a) The Welfare Fund is used to fund sports, cultural, and public welfare activities for the staff of the Fund; to provide regular or special hardship allowances to Fund staff; to invest in or repair welfare facilities of the Fund;

b) The Director of the Fund prepares an annual plan for using the Welfare Fund and submits it to the Management Board for approval after reaching consensus with the Trade Union Executive Committee of the Fund.

Chapter V

ACCOUNTING AND AUDIT SYSTEM FOR FINANCIAL REPORTS

Article 17. Accounting Records

1. Within one year from the date of commencement of operations, the Fund applies the accounting system currently prescribed for local Development Investment Funds. After this period, the Fund implements the accounting system according to the guidelines of the Ministry of Finance.

2. The fiscal year of the Fund runs from January 1st to December 31st annually.

Article 18. Financial Reports and Information Provision

1. The Fund is responsible for preparing and submitting quarterly and annual financial reports to the Ministry of Planning and Investment and the Ministry of Finance, including:

a) Balance Sheet;

b) Operating results report;

c) Notes to the Financial Statements;

d) Report on Entrusted Loan Situations as per Appendix 1 attached to this Circular;

đ) Report on Income and Expenditure Situations; Report on Distribution of Income and Expenditure Differences and Use of Funds as per Appendices 2 and 3 attached to this Circular;

e) Annual Financial Settlement Report;

g) Annual Financial Report audited in accordance with this Circular.

2. The Ministry of Planning and Investment approves the annual financial report specified in point e, Clause 1 of this Article.

3. Deadline for submitting reports:

a) Quarterly reports must be submitted no later than 45 days after the end of the quarter;

b) Annual reports must be submitted no later than 90 days after the end of the fiscal year;

c) The audit report on the annual financial statements of the Fund conducted by an independent auditing organization must be submitted no later than 120 days after the end of the fiscal year.

4. The Fund is responsible for providing information and submitting ad hoc reports as required by the Ministry of Finance, the Ministry of Planning and Investment, and other state management agencies in accordance with current laws.

Article 19. Audit and Financial Transparency

1. The Fund shall implement internal audit systems as prescribed.

2. The annual financial report of the Fund must be audited by the state auditing agency. In cases where the state auditing agency does not have plans to audit the Fund, the annual financial report of the Fund must be audited by an independent auditing organization in accordance with the provisions of the law. The results and reports on the implementation of the audit of the annual financial report of the Fund must be sent to the Ministry of Planning and Investment and the Ministry of Finance.

3. The Fund shall implement financial transparency in accordance with the provisions of the law.

Article 20. Preparation of Annual Financial Plan

1. The Fund has the responsibility to develop an annual financial plan for approval by the Ministry of Planning and Investment and submission to the Ministry of Finance for monitoring. The contents of the next year's financial plan include:

a) Plan for sources of capital and use of capital for small and medium-sized enterprises;

b) Financial plan including the contents stipulated in Appendices 4, 4a, and 4b attached to this Circular.

2. Before December 1st each year, the Management Board of the Fund submits the annual financial plan for approval by the Ministry of Planning and Investment as the basis for implementation.

Chapter VI

RESPONSIBILITIES OF THE AUTHORITIES

Article 21. Responsibilities of the Ministry of Finance

1. Implement the responsibilities prescribed in Clause 2 of Article 15 of Decision No. 601/QĐ-TTg.

2. Amend and supplement the financial management system for the Fund (if necessary).

3. Carry out supervision, inspection, and audit of compliance with laws on finance, implementation of financial plans through reporting systems and regulations on audits.

Article 22. Responsibilities of the Fund

1. The Fund is responsible under the law for organizing, operating, managing, using, and preserving state assets managed and used by the Fund.

2. Adhere to financial management regulations stipulated in this Circular and related legal documents.

3. Based on the guidance provided in this Circular, and other documents regulating state financial systems, issue specific guidelines on internal financial management regulations; management and use regulations for the risk reserve fund; business regulations.

Chapter VII

IMPLEMENTATION

Article 23. Effectiveness of Implementation

1. This Circular takes effect from October 1, 2015, and applies from the 2015 fiscal year.

2. During the implementation process, if there are difficulties or obstacles, please reflect them to the Ministry of Finance for study and amendment./.