Joint Circular No. 128-TT/LB provides guidance on the implementation of the material liability system for workers and officials regarding state property.

CIRCULAR

Of the Ministry of Finance - Labor - General Confederation of Trade Unions
Decision No. 128/TT-LB dated July 24, 1968 guiding the implementation of the material responsibility system for workers and officials regarding state property

I- MEANING, PURPOSE, PRINCIPLES

OF THE ISSUANCE OF THE MATERIAL RESPONSIBILITY SYSTEM

After several campaigns to improve enterprise management, especially after the campaign "3 constructions 3 oppositions," there have been certain improvements in managing state property: the awareness of protecting public property among workers and officials has initially increased, incidents of damage and loss of state property have decreased somewhat. However, since the entire country was at war, the situation of state property losses has increased due to both objective reasons, but mainly due to subjective reasons: education on the sense of responsibility for protecting state property among workers and officials has not been comprehensive enough, property management has not been strict enough, the enforcement of reward and punishment systems has not been severe or timely.

The Resolution of the Council of Ministers No. 59/CP dated May 10, 1962 on "protecting property, practicing thrift" states: "We must strive to protect property, practice thrift, rationally utilize the strength of the people and the state to boost production and combat, leading our people's anti-American rescue nation cause to complete victory." Decree No. 195/CP dated December 31, 1964 promulgating the labor discipline regulations clearly stipulates five items of labor discipline, including the protection of public property and sets out the principle that: "Those who cause damage to state property due to lack of sense of responsibility or violation of labor discipline shall compensate for such damage to the public fund."

Some sectors have also issued detailed and specific regulations on compensation systems applicable within their respective sectors. However, due to the lack of a legal regulation document setting out general principles of the state as a basis for each sector to develop specific regulations, the regulations issued by the sectors are inconsistent in content: from the basis of responsibility to conditions for exemption, reduction, degree of compensation, procedures for handling... each sector has different provisions, some too lenient, others too strict. In general, the sectors have only regulated compensation for shortages in the public fund and loss of state property, without fully addressing the entire material responsibility of workers and officials in protecting state property, specifically not regulating the compensation system in cases of damage to state property.

Along with the implementation of the compensation system, many sectors have not paid sufficient attention to strengthening political and ideological education, enhancing the sense of ownership and sense of responsibility; on the other hand, they have not promptly addressed issues arising from the implementation of the compensation system such as: clearly defining the responsibility system, improving property management systems, organizing technical appraisals, enhancing the proficiency level of workers' skills, etc.

Regarding compensation liability, it has not been clearly distinguished between intentional damage causing embezzlement, which are illegal acts under the jurisdiction of the courts, and cases where damage occurs unintentionally due to a lack of sense of responsibility or violation of labor discipline while performing work tasks, which should be handled according to the spirit of resolving labor relations. Some sectors have mechanically applied the principle that whenever there is damage or loss of state property, the person responsible for its preservation must fully and immediately compensate, resulting in some cases being handled inadequately, causing those tasked with preserving and using state property to worry about compensation liability and become less enthusiastic in their work.

In terms of implementation, it is generally lax. When damage to state property occurs, many sectors often only pay attention to administrative disciplinary measures against the offender, without adequately considering the aspect of compensation liability, sometimes requiring compensation to the state but not following up or urging payment of the determined compensation amount. Some sectors do not closely monitor the protection of property, thus failing to grasp the situation. How units handle right and wrong, superiors usually do not know to urge, remind, correct, and promptly draw lessons, propose necessary measures to prevent similar incidents from occurring in the future.

To contribute to correcting the above situation and promoting the implementation of the campaign to protect property and practice thrift, the Council of Ministers has issued the material responsibility system for workers and officials regarding state property as a basis for sectors and localities to study and apply uniformly and appropriately to the specific circumstances of each sector and locality.

The basic spirit of the material responsibility system is to emphasize the responsibility for managing and protecting state property, while also attaching great importance to the cadre policy of the Party and Government. On the basis of strengthening political and ideological education, enhancing the sense of responsibility and sense of ownership, and improving management systems, on one hand, timely commendation and rewards for units and individuals with achievements in managing and protecting state property must be given, on the other hand, the material responsibility of workers and officials, i.e., the responsibility to compensate in cases of damage or loss of state property, must be clearly defined, making workers and officials more seriously concerned about managing and protecting state property in all situations. The purpose of compensation is to strengthen the education of workers and officials, enhance the spirit of collective ownership, strengthen the sense of management and sense of responsibility, and at the same time compensate for a certain extent of damage caused to state property.

Handling must be based on the Party and Government's policies and guidelines, generally taking into account the living conditions of workers and officials. Strictly dealing with violations of policies, systems, and discipline is also for educational purposes. In specific cases, distinctions are made based on the circumstances in which the incident occurred and the attitude of the offender.

II- MAIN POINTS OF THE CONTENT OF THE SYSTEM
MATERIAL LIABILITY

1. Scope of Implementation

This material liability regime applies to state workers and officials for losses occurring due to violations of labor discipline or lack of responsibility during production or work.

Therefore, cases of embezzlement, misappropriation, destruction of state property, and generally all intentional acts causing damage to state property in various ways, are not within the scope of handling under this regime but fall under the jurisdiction of judicial authorities. For minor cases of embezzlement that judicial authorities determine do not warrant prosecution before courts, they are referred back to the agencies or enterprises for handling, and when these agencies or enterprises handle such cases, they do not apply the provisions of this regime.

On the other hand, cases causing damage not arising from the performance of labor duties or not from the authorized use of property also do not fall within the scope of handling under this regime because these matters pertain to civil liability.

As for those who produce defective goods or constructions with technical flaws, this regime does not apply, but they must compensate according to Circular No. 97/TTg dated September 29, 1962 of the Government Prime Minister.

It should be noted that in cases where a lack of responsibility results in serious damage to state property to the extent that prosecution before courts is required under Decree No. 267/SL dated June 15, 1956, compensation is decided by judicial authorities and not implemented under this regime.

According to Article 5 of the material liability regime, in addition to compensating for the loss to the public treasury, the person at fault may also be subject to disciplinary action in one of the four forms prescribed in the labor discipline regulations (reprimand, warning, demotion in position, demotion in rank, or dismissal), depending on the nature of the incident and the degree of fault. This matter is examined and proposed by the Disciplinary Council in accordance with Circular No. 13/TT-LD dated August 30, 1966 of the Ministry of Labor - Civil Service guiding the implementation of the labor discipline regulations.

2. Subjects of Implementation

According to Article 1, the subjects of this regime are state workers and officials working permanently or temporarily (within or outside the state's establishment) in regular or irregular labor forces, regardless of their positions as leaders or staff members, in agencies and enterprises at the district level or higher (including state-owned enterprises, joint-stock enterprises, construction sites, farms, forestry stations, stores, hospitals, schools, laboratories, other public service agencies, and state management agencies).

3. Determination of Fault (according to Articles 7, 8, 9)

The determination of fault is important because fault is the basis for assigning liability for compensation.

The material liability regime operates on the principle that only those who cause damage through fault are liable for compensation; if there is no fault, there is no liability for compensation. Therefore, when a loss occurs, agencies and enterprises must base their investigation and assignment of responsibility on the principles and regimes of property management and protection already established, accurately concluding about the fault and degree of fault of each individual. If the loss is caused by the fault of multiple individuals, all those at fault, including responsible officials of the agency or enterprise, are liable for compensation according to the degree of their fault.

To ensure the appropriate determination of fault and degree of fault, during the investigation and analysis, attention should be paid to many aspects such as: the circumstances under which the loss occurred, difficulties that the worker or official could not overcome, unclear responsibilities, low technical proficiency, inability to foresee and take preventive measures, etc. The investigation and determination of responsibility must be thoroughly conducted following a mass line approach, with the participation of the grassroots trade union.

Additionally, if the loss occurs unintentionally due to enthusiasm in work (production or work) and attention has been given to technical assurance, it shall not be considered a fault and no compensation is required, but lessons should be learned to prevent similar incidents from happening again.

Article 9 provides: "If damage is caused by unforeseeable objective conditions beyond human capacity to prevent or mitigate such as severe storms, floods, enemy bombardments, etc., and the person responsible for the work has done their utmost to prevent or limit the damage, they shall be exempt from liability for compensation; if they fail to fulfill their responsibility and capability and thereby cause damage, they shall still be liable for compensation."

Example: A warehouse manager, upon receiving information about an impending storm, personally inspected the warehouse system and took every possible measure and means to protect it. During the storm, he actively fought against it, and all these actions were known and recognized by the people around him. This warehouse manager does not have to compensate for the losses caused by the storm because he demonstrated a sense of responsibility in protecting assets and utilized his full capabilities to minimize damage.

Conversely, another warehouse manager, upon receiving information about an impending storm, not only failed to recheck the warehouse but also left the warehouse to go elsewhere. When the storm occurred, he did not actively protect the warehouse, resulting in some losses to goods stored there. In this case, the warehouse manager is liable for compensating for the losses caused by the storm because he did not fulfill his responsibilities and capabilities to prevent and mitigate damage.

4. Amount of Compensation (according to Articles 10, 11, 12).

It is important to understand that when assessing damages to determine the amount of compensation, it is based solely on direct damage caused to the property under the responsibility of the person at fault, and does not include indirect damage, which is the effect of the property being damaged or lost.

Example: A driver who caused a vehicle carrying passengers to crash due to reckless driving must compensate for the cost of repairing the vehicle, but not for the loss of revenue (ticket sales) during the time the vehicle was in the repair shop.

To clearly identify fault and the degree of fault—the basis for determining the amount of compensation—besides investigating and collecting all relevant materials related to the incident and the circumstances causing the damage, consideration must be given to the daily work spirit, attitude, and protective awareness of the person at fault. For the same incident, if the person at fault has consistently shown good work spirit, attitude, and high sense of responsibility, and has never been disciplined before, and this time the damage occurred due to a mere oversight, then they may be considered more leniently when determining the amount of compensation.

When determining the amount of compensation, distinction is made between cases of damaging property and cases of losing property. If state property is damaged without embezzlement or misappropriation, depending on the specific situation, compensation for the entire or part of the damage must be paid, but the maximum amount cannot exceed three months' salary and salary supplements of the person at fault.

Example: An employee with a monthly salary and salary supplement of 60 dong damaged a machine requiring repairs costing 250 dong. The maximum compensation amount would be: 60 dong x 3 = 180 dong. Within this maximum limit, the agency or enterprise will decide on the specific compensation amount.

Note: Salary supplements only include regional allowances. When calculating the compensation amount, other types of allowances or subsidies such as hazardous duty allowance, health deterioration subsidy, technical allowance, multiple child subsidy, evacuation subsidy, etc., are not included.

If state property is lost, full compensation for the lost property must be provided as previously practiced, but the higher authority may decide on lower compensation if there are sufficient reasons to confirm that the loss was not due to embezzlement or misappropriation, i.e., there is no suspicion of embezzlement or misappropriation. This proposal must be discussed and agreed upon by the head of the agency or enterprise and the grassroots trade union, after soliciting opinions from the majority of the masses within the unit.

The principle of full compensation in cases of lost property is maintained to avoid loopholes and prevent any calculations or exploitation of the system, while at the same time avoiding the rigid application of full compensation without regard to fairness and reasonableness. Therefore, the possibility of lower compensation is proposed if there are valid reasons, subject to review and decision by the higher authority.

In cases of inventory shrinkage (such as rice, fish sauce, sugar, salt, fuel, etc.), a thorough investigation and analysis of the causes of shrinkage must be conducted to distinguish between legitimate shrinkage (natural shrinkage within officially defined limits for storage, entry, exit, or transportation) and shrinkage due to lack of responsibility of the person in charge of storage, entry, exit, or transportation of goods and materials. Even within the defined limits of shrinkage, attention should be paid to whether there is suspicion of embezzlement. Only in cases where shrinkage exceeds the defined limits due to a lack of responsibility or violation of labor discipline by the person in charge, shall compensation be required.

5. Implementation of Compensation (according to Article 13).

When deducting compensation from monthly salary, the economic situation, income level, and family status of the person at fault must be taken into account. Generally, compensation is deducted gradually from the monthly salary rather than forcing the person at fault to pay the entire amount at once, except in cases of minor damage where the person at fault voluntarily agrees to pay in full. The monthly deduction amount must be calculated reasonably, taking into account the economic situation of the person at fault, but not less than 10% and not more than 30% of the total monthly salary and regional allowance (if applicable). If the person at fault owes the state other amounts (for example, loaned money for purchasing a bicycle on credit, advance travel allowance), the total amount to be deducted (including compensation and other debts) shall not exceed 30% of the total monthly salary and regional allowance of the individual.

- Example 1: Employee X has a monthly salary and regional allowance of 58 dong. He damaged a machine requiring repairs costing 600 dong and must compensate nearly three months' salary, which is 170 dong. The monthly deduction for compensation from Employee X's salary is 17 dong (approximately 30% of the monthly salary).

However, since Mr. X still has to pay for the installment purchase of a bicycle each month at 10đ (with 3 months left until the debt is paid off) and must repay the advance travel allowance of 5đ (in one lump sum), the compensation amount deducted from Mr. X's salary will be as follows (note: salary compensation begins in the month following the compensation decision):

- Example 2: An employee working at a Research Institute receives a monthly salary and regional allowance totaling 60đ, damages a machine requiring repair costs of 500đ, and must compensate with an amount equal to three months' salary, which is 180đ. Given that he has many children and his family's average income is low, the monthly compensation amount to be deducted from his salary is set at 10% (i.e., 6đ per month).

Once the compensation decision is made, it is necessary to monitor and urge the consistent and full deduction from the salary, especially in cases where the person responsible for compensation transfers to another agency (on the salary certificate issued to that person, the total compensation amount, the amount already deducted from the salary up to the last day at the previous agency, the amount the new agency will continue to deduct from the salary to complete the compensation, and the amount to be deducted from the salary each month at the new agency must be clearly stated); see specific accounting details in Section 9.

In cases where the person at fault leaves their job, the unpaid compensation amount is considered a debt to the public fund and will be recovered according to the established regulations for public fund debts (separate guidelines will be provided).

6. Waiver, reduction, or postponement of compensation.

It is necessary to distinguish between ordinary cases and special cases.

There are two ordinary cases:

a) During the period of compensation implementation, if the person at fault encounters sudden difficulties in life such as natural disasters, enemy attacks, illness, etc., they may temporarily postpone compensation until they can resume regular monthly payments.

b) If more than 50% of the compensation amount has been paid and the person has shown good performance in work or production, depending on the level of achievement, they may be granted a reduction or waiver of the remaining amount.

There are two special cases:

a) If encountering sudden difficulties in life and showing outstanding achievements in work, having a model attitude in labor, and receiving the approval of the masses, the head of the unit may also propose a reduction or waiver of the remaining compensation.

b) Even if less than 50% of the compensation amount has been paid but there are outstanding achievements in work or production, a reduction or waiver of the remaining amount may also be granted.

To ensure the implementation of the policy of waiver and reduction is cautious and not arbitrary, all cases of waiver or reduction must be proposed by the head of the agency or enterprise after consultation with the local trade union committee and decided upon by the higher authority after consultation with the financial department at the same level (Department of Finance or Ministry of Finance). The higher authority must thoroughly understand the situation and study all aspects before making a decision.

It is important to grasp the significance and conditions of the above waivers and reductions to implement them correctly, avoiding arbitrary and widespread waivers, casually writing off debts, and thus losing the strict nature of the system.

7. Procedures for handling.

a) Authority to handle:

Regarding the authority to handle, the spirit of this regulation stipulates that except for cases under the jurisdiction of the Court, if there are unclear matters in practice, opinions should be sought from the People's Procuracy; for common losses occurring during the labor process, they shall be handled by enterprises, agencies, which are organizations responsible to the State for the entire assets entrusted to the unit for management. According to Article 15 of the regulation, the Provincial People's Committee and the Central Ministries must clearly define the handling authority of each type of enterprise and agency under their jurisdiction. Accurately and reasonably defining the handling authority of each level is very important because if too much authority is concentrated at higher levels, the work will become backlogged, and higher authorities may not be able to timely and appropriately resolve each case. If inappropriate authority is delegated to lower levels, it may lead to arbitrary, favoritism, leniency, or overly rigid handling, contrary to the spirit of the regulation.

Therefore, the Provincial People's Committee (for units under local jurisdiction) and the Central Ministries (for units under central jurisdiction) must clearly define:

- Which unit has the authority to handle?

- Up to what level of handling (based on the extent of loss)?

- Does the immediate superior have the right to review the handling decisions made by the subordinate, revoke or amend the subordinate's decisions, and examine cases of waiver, reduction, and appeals?

These provisions must be agreed upon by the Ministry of Finance, the Ministry of Labor, and the General Trade Union before issuance.

b) Disciplinary Council:

- If the matter is clear, the damage is not significant, and the person at fault accepts responsibility for compensation, there is no need to refer it to the Disciplinary Council; the head of the enterprise or agency can decide on the compensation amount after consulting with the local trade union committee and the chief accountant of the unit.

- If the matter is complex and the damage is relatively large, the head of the enterprise or agency must refer it to the Disciplinary Council for review and consultation with the chief accountant before deciding on compensation.

- Headed by the Director of the Enterprise or the Head of the Agency.

The composition of the Disciplinary Council includes:

The opinion of the Disciplinary Council is a recommendation, not a decision, but it should be fully considered. The person at fault is invited to attend the Disciplinary Council meeting to present their views regarding the Council's observations and conclusions.

Opinion The opinion of the Disciplinary Council is a recommendation, not a decision, but it must be fully considered. The person who committed the violation is invited to attend the Disciplinary Council's meeting to present their views on the Council's observations and conclusions.

Before the head of the agency or enterprise decides on compensation, the opinion of the chief accountant must be sought because the chief accountant is responsible for organizing and implementing the economic and financial regulations and rules, and for promptly and fully preparing all necessary procedures and documents regarding the handling of losses, wastage, damage, embezzlement cases, and instances of misusing state property, while also proposing measures to address these issues to the head of the unit.

If the person directly causing the loss is the head of the agency or enterprise at any level, the handling and procedures shall be conducted as with any other individual. The head who, due to a lack of responsibility, directs bureaucratic work leading to damage to state property of any kind, shall also bear the responsibility for compensation.

Example 1: A construction site director mobilized workers to the site in large numbers but, due to insufficient tools, some workers had no work to do (wasting labor) and still received wages, causing financial loss to the state.

Example 2: An enterprise had a large amount of wood, bamboo, and leaves stored at a location prone to being swept away by floods. Workers and local residents actively suggested to the enterprise director that the materials should be moved to a safer place, but the director refused to accept the suggestions and did not take necessary protective measures, resulting in the loss of materials due to flooding.

Example 3: A department head used a motorcycle for work, drove recklessly, and damaged the vehicle, requiring it to be repaired.

In the above three cases, the director or department head must bear responsibility, and superiors may decide to require compensation.

Files concerning losses caused by the heads of agencies or enterprises must be submitted to the superior unit for review and determination of the compensation amount. Prior to making a decision, the superior head must present the case to the disciplinary council of the unit for examination and discuss with the financial authority at the same level.

c) Reviewing the handling of compensation at lower levels and examining complaints: The superior agency has the responsibility to review the handling and compensation decisions made by lower levels to ensure they align with the state's policies and guidelines. If it is found that the lower level has handled the matter inadequately, the head of the superior agency will discuss with the financial authority at the same level and has the right to reject or modify the compensation decision of the lower level. Therefore, the compensation amount must be re-evaluated.

- If the new compensation amount is lower than the original compensation amount: the person at fault will be refunded the excess amount paid.

- If the new compensation amount is higher than the original compensation amount: the person at fault must compensate according to the new amount.

In cases where there are complaints about compensation, the superior of the level that issued the compensation decision must review and respond promptly to the parties involved.

d) Cases where new facts are discovered after the compensation amount has been decided.

If new facts are discovered after the compensation amount has been decided, which change the previous assessment of the fault and its severity, the competent authority must reassess and decide the compensation amount again. The implementation of compensation according to the new amount will be handled as described in the review of the handling process mentioned above.

8. Matters of reward.

To ensure that the material responsibility system fully achieves its practical effects in promoting the protection of assets and thrift, great importance must be placed on political and ideological education, and this must be closely linked with the implementation of the material compensation responsibility system. Timely and appropriate rewards should be given to those who have achieved results in saving and protecting state assets based on the general reward system. Depending on the extent of their achievements, the form of reward can range from low to high: commendation, award certificates, medals; recommendation to the Prime Minister and President for awarding medals; if there are outstanding achievements, recommendation to the Government for awarding orders.

For individuals who not only protect assets well but also propose reasonable production improvements or operational improvements that result in increased utilization of machinery and equipment, raw materials, recovery of old machines and equipment, etc., attention should be paid to applying the regulations on rewarding technical innovations, production rationalization, and operational improvements issued together with Decree No. 20-CP dated February 8, 1965 by the Council of Ministers.

9. Issues related to accounting for expenditures on asset losses and income from compensation.

1. For enterprises, construction sites, agricultural farms, etc...

a) Method of accounting for expenditure on asset losses:

Generally, expenditures on asset losses (losses or damages) are recorded according to current accounting regulations. Specifically:

- In the case of loss of money, materials, goods: record in the "unusual loss" account (190);

- In the case of loss of fixed assets or complete damage of fixed assets (requiring settlement): reduce the fixed asset capital account (125).

- Expenditure on major repairs: use the major repair fund and record in account 011;

- Expenditure on minor repairs: use the working capital (regular maintenance expenses) and include in cost (for industrial enterprises, construction, transportation, etc.) or include in operating expenses (for trading enterprises).

b) Method of accounting for income from compensation payments:

- In the case of loss of money, materials, goods: record in the "miscellaneous income" account (account 190);

- In the case of loss of fixed assets or complete damage of fixed assets: record additional income from changes in fixed asset prices;

- In the case of major repairs required for heavily damaged machinery and equipment: reduce expenditure on major repairs;

- In the case of minor repairs: reduce cost or reduce operating expenses (i.e., reduce regular maintenance expenditure).

Note:

+ The determined compensation amount is recorded in account 101 "receivables and payables" to monitor the gradual deduction from the salary of the person at fault.

+ The exempted or reduced compensation amount is recorded in the "unusual loss" account (190).

2. Special provisions for administrative and public service units.

Expenditures on repairing machinery, furniture, and tools are included in the unit's budget (budgetary expenditure).

Income from compensation payments will be remitted to the state budget (miscellaneous income).

For property that is lost or damaged beyond repair, it must be clearly noted in the inventory list of assets.

In the case where workers or officials commit errors and transfer to new enterprises or agencies:

- For the old enterprise: the unpaid compensation amount shall be considered as "unusual loss" (account 190).

- For the new enterprise: the collected compensation amount shall be considered as "miscellaneous income" (account 190).

- For the new administrative or service agency: the collected compensation amount shall be submitted to the State budget (miscellaneous income).

III. TASKS OF SECTORS AND UNITS

As stipulated in the regulations, to effectively protect assets, it is first necessary to attach great importance to political and ideological education, making workers and officials have a comprehensive and profound understanding, recognizing the significant meaning and revolutionary content of protecting State assets, viewing this as their own vital interest and duty, and implementing it consistently and voluntarily in all aspects of work and production. The heads of agencies and enterprises have the responsibility to work with the grassroots trade unions to develop plans and organize the implementation of political and ideological education, widely disseminating the content of the responsibility for protecting State assets, explaining clearly the significance of issuing material responsibility systems so that everyone can grasp them and participate in their implementation.

Based on improved awareness, economic and financial management must be strengthened, maintaining socialist management principles, emphasizing labor discipline, resolutely enforcing management systems and regulations, promptly correcting deficiencies in management work, preventing violations of policies, systems, and regulations. In addition to the tasks specified in Article 3 of the material responsibility system, the heads of sectors at the central level and the administrative committees of regions, cities, and provinces also have the responsibility to specify concrete requirements (including the authority to handle each type of agency or enterprise) to apply to subordinate agencies and enterprises; these provisions must be agreed upon by the Ministry of Finance, the Ministry of Labor, and the General Confederation of Trade Unions before issuance.

During the implementation of the material responsibility system, if sectors and localities encounter difficulties, they should promptly report to the Ministry of Finance so that the Ministry of Finance can discuss with the Ministry of Labor and the General Confederation of Trade Unions to resolve them uniformly.

 (1) This section has been revised according to Point 4, Article 36, Chapter III of the new Accounting Organization Charter.