Circular No. 158/2013/TT-BTC guiding certain contents regarding financial supervision and assessment of business efficiency for state-owned enterprises and enterprises with state capital.

CIRCULAR

Guidelines on certain aspects of financial supervision and assessment of operational efficiency for state-owned enterprises and enterprises with state capital.

For state-owned enterprises and enterprises with state capital.

owner and state-owned enterprises

________________

 

Pursuant to the Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decree No. 61/2013/NĐ-CP dated June 25, 2013 of the Government on the issuance of the Financial Supervision Regulation and Operational Efficiency Assessment and Financial Information Disclosure for State-Owned Enterprises and Enterprises with State Capital;

The Minister of Finance hereby issues this Circular amending and supplementing certain Articles of Circular No. 133/2015/TT-BTC dated August 31, 2015, issued by the Minister of Finance guiding the financial management mechanism for the Vietnam Chamber of Commerce and Industry (hereinafter referred to as Circular No. 133/2015/TT-BTC).

The Minister of Finance issues this Circular guiding certain aspects of financial supervision and assessment of operational efficiency for state-owned enterprises and enterprises with state capital as follows:

Part I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular guides certain aspects of financial supervision and assessment of operational efficiency for state-owned enterprises and enterprises with state capital as prescribed in Decree No. 61/2013/NĐ-CP dated June 25, 2013 of the Government on the issuance of the Financial Supervision Regulation and Operational Efficiency Assessment for State-Owned Enterprises and Enterprises with State Capital (hereinafter referred to as the Regulation issued together with Decree No. 61/2013/NĐ-CP).

Article 2. Applicability

This Circular applies to enterprises, organizations, and individuals specified in Article 2 of the Regulation issued together with Decree No. 61/2013/NĐ-CP.

2. Enterprises operating in the financial, credit, banking, insurance, lottery, and securities sectors shall comply with the provisions on financial supervision and operational efficiency assessment set forth in this Regulation and relevant laws on finance, credit, banking, insurance, lottery, and securities. In case specialized laws have different provisions from the Regulation issued together with Decree No. 61/2013/NĐ-CP and this Circular, such specialized laws shall apply.

Shareholders of enterprises operating in the financial, credit, banking, insurance, lottery, and securities sectors shall be responsible for developing guidelines on financial supervision that are appropriate to the specific characteristics of their business activities.

Article 3. Explanation of Terms

In addition to the terms defined in Article 4 of the Regulation issued together with Decree No. 61/2013/NĐ-CP, the terms in this Circular are understood as follows:

1. "Financial report not reflecting actual conditions, significantly distorting business results" means that the enterprise reports profit or break-even while in reality it incurs losses.

2. "Enterprise showing signs of financial instability" refers to enterprises subject to special financial supervision as stipulated in Clause 1, Article 10 of the Regulation issued together with Decree No. 61/2013/NĐ-CP.

Part II

FINANCIAL SUPERVISION

PART I

FINANCIAL SUPERVISION BY SHAREHOLDERS

Section 1

FINANCIAL SUPERVISION BY SHAREHOLDERS FOR

STATE-OWNED ENTERPRISES

Article 4. Content of Supervision

1. Shareholders shall supervise enterprises according to the supervision content prescribed in Article 6 of the Regulation issued together with Decree No. 61/2013/NĐ-CP.

2. To implement the supervision content prescribed in Article 6 of the Regulation issued together with Decree No. 61/2013/NĐ-CP, the enterprise must prepare an analysis and evaluation report on the current status and operational effectiveness of the enterprise (referred to as the Financial Status Report) based on Form No. 01 attached hereto and the following regulations:

2.1. Management and utilization of state capital at enterprises

a) Investment situation: the enterprise prepares Form 01 of Model No. 01 and evaluates the following issues:

- For projects in Group A and Group B: specify the total investment amount and sources of funds for each project; evaluate the progress of project implementation compared to the plan; disbursement progress of the project compared to the plan; issues related to land use, natural resource management, environmental protection, recovery of investment permits, and other investment management regulations; adjustments to objectives, scale of capital, progress, and principal investor during the reporting period for investment projects.

- For remaining projects: specify the total investment amount and sources of funds for the project; completion time of the project; progress of project implementation compared to the plan; difficulties and issues (if any) during the implementation process.

- For projects already put into use during the reporting period, assess the generated benefits.

- Recommendations and proposals of the enterprise.

The above projects are those where the enterprise is the principal investor or under its management.

b) Fund-raising and fund utilization situation: the enterprise analyzes and evaluates the following issues:

- Total funds raised during the reporting period and cumulatively up to the reporting period, including: bond issuance, loans from credit institutions, loans from individuals.

- Fund utilization situation, including investment in construction, production and business operations, and other purposes.

- Guarantees for loans to subsidiaries and associated companies (if any), and the utilization and repayment situation of these guarantees.

- Utilization of raised funds and the benefits derived from their use.

c) Investment outside the enterprise: the enterprise prepares Form 02 of Model No. 01 and analyzes and evaluates the following issues:

- Whether the enterprise's external investments comply with legal regulations.

- Investment effectiveness: dividends or profits distributed relative to the total investment value. Dividends or profits are based on the resolution of the General Meeting of Shareholders or the Board of Directors of the invested enterprise.

- Plans to increase or decrease investment capital in subsidiaries, associated companies, and long-term investments.

- Withdrawal of capital from non-core business investments according to the Enterprise Restructuring Plan.

- Recommendations and proposals of the enterprise.

d) Asset management, receivables, and payables situation: the enterprise analyzes and evaluates the following issues:

- Whether the authority to decide on investment projects and asset purchases during the reporting period complies with legal regulations; depreciation of assets; liquidation and sale of assets; handling of missing, substandard, or deteriorated goods.

- Accounts receivable situation at the reporting period: total amount of receivables including difficult-to-collect accounts receivable, provision for doubtful accounts receivable, handling of difficult-to-collect accounts receivable during the reporting period. The enterprise must analyze in detail each item of difficult-to-collect accounts receivable.

- Accounts payable situation at the reporting period: total amount of payables including overdue payables, ability to settle debts, ratio of payables to equity. The enterprise must analyze in detail each item of overdue payables.

2.2. Capital preservation and development situation: enterprises prepare according to Form 06 - Model No. 01.

a) The assessment of the degree of capital preservation and development of the enterprise is carried out in accordance with the guiding document implementing Decree No. 71/2013/NĐ-CP dated July 11, 2013 of the Government on state investment in enterprises and financial management of enterprises wholly owned by the State.

b) The assessment of the efficiency of the enterprise's operations through indicators: return on equity realized, return on equity after tax (ROE), return on assets after tax (ROA). The higher these indicators reflect the more effective the use of capital and assets by the enterprise.

The indicator of return on equity realized is determined in accordance with Clause 2 Article 14 of this Circular.

The indicator of net profit is determined in the Report on Business Results - Code 60 (Model B02 - Enterprise issued pursuant to Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance).

The indicator of total assets is determined in the Balance Sheet - Code 270 (Model B01-DN issued pursuant to Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance).

2.3. Business operation and financial situation of the enterprise: enterprises prepare according to Form 03 - Model No. 01 and analyze and evaluate the following issues:

a) Trends in production volume (or quantity purchased) during the period, sales volume (or quantity sold) during the period, end-of-period inventory of key products.

b) Trends in financial indicators: revenue and costs related to product consumption during the period, revenue and financial activity costs, other income and expenses, business results. Trends are compared between the actual indicators at the reporting period and the annual plan indicators and the actual indicators of the two consecutive years prior to the reporting year.

c) Implementation of public goods and services (if any), including evaluation of the results of providing public goods and services in terms of quantity and quality, revenue and costs related to providing public goods and services during the period compared to the plan and previous periods (Form 04 - Model No. 01).

d) Implementation of obligations to the state budget, profit distribution, establishment and use of funds, changes in the Corporate Restructuring Support Fund at economic groups and corporations (Form 07 - Model No. 01).

For state-owned economic groups and corporations, which are permitted to establish special funds in accordance with the provisions of the law, they must report on the establishment and use of these funds; simultaneously supplement explanations about the legal basis, sources of establishment, and mechanisms for using these special funds in the report according to Form 07 - Model No. 01.

đ) Analyze the cash flow during the reporting period of the enterprise to be able to assess the following issues:

- Whether the amount of cash generated by the enterprise is sufficient to meet the needs of production and business activities, investment activities, and financial activities of the enterprise.

- Whether the amount of cash generated by the enterprise is sufficient to timely settle due debts.

e) Present recommendations and proposals of the enterprise.

2.3. Compliance with regulations, policies, and laws, including the assessment of compliance with tax policy regulations, wage policy, and other policies; implementation of obligations to the state budget according to the contents stipulated in Clause 4 Article 14 of this Circular (Form 05 - Model No. 01).

2.4. Explanation by the enterprise regarding the opinions of independent auditors, supervisors, and owners on the financial statements of the enterprise.

For parent companies, additional information on total assets, equity, accounts receivable, accounts payable, and profits generated during the reporting period of the group, corporation, or company must be reported according to Form 08A - Model No. 01; present the business results of each subsidiary, reasons for losses or financial difficulties (if any) according to Form 08B - Model No. 01. Information in Form 08A - Model No. 01 is provided based on consolidated financial reports or aggregated financial reports of the group, corporation, or company.

2.5. For the supervision content prescribed in Clause 4 Article 6 of the Regulation issued together with Decree No. 61/2013/NĐ-CP, enterprises prepare reports and evaluations according to the guidance of the Ministry of Labor, Invalids, and Social Affairs.

3. Based on the enterprise's evaluation report stipulated in Clause 2 of this Article and relevant documents, the owner prepares a Financial Supervision Report in which comments and evaluations of the enterprise's financial situation according to the contents stipulated in Article 6 of the Regulation issued together with Decree No. 61/2013/NĐ-CP are made, from which the owner's recommendations for each parent company, limited liability company with one member established by the owner's decision or entrusted to manage are presented. The report is prepared according to Form 01 - Model No. 02 issued together with this Circular.

In the report, the owner must evaluate the financial status of the enterprise at different levels: financially safe, signs of financial unsafety.

4. Based on the financial supervision report of each enterprise, the owner compiles and prepares a report on the results of financial supervision for enterprises under the owner's management scope. The report is prepared according to Form 02 - Model No. 02 issued together with this Circular.

The financial supervision result report is sent to the Ministry of Finance along with the financial supervision report of each enterprise.

5. The Board of Members of the Parent Company shall prepare a Financial Supervision Report in accordance with Clause 3 of this Article for wholly-owned subsidiaries (companies with limited liability having 100% capital contributed by the parent company). This report shall be submitted to the owner along with the Financial Situation Assessment Report of the parent company.

Specifically, the Board of Members of SCIC must prepare a Financial Supervision Report for wholly-owned limited liability companies transferred from the Ministry managing the industry and the Provincial People's Committee.

Article 5. Methods of Supervision by the Owner

1. The owner shall implement financial supervision methods for enterprises in accordance with Article 8 of the Regulation issued together with Decree No. 61/2013/NĐ-CP. To implement financial supervision methods, the owner needs to carry out the following tasks:

a) In the fourth quarter of the previous year, organize the preparation of a financial supervision plan for enterprises including inspection and audit plans to be sent to the Ministry of Finance and the Government Inspectorate (for owners who are the Ministries managing industries); send to the provincial inspectorate, Department of Finance (for owners who are the Provincial People's Committees).

Audit plans at enterprises managed by the Ministries managing industries need to be based on the plans of the State Audit Office, the Government Inspectorate, and the Ministry of Finance Inspectorate; audit plans at enterprises established by the Provincial People's Committees need to be based on the regional State Audit Office plans and provincial inspectorate plans to ensure compatibility and avoid overlap and duplication in terms of content and auditing units.

b) Organize continuous and periodic supervision of enterprises based on monitoring through planned inspections and audits, combined with monitoring through financial reports and other relevant reports provided by the enterprise. At the same time, strengthen monitoring through inspection work to assess the feasibility, implementation process, and results of compliance with legal regulations in implementing investment plans, funding schemes, and other projects of the enterprise.

Article 6. Organization of Supervision by the Owner

The owner shall organize supervision of enterprises in accordance with Clause 1 of Article 9 of the Regulation issued together with Decree No. 61/2013/NĐ-CP. Among which:

1. The owner needs to implement the following contents:

a) Designate specific units or individuals as the focal point for supervision and consolidation of supervision results of enterprises.

b) Define roles, responsibilities, and reporting mechanisms for units or individuals assigned as focal points for supervision and consolidation of supervision results.

c) Define coordination mechanisms in supervision and consolidation of supervision results between the focal unit and other units; between the focal unit and inspectors and specialized units under the owner; between the focal unit and financial management agencies, the Government Inspectorate, the State Audit Office, and independent auditors. Coordination mechanisms in supervision include specific contents about:

- Preparation and approval of supervision plans.

- Implementation of supervision plans, including exchange, feedback, and proposal of action plans for enterprises.

- Exchange, sharing, and provision of information on financial supervision, inspection, examination, and audit results at enterprises.

d) For owners who are Provincial People's Committees, they assign the Department of Finance to act as the focal point for consolidating financial supervision results of enterprises and organize supervision according to the guidance mentioned above.

2. Based on the financial reports of enterprises, reports from auditing, inspection agencies, direct supervision results at enterprises, and related reports; the owner evaluates and examines the effectiveness of production and business operations, management, use, preservation, and development of capital, liquidity situation, and debt repayment capacity of enterprises to identify enterprises showing signs of poor performance and potential financial instability.

Depending on the severity of the findings, the owner considers handling measures for enterprises in one of the following forms:

a) Issuing a reminder letter to the leadership of the enterprise and recommending remedial measures; continue supervising the enterprise's acceptance and implementation of recommendations.

b) Issuing a reminder letter to the leadership of the enterprise and proposing remedial measures; continue supervising the enterprise's acceptance and implementation of the owner's directives. At the same time, the owner increases indirect supervision frequency by requiring the enterprise and the Inspector to submit additional reports on specific topics and faster reporting times.

c) Deciding to place the enterprise under special supervision, notifying relevant agencies to handle it according to the special supervision procedures stipulated in Clause 4 of this Article.

d) Implement disciplinary actions against the leadership of the enterprise in accordance with Point h, Clause 1 of Article 9 of the Regulation issued together with Decree No. 61/2013/NĐ-CP.

3. The owner has the responsibility to determine and discuss with the enterprise's financial management agency the level considered serious for each enterprise depending on the scale of production, industry, operational life cycle, and priority activities during different periods of that enterprise.

4. For enterprises under special supervision, the owner needs to implement the following provisions:

a) Conducting self-study or hiring consultants to assist the owner in researching and evaluating restructuring plans for enterprises. The restructuring plan clearly outlines the following contents:

- The current status of the enterprise regarding organizational structure, governance, financial situation, production and business operations, market...

- Current difficulties and obstacles faced by the enterprise and their causes.

- Solutions including general plans and specific actions to resolve these difficulties.

- Implementation roadmap for the aforementioned plans and actions, responsibilities of all parties involved.

- Deployment organization plan specifying the focal unit responsible for implementation.

- Commitment from the enterprise's leadership.

b) The owner may engage a financial advisory service organization, accounting firm, or independent auditor to review the financial data and operations of the enterprise to have a basis for making evaluations, comments, and conclusions on supervision.

The owner shall implement the selection process for advisors in accordance with the provisions of the law. The financial advisory service organization, accounting firm, or independent auditor engaged by the owner shall not overlap with the organization that the enterprise has hired annually to audit its financial reports as stipulated. The cost of engaging advisors shall be included in the enterprise's business expenses.

c) The owner must send to the financial management authority at the same level the contents of the Decision on Special Financial Supervision and the Owner's Special Financial Supervision Plan.

The Special Financial Supervision Plan includes the following contents:

- Supervisory Organization: specifying the supervisory focal point; roles, responsibilities, and reporting mechanisms of the supervisory focal point; needs, plans, and anticipated costs for using consultants for supervisory and evaluation purposes; requirements for coordination with related parties, including inspections at various levels, state audits, independent audits, and financial management authorities.

- Specific supervisory, review, inspection, and audit activities.

- Implementation schedule.

- Requirements and reporting systems regarding the results of supervision and feedback from related parties on the outcomes of each supervisory, review, inspection, and audit activity.

d) After receiving opinions from the financial management authority, the owner proceeds to implement special financial supervision according to the planned schedule, regularly updating the supervision results and changes in the supervision plan for related parties.

đ) During the process of special financial supervision, in addition to the requirements and contents of financial supervision stipulated in Article 4 of this Circular, the owner directs the enterprise to implement periodic reporting in accordance with Clause 7 of Article 11 of this Circular.

Section 2

FINANCIAL SUPERVISION BY SHAREHOLDERS

FOR ENTERPRISES WITH STATE CAPITAL

Article 7. Organizing Financial Supervision at Enterprises where the State Holds More Than 50% of the Charter Capital

1. The owner shall specify in writing the roles, responsibilities, delegation of authority, reporting mechanisms, and feedback procedures of the Representative; the coordination mechanism between the unit appointed as the focal point for consolidating supervision results and the Representative.

2. Every six months and annually, the Representative shall prepare financial supervision reports according to the contents specified in Clause 1 of Article 21 of the Regulation issued together with Decree No. 61/2013/ND-CP and Form 01 - Model 03 issued together with this Circular.

3. Based on the financial supervision report of the Representative, the owner shall prepare the Report on the Results of Financial Supervision according to Form 03 - Model 03 issued together with this Circular, summarizing the financial supervision results for state-owned enterprises under their management responsibility.

The Board of Members of SCIC is responsible for preparing the Report on the Results of Financial Supervision for enterprises where the state holds more than 50% of the charter capital received by SCIC from the Ministry managing the sector and provincial People's Committees up to the reporting date.

4. In cases where enterprises show signs of poor performance and potential financial instability, the owner shall direct the Representative to exercise the rights of shareholders as stipulated in Clause 2 and Clause 3 of Article 79 of the Enterprise Law 2005, specifically requiring the Audit Committee to conduct detailed checks on issues related to the management and operation of the enterprise or requesting the Board of Directors to convene a General Shareholders' Meeting in cases where the Board of Directors seriously violates shareholder rights or management obligations or makes decisions beyond delegated authority.

At the same time, the owner shall require the Representative to increase the frequency of financial situation reports to provide timely guidance.

5. The owner bears ultimate responsibility for supervising the enterprise, the Representative is an individual authorized by the owner to supervise the enterprise and is only responsible for matters delegated by the owner.

6. For Representatives concurrently holding leadership positions within the enterprise, in addition to being responsible for matters authorized by the owner, the Representative must also bear responsibility as a leader of the enterprise in accordance with relevant laws.

Article 8. Financial supervision organizations at enterprises where the state holds not more than 50% of the charter capital

1. The owner shall specify in writing the role, responsibilities, delegation of authority, reporting mechanism, and feedback mechanism of the Representative (if any) or unit/person assigned to supervise state capital contribution at the enterprise (referred to as the management unit/person); the coordination mechanism between the unit designated as the focal point for consolidating supervision results and the Representative.

2. Annually, the Representative or the management unit/person shall prepare financial supervision reports according to the contents stipulated in Clause 2, Article 21 of the Regulation issued together with Decree No. 61/2013/ND-CP and Form 02 - Model No. 03 issued together with this Circular.

3. Based on the financial supervision report of the Representative or the management unit/person, the owner shall prepare a Report on the Results of Financial Supervision, summarizing the financial supervision results for enterprises with state capital contributions according to the contents specified in Clause 2, Article 21 of the Regulation issued together with Decree No. 61/2013/ND-CP. The report shall be prepared according to Form 03 - Model No. 03 issued together with this Circular.

4. The Board of Members of SCIC shall be responsible for preparing the Report on the Results of Financial Supervision for state-owned enterprises where SCIC holds not more than 50% of the charter capital, which have been received from the Ministry managing the sector and the People's Committee of the province up to the reporting date.

5. In cases where enterprises show signs of poor performance and potential financial instability, leading to the risk of losing state capital contributions, the owner shall instruct the Representative or the management unit/person to exercise shareholders' rights as prescribed in Clause 2 and Clause 3, Article 79 of the Enterprise Law 2005.

Chapter II

FINANCIAL SUPERVISION BY THE FINANCIAL MANAGEMENT AUTHORITY OF ENTERPRISES

 FINANCIAL MANAGEMENT AUTHORITY OF ENTERPRISES

Article 9. Coordination between the financial management authority of enterprises and the owner in financial supervision of enterprises where the state is the owner

Based on the provisions in Clause 2, Article 9 of the Regulation issued together with Decree No. 61/2013/ND-CP, the financial management authority of enterprises shall coordinate with the owner to implement financial supervision work for enterprises where the state is the owner, including the following contents:

1. Ministry of Finance:

a) Participate in providing opinions to the Ministry managing the sector regarding the plan for supervising enterprises (including inspection and audit plans), specialized supervision of enterprises under special supervision, and enterprises producing essential goods for society.

b) Based on the agreed inspection and audit plans, coordinate with the Ministry managing the sector to implement them and periodically update the progress of financial supervision implementation between the Ministry managing the sector and the Ministry of Finance.

c) Participate in providing opinions to the owner regarding comments, evaluations, warnings, and recommendations for enterprises.

In case there is disagreement between the Ministry of Finance and the owner, the Ministry of Finance shall be responsible for compiling the opinions to report to the Prime Minister for consideration and decision.

d) Upon receiving the Decision and Special Financial Supervision Plan from the owner, the Ministry of Finance must:

- Review the necessity of placing the enterprise under special supervision and the owner's special financial supervision plan; if there is no agreement, provide a written response within seven working days from receipt of the owner's document.

- Coordinate to organize supervision according to the unified plan with the owner, periodically update supervision results and changes in the enterprise supervision plan.

2. Provincial Department of Finance:

a) Coordinate with relevant agencies (Provincial Inspectorate, State Audit Office regional branch, provincial departments) to develop a financial supervision plan (including inspection and audit plans), specialized supervision of enterprises established by the People's Committee of the province and report to the owner (People's Committee of the province) for consideration and decision.

b) Organize enterprise supervision according to the plan approved by the owner.

c) Report to the owner the supervision results and propose measures to improve the financial situation of the enterprise.

Article 10. Coordination between corporate financial management agencies and owners in financial oversight of state-owned enterprises

To implement financial oversight of state-owned enterprises as stipulated in Articles 20, 21, 22, 23, and 24 of the Regulation issued together with Decree No. 61/2013/NĐ-CP, corporate financial management agencies shall coordinate with owners to carry out financial oversight of state-owned enterprises with the following contents:

1. Coordinate with owners in requesting the Representative to submit periodic and ad hoc reports on the financial situation of state-owned enterprises.

2. Participate in providing opinions with owners regarding comments, evaluations, warnings, and recommendations for state-owned enterprises.

3. Participate in providing opinions with owners when owners decide to expand investment or withdraw investment from state-owned enterprises.

Chapter III

FINANCIAL OVERSIGHT WITHIN THE ENTERPRISE

Article 11. Organization of financial oversight within the parent company and independent limited liability company

The Board of Members and Management Board of the parent company and independent limited liability company must implement the following contents:

1. Issue in writing procedures for operations in the financial field such as planning, budgeting, and forecasting procedures; effective operation management procedures; accounting and consolidated report preparation procedures; financial risk management procedures, and other regulations.

2. Issue mechanisms for task assignment and responsibility distribution among departments and between departments and internal control units.

3. Regularly review and evaluate the effectiveness of enterprise operations to promptly identify and address deficiencies.

4. To maintain the internal control unit's effective operation, it is necessary to:

a) Appoint individuals with sufficient experience, capability, and qualifications to assume assigned positions, ensuring independence and absence of conflicting interests.

b) Issue and disseminate internal management regulations of the enterprise.

c) Issue procedures, regulations, policies, processes, and tools supporting activities.

d) Train, enhance staff capabilities, and develop human resources.

5. Have an information technology system to support the internal control unit's activities and the enterprise's overall operations.

6. Create conditions and coordinate with the Inspector appointed by the owner to perform functions and tasks as prescribed in Decision No. 35/2013/QĐ-TTg dated June 7, 2013, issued by the Prime Minister on the operation regulations of Inspectors of wholly state-owned limited liability companies.

7. For enterprises under special financial supervision, upon receiving the Special Financial Supervision Decision from the owner, the Board of Members (Company Chairman), General Director (Director) of the enterprise must implement the tasks specified in Article 12 of the Regulation issued together with Decree No. 61/2013/NĐ-CP and regularly report to the owner and financial agency according to Form 09 - Model No. 01 issued together with this Circular.

Article 12. Organization of financial oversight at subsidiary companies of the parent company

The Board of Members and Management Board of the parent company must implement the following contents at subsidiary companies:

1. Specify the roles, responsibilities, delegation, authorization, and reporting mechanisms of the Inspector or Representative.

2. Through the Inspector or Representative, the Board of Members of the parent company establishes an internal financial oversight system for the entire enterprise.

Part III

EVALUATION OF ENTERPRISE OPERATIONS EFFICIENCY

Article 13. Implementation of enterprise evaluation and classification and the results of managerial staff activities

1. Based on the annual financial plan of the company approved by the Board of Members/Company Chairman (after being reviewed by the owner and the same-level financial authority and officially commented in writing by the owner); the owner shall examine and assign evaluation criteria to serve as the basis for evaluating and classifying enterprises.

2. The owner must base on the specific business characteristics of each enterprise to assign appropriate evaluation criteria. For revenue and business outcome indicators, specific numerical data must be defined.

3. For enterprises engaged in public welfare activities and special obligations, the owner must assign clear plans and tasks for the production and provision of public goods and services to enable the assessment of the enterprise's performance according to quantitative, value, and quality indicators.

4. For enterprises with planned losses according to the approved scheme by the competent authority, the enterprise evaluation and classification shall be carried out in accordance with the provisions of point b, Clause 1, Article 16 of this Circular.

5. Evaluation criteria must be specified and assigned to enterprises from the first quarter of the planning year and shall not be adjusted throughout the implementation period.

6. The evaluation of the effectiveness of enterprise operations must be based on the Financial Monitoring Report of the enterprise prepared by the owner, the audited annual financial report of the enterprise, and other reports.

In cases where the audited financial report contains reservations by the independent auditor regarding certain issues affecting business outcomes, the enterprise must provide a detailed written explanation to the owner for the owner to consider and decide whether to maintain or adjust the business outcome figures in the financial report. The owner shall bear responsibility for their decision and clearly explain it in the document seeking comments from the Ministry of Finance on the enterprise classification.

7. The owner must send to the Ministry of Finance the content of the Decision assigning evaluation criteria to enterprises established by the Prime Minister or the sector management ministry; send to the Provincial Department of Finance the content of the Decision assigning evaluation criteria to enterprises established by the provincial People's Committee for the enterprise financial management authority to have a basis for reviewing the enterprise evaluation and classification.

Article 14. Indicators for Evaluating the Effectiveness of Enterprise Operations

The evaluation of the effectiveness of enterprise operations is based on the indicators stipulated in point a, Clause 2, Article 15 of the Regulation issued together with Decree No. 61/2013/NĐ-CP, including:

1. Revenue and Other Income: The revenue and other income indicator is determined in the Business Operation Result Report (Form B02 - DN issued by Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance), which includes Net Sales Revenue and Service Provision (Code 10) + Financial Activity Revenue (Code 21) + Other Income (Code 31).

For enterprises mainly producing products such as electricity, coal, oil and gas, cement, the calculation is based on the consumption volume of the product during the period; the unit for calculating the crude oil production volume is ton, natural gas is cubic meters,³coal and cement is tons, electricity is kilowatt-hours.

2. Realized Profit and Return on Equity:

a) Realized profit: includes net profit from business operations and other profits. This indicator is determined in the Business Operation Result Report - Code 50 (Form B02 - DN issued by Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance).

When calculating the profit indicator, the enterprise must:

- Adequately include all costs in the cost of products and services consumed during the period according to current regulations to ensure the principle of prudence in business, such as setting up provisions for inventory write-downs, investment losses, bad debts, warranty expenses, price differences, interest expenses arising during the period, sales and administrative expenses incurred during the period.

- For actual loss values of assets, including unrecoverable receivables after deducting compensation attributable to individuals, organizations, insurance companies (if any) and bad debt provisions, if there is still a shortfall, it should be recorded as administrative expenses incurred during the period.

b) The return on equity is calculated as the ratio between realized profit and the average equity capital of the enterprise in the year.

The determination of realized profit is as prescribed in point a, Clause 2 of this Article.

Equity capital at the enterprise is determined in the Balance Sheet (Form B01-DN issued by Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance), including Owner Investment Capital (Code 411), Development Fund (Code 417), Basic Construction Investment Capital (Code 421). Average annual equity capital is determined by dividing the total end-of-quarter equity capital balances by four quarters.

If at the time of preparing the annual financial report, the enterprise has not yet distributed or set aside funds for the Development Fund as required by Clause 3, Article 38 of Government Decree No. 71/2013/NĐ-CP dated July 11, 2013, when evaluating the effectiveness of the enterprise, the amount to be set aside for the Development Fund must be added to the equity capital indicator to determine the return on equity.

3. Overdue Debts and Ability to Repay Maturing Debts:

a) Overdue debts: these are debts that have exceeded the agreed payment deadline to creditors. The determination of overdue debts is based on the repayment term stated in loan agreements, economic contracts, or other commitment documents.

b) Ability to repay maturing debts: the ability of the enterprise to repay maturing debts is the current ability determined by the ratio of short-term assets to short-term liabilities and is calculated using the following formula:

Where:

- Short-term assets are determined based on the end-of-period balance (Code 100 on the Balance Sheet - Form B01-DN issued pursuant to Decision No. 15/2006/QD-BTC dated March 20, 2006 of the Minister of Finance).

- Short-term liabilities are determined based on the end-of-period balance (Code 310 on the Balance Sheet - Form B01-DN issued pursuant to Decision No. 15/2006/QD-BTC dated March 20, 2006 of the Minister of Finance).

4. Compliance with regulations, policies, and laws:

a) Regulations, policies, and laws as stipulated in Clause 2, Article 15 of the Regulation promulgated together with Decree No. 61/2013/NĐ-CP include areas such as tax, budget revenue collection, credit, insurance, environmental protection, labor, wages, financial systems, accounting, auditing, financial reporting systems, financial monitoring reports, other reports, and the implementation of inspection and audit results.

b) Compliance with regulations, policies, and laws means adhering to the prescribed provisions without any acts of non-compliance, omission, incomplete implementation, untimely implementation, or failure to implement.

c) Violations include actions by organizations or individuals under the guise of an organization or by enterprise management officials.

d) An enterprise that has not been penalized by competent authorities for administrative violations related to mechanisms and policies in any of the aforementioned fields, or has been reminded by competent authorities about the implementation of mechanisms and policies as prescribed by law but not to the extent of being subject to administrative penalties, shall be classified highly in this indicator.

5. Implementation of public goods products and services:

Implementing public goods products and services involves directly carrying out national defense and security tasks or producing public goods and providing public services according to state policy through bidding or receiving orders or assignments from the state. The evaluation of this indicator is based on the degree of completion regarding production volume and quality of products and services.

Depending on the field of operation, specialty, and specific nature, the owner shall establish appropriate criteria for evaluation.

6. When calculating the indicators specified in Clauses 1, 2, 4, and 5 of Article 14 of this Circular, the following factors shall be excluded:

a) Due to force majeure such as natural disasters, fires, epidemics, wars, or unexpected accidents.

b) Due to investment expansion affecting profits in the first two years from the year the investment project is put into use.

Considering the exclusion of this factor is based on the investment plan of the enterprise which has been approved by the competent authority, where the impact on profit has been calculated.

c) Due to state price adjustments (for products with state-set prices) affecting the enterprise's revenue or due to having to achieve economic and social targets as directed by the Government or the Prime Minister.

d) Due to state policy adjustments affecting the enterprise's revenue and profits.

Article 15. Indicators for Evaluating the Performance of Enterprise Management Officials

The evaluation of the performance of enterprise management officials is carried out in accordance with Point c, Clause 2, Article 15 of the Regulation promulgated together with Decree No. 61/2013/NĐ-CP, wherein:

1. Criteria for evaluating the performance of enterprise management officials are guided by the Ministry of Home Affairs.

2. Degree of achievement of state-set profit rate on equity capital: the ratio of actual achievement compared to the profit rate set by the owner at the beginning of the year.

3. The classification result of the enterprise is the result reviewed and announced by the owner.

Article 16. Evaluation Method

1. The effectiveness of business operations shall be evaluated based on the following criteria:

a) Criterion 1: Revenue and other income

- The enterprise is classified as type A when actual revenue equals or exceeds the assigned plan.

- The enterprise is classified as type B when actual revenue is lower but at least 90% of the assigned plan.

- The enterprise is classified as type C when actual revenue is below 90% of the assigned plan.

b) Criterion 2: Return on equity

- The enterprise is classified as type A when the actual return on equity equals or exceeds the assigned plan.

- The enterprise is classified as type B when the actual return on equity is lower but at least 90% of the assigned plan.

- The enterprise is classified as type C when the actual return on equity is below 90% of the assigned plan.

- For enterprises with planned losses: if actual losses are lower than planned losses: classified as type A; if actual losses equal planned losses: classified as type B; if actual losses exceed planned losses: classified as type C. In cases where additional tasks lead to increased losses, these are excluded from the loss assessment against the planned loss.

c) Criterion 3: Overdue payable debt and ability to pay maturing debts

- Enterprises without overdue payable debt and with a debt payment capacity ratio greater than 1 are classified as type A;

- Enterprises without overdue payable debt and with a debt payment capacity ratio between 0.5 and 1 are classified as type B;

- Enterprises with overdue payable debt or a debt payment capacity ratio less than 0.5 are classified as type C.

For enterprises operating in specific sectors (such as air cargo transportation), shareholders consider determining the debt payment capacity ratio appropriate to the characteristics of the enterprise's operations for classification purposes under this criterion.

d) Criterion 4: Compliance with current laws and regulations

- Enterprises without a conclusion from competent authorities regarding violations of mechanisms or policies in the areas mentioned in Clause 4, Article 14 of this Circular or reminded by competent authorities about the implementation of mechanisms or policies as prescribed by law but not yet subject to administrative penalties: classified as type A.

- Enterprises violating any of the following situations are classified as type B:

+ Being reminded once in writing by shareholders or financial management agencies of the enterprise regarding late submission of supervisory reports, enterprise classification reports, financial statements, and other reports not in accordance with regulations or deadlines.

+ Being administratively penalized by warning or fines (total amount of fines under 10,000,000 VND) within 12 months from the date of review and evaluation of the enterprise classification.

- Enterprises violating any of the following situations are classified as type C:

+ Not submitting supervisory reports, enterprise classification reports, financial statements, and other reports as required or submitting them late and being reminded twice or more in writing by shareholders or financial management agencies of the enterprise.

+ Being administratively penalized by other forms (excluding warnings) or fined (total amount of fines 10,000,000 VND or more) within 12 months from the date of review and evaluation of the enterprise classification.

+ Enterprise managers committing acts of law violation during the performance of their duties to the extent of being criminally prosecuted.

e) Criterion 5: Implementation of public goods products and services

- Completing or exceeding the plan for production volume with product or service quality meeting the prescribed standards: classified as A;

- Completing at least 90% of the plan for production volume with product or service quality meeting the prescribed standards: classified as B;

- Completing less than 90% of the plan for production volume or product or service quality not meeting the prescribed standards: classified as C.

2. Comprehensive classification of enterprises:

a) For trading enterprises, based on the classification results for each of the criteria 1, 2, 3, and 4 stipulated in Clause 1 of this Article, enterprises are classified as follows:

- Enterprises are classified as type A when there is no criterion classified as type C, including criteria 2 and 4 being classified as type A;

- Enterprises are classified as type C when criterion 2 is classified as type C or criterion 2 is classified as type B and the remaining three criteria are classified as type C;

- Enterprises are classified as type B if they are not classified as type A or type C.

b) For enterprises established and regularly operating primarily providing public goods products and services, based on the classification results for each of the criteria 1, 3, 4, and 5 stipulated in Clause 1 of this Article, enterprises are classified as follows:

- Enterprises are classified as type A when there is no criterion classified as type C and criteria 4 and 5 are classified as type A;

- Enterprises are classified as type C when criterion 5 is classified as type C or criterion 5 is classified as type B and the remaining three criteria are classified as type C;

- Enterprises are classified as type B if they are not classified as type A or type C.

3. Classification of managerial officials of enterprises as follows:

a) Outstanding completion of tasks when:

- Meeting the evaluation criteria for the performance of managerial officials of enterprises as guided by the Ministry of Home Affairs.

- Achieving or exceeding the shareholder-set target for the actual return on equity.

- The enterprise is classified as A.

b) Failure to complete tasks if:

- Not meeting the evaluation criteria for the performance of managerial officials of enterprises as guided by the Ministry of Home Affairs.

- Achieving less than 90% of the shareholder-set target for the actual return on equity.

- The enterprise is classified as C.

c) Completion of tasks: all other cases.

4. Classification of enterprises for evaluation and classification:

a) Enterprises with a proportion of state public goods products and services revenue less than 70% of total revenue are classified according to the provisions of point a, Clause 2 of this Article.

b) Enterprises with a proportion of state public goods products and services revenue of 70% or more of total revenue are classified according to the provisions of point b, Clause 2 of this Article.

5. The Board of Directors of the Parent Company bases the evaluation and classification of enterprises and managerial officials at wholly-owned limited liability companies on the criteria for enterprise classification and managerial official evaluation set out in Clauses 1, 2, 3, and 4 of this Article.

Article 17. Evaluation of the effectiveness of state-owned enterprises' operations

a) Annually, the owner shall apply evaluation criteria for the effectiveness of operations of state-owned enterprises to assess state-owned enterprises, particularly those in which the state holds more than 50% of the registered capital.

The results of the evaluation of the effectiveness of enterprise operations will serve as the basis for the owner to consider investment, expansion of investment, or reduction of state capital in these enterprises; at the same time, it serves as the basis for evaluating and rewarding the Representative Person and assigning tasks to the Representative Person for the following year.

b) The assessment of the effectiveness of operations of state-owned enterprises must be based on plans approved by the Shareholders' Meeting or the Board of Directors (for joint-stock companies), the Board of Members (for limited liability companies).

Part IV

REPORTING REGIME AND IMPLEMENTATION ORGANIZATION

Article 18. Reporting regime for state-owned enterprises

1. Financial situation assessment report:

a) Periodically (every six months and annually), the Board of Members (Company Chairman) of the enterprise must prepare a Financial Situation Assessment Report according to the contents stipulated in Article 6 of the Regulation issued together with Decree No. 61/2013/ND-CP and the guidance provided in Clause 2, Article 4 of this Circular.

The Financial Situation Assessment Report must be submitted to the owner, the financial management agency of the enterprise (the Ministry of Finance for enterprises established by the Prime Minister or the Ministry managing the industry, the Provincial Department of Finance for enterprises established by the People's Committee of the province).

The submission deadline coincides with the deadline for submitting interim or annual financial reports as prescribed by the accounting system. For extraordinary reports and reports upon request, they must be submitted within the deadlines set by the requesting agency. Enterprises under special financial supervision must submit monthly, quarterly, and annual periodic reports.

2. Financial monitoring report and Financial Monitoring Results Report:

a) The industry management ministry prepares the Financial Monitoring Report and the Financial Monitoring Results Report for enterprises in the assigned fields as stipulated in Article 5 of the Regulation issued together with Decree No. 61/2013/ND-CP and sends them to the Ministry of Finance before August 31 of the same year for the six-month report and before May 31 of the following year for the annual report.

b) The provincial people's committee prepares the Financial Monitoring Report and the Financial Monitoring Results Report for enterprises in the assigned fields as stipulated in Article 5 of the Regulation issued together with Decree No. 61/2013/ND-CP and sends them to the Ministry of Finance before August 31 of the same year for the six-month report and before May 31 of the following year for the annual report.

c) SCIC prepares the Financial Monitoring Report and the Financial Monitoring Results Report for single-member limited liability companies received from the industry management ministries and provincial people's committees and sends them to the Ministry of Finance before August 31 of the same year for the six-month report and before May 31 of the following year for the annual report.

d) The Ministry of Finance compiles the monitoring results reports from the industry management ministries, provincial people's committees, economic groups, and state-owned corporations to report to the Government and the Prime Minister before September 30 of the same year for the six-month report and before July 31 of the following year for the annual report.

3. Effectiveness assessment and classification report of enterprises:

a) Enterprises must submit their effectiveness assessment and classification report of the reporting year to the owner and the same-level financial management agency (the Ministry of Finance for enterprises established by the industry management ministry, the Provincial Department of Finance for enterprises established by the provincial people's committee) before April 30 of the following year. The report is prepared according to Form 01 and Form 02 - Model 04 attached to this Circular.

b) The industry management ministry and the provincial people's committee must review and send the classification results of the reporting year of enterprises in the assigned fields to the Ministry of Finance before May 31 of the following year.

c) The classification of parent companies established by the Prime Minister, the industry management ministry, and the provincial people's committee; independent single-member limited liability companies established by the industry management ministry is announced after receiving written comments from the Ministry of Finance and must be completed before July 31.

Article 19. Reporting regime for state-owned enterprises

Financial supervision reports:

a) Semi-annually and annually, the Representative shall prepare financial supervision reports for state-owned enterprises holding more than 50% of the charter capital, to be submitted to the owner and the enterprise's financial management authority at the same level before July 31 each year for the semi-annual report and before March 31 of the following year for the annual report.

b) Annually, the Representative shall prepare financial supervision reports for state-owned enterprises holding not more than 50% of the charter capital, to be submitted to the owner before March 31 of the following year.

2. Financial supervision result reports:

a) The Ministry in charge of the sector shall submit Financial Supervision Result Reports for enterprises under its jurisdiction as specified in Clause 1, Article 20 of the Circular issued together with Decree No. 61/2013/NĐ-CP on the Ministry of Finance, before August 31 of the same year for the semi-annual report and before May 31 of the following year for the annual report.

b) The People's Committee of the province shall submit Financial Supervision Result Reports for enterprises under its jurisdiction as specified in Clause 2, Article 20 of the Circular issued together with Decree No. 61/2013/NĐ-CP on the Ministry of Finance, before August 31 of the same year for the semi-annual report and before May 31 of the following year for the annual report.

c) SCIC shall submit Financial Supervision Result Reports for state-owned enterprises receiving capital from the Ministries in charge of the sectors and the People's Committees of the provinces to the Ministry of Finance, before August 31 of the same year for the semi-annual report and before May 31 of the following year for the annual report.

d) The Ministry of Finance shall compile the financial supervision results reports from the Ministries in charge of the sectors and the People's Committees of the provinces to report to the Government and the Prime Minister before September 30 of the same year for the semi-annual report and before July 31 of the following year for the annual report.

Article 20. Implementation

1. This Circular takes effect from December 28, 2013, and applies to implement financial supervision and evaluate the effectiveness of operations of state-owned enterprises starting from the fiscal year 2013 onwards.

2. Repeal Circular No. 115/2007/TT-BTC dated September 25, 2007, of the Ministry of Finance guiding certain contents regarding supervision and evaluation of the effectiveness of state-owned enterprises' operations, and Circular No. 42/2008/TT-BTC dated May 22, 2008, of the Ministry of Finance guiding certain provisions of the supervision regulations for loss-making and ineffective state-owned enterprises operating, issued together with Decision No. 169/2007/QĐ-TTg dated November 8, 2007, of the Prime Minister.

3. In case of difficulties during implementation, units are requested to promptly reflect them to the Ministry of Finance for guidance on handling./.