Joint Circular No. 161/1998/TTLT/TC-GTVT guiding financial management systems and payment issuance regulations for state-owned enterprises operating public services in the railway infrastructure management and repair sector.

JOINT CIRCULAR

Guidelines for financial management and disbursement payment systems for state-owned enterprises operating public services in the field of railway infrastructure management and repair

Based on Decree No. 56/CP dated October 2, 1996 of the Government regarding state-owned enterprises operating public services;

Based on Circular No. 06/TC/TCDN dated February 24, 1997 of the Ministry of Finance guiding the financial management system for state-owned enterprises operating public services;

Based on the decision of the Minister of Transport to establish public service enterprises in the railway sector;

Based on the specific characteristics of the operations of state-owned enterprises operating public services in the field of railway infrastructure management and repair;

The Ministry of Finance and the Ministry of Transport issue guidelines for financial management and disbursement payment systems for state-owned enterprises operating public services in the field of railway infrastructure management and repair as follows:

I. GENERAL PROVISIONS

1. The subject of this Circular is state-owned enterprises operating public services in the field of railway infrastructure management and repair (referred to as railway public service enterprises) under the Vietnam Railway Corporation established by the Minister of Transport according to the criteria stipulated in Article 1 and Article 2 of Decree No. 56/CP dated October 2, 1998 of the Government. The Ministry of Transport assigns tasks, places orders, and delegates authority to the Vietnam Railway Corporation to sign contracts, inspect, supervise, and accept the volume of railway infrastructure management and repair work for railway public service enterprises.

2. Railway public service enterprises are allocated capital, assets, and necessary human resources by the State to fulfill their tasks of managing, maintaining, and repairing railway infrastructure to ensure safe rail transport according to economic and technical norms issued by the Ministry of Transport.

3. For assets that are part of the railway infrastructure system managed by railway public service enterprises such as: bridge, road, tunnel systems (mainline bridges, tunnels, station roads, platforms, retaining walls, fences, various types of culverts, fixed equipment along the line like signs, boundary markers, guard posts, and crossing gates); communication and signaling system equipment (entrance and exit signals, signal cable systems, train control devices, centralized control systems, transmission lines, power supply systems, central offices); architectural structures at stations (office buildings, waiting halls, ticket offices, baggage warehouses, platforms, wings, cargo yards, guard posts, and crossing gates), these enterprises are not required to depreciate basic assets but must determine and monitor the level of wear and tear according to Clause 1 and 2 of Article 19 of the Management, Use, and Depreciation System for Fixed Assets issued with Decision No. 1062/TC/QĐ/CSTC dated November 14, 1996 of the Minister of Finance.

4. Railway public service enterprises organize accounting according to the enterprise accounting system and comply with tax payments and other national budget revenues as prescribed by the State for state-owned enterprises operating public services.

5. Railway public service enterprises are exempt from paying the use of state budget funds and land lease fees for areas of land attached to the railway infrastructure assets mentioned above. In cases where railway public service enterprises use these areas for business services, they must pay land lease fees according to the law.

6. In addition to fulfilling assigned public service tasks, railway public service enterprises have the right to utilize land, scenery, capital, and assets under their management to engage in additional business activities consistent with the enterprise's capacity and market demand, subject to the following conditions:

- Approval in writing by the Ministry of Transport;

- Not affecting the fulfillment of assigned railway infrastructure management, maintenance, and repair tasks;

- Registration of supplementary business activities according to current regulations;

- Separate accounting for non-public service business activities;

- Compliance with tax obligations for non-public service business activities according to the law.

II. MANAGEMENT AND USE OF CAPITAL AND ASSETS IN RAILWAY PUBLIC SERVICE ENTERPRISES

1. Investment, capital raising, and external investment are carried out according to the guidelines set forth in Points 1, 2, and 3 of Section II of Circular No. 06 TC/TCDN dated February 24, 1997 of the Ministry of Finance guiding the financial management system for state-owned enterprises operating public services.

2. Transfer, leasing, mortgaging, and pledging of assets:

- The transfer, leasing, mortgaging, and pledging of assets under the management of railway public service enterprises must be decided by the Minister of Transport after obtaining written agreement from the asset management agency of the State at the enterprise.

- Railway public service enterprises are not allowed to mortgage, pledge, lease, or sell fixed assets belonging to the railway infrastructure system.

- Railway public service enterprises may sell unused or obsolete assets to recover capital for reinvestment. When selling, the enterprise must form a valuation committee and conduct auctions according to the law. The committee includes the Director, Chief Accountant, Head of Technical Department, and other positions as required by the unit.

- Any difference between the proceeds from the sale of assets and the remaining value of the assets and the costs of the sale shall be recorded in the enterprise's business results.

- For leased assets, the enterprise must continue to depreciate according to regulations and separately track them for recovery upon expiration of the lease term.

- It is not permitted to mortgage, pledge, or lease borrowed, rented, held, or pledged assets from other enterprises.

3. Liquidation of assets: The railway public utility enterprise may liquidate assets that are obsolete, have lost quality, are technologically outdated, are no longer needed, are irreparably damaged, or have exceeded their useful life.

3.1 For fixed assets belonging to the railway infrastructure system: Permission in writing from the Ministry of Transport and the state capital and asset management agency at the enterprise must be obtained before liquidation can occur.

After liquidation, based on the remaining value, the business capital should be reduced on the accounting books. The difference between the proceeds from selling the liquidated fixed assets and the liquidation costs must be paid to the state budget (or may be supplemented to the infrastructure repair fund if approved by the Ministry of Finance).

3.2 For other fixed assets, the liquidation process shall be carried out in accordance with the procedures applicable to state-owned enterprises engaged in commercial activities.

3.3 Liquidation procedure: The enterprise must establish a liquidation committee consisting of the Director, Chief Accountant, Head of Technical Department, and other positions as required by the unit. In cases where parts or scrap recovered from liquidated assets are used for production and business operations, the enterprise must organize valuation; if selling materials or liquidated assets, public notice and auction according to the law must be conducted.

4. All scrap materials replaced during maintenance, upkeep, and repair of railway infrastructure (rails, sleepers, switch blades, accessories, etc.) must be recovered and properly recorded in inventory at the units according to regulations and then sold. The sale must follow the same regulations as those for asset sales. The difference between the proceeds from selling these scrap materials and the sale costs must be paid into the state budget (or may be supplemented to the infrastructure repair fund if approved by the Ministry of Finance).

5. Capital transfer, responsibility for capital preservation, revaluation of assets, loss handling plans, and management of receivables and payables shall be carried out in accordance with the regulations applicable to state-owned enterprises engaged in commercial activities.

6. The railway public utility enterprise has the responsibility to maintain accounting records accurately reflecting all current assets and capital of the enterprise in accordance with the current accounting system.

III. FINANCIAL RESULTS AND HANDLING OF THE RAILWAY PUBLIC UTILITY ENTERPRISE

A. FINANCIAL RESULTS

1. Revenue of the railway public utility enterprise includes: revenue from public service activities, revenue from production and business operations, and revenue from other activities.

a) Revenue from public service activities includes:

- Payments made by the State for public service products and services implemented according to approved plans and budgets.

- Income from emergency traffic restoration activities caused by natural disasters, fires, typhoons, floods, or accidents where the railway public utility enterprise incurs additional costs beyond the assigned plan to restore traffic.

b) Revenue from production and business operations and other activities shall be handled in accordance with the regulations applicable to state-owned enterprises engaged in production and business operations.

c) The railway public utility enterprise is responsible for maintaining accounting records to fully and promptly record and reflect all sources of income and issue complete invoices and vouchers in accordance with the regulations of the Ministry of Finance.

2. Expenses of the railway public utility enterprise include: expenses for public service activities, business operations, and other activities.

a) Contents of expenses for public service activities include:

- Material, fuel, and energy costs used during operations;

- Wages, salaries, and allowances with wage characteristics according to the State's regulations;

- Contributions to social insurance, health insurance, and trade union funds according to the State's regulations;

- Depreciation costs of fixed assets, objects, and rates as prescribed by the Ministry of Finance (excluding fixed assets in the railway infrastructure system which are not subject to depreciation as stipulated in Point 3 - Section I - Circular of this document);

- Costs for regular repairs and major repairs of fixed assets;

- Amounts set aside and paid to form funds for higher-level management agencies (if any). The annual rate is proposed by the Ministry of Transport after obtaining the agreement of the Ministry of Finance;

- Other expenses as prescribed by the State;

Expenses such as raw materials, purchased services... must be supported by valid invoices and vouchers according to the regulations of the Ministry of Finance. Expenses for hospitality, reception, ceremonial events, conferences, transactions, external relations... must not exceed the limits set by the State.

b) Contents of expenses for production and business operations and other activities shall be handled in accordance with the regulations applicable to state-owned enterprises engaged in business operations.

3. The railway public utility enterprise may use revenues to cover expenses, including:

- Revenues from public service activities to cover expenses for public service activities, taxes, and other income from the State as prescribed by law (excluding corporate income tax);

- Revenues from production and business operations and other activities to cover expenses for business operations and other activities, taxes, and other income from the State as prescribed by law (excluding corporate income tax);

- The railway public utility enterprise must ensure profitability in its business operations in principle and cannot use profits from public service activities to offset losses in business operations and other activities.

B. FINANCIAL RESULT HANDLING

1. For railway public utility enterprises with income in a year, including income from business operations and other activities, they shall be handled in the following order:

a) Pay corporate income tax as prescribed by law;

b) Deduct penalties for breach of contract, overdue payments, and legitimate expenses not deducted when determining taxable income;

c) Deduct unrecovered losses from pre-tax income;

d) The remaining income after deducting items a, b, and c shall be allocated to the following funds at the prescribed ratios and limits:

- Development Investment Fund: Minimum 5%;

- Financial Reserve Fund: 10%, the balance of this fund shall not exceed 25% of the registered capital.

- Deduct up to two reward and welfare funds not exceeding three months' actual salary if the amount paid to the state budget in the reporting year is higher than the previous year; equal to two months' actual salary if the amount paid to the state budget in the reporting year is the same or lower than the previous year.

After deducting the development investment fund and financial reserve fund, if there is a surplus from the profit allocated to the two reward and welfare funds, the remaining difference shall be fully supplemented into the development investment fund. If there is insufficient source to establish the two reward and welfare funds at two months' actual salary, the state shall provide the railway public service enterprise with the remaining amount.

2. Procedures, timing for establishing, and purposes of using the funds of the railway public service enterprise shall be carried out as for state-owned enterprises engaged in business operations.

Within the total amount allocated to the two reward and welfare funds, the General Director of the railway public service enterprise has the right to decide the proportion allocated to each fund after consulting with the enterprise's trade union.

The railway public service enterprise does not establish a job loss allowance reserve fund. In special cases where it is necessary to reduce the scale of maintenance and repair activities of railway infrastructure, the Ministry of Transport and the Ministry of Finance will consider providing assistance to workers who lose their jobs according to the prescribed regulations.

VI. ESTABLISHING PLANS AND MANAGEMENT REGIMES, ISSUANCE, AND PAYMENT FOR RAILWAY PUBLIC SERVICE PRODUCTS

A. ESTABLISHING AND ASSIGNING PLANS

1. Annually, based on the technical condition of bridges, roads, tunnels, information, signaling equipment; architectural works belonging to railway infrastructure and transportation needs on each operating route, economic and technical standards, regulations, and guidelines of the Ministry of Transport, the railway public service enterprise establishes plans for managing and repairing railway infrastructure, financial revenue and expenditure estimates, and sends them to the Vietnam Railway Association for review and consolidation to submit to the Ministry of Transport and the Ministry of Finance. The Ministry of Transport is responsible for approving, consolidating reports, and sending them to financial authorities and relevant agencies.

2. Within the annual budget revenue and expenditure plan approved, the Minister of Transport assigns plans for managing and repairing railway infrastructure (including emergency traffic restoration reserve fund plans due to natural disasters, fires, typhoons, floods, or accidents caused by external factors), allocates the budget estimate to railway public service enterprises, and sends it to the Ministry of Finance for consolidation. State budget funds will only be issued and paid within the approved budget estimate.

In cases where the approved budget estimate is exceeded, they will be handled according to the State Budget Law and current regulations.

In cases where additional costs are incurred by the railway public service enterprise to restore emergency traffic due to natural disasters, fires, typhoons, floods, or accidents caused by external factors beyond the assigned plan, the railway public service enterprise must prepare a record confirming the extent of damage (with confirmation from local authorities or the Railway Traffic Inspection Board), and report any shortfall after using the reserve fund to the Ministry of Transport and the Ministry of Finance for consideration and resolution.

B. ISSUANCE AND PAYMENT OF OPERATING COSTS

1. Sources of funds for issuing and paying for railway public service infrastructure products include:

- Funds provided by the state budget;

- Funds collected from railway infrastructure usage fees paid by railway transport enterprises according to the ratio set by the state;

- Other sources of funds (if any);

2. These sources of funds can only be used for the purpose of managing, maintaining, and repairing railway infrastructure, and cannot be used for other purposes.

3. The issuance and payment of railway public service products to railway public service enterprises are carried out through the National Treasury System; Monthly, the Ministry of Finance transfers provisional funding by "payment order" to the National Treasury to issue and pay to railway public service enterprises, while also notifying the Vietnam Railway Association as a basis for tracking, consolidating, and reporting.

The management, issuance, and payment system for railway public service products of the National Treasury is implemented according to Circular No. 40/1998/TT-BTC dated March 31, 1998, of the Ministry of Finance, "guidelines for managing, issuing, and paying state budget expenditures through the National Treasury." Additionally, for railway public service enterprises, the National Treasury will proceed with issuance and payment when all of the following are available:

+ Notification of production plans and budget funding plans approved and allocated by the Ministry of Transport;

+ Economic and technical standards for each product issued by the Ministry of Transport;

+ Completion quantity and quality acceptance records for products and services confirmed by the Vietnam Railway Association authorized by the Ministry of Transport;

+ Reports on the implementation of plans.

VII. ACCOUNT AUDIT, FINANCIAL REPORTING, AND FINANCIAL DISCLOSURE

1. Establishing and Reporting Financial Statements

- Quarterly and annually, the railway public service enterprise is responsible for preparing financial statements in accordance with current regulations. The General Director of the enterprise must bear responsibility before the state and law for the accuracy and truthfulness of the financial statements.

- Quarterly and annual financial statements are sent to the Vietnam Railway Association; the Ministry of Transport, tax authority, state asset management agency at the enterprise, and statistical agency.

- The time for submitting final accounts is in accordance with the regulations of the Ministry of Finance.

2. Accounting Audit and Financial Reporting:

- Quarterly and annually, the railway public service enterprise must conduct self-audits of accounting and financial reporting.

- The Ministry of Transport, together with the State Capital Management and Asset Administration Agency at Enterprises and the Vietnam Railway Association, organizes the audit and approval of annual settlement and financial reports of railway public service enterprises.

- Financial authorities shall have the duty to inspect compliance with financial systems, accounting practices, revenue and budget payment discipline, and the accuracy and truthfulness of financial reports.

- Violations of accounting systems, financial income and expenditure systems, budget submission systems, and establishment and use of enterprise funds will be subject to administrative and economic penalties according to the law.

3. Public Disclosure of Annual Financial Reports:

- Pursuant to the annual financial report that has been approved by the competent authority, the railway public utility enterprise shall publicly disclose certain financial indicators before the conference of workers and staff members of the enterprise.

- The contents of the disclosed indicators shall follow the model attached to Circular No. 06/TC/TCDN dated February 24, 1997, issued by the Ministry of Finance.

VIII. IMPLEMENTATION PROVISIONS

1. In addition to the specific provisions for railway public utility enterprises set forth in this circular, such enterprises must also comply with other legal regulations applicable to state-owned enterprises.

2. This circular shall take effect from January 1, 1999. All previous regulations concerning the financial management of railway public utility enterprises that conflict with this circular are hereby abolished.

3. During implementation, if any difficulties arise, railway public utility enterprises are requested to reflect them to the Vietnam Railway Association for consolidation and reporting to the Ministry of Transport and the Ministry of Finance for study and appropriate amendments.