Circular No. 17-TC/TCÐN guiding the financial management mechanism for population-health family projects and national health support

CIRCULAR

ISSUED BY THE MINISTRY OF FINANCE UNDER DECREE NO. 17 TC/TCĐN ON APRIL 3, 1997 GUIDING THE MANAGEMENT MECHANISM FOR FINANCIAL RESOURCES FOR POPULATION AND FAMILY HEALTH PROJECTS AND NATIONAL HEALTH SUPPORT PROJECTS
POPULATION AND FAMILY HEALTH PROJECTS AND NATIONAL HEALTH SUPPORT PROJECTS

Pursuant to the Credit Agreement signed between the Government of Vietnam and the International Development Association on February 26, 1996 for population and family health projects and national health support projects;

Pursuant to the Loan Agreement between the Government of the Socialist Republic of Vietnam and the Asian Development Bank dated November 28, 1996 for the population and family health project;

Pursuant to the Agreement between the Government of Vietnam and the International Development Association dated June 30, 1996 regarding financial contributions from the Governments of the Netherlands and Sweden for the national health support project; and the Agreement between the Government of Germany and the Government of Vietnam dated January 24, 1997 regarding non-refundable aid to be provided to the Socialist Republic of Vietnam for the implementation of the population and family health project;

Pursuant to Decree No. 58/CP dated August 30, 1994 of the Government promulgating regulations on foreign borrowing and debt repayment; and Decree No. 20/CP dated March 15, 1994 of the Government promulgating regulations on the management and utilization of official development assistance;

Pursuant to Decree No. 42/CP dated July 16, 1996 of the Government promulgating the charter for investment and construction management; Decree No. 43/CP dated July 16, 1996 of the Government promulgating regulations on tendering; and Decree No. 87/CP dated December 19, 1996 of the Government detailing the delegation of authority, budget preparation, execution, and settlement, and Circulars guiding the implementation of these Decrees;

Pursuant to Joint Circular No. 09/TC-NH dated June 2, 1994 of the Ministry of Finance and the State Bank of Vietnam on the management and utilization of foreign loans by the Government; and Circular No. 18 TC/TCĐN dated March 5, 1994 of the Ministry of Finance guiding the management and utilization of foreign loans by the Government;

Pursuant to Decision No. 735/TTg dated November 9, 1995 and Decision No. 767/TTg dated November 27, 1995 of the Prime Minister approving the population and family health project and the national health support project.

The Ministry of Finance guides the management and utilization of funds for the two projects as follows:

PART I
GENERAL PROVISIONS

1. Explanation of terms:

In this Circular, the following terms shall be understood as follows:

1.1. The Project Management Agency is the National Population and Family Planning Commission (for the population and family health project) and the Ministry of Health (for the national health support project). To implement the project and coordinate project activities, the National Population and Family Planning Commission and the Ministry of Health establish a Central Project Management Board.

1.2. Provincial Project Management Boards (in provinces where sub-projects under Content I - upgrading healthcare facilities are located) have powers and responsibilities as defined in the decisions establishing the Provincial Project Management Boards by the respective ministries.

1.3. Beneficiary Provinces: are provinces without Provincial Project Management Boards but benefiting from nationwide implementation contents of the projects.

1.4. International Financial Institutions: the International Development Association (IDA) and the Asian Development Bank (ADB).

1.5. Governments: the Governments of Germany, the Netherlands, and Sweden providing non-refundable aid for the population and family health project and the national health support project.

1.6. Projects: the population and family health project according to Decision No. 735/TTg dated November 9, 1995 of the Prime Minister and the national health support project according to Decision No. 767/TTg dated November 27, 1995 of the Prime Minister.

1.7. Serving Banks: the Agricultural and Rural Development Bank for the population and family health project and the Investment and Development Bank for the national health support project.

1.8. Construction Investment Costs: construction content under Content I of the projects (including construction costs, design consultancy fees, and management costs of Provincial Project Management Boards in provinces with construction works).

1.9. Operational Expenditures: include expenditures such as equipment procurement, essential medicines, training, contraceptive supplies, consulting services, information-education-communication activities, research trials, stipends for volunteers, infrastructure maintenance and equipment, logistics, and project management costs, and expenditures related to national programs on malaria, tuberculosis, and respiratory infections.

2. General Principles:

2.1. The projects utilize the following sources of funding:

* Loans from IDA and ADB;

* Non-refundable aid from the Governments of Germany, the Netherlands, and Sweden;

* Counterpart funds from the Government of Vietnam provided from the state budget.

2.2. The loan funds from international financial institutions and aid from governments are revenues of the Government of Vietnam, which the Ministry of Finance is responsible for collecting into the state budget and allocating to the National Population and Family Planning Commission and the Ministry of Health to implement approved projects. The Ministry of Finance monitors and manages the loans and repayments when due (both principal and interest).

2.3. The Project Management Agencies are responsible for using funds for their intended purposes and project contents as approved, consistent with the conditions committed in the loan agreements with IDA and ADB, aid agreements with governments, and related documents accompanying these agreements.

2.4. The projects are funded from two sources, domestic and foreign. Domestic funding is implemented in accordance with current state regulations. Foreign funding is allocated in accordance with the provisions of this Circular, consistent with domestic regulations and the loan and aid agreements.

2.5. The allocation of construction investment costs (as specified in Article 1.8 Part I) for the projects is carried out in accordance with Decree No. 42/CP, Decree No. 43/CP dated July 16, 1996, Decree No. 87/CP dated December 19, 1996 of the Government, and Circulars guiding the implementation of these Decrees, and specific provisions in this Circular.

2.6. Operational expenditures (as specified in Article 1.9 Part I) are implemented in accordance with current state regulations on administrative and operational expenditure standards and specific provisions in this Circular. The Ministry of Finance allocates operational funds to the Central Project Management Board from both domestic and foreign sources. The Central Project Management Board is directly responsible for implementing or delegating to subordinate units at the provincial level through service agency contracts.

2.7. Serving banks carry out procedures for withdrawing funds from IDA and ADB (including direct payment methods, reimbursement, and letters of commitment) and pay for the projects upon approval by the Ministry of Finance.

2.8. During the process of withdrawing bank loans to serve the project, service fees for each withdrawal (including opening L/C fees, document submission fees, telegrams, faxes, etc.) shall be charged according to Decision No. 162-QĐ/NH2 dated August 9, 1993 of the Governor of the State Bank on collecting service fees for payment transactions through banks. The aforementioned service fees shall be included in the total cost of the project.

PART II
SPECIFIC PROVISIONS

1. OPENING ACCOUNTS:

1.1. At the State Bank (Trading Department), the Project Management Board of the Population and Family Health Project opens two loan accounts under the name of the project to receive IDA and ADB loan funds, and the Project Management Board of the National Health Support Project opens three loan accounts to receive IDA loan funds, Dutch grant aid, and Swedish grant aid.

1.2. At the serving bank, the Project Management Board opens a special account for IDA funds and a provisional account for ADB funds.

1.3. The Project Management Board opens a limit account at the State Treasury in Hanoi to receive counterpart domestic funding for the project. Provincial Project Management Boards open an account at the branch of the serving bank in their province to receive funds from the special account for settling expenditures using IDA loan funds or from the provisional account for ADB loan funds, and another account at the Provincial Investment Development Bureau to monitor the disbursement of domestic counterpart funding and record foreign funding allocations (for the provincial project).

2. Establishing and approving the project capital plan

2.1. Annually, in accordance with the regulations on budget preparation, submission, and review, the Central Project Management Board prepares the project's budget, including investment capital and operational expenditure budgets, to submit to the competent authority for consolidation and presentation to the Ministry of Planning and Investment and the Ministry of Finance for approval by the Government and the National Assembly.

The capital plan for the project must clearly distinguish between investment construction capital and operational expenditure capital, detailing the tasks to be implemented, sources of loan funds, the schedule for withdrawing loan funds from international financial institutions, government grants, and the necessary domestic counterpart funding for each component of the project.

This plan is submitted to the Ministry of Finance and the Ministry of Planning and Investment as stipulated.

Upon assignment of the plan by the Prime Minister, the Ministry of Finance will notify the project manager of the operational expenditure funding allocation for the projects, and the Provincial Investment Development Bureaus of the investment construction capital allocation for the provinces where the projects are located. The project manager is responsible for notifying the Project Management Boards of the approved plan based on the assigned plan.

After receiving notification from the project manager, the Central Project Management Board needs to adjust the detailed budget to align with the notified plan.

3. The total budget and the structure of fund usage are specified in Decisions No. 735/TTg dated November 9, 1995 and No. 767/TTg dated November 27, 1995 of the Prime Minister on the approval of the Population and Family Health Project and the National Health Support Project, loan agreements with IDA and ADB, grant agreements with governments, and other documents issued by the Prime Minister.

4. Allocation and utilization of domestic government funds

The allocation and utilization of domestic counterpart funds are carried out in accordance with current domestic regulations, consistent with the schedule for withdrawing loan and grant funds.

4.1. Counterpart investment construction capital: Quarterly, based on the annual plan divided by quarter, the General Department of Investment Development will notify the provincial investment bureaus of the counterpart capital allocation. The counterpart capital will be directly paid (based on the payment ratio) to suppliers and contractors upon request by the provincial project management board. The capital allocation process follows the provisions of Circular No. 63 TC/ĐT dated November 2, 1996 of the Ministry of Finance guiding the management and allocation of investment capital for projects funded by state budget.

Scheme of counterpart capital circulation - Appendix 2

4.2. Counterpart operational expenditure capital: Quarterly, based on the annual plan divided by quarter, the Ministry of Finance (Administrative and Operational Expenditure Department) will notify the first-tier financial units of the project managers of the counterpart capital limits for the projects. The Central Project Management Boards request these units to allocate counterpart capital based on the payment ratio, following the quarterly budget approved by the Ministry of Finance.

5. Withdrawal and management of loan funds from international financial institutions

All procedures and forms for withdrawing funds and making payments from loan accounts are carried out in accordance with Circular No. 18 TC/TCĐN dated March 5, 1994 of the Ministry of Finance, Circular No. 09/TC-NH dated June 2, 1994 of the Ministry of Finance and State Bank, and comply with the disbursement principles of international organizations.

A. Withdrawal and payment from special accounts (provisional accounts)

5.1. Initial withdrawal into special accounts (or provisional accounts)

The Project Management Board prepares the necessary documents to send to the Ministry of Finance (Budget and Treasury Department) and the State Bank (Trading Department):

- A loan withdrawal application form according to IDA or ADB model

- A letter requesting withdrawal of funds

Based on the loan agreement, within three days, the Ministry of Finance will issue a letter of approval sent to the State Bank and the Project Management Board.

Upon receipt of the Ministry of Finance's letter, the State Bank reviews and if the application meets the conditions for withdrawal, it signs the loan withdrawal application and sends it to IDA (or ADB).

Once the money has been transferred to the project's loan account at the State Bank, the State Bank immediately transfers (on the same working day) to the special account (IDA loan) or provisional account (ADB loan) at the serving bank.

Initial withdrawal into special accounts (or provisional accounts) is illustrated in Appendix 3.

5.2. Additional withdrawal to replenish special accounts (provisional accounts)

The principle for additional withdrawals to special accounts (provisional accounts) is actual expenditure, meaning that the project can only withdraw additional funds for amounts already settled.

Monthly (but not exceeding three months) or when the special account (or provisional account) has spent 20% of its total balance, the Project Management Board prepares the necessary documents to withdraw additional funds to replenish the special account/provisional account and sends them to the Ministry of Finance (Budget and Treasury Department) and the State Bank for approval to replenish the special account.

- An IDA and ADB loan withdrawal application form

- A letter requesting withdrawal of funds

- A list of expenditures by the Central Project Management Board

- A statement of the special account/provisional account balance from the serving bank.

Within five working days, the Ministry of Finance will notify approval for additional withdrawal to replenish the special account/provisional account. The State Bank signs the loan withdrawal application and sends it to IDA/ADB.

When the money arrives at the loan account, the State Bank implements the provisions set out in point 5.1 above.

Specific procedures are detailed in Appendix 4 - Replenishing Special Accounts

5.3. Using funds from special accounts or advance accounts to pay for construction works:

The General Department of Investment Development authorizes the Provincial Construction Investment Departments to review and confirm the volume of construction works within their jurisdiction where there is a Project Management Board. When the Provincial Project Management Board has a need to spend on its own operations or on construction works directly contracted by it, the Provincial Project Management Board shall submit the following documents to the Provincial Construction Investment Department managing the project:

- Technical design and total budget estimate approved by the competent authority.

- Decision on awarding the contract.

- Acceptance certificate.

- Payment request form.

Within five working days after receiving all necessary documents and certificates, the Provincial Construction Investment Department shall be responsible for reviewing, checking, and confirming the volume of work or construction works that have been completed and are eligible for funding, returning them to the Provincial Project Management Board and reporting back to the General Department of Investment Development.

After the volume of work has been confirmed, the Provincial Project Management Board shall send the confirmation letter to the Central Project Management Board.

Based on the funding requirements confirmed by the Provincial Construction Investment Department, the Central Project Management Board shall issue a letter requesting the bank serving the account to withdraw funds from the special account. Upon withdrawal, the serving bank shall immediately notify the General Department of Investment Development. The circulation of documents and the relationship between agencies during the payment process for construction works and procurement expenses through special accounts (advance accounts) are illustrated in Appendix 5.

5.4. Withdrawal of funds for public services:

- Based on the annual expenditure plan divided by quarter which has been approved, each quarter the Central Project Management Board shall issue a detailed expenditure plan and a request letter from the project owner to the Ministry of Finance (Department of Administrative Services) to withdraw funds from the special account. The Ministry of Finance will examine and authorize the bank to disburse funds according to the expenditure order of the Central Project Management Board. Monthly, the serving bank shall be responsible for notifying the Ministry of Finance about the statement of expenditures from the special account to record income and expenditure in the budget.

- Expenditures from the special account for public service activities shall comply with domestic expenditure standards.

- Regarding other expenditures for staff participating in training and consulting both domestically and internationally, the Ministry of Finance provides additional guidance as follows:

+ Domestic training and training:

The project owner needs to prepare a detailed report on the training content, number of participants, duration, and location suitable for project implementation and loan agreement provisions. The average expenditure should not exceed 200 USD per person per week (including materials, accommodation, transportation, and speaker fees).

+ Overseas training and training:

The project owner needs to prepare a list of participants for overseas training and training, signed training contracts, and a Letter of No Objection from the World Bank. The contract must specify the training content, number of people, number of days, location, and training service costs payable to the training provider.

The expenditure for staff participating in overseas training and instruction shall be applied according to Circular No. 32 TC/TCĐN dated April 21, 1995, and Circular No. 44 TC/TCĐN dated May 21, 1994, issued by the Ministry of Finance.

- Consulting fees: the selection of consultants must follow domestic regulations (Decree 43/CP dated July 16, 1996 on tendering rules) and provisions in loan agreements and aid agreements. Consultant files (domestic and international) must be officially approved in writing by the supervising ministry.

Domestic consultants: domestic consultants must be carefully selected and approved by the competent authority based on specific project requirements and the expertise of the consultant. The maximum monthly salary for domestic consultants is 500 USD.

Procedures for withdrawing funds from special accounts and counterpart funds - Appendix 5a

5.5. Funds from the special account (central account) can be used to pay for any legitimate expenses (consistent with the project content, included in the budget estimate, and in accordance with regulations) of the project. The limit of the expense amount depends only on the available balance in the special account (central account).

5.6. Interest on deposits:

While unused borrowed funds in the special account generate interest (interest rate for non-term deposits), on the fifth day of each month, the serving bank must deposit all accrued interest from the special account (advance account) into the State Treasury (the state's foreign currency reserve account at the State Bank Branch). Account number 331.213.020.1.

B- Withdrawal of funds from IDA and ADB for direct payments and procedures for special commitment letters (applicable to both construction works and public services).

Based on the payment request from the supplier of goods and services, the Central Project Management Board prepares a withdrawal application from the loan account and necessary documents to send to the Ministry of Finance (Department of Financial Management) and the serving bank. The payment file includes:

- Withdrawal application form

- A letter requesting withdrawal of funds

- Copy of the procurement contract for goods and equipment

- Copy of the consulting contract

- Payment request from the supplier of goods and services

- Copy of other economic contracts

- Documents proving the validity of the contract (such as the government's approval of the contract or the competent government agency, comments from IDA, ADB, or bidding results for construction contracts and procurement of goods over 150,000 USD and consulting contracts valued over 100,000 USD for companies and over 50,000 USD for individuals).

- Copy of the bill of lading (for direct payment of goods value).

Within five working days from the date of receipt of complete withdrawal documents, the Ministry of Finance (Department of Financial Management) shall examine, check, and approve the withdrawal. The Central Project Management Board and the serving bank shall sign the withdrawal application to pay the beneficiary (contractor, supplier).

After receiving notification from IDA or ADB regarding payment to the supplier of goods and services and contractors, the Central Project Management Board shall be responsible for informing two copies to the Ministry of Finance (Department of Financial Management and Department of Administrative Services or General Department of Investment Development) to record income and expenditure in the budget.

The circulation of documents and the relationship between agencies in direct payments and special commitments are illustrated in Appendices 6 and 7.

6. Withdrawal and use of funds for government aid grants

6.1. The Ministry of Health and the National Committee for Population and Family Planning have the responsibility to receive, distribute, and manage expenditures from government aid funds according to Circular No. 22 TC/VT dated March 20, 1995 of the Ministry of Finance and in accordance with the approved project content.

6.2. The budgetary assistance from the German Government will be allocated to the National Committee for Population and Family Planning to implement the national family planning program. For the portion of funding for social marketing activities that can be recovered, the National Committee for Population and Family Planning shall manage and account for it in accordance with the regulations of the Ministry of Finance.

7. Reporting

7.1. Quarterly, the Central Project Management Board has the responsibility to report in detail on the special account expenditures for public services at the level approved by the Ministry of Finance to the project management agency and to the Ministry of Finance (Department of Budget).

7.2. Every six months, the project manager has the responsibility to report to the Ministry of Finance (Department of Foreign Finance, Investment Development General Department, Department of Budget), the Ministry of Planning and Investment, and the State Bank on the implementation of the project, the use of loan capital, aid capital, and government counterpart capital.

7.3. Monthly, the commercial bank serving the project has the responsibility to notify the Ministry of Finance (Department of Foreign Finance) and the State Bank (Trading Department) about the detailed expenditure statement of the special account (advance account). In the statement, the interest accrued in the month and the date of transferring the interest to the Ministry of Finance must be clearly stated.

8. Inspection, Audit, Settlement

8.1. Periodically and unexpectedly, the Ministry of Finance, the Ministry of Planning and Investment, the State Bank, the National Committee for Population and Family Planning, and the Ministry of Health will inspect the implementation of the project and the use of project funds (domestic and foreign). If misuse of funds is discovered, the Ministry of Finance will suspend the allocation of funds until the competent authorities handle the violation.

8.2. Annually, the special account, advance account, accounting books, and accounting records of the project must be audited by an independent auditing agency in accordance with state regulations, loan agreements, and aid agreements. The audit documents will be sent to the Ministry of Finance and serve as a basis for considering additional withdrawals from the special account (advance account) or withdrawals from the special account (advance account) for payment, as well as for evaluating the project's implementation.

8.3. The Central Project Management Board is responsible for settlement according to current regulations. Annually, the Project Management Board is responsible for reporting and settling all expenditure items with the project management agency so that the agency can consolidate them into the annual settlement report of the unit submitted to the Ministry of Finance for approval according to state regulations.

PART III
IMPLEMENTING PROVISIONS

This Circular takes effect fifteen days after the date of signature, replacing Circular No. 31 TC/TCĐN dated June 21, 1996 of the Ministry of Finance. During implementation, if there are difficulties, the Central Project Management Board, the National Committee for Population and Family Planning, the Ministry of Health, and the serving banks should promptly reflect them to the Ministry of Finance for study and amendment.

ANNEX 1

INVESTMENT CAPITAL PLAN 199...

Project:

Unit:

Project:

Unit: Central Project Management Board... INVESTMENT PLAN 199...

(By Quarter)

ANNEX 2

PAYMENT WITH COUNTERPART FUNDS

(1): Notification of capital plan according to the fund

(2): Signing economic contracts

(3): Implementing contracts

(4): Requesting payment

(5): Confirming completed work. After the Provincial Project Management Board checks and confirms the completion of the work, collect all necessary documents and notify the Provincial Investment Development Bureau for further confirmation.

accept the completed work, collect all necessary documents and certificates to notify

the Provincial Investment Development Department for the Provincial ID Department to review and confirm the work once again.

confirm the completion of the work, collect all necessary documents and certificates to notify the Provincial Investment Development Department for the Provincial ID Department to review and confirm completeness.

(6): Transfer payment money

(7): Report to the Provincial Investment Development Bureau

(8): Report to the Central Project Management Board on the allocation of counterpart funds

ANNEX 3

WITHDRAWING INITIAL FUNDS INTO THE SPECIAL ACCOUNT
(TEMPORARY ACCOUNT)

(1) Prepare withdrawal request form and initial withdrawal proposal

(2) Approval of withdrawal

(3) Sign withdrawal form and send to the World Bank (or ADB)

(4) Transfer funds into the advance account

(5) Transfer funds into the Special Account (or Temporary Account)

(6) Notify the Central Project Management Board and the Ministry of Finance of the funds received

ANNEX 4

SUPPLEMENTING THE SPECIAL ACCOUNT
(TEMPORARY ACCOUNT)

(1) Prepare withdrawal request form and proposal

(2) Approval of withdrawal

(3) Sign withdrawal form and send to the World Bank (or ADB)

(4) Transfer funds into the advance account

(5) Transfer funds into the special account (or temporary account)

(6) Notify the Central Project Management Board and the Ministry of Finance of the account balance

ANNEX 5

PAYMENT THROUGH THE SPECIAL ACCOUNT - TEMPORARY ACCOUNT
BASIC CONSTRUCTION INVESTMENT EXPENSES

(1) Signing contracts

(2) Implementing contracts

(3) Requesting payment

(4) Inspecting completed work. After the Provincial Project Management Board inspects and confirms the completion of the work, collect all necessary documents and notify the Provincial Investment Development Bureau for further confirmation.

confirm the completion of the work, collect all relevant documents and materials,

notify the Provincial Investment Management Department so that the Investment Management Department can inspect and verify completeness.

payment conditions.

(4a) Report to the General Department of Investment Development

(5) Request for capital payment

(6) Transfer funds: The Central Agricultural Bank transfers payment funds

to the contractor through the account of the Provincial Project Management Board at the

Provincial Agricultural Bank.

(6a) Notification to the General Department of Investment Development

ANNEX 5A

WITHDRAWING FUNDS FOR OPERATIONS

(1) Sign agreement

(2) The Central Project Management Board prepares quarterly budget estimates and submits them to the project sponsor

(3) The project sponsor approves detailed budget estimates and forwards them to the Ministry of Finance

(Public Administration and State Enterprises Department) requests withdrawal of funds

(4) The Ministry of Finance (Public Administration and State Enterprises Department) reviews and issues a document

approving the withdrawal of funds sent to the bank to withdraw funds from the Special Account (Advance Payment Account)

(4a) The Ministry of Finance (Public Administration and State Enterprises Department) sends a document approving the quarterly budget estimate of the Central Project Management Board

(5) The bank disburses funds according to the expenditure order of the Project Management Board

(5a) The first-level financial agency of the project sponsor disburses counterpart funds according to the payment ratio

for the Central Project Management Board to pay the contractor

Central

(1): Agreement

(2): Contract

ANNEX 6

DIRECT PAYMENT

Annotation

(3): Performance of Contract

(4): Payment Request

(5): Acceptance, quality inspection of goods and services

(6): Request for fund withdrawal for payment

(7): Approval of fund withdrawal for payment

(8): Withdrawal of funds

(9): Transfer of payment funds

(1) Agreement

(2) Contract

ANNEX 7

PAYMENT THROUGH LETTER OF GUARANTEE PROCEDURE

(3) Execution of contract

(4) Payment request

(5) Acceptance, quality inspection of goods

(6) Request for fund withdrawal for payment

(7) Approval of fund withdrawal for payment

(8) Request for fund withdrawal for payment in the form of a commitment letter

(9) Send a commitment letter to the seller's bank

(10) Seller's bank pays the supplier, contractor

(11) Send refund request

(12) ADB/WB pays the seller's bank

(12) Send refund request

(13) ADB/WB pays the seller's bank