Decision No. 232/1999/QD-TTg On the issuance of the Financial Management Regulation for the Development Support Fund

Pursuant to …;

Regarding the issuance of the Financial Management Regulation of the Development Support Fund

_____________________

PRIME MINISTER

Pursuant to the Law on the Organization of the Government dated September 30, 1992;

Pursuant to Decree No. 43/1999/NĐ-CP dated June 29, 1999 of the Government on state investment credit for development;

Pursuant to Decree No. 50/1999/NĐ-CP dated July 8, 1999 of the Government on the organization and operation of development support funds;

Considering the proposal of the Minister of Finance,

DECISION:

Article 1. This Decision promulgates the Financial Management Regulation of the Development Support Fund.

Article 2. The Ministry of Finance shall be responsible for guiding and supervising the implementation of this Regulation issued together with this Decision.

Article 3. This Decision takes effect from January 1, 2000.

Ministers, Heads of ministerial-level agencies, Chairpersons of provincial people's committees under the central government, Chairpersons of the Management Board and General Directors of the Development Support Fund are responsible for implementing this Decision.

REGULATIONS

Financial management of the Development Support Fund

(Issued together with Decision No.: 232/1999/QĐ – TTg

dated December 17, 1999 of the Prime Minister)

Chapter I

GENERAL PROVISIONS

Article 1. This Regulation applies to the financial management activities of the Development Support Fund system (hereinafter referred to as the Fund).

Article 2. The Fund is a state financial organization operating without profit-making objectives, ensuring capital recovery and cost compensation, having legal personality, registered capital, balance sheet, seal, and accounts opened at the State Treasury, domestic and foreign banks, and able to organize payments with customers directly related to its activities.

The Fund is a centralized accounting unit within the entire system; it implements income and expenditure and finalizes financial income and expenditure according to the regulations stipulated in this Regulation; it is exempted from tax and other national budget contributions to reduce lending interest rates and guarantee fees.

Article 3. The Fund carries out the task of mobilizing medium and long-term capital, receiving and managing various sources of capital provided by the state for investment credit development to implement the state's investment support policy.

Article 4. The Ministry of Finance performs the function of state management over finance, has the responsibility to guide and inspect the income and expenditure activities of the Fund.

Chapter II

CAPITAL, FUNDS, AND ASSETS

Article 5. Operating capital of the Fund

1. Capital owned by the state:

a) Registered Capital;

b) Annual state budget capital allocated for investment purposes.

In case of changes in the registered capital, the Management Board of the Fund shall report to the Minister of Finance for submission to the Prime Minister for decision.

2. Mobilized capital in the following forms: medium and long-term loans from organizations and individuals both domestically and internationally, and loans from the Foreign Debt Repayment Reserve Fund, Postal Savings Fund, Vietnam Social Insurance Fund; capital from bond issuance; loans and foreign aid from the government used for on-lending according to the entrustment of the Ministry of Finance.

3. Entrusted capital for investment development lending from organizations and individuals both domestically and internationally.

Article 6. The Ministry of Finance implements the allocation of state-owned capital and the arrangement of annual supplementary capital for investment targets.

The Fund may use capital to implement investment lending, post-investment interest rate support, and investment credit guarantees in accordance with the relevant state regulations. The Chairman of the Management Board and the General Director of the Fund are responsible for the safe management, proper use, and effective utilization of the Fund's capital.

The Fund has the right to change the capital structure and assets within the Fund system to serve the development of the Fund's operations.

Article 7. The Fund is allowed to establish a risk reserve fund from operational expenses to offset losses and damages caused by objective factors during the implementation of state investment credit development projects. The amount set aside is calculated at 2% of the annual interest income from lending. If unused at year-end, this reserve can be carried forward to offset risks in subsequent years. In cases where the risk reserve fund is insufficient to cover losses, the Management Board of the Fund shall report to the Ministry of Finance for submission to the Prime Minister for decision.

The establishment, use, and authority to handle risks are implemented according to Article 22 of Decree No. 43/1999/NĐ-CP dated June 29, 1999 on state investment credit development, and the Ministry of Finance will provide specific guidance on this Regulation.

Article 8. The Fund is allowed to form a guarantee reserve fund to pay to financial institutions when the project sponsor does not repay the loan on time. The maximum limit of the guarantee reserve fund is 5% of the total state investment credit development capital (excluding ODA on-lending capital). If unused at year-end, this capital can be transferred to the next year's lending source. In cases where the guarantee reserve fund is insufficient to fulfill guarantee obligations, the Management Board of the Fund shall report to the Ministry of Finance for submission to the Prime Minister for decision.

Principles, objects, rights, obligations, and procedures for guarantees are implemented according to Section III of Decree No. 43/1999/NĐ-CP dated June 29, 1999 on state investment credit development and current state regulations.

Article 9. Annually, the Fund is responsible for balancing capital sources and the demand for state investment credit development capital; raising funds with higher interest rates for investment lending must ensure the principle of only mobilizing when all non-interest-bearing or low-interest-bearing sources have been fully utilized.

When performing the state-assigned investment credit tasks, the Fund receives interest rate differential subsidies from the state. The subsidy level is determined based on the difference between the interest rates of the combined sources of capital and the prescribed lending rates, plus the management fee received.

The management fee in the first five years since the Fund's establishment is determined at 0.2% per month on the average outstanding loan balance from domestic credit sources and 0.3% per year on the average outstanding loan balance from foreign credit sources.

For projects eligible for post-investment interest rate support as prescribed by the Government, the Fund receives post-investment interest rate support funding from the state budget. The level of post-investment interest rate support is implemented according to Article 28 of Decree No. 43/1999/NĐ-CP dated June 29, 1999 on state investment credit development.

The Ministry of Finance provides detailed guidance on the financial regime for interest rate differential subsidies and post-investment interest rate support.

Article 10Sources of investment credit development capital that the Fund uses

1. Investment lending.

2. Post-investment interest rate support.

3. Implementing the task of investment credit guarantee.

4. Repaying loans to organizations and individuals both domestically and internationally.

5. Performing other tasks as prescribed by the Government.

Article 11. Investment Capital for Construction and Fixed Asset Purchases

1. The Fund's capital for basic construction investment and fixed asset purchases is formed from the following sources: state budget allocations, depreciation of fixed assets, development investment funds, and other lawful sources.

2. The rate of depreciation for fixed assets; management and use of investment capital for basic construction, purchase of fixed assets; sale, liquidation of assets; inventory and revaluation of assets of the Fund shall be carried out in accordance with regulations applicable to state-owned enterprises.

Article 12. Ensuring Capital Recovery for the Fund

The Fund is responsible for managing and using investment capital for its intended purpose, for the appropriate target, effectively, ensuring capital recovery and covering costs.

The Fund shall ensure capital recovery in accordance with the following provisions:

1. Purchasing insurance for assets and other insurance regimes related to capital in accordance with regulations.

2. Being allowed to use idle capital for:

a) Investing in government bonds and treasury bills;

b) Providing loans to support projects funded from the state budget that temporarily lack capital;

c) Providing initial production capital loans for projects eligible for Fund loans.

The use of idle capital for investment by the Fund must ensure capital safety, be effective, and not affect the state's credit investment development mission. The amount of capital used for lending under this Clause 2 shall not exceed 20% of the total temporary idle capital of the Fund.

3. Being allowed to account for the following expenses:

a) Provision for risks during the course of operations;

b) Provision for exchange rate risks.

The Ministry of Finance shall provide detailed guidance on the establishment and use of these risk provisions.

Chapter III

FINANCIAL INCOME AND EXPENSES

Article 13. Income of the Development Support Fund

1. Income from business activities:

a) Interest income from loans;

b) Interest income from deposits;

c) Service fees for guarantee services at 0.5% per annum on the guaranteed amount for investors;

d) Fees for entrusted loan relending;

đ) Subsidies for interest rate differences provided by the state budget;

e) Other business activity and service income.

2. Income from financial activities:

a) Income from trading in government bonds and treasury bills;

b) Rental income from assets.

3. Income from extraordinary activities:

a) Penalties;

b) Proceeds from asset liquidation and sale (after deducting liquidation and sale expenses);

c) Other extraordinary income.

Article 14. Expenses of the Development Support Fund

1. Business activity expenses:

a) Interest expense on raised capital;

b) Interest expense on loans;

c) Interest expense on bonds;

d) Payment transaction expenses;

đ) Entrusted service and service costs;

e) Risk reserve expenses;

g) Other business operation expenses.

2. Management expenses:

a) Salaries and allowances according to the regime set forth by the Ministry of Labor, Invalids and Social Affairs and approved by the Prime Minister;

b) Social insurance, health insurance, and trade union contribution expenses in accordance with state regulations;

c) Meal allowance during work breaks. The amount per person shall not exceed the minimum wage stipulated by the state for workers and civil servants;

d) Hardship allowances as prescribed by law;

đ) Allowances for Council members working part-time;

e) Transaction attire costs;

h) Personal protective equipment expenses in accordance with regulations;

h) Depreciation costs of fixed assets. The rate of provision is determined by the Ministry of Finance as for state-owned enterprises;

i) Postal fees, maintenance and repair of fixed assets, procurement of tools, office supplies, warehouse operation costs, loading and transportation costs, electricity and water costs, health and sanitation costs, fuel costs, travel expenses, training and professional skill improvement costs, scientific research and technological innovation costs;

k) Publicity, press conference, transaction, foreign affairs, conference costs. These expenses shall not exceed 7% of total costs in the first two years of establishment and not more than 5% thereafter;

l) Other management expenses as prescribed.

3. Financial activity expenses:

a) Expenses from trading in government bonds and treasury bills;

b) Asset rental expenses.

4. Extraordinary expenses:

a) Costs for recovering written-off debts;

b) Expenses for collecting penalties as prescribed;

c) Asset insurance expenses and other types of insurance expenses as prescribed;

d) Other extraordinary costs.

Article 15. The Fund shall accurately account for expenses in accordance with established regulations and bear legal responsibility for the accuracy of all expenses and comply with regulations on invoices and accounting vouchers.

Article 16. Expenses not to be accounted for in the Fund's operations

1. Losses that have been supported by the Government or compensated by insurance agencies or the party causing the loss.

2. Administrative fines, environmental fines, overdue loan penalties due to subjective reasons, financial system violation fines.

3. Expenses for basic construction investment and fixed asset purchases.

4. Expenses from other funding sources.

Chapter IV

INCOME AND EXPENSE DIFFERENTIALS AND RESERVE FUND ALLOCATION

Article 17. The difference between financial income and expenses realized in a year is the result of the Fund's financial activities, determined by subtracting total expenses incurred in the year from total income.

Article 18Distribution of Income

After deducting legal penalties for violations, the annual financial income and expenditure difference shall be distributed as follows:

1. Allocating 10% to the operational risk reserve fund. The allocation continues until the balance reaches 25% of the charter capital.

2. Allocating up to 50% to the development investment fund.

3. Allocating 5% to the severance pay reserve fund. The allocation continues until the balance reaches six months' salary of the Development Support Fund.

4. Allocating to the award and welfare funds. The allocation ratio for these two funds is implemented as for state-owned enterprises. The distribution ratio of the two funds is decided by the Fund Management Board.

5. The remaining amount after establishing the above funds will be added to the development investment fund.

Article 19. In the first five years since the Fund begins operations, the Fund may spend according to the financial plan approved by the Fund Management Board and reported to the Ministry of Finance. The Fund's financial plan is based on the Fund receiving management fees at 0.2% per month on the average outstanding domestic credit balance and 0.3% per annum on the average outstanding foreign credit balance. In cases where income does not cover planned expenses, the Fund reports to the Ministry of Finance for handling within its authority.

Chapter V

ACCOUNTING SYSTEM, STATISTICAL REPORTING, AUDITING, AND FINANCIAL PLANNING

Article 20. The Fund must implement current accounting and statistical systems and directives issued by the Ministry of Finance.

The Fund's fiscal year starts on January 1 and ends on December 31 of each calendar year.

Article 21The Fund is responsible for preparing and submitting the following financial plans in accordance with current regulations:

1. Plan for sources and use of capital.

2. Plans for state budget support for preferential activities: interest rate subsidies, post-investment interest rate support.

3. Basic construction investment plan.

4. Income and expenditure financial plan.

5. Staffing and salary fund plan.

Article 22The Fund is responsible for preparing and submitting business reports, statistical reports, accounting reports, and other periodic and special reports as required by current regulations and the Ministry of Finance.

The Fund's annual financial settlement report is approved by the Fund Management Board and submitted to the Ministry of Finance.

Annually, based on the Fund's financial settlement report, the Ministry of Finance will review and inspect according to the functions of the state management agency.

Article 23. The Fund implements internal audit procedures, publicly announces annual financial results in accordance with the Ministry of Finance's guidelines, and is responsible for the published data.

Chapter VI

IMPLEMENTATION

Article 24. The Ministry of Finance shall take the lead and coordinate with relevant ministries and sectors to guide the implementation of this Regulation.