Circular No. 26-TC/NSĐP guiding the implementation of Resolution No. 138-HĐBT dated November 19, 1983 of the Council of Ministers on improving the system of budgetary management decentralization at the district level.

CIRCULAR

OF THE MINISTRY OF FINANCE NO. 26-TC/NSĐP ON JUNE 29, 1984 GUIDING THE IMPLEMENTATION OF RESOLUTION NO. 138-HĐBT ON NOVEMBER 19, 1983 OF THE COUNCIL OF MINISTERS ON IMPROVING THE SYSTEM OF DECENTRALIZED MANAGEMENT OF THE STATE BUDGET FOR PROVINCES.

The Council of Ministers issued Resolution No. 138-HĐBT on November 19, 1983 on improving the system of decentralized management of the state budget for localities; in which Part V of the Resolution of the Council of Ministers set forth provisions regarding the improvement of the construction and management of the county budget to make the county (and equivalent administrative units) truly become a level of budget management.

The Ministry of Finance guides specific points on improving the system of decentralized management of the state budget for counties and equivalent administrative units (hereinafter referred to as counties).

I. DETERMINATION OF THE POSITION OF THE COUNTY BUDGET

The county budget is the basic financial plan of the county for building and developing the economy, culture, and society at the county level.

The county budget is a component part of the provincial budget. The county budget includes the county-level budget and the budgets of communes within the county. The commune budget is a component part of the county budget. The entire local budget (at all three levels of province, county, and commune) is a component part of the state budget. Therefore, the requirement to improve the system of decentralized management of the state budget for the county and provincial levels according to Resolution No. 138-HĐBT of the Council of Ministers this time must aim to:

a) Ensure the unified management by the Central Government of financial policies and systems, and concentrate the majority of revenues for the central government's budget to meet the important expenditure needs of the country.

b) Enhance the responsibility of the county-level government in participating in national financial management, while creating reasonable conditions for the county to be proactive in building and implementing the county budget plan to promote economic development, cultural advancement, and improve the living standards of the people in the county.

II. CONTENTS OF INCOME AND EXPENDITURE OF THE COUNTY BUDGET

The county budget is allocated by the People's Committee and People's Council of the province, city, special zone (hereinafter referred to as province) within the provincial budget according to the following unified regulations:

A. THE EXPENDITURE TASKS OF THE COUNTY BUDGET MUST BE SUITABLE WITH THE ACTUAL SITUATION AND MEET THE REQUIREMENTS OF DECENTRALIZED MANAGEMENT OF THE ECONOMY AND CULTURE AT THE COUNTY LEVEL.

The contents of expenditures from the county budget include:

1. CAPITAL FOR BASIC CONSTRUCTION TO BUILD ECONOMIC AND CULTURAL PROJECTS OF THE COUNTY.

Sources of capital for basic construction of the county include:

a) Concentrated capital distributed and transferred by the province from the central government's budget investment in projects listed in the national plan notified to the province and the self-owned capital of the provincial budget allocated by the Provincial People's Committee to the county according to the basic construction plan index decided for the county.

b) Self-owned capital of the county budget raised by the county such as increased revenue, savings in expenditure during the year, surplus funds from the previous year's county budget, lottery proceeds reserved for the county by the province, contributions from the welfare fund of state-owned enterprises under the central or provincial government located in the county, voluntary contributions from the people in cash or kind and labor under the principle of joint effort between the state and the people, and loans from the State Bank for equipment procurement by county enterprises (if applicable).

In previous years, many counties were not assigned tasks to manage capital for basic construction by the province. Now, the Provincial People's Committee should assign the management of economic and cultural projects of the county with medium and small scales and non-complex technology to the county. The management, disbursement, and settlement of capital for basic construction of the county must comply with the principles and regulations of state management of capital for basic construction.

2. Working Capital for County-Owned State Enterprises.

The county budget ensures sufficient working capital quotas for directly managed county-owned state enterprises according to the current system.

For newly transferred state enterprises to the county, when transferring, a detailed inventory and assessment of assets, capital, debts, and immediate determination of working capital quotas for the enterprise must be conducted. The provincial budget should provide adequate capital before transfer to facilitate county management. During operation, if the county deems it necessary to expand, the county budget will ensure additional funding.

If county-owned state enterprises suffer losses in production and business operations, the County People's Committee must carefully examine and consider whether the county budget should cover the losses.

3. Expenditure on Economic Services.

The county budget ensures operating expenses for economic service organizations at the county level, including salaries, allowances, and collective welfare for staff engaged in services; expenses for purchasing materials and equipment, and operational costs of agricultural stations and nurseries that have not yet implemented independent economic accounting (seedling nurseries, plant and animal breeding stations, pest control stations, veterinary stations...), forest management and protection services according to Circular No. 1-TT/LB dated January 18, 1984 of the Joint Ministry of Finance - Forestry - State Planning Commission (if delegated by the province to the county), water conservancy, dike maintenance services; road maintenance and bridge repair services; repair of public buildings and maintenance of public welfare facilities managed by the county...

4. Expenditure on Educational, Health, Cultural, and Social Services.

Expenditures for educational, health, cultural, and social services include salaries, allowances, and collective welfare for staff, expenses for purchasing and repairing schools, hospitals, cultural facilities, and operational costs of primary education, literacy training, and initial cadre and technical worker training; health care, disease prevention, maternal and child health care, family planning, childcare, sports, culture, arts, and information broadcasting services of the county delegated by the province to the county management. The county budget also ensures support for visiting and assisting families of war heroes, martyrs, those who contributed to the revolution, and relief for the people affected by disasters (in cases of major natural disasters or enemy attacks, the provincial and central government budgets will provide partial assistance).

To expand educational, cultural, and social work, the People's Committee of the district properly applies the principle that both the State and the people participate in building, repairing, and equipping facilities for schools, hospitals, cultural works, and sports venues in the district.

5. Administrative management expenses.

Except for the sectors of the county military unit, public security, prosecution, statistics, commerce tax, county party committee office, post office, bank, and foodstuff (vertical sector) which are funded by the Central Budget according to the vertical system, all other organizations under the administrative machinery of the county government and county mass organizations are covered by the county budget, including salaries, allowances, collective welfare, and all operational expenditures in accordance with state policies, systems, and standards.

6. Other expenditures.

In addition to the sources of capital and funds for the aforementioned expenses, the county budget also ensures funding for militia training and recruitment, maintenance of border guard forces, and other expenses as stipulated by state regulations.

7. Transfer payments from the county budget to the commune budget for tax redistribution and commune budget subsidies.

While the unified management and accounting of the commune budget according to the state budget management system has not yet been implemented, all revenues from agricultural taxes, new taxes, slaughter taxes, and other commercial-industrial taxes collected directly by communes must be fully remitted to the state budget before being redistributed to the communes. The portion allocated to the commune budget must be planned and recorded in the county budget, then the county budget will transfer payments to the commune budget according to the redistribution ratio specified by the county for each commune.

Revenue from the submission of agricultural products (5%) collected for the commune budget is also planned within the county budget and the county budget transfers payments to the commune budget.

For communes truly facing difficulties where commune budget revenues cannot cover expenditures, the county budget provides subsidies in the initial years to support these communes in quickly achieving self-balanced budgets.

8. Subsidies for the sale price of goods supplied to county-managed employees and dependents.

Depending on the situation of economic management decentralization to the county and the level of financial management capability of the county, the Provincial People's Committee may delegate the county budget to assume responsibility for subsidies for goods supplied to county-managed employees and dependents. This expenditure must be calculated according to the designated objects and subsidy prices as prescribed by state regulations.

9. Additionally, the county budget allocates a contingency fund ranging from 3% to 5% of the total regular expenditures of the county budget to address unexpected needs not foreseen in the annual budget estimate.

B. SOURCES OF REVENUE AND REDISTRIBUTION RATES FOR THE COUNTY BUDGET.

Allocation of revenue sources for the county budget should prioritize those revenues requiring the dynamism and initiative of the county to develop its economy, actively exploit and generate more revenue for the county budget while ensuring the expenditure tasks of the county budget, minimizing subsidies to balance the county budget to the lowest extent possible.

The sources of revenue and redistribution rates for the county budget are defined as follows:

1. Revenues retained entirely for the county budget include:

a) Revenue from depreciation, recovery of working capital, and proceeds from the sale of discarded assets of enterprises directly managed by the county.

b) Revenue from county public services.

c) Revenue from afforestation and forest protection (if delegated by the province to the county).

d) Revenue from the welfare fund of central state-owned enterprises operating within the county (the portion allocated to the county).

e) Revenue from the submission of agricultural products at 10% of their value submitted to the province and central government at the state procurement price, of which 5% goes to the county budget and 5% is transferred to the commune budget as stipulated by the state.

g) Revenue from lottery sales (the portion allocated to the county).

Other revenues such as fees, fines, and contributions from the people for the construction and repair of water conservancy, transportation, school, hospital, and welfare projects approved by the state.

2. Revenues of the national budget uniformly redistributed by the Provincial People's Committee for all counties in the province:

a) Revenue from state-owned enterprises and profits (including local import-export price differences if any) managed by the county, including enterprises funded by the county budget or built with bank loans.

b) Revenue from state-owned enterprises and profits managed by the provincial government located within the county, including price differences (if any).

Agricultural tax (including 10% redistributed to the commune budget).

c) Commercial-industrial tax (including the portion redistributed to the commune budget, if any).

The uniform redistribution rate for county budgets shall not exceed the central government's uniform redistribution rate for the provincial budget.

3. Additional redistributed revenues.

For counties where the uniform redistribution rate does not meet the expenditure requirements according to state policies and systems, the Provincial People's Committee supplements the redistribution rate and additional revenues for the county budget in the following order:

a) Agricultural tax.

b) Commercial-industrial tax.

c) Revenue from state-owned enterprises and profits managed by the county.

d) Revenue from state-owned enterprises and profits managed by the provincial government.

4. Redistribution rates for county budgets (including both the uniform redistribution rate and any supplementary redistribution rate) shall not exceed the central government's announced redistribution rate for the provincial budget (city and special zone) and shall remain stable until the end of 1985.

5. Subsidies from the provincial budget to the county budget.

After determining the revenue sources and maximum redistribution rates (equal to the central government's allocation for the provincial budget), if the county budget revenues still fall short of meeting expenditure requirements, the provincial budget will consider providing subsidies to the county budget to cover the shortfall. This subsidy is reviewed annually and notified to the county at the beginning of each year.

III. BUDGET PLANNING INDICATORS ASSIGNED TO COUNTIES.

Pursuant to Resolution No. 138-HĐBT on improving the system of budgetary management decentralization and Decree No. 158-HĐBT dated February 17, 1983 of the Council of Ministers on issuing the system of legal indicators for the state plan in 1984, after clearly determining the expenditure tasks, sources of revenue, and the rate of revenue redistribution (the unified general rate and the supplementary rate) for each district's budget within the province, the Provincial People's Committee has the responsibility to assign the following annual state budget planning indicators to the district authorities.

1. The total state budget revenue on the district's territory, including the specific revenue collection tasks from state-owned enterprises, profits of state-owned enterprises, agricultural tax, and business and industry tax.

2. The supplementary redistribution rate for the district's budget (if applicable).

3. Subsidies from the provincial budget to the district's budget (if applicable).

4. Centralized investment capital for basic construction projects allocated by the province to the district according to objectives.

Along with assigning the above legal indicators, the Department of Finance may also assign guiding budget planning indicators to assist the district authorities in aligning the district budget with the provincial budget, adequately distributing funds and expenses for necessary tasks that are consistent with the local state plan's direction and tasks.

IV. RIGHTS AND RESPONSIBILITIES OF THE DISTRICT AUTHORITIES IN MANAGING THE DISTRICT BUDGET.

Annually, based on the state plan indicators assigned by the Chairman of the Provincial People's Committee to the district authorities and the guiding indicators provided by the Department of Finance, the District People's Committee must prepare the formal district budget draft, submit it to the District People's Council for approval, then issue revenue and expenditure tasks to units, enterprises, and grassroots organizations within the district, assign agricultural tax, business and industry tax collection, and village budget revenue and expenditure tasks to the village authorities for implementation, and simultaneously send them to the Provincial People's Committee and the Department of Finance for monitoring and management.

The district budget plan must ensure at least the minimum total state budget revenue and major revenue items on the district's territory as stipulated by the Provincial People's Committee. If the District People's Committee can increase revenue sources and build a higher state budget revenue plan (calculated based on the redistribution rate allocated to the district's budget), they have the right to allocate a higher district budget expenditure, adhering to the principle of not exceeding the district's revenue capacity, prioritizing increased investment in basic construction projects, additional working capital for district enterprises (if needed), or funding economic, educational, cultural, and health development needs of the district.

While managing the budget, the district should strive to economize on administrative expenditures to balance spending for economic development and cultural activities and ensure sufficient funding for basic construction.

During the execution of the budget, if the district exceeds its revenue plan, in addition to the portion of the district's budget that benefits from the redistribution rate set by the province, the district's budget will also be eligible for a share of the central government's bonus fund allocated to the provincial budget and the excess revenue of the provincial budget, with the bonus rate determined by the province.

If the district fails to meet its revenue plan, it must rearrange expenditures to achieve budget self-balance. Only after such rearrangement, if the budget still cannot be balanced due to objective reasons such as severe natural disasters or enemy attacks, will the province consider providing support to the district through loans or additional subsidies.

If the district ends up with a surplus due to increased revenue and reduced expenditure, the district may use this surplus for two purposes:

- To establish a financial reserve fund for the district, allocating half (50%) of the surplus.

- The remaining amount will be recorded as revenue for the next year to serve as self-funded capital for basic construction projects aimed at expanding economic and cultural welfare facilities in the district.

The district's financial reserve fund shall be deposited in an account at the State Bank and replenished annually with the district's budget surplus, aiming to reach a level equivalent to 2 to 3 months of regular expenditures. This fund can only be temporarily borrowed when budget revenues are not yet collected and must be repaid by the end of the fiscal year.

For village budgets, the Ministry of Finance will issue separate circulars.

V. ENHANCING FINANCIAL DISCIPLINE

This improvement in the decentralized management of the budget is crucial for reforming the management mechanism, overcoming bureaucratic centralism, rigidity, and paternalism, thereby creating conditions for local authorities at all levels (province, district, village) to proactively exploit local potential for economic development, boost production, actively increase revenue to meet local expenditure needs, and gradually stabilize and institutionalize budget management. Therefore, it is essential to enhance financial discipline, strengthen the management responsibilities of district authorities, intensify supervision by provincial authorities, and strictly enforce all financial policies, systems, and regulations prescribed by the state.

The most important aspect of national financial discipline is outlined in Resolution No. 138-HĐBT of the Council of Ministers, which the Ministry of Finance has clarified as follows:

1. All financial revenues and expenditures from villages to districts, provinces, and the central government must comply with centrally established policies and systems. If localities find any inconsistencies, they should study and propose adjustments to the Ministry of Finance. Local authorities at all levels (provinces, districts, villages) are not allowed to arbitrarily establish revenue and expenditure policies and systems that contradict central regulations and the guidance of the Ministry of Finance.

2. All revenues belonging to a certain level of budget must be collected fully and promptly into that level of budget according to the adjustment ratio for each revenue item prescribed by the Central Government for provincial budgets and by provinces for district budgets. All expenditures from a certain source of funds must be used strictly for their intended purposes. Local authorities at all levels shall not arbitrarily issue orders to collect revenues of higher-level budgets or to divert funds from higher-level budgets for their own budgets, as each level's budget falls under the jurisdiction of the budget account holder of that level. Both the person issuing incorrect orders and the person executing such orders are considered violations of state financial discipline.

3. All revenues and expenditures of the budget must be fully and promptly recorded in the State budget accounting and truthfully reflected and reported to the local authority of their level and the higher-level finance agency. It is absolutely forbidden for units, agencies, and local authorities at all levels to establish and maintain illegal funds on their own initiative. Any revenues kept outside the budget, even if deposited with the State Bank, are considered extrabudgetary funds and illegal funds.

4. Strengthening the work of inspection and audit of financial matters by local authorities at all levels is required. Any actions contrary to the provisions above are considered violations of state financial discipline and must be dealt with strictly.

The finance agencies and the State Bank at the provincial and district levels have the responsibility to strictly implement the provisions regarding financial discipline mentioned above, while also inspecting and identifying agencies and units establishing extrabudgetary funds and illegal funds, and enforcing the national standards and regulations correctly.

VI. IMPLEMENTATION MEASURES

The Council of Ministers' Resolution on improving the decentralization of budget management for localities begins to be implemented from January 1, 1984.

To implement the policy of the Council of Ministers properly, it is requested that the Chairmen of People's Committees of provinces, cities, and centrally-administered municipalities:

1. Based on the 1984 provincial budget plan, the situation, and the policies and decisions on economic decentralization of the province for district authorities, apply this Circular to issue a decision clearly defining the tasks of expenditures assigned to districts, thereby determining the revenues and unified adjustment ratios for district budget revenues. For districts where general revenue does not meet expenditure needs, the province decides on supplementary adjustment ratios (up to the maximum central adjustment ratio for provincial budgets) and subsidies (if any), and immediately notify the People's Committees of the districts, finance agencies, and State Banks at all levels to implement them.

2. Direct the People's Committees of districts to calculate and prepare the 1984 budget revenue and expenditure plans in accordance with the policies and new budget management decentralization resolutions of the Council of Ministers, this Circular of the Ministry of Finance, and the provincial resolution on decentralization for district budgets. Any guidance in Circular No. 8-TC/QLNS dated May 31, 1979 of the Ministry of Finance concerning budget management decentralization for districts that contradicts the provisions of this Circular shall be abolished.

3. Direct the Department of Finance to consolidate the budget plans of districts, towns, and cities within the province together with the provincial budget revenue and expenditure plan, forming the provincial, city, and special zone budget plan (clearly divided into three levels: province, district, commune) in accordance with the model provided in Circular No. 44-TC dated December 20, 1983 of the Ministry of Finance on preparing the 1984 State budget under the new decentralization system, and submit it to the Ministry of Finance no later than July 31, 1984.

4. Implement adjustments to budget revenues of the first months of 1984 among the central, provincial, and district budgets according to the guidance in Circular No. 8-TC/NSĐP dated February 24, 1984 of the Ministry of Finance.

During the implementation process, if there are any difficulties, they should be promptly reported to the Ministry of Finance for study and resolution.