Circular No. 32/2005/TT-BTC guiding the financial management regime of state finances for non-repayable foreign aid sources for Associations.

CIRCULAR

Guidelines for the State Financial Management System for Non-Repayable Foreign Aid to Associations

from abroad

Pursuant to Decree No. 60/2003/NĐ-CP dated June 6, 2003 of the Government detailing and guiding the implementation of the State Budget Law.

Pursuant to Decree No. 77/2003/NĐ-CP dated July 1, 2003 of the Government on the functions, tasks, powers, and organizational structure of the Ministry of Finance.

Based on Decree No. 88/2003/NĐ-CP dated July 30, 2003 of the Government regarding organization, operation, and management of Associations;

Pursuant to Decision No. 64/2001/QĐ-TTg dated April 26, 2001 of the Prime Minister promulgating the regulations on management and utilization of non-governmental foreign aid.

The Ministry of Finance issues guidelines for the State financial management system for non-repayable foreign aid to associations as follows:

A. GENERAL PRINCIPLES

1. These Circulars apply to Union Associations, General Associations, Associations, political-social organizations, political-social-professional organizations, social-professional organizations, non-state public service units at central and local levels, and organizations with legal personality established by Union Associations, General Associations, Associations, Schools, Institutes...or state agencies at various levels (hereinafter referred to collectively as Associations) that receive non-repayable foreign aid.

2. Non-repayable foreign aid referred to in these Circulars means assistance in the form of money, goods, knowledge, from governments (if applicable), international organizations, non-governmental organizations from abroad, economic or scientific organizations, or individuals from abroad (hereinafter referred to as the Donor) directly provided to Associations or through Associations, officially signed between both parties and approved by competent authorities.

3. Non-repayable foreign aid directly provided to Associations is considered income of the Associations; when receiving aid, Associations base on the value recorded on the aid confirmation certificate to increase their financial resources and assets simultaneously. The Ministry of Finance performs its state management function over this aid through accounting, statistics, reporting, and inspection work to ensure transparent and lawful financial management of Associations.

4. Non-repayable foreign aid provided to the Government of Vietnam or local authorities through Associations is considered state budget revenue as stipulated in Article 30 and 31 of Chapter 3 of the State Budget Law (Law No. 01/2002/QH11 adopted by the National Assembly of the Socialist Republic of Vietnam at its second session from November 12 to December 16, 2002). When receiving aid, based on the value recorded on the aid confirmation certificate, state financial agencies record state budget revenue (central government budget if aid is for the Government and local government budget if aid is for localities) while recording disbursements to beneficiaries. 5. Associations directly using, managing non-repayable aid or assigned to implement non-repayable aid programs/projects are responsible for implementing the agreed purposes and contents with donors and decisions approving aid by competent authorities; fully comply with current state regulations on financial management, strictly follow the Accounting Law, and provisions in these Circulars.

I. RECEIVING NON-REPAYABLE AID

B. SPECIFIC PROVISIONS

1. Conditions for Confirmation of Non-Repayable Aid

All foreign aid must meet the conditions set out in the regulations on receiving non-repayable aid to be confirmed for receipt:

a. The recipient entity must be a legally established organization with legal personality under the law.

b. There must be a signed agreement between the Donor and the recipient entity and a decision approving aid by the competent authority as prescribed by law.

2. Confirmation of Aid

All non-repayable aid that meets the conditions for receipt must go through the aid confirmation procedure. Associations receiving aid are responsible for completing the declaration and requesting aid confirmation procedures. The aid confirmation certificate issued by the Ministry of Finance serves as the document for recording budget revenue-expenditure for aid to the Government and local authorities, as the accounting document for the recipient and managing entities, and as the basis for tax exemption procedures for imported aid goods and tax refund for goods purchased domestically with aid funds.

a) Aid Confirmation Certificate

The aid confirmation certificate is issued according to Model 1 and Model 2 attached to these Circulars.

- + Model 1 is the aid confirmation certificate for goods.

+ Model 2 is the aid confirmation certificate for money.

- The aid confirmation certificate for goods is made in five copies. If the aid goods are cars or motorcycles, an additional copy must be made for registration.

- The aid confirmation certificate for money is made in four copies.

b) Items requiring aid confirmation include

- Construction projects implemented and transferred by the Donor in the form of "turnkey" or carried out by the project owner through full-package tendering.

- Goods and equipment listed in the project annex or in the aid notification imported or purchased domestically.

- Foreign currency or Vietnamese dong transferred by the Donor to domestic entities for direct use to fulfill aid agreements (including aid for activities with administrative or service fees as committed in the project documentation).

- Consulting services and technical services paid from non-repayable aid program/project funds as evidenced by contracts signed between the project owner and consulting organizations within and outside the country.

c) Time and place of confirmation

c) Time and place of acknowledgment

Upon receiving aid funds, goods, or notification of receipt of goods; the Bank's confirmation letter regarding aid funds; or immediately after the acceptance and handover, final settlement of procurement contracts, tender contracts, and consultancy service contracts, the entities specified above shall submit to the Ministry of Finance (Department of Foreign Finance - Ministry of Finance - Hanoi or International Aid Management and Reception Team in Ho Chi Minh City, No. 138 Nguyen Thi Minh Khai Street, District 3, or International Aid Management and Reception Team in Da Nang - No. 48 Pasteur Street) the documents stipulated below for the purpose of confirming aid.

3. Documents required for confirming aid

a) For aid goods, the following documents are required:

- Decision approving aid from the competent authority

- Contract documents signed with the donor.

- Project aid documentation.

- Approval document for commercial contract in accordance with current regulations, accompanied by a commercial invoice (Invoice) or an invoice issued by the Ministry of Finance if purchasing domestically.

- Ocean bill of lading (Bill of Lading) or air waybill (Airway Bill).

- Detailed packing list (Packing List).

In cases where invoices and bills of lading are not yet available, a receipt of goods from the transportation organization must be provided.

If a consignment of aid goods is sent to multiple locations, a power of attorney from related units and a detailed distribution list of aid goods must be attached.

For programs and projects that are tendered in Vietnam to purchase equipment, goods, and consultancy services using aid funds, in addition to the aforementioned documents, the following additional relevant documents are required:

- Minutes of the tender results, decision recognizing the successful bidder or approval of the successful bidder by the project approval authority.

- Supply contract or service contract signed between the Project Owner and the successful bidder.

- Foreign trade contract (for import-export companies that win bids to purchase goods for aid projects and must import goods), or an invoice according to the model prescribed by the Ministry of Finance if purchasing domestically produced goods.

b) For aid funds, the following documents are required:

- Decision approving aid from the competent authority

- Contract documents signed with the donor.

- Project aid documentation.

- Documents proving the receipt of aid funds.

c) For construction projects funded by aid in the form of "turnkey" projects implemented by the donor or carried out by the project owner through a lump-sum tendering method:

In this case, the Ministry of Finance will confirm aid only once, upon completion, acceptance, and handover of the project. The documents for confirming aid include:

- Decision approving aid from the competent authority

- Contract documents signed with the donor.

- Project aid documentation.

- Procurement contract (Construction contract, procurement contract, consultancy contract).

- Acceptance, handover minutes, and contract termination minutes.

d) In urgent situations or due to other objective reasons, if the recipient of aid cannot promptly complete the procedures for confirming aid, they must report the value of received aid (for aid to the Government of Vietnam or local authorities implemented through Associations) quarterly to the financial department at their level to record the receipt and expenditure of state budget funds for aid money and goods according to Form No. 3 issued together with this Circular..

II. TAX REGIME FOR GOODS PURCHASED WITH NON-REPAYABLE AID FUNDS

NON-REPAYABLE AID FUNDS

All materials, goods, machinery, equipment, and transport vehicles imported or purchased domestically from non-repayable aid funds approved by the competent authority are exempt from indirect taxes (import tax, special consumption tax, value-added tax) in accordance with current tax laws.

1. For imported goods

For goods not listed in the prohibited import list or the list of goods subject to management under Decision No. 46/2001/QD-TTg dated April 4, 2001, of the Prime Minister on managing exports and imports of goods during the period 2001-2005, the recipient must present the decision approving aid from the competent authority, the aid contract documents signed with foreign parties, and the aid confirmation document from the Ministry of Finance to the customs authority to be exempted from indirect taxes when receiving goods.

2. For domestically purchased goods

- When Associations use non-repayable foreign aid funds to purchase goods in Vietnam, they are entitled to a refund of the value-added tax paid as shown on the value-added tax invoice at the time of purchase.

The refund application for this case shall be carried out in accordance with the guidance at Point 5, Section II, Part D of Circular No. 120/2003/TT-BTC dated December 12, 2003, of the Ministry of Finance guiding the implementation of Decree No. 158/2003/NĐ-CP dated December 10, 2003, of the Government detailing the implementation of the Law on Value-Added Tax and the Law amending and supplementing certain articles of the Law on Value-Added Tax.

- When the donor purchases goods in Vietnam for aid to Vietnam, those goods are exempt from value-added tax. To be exempt from value-added tax, the donor must provide a document to the seller specifying the name of the international organization or foreign individual purchasing the goods for non-repayable aid to Vietnam, the quantity or value of the goods purchased, and a confirmation document from the Ministry of Finance regarding the aid amount.

At the time of sale, the seller must issue an invoice in accordance with the provisions at Point 5.1, Section IV - Part B of Circular No. 120/2003/TT-BTC dated December 12, 2003, of the Ministry of Finance guiding the implementation of Decree No. 158/2003/NĐ-CP dated December 10, 2003, of the Government detailing the implementation of the Law on Value-Added Tax and the Law amending and supplementing certain articles of the Law on Value-Added Tax.

III. ON INVESTMENT IN BASIC CONSTRUCTION AND PROCUREMENT OF MATERIALS AND GOODS FROM NON-REPAYABLE AID FUNDS

FROM NON-REPAYABLE AID FUNDS

1. On investment in basic construction

- For aid funds allocated to the Government or local authorities through Associations, if there is a basic construction investment project, the Association is responsible for implementing the capital management regulations for basic construction investment and the bidding regulations for basic construction in accordance with current regulations.

- For direct aid funds allocated to Associations, if there is a basic construction investment project, the project owner is solely responsible for the effectiveness of the investment, while the State manages only the planning and construction permit issuance.

2. On procurement of materials and goods

- For government aid sources or local administrative levels implemented through Associations, when purchasing equipment, materials, supplies, and working tools, the Association must comply with current regulations on bidding and procurement.

- For direct aid to the Association, when purchasing equipment, materials, supplies, and working tools, the Association shall be responsible for the effectiveness of such purchases.

IV. STANDARDS FOR AID EXPENDITURE

The standards for using aid funds to cover project activities (salaries and allowances; training, seminar, conference expenses; travel expenses, administrative management costs, etc.) shall be carried out according to the following provisions:

1. For expenditures specified with specific expenditure standards in the signed aid agreement with the donor, the Association shall implement according to the agreed standards with the donor.

2. For expenditures not specified with specific standards by the donor, the Association should refer to the expenditure levels of other similar organizations for comparable projects or domestic expenditure standards to determine appropriate expenditure levels that meet the project's requirements, based on the principle of ensuring frugal and effective spending.

V. ACCOUNTING, SETTLEMENT, AND REPORTING ON AID IMPLEMENTATION

1. The Association must establish an accounting system or appoint accountants to organize accounting work for the receipt, management, and utilization of non-reimbursable aid in accordance with the detailed regulations and guidance provided in Decree No. 128/2004/NĐ-CP dated May 31, 2004, issued by the Government on implementing certain provisions of the Accounting Law applicable to state accounting and accounting systems prescribed by the Ministry of Finance.

The Association must organize documentation, accounting books, and financial reports to track in detail and settle separately the value of direct aid to the Association and the value of aid to the Government or local administrative levels implemented through the Association, including:

- Organizing accounting for aid to the Government or local administrative levels in accordance with accounting laws applicable to units using state budget funds.

- Organizing accounting for direct aid to the Association in accordance with accounting laws applicable to units not using state budget funds.

Annual settlement reports for direct aid to the Association are annual financial statements. The Association must submit annual financial statements and annual settlement reports to the immediate superior authority and the same-level finance authority in accordance with Article 24 and Article 25 of Decree No. 128/2004/NĐ-CP dated May 31, 2004, issued by the Government.

2. The immediate superior accounting unit of the Association has the responsibility to review, audit, and approve the annual settlement of aid implemented by the Association.

For aid projects for the Government or localities implemented through the Association, upon completion of the aid program, the Association is responsible for preparing a final settlement report for approval by the competent authority. After the final settlement report is approved, the Association must transfer the project to the recipient unit for reception and management. The handover record must fully document decisions made by the approving authority regarding remaining funds, existing assets, surplus or shortage of assets, outstanding debts, etc., and the Association must also hand over to the recipient unit a report evaluating the project's implementation results, particularly highlighting the necessary conditions for long-term project effectiveness.

3. The Association must disclose the contents of the annual financial statement and the settlement of financial income and expenditure for the year in accordance with Articles 32 and 33 of the Accounting Law.

4. Annually and semi-annually, the Association must report to the immediate superior authority and relevant authorities at the same level (finance, statistics, planning and investment) on the implementation of aid according to Model Form 4 attached to this Circular.

5. For aid to community revolving credit programs implemented through the Association, depending on the specific characteristics of each locality, the Association is responsible for coordinating with local authorities and social organizations to study and develop management regulations for credit programs suitable for the local economic and cultural characteristics; establishing a community credit program management board to maximize the effectiveness of the credit program while ensuring the safety of loans. During implementation, the Association is responsible for promptly reflecting each fund transfer to the management board, coordinating with the management board to report semi-annually and annually on loaning situations, the effectiveness of loan usage, and the ability to recover borrowed funds.

Upon completion of the revolving credit program, the Association is responsible for coordinating with the management board to prepare a comprehensive settlement report on the credit program to be submitted to the Provincial Department of Finance.

The credit program settlement must reflect the main indicators as follows:

Total amount of capital lent.

Total amount of capital recovered.

Total amount of unrecovered debt (classified and assessed for recovery potential, recommendations for handling uncollectible debts).

Total interest generated, interest used, unused interest (specifying the use of interest and recommendations for unused interest).

The Provincial Department of Finance where the community uses the credit capital has the responsibility to inspect and approve the credit program settlement.

The approved credit program settlement serves as the basis for transferring recovered credit capital.

The entity receiving the handover and the direction for continuing to utilize the recovered credit funds shall be carried out according to the commitments already signed with the sponsor. In cases where the commitment does not specify the recipient and purpose of using the recovered funds from the credit program, the Council shall guide the Program Management Board to propose the purpose and recipient of the recovered funds for submission to the Department of Finance for decision (continuing the program at the local level, transferring to another area within the province, submitting to the local budget...).

VI. FINANCIAL HANDLING IN CASES OF ORGANIZATIONAL STRUCTURAL CHANGES OF THE ASSOCIATION

DIVISION; MERGER; CONSOLIDATION; DISSOLUTION AND TERMINATION OF OPERATIONS

1. In principle, financial resources and assets formed from non-repayable aid directly allocated to the Association shall belong to the Association, serving purposes consistent with the regulations on organization and operation of the Association as stipulated by law, under no circumstances may they be converted into personal property in any form.

2. When dividing, splitting; merging; consolidating; dissolving and terminating operations, the Association must strictly comply with all provisions set forth in Article 30, Chapter V, Decree No. 88-2003/NĐ-CP dated July 30, 2003 of the Government on the organization, operation, and management of Associations.

3. Regarding financial management, the Associations have the responsibility to implement specific provisions as follows:

- Upon termination of operations, the entire money and assets formed from non-repayable aid, after settling any debts (if any), the Association must hand over to the direct superior authority of the Association or the authority issuing the termination decision for that authority to negotiate and agree with the finance authority of the same level on the handling thereof.

- The handover of money and assets between the old unit and the new unit upon division, splitting, or merger decisions must be conducted with the witnessing and confirmation of the authority issuing the division, splitting, or merger decision and the finance authority of the same level.

- Documentation related to division, splitting; merger; consolidation; dissolution and termination of operations of the Association is accounting documentation that must be stored for a minimum of 10 years at the storage location as decided by the authority with jurisdiction over division, splitting, merger, or termination of operations of the Association.

- In cases of division, splitting; merger; consolidation; dissolution and termination of operations, the Association must prepare a financial report at the time of division, splitting, merger, or termination.

- In cases of division, splitting; merger; consolidation; dissolution and termination of operations, the Association must fully perform the accounting tasks prescribed in Articles 42, 43, 44, 45, and 47, Section 6, Chapter II of the current Accounting Law.

C. IMPLEMENTATION

1. This Circular shall take effect fifteen days from the date of publication in the Official Gazette.

2. During implementation, if there are any difficulties, the Associations need to promptly reflect them to the Ministry of Finance so that the Ministry of Finance can study, supplement, and amend./.