Circular No. 43/TC-TCNH guiding financial management regulations for the Ho Chi Minh City Urban Development Investment Fund

 

CIRCULAR

Guidelines for the financial management regime of the Urban Development Investment Fund of Ho Chi Minh City

Ho Chi Minh City

Pursuant to Decision No. 644/TTg dated September 10, 1996 of the Prime Minister on the establishment of the Urban Development Investment Fund of Ho Chi Minh City;

Pursuant to Decree No. 178/CP dated October 28, 1994 of the Government stipulating the tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decision No. 1148/QDUB-KT dated March 15, 1997 of the Chairman of the People's Committee of Ho Chi Minh City approving the charter of the Urban Development Investment Fund of Ho Chi Minh City

The Ministry of Finance guides the financial management regulations for the Urban Development Investment Fund of Ho Chi Minh City as follows:

I. GENERAL PROVISIONS

1. The Urban Development Investment Fund of Ho Chi Minh City (hereinafter referred to as the Fund) is a state financial organization established to mobilize capital for direct and indirect investment in economic and social infrastructure projects and urban development projects in Ho Chi Minh City; provide investment advisory services and participate in the capital market.

2. The Fund has legal personality, with a registered capital of five hundred billion Vietnamese dong at its establishment. The Fund has rights under the law and responsibilities regarding assets within the limit of the registered capital managed by the Fund.

3. Financial income and expenditure, accounting, and settlement shall be carried out in accordance with the Accounting and Statistics Law and the financial regulations of the State. The fiscal year of the Fund starts from January 1 and ends on December 31 each year.

4. The operation of the Fund is conducted based on the principle of financial autonomy, preservation and development of capital, self-financing, and self-risk bearing. The Fund is subject to state financial management as guided in this circular.

5. The Fund is responsible for registering and declaring taxes payable according to the provisions of the State.

II. CONTENTS OF FINANCIAL MANAGEMENT

1. Sources of operating capital: The sources of the Fund include:

- Charter capital

- Mobilized capital

- Entrusted capital

- Other sources of funding (if any)

a) Registered capital and additional sources of capital:

- The initial registered capital of the Fund is five hundred billion Vietnamese dong (VND 500 billion), formed from existing revenues of Ho Chi Minh City as prescribed by law, including: Proceeds from the sale of state-owned property; land fund money; surcharges on electricity, water, and telephone rental fees; a portion from the surplus budget of 1996 of the city; and voluntary contributions from organizations and individuals both domestically and internationally (if any).

- The registered capital may be supplemented annually. The mechanism for supplementing the registered capital is stipulated in Section 2, Article 19 of the Charter of the Organization and Operation of the Fund.

b) Mobilized capital: The Fund can mobilize and accept capital from the following sources:

- Medium and long-term loans from domestic and foreign organizations and individuals and other forms of capital mobilization permitted by law;

- Domestic loans from domestic organizations and individuals belonging to various economic sectors through lawful means such as: public issuance of bonds (project bonds, urban bonds, corporate bonds...); and credit contracts.

- Foreign loans through methods: direct and indirect issuance of bonds to the international financial market; composite loans; direct loans from foreign banks and financial institutions; government and international aid sources...as prescribed by the State;

- Other forms of fundraising from grants and assistance;

- Entrusted investment management funds from domestic and foreign investors according to entrustment contracts.

The total outstanding debt from commercial credit loans is limited to not more than one (1) time the registered capital of the Fund at the corresponding time (including the reserve fund and supplementary registered capital).

2. Use of capital:

2.1. Principles of capital utilization: The investment and use of the Fund's capital must ensure financial autonomy, efficiency, preservation, and development of capital; meet the regular payment requirements of the Fund and comply with the following principles:

- The Fund may use up to twenty percent (20%) of its registered capital to purchase shares of other enterprises, with a maximum shareholding ratio of ten percent (10%) of the enterprise. In other cases, permission from the Chairman of the People's Committee of Ho Chi Minh City must be obtained, in compliance with current laws. The Management Board may only decide to purchase shares of an enterprise with a higher ratio than ten percent if it is reduced gradually over three (3) to five (5) years to ensure a maximum shareholding ratio of ten percent.

- The Fund may lend to specific projects with interest rates determined by the People's Committee of Ho Chi Minh City based on the proposal of the Management Board but not exceeding the ceiling for medium and long-term loan interest rates announced by the State Bank at the time of lending.

2.2. Investment capital:

a) The Fund is permitted to use legitimate sources of capital (including the reserve fund for supplementary registered capital) and mobilized capital to invest in projects of Ho Chi Minh City:

- Infrastructure development projects;

- Key industrial projects; agricultural projects.

- Certain public welfare infrastructure projects that do not aim for profit.

b) Investment advisory activities and other investments as stipulated in the Charter of the Fund.

3. Payment and preservation of capital:

- The Fund is responsible for fully and timely repaying principal and interest on all domestic and foreign debts, including international credits permitted by the Government for the Fund to accept.

- Purchasing asset insurance, business risk insurance, and other types of insurance as prescribed by current State regulations.

- The Fund is responsible for managing and using capital for the intended purpose and target, efficiently, recovering principal and interest promptly and fully to ensure capital recovery, cost coverage, and timely and full repayment to organizations and individuals who have lent to the Fund.

- In case of risk, capital loss, or asset loss, the Fund must clearly identify the cause, extent of loss, and develop a resolution plan. For cases where individual or collective responsibility is clearly identified, the individuals or groups causing the asset loss must compensate; the compensation amount is determined by the Management Board in accordance with the Law. For risks and losses due to objective reasons, they will be covered by the Financial Reserve Fund; if the risks and losses are force majeure events such as natural disasters, storms, floods, etc., after using the Financial Reserve Fund for coverage and still not being sufficient, the Management Board of the Fund must report the cause and extent of damage to the People's Committee of Ho Chi Minh City for consideration and resolution after consulting the Ministry of Finance.

4. Depreciation of fixed assets, basic construction costs, procurement, and management of fixed assets:

- The Fund must strictly follow the current regulations on the extraction and use of depreciation of fixed assets.

- Sources of capital for new construction, repair, and procurement of fixed assets of the Fund include the following:

+ A portion of the registered capital to build initial physical infrastructure (the level of use of registered capital for building physical infrastructure is decided by the Management Board upon submission to the People's Committee of Ho Chi Minh City).

+ Sources of basic depreciation of fixed assets.

+ Other sources such as foreign and domestic organization aid funds under various sponsorship projects...

The Fund implements construction activities and purchases of fixed assets within the available capital and in accordance with the Investment and Construction Management Regulations issued together with Decree No. 42/CP dated July 16, 1996, of the Government.

III. INCOME AND EXPENSES OF THE FUND

1. Income items of the Fund:

- Interest income from direct and indirect investment capital;

- Income from direct investment activities;

- Interest income from loan financing;

- Interest income from deposits at State Treasury, banks;

- Consulting service fees for investment;

- Management fees from entrusted investment capital according to entrusted contracts;

- Income from market operations;

- Recovery of reserve fund write-offs;

- Other income generated during operations outside the above items;

2. Operating expenses:

a) Business expenses:

- Expenses related to joint ventures, partnerships, and share capital contributions (if applicable);

- Interest payments on raised bonds;

- Interest payments on medium and long-term loans;

- Payment of interest on entrusted capital according to the Entrustment Contract;

- Expenses for issuing bonds, stocks, and raising capital;

- Expenses incurred in investment appraisal, lending, inspection, and debt recovery for investment projects or projects funded by the Fund;

- Costs for participating in the capital market;

- Service and brokerage commissions as per budget estimates and economic contracts;

- Other business-related expenses.

b) Administrative expenses:

- Wages and various wage supplements;

- Contributions to social insurance, health insurance, and other mandatory deductions based on salary as prescribed by state regulations;

- Allowances for members of the Management Board and other兼任职务的津贴；聘请国内外专家（如有）的费用；

- Depreciation of fixed assets in accordance with state regulations;

- Purchase and provision of working materials and equipment;

- Rent for office space and property tax (if any);

- Repair and maintenance costs for assets;

- Travel expenses;

- Communication and advertising fees;

- Office supplies and seals;

- Training and professional development costs;

- Uniforms and occupational safety equipment costs;

- Other necessary and reasonable expenses such as water, electricity, sanitation, hospitality, conferences, transactions, etc.;

- Provision for price reduction of assets.

3. Financial Revenue and Expenditure Management:

All revenue and expenditure items of the Fund are recorded based on the aforementioned revenue and expenditure categories and valid vouchers.

a) The Fund is responsible for collecting all income generated during its operation accurately, fully, and promptly to record it as income; it shall not allow any income to remain off the books or fail to be recorded as income.

b) The Fund may allocate expenses for its operations as follows:

- Business expenses: Actual business expenses arising from the specified expenses in paragraph a of point 2 above;

- Administrative expenses:

+ The General Director of the Fund establishes economic and technical norms, indirect cost standards to submit to the Management Board for approval as the basis for managing the Fund's operations.

+ Wages and allowances for full-time and part-time staff of the Management Board and Supervisory Board shall be implemented according to the current system.

+ Wages and allowances for the operational management staff: Based on staffing norms and wage systems prescribed by the State, the Fund determines the total wage fund, establishes wage and bonus systems suitable for its operational characteristics to submit to the People's Committee of Ho Chi Minh City for approval. In cases where the Fund encounters difficulties in business operations, it must still ensure the minimum basic salary for its employees. The wage fund shall not be used for other purposes.

+ Fixed asset depreciation costs: All fixed assets of the Fund must be utilized in business operations and depreciated in full according to state regulations.

+ For expenses that do not comply with the system, the person who approves the improper expense shall bear the responsibility to reimburse; excess expenses over approved standards must clearly identify responsibility and propose a resolution plan to the Management Board. The Management Board of the Fund is responsible under the law for its resolution decisions and must report in writing to the People's Committee of Ho Chi Minh City.

+ Economic activities arising shall be reflected in Vietnamese Dong; if foreign currency transactions occur, they must be converted into Vietnamese Dong at the official exchange rate published by the State Bank of Vietnam at the time of transaction occurrence.

- The Fund shall not account for the following expenses:

+ Losses and damages from joint ventures, investment activities;

+ Compensation for losses provided or paid by the party causing the loss or insurance company;

+ Overseas travel expenses exceeding the state-prescribed limit;

+ Expenditures related to rewards and welfare, such as bonuses, hardship allowances, support for social organizations, agencies, and other localities;

+ Basic construction investment and fixed asset procurement expenses funded from investment construction capital;

+ Risks covered by the financial reserve fund;

+ Expenditures from other sources of funding;

+ Other expenditures not in compliance with the provisions of Section 2 above.

4. Distribution of surplus income of the Fund:

The surplus income of the Fund is determined by the difference between income and reasonable, legitimate expenses for these activities. Specifically:

(Surplus Income) = (Income) - (Legitimate, Valid Expenses)

The surplus income of the Fund is distributed in the following sequence:

1. Fulfilling tax obligations as stipulated by the State: The Fund enjoys tax exemption and reduction policies (capital tax, revenue tax, profit tax) as prescribed by the Law.

2. Deducting fines for non-compliance with budget collection discipline, administrative penalties, breach of contract penalties, overdue debt penalties, and legitimate expenses not deducted before determining the profit tax payable.

3. Deduct losses not deducted from pre-tax profit;

4. Dividing profits among capital contributors according to the business cooperation contract (if applicable);

5. The remaining profit after deducting items 1 to 4 above, the Fund shall establish the following reserves:

a. Additional Capital Reserve Fund: The contribution rate is 15% until it equals the registered capital;

b. Financial Reserve Fund: The contribution rate is 10% and continues until it reaches 25% of the registered capital.

c. Business Development Reserve Fund: The minimum contribution rate is 50%;

d. Unemployment Assistance Reserve Fund: The maximum contribution rate is 5%, but not exceeding six months' salary.

e. After establishing the aforementioned reserves, the Fund shall set up reward and welfare funds in accordance with the regulations:

- The maximum amount to be set aside does not exceed three months' salary if the profit rate for the current year is not lower than that of the previous year.

- The maximum amount to be set aside does not exceed two months' salary if the profit rate for the current year is lower than that of the previous year.

f. The remaining amount shall continue to be added to the Business Development Reserve Fund.

g. The use of the aforementioned funds shall be implemented in accordance with the provisions of Decree No. 59/CP dated October 3, 1996, of the Government.

5. Accounting, Statistics, and Audit System of the Fund:

1. The Fund must maintain accounting ledgers, record vouchers, and perform accounting entries and financial settlement reports in accordance with the Accounting and Statistics Ordinance and the regulations of the Ministry of Finance.

2. The Fund shall conduct audits in accordance with current regulations and organize internal financial statement audits or hire independent auditors if deemed necessary. The Management Board and General Director of the Fund are responsible for the accuracy and truthfulness of these reports. 3. Annually, the Fund shall publish and disclose its operational results, assets, capital, and debts according to the guidelines of the Ministry of Finance and shall be legally accountable for the accuracy and truthfulness of the published content.

4. The Management Board of the Fund is responsible for approving the annual financial settlement of the Fund and shall be accountable for this approval. The Fund is responsible for reporting the annual tax settlement to the Tax Authority in accordance with the laws and instructions of the Tax Authority. Regularly report to the People's Committee of the city, the city's Tax Authority, and submit to the Ministry of Finance the following documents:

- Quarterly, no later than fifteen days after the end of each quarter:

+ Report on sources and use of capital;

+ Income and expense report.

- Annually, within 30 days after the end of the fiscal year:

+ Balance sheet;

+ Income and expense settlement report;

+ Report on the balance and use of capital.

- Decision approving the financial settlement.

The Fund is subject to inspection, audit, and supervision by the financial authority in accordance with the provisions of the Law. The Ministry of Finance shall organize inspections on the implementation of the financial reporting system of the Fund when necessary.

6. Financial Planning

At the time of preparing the annual budget plan, the Fund must prepare and report to the People's Committee of the city, simultaneously sending to the Ministry of Finance, the plan for mobilizing and utilizing capital, and the financial income and expenditure plan.

The Fund is responsible for developing the annual and long-term financial plans to be submitted to the People's Committee of the city for approval and sent to the Ministry of Finance, including:

- Capital source plan and capital utilization plan.

- Financial income and expenditure plan.

- Plan for distributing income and expenditure differences.

III. IMPLEMENTATION PROVISIONS

1. The Fund is legally responsible for the effective use, preservation, and development of state assets and capital raised from other organizations and individuals throughout its operations in accordance with the goal of investing in and developing economic and social infrastructure in Ho Chi Minh City.

2. This Circular shall take effect fifteen days from the date of signature; During the implementation period, any difficulties should be reported to the Ministry of Finance for timely review and amendment.