Joint Circular No. 48/2002/TTLT/BTC-BNN&PTNT guiding the financial management regime for agricultural cooperatives

MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT - MINISTRY OF FINANCE ********	SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness ********
NUMBER: 48/2002/TTLT-BTC-BNNPTNT	HA NOI, MAY 28, 2002

 

JOINT CIRCULAR

JOINT CIRCULAR NO. 48/2002/TTLT-BTC-BNNPTNT OF THE MINISTRY OF FINANCE AND THE MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT ON MAY 28, 2002 GUIDING THE FINANCIAL MANAGEMENT REGIME FOR AGRICULTURAL COOPERATIVES

BASED ON THE LAW ON COOPERATIVES ISSUED ON MARCH 20, 1996, WHICH BECAME EFFECTIVE ON JANUARY 1, 1997; TO ENSURE THAT THE FINANCIAL MANAGEMENT OF AGRICULTURAL COOPERATIVES IS SYSTEMATIC, THE JOINT MINISTRIES OF FINANCE AND AGRICULTURE AND RURAL DEVELOPMENT ISSUE THIS GUIDANCE ON THE FINANCIAL MANAGEMENT REGIME FOR AGRICULTURAL COOPERATIVES AS FOLLOWS:

A. GENERAL PROVISIONS

1. THIS CIRCULAR APPLIES TO AGRICULTURAL COOPERATIVES, COMBINED BUSINESS AGRICULTURAL COOPERATIVES, SALT INDUSTRY COOPERATIVES, AND OTHER SIMILAR COOPERATIVES PROVIDING SERVICES SUCH AS INTENSIVE LAND CULTIVATION, SEEDS, PESTICIDES, AND FERTILIZERS FOR AGRICULTURE (HEREINAFTER REFERRED TO AS COOPERATIVES).

2. BASED ON THEIR CHARACTERISTICS AND OPERATING CONDITIONS, COOPERATIVES SHALL ESTABLISH BYLAWS IN ACCORDANCE WITH THE PROVISIONS OF THIS CIRCULAR, TO BE APPROVED AT THE MEMBERS' CONVENTION, SERVING AS THE BASIS FOR IMPLEMENTATION AND ENSURING TRANSPARENCY, DEMOCRACY, AND COMPLIANCE WITH THE LAW.

B. SPECIFIC PROVISIONS

I. SOURCES OF FUNDS FOR PRODUCTION AND BUSINESS

THE FUNDS USED BY COOPERATIVES FOR PRODUCTION AND BUSINESS INCLUDE:

1. OWN CAPITAL.

1.1 CONTRIBUTIONS FROM MEMBERS:

WHEN JOINING THE COOPERATIVE, MEMBERS MUST CONTRIBUTE TO THE REGISTERED CAPITAL AS STATED IN THE RESOLUTION OF THE MEMBERS' CONVENTION AND LISTED IN THE BYLAWS FOR BUSINESS REGISTRATION PURPOSES.

MEMBERS CAN CONTRIBUTE WITH MONEY. IF CONTRIBUTING WITH ASSETS OR LABOR, THEY MUST BE CONVERTED INTO MONEY AT THE LOCAL MARKET PRICE, AS DETERMINED BY THE MEMBERS' CONVENTION.

MEMBERS CAN CONTRIBUTE IN ONE INSTALLMENT OR MULTIPLE INSTALLMENTS, BUT THE FIRST INSTALLMENT MUST BE AT LEAST 50% OF THE REQUIRED AMOUNT, WITH THE REMAINING PORTION TO BE CONTRIBUTED WITHIN 12 MONTHS.

THE CONTRIBUTIONS OF MEMBERS SHALL BE ADJUSTED ACCORDING TO THE DECISION OF THE MEMBERS' CONVENTION AS FOLLOWS:

+ INCREASED CONTRIBUTIONS: WHEN THE COOPERATIVE RAISES ADDITIONAL CAPITAL CONTRIBUTIONS FROM MEMBERS TO INCREASE THE REGISTERED CAPITAL; OR WHEN NEW MEMBERS ARE ADMITTED.

+ DECREASED CONTRIBUTIONS: WHEN THE COOPERATIVE RETURNS CONTRIBUTIONS TO MEMBERS; OR THE MEMBERS' CONVENTION DECIDES TO USE CONTRIBUTIONS TO COVER LOSSES FROM PRODUCTION AND BUSINESS IN THE YEAR.

THE COOPERATIVE MUST MAINTAIN ACCOUNT BOOKS TO RECORD THE CONTRIBUTIONS OF EACH MEMBER PROMPTLY.

1.2 TRANSFERRED CAPITAL FROM AN OLD COOPERATIVE OR FROM THE LOCAL ADMINISTRATION:

WHEN AN OLD COOPERATIVE CHANGES ITS ACTIVITY ACCORDING TO THE LAW ON COOPERATIVES, THE VALUE OF ASSETS DIRECTLY USED FOR COMMON PRODUCTION AND BUSINESS AND THE REMAINING CAPITAL AND FUNDS OF THE OLD COOPERATIVE SHALL BE HANDLED AS FOLLOWS:

- THE REMAINING CAPITAL AND FUNDS SHALL BE EVENLY DISTRIBUTED AS CAPITAL CONTRIBUTIONS OF EACH MEMBER.

- ASSETS USED FOR PRODUCTION AND BUSINESS PURPOSES SUCH AS IRRIGATION WORKS, ELECTRICITY FACILITIES, STORAGE HOUSES, DRYING YARDS, WHARVES, ETC.

+ IF THE MAJORITY OF MEMBERS (MORE THAN 50%) OF THE OLD COOPERATIVE JOIN THE NEW COOPERATIVE, THESE ASSETS SHALL BE TRANSFERRED AS COLLECTIVE CAPITAL OF THE NEW COOPERATIVE, WITHOUT BEING DISTRIBUTED TO EACH MEMBER.

+ IF THE NEW COOPERATIVE IS FORMED WITH LESS THAN 50% OF THE MEMBERS OF THE OLD COOPERATIVE JOINING BUT USING AND EXPLOITING THESE ASSETS, THE DECISION ON THE HANDLING OF THESE ASSETS SHALL BE MADE BY THE PEOPLE'S COMMITTEE OF THE COMMUNE OR WARD. IF THE NEW COOPERATIVE RECEIVES OR RENTS THESE ASSETS, THEY SHALL BE ACCOUNTED FOR ACCORDING TO CURRENT REGULATIONS ON THE RECEIPT OR RENTAL OF ASSETS FOR PRODUCTION AND BUSINESS NEEDS. THE RENTAL FEES IN THE YEAR SHALL BE ACCOUNTED FOR AS PRODUCTION AND BUSINESS COSTS OF THE COOPERATIVE.

1.3 COOPERATIVE FUNDS: COOPERATIVE FUNDS ARE COLLECTIVE CAPITAL OF THE COOPERATIVE THAT HAS NOT BEEN USED.

THE COOPERATIVE SHALL HAVE FUNDS DRAWN FROM PROFITS AFTER TAXES: DEVELOPMENT FUNDS FOR PRODUCTION AND BUSINESS, FINANCIAL RESERVE FUNDS, AND OTHER FUNDS AS DECIDED BY THE MEMBERS' CONVENTION. THE LEVEL OF CONTRIBUTIONS AND USE OF THESE FUNDS MUST BE DECIDED BY THE MEMBERS' CONVENTION AS FOLLOWS:

- DEVELOPMENT FUNDS FOR PRODUCTION AND BUSINESS: USED FOR EXPANDING PRODUCTION AND BUSINESS ACTIVITIES, UPDATING TECHNOLOGY, EXTENSION WORK, AND TRAINING AND DEVELOPING COOPERATIVE STAFF.

- FINANCIAL RESERVE FUNDS: USED TO COMPENSATE FOR LOSSES CAUSED BY NATURAL DISASTERS OR FIRES, AS DECIDED BY THE MEMBERS' CONVENTION.

- OTHER FUNDS (IF ANY): USED FOR SOCIAL BENEFITS AND REWARDS FOR COLLECTIVES AND INDIVIDUALS WHO HAVE ACHIEVED OUTSTANDING RESULTS IN BUSINESS AND PRODUCT MARKETING.

1.4 STATE ASSISTANCE FUNDS (STATE GRANTS AND GIFTS FROM ORGANIZATIONS AND INDIVIDUALS).

2. LOAN FUNDS AND FUNDS OCCUPIED.

2.1 LOAN FUNDS:

- LOANS FROM BANKS AND OTHER CREDIT ORGANIZATIONS.

- LOANS FROM MEMBERS AND OTHER ORGANIZATIONS AND INDIVIDUALS AS AGREED.

LOAN CONTRACTS WITH LOAN AMOUNTS EQUAL TO OR GREATER THAN 50% OF THE REGISTERED CAPITAL OF THE COOPERATIVE MUST BE APPROVED BY THE MEMBERS' CONVENTION; LOANS UNDER 50% OF THE REGISTERED CAPITAL ARE DECIDED BY THE COOPERATIVE MANAGEMENT BOARD.

2.2 FUNDS OCCUPIED, INCLUDING: UNPAID DEBTS, UNALLOCATED INCOME... THE COOPERATIVE IS RESPONSIBLE FOR REPAYING THESE DEBTS ON TIME WHEN THEY ARE DUE.

3. OTHER FUNDS RAISED INCLUDE: SHAREHOLDER CAPITAL CONTRIBUTIONS (IF ANY), JOINT VENTURE CAPITAL, AND ASSOCIATION CAPITAL...

II. MANAGEMENT OF ASSETS AND CAPITAL IN CASH

ASSETS IN AGRICULTURAL COOPERATIVES INCLUDE: ARCHITECTURAL STRUCTURES, BUILDINGS, FACTORIES, MACHINERY, EQUIPMENT, MATERIALS, RAW MATERIALS, FUEL, FINISHED GOODS, SEMI-FINISHED GOODS, AND TYPES OF CAPITAL IN CASH (CASH, DEPOSITS), ETC.

ASSETS IN THE COOPERATIVE ARE DIVIDED INTO TWO TYPES: FIXED ASSETS AND CURRENT ASSETS.

1. FIXED ASSETS.

1.1 FIXED ASSETS IN THE COOPERATIVE: INCLUDING TANGIBLE FIXED ASSETS AND INTANGIBLE FIXED ASSETS.

- TANGIBLE FIXED ASSETS ARE MATERIAL PRODUCTION MEANS (EACH UNIT OF ASSET WITH AN INDEPENDENT STRUCTURE OR A SYSTEM OF MANY PARTS OF ASSETS LINKED TOGETHER TO PERFORM ONE OR MORE SPECIFIC FUNCTIONS) WITH A VALUE OF 5 MILLION VIETNAM DONG OR MORE AND A USAGE LIFE OF MORE THAN ONE YEAR, PARTICIPATING IN MANY BUSINESS CYCLES, BUT STILL RETAINING THEIR ORIGINAL PHYSICAL FORM SUCH AS: HOUSES, BUILDINGS, MACHINES, EQUIPMENT, FRUIT TREES, AND LONG-LIVED INDUSTRIAL CROPS...

MATERIAL PRODUCTION MEANS WITH A VALUE LESS THAN 5 MILLION VIETNAM DONG BUT ESSENTIAL TO MANY BUSINESS CYCLES OF THE COOPERATIVE ARE ALSO CONSIDERED FIXED ASSETS:

+ BREEDING SOWS, BULLS.

+ DESKS, CHAIRS, OFFICE CABINETS, TELEVISIONS, COMPUTERS.

+ Vehicles and vessels for transportation.

For short-term industrial crops with a harvest period of 2-3 years such as sugarcane, bananas, pineapples, mulberry trees, although their value exceeds VND 5 million, they are not recorded as fixed assets. The costs of planting and caring for these crop gardens are allocated to production costs according to the harvesting time of the garden.

- Intangible fixed assets are those without a specific physical form but with significant investment value and participation in multiple production cycles, such as cooperative establishment costs, purchase costs of invention patents, technology transfer costs, etc.

1.2- Management and utilization of fixed assets:

The management, utilization, and depreciation of fixed assets in cooperatives shall be carried out in accordance with Decision No. 166/1999/QD-BTC dated December 30, 1999, issued by the Ministry of Finance, and the detailed guidance below:

- Cooperatives must establish regulations on the management and utilization of fixed assets at each stage and each production department, and throughout the entire cooperative; maintain books to track the original cost, depreciation, and timely reflect all changes in quantity, quality, and remaining value of each fixed asset.

- All fixed assets invested, constructed, purchased, and used by the cooperative for production and business operations must be depreciated and included in the product and service cost to recover capital. Depreciation of fixed assets is calculated using the following formula:

		Original cost of fixed assets
Annual depreciation rate	=	---------------------------------
		Number of years of use

The number of years of use of fixed assets is based on the technical lifespan according to design, current condition, and economic lifespan of the fixed assets. In cases where it is not specified in the technical design, it is decided by the cooperative management board.

- The following fixed assets shall not be subject to basic depreciation:

+ Fixed assets invested using state budget funds, contributions from members' labor and capital (not invested using cooperative capital) serving the general public, not specifically for the cooperative's production and business activities such as dikes, embankments, bridges, culverts, irrigation canals, roads...

+ Fully depreciated fixed assets (capital fully recovered) that continue to be used.

+ Unused, idle fixed assets awaiting liquidation.

+ Fixed assets serving cooperative welfare facilities such as kindergartens, traditional houses, etc.

+ Leased fixed assets for use.

Cooperatives implement regular maintenance and major repair systems for each type of fixed asset:

+ The maintenance of fixed assets is evaluated by the user department, a budget is prepared, and recommendations are made to the management board for decision-making.

+ Regular maintenance and preservation costs of fixed assets are directly included in the production and business costs of the current fiscal year.

+ Major repair costs are accounted for as follows:

* Fully included in the production and business costs of the object using the fixed asset in the year if the cost is small.

* Included in pending costs to be allocated gradually over the years if the cost is large.

Cooperatives may invest in updating fixed assets, actively liquidate and sell unused fixed assets to maximize efficiency in production and business operations.

For the construction and acquisition of large-value fixed assets (specific amounts must be recorded in the cooperative charter), the management board must have a plan approved by the member assembly; smaller amounts are decided by the management board and reported to the member assembly in the same year.

For fixed assets acquired or constructed with borrowed funds, cooperatives must repay the debt on schedule using the depreciation fund of fixed assets (including depreciation of fixed assets invested using cooperative-owned capital) and the development investment fund of the cooperative.

Liquidation and sale of fixed assets are conducted through the asset disposal committee of the cooperative. The committee includes representatives from the management board, supervisory board, and chief accountant.

In cases of increases or decreases in fixed assets due to purchases, constructions, transfers, losses, etc., complete handover and liquidation records must be established. The acceptance and liquidation team consists of representatives from the management board, chief accountant, supervisory board of the cooperative, and representatives from the parties involved, who sign off on the record, clearly defining responsibilities and measures for dealing with actions causing waste, embezzlement, lack of responsibility leading to damage, loss, or destruction of cooperative fixed assets.

Those responsible for managing and utilizing fixed assets must have professional knowledge and technical skills for usage and preservation; they are responsible for protecting and ensuring the long-term usability and increased efficiency of fixed assets.

At the end of the year, cooperatives must conduct an inventory of fixed assets. If excess or missing assets are discovered, the reasons must be identified. Excess assets should be recorded as increased capital, while missing assets require determination of liability for compensation, with any remaining shortfall recorded as reduced capital.

2- Current assets.

Current assets in cooperatives include: inventory goods and monetary capital.

2.1- Inventory goods as current assets, including: various types of materials, fuel, tools, products, goods, semi-finished products, unfinished products...

Cooperatives must organize warehouse systems to effectively manage, store, and utilize assets.

- The warehouse manager is responsible to the cooperative management board for the storage of all current assets of the cooperative in warehouses and yards.

- All cases of warehousing and unloading must be documented with full relevant documents (warehouse entry and exit forms, warehouse books, material and product books...).

- The recorded value of assets entering the warehouse is the purchase price plus transportation, storage costs, and other related expenses.

- Cooperatives establish loss rates for each type of current asset for each industry and production cycle, appropriate to the cooperative's conditions, and assign management responsibility to the warehouse manager. Losses exceeding the specified limits without justifiable reasons require clear accountability from managers to compensate.

The total value of all current assets used must be included in the cost of the object using them during the cooperative's production and business operations, services.

In cases where tools and equipment with large quantities are used for more than one year, they shall be included in the production and business costs of the user entity over two years.

- Cooperatives must regularly conduct inventory checks on current assets. If excess or missing assets are discovered, the causes must be clearly identified. Excess assets should be recorded as an increase in capital, while missing assets require determination of responsibility for compensation. The difference in value after compensation shall be recorded as a decrease in capital.

- At year-end inventory, if raw materials, tools, supplies, goods, and finished products in stock have market prices lower than their book values, the cooperative may establish a reserve for inventory write-downs. The amount of the reserve is the difference between the reduced value recorded in the books and the market value at December 31. This write-down reserve can be recorded as a business expense before preparing the annual financial report. The establishment and use of this reserve shall be carried out according to Circular No. 107/2001/TT-BTC dated December 31, 2001, issued by the Ministry of Finance, titled "Guidelines for Establishing and Using Reserves for Inventory Write-Downs, Securities Investment Write-Downs, and Bad Debt Provisions in Enterprises."

2.2- Cash Capital: This is a portion of current assets in the form of monetary funds, including:

- Cash on hand (including bank drafts and foreign currency).

- Bank deposit balances (including both Vietnamese dong and foreign currency).

- Valuable metals, precious stones, and negotiable securities.

Cooperatives must establish uniform management regulations and maintain detailed records to track cash receipts, payments, bank drafts, and foreign currencies.

The cashier must continuously update cash transactions and strictly adhere to cash management regulations.

Regularly (monthly), a cash inventory check must be conducted and the bank account balances must be reconciled with the cooperative's records.

III. MANAGEMENT OF REVENUE

1- Revenue of cooperatives includes

:

1.1- Revenue from production and business activities: This is the total value of products, goods, and services sold or provided by the cooperative to member households and customers, which are paid for or accepted for payment (even if not yet received).

Revenue is calculated in monetary terms. In cases where revenue is received in kind (barter), it must be converted to monetary value for accounting purposes.

1.2- Revenue from other activities: This includes government price support payments (agricultural incentives, electricity subsidies, etc.), rental income, proceeds from the liquidation or sale of fixed assets, interest income from loans and deposits, joint venture profits, income from trading in treasury bills and bonds, and other extraordinary income.

All revenue generated during the period must be supported by invoices and other documentation and must be promptly and fully reflected in the cooperative's accounting records according to Decision No. 1017 TC/CĐKT dated December 12, 1997, issued by the Ministry of Finance regarding accounting regulations for agricultural cooperatives.

2. Items that cannot be recorded as revenue include

:

- Recovered debts, advance payments, capital contributions from members, or joint venture investments from other organizations and individuals.

- Government investment support:

+ Government support for transportation and water conservancy: Recorded as an increase in capital.

+ Subsidies for transport costs supporting mountainous and border regions: Recorded as a reduction in expenses.

- Money or assets donated to the cooperative by organizations or individuals: Recorded as an increase in capital.

- In cases where the cooperative has issued sales invoices and received payment but not yet delivered the goods, the value of these goods shall not be recorded as revenue but rather as prepaid customer payments.

3. Several important points to note regarding revenue management and accounting.

- For goods sold on consignment by other entities, revenue is the commission earned from the consignment sales.

- For processing services, revenue is calculated based on the processing fee recorded on the invoice for completed processed products accepted for payment by the client.

- For products, goods, and services produced by the cooperative for gifts or internal consumption, revenue is calculated based on the production cost (cost of goods sold) of those items.

- For long-term lease activities, the cooperative shall record the advance rent received as a liability. Annual revenue from leasing is calculated by dividing the total rent received by the number of years covered by the lease agreement.

- For contractual service activities within the cooperative, revenue is the amount due under the contract.

- For credit activities, revenue is the interest income from loans due for collection within the period.

- Cooperatives with revenue in foreign currency must convert it to Vietnamese dong using the exchange rate published by the State Bank of Vietnam at the time the revenue was generated.

IV. MANAGEMENT OF PRODUCTION COSTS AND PRODUCT SERVICE CONSUMPTION COSTS

1. Production and business activity costs in cooperatives.

Production and business activity costs in cooperatives include direct costs for each production and business activity and indirect costs.

Cooperatives must record and reflect all actual costs incurred for each service and production activity. Cost management and accounting shall be carried out as follows:

1.1- Direct Costs:

- Material costs include: raw material, material, fuel, tools... Management of material costs is implemented through two stages: material consumption rates and material prices.

+ Material consumption rates: All materials used in production and business activities must be strictly managed according to the cooperative's specified consumption rates for each type of material per product.

+ Material prices: Used for accounting and determining material costs, these are actual prices, including:

External material prices: purchase price recorded on the seller's invoice plus transportation, loading/unloading, storage, and reasonable losses during transit, and warehouse rental fees.

Self-manufactured material prices: actual raw material costs plus actual costs incurred during self-manufacturing.

The prices of various types of raw materials and processing costs, transportation, storage, procurement expenses mentioned above must be recorded on invoices and documents according to the prescribed regulations. In cases where raw materials are purchased from direct producers without invoices, the buyer must prepare a detailed list, clearly stating the name, address of the seller, quantity of goods, unit price, total amount, signature of the seller, and approval by the cooperative management.

- Depreciation costs of fixed assets (as stipulated in point 1, Section II of this Circular).

- Labor costs: including wages paid to cooperative members and hired labor directly involved in the cooperative's production and business activities at market rates at the time of hiring (if paid in kind, it shall be converted into monetary value).

Management staff salaries for each service team and industry sector are calculated according to the provisions set out in point 4.b of this section - regulations regarding cooperative management staff salaries.

- External service costs: these include repair costs for fixed assets, electricity and water charges paid to branch power stations and irrigation factories; freight and handling fees; other external services purchased, and only recorded based on actual expenditures with valid and reasonable supporting documents as prescribed.

+ Marketing promotion and cooperation expenditure includes: income from market information about customers and export products, economic and trade consultancy fees, market search activities, organizing exhibition booths abroad. Expenditure on establishing representative offices and warehouses abroad is capitalized as fixed assets.

+ Export brokerage commissions or transaction fees: if the cooperative exports directly or through agency, such costs can be recorded as production expenses.

The cooperative management council establishes rules and expense standards which must be publicly disclosed as a basis for management, operation, and supervision. The head of the cooperative decides on the expense levels and is responsible before the member assembly for his decisions.

1.2- Indirect costs (cooperative management costs) include:

- Office supplies costs.

- Depreciation costs of office fixed assets.

- Wages for cooperative management staff.: The payment of wages to cooperative management staff is based on the cooperative's annual production and business results, services, determined by two methods: 1%-5% of revenue or 20-25% of net income (revenue minus direct costs). The choice of calculation method and specific wage ratio is decided by the member assembly depending on the cooperative's specific conditions.

+ Calculation of wages according to the following tables:

TABLE 1: Calculating the wage fund for cooperative management staff based on revenue

Revenue level (in million dong)	Percentage (%) deducted from revenue
50 – 260	5%
Over 260 - 2,000	3% of additional revenue over 260 million
Over 2,000 - 12,000	2% of additional revenue over 2,000 million
Over 12,000	1% of additional revenue over 12,000 million

Example: The cooperative's revenue in 1999 was 2,500 million dong, the wage fund calculated based on revenue is as follows:

(260 million x 5%) + (1,740 million x 3%) + (500 million x 2%) = 75.2 million dong.

TABLE 2: Calculating the wage fund for cooperative management staff based on net income

Net income level (in million dong)	Percentage (%) deducted from net income
10 – 270	25%
Over 270	20%

Based on the wage fund for cooperative management staff as stated above, the cooperative uses the head's wage as a factor of 1 to calculate wages for each position of cooperative management staff, according to Table 3.

TABLE 3: Wage standards for cooperative management staff by position

Position of management staff		Wage factor
Head		1
Deputy Head		0,8
Member of the Management Council		0,7
Chairman of the Supervisory Board (Supervisory Board members receive salary based on specific workload assigned)		0,7 - 0,8
…on…day…month…year…		0,8
Accountant		0,6
Cashier, warehouse manager, technical staff		0,5
Service team leader Team leader for service reception teams, production teams	Linked to actual revenue achieved	0,4 0,3

- Repair costs for office assets

- External service costs: lighting electricity, telephone...

- Other monetary expenses such as interest payments on borrowed capital from organizations and individuals, sales expenses, business license tax, property tax, value-added tax payable to the State.

Particularly, hospitality, ceremonial expenses, transaction costs serving the cooperative's production and business operations, conference expenses must have clear objectives, effectiveness, thriftiness, and not exceed the control limits specified in Circular No. 18/2002/TT-BTC dated February 20, 2002, issued by the Ministry of Finance.

- Travel expenses for cooperative cadres and members: Depending on the specific conditions of the cooperative, apply Circular No. 94/1998/TT-BTC dated June 30, 1998, issued by the Ministry of Finance to establish travel expense regulations for cadres and members dispatched by the cooperative management council for work but not exceeding the prescribed limit.

At year-end, cooperative management costs are consolidated and allocated to calculate the cost of each product and service of the cooperative according to the revenue or cost criteria of each activity.

- Provisions for inventory write-downs established according to point 2.1, Section II of this Circular, and provisions for doubtful debts established according to point 2.2, Section V of this Circular.

- Other expenses such as asset disposal costs, debt collection costs...

Cooperatives may include these expenses when determining corporate income tax according to the provisions of Circular No. 18/2002/TT-BTC dated February 20, 2002, issued by the Ministry of Finance.

The following items shall not be included in operating expenses for business services:

- Penalties for breach of contract or violation of laws such as the Labor Law, Tax Law, Environmental Protection Law, Traffic Law, failure to report statistics, financial accounting, and other laws. If the penalty is due to the cooperative's violation, it will be deducted from the post-tax profit of the cooperative; if due to a group or individual, the group or individual must pay the fine.

- Construction investment costs, purchase of fixed assets. Interest payments on construction investment loans during the period before completion and commissioning are recorded as construction investment costs.

- Advance payments, debt repayment, and other loans.

- Expenses belonging to the content of cooperative funds.

2. Cost of products and services consumed during the period (or cost of goods sold and services provided during the period)

The cost of products and services includes: direct costs; indirect costs (management expenses) determined as follows:

- The cost of products and services consumed during the period is calculated according to the weighted average method of production costs of products during the period and opening inventory costs at the beginning of the period; or it can be determined by adding the opening work-in-progress costs, adding the direct production costs incurred during the period, and subtracting the closing work-in-progress costs.

- Cooperative management expenses incurred are fully allocated to the cost of products during the period. In cases where the production cycle of products is long or has special characteristics, cooperative management expenses may be allocated in accordance with specific circumstances to ensure they match the volume of products consumed during the period, opening inventory, and closing work-in-progress.

Depending on the production and business conditions of the cooperative, the object and appropriate method for calculating the cost of products and services should be determined.

V. MANAGEMENT OF DEBTS AND PAYMENTS

1. Debts payable.

a- Debts payable arising from borrowing or occurring during the purchase and sale of materials, products, and goods must be classified according to the debtor and the nature of the debt, including: payable to banks and financial institutions, payable to suppliers, payable to the State, payable to members, and other payables; short-term debts, long-term debts.

b- The cooperative must maintain detailed records to track each creditor, the content of each loan, the loan term, and each payment made.

Accounting must monitor loan repayments, implement checks and supervision to ensure that borrowed funds are used for their intended purpose and that loans are repaid on time to avoid overdue debts.

2. Receivables.

2.1- Debts receivable within the cooperative include:

- Receivables from customers: these are agricultural products sold by the cooperative to enterprises, social organizations, and individuals outside the cooperative who have not yet paid or have not paid the full amount.

- Receivables from member households and farmers: these are service fees such as irrigation, plant protection, veterinary, scientific and technical services, advance materials... which member households and farmers have not yet paid or have not fully paid to the cooperative.

- Other receivables: these are receivables from individuals and units inside and outside the cooperative regarding material compensation, temporary loans, etc.

2.2- The cooperative must maintain detailed records to track each debtor, the content of each receivable, and each payment made. For receivables in kind, the cooperative must monitor to recover the physical assets to preserve capital when prices fluctuate.

- For receivables from regular and periodic transaction customers, the cooperative must check and reconcile the amounts receivable, amounts received, remaining amounts, and confirm the debt with the cooperative in writing.

- For receivables from member households, the cooperative must maintain settlement accounts for each household to unify management and tracking of receivables and payments made.

The cooperative needs to record in detail each payment transaction for each debtor; if the team leader borrows on behalf of the cooperative, the debtor cannot be recorded as a member's receivable through teams or groups...

- Difficult-to-collect receivables are debts overdue for two years or more, which the cooperative has reconciled and pursued multiple times but still have not been recovered; or debts overdue less than two years but the debtor unit is currently under consideration for dissolution, bankruptcy, the debtor has fled, or is being prosecuted, detained, or tried by legal authorities.

- For these debts, the cooperative must actively urge repayment and apply measures to recover debts such as reporting debts, sending requests to the court for resolution.

When preparing annual financial statements, the cooperative can establish provisions for difficult-to-collect receivables and record them as cooperative management expenses for the year. The level of provision depends on the potential loss for each receivable, but the total maximum level of provision shall not exceed 20% of the total receivables of the cooperative as of December 31.

The establishment and use of provisions for difficult-to-collect receivables shall be carried out in accordance with Circular No. 107/2001/TT-BTC dated December 31, 2001, issued by the Ministry of Finance, "Guidelines for the establishment and use of provisions for inventory write-downs, investment securities write-downs, and difficult-to-collect receivables at enterprises."

- Unrecoverable receivables are debts owed by the cooperative to debtors, but the debtor is an organization that has been dissolved, bankrupt, or ceased operations without the ability to pay; the debtor is an individual who has died, disappeared, is serving a prison sentence, or is being prosecuted, detained, or tried by legal authorities, but there is sufficient evidence to prove that the debt cannot be recovered; debts overdue for more than three years, for which the cooperative has applied all measures but still cannot recover the debt...

Annually, the cooperative establishes a committee to handle assets and debts to consider and process the cancellation of these debts. Losses from debt cancellation are recorded as deductions from provisions for difficult-to-collect receivables; if insufficient, they are recorded as production and business expenses for the year. If recorded as business expenses results in a loss for the cooperative, the board of directors of the cooperative reports to the general assembly of members to reduce capital.

3. Management and tracking of advances and advance payments.

An advance is a sum of money that the cooperative pre-pays to staff or members to carry out tasks approved by the cooperative director.

Contents of advances in the cooperative include: advances for purchasing materials, tools, production supplies, fixed assets; advances for wages, travel expenses... The tracking and accounting of advances are carried out according to the following regulations:

- The person receiving the advance must be a staff member or member of the cooperative.

- The advance request form must clearly state the name, address (unit, department), and amount requested, the reason for the advance, the purpose of using the advance, and the repayment date, which must be signed off by the cooperative director. The accountant prepares a payment voucher attached to the advance request form and transfers it to the cashier for disbursement.

- Advance payment shall be settled immediately upon completion of the work. If the settlement is delayed beyond the date specified on the advance payment receipt, the person receiving the advance payment and the accountant overseeing the advance payment shall bear responsibility for late payment penalties according to the financial accounting management regulations of the cooperative.

- The recipient of the advance payment must use the funds strictly for the purposes stated on the advance payment receipt, settle within the prescribed time limit, and provide all original supporting documents. A person who has not yet settled the previous advance payment shall not be eligible for a second advance payment.

- The cooperative shall maintain detailed records of each advance payment made to individual recipients, tracking both the advance payments and their subsequent settlements.

4. Monitoring, managing, and settling state taxes.

The cooperative shall proactively declare, calculate, and determine the amount of tax payable according to current tax laws, keeping detailed records of amounts due, paid, and still owing for each tax item as per the financial reporting form for agricultural cooperatives, and shall not delay tax payments.

5. Monitoring, managing, and settling transactions with members and employees.

Transactions with members and employees of the cooperative include wages, interest, and other amounts that the cooperative is required to pay.

The cooperative must maintain detailed records tracking each individual recipient and each payment owed. For payments made in kind, detailed records must be kept showing quantity, unit price, and total amount payable; simultaneously, the cooperative must maintain detailed settlement records for member households to ensure financial transparency and democratic practices, and shall not make payments through teams or groups.

VI. DISTRIBUTION OF COOPERATIVE PROFITS

Profits from the cooperative's business operations in a year, including all profits earned during the period, shall be distributed as follows:

- Covering previous years' losses of the cooperative as stipulated by tax laws.

- Paying corporate income tax according to current national tax laws.

- Deducting fines for breach of contracts and violations of laws for which the cooperative is responsible.

- Paying dividends to investors who have contributed capital to the cooperative.

- The remaining profit shall be distributed as follows:

+ Establishing reserves as provided in Part B, Section I of this Circular.

+ Distributing profits to members based on their capital contributions.

VII. FINANCIAL REPORTING

At the end of each accounting period (end of crop season or year-end), the cooperative's accountant must close the books, conduct an inventory check, reconcile account balances with the bank, reconcile receivables and payables, and prepare financial reports for internal management and government oversight.

The cooperative is responsible for preparing financial reports in accordance with Decision No. 1017-TC/QĐ/CĐKT dated December 12, 1997 issued by the Minister of Finance regarding accounting systems applicable to cooperatives, and submitting them to the Department of Agriculture and Rural Development, the registration authority, the county finance department, and the county tax office.

The county finance department and the Department of Agriculture and Rural Development are responsible for compiling and submitting reports to the Provincial Department of Finance and Price Control, and the Provincial Department of Agriculture and Rural Development. These departments are responsible for compiling and analyzing financial and business conditions, capital usage, and making observations and recommendations to the Ministry of Finance (Enterprise Financial Department) and the Ministry of Agriculture and Rural Development (Rural Policy Department).

VIII. FINANCIAL TRANSPARENCY AND FINANCIAL AUDITS IN THE COOPERATIVE

1. Financial Transparency.

Annually and semi-annually, the cooperative manager is responsible for publicly reporting financial statements to members and at the General Assembly of Members.

The main contents of the public financial report include:

- Total revenue: specific sources of income - Form 03-HTX/NN (Decision No. 1017 TC/CDKT)

- Total expenditure: specific expenditure items - Form 03-HTX/NN (Decision No. 1017 TC/CDKT)

Detailed revenue and expenditure by industry, service, and product; results of profitability and losses from these activities.

- Profit distribution results according to the cooperative charter and resolutions of the General Assembly of Members - Form 06 HTX/NN (Decision No. 1017 TC/CĐKT) and handling of losses (if any).

- Accounts receivable and payable within the cooperative: old debts, newly incurred debts, overdue debts, due debts, and difficult-to-collect debts.

- Quantity and value of products and materials in stock; cash balance; unsold products and unused assets, proposing solutions for effective use of capital.

2. Financial Audit.

- The cooperative's chief accountant is responsible for regularly auditing internal accounting operations.

- The audit committee of the cooperative is responsible for supervising and auditing financial and accounting activities according to the cooperative's charter. They monitor and control the management and use of materials, assets, capital, and reserves; manage income and expenditures and income distribution within the cooperative; and verify compliance with financial plans and policies.

- The State management agency for agricultural cooperatives is tasked with inspecting compliance with financial and accounting regulations of the cooperative.

IX. IMPLEMENTATION ORGANIZATION

1- The Ministry of Finance (Enterprise Financial Department) and the Ministry of Agriculture and Rural Development (Rural Policy Department) are responsible for directing provincial Departments of Finance and Price Control and Departments of Agriculture and Rural Development to implement this Circular to cooperatives; providing regular guidance and inspection of financial management systems for cooperatives and enforcing reward and penalty systems as currently prescribed.

2- The management board of agricultural cooperatives is responsible for implementing the provisions set out in this Circular.

3- This Circular takes effect fifteen days after its issuance. Any previous regulations inconsistent with this Circular are hereby repealed.

During implementation, any difficulties should be promptly reported to the Ministry of Finance and the Ministry of Agriculture and Rural Development for supplementary guidance to ensure compliance.

 

Cao Duc Phat (Signed)

TRAN VAN TA (Signed)