Circular No. 50/TC-TCĐN guiding the financial management mechanism for the Project to conserve and develop agricultural resources in Quang Binh Province

CIRCULAR

Guidelines for the Financial Management Mechanism of the Project on Conservation and Development of Agricultural Resources in Quang Binh Province

Pursuant to the loan agreement No. 434-VN signed on January 16, 1997 between the Government of the Socialist Republic of Vietnam and the International Fund for Agricultural Development (IFAD) for the Project on Conservation and Development of Agricultural Resources in Quang Binh Province;

Pursuant to Decree No. 58/CP dated August 30, 1993 of the Government stipulating the Borrowing and Repayment Regulations for Foreign Debts and circulars guiding the implementation of the Decree;

Pursuant to Decree No. 42/CP dated July 16, 1996 of the Government stipulating the Investment Construction Management Charter; Decree No. 43/CP dated July 16, 1996 of the Government promulgating the Tendering Regulations; Decree No. 87/CP dated December 19, 1996 detailing the preparation, implementation, and settlement of the budget and circulars guiding the implementation of the Decrees;

Pursuant to Decision No. 642/TTg dated September 10, 1996 of the Prime Minister approving the Project on Conservation and Development of Agricultural Resources in Quang Binh Province from 1997 to 2001;

After reaching consensus with the Ministry of Agriculture and Rural Development, the Ministry of Planning and Investment, the Agricultural Bank of Vietnam and the People's Committee of Quang Binh Province, the Ministry of Finance hereby provides guidelines for the financial management mechanism for the Project on Conservation and Development of Agricultural Resources in Quang Binh Province as follows:

I- GENERAL PROVISIONS

1. Explanation of terms:

1.1. "Agreement" refers to the loan agreement No. 434-VN signed on January 16, 1997 between the Government of the Socialist Republic of Vietnam and the International Fund for Agricultural Development (IFAD) for the Project on Conservation and Development of Agricultural Resources in Quang Binh Province.

1.2. "IFAD" refers to the International Fund for Agricultural Development.

1.3 "Project" refers to the Project on Conservation and Development of Agricultural Resources in Quang Binh Province financed by IFAD.

1.4 "National Coordination Committee" refers to the National Coordination Committee of the Tuyen Quang Project financed by IFAD, which is also the National Coordination Committee of the Quang Binh Project according to Decision No. 642/TTg dated September 10, 1996 of the Prime Minister, responsible for directing the project at the central level.

1.5 "Provincial Project Management Board" established by the Provincial People's Committee, responsible for coordinating the project at the provincial level.

1.6 "Investment Manager" is the People's Committee of Quang Binh Province, "Project Manager" is the Project Management Board authorized by the Provincial Project Management Board, established by the decision of the Provincial People's Committee.

2. Management Principles:

2.1. The Government of Vietnam manages borrowing and repayment to IFAD in accordance with the terms stipulated in the Agreement and consistent with current regulations of the Government of Vietnam.

2.2. Sources of funding for the project include:

- Loan from IFAD

- Non-reimbursable aid from UNDP and other international organizations

- Counterpart funds contributed by Vietnam

All IFAD loans and co-financing sources for the Project are loan and grant funds of the Government and are reflected in the state budget.

2.3. The IFAD loan (grant portion) will be converted into Vietnamese dong and directly allocated to the Project through the State Treasury system, in the form of a targeted subsidy from the Central Budget to the Quang Binh Provincial Budget.

The IFAD loan (credit portion) will be converted into Vietnamese dong and transferred to the Agricultural Bank of Vietnam (ABV) for lending upon request of ABV/Project Management Board and in compliance with the terms stipulated in the supplementary loan agreement between the Ministry of Finance and ABV. The Agricultural Bank of Vietnam will directly assume debt obligations with the Ministry of Finance.

2.4. Non-reimbursable aid from UNDP and other international organizations: managed and accounted for according to current regulations governing the receipt and expenditure of non-reimbursable aid from these organizations.

2.5. Counterpart funds: arranged by the People's Committee of Quang Binh Province within the annual budget plan.

3. Components of the project:

The IFAD loan is implemented through two main parts:

3.1. Part allocated to Quang Binh Province to implement project components including:

(1) Agricultural development;

(2)

(3) Aquaculture development;

(4) Sand stabilization;

(5) Rural road rehabilitation and infrastructure development;

(6) Institutional strengthening support.

3.2. Part allocated to the Agricultural Bank of Vietnam for relending to finance the credit activities of the Project in accordance with the terms stipulated in the supplementary loan agreement between the Ministry of Finance and the Agricultural Bank of Vietnam.

II. BUDGET PLANNING

1. Financial planning for the project:

Annually, following the procedures for preparing, submitting, and reviewing the state budget estimates, the Project Management Board prepares the project's financial plan, sends it to the Department of Finance for approval by the Provincial Project Management Board, submits it to the Provincial People's Committee for inclusion in the provincial general budget plan, and presents and defends the plan with the Ministry of Planning and Investment and the Ministry of Finance, and submits it to the Government and the National Assembly for approval. The preparation, defense, approval, and announcement of the budget plan follow the annual budget estimate preparation procedures.

2. The financial plan must include:

- The volume of work to be carried out;

- Funding sources, including IFAD loans, grants (from UNDP and other organizations), and domestic counterpart funds;

- Detailed schedules for drawing down loans and using counterpart funds divided by month, quarter, year, and each component of the work.

This plan includes the portion of the IFAD loan drawn down for relending to the Agricultural Bank of Vietnam.

3. After receiving the Prime Minister's decision allocating the annual budget plan to the province, the Provincial People's Committee informs the Project Management Board about the approved budget plan. The notification of the approved provincial budget plan must be sent to the Ministry of Finance (Department of Foreign Financial Affairs, State Budget Department, Central Treasury), and the Ministry of Planning and Investment, Provincial Treasury for monitoring the withdrawal and use of project funds.

III. OPENING ACCOUNTS

1. The Ministry of Finance (Central State Treasury) opens a special account in US dollars at the Vietnam Commercial Joint Stock Bank to receive funds disbursed by IFAD.

2. The Quang Binh Provincial State Treasury opens a project fund account with sub-accounts to receive and manage the IFAD funds transferred by the Ministry of Finance and the provincial budget counterpart funds allocated to the project.

3. The Project Management Board shall open a deposit account at the Provincial Treasury in accordance with the current regulations to process payment requests of the Project Management Board.

IV. WITHDRAWAL, DISBURSEMENT AND MANAGEMENT OF FOREIGN LOAN FUNDS

1. Withdrawal to Special Account: The initial withdrawal and additional withdrawal to the Special Account shall be carried out by the Ministry of Finance (Department of Foreign Finance) based on the provisions of the Loan Agreement.

1.1. Initial withdrawal to the Special Account: Based on the Special Account Limit specified in the Loan Agreement, which is one million US dollars, and upon the request of the Project Management Board, the Ministry of Finance will sign the application for the initial withdrawal to the Special Account.

1.2. Additional withdrawal to the Special Account: From the second withdrawal onwards, based on the actual amount spent, the Project Management Board prepares the application for additional withdrawal to the Special Account, along with a letter requesting withdrawal and relevant supporting documents proving legitimate expenditure (contracts, invoices, payment requests, expense statements, work volume confirmations...), and sends them to the Ministry of Finance (Department of Foreign Finance). After reviewing the validity of the withdrawal request documents, the Ministry of Finance (Department of Foreign Finance) will sign the withdrawal application and send it to IFAD (withdrawal procedures - Appendix I).

2. Implementation of fund transfer to Quảng Bình Province to implement the project:

a. Transfer of loan funds to the Project Management Board to implement the project: When there is money in the Special Account, based on the annual budget estimate of the Project approved by the Provincial Project Management Board, and according to the project implementation progress, upon the request of the Project Management Board, the Ministry of Finance will convert foreign currency into Vietnamese Dong (VND) and transfer it to the Project Source Fund Account at the Quảng Bình Provincial Treasury (transfer procedures - Appendix II).

The principles of budget accounting are as follows:

- The Central Treasury, upon the request of the Department of Foreign Finance, will process the conversion of foreign currency into VND and record the receipt of IFAD loan funds in the central government budget.

- The State Budget Department, upon the request of the Department of Foreign Finance, will issue an order to transfer funds to the provincial budget in the form of targeted assistance from the central government budget to the Quảng Bình provincial budget, while issuing a mandate to transfer funds on behalf of the Quảng Bình Provincial Department of Finance to the Project Source Fund Account at the Quảng Bình Provincial Treasury.

- The Quảng Bình Provincial Department of Finance, based on the notification of receipt and debt statement from the Central Treasury, will record the receipt of targeted assistance in the provincial budget, and record the transfer of funds into the Project Source Fund Account for management by the Quảng Bình Provincial Treasury and disbursement to the project.

b. For IFAD funds transferred to the State Bank of Vietnam for credit lending:

Upon the request of the State Bank of Vietnam/Project Management Board, based on the approved credit plan of the project, the Department of Foreign Finance will request the Central Treasury to process the conversion of foreign currency into VND and record the receipt of IFAD loan funds in the central government budget. The Department of Foreign Finance will issue a notice approving the budget estimate and request the State Budget Department to issue an order to transfer funds to the State Bank of Vietnam for borrowing.

3. Management and Disbursement of Funds:

The Provincial Treasury is responsible for managing and controlling expenditures of the project. The disbursement and payment to the project are carried out in two stages: advance payment and settlement.

a. Advance Payment: The Project Management Board submits documents to the Provincial Treasury to withdraw funds from the Project Source Fund Account. The documents include:

- Original project documents (copies of the Loan Agreement, Approved Project, decision appointing the Project Director...)

- Annual expenditure plan and budget estimate of the project approved by the competent authority (Vietnamese side, UNOPS side).

- Legitimate procurement contracts for goods, services, construction works.

- Documents proving the legitimacy of the contracts (contract approval by the competent authority of the Vietnamese side, UNOPS contract approval).

- Letter requesting advance payment from the project owner.

Advance payments are made separately for each individual work item. The maximum advance payment for each work item shall not exceed the limit prescribed in Chapter III, Article 35 of Decree No. 42/CP dated July 16, 1997.

b. Settlement: When the work volume is completed, the project owner must submit a request to the Provincial Treasury to pay the contractor, including:

- Letter requesting the Provincial Treasury to withdraw funds from the Project Source Fund Account for payment.

- Invoices, waybills (if any)/ delivery confirmation.

- Completion acceptance report and other necessary documents proving that the work has been completed or handed over (for basic construction projects).

- Payment request from the contractor or supplier.

- Other necessary documents.

The Provincial Treasury will review the Project Management Board's advance payment and settlement request documents and only make advance payments and settlements from the Project Source Fund Account when confirming that the project activities requiring payment have been carried out in accordance with current national regulations, consistent with the approved project content, and within the IFAD funding ratio and counterpart funding. During payment, the Provincial Treasury will deduct the previously advanced amount from the contractor.

Within five working days from the date of receiving a complete and valid withdrawal request, the Provincial Treasury will verify and confirm the documents meet the conditions for payment and carry out the payment as requested by the Project Management Board.

Withdrawal procedures from the source fund account - Appendix III.

V. DISBURSEMENT AND PAYMENT USING COUNTERPART FUNDS

The counterpart funds of the Project are allocated in the provincial budget of Quảng Bình. The disbursement of counterpart funds for the Project is carried out quarterly by the Provincial Department of Finance based on the approved expenditure plan of the Project and the monthly, quarterly, and annual budget estimates. The counterpart funds will be transferred into the Project Source Fund Account at the Provincial Treasury for management and disbursement according to point 3 of Part IV of this Circular.

VI. RESPONSIBILITIES OF PROVINCIAL UNITS IN THE MANAGEMENT AND USE OF FUNDS

1. The Provincial Project Management Board is responsible for:

1.1. Approving the budget estimates for the use of project funds to be incorporated into the provincial general budget plan, coordinating and monitoring the implementation of the project locally.

1.2. Approving annual final accounts reports and completion final accounts reports of the project.

2. The Project Management Board is responsible for:

2.1. Establish the annual work program and budget estimate to submit to the Provincial Project Management Board for approval, organize the implementation of the project in accordance with the terms of the loan agreement signed between IFAD and the Government of Vietnam.

2.2. Monthly and quarterly report on the use of funds and progress of the project to the Provincial Project Management Board, State Treasury, and Provincial Department of Finance and Price; prepare the annual final account report and the final project completion report (detailed according to loan, grant, and counterpart funds) to be sent to the Provincial Department of Finance and Price, State Treasury, Provincial People's Committee, and Ministry of Finance in accordance with current regulations.

3. The Department of Finance and Price of Quang Binh Province shall be responsible for:

3.1. Participate in coordinating the Project, assist the Provincial Project Management Board in monitoring the implementation of the approved work program. 3.2. Organize the supervision and inspection of the Project's implementation.

3.3. Based on the budget estimate approved by the competent authority, quarterly transfer the counterpart funds into the project's source fund account for management and disbursement by the provincial State Treasury according to the loan drawdown schedule.

3.4. Process the accounting procedures for the IFAD loan funds subsidized by the central government budget to implement the project.

3.5. Review monthly and quarterly reports, jointly with the provincial State Treasury review the annual final accounts and assess the final project completion report to submit to the Provincial Project Management Board for approval.

3.6. At year-end, based on the approved annual final project report, the Department of Finance will consolidate it into the local government budget final accounts; send the approved project final report to the Ministry of Finance (Department of State Budget, Department of Financial Management, Central State Treasury) in accordance with current regulations.

4. The State Treasury of Quang Binh Province shall be responsible for:

4.1. Process the procedures to open a source fund account for the project.

4.2. Receive IFAD funds and counterpart funds transferred from the Ministry of Finance and the Department of Finance into the project's source fund account.

4.3. Based on the project's budget estimate, conduct checks, reviews, and approve payment requests from the Project Management Board and disburse funds from the project's source fund account according to current regulations.

4.4. Monthly prepare a statement of the project's source fund account, reflecting transactions from the account and the account balance, to be sent to the Project Management Board and the Department of Finance of Quang Binh Province.

4.5. Lead together with the Department of Finance and Price to review the final account report of each component, annual final accounts, and assess the final project completion report to submit to the Provincial Project Management Board for approval.

VII. RESPONSIBILITIES OF UNITS UNDER THE MINISTRY OF FINANCE AND COMMERCIAL BANKS SERVING THE PROJECT

1. Department of Foreign Finance

1.1. Be responsible for generally monitoring the progress of the project's implementation.

1.2. Process the procedures to request the State Treasury to open a special account at Vietcombank, withdraw IFAD loan funds into the special account. Upon the project owner's request, propose the State Treasury to convert foreign currency into Vietnamese Dong and request the Department of State Budget to transfer money to the project's source fund account and lend to the Agricultural Bank.

1.3. Check and sign the withdrawal request form sent to the IFAD Fund.

1.4. Check and compile the annual borrowing and repayment plan of the project when due.

2. State Budget Department:

2.1. Based on the approved work program and budget plan of the project, transfer the converted IFAD loan funds into the project's source fund account at the Quang Binh Provincial State Treasury.

2.2. Process the accounting procedures for the loan funds into the state budget and record the transfer of targeted subsidy funds for Quang Binh Province to implement the project.

2.3. Monitor the project's implementation in the province.

2.4. Coordinate with the Department of Foreign Finance to develop the annual repayment plan for IFAD.

3. Central State Treasury

3.1. Record revenue in the budget when processing the conversion of foreign currency, record expenditure in the budget when transferring funds into the project's source fund account at the Quang Binh Provincial State Treasury upon receipt of the spending order from the Department of State Budget.

3.2. Organize accounting, statistics, and bookkeeping of the project's funds.

3.3. Direct and guide the Quang Binh Provincial State Treasury on the procedures for approving expenditures and disbursing funds for the IFAD project.

4. Vietcombank

4.1. Vietcombank monitors the withdrawal of IFAD funds into the special account and expenditures from this account.

4.2. After each withdrawal of foreign currency from the special account at the request of the State Treasury, Vietcombank sends a notification to the Ministry of Finance (State Treasury, Department of Foreign Finance) regarding the date, amount, and exchange rate for recording revenue and expenditure in the state budget.

4.3. Annually and quarterly (on the fifth day of the first month of each quarter), Vietcombank prepares a detailed statement of the special account, clearly stating the purpose of expenditure, date of payment, amount paid, equivalent Vietnamese Dong amount, and exchange rate, to be sent to the Ministry of Finance (Department of Foreign Finance, Central State Treasury). The statement must reflect the account balance, monthly interest accrued, and the date of transferring that interest into the Ministry of Finance's Foreign Currency Concentration Account at Vietcombank (account number 212.210.371.000).

4.4. Vietcombank is entitled to service fees for each fund transfer according to the bank's fee schedule. These fees are included in the total project costs and recorded in the loan funds.

VIII. REPORTING, INSPECTION, AND AUDIT REGIME

1. Quarterly and annually, the Project Management Board is responsible for reporting to the Ministry of Finance (Department of Foreign Finance, Department of State Budget) and the Ministry of Planning and Investment on the use of loan, grant, and counterpart funds; the Project Management Board is responsible for preparing the final account report when a component is completed, the annual final account, and the final project completion report to be reviewed by the provincial State Treasury and Department of Finance before submission to the Provincial Project Management Board for approval.

2. Regularly and urgently, the Ministry of Finance, the Ministry of Planning and Investment, the Ministry of Agriculture and Rural Development, and the Quang Binh Provincial People's Committee will inspect the project's implementation and the use of domestic and foreign funds. If improper use of funds is discovered, the Ministry of Finance will suspend fund transfers to address the violation.

3. Annually, the special account, project accounts, accounting books and records of the project must be audited independently in accordance with the regulations of the State and international organizations. The final settlement report and audit report will be sent to the Ministry of Finance and serve as the basis for considering additional withdrawals from the special account or transferring funds to the project's source capital account, and also serve as the foundation for evaluating the implementation of the project.

VII. IMPLEMENTATION PROVISIONS

This Circular takes effect fifteen days from the date of signature. During the implementation process, if there are any difficulties, relevant agencies need to promptly reflect them to the Ministry of Finance for research and amendment.

 

ANNEX I

WITHDRAWAL OF FUNDS TO THE SPECIAL ACCOUNT

 

 

 

 

 

 

 

 

(1) The Project Management Board submits a request for fund withdrawal to the Ministry of Finance.

(2) The Ministry of Finance reviews, signs the request, and sends it to IFAD.

ANNEX II

TRANSFER OF FUNDS FROM THE SPECIAL ACCOUNT TO THE PROJECT SOURCE CAPITAL ACCOUNT

 

 

 

 

 

 

 

(1) The Project Management Board requests the transfer of funds to the project source capital account according to the project implementation progress and based on the approved plan.

(2) The Ministry of Finance reviews and processes the conversion of foreign currency from the Special Account into Vietnamese dong to transfer to the project's source capital account at the Provincial Treasury.

(3) The State Budget Department transfers Vietnamese dong to the project source capital account at the Provincial Treasury in the form of central government subsidies to local budgets.

ANNEX III

EXPENDITURE FROM THE PROJECT SOURCE CAPITAL ACCOUNT

 

 

 

 

 

 

(1) The contractor performs work according to the contract and requests payment for completed work volume.

(2) The Project Management Board inspects and requests the Provincial Treasury to accept payment.

(3) The Provincial Treasury examines, evaluates, confirms that the completed work meets the conditions for funding and pays the contractor, supplier from the IFAD and counterpart funds according to the agreed ratio.