Circular No. 67/2006/TT-BTC guiding the financial management regime of the Vietnam Universal Service Fund

CIRCULAR

Guidelines for the Financial Management System

of the Vietnam Universal Service Fund

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Pursuant to Decision No. 191/2004/QĐ-TTg dated November 8, 2004 of the Prime Minister on the Vietnam Universal Service Fund;

Pursuant to Decision No. 74/2006/QĐ-TTg dated April 7, 2006 of the Prime Minister approving the program to provide universal telecommunications services until 2010;

Pursuant to the guidance of the Prime Minister regarding the mechanism for lending by the Vietnam Universal Service Fund as stated in Document No. 3534/VPCP-KTTH dated July 5, 2006 of the Government Office;

The Ministry of Finance hereby provides guidelines for the financial management system of the Vietnam Universal Service Fund as follows:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. The Vietnam Universal Service Fund (hereinafter referred to as the Fund) is a state financial organization operating without profit-making objectives, ensuring capital recovery and cost compensation; the Fund has legal personality, registered capital, a seal, a balance sheet, and bank accounts at the State Treasury and domestic banks.

2. The Fund is a centralized accounting unit, implementing the financial system and annual revenue and expenditure settlement according to the provisions set forth in this Circular; it is exempt from corporate income tax and value-added tax on the following activities:

- Supporting costs for developing and maintaining the provision of universal telecommunications services during each period.

- Providing preferential loans to telecommunications and Internet enterprises for new construction, upgrading, and expansion of telecommunications and Internet infrastructure serving the provision of universal telecommunications services.

Other activities of the Fund must be subject to taxes as prescribed by current regulations.

3. The Minister of Posts and Telecommunications shall allocate state-owned capital to the Fund.

4. The Director of the Fund and the Management Board are responsible to the Minister of Posts and Telecommunications for the safekeeping of the Fund's capital and assets, supervising the proper and effective use of capital.

5. The Ministry of Finance shall lead and coordinate with the Ministry of Posts and Telecommunications in performing state management functions over finance, guiding, and inspecting the Fund's annual revenue and expenditure activities.

II. CAPITAL AND ASSETS

1. The operational capital of the Fund includes:

1.1. Registered capital comprising:

- VND 200 billion provided by the State Budget.

- VND 300 billion supplemented from annual contributions of telecommunications enterprises as stipulated in Clause 2, Article 6 of Decision No. 191/2004/QĐ-TTg of the Prime Minister within three years from the date the Fund commences operations.

1.2. Annual contributions of telecommunications enterprises as prescribed by current regulations, including:

- Contributions based on service revenue (excluding connection fees):

+ Mobile telecommunications services, contribution rate is 5% of revenue.

+ International long-distance telephone services, international leased-line services, contribution rate is 4% of revenue.

+ Domestic long-distance telephone services, domestic leased-line services, contribution rate is 3% of revenue.

- Additional connection fees (if applicable).

1.3. Capital to implement programs and projects on providing universal telecommunications services assigned by the State.

1.4. Grants, donations, and voluntary contributions from organizations and individuals both domestically and internationally.

1.5. Other capital as prescribed by law.

2. The operational capital of the Fund shall be used for the following purposes:

2.1. Supporting eligible recipients of universal telecommunications services under the Government’s Universal Telecommunications Program based on the Fund’s financial capacity. Support shall be implemented through telecommunications service providers in the following forms:

- Supporting costs for developing and maintaining telecommunications services according to the Universal Telecommunications Services Provision Program approved by the Prime Minister from the annual contributions of telecommunications enterprises.

- Providing preferential loans to telecommunications and Internet enterprises for new construction, upgrading, and expansion of telecommunications and Internet infrastructure and facilities serving the provision of universal telecommunications services.

2.2. Implementing programs and projects on providing universal telecommunications services assigned by the State.

2.3. Investment in basic construction and acquisition of fixed assets:

Total investment capital for basic construction and acquisition of fixed assets shall not exceed 5% of the existing registered capital and shall be formed from sources such as depreciation of fixed assets, development investment fund, registered capital, and other lawful sources as prescribed by the State.

Investment in fixed assets, establishment and utilization of depreciation of fixed assets of the Fund shall be carried out in accordance with regulations applicable to state-owned companies. Annually, the Fund shall develop an investment plan for fixed assets to be submitted to the Ministry of Posts and Telecommunications for review and approval, and implement investment activities within the approved plan.

2.4. Short-term investment in government bonds from temporarily idle funds not originating from the State Budget.

The surplus operational capital of the Fund from the previous year may be carried forward to the next year for use according to the approved plan.

3. The Fund shall ensure the preservation of capital during its operation through the following methods:

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

- When risks or losses occur, the Fund must promptly identify the cause and extent of the loss and formulate a resolution plan:

+ If the loss of assets is due to the fault of a group or individual, the group or individual causing the loss must compensate according to the law.

+ If the assets have been insured, the matter will be handled according to the insurance contract.

- In cases where losses are caused by unforeseeable external factors, the risk reserve fund may be used to cover the losses as prescribed in Section III of this Circular.

4. Annually, the Fund must balance its capital sources and needs for operations; plan the sources of operational capital; and use the capital provided by the state budget in accordance with the provisions of the State Budget Law and related documents.

5. Inventory of assets:

The Fund must conduct inventory and determine the quantity of assets (fixed assets and long-term investments, current assets and short-term investments), reconcile receivables and payables in the following situations:

- Closing the accounting books to prepare the annual financial report.

- Implementing decisions on division, merger, consolidation, or ownership conversion.

- After natural disasters, enemy threats, or when there are changes in assets.

- In accordance with the decision or policy of the competent state agency.

For excess, deficient, unrecoverable debts, and overdue debts, the causes and responsibilities of those involved must be clearly identified, and the level of material compensation shall be determined in accordance with the regulations.

6. Revaluation of assets:

6.1. The Fund shall conduct revaluation of assets in the following cases:

- Pursuant to the Decision of the competent state agency.

- Recovery of collateral assets when the project investor cannot repay the debt.

- Liquidation or sale of assets.

6.2. Any increases or decreases in the valuation of assets due to revaluation (excluding the recovery of collateral assets and assets formed from loans of the Fund when the project investor cannot repay the debt) shall be recorded as increases or decreases in the capital sources according to the regulations applicable to state-owned enterprises.

7. The Fund may liquidate or sell off obsolete, deteriorated, irreparable, technologically outdated, or inefficiently utilized assets.

When liquidating assets, the Fund must appraise the assets and organize auctions in accordance with the law. The difference between the proceeds from the liquidation or sale of assets and their remaining book value on accounting records, along with any liquidation or sale expenses, shall be recorded as income or expenses of the Fund.

III. ACTIVITIES OF SUPPORT AND LOANING CAPITAL BY THE FUND

1. Recipients of support and loaned capital from the Fund

1.1. These are public telecommunications services within the scope and objects defined in Decision No. 74/2006/QĐ-TTg dated April 7, 2006, of the Prime Minister approving the program for providing public telecommunications services until 2010.

1.2. The Ministry of Posts and Telecommunications shall specify in detail the recipients of support and loaned capital from the Fund after coordinating with the Ministry of Finance.

2. Principles, conditions, levels, and methods of capital support

2.1. Principles of support

- Only support costs for public telecommunications services within the objects of support specified in Point 1, Part III of this Circular and included in the annual plan approved by the Ministry of Posts and Telecommunications.

- Support for the development and maintenance of public telecommunications services shall be implemented through telecommunications service providers.

- Capital support disbursements shall be made according to progress, with quarterly advance payments and annual settlements.

2.2. Planning support

- Annually, telecommunications service providers shall prepare a support plan to submit to the Fund.

- Based on the Public Telecommunications Service Provision Program approved by the Prime Minister; based on additional capital plans and support needs of the objects, the Fund shall organize the selection and review of projects providing public telecommunications services funded according to state regulations; compile and submit to the Ministry of Posts and Telecommunications for consideration and decision.

2.3. Conditions for receiving support

- Enterprises must provide public telecommunications services;

- Be included in the annual plan approved by the Ministry of Posts and Telecommunications;

- Have complete documentation requesting support from the Fund in accordance with the regulations of the Ministry of Posts and Telecommunications (itemized list of public service products and quantities, completion volume verification records, confirmation from the competent authority, etc.).

2.4. Level and method of support

- The level of support for enterprises to develop and maintain public telecommunications services shall be determined based on the support standards issued by the Ministry of Posts and Telecommunications after consulting with the Ministry of Finance.

Support amount = Number of public service products and services (x) Support standard

- The Fund shall directly allocate support capital to telecommunications service providers or entrust financial organizations and banks to allocate it. Entrustment must be carried out through a trust agreement signed between the Fund and the entrusted agency, specifying the responsibilities of both parties to ensure compliance with the regulations on capital allocation for developing and maintaining public telecommunications services.

2.5. Advance payment and settlement

a) Advance payment

- Quarterly, the enterprise receiving support prepares a payment application for the actual quantity of telecommunications public services provided in the previous quarter while requesting an advance payment for the next quarter.

- The application for advance capital includes:

+ A written request for advance capital from the enterprise;

+ Plan for the number and quantity of telecommunications public services to be provided in the year and quarter; plan for the support capital allocation from the Fund to the enterprise annually and detailed for each quarter.

+ Payment documentation for the actual quantity and number of telecommunications public services provided in the previous quarter before requesting an advance (from the second quarter onwards).

- The maximum quarterly advance is 75% of the planned support capital for the quarter; the maximum quarterly payment is equal to the planned support capital for the quarter.

b) Settlement

- At the end of the year (December 31), the Fund and the telecommunications service provider shall settle the support capital allocation.

- Based on the capital plan, support standards, and the actual number of telecommunications public services provided in the year, the Fund shall approve the settlement of capital allocations to supported enterprises and handle:

+ Additional allocation in case the settlement amount exceeds the advance amount;

+ Recovery of the difference or deduction from the next year's plan (if the enterprise continues to provide telecommunications public services) in case the settlement amount is less than the advance amount.

3. Principles, conditions, levels of loan capital, terms, interest rates on loans, and risk provisions

3.1. Principles of lending

- Only lend to projects developing public telecommunications infrastructure within the objects of support specified in Point 1, Part III of this Circular and included in the annual plan approved by the Ministry of Posts and Telecommunications.

- Loaning capital for the development and maintenance of public telecommunications services shall be conducted through telecommunications service providers.

- Disbursement of loan capital shall be made according to the progress of the loan project.

3.2. Conditions for lending

- Belong to the objects eligible for loans as prescribed;

- Be included in the annual plan approved by the Ministry of Posts and Telecommunications;

- The loan project has completed all investment construction procedures as required.

- Enterprises borrowing capital must have a feasible financial plan and the ability to repay the loan when due, which shall be appraised and approved by the Fund;

- Have complete documentation as required by the Fund for requesting a loan from the Fund.

3.3. Amount of Loan, Term, and Interest Rate

- The maximum amount of loan is 70% of the total investment value of the project.

- The maximum term of the loan does not exceed 10 years.

- The interest rate on borrowed capital is equal to the interest rate of government bonds with a term of five years determined by the Management Board of the Fund; the adjustment of the interest rate on loans shall not exceed twice a year. The interest rate on borrowed capital remains fixed throughout the loan period; the late payment interest rate is 150% of the loan interest rate.

3.4. Provision for Risk and Risk Management

- The Fund may establish a risk reserve fund to offset losses arising from objective reasons during the process of lending projects for new construction, upgrading, expanding telecommunications infrastructure, Internet, and other projects serving the provision of public telecommunications services after using the compensation funds from insurance agencies (if any) to reduce the loss.

- The establishment of the risk reserve fund shall be carried out once a year at the end of the fiscal year. The annual contribution ratio is 0.5% based on the outstanding loan balance of the Fund.

- At the end of the year, if the risk reserve fund is not fully utilized, the remaining balance will be transferred to the next year's risk reserve fund.

- Authority to manage risks: The Ministry of Posts and Telecommunications shall take the lead in coordinating with the Ministry of Finance to decide on the management of risks (extension of debt, write-off) based on the proposal of the Fund Director and the Management Board for cases of risks due to objective and irresistible causes.

4. Responsibilities of Relevant Authorities

4.1. Telecommunications Enterprises Receiving Support and Borrowing Capital

- Use support capital and borrowed capital for their intended purposes; fully and timely repay the principal and interest of the loan.

- Provide complete documentation for the Fund to review before receiving support and borrowing capital according to regulations and bear responsibility for the truthfulness and accuracy of the provided documentation.

- Record accounting entries for received support and borrowed capital from the Fund and comply with tax laws applicable to enterprises.

4.2. Public Telecommunications Service Fund

- Implement disbursement and settlement of support capital and loan capital according to regulations.

- Monitor, compile, and report on the implementation of programs, plans, and projects providing public telecommunications services supported and financed by the Fund.

- Inspect and supervise the use of capital provided by the Fund for implementing programs, plans, and projects related to the provision of public telecommunications services; suspend support or recover previously provided funding upon discovering violations in the use of capital.

4.3. The Ministry of Posts and Telecommunications is responsible for inspecting and supervising the activities of the Fund in supporting and financing programs, plans, and projects related to the provision of public telecommunications services; reviewing and approving the settlement of support and development funding for maintaining public telecommunications services annually by the Fund.

IV. INCOME AND EXPENSES

1. Income of the Fund includes all receivables generated from its business operations and other services during the year, including:

1.1. Income from Business Operations:

- Revenue from lending activities of projects funded by the Fund, including interest income and other revenues;

- Interest income from deposits;

- Interest income from buying and selling government bonds;

- Other business operation and service revenues.

1.2. Other Income:

- Fine revenues;

- Proceeds from liquidation and sale of Fund assets (after deducting residual value and liquidation costs);

- Revenue from revaluation of collateral assets and assets formed from Fund loans when the borrower cannot repay the debt;

- Revenue from recovered debts that were previously written off;

- Other lawful revenues.

2. Expenses of the Fund include necessary expenditures for its operations within the approved budget, supported by financial invoices and legitimate documents. The level of expenditure is implemented in accordance with the law. In cases where the law has not provided specific provisions, the Fund bases its expenditure standards on its financial capacity, decides on expenditures, and bears legal responsibility.

Expenditures must be included in the annual financial plan approved by the Ministry of Posts and Telecommunications, including:

2.1. Operational Expenses:

- Payment service fees;

- Entrusted service fees;

- Establishment of a risk reserve fund;

- Other operational expenses.

2.2. Administrative Expenses:

2.2.1. Expenses for Employees Working at the Fund:

- Wages, allowances, and meal subsidies according to state enterprise regulations; the Fund manages wage unit prices according to state enterprise regulations.

- Social insurance, health insurance contributions, and trade union fee payments according to state regulations;

- Allowances for Management Board members and part-time staff; hiring experts and short-term contract workers.

- Expenses for female employees according to regulations.

2.2.2. Expenses for Administrative Activities and Official Duties:

- Purchase of labor tools and office supplies;

- Depreciation of fixed assets;

- Postal and telecommunication charges: Including postal fees, telecommunication, telegraph, telex, fax... paid according to invoices from postal authorities;

- Electricity, water, health, and office sanitation expenses;

- Fuel expenses for transportation for officials, civil servants, and employees traveling on official duties according to state regulations;

- Travel expenses for officials, civil servants, and employees traveling domestically and internationally, settled according to current regulations of the Ministry of Finance;

- Publicity and press conference expenses not exceeding 3% of total expenses and within the approved financial plan;

- Maintenance and repair expenses for assets according to the annual financial plan;

- Training, professional training, and scientific research expenses;

- Other administrative expenses within the approved financial plan.

2.2.3. Contribution to Unemployment Assistance Reserve Fund

The contribution rate ranges from 1% to 3% of the payroll base used for social insurance contributions of the Vietnam Public Telecommunications Service Fund.

The unemployment assistance reserve fund is used to pay unemployment benefits and job loss compensation as stipulated in Article 12 and Article 13 of Decree No. 39/2003/NĐ-CP dated April 18, 2003 of the Government detailing and guiding the implementation of certain provisions of the Labor Code regarding employment.

If the annual unemployment allowance reserve fund is not fully expended, the remaining balance shall be carried over to the next year. In cases where the unemployment allowance reserve fund is insufficient to cover unemployment allowances for employees who terminate their employment during the fiscal year, the entire shortfall shall be recorded as management expenses for the period.

2.3. Financial activity expenses:

- Expenses for purchasing and selling government bonds;

- Rental asset expenses;

2.4. Other expenses:

- Expenses for collecting penalties as prescribed;

- Asset insurance expenses and other types of insurance expenses as prescribed;

- Expenses due to revaluation differences of collateral assets when the project owner fails to repay the debt, assets formed from the Fund's loan capital;

- Expenses supporting Party and mass organization activities of the Fund according to state regulations (excluding expenses supporting organizations, localities, social organizations, and other agencies);

- Other expenses as prescribed by law.

3. The Fund shall not record the following items as expenses:

- Losses that have been supported by the Government or compensated by insurance agencies or the party responsible for causing the loss;

- Administrative penalty expenses due to subjective reasons or financial system violations;

- Construction investment expenses for fixed assets, procurement, upgrading, and renovation of fixed assets from construction investment capital;

- Expenses for repairing, maintaining, and equipping welfare assets and welfare projects;

- Expenses supporting localities, social organizations, and other agencies;

- Expenses exceeding the limits set by the State;

- Expenses from other funding sources.

V. DISTRIBUTION OF INCOME AND USE OF FUNDS

1. Income Distribution

After deducting financial penalties for violating legal provisions, the financial surplus or deficit for the year shall be distributed in the following order:

- Establishing a development investment reserve fund of at least 30%;

- Establishing a reward and welfare fund, with the maximum amount allocated to both funds being three months' salary, the ratio of which is determined by the Management Board;

- The remainder, after establishing the above funds, shall be added to the Development Investment Reserve Fund.

2. Purpose of Using Funds

2.1. The Development Investment Reserve Fund shall be used to supplement the registered capital.

2.2. The Reward Fund shall be used for:

- Year-end or periodic bonuses for staff of the Fund based on productivity and achievements, the amount of which is decided by the Director based on each staff member's performance.

- Special bonuses for individuals or groups within the Fund who propose technical improvements or procedural innovations that yield benefits, the amount of which is decided by the Fund Director.

- Bonuses for individuals or units outside the Fund that contribute effectively to the Fund's operations, the amount of which is decided by the Chairman of the Management Board and the Fund Director.

2.3. The Welfare Fund shall be used for:

- Investing in constructing or repairing welfare facilities of the Fund, contributing capital to build common welfare facilities within the industry or with other units under agreed contracts.

- Expenses for sports, cultural, and public welfare activities for the Fund's staff.

- Regular and emergency hardship assistance for staff of the Vietnam Public Telecommunications Service Fund.

- Contributions to the Social Welfare Fund and other welfare activities.

The Fund Director shall coordinate with the Fund's Trade Union Executive Committee to manage and utilize this fund.

VI. ACCOUNTING SYSTEM AND FINANCIAL PLANNING

1. The Fund shall apply the accounting system issued by the Ministry of Finance to account for its activities.

2. Annually, the Fund is responsible for preparing and reporting the financial plan to the Ministry of Posts and Telecommunications for approval and submitting it to the Ministry of Finance. The approved financial plan includes:

- Annual capital plan including: additional registered capital from the budget; state budget capital for specified purposes; annual contributions from telecommunications enterprises as prescribed; recovered loan capital.

- Capital usage plan including: preferential loan plan; support plan for developing and maintaining public telecommunications services;

- Detailed construction investment plan.

- Detailed financial income and expenditure plan including explanations about revenue and expenditure items and specific expenditure limits.

- Staff quota and salary fund plan.

These plans serve as the basis for the Fund to implement and settle accounts with the competent authority.

3. The Fund's annual financial report must be audited by an independent auditing organization before being submitted to the Ministry of Posts and Telecommunications for review and approval.

Periodically (quarterly, annually), the Fund is responsible for preparing and submitting financial reports to the Ministry of Posts and Telecommunications and the Ministry of Finance as stipulated in the accounting system.

The Fund's financial reporting system operates as prescribed for state-owned enterprises.

4. The Fund must publicly disclose its finances in accordance with the law.

VII. IMPLEMENTATION

1. Based on the provisions of this Circular, the Fund's Management Board shall guide the procedures for allocating and lending development and maintenance funds for public telecommunications services as a basis for the Fund's implementation.

2. This Circular takes effect fifteen days after its publication in the Official Gazette. Any difficulties encountered during implementation should be reported by the Vietnam Public Telecommunications Service Fund to the Ministry of Finance for research and resolution./.