Circular No. 70/2001/TT-BTC guides the financial management regime for non-repayable aid funds.

CIRCULAR

Guidelines for the State's financial management regime

concerning non-repayable aid sources

 

Pursuant to the State Budget Law which was adopted at the ninth session of the ninth National Assembly on March 20, 1996; the Law Amending and Supplementing Certain Articles of the State Budget Law No. 06/1998/QH10 dated May 20, 1998, and current guiding documents under the Law;

Pursuant to Decree No. 17/2001/NĐ-CP dated May 4, 2001 of the Government promulgating the Regulation on Management and Use of Official Development Assistance;
Pursuant to Decision No. 64/2001/QĐ-TTg dated April 26, 2001 of the Prime Minister promulgating the Regulation on Management and Use of Non-Governmental Foreign Aid;

The Ministry of Finance issues guidelines for the State's financial management regime concerning foreign non-repayable aid as follows:

I. GENERAL PRINCIPLES:

1. Non-repayable aid includes assistance in the form of money, goods, knowledge, from governments, organizations under the United Nations, intergovernmental organizations, international organizations, non-governmental organizations (NGOs) abroad, economic organizations, or individuals from foreign countries provided to Vietnam for economic and social development purposes or other humanitarian purposes, implemented through formal documents signed between both parties, approved by competent authorities, and humanitarian and emergency relief assistance aimed at mitigating the consequences of war and natural disasters.

Any other transfers not falling within the scope defined above shall be considered as gifts and are not subject to the management guidelines set forth in this Circular.

Foreign non-repayable aid is a source of state budget revenue and must be fully and promptly recorded in the state budget.

2. The Ministry of Finance uniformly manages the State's financial regime for all non-repayable aid sources, from participating in financial opinions on the determination of aid usage policies; participating in project appraisals and allocation of funds for projects; to researching and issuing financial management mechanisms, confirming aid and recording aid sources in the budget; guiding and supervising compliance with financial management regimes, auditing final accounts, and guiding the transfer of assets, materials, and capital of projects after completion according to the provisions of this Circular.

- The Financial Accounting Department of Ministries, Sectors, or Mass Organizations is responsible for assisting the heads of Ministries, Sectors, and mass organizations in managing finance for all programs, projects, and non-repayable aid received and implemented by central Ministries, Sectors.

- Provincial Departments of Finance and Prices, District Financial and Pricing Offices, and Village Financial Boards are responsible for assisting local People's Committees in managing finance for all programs, projects, and non-repayable aid received and implemented by local units; monitoring the implementation of central-level aid programs and projects in their respective areas.

3. Project directors, heads of units directly using non-repayable aid are legally responsible for implementing the objectives, targets, and other commitments stipulated in each program and project as well as the financial management guidelines set forth in this Circular.

II. SPECIFIC PROVISIONS:

A. ESTABLISHING AND COMBINING THE BUDGET PROJECTIONS

Annually, based on the Ministry of Finance's guidelines for establishing the State Budget projections, commitment or agreement documents, and plans for implementing programs, projects, or notifications of aid distribution from the managing agency to the unit, the actual implementation situation of the project in the year; units or project leaders establish budget projections for non-repayable aid receipts and matching funds (if applicable), together with their own budget projections, and submit them to the project managing agency and the same-level financial agency:

- Projects under Ministries and Sectors send to the Financial Accounting Department of the Ministry or Sector.

- Projects under localities send to the same-level financial agency.

Central Ministries and Sectors and Local Departments of Finance and Prices are responsible for consolidating budget projections for non-repayable aid receipts within their management scope and matching fund requirements (if applicable) and submitting them to the Ministry of Finance and the Ministry of Planning and Investment for consolidation in the State Budget.

The matching fund projection is established in accordance with Decree No. 17/2001/NĐ-CP dated May 4, 2001 of the Government and the detailed circular guiding its implementation for all ODA and non-governmental foreign aid programs and projects.

The budget projection for non-repayable aid receipts is established according to Table 3 attached to this Circular.

B. REGIME FOR USING AID:

- All expenditure activities must have specific budgets and be based on the items approved by the funding agency, spending correctly according to the intended recipients and purposes, and not exceeding the agreed amounts with the foreign side.

- In cases where project documents do not contain detailed and specific budgets, the implementing units must base their expenditures on the commitments made with the foreign side and domestic expenditure standards.

- Apart from the specific expenses clearly stated in the project documents, units may not use the aid funds for any other purpose without authorization. Project directors or directly supervising agencies may not reallocate aid funds among units except with written permission from the aid organization and the project approval agency.

- Interest on bank deposits of programs and projects under budgetary disbursement for official development assistance that are currently being implemented must be used strictly according to the commitments with the donor. In cases where the interest on aid deposit is not mentioned in the project documentation or is mentioned but the project has ended without the interest on aid deposit being fully utilized, all such interest on aid deposit shall be considered as a source of the State Budget. Upon final settlement of the completed project, the entity must remit the interest on aid deposit to the State Budget. Before the project ends or before the decision approving the final settlement of the completed project is issued, if the project includes additional expenditure items or the entity has other purposes for expenditure, the entity may only use the interest on aid deposit upon approval by the competent authority regarding the purpose and content of the expenditure and with the issuance of financial disbursement vouchers by the finance agency (in the form of revenue and expenditure records).

- For programs and projects under budgetary disbursement in the form of administrative and public service funding allocation, procurement, equipment, and services must comply with the provisions in the project documentation and current state regulations on procurement of goods and equipment.

- In cases where programs and projects use aid funds to invest in basic construction, repair headquarters, architectural works, and infrastructure projects, they must organize bidding or tendering in accordance with the provisions stated in the project documentation; if there is no agreement, they shall implement in accordance with current government regulations on managing bidding for investment construction projects.

- In cases where programs and projects use aid funds to pay salaries to Vietnamese staff involved in managing and implementing aid programs and projects, those receiving salaries from aid funds must fulfill the obligation to pay income tax in accordance with current laws on taxation.

C. IMPLEMENTATION OF RECEIVING, MANAGING AND ACCOUNTING THROUGH THE STATE BUDGET FOR AID FUNDS

1. Disbursing Aid Funds:

When aid programs and projects are signed and approved, the program/project management agencies and the program/project leading agencies have the responsibility to promptly complete all necessary conditions and procedures for disbursing aid funds. In cases where the disbursement of aid funds for programs and projects must go through a commercial bank, the selection of the authorized bank to withdraw funds will be decided by the Ministry of Finance. The commercial bank authorized to provide aid fund withdrawal services shall enjoy fees according to current regulations paid by the program/project leader from domestic counterpart funds or agreed upon with the donor.

2. Confirmation of Aid:

The directors of aid programs and projects and the heads of units receiving aid are responsible for processing the confirmation of aid in accordance with the following regulations:

2.1. Non-repayable aid amounts requiring confirmation of aid include:

- Construction projects carried out by contractors under the "turnkey" method, evidenced by handover and final settlement documents, and contracts for awarding and accepting bids.

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

- Foreign currency or Vietnamese dong transferred by foreign parties to domestic units for direct use in implementing aid agreements (including grants for project office operational expenses as committed in the project documentation).

- Consulting and technical service payments made from non-repayable aid program/project funds, evidenced by contracts signed between the project leader and consulting companies both within and outside the country.

2.2. Certificate of Aid:

- The certificate of aid is established based on the model issued together with this Circular. (Model No. 1 and No. 2)

- The certificate of aid consists of two parts:

Part 1 of the aid confirmation certificate is the confirmation part of the financial agency.

Part 2 is the declaration part of the aid-receiving unit. The aid-receiving unit must declare all data items listed on the aid confirmation certificate form and shall be legally responsible for the accuracy of the information and figures declared by itself.

The aid confirmation certificate is made in five copies. If the aid is automobiles or motorcycles, an additional copy must be prepared for registration purposes.

The aid confirmation certificate for monetary aid is made in four copies.

2.3. Time and place of confirmation:

Upon receipt of monetary aid, goods aid, or notification of receipt of goods; the bank's confirmation letter regarding the aid money; or immediately after acceptance and handover, settlement of tender contracts, procurement contracts, and service consultancy and technical service contracts, the entities specified above are required to submit the relevant documents as stipulated in point 3 below to the Ministry of Finance or the International Aid Management and Reception Board's Representative Office in Ho Chi Minh City or Da Nang to process the aid confirmation procedures.

3. Necessary documents for aid confirmation:

3.1. For goods aid, including:

+ Legal documents on aid:

- Approval documents for programs, projects, or permits issued by competent authorities;

- Project, program documents, Agreements, Protocols, Exchanged Notes, or officially signed agreements with foreign partners or aid notifications clearly stating the list, quantity, type, and value of approved goods...

+ Trade contract approval documents according to current regulations, accompanied by commercial invoices (Invoice) or invoices issued by the Ministry of Finance if purchasing domestically.

+ Ocean Bills of Lading or Airway Bills.

+ Detailed packing lists (Packing List)

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

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

For programs and projects organized through bidding in Vietnam to purchase equipment, goods, and consultancy services using aid funds, in addition to the aforementioned documents, the following related documents should also be supplemented:

- Bid result minutes or decision recognizing the winning bidder (if applicable).

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

- Foreign trade contracts if importing goods, or invoices according to the model prescribed by the Ministry of Finance if purchasing domestically produced goods.

3.2. For monetary aid, including:

- Legal documents on aid.

- Documents proving the transfer of aid money.

3.3. For projects that are basic construction works carried out by contractors under turnkey conditions:

- Legal project documents

- Tender acceptance contracts (Construction contracts, procurement contracts, and consultancy contracts).

- Acceptance, handover, or contract termination minutes.

3.4. In cases where urgent requirements or other objective reasons prevent the aid-receiving unit from completing the aid confirmation procedures in time, quarterly, the unit is responsible for compiling the value of received aid and reporting to the financial authority at the same level to record income and expenditure in the state budget for aid money and goods according to Model No. 7 attached hereto.

4. Recording in the State Budget:

4.1. The following documents serve as the basis for recording:

- The aid confirmation certificate issued by the Ministry of Finance to aid-receiving units, or

- The aid-receiving unit's request for recording income and expenditure in the state budget according to Model No. 7 attached, or

- Other documents proving the transfer and use of aid such as: tender acceptance contracts, trade contracts, consultancy contracts, bank authorized withdrawal vouchers, contract termination minutes, approved final reports of the unit (project completion settlement or annual settlement), etc...

4.2. The recorded value in the budgets at various levels is the value in VND converted from the original currency according to the accounting exchange rate published by the Ministry of Finance during each period. (Except in cases where the donor has specified the exchange rate).

- In cases where goods aid is received without an original currency value, it is temporarily calculated based on the price of similar imported goods in the same period; when actual inspection reveals discrepancies in excess or shortage, incorrect types, or prices not declared and confirmed; or for basic construction projects funded by aid, if the project cost is deemed unreasonable, within sixty days from the date of acceptance and handover or the date of issuing the aid confirmation certificate, the unit is responsible for re-evaluating the aid value and submitting the revaluation minutes to the same-level financial authority as the basis for recording in the budget. The revaluation is conducted by a valuation committee established by the unit's supervisory authority with the participation of representatives from the same-level financial authority. The revaluation process follows current regulations.

4.3. Funds belonging to aid projects but directly spent by the foreign side, such as expenses for consultant experts, training, tours, surveys, internships, and other expenses incurred abroad without proof of expenditure, are not recorded in the state budget.

4.4. Recording time: The recording of non-refundable aid into the State Budget is carried out immediately after the financial agencies at various levels have one of the documents proving the receipt and use of aid as stipulated in point 4.1, Section 4, Part C.

4.5. Allocation of aid recording into the State Budget:

- For non-refundable aid provided by governments, organizations, and individuals from abroad to the Government of Vietnam as regulated by law, which belongs to the central government revenue, the Ministry of Finance will handle the recording of income and expenditure through the central state budget.

- For non-refundable aid provided directly by organizations and individuals from abroad to provincial and municipal levels as regulated by law, which belongs to provincial and municipal state budget revenues, the Provincial and Municipal Departments of Finance and Prices will handle the recording of income and expenditure through the provincial and municipal budgets.

- For non-repayable grants directly provided to the district level from foreign organizations and individuals in accordance with the laws and falling under the revenue sources of the district budget, the District Finance Department shall handle the accounting entries for recording income and expenditure through the district budget.

- For non-repayable grants directly provided to communes, wards, and towns from foreign organizations and individuals in accordance with the laws and falling under the revenue sources of the commune, ward, and town budgets, the Commune, Ward, and Town Finance Boards shall handle the accounting entries for recording income and expenditure through the commune, ward, and town budgets.

4.6. Method of accounting for grant disbursements to users:

4.6.1. For projects subject to allocation:

- Allocation of capital for basic construction investment:

Record grant revenue in Chapter 160, Type 10, Clause 8 (or 9), corresponding Subsection of the current State Budget Classification; record provisional advance payments for basic construction investment through the National Treasury system and send detailed lists of grant recipient units' names and addresses to the National Treasury for allocation according to the current management regulations for basic construction investment.

In cases where basic construction projects are fully funded by grants (without domestic counterpart funds), the financial authority shall record grant revenue and directly allocate it to the beneficiary units (without provisional advance payments for basic construction investment through the National Treasury system).

- Allocation of administrative and public service expenses:

Record grant revenue as above and allocate it to beneficiary units according to the corresponding Chapter, Type, Clause, and Subsection of the current State Budget Classification. In cases where a central budget primary budget unit has multiple beneficiary units, attach a detailed list of the names, addresses, and specific grant values for each beneficiary unit within that primary budget unit to the State Budget Receipt and Payment Order. Primary budget units are responsible for reconciling, checking, and notifying their subordinate units according to the model of grant allocation notification for subordinate units issued by the Ministry of Finance (Annex 5 attached hereto). This notification is considered a receipt for allocating state budget funds to direct beneficiaries. Based on the capital allocation notification from the primary budget unit, grant recipients must record the allocated grant value in their accounting books, manage it, and settle accounts annually with their superior units.

In cases where grant programs or projects are managed centrally by a central agency but implemented through sub-projects at local levels, or managed by a ministry or sector but implemented through sub-projects at other ministries or sectors, during the implementation of the program or project, the Ministry of Finance shall handle the accounting entries for recording central government revenue and allocating it to the project manager. Upon completion of the program or project, the project manager shall transfer assets according to the guidelines set out in Point 4, Section E, Part II of this Circular. Based on the results of asset transfer after project completion, the transferring party shall reduce its assets and reduce the source of asset formation, while the receiving party shall increase its assets and increase the source of asset formation according to the current accounting regulations. For grant programs or projects where the role of the central managing agency is only technical support or specialized guidance without a financial management structure, central government revenue shall be recorded and allocated directly to the units receiving and using the grants (except for those programs or projects with specific provisions).

For social organizations and occupational social organizations not listed in the Chapters of the State Budget Classification or not guaranteed by the State for operational funding according to the State Budget Law, the accounting entries for recording revenue shall still follow the above regulations, but expenditures shall be recorded in Chapter 150 "Other Units," corresponding Type, Clause, Category, and Subsection of the current State Budget Classification, considered as a support from the State Budget to that unit. Assets formed from this support are State assets and must be managed according to the current regulations on State asset management at associations.

For social organizations and occupational social organizations implementing large-scale grant programs or projects with identifiable grant recipient units and capable of settling grant expenditures for these units upon confirmation by the recipient units, expenditures shall be recorded for the recipient units according to the corresponding Chapter, Type, Clause, and Subsection of the current State Budget Classification.

For grants with undetermined user units: Record the budget revenue according to the prescribed classification levels, simultaneously determine the usage plan in accordance with the agreed commitments and objectives with the donor side, submit to the competent authority for decision-making, then distribute to the user units and proceed with budget allocation procedures as stipulated above.

4.6.2. Projects subject to re-lending:

For projects involving production and business investments eligible for enterprises to borrow from the Government, the Ministry of Finance shall enter into a mandate contract with the Development Support Fund or commercial banks to lend to enterprises using grant funds, manage and recover borrowed funds, and simultaneously handle the accounting entries for recording revenue and lending through the central budget based on the current State Budget Classification.

4.6.3. For projects including a revolving credit fund component for poverty alleviation loans or small and medium-sized enterprise loans: Implement grant revenue recording and expenditure recording in Subsection 151 or Subsection 152, corresponding Sub-subsection according to the corresponding Chapter, Type, and Clause of the current State Budget Classification.

Determining interest rates and distributing and utilizing interest income requires attention to the following points:

- If the project documentation clearly specifies the interest rate and the use of interest, implement according to these provisions.

- In cases where the sponsor does not specify concretely, the interest rate for loans shall be implemented according to the preferential interest rate currently applied for ongoing poverty alleviation loans in the locality.

- The profits obtained shall be distributed and used according to the principle: After deducting bank service fees (if any), allocate a reasonable proportion to cover the expenses of the project management boards at all levels, with the remainder to be added to the revolving fund.

The financial authority at the same level shall coordinate with the implementing agency to specify the interest rate and the use of profits according to the general principles stipulated above for each specific project.

- Quarterly, the implementing agency shall report to the financial authority at the same level on the situation regarding the use of the aforementioned profits. Based on these reports, the financial authority shall process the recording of income and expenditure for the disbursement or loan through the budget at various levels for the specific purposes of the recovered profits.

Upon completion of the assistance program or project, the project owner shall be responsible for transferring this capital to the local budget where the project is implemented (except in cases where there is a separate agreement with the donor recorded in the project documentation).

D. ACCOUNTING AND MANAGEMENT OF ASSISTANCE ASSETS:

During the use of assistance, units must promptly and fully reflect all sources of funds and goods received (both quantity and value) on accounting vouchers and books in accordance with the provisions of the State Budget Law, the Accounting and Statistics Ordinance, the current accounting regulations, and the requirements of the donor (if any).

In cases where original vouchers must be sent to the donor, before sending them, the program or project owner must make copies of the original vouchers, prepare a list of original vouchers sent to the donor, clearly stating the voucher number, date, nature of income or expenditure, and the amount recorded on the voucher. This list must be signed by the preparer, the chief accountant, and the head of the unit. (Annex 6 issued together with this Circular). These copies of the original vouchers will be used for bookkeeping and stored and preserved according to the current management system for original vouchers and serve as the basis for accounting audits and final settlement of completed projects.

In cases where the actual amount of assistance used differs from the amount recorded on the assistance confirmation letter due to differences between the foreign exchange purchase rate of the bank being higher or lower than the accounting rate published by the Ministry of Finance, the implementing unit shall record the exchange rate difference in account 413 (Exchange Rate Difference) along with the bank's voucher. The balance of this account will be processed during the annual settlement review or upon project completion.

Units may use non-repayable assistance funds in the form of goods, equipment, etc., but without ownership rights transferred (project not yet completed) during the usage period for project implementation. Units must still fully record these transactions on relevant accounts outside the balance sheet to meet management requirements.

During the project implementation, the project owner may propose the liquidation of equipment and goods that have exceeded their useful life or are damaged and cannot be used for the project. Liquidation must be approved in writing by the funding organization or the project supervising authority.

The disposal of assets from assistance funds must comply with the current state regulations on the disposal of unused and unusable assets in administrative and public institutions. After completion, programs and projects receiving assistance must hand over assets. Equipment from assistance funds, when handed over to using units, becomes state property, and the units are responsible for managing it according to the current state asset management and liquidation regulations. Principles, formats, and contents of asset handover are carried out in accordance with Decree No. 14/1998/NĐ-CP dated March 6, 1998 of the Government on State Asset Management and Circular No. 42 TC/QLCS dated July 31, 1996 of the Ministry of Finance guiding the receipt and handover of assets between administrative and public institutions and economic organizations as decided by competent authorities.

For ongoing programs and projects, the remaining assistance funds on the accounts of these programs and projects at the end of the fiscal year shall be carried forward to the next year for continued implementation.

E. REPORTING, AUDITING, AND SETTLEMENT REGIME:

1. Reporting System:

Quarterly and annually, the directors of programs and projects and the heads of units directly using non-repayable assistance must prepare reports on the receipt and use of assistance according to Annex 4 issued together with this Circular and submit them to the project supervising authority. The project supervising authority is responsible for consolidating the overall situation of receipt and use of assistance for projects under its management as follows:

- Projects under central ministries and sectors shall send reports to the Financial Accounting Department of their respective ministry or sector for consolidation and submission to the Ministry of Finance.

- Projects under localities shall send reports to the Provincial Finance and Price Bureau for consolidation and submission to the Ministry of Finance.

Reports on the receipt and use of assistance must fully reflect all required contents and be submitted within the timeframes specified in Article 35 of Decree No. 17/2001/NĐ-CP dated May 4, 2001 of the Government and Article 20 of the Regulation issued together with Decision No. 64/2001/QĐ-TTg dated April 26, 2001 of the Prime Minister.

2. Inspection schedule:

Financial authorities at all levels are responsible for regularly auditing and guiding subordinate units to strictly implement the financial management regulations for non-repayable assistance stipulated in this Circular:

- The Financial Accounting Departments of central ministries and sectors shall audit and guide assistance programs and projects received and implemented by subordinate units of central ministries and sectors.

- Provincial Finance and Price Bureaus and District, County, and City Finance and Price Offices shall audit and guide assistance programs and projects and non-repayable assistance received and implemented by subordinate units of localities.

- If necessary, the Ministry of Finance may conduct audits of assistance programs and projects or non-repayable assistance received and implemented by subordinate units of central ministries and sectors or localities.

3. Settlement regime.

Annually and upon project completion, based on current regulations, the directors of assistance programs and projects and the heads of units using assistance are responsible for preparing detailed reports on the settlement of assistance income and expenditure as follows:

3.1. For construction investment projects: The final settlement shall be carried out in accordance with the provisions set forth in Circular No. 70/2000/TT-BTC dated July 17, 2000, issued by the Ministry of Finance, guiding the final settlement of investment capital.

3.2. For administrative and public service projects:

The contents and formats of the final settlement reports shall be implemented in accordance with the current regulations stipulated in Decision No. 999 TC/QĐ/CĐKT dated November 2, 1996, issued by the Minister of Finance on the issuance of the Administrative and Public Service Accounting System.

3.2.1. Annual final settlement:

The Ministry of Finance shall take the lead in reviewing the annual final settlement reports on revenue sources and the use of aid from central ministries and sectors, together with the review of the final settlement of administrative and public service funds. Based on the minutes of the final settlement review of aid sources, the Ministry of Finance will announce the total amount of approved final settlement for administrative and public service expenses, including the final settlement of aid sources for central ministries and sectors. Counterpart funds for projects shall be settled as if they were settled according to the current regulations governing the final settlement of state budget funds allocated by the government.

Provincial Departments of Finance and Price Control, District and County Financial and Price Control Offices shall take the lead in reviewing the annual final settlement reports on revenue and the use of aid from units under local management, together with the review of the final settlement of administrative and public service funds.

3.2.2. Project final settlement:

All programs, projects, and aid grants that have been approved by competent authorities upon completion must be fully settled and submitted to the corresponding financial authority in accordance with current regulations.

3.3. Some points to note when settling accounts:

3.3.1. When a project has completed its final settlement with the sponsor and there is still surplus money remaining, the project director shall report the handling plan to the supervising agency and the corresponding financial authority (as stipulated in the section on submitting final settlement reports) for consideration and decision.

3.3.2. The approval of the final settlement of completed projects must ensure compliance with the current regulations of the Ministry of Finance.

3.3.3. Along with submitting the final settlement report of completed projects, the project leader must also report the handling plans for assets, receivables and payables, and other outstanding issues to the supervising agency and the corresponding financial authority. The supervising agency of the project is responsible for consulting the opinions of the corresponding financial authority and relevant agencies to consider and decide or submit to the competent authority for approval of the handling plans for outstanding issues of the project before approving the final settlement of the completed project.

III. IMPLEMENTATION

1. This Circular replaces Circular No. 22/1999/TT-BTC dated February 26, 1999, issued by the Ministry of Finance, and shall take effect fifteen days after the date of signature.

2. During implementation, if any difficulties arise, relevant ministries, sectors, localities, units, and project leaders should promptly reflect them to the Ministry of Finance for study and resolution.