Circular No. 73/2018/TT-BTC guiding the use of financial resources in the management and operation of water conservancy works funded by state capital.

CIRCULAR

Guidelines on the use of financial resources in the management and operation of state-funded irrigation works

water conservancy works using state funds

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Pursuant toEnterprise LawNovember 26, 2014;

Pursuant toLaw on Management and Use of State Capital for Production and Business Investment at EnterprisesNovember 26, 2014;

Pursuant toCivil CodeNovember 24, 2015;

Pursuant toLaw on Irrigation June 19, 2017;

Pursuant toLaw on CooperativesNovember 20, 2012;

Pursuant toLaw on State Budgetdated June 25, 2015;

Pursuant toLaw on Management and Use of State Propertydated June 21, 2017;

Pursuant to Decree No.91/2015/NĐ-CPOctober 13, 2015 Government Decree on State Capital Investment in Enterprises and Management and Use of Capital and Assets at Enterprises;

Pursuant to Decree No.32/2018/NĐ-CPMarch 8, 2018 Government Decree amending and supplementing certain articles of Government Decree number91/2015/NĐ-CPOctober 13, 2015 Government Decree on State Capital Investment in Enterprises and Management and Use of Capital and Assets at Enterprises;

Pursuant to Decree No.151/2007/NĐ-CPOctober 10, 2007 Government Decree on the organization and operation of cooperative groups;

Pursuant to Decree No.193/2013/NĐ-CPNovember 21, 2013 Government Decree detailing certain provisions ofLaw on Cooperatives;

Pursuant to Decree No.87/2015/NĐ-CPOctober 6, 2015 Government Decree on supervising state capital investment in enterprises; financial monitoring, assessing operational efficiency, and publicly disclosing financial information of state-owned enterprises and enterprises with state capital;

Pursuant to Decree No.87/2017/NĐ-CP July 26, 2017 of the Government stipulating functions, tasks, powers, and organizational structure of the Ministry of Finance;

At the proposal of the Director of the Enterprise Finance Department,

The Minister of Finance issues this Circular guiding the use of financial resources in the management and operation of state-funded irrigation works.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular provides guidance on financial resources, management and use of financial resources, accounting entries, reporting systems, financial inspection, and supervision for units operating state-funded irrigation works as stipulated in Article 38 of the Law on Irrigation.

Article 2. Applicability

1. State-owned enterprises, enterprises established in accordance with the Law on Enterprises; grassroots irrigation organizations (cooperatives, cooperative groups) and individuals as prescribed by the Government shall manage and operate state-funded irrigation works (referred to as irrigation work operating units).

2. Agencies, organizations, and individuals related to the use of financial resources in the management and operation of state-funded irrigation works.

Chapter II

SOURCES OF FINANCIAL RESOURCES FOR UNITS OPERATING STATE-FUNDED IRRIGATION WORKS

Article 3. Principles for determining the sources of financial resources for units operating state-funded irrigation works

1. Units operating state-funded irrigation works, which are assigned by competent authorities to manage and operate such works according to Clause 1, Article 21 and Clause 3, Article 23 of the Law on Irrigation, may collect fees from providing irrigation products and services to users.

2. Funding for upgrading and modernizing irrigation works; marking boundaries of protected areas around irrigation works; supporting drought, water shortage, salinity intrusion, desertification, flood, and waterlogging prevention and mitigation; and supporting two reward and welfare funds shall be implemented according to the objectives decided by competent authorities and managed in accordance with the Law on State Budgets, the Law on Investment, the Law on Construction, the Law on Bidding, and the Law on Public Investment.

3. Revenue from liquidation and sale of infrastructure assets and other assets invested with state capital

a) Revenue from liquidation and sale of infrastructure assets invested with state capital:

- Liquidation, sale, and utilization of revenue from infrastructure assets invested with state capital shall be carried out in accordance with the Law on Management and Use of State Property, the Law on Management and Use of State Capital for Business Operations, and relevant guiding documents;

- For state-owned enterprises, the net proceeds from liquidation and sale of infrastructure assets invested with state capital, after deducting costs and paying taxes (if applicable), shall be recorded as an increase in the enterprise's owner's equity.

b) Revenue from liquidation of other assets invested with state capital of state-owned enterprises responsible for operating irrigation works

- Liquidation and sale of other assets invested with state capital (including compensation and resettlement payments...) of state-owned enterprises responsible for operating irrigation works shall be conducted in accordance with the Law on Management and Use of State Capital for Business Operations and relevant guiding documents.

- For state-owned enterprises, if the revenue from liquidation is less than the remaining book value, the responsibility for compensation by relevant collectives and individuals shall be clarified; the difference shall be recorded as a reduction in the enterprise's owner's equity. The irrigation work operating unit shall report to the asset owner for consideration and decision on reducing equity after receiving comments from the same-level finance authority.

4. State budget support for the cost of using public utility irrigation products and services for specific beneficiaries as prescribed by the Government through direct payment to irrigation work operating units based on the quantity of products inspected, collected, and the specific product price approved by competent authorities:

a) The central budget pays for central irrigation work operating units, while local budgets pay for local irrigation work operating units;

b) Product acceptance for public utility irrigation services is regulated as follows:

- The Ministry of Agriculture and Rural Development accepts products for central irrigation work operating units;

- Provincial People's Committees accept products for local irrigation work operating units;

c) Specific prices for public utility irrigation products and services; specific prices for other irrigation products and services:

- The Ministry of Agriculture and Rural Development determines specific prices for irrigation work operating units under central management;

- Provincial People's Committees determine specific prices for irrigation work operating units under local management.

Article 4. Financial sources in enterprises managing and operating water conservancy works funded by state capital

1. Revenue from activities providing water conservancy products and services, public benefits, and financial support from the state

a) The basis for determining revenue includes: acceptance certificates, contract termination records; water conservancy product and service supply contracts signed in accordance with Article 32 of the Water Law, which determine the volume of accepted products and the price of public benefit products and services as stipulated; subsidy, price support, and financial assistance decisions by competent authorities and relevant documents on the issuance, payment, and settlement of funds from the state budget in accordance with the law.

b) Revenue included in enterprise turnover includes:

- Revenue from the state budget allocated to the unit operating water conservancy works for the provision of public benefit water conservancy products and services eligible for state budget support as prescribed by the Government in Clause 2, Article 30 of the Water Law;

- Revenue from the provision of public benefit water conservancy products and services to entities not supported by the state budget that must pay the operating unit;

- Revenue from state support as prescribed, such as price support, subsidy, and financial assistance from the state budget (if any) as stipulated.

2. Revenue from other water conservancy product and service provision; other financial income, and revenue from other business activities is included in turnover and other income including:

a) Revenue from the provision of other water conservancy products and services as prescribed in Clause 3, Article 30 of the Water Law;

b) Revenue from financial activities: bank deposit interest, income from financial leasing, joint venture income, etc.;

c) Revenue from other business activities outside Clause 1; Point a and Point b of this clause.

Article 5. Financial sources in grassroots water conservancy organizations

In addition to the revenue sources determined as prescribed in Article 4 of this Circular, financial sources for operation in grassroots water conservancy organizations also include:

1. Revenue from support provided by organizations and individuals investing in new construction, repair, and upgrading of small-scale water conservancy systems, field irrigation systems; advanced and water-saving irrigation systems; advanced and modern irrigation and drainage systems; wastewater treatment systems for reuse as prescribed in Clause 3, Article 4 of the Water Law;

2. Revenue from contributions by organizations and individuals using water conservancy products and services as prescribed in Point a, Clause 1, Article 51 of the Water Law;

3. Revenue from state financial support as prescribed in Point b, Clause 1, Article 51 of the Water Law and guiding documents.

Article 6. Financial sources for individuals managing and operating water conservancy works funded by state capital

The revenue of individuals managing and operating water conservancy works funded by state capital is determined according to the provisions of Article 4 and Article 5 of this Circular (if applicable).

Chapter III

USE OF FINANCIAL RESOURCES IN ENTERPRISES OPERATING WATER CONSERVANCY WORKS

Article 7. Principles for using financial resources

1. Ensuring full implementation of tasks prescribed in Clause 1, Article 38 of the Water Law.

2. Clearly defining water conservancy infrastructure assets and works formed by state budget investment funds at enterprises entrusted by the owner to manage, use, and operate.

3. Using for the intended purpose, in compliance with state policies, regulations, and standards, ensuring complete and valid documentation as prescribed by law.

4. Ensuring compliance with specialized laws on the organization and management of water conservancy works. State-owned enterprises shall comply with the provisions of the Law on Management and Use of State Capital for Production and Business Operations at Enterprises, Enterprise Statutes, and guiding documents. Non-state-owned enterprises shall comply with the provisions of the Enterprise Law and Enterprise Statutes. Cooperatives shall comply with the Law on Cooperatives and Cooperative Statutes. Joint ventures and individuals shall comply with the laws on joint ventures and civil law.

5. For major repair costs

a) Major repair funding for fixed assets includes the portion included in the structure of water conservancy public benefit product and service prices and the portion supported by the state budget (maintenance funding).

b) The operating unit of water conservancy works shall prepare an annual plan for major repair funding for fixed assets and report it to the competent authority for consolidation and approval, specifying the total repair funding required, the source of repair funding included in the structure of public benefit product and service prices, and the support from the state budget:

- For units operating water conservancy works under central management, support is provided from the central government budget;

- For units operating water conservancy works under local management, support is provided from the local government budget and central government budget support (if any);

c) Major repair funding for fixed assets shall be managed, used, settled, and audited in accordance with the law on investment and construction. Major repair funding for fixed assets can only be used for repairing and upgrading water conservancy works and cannot be used for other purposes or converted into profits for the operating unit. Any unused amount shall be carried forward to the next year for continued major repair work.

6. For depreciation of fixed assets

a) Depreciation of fixed assets by the operating unit of water conservancy works shall be implemented in accordance with Circular No. 45/2013/TT-BTC dated April 25, 2013; Circular No. 147/2016/TT-BTC dated October 13, 2016; Circular No. 28/2017/TT-BTC dated April 12, 2017 of the Ministry of Finance guiding the management, use, and depreciation of fixed assets and related laws;

b) Fixed assets of the operating unit of water conservancy works that do not require depreciation shall only maintain detailed records of annual wear and tear values for each asset and shall not reduce the formation capital source:

- Assets include machinery and equipment, production lines, assets constructed with earth, cast with concrete for water supply, drainage, and water distribution facilities (such as reservoirs, dams, canals, ditches, etc.);

- Water pumps with a capacity of 8,000 cubic meters per hour and architectural structures used to operate such facilities;

c) The depreciation of fixed assets for units operating water conservancy works shall be applied using the straight-line method.

Article 8. Utilization of Financial Resources for Enterprises

Enterprises operating water conservancy works shall use the financial resources stipulated in Article 4 of this Circular to cover management and operation costs of water conservancy works as follows:

1. Operational expenses

a) Wages, salaries, and allowances of a wage nature, meal allowances during working hours, social insurance contributions, health insurance contributions, unemployment insurance contributions, and trade union fees paid directly by the enterprise;

b) Raw materials and fuel expenses for operating and maintaining the works, machinery, and equipment;

c) Electricity expenses for pumping, supplying, irrigating, and draining water (including electricity expenses for pumping water to prevent flooding and drought within and beyond the standard quota);

d) Expenses for water source generation;

đ) Expenses for labor protection, safety measures (if applicable), and protection of water conservancy works, serving flood and drought prevention (including under normal weather conditions and natural disasters);

2. Maintenance expenses for water conservancy works including inspection, monitoring, quality testing, regular maintenance, periodic repairs, and routine repairs of assets. These expenses do not alter the function or scale of the works.

3. Depreciation expenses of fixed assets

The deduction of depreciation of fixed assets shall be carried out according to Clause 6 of Article 7 of this Circular and current regulations.

4. Management expenses

a) Expenses for business management such as office supplies, raw materials for repairing assets, tools, office equipment used in management work, communication expenses for operating computer systems to manage water supply for production;

b) Training, scientific research, and application of new technologies to establish economic and technical standards directly related to the provision of water conservancy products and services;

c) Outsourcing service expenses for business management; expenses for purchasing and using technical documents and patents (which do not meet the criteria for fixed assets) shall be gradually allocated to management expenses;

d) Conference, hospitality, travel, transportation, female employee welfare, annual medical check-up expenses, conference participation fees, severance pay, auditing expenses, etc.;

đ) Expenses for collecting usage fees from users of public utility water conservancy products and services, and other water conservancy product and service usage fees;

e) Provisional expenses: reduction in inventory value, long-term investment losses, bad debt provisions, and other provisions as prescribed by law;

g) Taxes and fees payable as prescribed by law, such as land tax, land lease fees, stamp duty, etc.;

5. Other expenses directly related to the provision of water conservancy products and services

a) Financial expenses;

b) Permitting expenses for surface water exploitation and utilization, water resource exploitation and utilization expenses, operational procedure establishment expenses for water conservancy works, protective plan establishment expenses for water conservancy works, flood prevention plans for downstream areas, maintenance procedure establishment expenses for water conservancy works, boundary marker installation expenses for protected areas of water conservancy works, measurement, inspection, and safety evaluation expenses for water conservancy works (in cases where there are no other sources to ensure these expenses);

c) Other expenses such as debris removal, sedimentation pond cleaning at pump stations, weed and debris clearance, obstacle removal, etc.

Article 9. Use of financial resources for grassroots water management organizations

1. Grassroots water management organizations managing and operating water works shall use the financial resources prescribed in Article 5 of this Circular to cover costs for managing and operating water works as stipulated in Article 8 of this Circular, and also to invest in building new, repairing, and upgrading small-scale irrigation systems, field-level irrigation systems; advanced irrigation systems that save water; wastewater treatment systems for reuse.

2. The management and use of financial resources by grassroots water management organizations managing and operating state-funded water works shall be carried out in accordance with the Law on Cooperatives and the Cooperative Charter. For cooperative groups, it shall comply with the laws on cooperative groups and civil law.

Article 10. Use of financial resources by individuals managing and operating state-funded water works

1. Individuals managing and operating state-funded water works shall use the financial resources prescribed in Article 6 of this Circular to cover costs for managing and operating water works as stipulated in Article 8 of this Circular, and also to invest in building new, repairing, and upgrading small-scale irrigation systems, field-level irrigation systems; advanced irrigation systems that save water; wastewater treatment systems for reuse.

2. The use of income from individuals managing and operating state-funded water works shall comply with civil law regulations.

Article 11. Provisions on the use of financial resources in water work operation units

1. Income from providing water-related products and services, public utilities, and state financial support to cover operational costs for providing water-related products and services, public utilities.

2. Income from providing other water-related products and services to cover operational costs for providing such products and services, including taxes payable (if any).

3. Income from financial activities to cover financial activity costs, including taxes payable (if any).

4. Income from other business activities to cover costs for such activities, including taxes payable (if any).

5. Expenses not deductible when determining taxable income shall be implemented according to the Corporate Income Tax Law and related guiding documents.

6. Costs arising from activities providing public utility products and services, other water-related products and services, and other activities shall be allocated according to current accounting laws. Profit from public utility activities may not be used to offset losses from other activities.

During the process of production and business operations, water work operation units may use profits from financial activities and other activities to offset public utility activity results.

Article 12. Financial Results of Water Work Operation Units and Establishment of Funds

1. The financial results of water work operation units are the total income from providing public utility water-related products and services, other water-related products and services, financial activities, and other business activities after deducting costs, including taxes payable (if any).

2. For enterprises, the profit for the year serves as the basis for distributing profits and establishing enterprise funds.

3. For other water work operation units (cooperatives, grassroots water management organizations, etc.), based on their charters, they decide on the establishment and use of funds based on their business activity results and in compliance with relevant laws.

4. State-owned enterprises tasked with operating water works shall implement the establishment of reward and welfare funds from the following sources:

a) Enterprises implementing assignment tasks without using product and service support funds for public utilities shall establish two reward and welfare funds based on the enterprise classification results, in accordance with Decree No. 91/2015/ND-CP dated October 13, 2015 of the Government on state capital investment in enterprises and management and use of capital and assets in enterprises, and shall receive partial funding support for fund establishment from the budget:

- The central government budget supports central water work operation units;

- Local government budgets support local water work operation units;

b) Enterprises implementing bidding and ordering of public utility water-related products and services shall establish two welfare and reward funds based on the enterprise's financial results and classification results, in accordance with Decree No. 91/2015/ND-CP dated October 13, 2015 of the Government on state capital investment in enterprises and management and use of capital and assets in enterprises.

Chapter IV

ACCOUNTING RECORDS, AUDITING, AND FINANCIAL SUPERVISION

Article 13. Accounting Records

1. Units operating water conservancy works shall implement accounting records in accordance with current accounting laws.

2. Separate accounting records shall be maintained for each portion of revenue sources and the use of revenue from state support and business activities of the unit.

Article 14. Financial Plan

1. Each year before June 30, units operating water conservancy works shall establish financial plans for water supply, drainage, and water distribution under normal weather conditions based on their product and service provision tasks, pricing, and economic and technical norms, in accordance with the State Budget Law, Public Asset Management Law, Water Conservancy Law, State Capital Investment Management and Utilization Law for Production and Business at Enterprises, and related guiding documents to submit to relevant state management agencies, specifically:

a) Units operating water conservancy works that undertake management, operation, and protection tasks within a district shall have the District Finance Department take the lead in coordinating with the District Agriculture and Rural Development Department to guide and consolidate the financial plans of units within the district for review and approval by the District People's Committee, and then send them to the Provincial Finance Department and the Provincial Agriculture and Rural Development Department.

b) Units operating water conservancy works that undertake management, operation, and protection tasks within a province or centrally-administered city shall have the Provincial Finance Department take the lead in coordinating with the Provincial Agriculture and Rural Development Department to guide and consolidate the financial plans of water conservancy work operating units (including districts) for submission to the Provincial People's Committee for approval, and simultaneously send them to the Ministry of Finance and the Ministry of Agriculture and Rural Development.

c) Units operating water conservancy works that undertake management, operation, and protection tasks at the central level shall have the Ministry of Agriculture and Rural Development guide and consolidate the financial plans of water conservancy work operating units and send them to the Ministry of Finance.

2. State-owned enterprises undertaking water conservancy work operations shall prepare plans according to annexes and provide explanations and descriptions of data in accordance with the model specified in Decree No. 91/2015/NĐ-CP dated October 13, 2015 of the Government on state capital investment in enterprises and management and utilization of capital and assets at enterprises, Circular No. 219/2015/TT-BTC dated December 31, 2015, and other supplementary and replacement regulations (if any), and provide detailed explanations of each revenue and expenditure item as stipulated in Article 4, Article 8 of this Circular, including the actual figures of the previous year and the plan for the reporting year (current year).

3. For other enterprises, grassroots water conservancy organizations, and individuals managing and operating water conservancy works, detailed financial plans shall be prepared according to revenue and expenditure items as specified in Articles 4, 5, 6, 8, 9, and 10 of this Circular, including the actual figures of the previous year and the plan for the reporting year (current year).

Article 15. Financial Report

1. Each year, before March 30, units operating water conservancy works must prepare a financial report on the financial situation and use of funds in the plan and final accounts of the reporting year, specifically as follows:

a) Units operating water conservancy works that undertake management, operation, and protection tasks within a district shall submit the plan to the District Finance Planning Department and the District Agriculture and Rural Development Department. The District Finance Planning Department shall take the lead in coordinating with the District Agriculture and Rural Development Department to consolidate and submit to the District People's Committee for approval, and then send it to the Provincial Finance Department and the Provincial Agriculture and Rural Development Department.

b) Units operating water conservancy works that undertake management, operation, and protection tasks within a province or centrally-administered city shall submit the plan to the Provincial Finance Department and the Provincial Agriculture and Rural Development Department. The Provincial Finance Department shall take the lead in coordinating with the Provincial Agriculture and Rural Development Department to consolidate (including districts) and submit to the Provincial People's Committee for approval, and simultaneously send it to the Ministry of Finance and the Ministry of Agriculture and Rural Development.

c) Units operating water conservancy works that undertake management, operation, and protection tasks at the central level shall have the Ministry of Agriculture and Rural Development consolidate and send it to the Ministry of Finance.

2. State-owned enterprises undertaking water conservancy work operations shall prepare plans according to annexes and provide explanations and descriptions of data in accordance with the model specified in Decree No. 91/2015/NĐ-CP dated October 13, 2015 of the Government on state capital investment in enterprises and management and utilization of capital and assets at enterprises, Guiding Circular No. 219/2015/TT-BTC dated December 31, 2015, and other supplementary and replacement regulations (if any), and provide detailed explanations of each revenue and expenditure item as stipulated in Article 4, Article 8 of this Circular, including the plan and actual figures of the reporting year.

3. For other enterprises, grassroots water conservancy organizations, and individuals managing and operating water conservancy works, detailed financial reports shall be prepared according to revenue and expenditure items as specified in Articles 4, 5, 6, 8, 9, and 10 of this Circular, including the plan and actual figures of the reporting year.

Article 16. Inspection and Supervision

1. Annually, the owner agency shall conduct inspection and supervision and approve the implementation status of tasks related to the provision of public utility products and services and the business operation status of units exploiting water conservancy works.

2. For state-owned enterprises tasked with operating water conservancy works, this inspection and supervision shall be carried out concurrently with the supervision of state capital investment in the enterprise; financial supervision, assessment of operational efficiency, and disclosure of financial information of state-owned enterprises and enterprises with state capital according to Decree No. 87/2015/NĐ-CP dated October 6, 2015 of the Government and guiding documents supplementing or replacing it (if any). Specifically, as follows:

a) For units operating water conservancy works under central management, the Ministry of Agriculture and Rural Development shall take the lead and coordinate with the Ministry of Finance to carry out inspection and supervision. The results of inspection and supervision shall be reported to the Minister of Agriculture and Rural Development and the Minister of Finance.

b) For units operating water conservancy works under local management, the Department of Agriculture and Rural Development shall take the lead and coordinate with the Department of Finance and relevant agencies to inspect and supervise, report the results to the People's Committee of the province, and simultaneously send the results of inspection and supervision to the Ministry of Agriculture and Rural Development and the Ministry of Finance.

Chapter V

IMPLEMENTING PROVISIONS

Article 17. Effective Date

1. This Circular takes effect from October 1, 2018, and replaces Circular No. 11/2009/TT-BTC dated January 21, 2009, issued by the Ministry of Finance, guiding the ordering and planning for units responsible for managing and operating water conservancy works and the financial management regulations for state-owned companies responsible for managing and operating water conservancy works.

2. Units operating water conservancy works that are public service organizations (centers, management boards of water conservancy works...) during the period before reorganization in accordance with the Water Law shall implement guiding documents of the Water Law; financial resources and the use of financial resources in the management and exploitation of water conservancy works using state funds shall be applied as for enterprises according to the guidance provided in this Circular.

3. In the course of implementation, if there are difficulties or obstacles, units shall reflect them to the Ministry of Finance for study, amendment, and supplementation to ensure appropriateness./.