Joint Circular No. 81/1998/TTLT-BTC-NHNN guides the procedures, formalities, and management of withdrawing funds from official development assistance (ODA) sources.

CIRCULAR

JOINT CIRCULAR NO. 81/1998/TTLT-BTC-NHNN OF THE MINISTRY OF FINANCE AND THE NATIONAL BANK DATED JUNE 17, 1998 GUIDING THE PROCEDURES, FORMALITIES, AND MANAGEMENT OF WITHDRAWING FUNDS FROM OFFICIAL DEVELOPMENT ASSISTANCE (ODA)

Pursuant to the State Budget Law which was adopted by the National Assembly of the Socialist Republic of Vietnam on March 20, 1996;

Pursuant to Decree No. 87/CP dated August 5, 1997 of the Government promulgating the Regulations on Management and Use of Official Development Assistance Funds;

In accordance with Article 14, Clause 3, Points b and e, and Article 15, Clause 4 of Decree No. 87/CP dated August 5, 1997, the Ministry of Finance and the National Bank guide the procedures, formalities, and management of withdrawing funds from Official Development Assistance funds as follows:

I. GENERAL PROVISIONS

Official Development Assistance (ODA) funds are a source of revenue for the State Budget, must be recorded in the State Budget, and managed in accordance with the provisions of the State Budget Law and other guiding documents under the law attached hereto.

The Ministry of Finance is responsible for financial management regarding the withdrawal of funds, payment for projects, implementation of budgetary income and expenditure for ODA funds, guidance and inspection of financial management systems, settlement of projects, guidance and inspection of units implementing asset, material, and capital handover when projects conclude.

The National Bank directs commercial banks serving projects to report periodically to the Ministry of Finance and relevant agencies on the situation of fund withdrawal and payment for programs and projects using ODA funds through the banking system.

The project sponsor is responsible under the law for implementing ODA programs and projects in accordance with commitments stipulated in international treaties, strictly adhering to state regulations on financial management, accounting ordinances, and current accounting systems. The project sponsor establishes an ODA Project Management Board (hereinafter referred to as the Project Management Board) to implement the project. In cases where it is not necessary to establish a Project Management Board, the project sponsor directly performs the tasks of the Project Management Board as specified in this Circular.

This Circular only guides the procedures, formalities, and management of ODA fund withdrawal. For domestic counterpart funds, withdrawal and payment shall be carried out in accordance with the progress of foreign fund withdrawal and the current domestic expenditure regime.

II. SPECIFIC PROVISIONS GUIDING THE PROCEDURE FOR WITHDRAWING FUNDS

A. NECESSARY CONDITIONS FOR WITHDRAWING FUNDS

1. General conditions:

To carry out fund withdrawal, projects must meet the following conditions:

- Having an approved feasible project (except where there is a different decision by the Prime Minister),

- International treaties signed between Vietnam and foreign parties have been approved/approved according to current regulations and are effective,

- For loan rescheduling projects, there must be a rescheduling loan agreement signed with the Ministry of Finance or with an agency authorized by the Ministry of Finance to reschedule loans,

- Having an economic contract (construction, procurement, consultancy) that has been signed and approved in accordance with regulations,

- Having an annual fund withdrawal plan established and registered in accordance with the approved project budget estimate.

2. Commercial bank serving the project:

To carry out fund withdrawal for the project, the National Bank is responsible for designating a commercial bank to serve the project, taking into account the opinions of the Ministry of Finance, the project sponsor, and the requirements of the donor. During the implementation of the project, the commercial bank serving the project may charge fees according to the current regulations of the National Bank on bank service charges for payment transactions. Additionally, the serving bank is responsible for reporting the situation of fund withdrawal and special account payments to the Ministry of Finance, the National Bank, and the project sponsor.

3. Establishing and registering the annual fund withdrawal plan for the project.

Fund withdrawal for programs and projects using ODA funds must be based on international treaties and the approved annual budget estimates. The project sponsor is responsible for preparing, defending, and implementing the annual budget estimates in accordance with current regulations.

Based on the detailed annual budget estimate of the project already approved by the managing authority, the Project Management Board prepares the ODA fund withdrawal plan. The content of the fund withdrawal plan must be detailed by quarter, by each item, and by each source of funding including domestic counterpart funds, and must include a separate plan for items paid through special accounts (if the project applies this method of fund withdrawal). This plan needs to be registered with the Ministry of Finance and sent to relevant agencies (the serving bank, investment development agency). The registration form is attached as Appendix 1.

B. PROCEDURES FOR WITHDRAWING ODA FUNDS

1. OPENING ACCOUNTS:

To proceed with fund withdrawal and payment, the Project Management Board opens appropriate transaction accounts at the commercial bank serving the project in accordance with current regulations. For projects using the special account payment method, the Project Management Board needs to open additional special accounts named after the project at the serving commercial bank to receive advance funds from the donor.

2. Methods of ODA fund withdrawal:

Depending on the provisions in international treaties, ODA fund withdrawal and payment can be carried out through one or more common methods: direct payment, special accounts, letters of commitment, repayment, and money transfer procedures. The specific process is as follows:

2.1. Direct Payment:

To proceed with fund withdrawal through direct payment, the Project Management Board prepares a withdrawal application and necessary documents to send to the Ministry of Finance. These documents include: a withdrawal application form, a letter requesting withdrawal, an approved economic contract (only needed once per contract), a completion certificate, and a payment request from the contractor. For the first advance payment, no such documents are required but a Temporary Advance Guarantee (Bank Guarantee) and Performance Guarantee (Performance Bond) from the contractor's bank are necessary.

For general cases, within a maximum period of 5 working days, based on international treaties signed, the registered withdrawal plan, the Ministry of Finance examines and signs the withdrawal request form, then sends it to the sponsor.

For projects borrowing from the World Bank and the Asian Development Bank, within 5 working days from receiving all necessary documents, the Ministry of Finance issues a written opinion sent to the project management board and the serving bank. Based on the written approval of the Ministry of Finance, within a maximum period of 2 working days, the serving bank signs the withdrawal request form and sends it to the sponsor.

The sponsor's notification serves as the basis for the Ministry of Finance to process budget accounting procedures for the project. The withdrawal process follows Appendix 2.

2.2. Payment by way of a letter of undertaking:

The letter of undertaking method is commonly used for payment under import contracts (hereinafter referred to as import contracts). To proceed with withdrawal for payment by way of a letter of undertaking, the project management board sends the import contract to the Ministry of Finance. Within 5 working days, the Ministry of Finance reviews and approves the payment conditions, then notifies the project management board. Based on the Ministry of Finance's opinion, the serving bank, within 2 working days, processes the opening of a Letter of Credit (L/C), signs the application for issuance of the letter of undertaking, and transfers it to the sponsor. The withdrawal process follows Appendix 3.

After issuing the letter of undertaking, based on the signed contract, the sponsor pays the beneficiary. The sponsor's notification serves as the basis for the Ministry of Finance to process budget accounting procedures for the project.

2.3. Payment by way of a Special Account:

Under this method, the sponsor pre-funds a certain amount into the project's special account to expedite the withdrawal process.

a. Withdrawal to the special account:

To withdraw funds to the special account, the project management board submits necessary documents to the Ministry of Finance including: withdrawal request forms, letters requesting withdrawal. In cases of additional withdrawals to the special account, an expenditure statement prepared by the project management board, relevant payment vouchers complying with current budget management regulations, and a statement of the special account balance issued by the commercial bank must also be provided.

For general cases, based on signed international treaties and approved withdrawal plans, within a maximum period of 5 working days, the Ministry of Finance signs the withdrawal request form and sends it to the sponsor.

For projects borrowing from the World Bank and the Asian Development Bank, within 5 working days, the Ministry of Finance issues an opinion and notifies the project management board and the serving bank. Based on the written approval of the Ministry of Finance, within a maximum period of 2 working days, the serving bank signs the withdrawal request form and sends it to the sponsor.

Upon receipt of the notification that the funds have been transferred into the project's special account, the serving bank immediately informs the Ministry of Finance in writing for monitoring and budget accounting purposes. The withdrawal process follows Appendix 4.

b. Utilization of the special account:

- For construction investment expenditures: Based on the approved plan and the completed work volume of the project, the project management board requests the serving bank to make payments from the special account (for final payments under contracts, prior confirmation from the Investment Development Bureau or General Department is required). Each payment from the special account must comply strictly with the foreign/local capital ratio stipulated in the international treaty; if non-compliance is detected, the Ministry of Finance will suspend additional withdrawals for that expenditure. The withdrawal process follows Appendix 5.

- For recurrent expenditures: Based on the approved annual budget estimate, quarterly, the project management board sends detailed quarterly estimates according to the current budget classification to the Ministry of Finance. Within 5 working days from receiving complete documentation, the Ministry of Finance reviews and authorizes the serving bank to withdraw funds according to the project management board's payment orders. The withdrawal process follows Appendix 6.

Monthly, the serving bank is responsible for notifying the Ministry of Finance of the expenditure statement from the special account to process budget receipts and disbursements. The special account statement prepared and sent by the serving bank to the Ministry of Finance serves as the basis for the Ministry of Finance to process budget allocations for the project (for projects subject to budget allocation). The sponsor's notification of fund transfer to the special account serves as the basis for the Ministry of Finance to process budget accounting and record debts for loan-repayment projects.

c. Interest generated on the special account is handled as follows:

- For projects subject to state budget allocation, on the 5th day of each month, the commercial bank serving the project transfers the interest generated on the special account into the State Budget and notifies the Ministry of Finance (Department of Foreign Finance) in writing along with a copy of the payment authorization for budget accounting.

- For loan-repayment projects (the debt calculation date is the date of withdrawal from abroad), the interest generated on the special account is transferred into the account of the borrowing enterprise.

2.4. Refund Procedures:

Under the refund procedure, the project owner advances funds (from state budget sources or from their own capital) to pay the beneficiary, then submits a withdrawal request to the sponsor for a refund.

To implement the refund withdrawal procedure, the project management board is responsible for collecting necessary documents and preparing withdrawal request forms to submit to the Ministry of Finance. The documents include: acceptance certificates, payment vouchers, and proof of payment to contractors.

For general cases, within a maximum period of 5 working days, based on signed international treaties and approved withdrawal plans, the Ministry of Finance signs the withdrawal request form and sends it to the sponsor.

For World Bank loan projects and Asian Development Bank loan projects, within five working days, the Ministry of Finance shall issue a written opinion and notify the Project Management Board and the servicing bank. Based on the written approval of the Ministry of Finance, the servicing bank shall sign the withdrawal form and submit it to the financier within a maximum of two working days.

For withdrawals to repay funds previously disbursed from the state budget (or from other sources with a budget origin), the withdrawn amount must be remitted to the state budget.

For withdrawals to repay funds previously disbursed from the project owner's own capital (or raised capital, non-budget credit), the project owner may use the withdrawn amount according to current financial management regulations.

The withdrawal process is detailed in Appendix 7.

2.5. Procedures for transferring funds:

The method of transferring funds is the withdrawal method applied to pay suppliers of goods and services under contracts payable in Vietnamese Dong. Specifically, as follows:

Supply contracts for goods and services can only be implemented after the Ministry of Finance reviews and approves the payment terms of the contract.

When there is a need for payment, the Project Management Board needs to send the following documents to the Ministry of Finance:

- Invoices for imported equipment and goods, Certificates confirming the volume of work completed. In the case of advance payment for the first time, these documents are not required but a Temporary Advance Guarantee (Bank Guarantee) and Performance Bond from the Bid Bank are necessary.

- Withdrawal forms as prescribed.

Within seven working days, the Ministry of Finance will review and reconcile with the contract and disbursement plan or loan repayment plan, confirm the documents, sign the withdrawal form, and transfer it to the financier. After reviewing, the financier will transfer through the banking system:

- Vietnamese Dong to the contractor if the project falls under the budget disbursement category;

- Foreign currency withdrawn from abroad to the Project Management Board if the project falls under the loan repayment category. The Project Management Board will convert the foreign currency withdrawn into Vietnamese Dong to pay the contractor.

The withdrawal flowchart is detailed in Appendix 8. 2.6. Handling Exchange Rate Differences:

When the contract specifies payment in Vietnamese Dong, exchange rate differences may arise, which are handled as follows:

a. For projects under budget disbursement, exchange rate differences will be recorded in the budget.

b. For projects under loan repayment, exchange rate differences will be borne by the Project Owner.

C. MANAGEMENT REGIME FOR REPORTING AND INSPECTION OF ODA PROJECTS' WITHDRAWAL OF FUNDS:

Quarterly, commercial banks serving the projects report the situation of fund withdrawal and payment for each project to the Ministry of Finance (Department of Foreign Financial Affairs) and the State Bank of Vietnam (Department of International Relations). Before or on the fifth working day of each month, the servicing bank sends a report on the special account transactions of the project in the previous month to the Ministry of Finance (Department of Foreign Financial Affairs and General Department of Investment and Development) and the Project Management Board. The Ministry of Finance compiles the situation of fund withdrawal, payment, and ODA debt repayment, informs relevant agencies, and reports to the Prime Minister. The State Bank of Vietnam is responsible for compiling quarterly and annually to coordinate inspections and monitor the actual situation regarding fund withdrawal, payment, etc., through the accounts opened at the servicing banks of ODA programs and projects.

Project owners using ODA funds must prepare annual investment accounting reports and final settlement reports for completed projects (works or project components). Accounting reports and final settlement reports must comply with current regulations of the Ministry of Finance.

Annually, ODA projects must be independently audited by an auditing company approved by the Ministry of Finance. The audit includes the legality of project investment, annual investment expenditure (including completed basic construction costs, equipment purchase costs, other costs, costs not included in the value of the works), asset handover value, creditor and inventory status, special account audit. In exceptional cases, the Ministry of Finance will specify additional necessary contents. The audit framework, decision on selecting the auditing company, and audit contract must comply with the financier's regulations and be approved by the Ministry of Finance. The audit report must be submitted to the Ministry of Finance no later than fifteen days after completion (for projects financed by the World Bank and the Asian Development Bank, the audit report must also be sent to the State Bank of Vietnam (Department of International Relations)).

The Ministry of Finance will conduct regular or spot financial inspections of organizations and units using ODA funds, particularly focusing on the use of special accounts.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect fifteen days after its signing and applies generally to all ODA-funded projects and programs. For projects and programs with specific characteristics, the Ministry of Finance and the State Bank of Vietnam will provide specific guidance.

Previous guidelines that differ from this Joint Circular are no longer valid.

During implementation, if any issues arise, units are advised to promptly reflect them to the Ministry of Finance and the State Bank of Vietnam for study and amendment.

ANNEX 1

ODA FUND WITHDRAWAL PLAN YEAR...

Project:

Unit:

Managing Authority:

Project Category...  Disbursement...  Loan Repayment...

CONFIRMATION BY THE MANAGING AUTHORITY OF THE PROJECT PROJECT MANAGEMENT BOARD DIRECTOR

* The source of funds should clearly indicate the counterpart funds and foreign funds (which may include multiple foreign sources).

ANNEX 2

DIRECT PAYMENT

(2)

1. The Project Management Board signs a contract with the contractor. The contractor implements the contract and requests payment.

2. The Project Management Board reviews and approves payment to the contractor and prepares withdrawal forms and supporting documents for submission to the Ministry of Finance for review.

3. The Ministry of Finance (Department of Foreign Finance) examines and signs the withdrawal request to send to the sponsor. In the case of projects borrowing from the World Bank (WB) or the Asian Development Bank (ADB), the Ministry of Finance examines and agrees for commercial banks to sign the withdrawal request to send to the sponsor.

4. The sponsor examines the withdrawal request and pays to the beneficiary.

ANNEX 3

PAYMENT BY LETTER OF GUARANTEE PROCEDURE

(1) The project management board enters into a contract with the contractor.

(2) The project management board sends the contract to the Ministry of Finance (Department of Foreign Finance) for approval. The Ministry of Finance (Department of Foreign Finance) examines and approves the contract.

(3) Based on the approved contract, the project management board requests the service bank to open a Letter of Credit (L/C) and sign a request for guarantee.

(4) The service bank opens the L/C and signs the request for guarantee.

(5) The sponsor examines and issues the letter of guarantee and notifies the Ministry of Finance, the project management board, the seller's bank, and the issuing bank.

(6) The sponsor transfers money to the service bank to pay the seller according to the contract conditions.

ANNEX 4

WITHDRAWAL OF INITIAL FUNDS AND SUPPLEMENTATION OF THE SPECIAL ACCOUNT

1. The project management board collects the documents requesting withdrawal and submits them to the Ministry of Finance (Department of Foreign Finance) for the Special Account.

2. The Ministry of Finance examines and signs the withdrawal request and sends it to the sponsor. In the case of projects borrowing from the World Bank (WB) or the Asian Development Bank (ADB), the Ministry of Finance examines and sends its opinion to the service bank so that the service bank signs and sends the request to the sponsor.

3. The sponsor examines and transfers money to the Special Account (at the service bank).

ANNEX 5

PAYMENT FROM THE SPECIAL ACCOUNT FOR CONSTRUCTION AND DEVELOPMENT

(a) The project management board prepares a detailed quarterly budget based on the completed work volume plan and the ratio of foreign and domestic funds for each item and sends it to the first-level financial authority (project owner).

(b) The project owner approves the quarterly budget, registers with the Ministry of Finance (Investment Development General Department or Local Investment Development Department), and sends it to the service bank.

(1) The contractor performs the contract and requests payment.

(2) The project management board, based on the approved quarterly budget by the Ministry of Finance, issues a payment order to the service bank.

(3) The service bank pays the contractor according to the project management board's request.

ANNEX 6

PAYMENT FROM THE SPECIAL ACCOUNT FOR
OPERATIONAL EXPENSES

(a) The project management board prepares a detailed quarterly budget according to the current budget classification and sends it to the first-level financial authority (project owner).

(b) The project owner approves the quarterly budget and sends it to the Ministry of Finance (Civil Service Department) for approval.

(c) The Ministry of Finance (Civil Service Department) examines and sends its opinion to the project management board and the service bank.

(1) The contractor performs the contract and requests payment.

(2) The project management board, based on the approved quarterly budget by the Ministry of Finance, issues a payment order to the service bank.

(3) The service bank pays the contractor according to the project management board's request.

ANNEX 7

PAYMENT BY REFUND PROCEDURE

(a) The Ministry of Finance transfers funds according to the plan to the Investment Development General Department.

1. The Project Management Board signs a contract with the contractor. The contractor implements the contract and requests payment.

2. The project management board reviews, approves, and requests the Investment Development General Department to pay the contractor using domestic funds.

3. The Investment Development General Department pays according to the project management board's request.

4. The project management board collects the refund withdrawal documents and submits them to the Ministry of Finance (Department of Foreign Finance).

5. The Ministry of Finance (Department of Foreign Finance) examines and signs the withdrawal request and sends it to the sponsor. In the case of projects borrowing from the World Bank (WB) or the Asian Development Bank (ADB), the Ministry of Finance (Department of Foreign Finance) sends its opinion to the service bank so that the service bank signs and sends the request to the sponsor.

6. The sponsor disburses funds to repay into the state budget account.

Note: For projects receiving loan refinancing, the project owner must balance the funds to pay the contractor in advance. Afterward, they process the refund procedure, and once the sponsor disburses funds, the amount advanced by the project owner will be refunded to the project owner.

APPENDIX 8

WITHDRAWAL PROCEDURE FOR FUNDS TRANSFER

(1) The contractor performs the contract and requests payment.

(2) The project management board examines, approves, and requests the Ministry of Finance to sign the withdrawal request and send it to the sponsor.

(3) The Ministry of Finance signs the withdrawal request and sends it to the sponsor.

(4) The sponsor examines and pays the contractor through the service bank system.