Circular No. 82/2007/TT-BTC guides the state financial management regime for non-repayable foreign aid from state budget revenue sources.

CIRCULAR

Guidelines for the State Financial Management System for Non-Repayable Foreign Aid

 from Abroad Belonging to State Budget Revenue

______________________________

Pursuant to Decree No. 60/2003/NĐ-CP dated June 6, 2003, issued by the Government detailing and guiding the implementation of the Law on State Budget;

Pursuant to Decree No. 131/2006/NĐ-CP dated November 9, 2006, issued by the Government on the Regulations on Management and Use of Official Development Assistance (ODA) Sources;

Pursuant to Decision No. 64/2001/QĐ-TTg dated April 26, 2001, issued by the Prime Minister on the Regulations on Management and Use of Non-Governmental Foreign Aid;

Pursuant to Decree No. 77/2003/NĐ-CP dated July 1, 2003, issued by the Government stipulating the functions, tasks, authorities, and organizational structure of the Ministry of Finance.

The Ministry of Finance issues guidelines for the State financial management system for non-repayable foreign aid (hereinafter referred to as foreign aid) belonging to state budget revenue as follows:

Part I

GENERAL PROVISIONS

I. SCOPE OF APPLICATION

1. These guidelines apply to the financial management system for foreign aid belonging to state budget revenue, including:

1.1 Foreign aid belonging to central government budget revenue:

1.1.1 Non-repayable foreign aid (from foreign governments, international organizations, intergovernmental organizations...) provided to the State or the Government of the Socialist Republic of Vietnam within the framework of official development assistance (ODA) activities between Vietnam and foreign donors (hereinafter referred to as non-repayable ODA).

1.1.2 Non-repayable foreign aid from non-governmental foreign organizations, other organizations, and individuals from abroad, directly or through Vietnamese non-governmental organizations, provided to the following agencies and under the approval authority of the Prime Minister, ministers, heads of ministerial-level agencies, and agencies under the Government, and central agencies of people's organizations (as specified in Article 6, Points 1 and 2 of Decision No. 64/2001/QĐ-TTg dated April 26, 2001, issued by the Prime Minister on the Regulations on Management and Use of Non-Governmental Foreign Aid):

(a) Agencies of the Government (ministries, ministerial-level agencies, agencies under the Government);

(b) Central agencies of political organizations, political-social organizations, social-professional organizations;

(c) National Assembly, Supreme People's Court, Supreme People's Procuracy;

(d) Provincial People's Committees and municipal People's Committees directly under the central government;

(e) Agencies and units subordinate to and under the above-mentioned agencies;

1.2 Foreign aid belonging to local government budget revenue, including:

1.2.1 Non-repayable foreign aid from non-governmental foreign organizations, other organizations, and individuals from abroad, directly or through Vietnamese non-governmental organizations, provided to localities and under the approval authority of the Chairmen of Provincial People's Committees and municipal People's Committees directly under the central government (as specified in Article 6, Point 2 of Decision No. 64/2001/QĐ-TTg dated April 26, 2001, issued by the Prime Minister on the Regulations on Management and Use of Non-Governmental Foreign Aid).

1.2.2 Aid within the framework of bilateral cooperation between domestic localities and foreign localities.

2. Aid from non-governmental organizations, other organizations, and individuals from abroad directly provided to and under the approval authority of non-state organizations in Vietnam (including Federation Associations, General Associations, Associations, political-social organizations, social-professional organizations, social funds, charitable funds, legal entities established by Federation Associations, General Associations, and Associations) is revenue of these non-state organizations and does not belong to state budget revenue and is not within the scope of guidance of this Circular.

II. APPLICABLE ENTITIES

This Circular applies to central agencies of the State or the Government of the Socialist Republic of Vietnam (ministries, ministerial-level agencies, agencies under the Government; National Assembly, Supreme People's Court, Supreme People's Procuracy); provincial People's Committees; political organizations, political-social organizations, social-professional organizations; and units and organizations subordinate to and under the above-mentioned agencies.

III. FORMS OF NON-REPAYABLE AID

1. Non-repayable aid in kind:

1.1 Non-repayable aid in kind includes:

a) Construction projects implemented under the "turnkey" form (including long-term forests) within the framework of foreign aid programs and projects;

b) Equipment, machinery, materials, raw materials, supplies, and goods.

1.2 Non-repayable aid in kind can be provided under specific programs and projects or non-project aid (individual aid, humanitarian aid, emergency relief for natural disasters, epidemics, wars...).

2. Non-repayable aid in cash:

2.1 Non-repayable aid in cash is direct cash aid or aid in goods that are monetized. Non-repayable aid in cash may be in foreign currency or Vietnamese dong, in cash or by bank transfer.

2.2 Non-repayable aid in cash can be used to implement specific programs and projects, or transferred directly into the Government of Vietnam's budget as budget support to implement national target programs or the Government of Vietnam's socio-economic development programs.

3. Non-material non-repayable aid:

Non-material non-repayable aid involves the transfer without payment of intellectual property assets (copyrights, ownership rights to works, industrial property rights, technology transfer...); or the foreign side pays training, inspection, survey, seminar, expert fees... from foreign aid funds they manage and spend directly.

IV. CONTENTS OF STATE FINANCIAL MANAGEMENT

1. All program and project sponsors using non-repayable aid within the scope and application range of this Circular must comply with the State financial management system.

In cases where international agreements on foreign aid signed between the Government of Vietnam and the donor contain financial management commitments different from the provisions and guidelines set forth in this Circular, such commitments shall be implemented according to the agreements made by the Government of Vietnam in those international agreements.

2. The content of state financial management includes:

2.1 Preparation and consolidation of the budget revenue and expenditure forecast for programs and projects funded by non-repayable aid;

2.2 Confirmation of aid;

2.3 Control and accounting systems for state budget funds from non-repayable aid;

2.4 Procurement and expenditure standards for non-repayable aid programs and projects;

2.5 Reporting, accounting, auditing, and settlement systems for non-repayable aid;

2.6 Management systems for capital and assets formed from non-repayable aid.

V. PROJECT MANAGING AUTHORITIES AND PROJECT IMPLEMENTING ENTITIES/USING ENTITIES

RECEIVING FOREIGN AID

1. Project managing authority: refers to ministries, ministerial-level agencies, government-affiliated agencies, central agencies of political-social organizations, social-professional organizations, agencies under the National Assembly, Supreme People's Court, Supreme People's Procuracy, and provincial/municipal People's Committees directly under the central government, which have been assigned by the Government to manage foreign aid programs and projects.

2. Project implementing entity: is the entity entrusted by the Prime Minister or project managing authorities with the direct responsibility for managing and utilizing foreign aid funds and counterpart funds to implement programs and projects as approved by competent authorities, and the responsibility for managing and using post-project facilities once foreign aid programs and projects conclude.

Depending on the scale and characteristics of specific programs and projects, the project managing authority (for technical assistance programs and projects) or the project implementing entity (for investment programs and projects) may establish a project management board to assist these entities in performing specialized tasks, including tasks such as aid confirmation declaration, procurement, expenditure, accounting, auditing, settlement, and reporting as stipulated in this Circular. In such cases, the project managing authority or the project implementing entity must issue a formal delegation letter or enter into a contract with the project management board and submit this document to the corresponding financial agency for guidance and implementation of financial management regulations for the project management board.

3. Aid-using entity:

3.1 For separate aid projects: The aid-using entity is also the project implementing entity.

3.2 For national program or sector program aid approaches: The project implementing entity is an entity within a government agency responsible for coordinating the implementation of the program, while the aid-using entity may belong to another government agency or to a provincial/municipal People's Committee. In this case, the term Project Implementing Entity/Aid-Using Entity used in this Circular refers to either one or both of the above entities or organizations.

VI. ASSIGNMENT OF RESPONSIBILITIES FOR THE MANAGEMENT OF STATE FINANCIAL RESOURCES FOR FOREIGN AID FUNDS FROM STATE REVENUES

1. Responsibilities of financial agencies:

1.1 Ministry of Finance: Performs the function of managing state financial resources for foreign aid funds from central government revenues (as specified in point 1.1, Section I, Part I of this Circular) and has the following main responsibilities:

a) Guide the implementation of financial management systems for foreign aid funds; bear responsibility for inspecting the implementation of financial management systems by central and local agencies that are project managing authorities for foreign aid programs and projects for the State or the Socialist Republic of Vietnam.

b) Confirm and account for foreign aid funds from central government revenues.

1.2 Provincial Department of Finance: Performs the function of managing state financial resources for foreign aid funds directly allocated to localities from local government revenues (as specified in point 1.2, Section I, Part I of this Circular) and has the following main responsibilities:

a) Guide and inspect the implementation of financial management systems for foreign aid funds directly allocated to localities.

b) Confirm and account for foreign aid funds directly allocated to localities.

c) Coordinate with the Ministry of Finance in accounting for foreign aid funds from central government revenues allocated to support local budgets.

2. Responsibilities of project managing authorities and project implementing entities/aid-using entities:

2.1 Project managing authority:

a) Cooperate with financial agencies in directing, guiding, and inspecting subordinate units in strictly implementing financial management and foreign aid utilization systems.

b) Prepare and consolidate the budget revenue and expenditure forecast for aid, review, approve, and notify the approval of the final settlement of aid to subordinate budget units.

2.2 Project implementing entity/aid-using entity:

a) Bear primary legal responsibility for the implementation of foreign aid programs and projects in accordance with the provisions committed to in the Agreements, Memorandums of Understanding, or foreign aid project documents.

b) Declare and obtain confirmation from the financial agency on the Aid Confirmation Declaration Form as guided in Section II, Part II of this Circular.

c) Adhere to the financial management systems as stipulated in this Circular.

Part II

SPECIFIC PROVISIONS

I. PREPARATION AND CONSOLIDATION OF BUDGET FORECASTS FOR FOREIGN AID

1. For non-repayable ODA: Implementation shall follow the procedures for preparing, approving, and allocating financial plans for programs and projects as prescribed in the annual state budget preparation guidelines issued by the Ministry of Finance; Joint Circular No. 02/2003/TTLT-BKH-BTC dated March 17, 2003, issued by the Ministry of Planning and Investment and the Ministry of Finance, guiding the preparation of financial plans for programs and projects using Official Development Assistance (ODA) funds, and any subsequent supplements, amendments, or replacements to this Circular.

The financial plan (including both ODA capital and counterpart capital), after being consolidated into the annual state budget estimate, serves as the basis for the Planning and Investment Agency and the Financial Agency to allocate the state budget estimate to the project management agencies at the same level. Based on the allocated estimate, the project management agency allocates it in detail to the Project Owners/ODA-utilizing units under their jurisdiction according to each program and project, while sending it to the same-level Financial Agency and the State Treasury where transactions take place for expenditure control and state budget accounting in accordance with current regulations.

2. For non-governmental aid funds under programs and projects, especially those that utilize counterpart capital provided from the budget, must also prepare an annual financial plan, applying a similar process for the preparation, approval, and allocation of the financial plan for ODA programs and projects as stipulated in Circular Jointly Issued by the Ministry of Planning and Investment and the Ministry of Finance No. 02/2003/TTLT-BKH-BTC dated March 17, 2003, and subsequent supplementary, amended, or replacement documents.

3. For small and sporadic foreign aid not under specific programs or projects and arising unexpectedly during the year, the ODA-utilizing units must prepare an estimate of aid receipts and expenditures (including counterpart capital if applicable) to submit to the project management agency for supplementary approval of the financial plan to send to the same-level Financial Agency and the State Treasury where transactions take place for expenditure control and state budget accounting in accordance with current regulations.

II. ADOPTION OF AID

1. Adoption of aid refers to the financial agencies at various levels (Ministry of Finance, Provincial Finance Departments) confirming on the Aid Adoption Declaration Form filled out by the Project Owners/ODA-utilizing units.

2. The responsibilities of the Ministry of Finance and the provincial finance departments for adopting aid are specified in Section VI of Part I of this Circular.

3. Purpose of the Aid Adoption Declaration Form:

3.1 To enable financial agencies to promptly report the situation and figures of received non-repayable foreign aid, and serve as one of the bases for financial agencies to account for the state budget and participate in auditing final accounts of aid usage by Project Owners/ODA-utilizing units in accordance with the State Budget Law.

3.2 The Aid Adoption Declaration Form is also one of the legal documents for:

a) Customs authorities to implement tax exemptions on import/export duties, special consumption taxes (if applicable), and value-added tax at the import stage for equipment, machinery, materials, supplies, and other goods imported using foreign aid funds; or for tax authorities to refund VAT on domestic goods and services purchased using foreign aid funds.

b) Project Owners/ODA-utilizing units to prepare reports on receipt and utilization of aid in accordance with this Circular.

4. The format of the Aid Adoption Declaration Form is specified in Appendix 1 of this Circular, including:

4.1 Form C1-HD/XNVT: "Declaration Form for Adoption of Imported Goods Aid" (Appendix 1a): Used for declaring adoption of aid for imported equipment, machinery, materials, raw materials, supplies, and other goods from abroad.

4.2 Form C2-HD/XNVT: "Declaration Form for Adoption of Domestic Goods and Services Aid" (Appendix 1b): Used for declaring adoption of aid for domestically purchased equipment, machinery, materials, raw materials, supplies, and other goods (including service costs) using foreign aid funds.

4.3 Form C3-HD/XNVT: "Declaration Form for Adoption of Cash Aid" (Appendix 1c): Used for declaring cash aid from foreign sources.

4.4 Some points to note when declaring adoption of aid using the above forms are as follows:

a) In cases of foreign aid under national programs, sectoral programs, inter-sectoral programs, or regional programs: The Project Owner needs to clearly declare in the Aid Adoption Declaration Form the name, address, budget unit code (according to the current regulations in Decision No. 172/2000/QĐ-BTC dated November 1, 2000, of the Minister of Finance) and the amount allocated to each ODA-utilizing unit, so that financial agencies at various levels can proceed with state budget accounting.

b) In cases where foreign aid is provided in the form of individual goods, equipment, and cash to implement a basic construction project, and after completion, the project will be handed over to Vietnam in the form of a "turnkey project" (hereinafter referred to as Construction Aid): The Project Owner/ODA-utilizing unit also uses the aforementioned Forms C1, C2, and C3-HD/XNVT to declare adoption of aid, but on these forms, they need to mark the section "Construction Aid," and provide additional information about the project (name, location, expected construction and handover time) on the back of the Aid Adoption Declaration Forms. After the project is completed and handed over by the donor to Vietnam, the Project Owner/ODA-utilizing unit compiles the aforementioned Aid Adoption Declaration Forms to create a List of Adoption of Construction Aid (in the format specified in Appendix 2 of this Circular). This list, together with the Acceptance Report and Handover Report, serves as legal grounds for the Project Owner/ODA-utilizing unit to prepare a Final Account Report of the project to submit to the competent authority for audit and approval of the final settlement, and simultaneously serves as the basis for financial agencies at various levels to record income and expenditure of the entire project value in the state budget.

The Aid Adoption Declaration Form must be prepared in at least six original copies, of which:

5.1 The Financial Agency retains two copies (one for state budget accounting and one for registration of adoption declarations).

5.2 The Customs Authority/Tax Authority retains one copy each for processing and archiving tax exemption/refund files.

5.3 The project management agency retains one copy for monitoring and preparing comprehensive reports on foreign aid.

5.4 The Project Owner/ODA-utilizing unit retains one copy for preparing reports on receipt, payment, and final settlement of aid programs/projects.

In the case where aid items are transportation means (motorcycles, cars...), the Project Owner/Recipient Unit shall prepare an additional copy for use when registering the circulation of such means.

6. Subjects to file the Declaration of Aid Confirmation:

The Declaration of Aid Confirmation is filed by the Project Owner/Recipient Unit, registered in the Aid Confirmation Book of financial authorities at all levels, and signed by the authorized person of these authorities to confirm the aid on the Declaration of Aid Confirmation.

7. Time for filing the Declaration of Aid Confirmation:

7.1 Form C1-HD/XNVT: "Declaration of Aid Confirmation for Imported Goods" shall be filed immediately after the Project Owner/Recipient Unit receives the import documents (Invoice; Bill of Lading; Airway Bill and/or other transport documents if applicable).

7.2 Form C2-HD/XNVT: "Declaration of Aid Confirmation for Domestic Goods and Services" shall be prepared monthly, at the same time as the Project Owner/Recipient Unit prepares the detailed list of decisions to refund VAT for the aid program/project.

7.3 Form C3-HD/XNVT: "Declaration of Aid Confirmation for Financial Aid" shall be filed immediately after receiving the foreign transfer money receipt.

8. Necessary documents to accompany the Declaration of Aid Confirmation:

8.1 For the first Declaration of Aid Confirmation, the Project Owner/Recipient Unit must provide the following documents to financial authorities at all levels:

a) Legal File of the aid program/project including the main documents as follows:

- Program/project documents and approval documents from competent authorities;

- International agreements, agreements, or commitments on aid;

- Financial plan, budget estimate or notification of aid capital allocation (if these documents are not included in the approved program/project documents).

Additionally, in cases of non-governmental aid, the Project Owner/Recipient Unit must cooperate with relevant agencies to provide additional information about permits and activities of related non-governmental organizations.

b) Specific documents and certificates to prove goods, services, or construction aid such as import documents, disbursement notifications or donor transfer receipts, domestic purchase and service rental documents, sales contracts, handover minutes, final accounts of foreign-funded construction projects under the "turnkey" form, and other related documents.

8.2 For government aid implemented through an organization/unit under a government agency but the Recipient Units are organizations/units under localities, then in the first Declaration of Aid Confirmation, the legal file of the aid program/project must be additionally copied and sent to the Ministry of Finance to transfer to relevant provincial finance departments for management and state budget accounting.

For subsequent Declarations of Aid Confirmation: the Project Owner/Recipient Unit only needs to provide the specific documents mentioned in point 8.1b above.

8.3 The Project Owner/Recipient Unit must fully declare all the above documents in the Declaration of Aid Confirmation and bear legal responsibility for the accuracy of the figures and contents declared.

9. Place to confirm aid:

9.1 Ministry of Finance: at the Department of Foreign Finance - Ministry of Finance in Hanoi, or units performing management and reception tasks for international aid under the Department of Foreign Finance in Ho Chi Minh City and Da Nang City.

9.2 Provincial Finance Departments: Depending on actual conditions, each locality may organize a specialized unit or assign it to a functional department of the Provincial Finance Department to implement.

10. Some important points to note when declaring the Declaration of Aid Confirmation:

10.1 Price:

a) Form C1-HD/XNVT: "Declaration of Aid Confirmation for Imported Goods": according to the actual purchase price in foreign currency on the import invoice (FOB, CIF, C&F...).

b) Form C2-HD/XNVT: "Declaration of Aid Confirmation for Domestic Goods/Services": according to the price without tax on contracts signed between the contractor/supplier and the Project Owner.

10.2 Exchange rate for converting foreign currency to Vietnamese Dong: According to the monthly foreign exchange accounting rate published by the Ministry of Finance, available on the Ministry of Finance's website (http://www.mof.gov.vn).10.3 To facilitate the tax processing and state budget accounting for non-repayable aid, the declaration section regarding the Project Owner/Recipient Unit on the Declaration of Aid Confirmation should meet the following main requirements:

a) Fully and accurately declare the name and contact address of the Recipient Unit, Project Owner, and Project Management Authority.

b) Declare the budget unit code of the Project Owner/Recipient Unit; specifically, for Recipient Units that are enterprises or revenue-generating public institutions, additional tax registration number should be declared to facilitate tax refunds.

III. GUIDELINES FOR CONTROLLING EXPENSES AND STATE BUDGET ACCOUNTING OF NON-REPAYABLE AID

1.1 Control of expenses and state budget accounting for the counterpart funds of non-repayable aid programs/projects must be based on regulations on the preparation and adjustment of financial plans, reallocation of counterpart funds, and handling of unexpected situations outside the plan as guided in Circular Jointly Issued by the Ministry of Planning and Investment - Ministry of Finance No. 02/2003/TTLT-BKH-BTC dated March 17, 2003, and subsequent supplementary, amended, or replaced documents.

1. General principles:

1.2 Control of expenses and state budget accounting for the non-repayable aid funds of non-repayable aid programs/projects are not limited by the program/project financial plan (as stipulated in Section I Part II of this Circular) in the following cases:

a) Programs/projects not included in the approved financial plan but have a letter from the Project Management Authority committing to approve the financial plan for the program/project within two (02) months from the date of issuance of the letter to the financial authority and expenditure control authority.

a) Programs and projects not included in the approved financial plan, but for which there is a letter from the project managing agency sent to the financial agency at the same level and the expenditure supervising agency committing to approve the financial plan for the program or project within two (02) months from the date of issuance of the letter.

b) A program or project withdrawing non-repayable ODA exceeding the approved financial plan, but has a letter from the Project Management Agency sent to the Financial Agency at the same level and the Expenditure Control Agency committing to approve additional non-repayable ODA capital for the program or project within one (01) month from the date of signing the letter.

2. Expenditure control:

2.1 Expenditure control is the act of the Expenditure Control Agency (State Treasury/Re-lending Agency authorized) conducting inspections and confirming expenditures and payment files from the aid source of the Project Owner/Aid Using Unit in accordance with regulations on state budget expenditure management. The expenditure standards serving as the basis for the Expenditure Control Agency to carry out expenditure control are guided in point 2, section IV, part II of this Circular.

2.2 The Expenditure Control Agency only conducts expenditure control on monetary aid (transferred by the donor to Vietnam to purchase domestic goods, equipment, construction costs, or implement non-loan components in loan programs) through the following procedures: Direct Payment/Transfer, Refund/Settlement, Special Account/Advance Payment Account. Expenditure control is carried out according to Circulars of the Ministry of Finance guiding the file and procedure for expenditure control, including Circular No. 27/2007/TT-BTC dated April 3, 2007 for basic investment expenditure; Circular No. 79/2003/TT-BTC dated August 13, 2003 for administrative and public service expenditure, and any amendments, supplements, or replacements thereof. The Project Owners/Aid Using Units must submit the Program/Project Aid Legal File (as stipulated in point 8.1 a), section II, part II of this Circular) to the Expenditure Control Agency as the basis for expenditure control.

For other withdrawal procedures such as Direct Payment under Power of Attorney, Commitment Letter, and Payment by L/C without Commitment Letter: In this case, the Expenditure Control Agency does not conduct expenditure control, but the Project Owners send letters requesting the issuance of L/C, and/or Application for Issuance of Commitment Letter (Withdrawal Application) along with related files to the Financial Agency for approval and notification to the Serving Bank (L/C issuing bank) to execute the withdrawal, in accordance with specific provisions in Circular No. 78/2004/TT-BTC dated August 10, 2004 of the Ministry of Finance guiding the management of withdrawal for official development assistance (ODA) and any amendments, supplements, or replacements thereof.

2.3 No expenditure control system is implemented for in-kind aid. The head of the Project Management Agency and the Project Owner are responsible for receiving, managing, and using in-kind aid in accordance with current accounting and state asset management regulations and other relevant laws.

2.4 Project Owners/Aid Using Units that are budgetary units, state administrative agencies, public service units with income, political organizations, political-social organizations, social-professional organizations, and other organizations using state budget funds... must open accounts to receive aid at the State Treasury system and be subject to expenditure control by the State Treasury during the disbursement and use of aid funds. State Treasuries at all levels are responsible for providing detailed guidance and creating favorable conditions regarding the procedures for opening the above accounts for Project Owners/Aid Using Units.

2.5 In special cases agreed upon and committed to with foreign parties, Project Owners/Aid Using Units may open deposit accounts at commercial banks to receive and use aid for programs and projects, but expenditure documents and payment files from aid sources still must be submitted to the Expenditure Control Agency to carry out expenditure control.

2.6 Depending on the method by which the Donor transfers aid funds to Vietnam, expenditure control is carried out as follows:

a) If the Donor directly manages and controls expenditures for the program or project, it shall be conducted in accordance with the provisions in the Agreements, Memorandums, or Project Documents signed with the Donor.

b) If the Donor transfers funds through a budget support mechanism whereby aid funds are not tied to one or several specific projects but are transferred directly into the central budget and managed and used according to Vietnam's budget regulations and procedures:

The Ministry of Finance will transfer funds to agencies, units, and localities implementing the program through the State Treasury system as per the current method of disbursing state budget funds. The State Treasury will conduct expenditure control according to Circulars of the Ministry of Finance guiding the file and procedure for expenditure control, including Circular No. 27/2007/TT-BTC dated April 3, 2007 for basic investment expenditure; Circular No. 79/2003/TT-BTC dated August 13, 2003 for administrative and public service expenditure, and any amendments, supplements, or replacements thereof.

c) In cases where the Aid Agreements/Memorandums signed with the Donor provide for the opening of accounts at commercial banks or at the State Treasury to receive aid funds:

The State Treasury will conduct expenditure control according to the guidance in Circular No. 78/2004/TT-BTC dated August 10, 2004 of the Ministry of Finance guiding the management of withdrawal for official development assistance (ODA) and any amendments, supplements, or replacements thereof.

d) For foreign aid transferred to Vietnam in the form of establishing revolving credit funds or for lending to specific projects:

The Re-lending Agency authorized by the Financial Agency will conduct expenditure control according to the guidance in Circular No. 78/2004/TT-BTC dated August 10, 2004 of the Ministry of Finance guiding the management of withdrawal for official development assistance (ODA) and any amendments, supplements, or replacements thereof.

e) Programs and projects funded through grants and partially rescheduled loans from the state budget, implemented by the same Project Owner/Funding Recipient: The financial agency is responsible for determining the appropriate disbursement oversight agency based on the nature of the project and ensuring that there are no two disbursement oversight agencies for one program or project.

3. State budget accounting:

3.1 All non-reimbursable grants in kind or in cash, which are part of state budget revenue, must be fully recorded in the state budget according to the following provisions:

a) For grants where the Funding Recipient has been identified, financial agencies at all levels shall process the recording of income and expenditure in the state budget.

b) For grants where the Funding Recipient has not yet been identified, financial agencies at all levels shall be responsible for confirming the grant and managing it, while coordinating with the Project Management Agency or Project Owner to determine the usage plan in accordance with the agreed commitments and objectives with the donor, and submitting this plan to the competent authority for approval of the allocation of goods and funds to the Funding Recipients for their use, serving as the basis for recording income and expenditure in the state budget.

If the donor transfers the grant funds in one lump sum for spending over multiple years, expenditures included in the previous year's budget that have not been executed will automatically be carried forward to the next year for spending.

c) Expenditures from non-reimbursable grants in cash must be included in the annual budget revenue and expenditure forecast and recorded in the state budget within the fiscal year. For expenditures included in the previous year's budget that are implemented during the period of adjusting the final accounts (ending March 31 of the following year for provincial budgets, May 31 of the following year for central budgets), they should be recorded as expenditures of the previous year. For grants implemented under the form of targeted supplementary funding from the central budget to local budgets, the recording of income and expenditure in the state budget shall be completed no later than the adjustment period of the local budget final accounts.

The Ministry of Finance shall record income and expenditure in the central budget for grants that are part of central government revenue.

The Department of Finance shall record income and expenditure in the local budget for grants that are part of local government revenue and for grants implemented under the form of targeted supplementary funding from the central budget to local budgets.

National Treasury agencies at all levels are responsible for accounting for the receipt and expenditure of foreign aid in the state budget. Annually, along with reporting on the regular use of the state budget forecast, National Treasury agencies at all levels shall report to the financial agencies at the same level and higher-level National Treasury agencies on the situation of aid fund utilization and the balance of aid fund accounts opened by Project Owners/Funding Recipients at the transaction National Treasury, according to the form specified in Circular No. 101/2005/TT-BTC dated November 17, 2005, issued by the Ministry of Finance, guiding the end-of-year accounting closure and preparation/reporting of annual state budget final accounts.

3.2 Non-state budget accounting for the following grants:

a) In-kind grants: Procedures for confirming grants and recording them in the state budget are not required for non-reimbursable in-kind grants (as stipulated in Point 3, Section III, Part I of this Circular). Heads of agencies and units receiving non-reimbursable in-kind grants are responsible for monitoring and managing the use of such grants.

b) Funds spent or paid by the donor or its representative for beneficiaries who are "non-residents" (fees for consulting organizations or long-term foreign experts working in Vietnam; costs for foreign experts conducting surveys, evaluations, and project assessments in Vietnam...from foreign aid sources).

3.3 Accounting Process for the State Budget:

a) For imported goods grants (Form C1-HD/XNVT) and domestic goods and services grants (Form C2-HD/XNVT):

Monthly, the financial agency compiles the Grant Confirmation Declarations for each Funding Recipient into a Declaration of Grant Confirmation for Imported Goods/ Domestic Purchased Goods and Services (according to Form 3 of this Circular) for each first-level budget unit (directly receiving annual state budget forecasts assigned by the Prime Minister or the Chairman of the Provincial People's Committee) and on this basis, processes the recording in the state budget.

After recording in the state budget, the financial agency sends a notification to the Project Management Agencies, which are first-level budget units, along with the state budget accounting file including:

- Approval notice of the budget forecast (clearly stating the number and date of the budget expenditure order according to this Notice);

- Declaration of Grant Confirmation for each Project Owner/Funding Recipient;

- Copy of the Grant Confirmation Declaration of the Project Owner/Funding Recipient;

This file serves as the basis for first-level budget units to process the transfer of aid funds to lower-level budget units, which are Funding Recipients.

b) For grants in cash (Form C3-HD/XNVT):

After each confirmation of the grant, the financial agency does not immediately record the income in the state budget but instead sends a notification to the Project Management Agency, which is a first-level budget unit, along with the grant confirmation file including:

- Detailed list of Funding Recipients (if the grant money is divided among several Funding Recipients, which are lower-level budget units);

- Copy of the Grant Confirmation Declaration of the Grant Confirming Unit;

Upon receiving this file, the first-level budget unit shall issue a notification to the Funding Recipients, which are lower-level budget units, and also send it to the National Treasury where the Funding Recipient conducts transactions, along with a copy of this file, so that the National Treasury can monitor and control the expenditures.

Monthly, the units utilizing non-repayable aid shall aggregate expenditure vouchers and payment documents from the aid funds to prepare the "Comprehensive Expenditure Statement from Non-Repayable Aid Funds" according to each "Aid Confirmation Form" and submit them to the State Treasury where transactions take place for confirmation of the total amount expended from the aid funds on the statement, thereafter sending these documents to the first-level budget unit. The first-level budget unit shall consolidate these statements and submit them to the corresponding financial authority for budget accounting in accordance with the current State Budget Classification.

The "Comprehensive Expenditure Statement from Non-Repayable Aid Funds" shall be prepared according to the model prescribed in Appendix No. 4 of this Circular. This statement shall also be submitted by the Project Proponents/Units Utilizing Aid to the Tax Authority and serves as one of the bases for the Tax Authority to process value-added tax refunds for aid programs/projects.

c) For amounts and goods of aid for construction projects (including amounts converted from debt to aid for construction projects in Vietnam):

After confirming the aid, quarterly, the financial authorities at all levels shall aggregate the "Aid Confirmation Forms" models C1, C2, and C3-HD/XNVT marked "Construction Aid" and send them to the Project Management Authority and the State Treasury where the Project Proponent/Unit Utilizing Aid conducts transactions for coordinated management of expenditures, payments, and final settlement of investment capital after the foreign aid project/construction component has been completed and handed over to the Vietnamese side.

Upon completion of the project, the Project Management Authority shall submit to the corresponding financial authority the Final Settlement Reports and the Decision Approving the Final Settlement Report issued by the competent authority to proceed with state budget accounting procedures.

d) For humanitarian aid, emergency relief, non-governmental aid... implemented through agreements, aid arrangements for the Government but the recipients and users of the aid are organizations and individuals in localities not related to the state budget (such as orphanages, private schools, religious institutions...): The Ministry of Finance shall record revenue in the central budget and record supplementary targeted expenditure in the local budget (provincial or city budget).

3.4 Accounting for foreign aid in the State Budget Classification as follows:

a) Record revenue under Chapter 160, Type 10, Clause 08 or 09, Corresponding Sections from 73 to 76, Subsections corresponding to the funding organization (government, international organization, non-governmental organization...).

b) Record expenditure under the corresponding Chapters, Types, Clauses, Sections for the respective expenditure items, specifically some Sections as follows:

- Section 100: Wages

- Section 101: Labor Costs

- Section 102: Allowances

- Section 112: Conferences

- Section 119: Professional Expenses of Each Sector

- Section 145: Procurement of Assets for Professional Work

- Section 147: Construction and Installation Costs

- Section 149: Other Expenses

c) For foreign aid provided in the form of support to the budget:

- If foreign currency is sold to the State Bank of Vietnam: The State Treasury will record revenue in the central budget according to the actual purchase rate of the State Bank of Vietnam's Trading Department, under the State Budget Classification Chapter 160, Type 10, Clause 08 or 09, Corresponding Sections from 73 to 76, Subsections corresponding to the funding organization. The documents for the State Treasury to process the recording of state budget revenue are telegrams "with" foreign aid currency from foreign banks and transfer vouchers from the State Bank of Vietnam's Trading Department.

- If foreign currency is transferred into the National Foreign Currency Fund: The State Treasury will record revenue in the central budget according to the monthly foreign currency accounting rate published by the Ministry of Finance, accounting under the State Budget Classification Chapter 160, Type 10, Clause 08 or 09, Corresponding Sections from 73 to 76, Subsections corresponding to the funding organization. The documents for the State Treasury to process the recording of state budget revenue are telegrams "with" foreign aid currency from foreign banks and transfer vouchers from the State Bank of Vietnam's Trading Department.

3.5 Regulations on the deadlines for recording revenue and expenditure in the state budget for foreign aid: Implemented according to Decision No. 19/2007/QĐ-BTC dated March 27, 2007 of the Minister of Finance promulgating the Regulation on Recording Revenue and Expenditure in the State Budget for Loans and Foreign Aid, specifically as follows:

a) The deadline for issuing the approval notice for the budget estimate to record revenue and expenditure in the state budget for foreign aid is no later than ten (10) days from the date of receipt of complete valid documents.

b) The deadline for issuing the revenue recording order and payment order is no later than five (05) days from the date of receipt of the approval notice for the budget estimate.

c) The deadline for recording revenue and expenditure is no later than five (05) days from the date of receipt of the revenue recording order and payment order.

3.6 Adjustments to the State Budget Accounting Data:

a) Adjustments to the State Budget Accounting Data are conducted regularly throughout the fiscal year to address discrepancies between recorded revenue and expenditure in the state budget and the actual final settlement of foreign aid usage, which may arise in the following situations:

- Assets, goods, aid funds upon inventory and revaluation result in excess or shortage in quantity, or increase or decrease in value compared to the confirmed aid figures and state budget accounting (including adjustments to the actual import invoice price in foreign currency according to the Aid Confirmation Form C1-HD/XNVT for consistency with domestic market prices);

- Unspent aid funds returned to the Funding Organization;

- Amounts and goods of aid recorded in the state budget in the previous year but transferred for use in the following year (according to the project design or agreement with the Funding Organization);

- The competent state authority decides to change the financial mechanism applied (for example, deciding to switch from loan repayment to allocation from the state budget...).

b) The adjustment shall be carried out as follows:

- Based on the final reports on the actual use of foreign aid funds and decisions to adjust financial data and mechanisms issued by the competent state agencies, financial authorities at all levels shall review the data and prepare Budget Data Adjustment Forms to send to the Project Owners/Foreign Aid Users and the State Treasury for accounting purposes to increase or decrease the recorded revenue and expenditure figures in the budgets at all levels.

Based on the Budget Data Adjustment Forms, the State Treasury shall adjust the budget data according to the contents recorded on the forms. The Project Owners/Foreign Aid Users shall adjust their accounting reports and final accounts of foreign aid based on the Adjustment Notice from the State Treasury.

Annual budget data adjustments (if any) must be completed no later than the time allowed for adjusting the budgets at all levels. In cases where budget data adjustments are required after the annual state budget has been finalized, the project management agencies that are primary budget units need to report to the Ministry of Finance (for aid funds from central government revenues) or the People's Committee of the province/city (for aid funds from local government revenues) to obtain specific decisions on handling the matter.

- For balances in foreign aid accounts that were recorded as revenue in the previous year’s state budget but transferred for use in the following year: if the balance is fully utilized within the period allowed for adjusting the final accounts at all levels, it will be settled in the previous year’s state budget. After this period, if there is still a balance remaining, it may be carried over to the next year for use and settlement in the next year’s state budget. The Project Owners/Foreign Aid Users must report to the State Treasury where transactions take place (in detail according to Chapter, Type, Clause, Section, and Subsection) so that the State Treasury can consolidate the information for the primary budget unit and submit it to the same-level financial authority to process the reduction of expenditures in the previous year and transfer the funds to the next year (within 45 days after the end of the adjustment period for each level of budget).

For inventory of goods and materials from foreign aid that have already been settled as expenditures in the previous year's budget but are to be used in the following year, the Project Owners/Foreign Aid Users must organize monitoring and usage according to the intended purpose and report separately to the State Treasury where transactions take place and the same-level financial authority. There will be no adjustment of budget accounting data in this case.

IV. REGIME FOR PROCUREMENT AND EXPENDITURE STANDARDS APPLICABLE TO FOREIGN AID PROGRAMS AND PROJECTS

1. Procurement regime:

1.1 The project management agencies, Project Owners/Foreign Aid Users must strictly comply with the Law on Bidding and current procurement regulations of Vietnam during the implementation of foreign aid programs and projects.

In cases where the donor requires the application of procurement regulations different from those currently in force in Vietnam and agreed upon in international agreements signed with the donor, such regulations shall be applied according to the provisions of the international agreement. Agencies authorized to negotiate and sign international agreements must report to the project management agency and the same-level financial authority any provisions that differ from current regulations during the negotiation and signing process to consider and decide whether to allow implementation or amend and adjust Vietnam's procurement regulations accordingly.

1.2 Except when specifically agreed otherwise with the donor, expenditures and procurement from foreign aid funds for programs and projects, particularly those made in Vietnam, must be decided and managed by Vietnam. During the drafting of project documents or negotiations of foreign aid agreements, project management agencies and Project Owners must agree with donors according to this principle to ensure that Vietnam has real autonomy in spending and facilitate the implementation of expenditure control regimes.

2. Expenditure standards:

2.1 For expenditure standards from domestic counterpart funds for foreign aid programs and projects: apply the expenditure standards prescribed in Decision No. 61/2006/QĐ-BTC dated November 2, 2006, issued by the Minister of Finance regarding "Some expenditure standards applicable to projects/programs using official development assistance (ODA) funds" and any subsequent amendments or replacements thereof.

2.2 For expenditure standards from foreign aid funds: apply the expenditure standards stipulated in foreign aid agreements and memorandums signed with donors, or set the expenditure levels agreed upon by the donor representatives, the Ministry of Finance, and the project management agencies (if not specified otherwise in the agreements and memorandums). Project management agencies and Project Owners/Foreign Aid Users are responsible for providing complete documentation and agreements with donors regarding expenditure standards, budget estimates, and plans for foreign aid fund utilization to the expenditure control agency to ensure proper expenditure control without affecting the project schedule and commitments to donors.

V. ACCOUNTING, FINAL ACCOUNTING, AUDITING, AND REPORTING REGIMES

1. Accounting and final accounting:

1.1 Project Owners/Foreign Aid Users must establish accounting systems at their units to record non-repayable foreign aid funds according to the current accounting system of Vietnam. Accounting records must be detailed for each source of funding (aid funds, counterpart funds) and according to the approved budget items. Foreign aid funds cannot be combined with administrative and public service funds allocated to the unit.

1.2 In cases where the Sponsor has requirements for using accounting systems different from the current accounting system of Vietnam, the Project Owners/Grant Users must immediately report to the Project Management Authority and the Ministry of Finance to guide implementation in accordance with the current regulations of Vietnam. If the Sponsor agrees to use Vietnam's accounting system but has specific requirements for different reporting forms, the Project Owners/Grant Users must report to the Ministry of Finance to obtain permission and guidance on using appropriate software to prepare reports according to the Sponsor's requirements.

1.3 Annually, the Project Owners/Grant Users who are primary budget units have the responsibility to compile and prepare annual final accounts reports to submit to the same-level financial authority for review, verification, and notification of annual settlement.

a) For construction investment capital: implement in accordance with Circular No. 53/2005/TT-BTC dated June 23, 2005, issued by the Ministry of Finance guiding the preparation and verification of final accounts reports for construction investment capital from state budget sources on an annual fiscal basis and any amendments, supplements, or replacements thereof.

b) For operational capital: implement in accordance with the Circular of the Ministry of Finance guiding the review, verification, and notification of annual settlements for administrative agencies, public institutions, and organizations supported by the state budget.

1.4 Upon completion of the project, all Project Owners/Grant Users must prepare final accounts reports for construction investment capital (for construction projects) or final accounts reports for administrative and operational capital (for projects with administrative and operational expenditure characteristics) to submit to the Project Management Authorities for examination and approval in accordance with the current accounting regulations.

a) Final accounts reports for construction investment capital shall be applied in accordance with the provisions of Circular No. 33/2007/TT-BTC dated April 9, 2007, issued by the Ministry of Finance guiding the settlement of construction investment capital and any amendments, supplements, or replacements thereof.

b) Final accounts reports for administrative and operational capital shall be applied in accordance with the provisions of Decision No. 19/2006/QD-BTC dated March 30, 2006, issued by the Minister of Finance establishing the accounting system for administrative and operational activities and any amendments, supplements, or replacements thereof.

2. Audit

2.1 In the case of annual independent audits hired by the Sponsor: The Project Management Authority and the Project Owner have the responsibility to send, or request the Sponsor to send, annual independent audit reports to the respective-level financial authorities. Independent audit reports together with audited financial statements prepared by Vietnam are considered the main bases for the financial authorities to verify and approve final accounts for Project Owners/Grant Users.

2.2 In the case of audits conducted by Vietnam: If the Agreement or Project Documentation stipulates that the Project Owner/Grant User must submit independent audit reports, the Project Owner/Grant User has the responsibility to report to the Project Management Authority and the same-level financial authority to obtain permission to hire independent auditors for auditing. These audit reports are submitted to the financial authority and serve as one of the legal bases for the financial authority to approve final accounts for construction investment capital and administrative and operational capital of grant programs/projects.

3. Reporting System:

3.1 The Project Owner/Grant User must prepare and submit the following grant receipt and utilization reports to the Project Management Authority and the same-level financial authority:

a) Quarterly reports not later than 15 days after the end of each quarter;

b) Annual reports not later than January 31 of the following year;

c) Reports at the conclusion of the entire grant program/project, not later than six months after the conclusion of the program/project;

3.2 The quarterly and annual reports above are prepared based on the Grant Confirmation Declarations and the actual situation of grant receipt and utilization by the Project Owner/Grant User, according to the model specified in Appendix 5 of this Circular. Specifically, the final project report is prepared according to the Model Final Accounts Report for Construction Investment Capital (for construction projects) or the Final Accounts Report for Administrative and Operational Capital Projects (for projects implemented by administrative and public institution units) in accordance with current regulations. Non-repayable non-material grants are only included in these reports if they can be converted to monetary value and there is sufficient documentation and evidence to prove them.

3.3 Reports of the Project Owner/Grant User who are primary budget units under the central budget are sent to the Ministry of Finance (Department of Foreign Financial Affairs) one copy, while simultaneously transmitting the report via email to the Ministry of Finance at the email address: [email protected].

VI. MANAGEMENT REGIME FOR CAPITAL AND ASSETS FORMED FROM NON-REPAYABLE GRANTS

1. Assets formed from foreign non-repayable grants, which are part of state budget revenue, are assets established as state property, thus the registration, reporting, management, utilization, and disposal of such assets are carried out in accordance with Decree No. 14/1998/NĐ-CP dated March 6, 1998, issued by the Government on State Asset Management; Decree No. 137/2006/NĐ-CP dated November 14, 2006, issued by the Government on the delegation of state management authority over state assets at administrative agencies, public institutions, and state-owned enterprises, and any amendments, supplements, or replacements thereof.

2. The management and disposal of assets of grant programs/projects after the project's completion, for Project Owners who are administrative agencies, public institutions, and other organizations, are carried out in accordance with Circular No. 116/2005/TT-BTC dated December 19, 2005, issued by the Ministry of Finance guiding the management and disposal of assets of projects funded by state budget capital upon project completion.

For grant programs/projects implemented by enterprises, when the project is completed, the enterprise is responsible for submitting final accounts reports for completed projects to the Ministry of Finance (for projects under the central government budget) or the Department of Finance (for projects under local government budgets). The Ministry of Finance or the Department of Finance will base their decisions on the actual situation of the project to transfer capital and assets to the enterprise for management and utilization.

3. Interest on aid deposits: The interest on aid deposit accounts must be recorded separately and used strictly in accordance with the commitments set forth in agreements and memoranda signed with each donor. In cases where the donor has agreed to allow the use of this interest for additional funding for activities under existing programs or projects, or for new projects, the Project Owner/aid-receiving entity shall report to the project management agency and the co-level financial agency for consideration and decision on specific usage, and shall be responsible for processing confirmation procedures for the additional interest amount as a new aid grant.

In the absence of an agreement or commitment with the donor regarding the use of aid deposit interest, the Project Owner/aid-receiving entity shall be responsible for remitting the entire interest amount to the State Budget; if these entities fail to remit within the prescribed time frame, the State Treasury or the commercial bank where the project account is held will automatically transfer the entire accrued interest to the State Budget.

4. For credit components in aid programs and projects: After the completion of the program or project, depending on the specific agreements and memoranda with donors, credit components may be recovered for the State Budget, or continued to be assigned to credit organizations for lending through revolving credit funds. Upon completion of the program or project, based on the Agreement, Memorandum, or commitment with the donor, the financial agencies at all levels shall coordinate with the project management agency to provide detailed guidance on recovering for the State Budget or reassigning to revolving credit funds for continued lending.

VII. REWARDS AND SANCTIONS FOR VIOLATIONS

1. Project Owners/aid-receiving entities that demonstrate outstanding performance in implementing the reporting, declaration, and confirmation requirements of this Circular shall be recommended for rewards by financial agencies at all levels in accordance with the law on commendation and reward.

2. Project Owners/aid-receiving entities that fail to implement, or implement inadequately, the financial management regulations stipulated in this Circular (particularly failing to strictly confirm aid, report receipt and use of aid to financial agencies at all levels), depending on the specific level of violation, financial agencies at all levels may impose one or more of the following sanctions:

- Issuing a decision to temporarily suspend budget disbursements (including matching funds for aid projects) for the violating entity and notifying the State Treasury at the same level to implement it, while also notifying the managing agency of the violating entity to urge and remind them;

- Not processing final settlement and transferring funds for aid amounts that have not completed the declaration confirmation form when reviewing and approving annual settlements;

- Recommending relevant authorities not to allocate future aid amounts to the violating entity;

- In cases where the violations are deemed serious, financial agencies at all levels may propose to higher-level authorities or related functional agencies to organize inspections, audits, or refer the case to criminal investigation agencies for the violating entity.

Part III

IMPLEMENTATION

This Circular replaces Circular No. 70/2001/TT-BTC dated August 24, 2001, of the Ministry of Finance and takes effect fifteen days after its publication in the Official Gazette.

During implementation, if there are any unresolved issues or new issues not covered by this Circular, relevant units and agencies are requested to report to the Ministry of Finance for study, amendment, and supplementation.