Joint Circular No. 90/1997/TTLT/TC-NN guiding the financial management regime for state-owned enterprises operating public services in the field of irrigation and water conservancy works.

MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT - MINISTRY OF FINANCE ********	SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness ********
Number: 90/1997/TTLT-BTC-BNN	Hanoi, December 19, 1997

 

JOINT CIRCULAR

JOINT CIRCULAR NO. 90/1997/TTLT-BTC-BNN OF THE MINISTRY OF FINANCE AND THE MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT ON DECEMBER 19, 1997 GUIDING THE FINANCIAL MANAGEMENT REGIME FOR STATE ENTERPRISES ENGAGED IN PUBLIC SERVICES IN THE FIELD OF IRRIGATION AND WATERWORKS MANAGEMENT

Pursuant to the State Enterprise Law adopted by the National Assembly on April 20, 1995; the Waterworks Construction and Protection Ordinance dated August 31, 1994; Government Decree No. 56/CP dated October 2, 1996 on state enterprises engaged in public services, the Ministry of Finance issued Circular No. 06-TC/TCDN dated February 24, 1997 guiding the financial management regime for state enterprises engaged in public services according to the provisions of Government Decree No. 56/CP dated October 2, 1996.
Due to the specific nature of operations and financial management mechanisms of enterprises operating in the field of irrigation and waterworks construction and protection; apart from implementing the provisions of Circular No. 06-TCTCDN dated February 24, 1997 of the Ministry of Finance, the Joint Ministry of Finance and Agriculture and Rural Development further guides certain issues regarding the financial management regime for state enterprises engaged in public services in the field of irrigation and waterworks construction and protection as follows:

I. GENERAL PROVISIONS

1. The subject of this Circular is state enterprises engaged in public services in the field of irrigation and waterworks construction and protection (referred to as water management enterprises): including independent accounting enterprises established by the Minister of Agriculture and Rural Development, the Chairman of the People's Committee of provinces and centrally-administered cities according to the criteria stipulated in Article 1 and Article 2 of Government Decree No. 56/CP dated October 2, 1996.

2. Water management enterprises provide irrigation services according to assigned tasks or orders; they collect water fees and other revenues as prescribed by the State. Water management enterprises are allocated capital, resources, land, and other assets by the State, have the responsibility to use them efficiently, preserve and develop the allocated capital, possess rights and obligations under civil law, and bear responsibility for their activities within the scope of capital and assets managed by the enterprise under the principle of self-financing with State financial support in cases as provided in Article 11 of the Waterworks Construction and Protection Ordinance.

3. In addition to performing irrigation tasks, water management enterprises may utilize land, scenery, capital, and State assets managed by the enterprise to organize supplementary business activities suitable to the enterprise's capacity and market demand subject to the following conditions:

- Must be approved in writing by the authority that established the enterprise.

- Shall not affect the performance of assigned irrigation tasks.

- Registering additional business lines in accordance with current regulations.

- Shall separately account for supplementary business activities.

- Shall fulfill tax obligations for supplementary business activities in accordance with the law.

4. Water management enterprises are entitled to certain financial policies:

- Priority investment in capital, provision of part or all of the registered capital, preferential loans, or support through official sources for projects and works in the field of waterworks exploitation.

- Exemption from depreciation charges for constructed and earthwork structures, pumps with a capacity of 8,000 cubic meters per hour or more, as well as attached fixed assets and some other assets as specified in Decision No. 1062/TC/QD/CSTC dated November 14, 1996 of the Ministry of Finance.

- No payment of land use tax for areas allocated by the State for constructing and protecting waterworks (including management houses of stations, main facilities, workshops, warehouses serving the exploitation and protection of waterworks). If water management enterprises use these areas for commercial purposes, they must pay rent according to Government Decree No. 85/CP dated December 17, 1996.

- No payment of turnover tax on water fees collected from direct agricultural production services.

- No payment of budget capital usage fee.

5. Water management enterprises are subject to financial inspection and supervision by the finance authority acting as the representative of the State owner of capital and assets at the enterprise pursuant to the delegation of the Government.

II. MANAGEMENT AND USE OF CAPITAL AND ASSETS

1. Capital Investment:

1.1. Newly established water management enterprises are prioritized by the State to invest part or all of the initial registered capital, not less than the statutory minimum capital as stipulated in Government Decree No. 50/CP dated August 28, 1996, commensurate with the scale of assigned irrigation tasks. Enterprises are responsible for continuously preserving and developing capital from their own business results. Water management enterprises are invested in works, assets, machinery, and equipment that do not require depreciation when these assets are no longer usable; or additional capital is provided by the State when it deems necessary to support the enterprise to fulfill additional assigned tasks or when the enterprise truly lacks capital relative to the assigned irrigation tasks (after mobilizing existing capital within the enterprise). Sources of additional investment for operating enterprises include:

- For profitable enterprises, tax benefits can be considered to supplement the enterprise's capital according to the law.

- For unprofitable enterprises or those still lacking capital after tax benefits, the State will consider additional investment.

1.2. The authority establishing water management enterprises and the corresponding finance authority are responsible for ensuring the initial registered capital at the time of establishment according to Article 2 of Government Decree No. 50/CP dated August 28, 1996, and supplementing capital for the enterprise.

1.3. Investment procedures:

a. For construction investment: Agricultural water enterprises are entitled to state investment for upgrading, reconstructing, building anew, expanding the scale of operations of agricultural water enterprises, major repairs of works, machinery and equipment, and restoring works that have not been depreciated using basic construction investment funds in accordance with the current regulations of the Investment Management Charter.

b. For additional business capital investment: Enterprises must prepare a request for supplementary capital including:

- The decision on establishment of the enterprise.

- A business registration certificate.

- The decision of the head of the agency responsible for establishment regarding the assignment of public service tasks.

- The production and financial plan of the enterprise which has been approved by the competent authority.

- The annual financial report of the enterprise in the previous year (if it is an operating enterprise).

1.4. The procedure for providing capital to enterprises shall be carried out in accordance with the provisions of the Ministry of Finance.

2. Sale, lease, mortgage, pledge of assets:

- Agricultural water enterprises may sell assets that are not needed or obsolete technology to recover capital after obtaining the opinion of the agency responsible for establishing the enterprise. Prior to selling, the enterprise must establish a Valuation and Public Auction Committee in accordance with the law. The committee must include representatives from the management board, technical staff, chief accountant, and direct managers of the assets... The difference between the proceeds from the sale of the asset and its remaining book value and sale expenses shall be recorded in the enterprise's business results. For assets that have not been depreciated when sold, the enterprise shall record a reduction in business capital. The proceeds from the sale (after deducting sale expenses) shall be fully remitted to the state budget (or recorded as an increase in business capital if reinvested by the state).

- For important fixed assets and main production lines: before selling the asset, the enterprise must obtain written consent from the agency responsible for establishing the enterprise after receiving written agreement from the state capital and asset management agency at the enterprise.

- For unused or inefficiently used assets that are leased, the enterprise must prepare a plan and report to the agency responsible for establishing the enterprise for approval. For leased assets aimed at improving utilization efficiency and increasing enterprise income, depreciation must still be recorded according to regulations, and the asset must be recovered upon expiration of the lease term.

- Enterprises may mortgage, pledge, and borrow from credit institutions in accordance with the law. Enterprises are not allowed to mortgage or pledge borrowed, rented, held-in-trust, or pledged assets from other individuals or enterprises without the owner's consent.

3. Liquidation of assets:

Agricultural water enterprises may liquidate assets that are not needed, technologically obsolete, unusable, damaged, or substandard...

Important machinery, equipment, and main production lines such as pumps, canals, etc., which are critical to the operation of the enterprise, must be approved in writing by the agency responsible for establishing the enterprise and the state capital and asset management agency at the enterprise before being liquidated.

When liquidating, a Liquidation Committee must be established, which must include representatives from enterprise leadership, technical staff, chief accountant, and asset managers... If parts, scrap materials, or assets from liquidation are used for production and business, the enterprise must organize valuation. If the liquidated assets are sold, a public auction must be organized in accordance with the law. The difference between the proceeds from the liquidation (including the value used for business investment) and the remaining book value of the liquidated asset and liquidation expenses shall be recorded in the enterprise's business results. For fixed assets that have not been depreciated, the enterprise may record a reduction in business capital. The net proceeds from the liquidation after deducting liquidation expenses must be fully remitted to the state budget (or recorded as an increase in business capital if reinvested by the state).

4. Agricultural water enterprises implement the system of depreciation and use of fixed assets in accordance with the regulations of the Ministry of Finance. The following assets do not require depreciation:

- Cast-in-place structures and earthworks...

- Water pumps with a capacity of 8,000 m³/h or more, along with architectural components for operating the works, as stipulated by current regulations.

- Fixed assets formed from welfare funds of the enterprise that do not directly serve the production and business activities of the enterprise.

- Leased fixed assets.

- Fully depreciated fixed assets that are still in use.

- Unused fixed assets awaiting reallocation, stored for over one year, registered with the finance agency.

All depreciation of fixed assets retained by the enterprise for reinvestment, renewal, replacement of fixed assets, and use for business needs shall be in accordance with the regulations of the Ministry of Finance.

For assets that do not require depreciation, the enterprise must still maintain records and reflect the value of wear and tear as prescribed.

5. Agricultural water enterprises shall conduct asset revaluation in the following cases:

- Asset inventory and revaluation as decided by the State.

- Using assets for joint venture contributions or share capital contributions in accordance with the law.

The handling of the results of asset inventory and revaluation must comply with the State's regulations.

III. INCOME, EXPENSES AND DISTRIBUTION OF PROFITS

1. The income of agricultural water enterprises includes income from irrigation services (in accordance with water fee policies), income from comprehensive exploitation of hydraulic works, income from state support as prescribed, and other income...

1.1. Income from irrigation service activities: Is the amount of water fees received and verified according to the contract. The level of water fees is determined by the People's Committees of provinces and centrally-administered cities.

For inter-provincial waterworks enterprises, revenue is the amount of money submitted by waterworks enterprises within the system as decided by the Management Board of the system.

1.2. Revenue from business operations involving the comprehensive exploitation of irrigation works includes: aquaculture, boat mooring rental, tourism, power generation, industrial water supply, residential water supply for industrial zones, or other business activities...

1.3. Revenue from state support as prescribed.

1.4. Other revenues: such as collection of previously written-off bad debts, proceeds from asset liquidation and sale, joint ventures and cooperatives, financial leasing, and other receipts...

2. Costs of waterworks enterprises include:

2.1. Costs for irrigation and drainage operations:

1. Wages and allowances.

2. Social insurance, health insurance, and trade union fees calculated based on wages paid directly by the enterprise to employees.

3. Depreciation of fixed assets that require depreciation.

4. Raw materials and supplies for operation and maintenance of machinery and equipment used for irrigation services.

5. Major repairs of fixed assets.

6. Regular maintenance of fixed assets.

7. Electricity costs for pumping water for irrigation and drainage.

8. Water source development costs (if applicable).

9. Enterprise management costs (including communication expenses for operating computer systems to manage water for production purposes).

10. Costs for flood and drought prevention and response. 11. Contributions to flood prevention funds.

12. Training, scientific research, and application of new technologies to establish economic and technical standards.

13. Costs for labor protection, safety, and water conservancy facility protection...

14. Costs for collecting water resource fees.

15. Other costs...

2.2. Costs for business operations involving the comprehensive exploitation of resources include costs for aquaculture, fishing, protection, and other business activities...

2.3. Other activity costs include costs for recovering previously written-off bad debts, fines collection, and asset liquidation and sale costs...

In addition to the aforementioned costs, waterworks enterprises may also include severance pay for employees according to Decree No. 198/CP dated December 31, 1994, issued by the Government guiding certain provisions of the Labor Code.

All expenditures must be supported by valid documentation as stipulated by current regulations.

3. Waterworks enterprises may use revenue to cover costs, including:

- Revenue from irrigation service activities to cover irrigation service operation costs, taxes, and other state revenues as prescribed by law (excluding income tax).

- Revenue from comprehensive exploitation business activities to cover comprehensive exploitation business operation costs, taxes, and other state revenues as prescribed by law (excluding income tax).

- Revenue from other activities to cover other activity costs, taxes, and other state revenues as prescribed by law (excluding income tax).

Waterworks enterprises conducting supplementary business operations must ensure profitability and not offset losses from commercial activities with profits from public welfare activities.

3. Distribution of profits:

1. For waterworks enterprises with actual profits realized in the year (including both business profits and other activities), the distribution shall follow the following order:

a. Pay corporate income tax as required by law.

b. Deduct penalties for breach of contract, overdue payments, and legitimate costs not deducted when determining taxable profit.

c. Deduct losses not deductible before tax.

d. The remaining profit after deducting items a, b, and c shall be allocated to the following reserve funds at the prescribed rates and limits:

+ Development Investment Fund: Minimum 50%.

+ Financial Reserve Fund: 10%, with the balance of this fund not exceeding 25% of the registered capital.

+ Allocate two bonus and welfare funds equal to three months' actual salary if the budget submission plan approved by the competent authority is completed. Otherwise, allocate two bonus and welfare funds equal to two months' actual salary.

After deducting items a, b, c, and d, if there is a surplus from the Development Investment Fund and the Financial Reserve Fund, the excess will be transferred entirely to the Development Investment Fund. If there is insufficient funding to allocate two bonus and welfare funds equal to two months' actual salary, the enterprise will be provided with the shortfall by the State.

2. For waterworks enterprises where revenue is insufficient to cover reasonable costs, after using 50% of business activity profits (if any) to cover costs, if there is still a loss, the State will provide support as follows: - Provide sufficient funds to cover the remaining loss.

- Allocate two bonus and welfare funds equal to two months' actual salary of the enterprise.

- Remaining revenue from comprehensive exploitation business activities and other activities (if any) will be allocated to the Development Investment Fund at 80% and the Financial Reserve Fund at 20%.

* Allocation of financial support is implemented as follows:

- For waterworks enterprises established by the Chairman of the People's Committee of provinces and cities, financial support is provided from local budgets.

- For waterworks enterprises established by the Ministry of Agriculture and Rural Development, the Ministry of Agriculture and Rural Development, together with the Ministry of Finance, will determine the level of central government budget support.

In cases of extraordinary natural disasters or floods, if after mobilizing all available legal funds of the enterprise and receiving subsidies from budgetary plans at various levels, the losses cannot be covered, they will be handled separately according to the decision of the Government.

The allocation and management of financial support are carried out according to Circular No. 68-TC/TCDN dated September 25, 1997, issued by the Ministry of Finance regarding guidance on certain financial supports for state-owned enterprises and other regulations of the Ministry of Finance.

3. Procedures, timing, and purposes of establishing and using funds by enterprises are conducted similarly to those for commercial enterprises.

Within the total amount allocated to the two reward and welfare funds, the director of the enterprise has the authority to decide the proportion of the amount allocated to each fund after consulting with the enterprise trade union.

Agricultural water enterprises shall not establish an unemployment reserve fund. In special cases where it is necessary to reduce the scale of irrigation activities, the agency deciding on the establishment of the enterprise and the financial agency at the same level shall consider providing subsidies to workers who lose their jobs according to the prescribed regulations. For agricultural water enterprises located in remote areas, border islands, or strategically difficult regions, the State shall consider supporting the following expenses:

- Kindergarten and education expenses in areas without schools under the educational system.

- Health service expenses for places that must maintain hospitals or clinics due to special conditions.

IV. FINANCIAL PLAN

1. Annually, based on the provisions and guidance of the agency deciding on the establishment of the enterprise and the enterprise's financial agency, agricultural water enterprises must prepare production and irrigation service plans, financial revenue and expenditure budgets (including subsidy plans), report to the agency deciding on the establishment of the enterprise and the financial agency at the same level. The agency deciding on the establishment has the responsibility to approve, compile reports, and submit them to the financial agency and related agencies.

2. Within the annual budget revenue and expenditure plan approved, the head of the agency deciding on the establishment of the enterprise assigns irrigation plans and allocates the state budget to agricultural water enterprises and sends it to the financial agency at the same level for coordination. The state budget only supports within the approved budget. In cases where the approved budget is exceeded, they will be handled according to the State Budget Law and current regulations.

V. ACCOUNTING AUDIT, FINANCIAL REPORTING AND FINANCIAL DISCLOSURE

1. Preparing financial reports

- Quarterly and annually, agricultural water enterprises have the responsibility to prepare financial statements in accordance with current regulations. The enterprise director is responsible before the State and the law for the accuracy and truthfulness of the financial statements.

- Financial statements quarterly and annually are sent to the agency deciding on the establishment of the enterprise, tax agency, state capital and asset management agency at the enterprise, and statistical agency.

2. Accounting Audit and Financial Reporting:

- Quarterly and annually, agricultural water enterprises must conduct self-audits of accounting and financial statements.

- The agency deciding on the establishment of the enterprise, together with the state capital and asset management agency at the same level, is responsible for organizing the audit and approval of the annual financial statements of the enterprise.

- The financial agency implements inspections of compliance with financial accounting systems, fiscal discipline, and the accuracy and truthfulness of financial statements.

- Violations of accounting systems, financial income and expenditure systems, fiscal payments, and fund establishment and usage systems of enterprises are subject to administrative and economic penalties according to the law.

3. Public disclosure of annual financial statements:

- Based on the annual financial statements approved by the competent authority, the enterprise publicly discloses certain financial indicators according to the regulations of the Ministry of Finance.

- The content of the disclosed indicators shall follow the model attached to this Circular.

VI. IMPLEMENTATION PROVISIONS

1. In addition to the specific provisions for agricultural water enterprises in this Circular, such enterprises must also comply with other legal provisions applicable to state-owned enterprises.

2. This Circular takes effect from the date of issuance. All previous regulations concerning the financial management of agricultural water enterprises that conflict with this Circular are abolished.

3. During implementation, if there are any difficulties, enterprises are requested to report to the Ministry of Agriculture and Rural Development and the Ministry of Finance for research and appropriate amendments.

Pham Van Trong (Signed)

Vu Trong Hong (Signed)

 

SOCIALIST REPUBLIC OF VIETNAM

Independence - Freedom - Happiness

Prepared by Accountant Director

TABLE OF PUBLIC DISCLOSURE OF FINANCIAL REPORTS

Year...

No.	Index	Previous Year	Current Year	Ratio compared to the previous year
1	2	3	4	5
1	Total state capital
2	Results of operations:
	- Main Products and Services
	- Consumed Products and Supplied Services in the Year
	- Total Revenue
	Of which: Revenue from public service activities
	- Total Expenses
	Of which: Expenses for Public Service Activities
	- Profit from public services
	- Profit from Business Operations and Other Activities
3	Payments to the state budget:
	- Total amount due
	Including: Income tax
	- Paid into the state budget in the year
	Including: Income tax
4	Amounts Provided by the State
	- Supplementing investment construction capital
	- Supplementing business capital
	- Price Subsidies
	- Subsidies
	- Welfare and Reward Funds
5	Total Wages Implemented
	- Average Wage
6	Enterprise funds:
	a. Development Investment Fund
	- Beginning balance
	- Allocated in the Year
	- Used in the Year
	- Ending balance
	b. Financial reserve fund
	- Beginning balance
	- Allocated in the Year
	- Used in the Year
	- Ending balance
	c. Reward and Welfare Fund
	- Beginning balance
	- Allocated and Provided in the Year
	- Used in the Year
	- Ending balance

The enterprise is responsible for the accuracy and truthfulness of this report.

Prepared by Director

(Signature, stamp)