Decision No. 96/2000/ND-BTC Issuing detailed guidance on the procedures and formalities for withdrawing ODA funds

1. Official Development Assistance (ODA) funds allocated for investment in projects and programs (hereinafter referred to collectively as ODA projects) constitute a source of revenue for the State Budget, which must be recorded in the budget and managed in accordance with the State Budget Law and its implementing regulations.

2. The Ministry of Finance is responsible for financial management concerning the withdrawal of funds for payment to projects and programs, implementing the recording of income and expenditure of ODA funds in the State Budget, guiding and supervising the implementation of financial management systems, finalizing accounts of projects, guiding and supervising units in the transfer of assets, materials, and capital of projects upon completion.

3. The controlling agency is:

+ The State Treasuries at all levels (depending on the decentralization implemented for each project) shall control the spending activities of projects funded from the State Budget, including projects where part of the funds are loaned back to the project sponsors.

+ The lending agency (the Development Support Fund or other agencies authorized by the Ministry of Finance in special cases) shall control the spending activities of projects that are entirely loaned back.

4. The project sponsor is responsible under the law for implementing ODA projects in accordance with the commitments stipulated in international agreements, strictly adhering to state regulations on financial management, implementing accounting and auditing systems according to current state regulations.

5. This guidance only specifies the procedures, formalities, and management of withdrawing ODA funds. For domestic counterpart funds, the withdrawal and payment shall comply with current regulations on investment and construction management and state budget expenditure management, consistent with the project's progress and the withdrawal of foreign funds.

6. For projects and programs with specific characteristics, the Ministry of Finance may issue specific guidelines depending on management requirements.

1. Classification of projects for planning and expenditure management:

a. Classification based on nature of expenditure:

- Construction investment projects include projects involving basic construction expenditures as defined in Part II, Section I, Circular No. 135/1999/TT-BTC dated November 19, 1999 of the Ministry of Finance or subsequent amendments and supplements thereto.

- Administrative and social service development investment projects include projects investing in economic and social sectors without basic construction components.

For projects comprising both construction investment and administrative and social service investment components, the project sponsor should coordinate with the Ministry of Planning and Investment and the Ministry of Finance to apply one of the two types of project planning and expenditure management methods.

- Credit programs include programs or credit components of a project using ODA funds for banks and credit institutions to lend to projects or end-users to achieve predetermined objectives.

b. Classification based on funding mechanism:

- Grant-funded projects include projects utilizing ODA funds through the State Budget grant mechanism.

- Loan-funded projects include projects utilizing ODA funds through the loan mechanism from the State Budget.

- Hybrid projects combining grants and loans include projects receiving a portion of ODA funds as grants from the State Budget and the remaining portion as loans from the budget.

2. Preparation of investment capital plans or budget estimates for ODA projects:

a. For grant-funded projects:

Annually, at the time of preparing, submitting, and reviewing the State Budget estimate according to current regulations, the Project Management Board bases the project's progress to prepare the investment capital plan for the project (for construction investment projects) or the budget estimate (for administrative and social service projects) to be submitted to the main ministry (if the project is centrally managed) or the People's Committee of the province/city directly under the central government (if the project is locally managed) for consolidation into the overall budget plan of the ministry/province to be submitted to the Ministry of Finance, the Ministry of Planning and Investment for approval by the Government and the National Assembly.

This plan must clearly reflect the project's expenditure items, the project's funding sources such as loans, aid, domestic counterpart funds from the Central Budget, Local Budget, beneficiary contributions, and credit funds (if applicable).

The approval and allocation process for investment capital plans and budget estimates for projects must comply with current domestic regulations (Capital for construction projects will be announced by the Ministry of Planning and Investment, while capital for administrative and public service projects will be announced by the Ministry of Finance). Decisions by Ministries or provincial/municipal People's Committees allocating investment capital plans or budget estimates for projects must be sent to the Ministry of Finance (the Investment Department if it is a construction project, or the Administrative and Public Service Department if it is an administrative and public service project). The Investment Department and the Administrative and Public Service Department are responsible for compiling and announcing investment capital plans or budget estimates for projects to the State Treasury Central Office and the Department of Foreign Finance as a basis for monitoring and reconciling when disbursing and paying ODA funds for the project.

b. For rescheduling projects:

Projects need to establish investment capital plans in accordance with current regulations, clearly stating ODA sources and matching funds, and such plans must be approved by competent authorities. The project sponsor is responsible for balancing sufficient matching funds according to the project implementation schedule and reporting to the Ministry of Finance and the Ministry of Planning and Investment on the matching fund balance.

c. For hybrid projects, the procedures for establishing investment capital plans or budget estimates shall be applied depending on the nature of the components that are allocated or rescheduled, following the provisions in Sections a) or b) above.

3. ODA withdrawal plan:

- Annual plan: In August each year, along with the process of establishing investment capital plans/budget estimates for projects or plans for using credit from ODA sources, project management boards prepare the next year's ODA withdrawal plan and send it to the main ministry and the Ministry of Finance (Department of Foreign Finance) for consolidation of the overall ODA withdrawal plan and monitoring the use of ODA funds in the planning year. This plan needs to clearly specify each ODA source (if it is a mixed aid and loan or co-financing project) and break down by quarter.

To carry out withdrawals and payments, project management boards open appropriate transaction accounts at commercial banks serving according to current regulations. For projects using special account/payment advance payment methods, project management boards need to open additional special accounts/payment advances named after the project (for WB and ADB projects) or named after the Ministry of Finance (for other projects) at commercial banks serving to receive advance funding from sponsors.

Servicing banks are responsible for reporting the situation of foreign withdrawals and/or special account/payment advance payment transactions of the project to the Ministry of Finance, the State Bank, and the Project Sponsor.

During the project implementation period, servicing banks are entitled to fees according to the current regulations of the State Bank regarding bank service charges.

* Expense control applies to all construction and administrative and public service projects.

* Documentation and procedures for expense control for construction projects follow the provisions of Circular No. 135/1999/TT-BTC dated November 19, 1999, issued by the Ministry of Finance guiding the management and settlement of investment and public service funds with investment characteristics from state budget sources or amended and supplemented circulars replacing this circular.

* Documentation and procedures for expense control for administrative and public service projects follow the provisions of Circular No. 40/1998/TT-BTC dated March 31, 1998, issued by the Ministry of Finance guiding the management, allocation, and settlement of state budget expenditures through the State Treasury or amended and supplemented circulars replacing this circular.

* The control of documentation for requesting payments from foreign sources for ODA projects is not limited by the project's investment capital plan or budget estimate (or notification of funding limits).

* After reviewing and controlling the expenditure documentation of the unit, the expense control agency confirms the value on the payment voucher as valid and eligible for payment according to the prescribed ratio of foreign capital and matching funds in international agreements or project documents. Payment vouchers with confirmation from the expense control agency serve as the basis for implementing foreign withdrawal procedures.

Depending on the provisions in international agreements, the withdrawal and payment of ODA funds are carried out through one or more common forms: direct payment, special account, letter of commitment, repayment, and money transfer procedures.

INITIAL DOCUMENTATION AS THE BASIS FOR MANAGING ODA WITHDRAWALS:

The Project Management Board needs to submit the following documents to the Ministry of Finance (Department of Foreign Finance):

* Investment decision by the competent authority;

* International agreement on ODA signed between Vietnam and the sponsor and related project documents;

* Annual investment capital plan/budget estimate assigned by the competent authority;

* Rescheduling agreement signed between the project sponsor and the authorized lending agency (if it is a rescheduling project);

* Decision by the competent authority recognizing the winning bidder (or tender designation decision);

* Contract (construction, procurement, consulting, etc.) between the project sponsor and the contractor/or approved expenditure budget by the competent authority (if the expenditure activity does not follow the contract form);

* Decision by the competent authority approving the contract;

* If the contract requires prior consent from the sponsor, an "no objection" opinion from the sponsor is also required;

* Contractor bank guarantee;

* Advance payment guarantee (if it is advance payment);

The Project Management Board only needs to submit the above documents once for the entire project, except for the annual investment capital plan/budget estimate which is submitted annually.

1. Withdrawal procedure according to the direct payment method (or money transfer method):

Direct payment is a form of payment at the request of the Borrower, where the financier transfers the payment directly to the contractor/supplier. This form is typically applied in cases of payments made according to progress for large construction contracts, consultancy contracts, or payments for small import contracts that do not require the issuance of a Letter of Credit (L/C).

For projects financed by JBIC, this form is called the withdrawal and transfer of funds method and is only applicable to withdrawals denominated in Vietnamese Dong.

1.1. To withdraw direct payments in installments, the Project Management Board shall submit the following documents to the Ministry of Finance (Department of Foreign Financial Affairs):

* Withdrawal application form and accompanying statements in the prescribed format, along with a letter requesting withdrawal;

* Invoice/payment request from the contractor;

* Payment voucher confirmed by the Expenditure Control Agency. In cases of advance payments, a payment voucher for advance payments confirmed by the Expenditure Control Agency must be provided.

* In special cases, the Ministry of Finance may request additional explanatory documents from the Project Management Board.

1.2. Within five working days from the date of receipt of complete and valid documents, the Ministry of Finance (Department of Foreign Financial Affairs) will review and sign the withdrawal application form to send to the financier.

For projects financed by the World Bank (WB) and the Asian Development Bank (ADB), within five working days from the date of receipt of complete and valid documents, the Ministry of Finance (Department of Foreign Financial Affairs) will issue a written opinion to the Project Management Board and the servicing bank. Within two working days from the date of the Ministry's opinion, the servicing bank and the Project Management Board will sign the withdrawal application form and send it to the financier.

If the financier accepts the withdrawal request, they will transfer the money directly into the contractor's account. For JBIC projects, the transfer of payment into the contractor's account will be through the servicing bank.

2. Withdrawal process under the Guarantee Letter procedure or payment by L/C without a Guarantee Letter:

2.1. The Guarantee Letter procedure is a form at the request of the Borrower, where the financier issues a Guarantee Letter to ensure payment to a commercial bank for amounts already or to be paid via a Letter of Credit (L/C).

This form is typically applied in cases of import payments via L/C and foreign currency payments in JBIC project contracts.

The Project Management Board shall submit the following documents to the Ministry of Finance (Department of Foreign Financial Affairs):

* A letter requesting the Ministry of Finance to approve the opening of an L/C and to issue a Guarantee Letter, accompanied by the withdrawal application form and accompanying statements in the prescribed format (for JBIC projects, there is no need to submit the withdrawal application form and accompanying statements).

Within five working days from the date of receipt of complete and valid documents, based on the request letter and the provisions of the contract, the Ministry of Finance (Department of Foreign Financial Affairs) will issue a written approval to open an L/C to the Project Management Board and the servicing bank. Based on the Ministry's agreement, within two working days from the date of the Ministry's opinion, the servicing bank will proceed to request the overseas servicing bank to open an L/C and notify the financier to issue a Guarantee Letter (for JBIC projects) or jointly sign the withdrawal application form with the Project Management Board and send it to the financier (for WB and ADB projects).

If the financier accepts the request letter or withdrawal application form, they will issue a Guarantee Letter.

2.2. Payment by L/C without a Guarantee Letter (applicable to certain bilateral financing projects):

The Project Management Board shall submit the following documents to the Ministry of Finance (Department of Foreign Financial Affairs):

- A letter requesting the Ministry of Finance to approve the opening of an L/C.

Within five working days from the date of receipt of complete and valid documents, the Ministry of Finance will issue a written approval to open an L/C to the Project Management Board and the servicing bank.

3. Withdrawal process under the Reimbursement procedure or Retroactive procedure:

Reimbursement payment is a form where the financier finances the expenditures of the project that have already been incurred and paid by the Borrower using budget funds or self-funds. This form is typically applied in cases of small procurement payments or certain construction items.

Retroactive payment is a form where the financier finances the expenditures of the project that have already been incurred and paid by the Borrower using budget funds or self-funds before the loan agreement becomes effective. This form is only applicable when agreed upon by the financier during project preparation and included in the loan agreement.

To withdraw funds under the reimbursement (or retroactive) procedure, the Project Management Board shall submit the following documents to the Ministry of Finance (Department of Foreign Financial Affairs):

Documents to be submitted each time a withdrawal is requested:

* A letter requesting withdrawal and the withdrawal application form and accompanying statements in the prescribed format. The withdrawal application form must include the name and account number of the beneficiary unit that has prepaid the reimbursement amount;

* Payment vouchers confirmed by the Expenditure Control Agency in accordance with current regulations and other supporting documents proving the amount and source of funds paid to the contractor;

* In special cases, the Ministry of Finance may request additional explanatory documents from the Project Management Board.

Within five working days from the date of receipt of complete and valid documents, the Ministry of Finance (Department of Foreign Financial Affairs) will review and sign the withdrawal application form to send to the financier.

For projects financed by the World Bank (WB) and the Asian Development Bank (ADB), within five working days from the date of receipt of complete and valid documents, the Ministry of Finance (Department of Foreign Financial Affairs) will issue a written opinion to the Project Management Board and the servicing bank. Within two working days from the date of the Ministry's opinion, the servicing bank and the Project Management Board will sign the withdrawal application form and send it to the financier.

If the financier accepts the request, they will return the funds already paid.

For withdrawals of reimbursement for amounts previously paid by the state budget (or from other sources with a budget origin), the withdrawn funds must be deposited into the state budget where the advance was made.

For withdrawals of reimbursement for amounts previously paid by the project owner using self-funds (or credit or other raised funds not originating from the budget), the project owner may use the withdrawn funds in accordance with current financial management regulations.

4. Withdrawal process under the Special Account/Suspense Account procedure:

4.1. Special Account/Advance Account is a form where the financier provides an advance to the borrower for deposit into the Special Account/Advance Account, allowing the borrower to facilitate small payments, reduce the number of requests for disbursements from the financier, and accelerate payment speeds for project activities. This form is typically applied in cases of paying invoices according to progress, purchasing small equipment, project management board operating costs, etc.

The limit of the Special Account/Advance Account depends on the expenditure needs of the project and is determined in the loan agreement or the project's disbursement letter.

a. First withdrawal to the Special Account/Advance Account:

To make the first withdrawal to the Special Account/Advance Account, based on the account limit stipulated in the loan agreement and the projected future expenditures, the Project Management Board shall submit the following documents to the Ministry of Finance (Department of Foreign Financial Affairs):

* Request letter for withdrawal, withdrawal form, and accompanying bank statements according to the prescribed format.

Within five working days from the date of receipt of complete and valid documents, the Ministry of Finance (Department of Foreign Financial Affairs) will examine and sign the withdrawal form to be sent to the financier based on international agreements signed.

For projects funded by the World Bank (WB) and the Asian Development Bank (ADB), within five working days from the date of receipt of complete and valid documents, the Ministry of Finance (Department of Foreign Financial Affairs) will issue a written opinion to the Project Management Board and the servicing bank. Within two working days from the issuance of the Ministry of Finance's opinion, the servicing bank and the Project Management Board will sign the withdrawal form to be sent to the financier.

The financier will review and approve the transfer of funds into the Special Account/Advance Account.

b. Expenditure process from the Special Account/Advance Account:

- Post-payment audit process:

When there is a request for payment to the contractor/supplier/advisor, after completing acceptance, quantity verification, documentation, and approval for payment according to current regulations, and calculating the amount payable from ODA funds at the specified rate in the project documents, the Project Management Board requests the servicing bank to withdraw funds from the Special Account/Advance Account to pay the beneficiary.

Within five working days after withdrawing funds from the Special Account/Advance Account for payment, the Project Management Board sends the payment documentation according to current regulations to the Audit Office for post-payment audit. Within five working days, based on the results of reviewing the payment documentation, the Audit Office confirms the completed quantities sufficient for payment on the invoice or statement (simultaneously paying the counterpart fund, if applicable).

In cases of one-time payments or final payments under contracts, the Project Management Board sends the payment documentation according to current regulations to the Audit Office to request pre-audit and confirmation that the documentation meets the conditions for payment. Within five working days, the Audit Office reviews the documentation, confirms the completed quantities sufficient for payment (simultaneously paying the counterpart fund, if applicable). Based on the Audit Office's confirmation, the Project Management Board processes with the servicing bank to make payments from the Special Account/Advance Account to the contractor.

An invoice with the Audit Office's confirmation is one of the bases for the Project Management Board to process additional withdrawals to the Special Account/Advance Account in the future.

- Pre-payment audit process:

For multi-level managed projects (central and local levels) or complex projects due to their nature, the pre-payment audit process will be applied for expenditures from the Special Account/Advance Account as follows:

Under this process, the servicing bank only disburses funds from the special account/advance account when payment requests are accompanied by invoices confirmed by the Audit Office as meeting the conditions for payment.

* When there is a request for payment to the contractor/supplier/advisor, etc., the Project Management Board (central/local) sends the payment documentation according to current regulations to the Audit Office. Within five working days, the Audit Office conducts the review of the documentation, confirming the foreign funds sufficient for payment (and simultaneously paying the counterpart fund, if applicable).

For multi-level managed projects:

* To withdraw funds from the Special Account/Advance Account, the local Project Management Board sends the payment request along with the Audit Office's confirmation to the central Project Management Board.

* Based on the request of the local Project Management Board, the central Project Management Board sends the payment request along with the Audit Office's confirmation to the servicing bank to disburse funds from the Special Account/Advance Account to the beneficiary.

* For projects with a second-level advance account at the local level, the local Project Management Board sends the payment request along with the Audit Office's confirmation to the servicing bank to disburse funds from the second-level advance account to the beneficiary.

For single-level managed projects:

* The Project Management Board sends the payment request along with the Audit Office's confirmation to the servicing bank to disburse funds from the Special Account/Advance Account to the beneficiary.

c. Process for additional withdrawal to the Special Account/Advance Account:

To make additional withdrawals to the Special Account/Advance Account, the Project Management Board must submit the following documents to the Ministry of Finance (Department of Foreign Financial Affairs):

* Request letter for additional withdrawal to the Special Account/Advance Account, withdrawal form, and accompanying bank statements according to the prescribed format;

* A statement of expenditures prepared by the Project Management Board clearly showing the amounts already spent from the Special Account/Advance Account, the date of the Audit Office's confirmation regarding the expenditures, and copies of the invoices for payment with the Audit Office's confirmation.

* Bank statement of the special account provided by the servicing bank.

* The promissory note signed between the project sponsor and the agency authorized by the Ministry of Finance to manage the loan rescheduling for the amounts withdrawn to the special account (in the case of the project receiving rescheduled loans);

Within five working days from the date of receipt of complete and valid documents, the Ministry of Finance (Department of Foreign Finance) will examine and sign the withdrawal request sent to the financier.

For projects funded by the World Bank (WB) and the Asian Development Bank (ADB), within five working days, the Ministry of Finance (Department of Foreign Finance) will provide comments to the Project Management Board and the servicing bank. Within two working days from the receipt of the Ministry of Finance's comments, the servicing bank and the Project Management Board will send the documents to the financier.

The financier will review and approve the transfer of additional funds into the Special Account/Advance Payment Account.

4.2. Withdrawal and payment through the Special Account for JBIC loans:

a. Opening the Special Account and the first withdrawal:

- Upon the authorization of the Ministry of Finance (Department of Foreign Finance), the Vietnam Commercial Bank opens a Special Account in Japanese Yen, and the Interest Account of the Special Account at the Tokyo-Mitsubishi Bank with the Ministry of Finance (Department of Foreign Finance) as the account holder.

- Domestically, the Ministry of Finance (Department of Foreign Finance) requests the Vietnam Commercial Bank to open dedicated accounts corresponding to the Special Account and the Interest Account of the Special Account, with the Ministry of Finance (Department of Foreign Finance) as the account holder, to monitor and record the amount withdrawn and the interest accrued on the Special Account as well as future debt repayment.

- The Ministry of Finance (Department of Foreign Finance) signs the First Withdrawal Request Form to be sent to the financier with a value according to the agreement, but not exceeding 50% of the agreement value. The first withdrawal does not require accompanying documents.

b. Payment from the Special Account:

- For payments made in Vietnamese Dong:

* The project sponsor/Project Management Board collects supporting documents to submit to the Expenditure Control Agency to implement expenditure control according to current regulations.

* After receiving confirmation from the Expenditure Control Agency, the project sponsor/Project Management Board prepares and submits a file to the Ministry of Finance (Department of Foreign Finance) including: the contractor's payment request form with the sponsor's confirmation, a summary of the withdrawn funds (Accumulated Payment Claimed and Paid), invoices, payment vouchers with the Expenditure Control Agency's confirmation. In cases of advance payment, a provisional advance guarantee issued by a bank accepted by the sponsor must also be provided.

* Within seven days from the receipt of complete and valid documents, the Ministry of Finance or the agency authorized by the Ministry of Finance sends a letter requesting the Vietnam Commercial Bank to transfer payment according to the sponsor's request. Within three days after receiving the request letter, the Vietnam Commercial Bank will execute the transfer and then send the Ministry of Finance the Transfer Notification Forms along with the bank's transfer documents for the Ministry of Finance to process the supplementary withdrawal into the Special Account.

- For payments made in foreign currency to settle import Letters of Credit (L/C):

* The Ministry of Finance authorizes the Vietnam Commercial Bank to automatically deduct from the Special Account to settle import L/Cs according to the regulations governing L/C payment methods.

* After settlement, the Vietnam Commercial Bank copies the import documents along with confirmation of payment and sends them to the Ministry of Finance (Department of Foreign Finance) to process the supplementary withdrawal into the Special Account.

c. Supplementary withdrawal into the Special Account:

The Ministry of Finance compiles the payment documents from the Vietnam Commercial Bank, including copies of the payment request forms for expenditures in Vietnamese Dong, or sets of import documents with confirmation of payment from the Vietnam Commercial Bank, and sends the supplementary withdrawal request to JBIC.

If the value of the first withdrawal is 50% of the agreement value, subsequent supplementary withdrawals will only be allowed up to 50% of the requested value. If the value of the first withdrawal is less than 50% of the agreement value, the Ministry of Finance (Department of Foreign Finance) can withdraw 100% of the requested value until the total withdrawn amount reaches 50% of the agreement value. Subsequent supplementary withdrawals will only be allowed up to 50% of the requested withdrawal value to ensure that when disbursing 100% of the agreement value, the financier has collected all necessary withdrawal documents.

5. Withdrawal procedures for credit projects or credit components:

Credit projects or credit components of projects shall be carried out as follows: based on the loan continuation requirements and expenditures for project contents, the financial institution receiving the loan rescheduling prepares withdrawal documents from the financier to continue lending or spending on project activities according to the loan agreement, project agreement (if any), and current regulations on credit, bidding, procurement, etc.…

The financial institution receiving the loan rescheduling needs to send the following documents to the Ministry of Finance:

- A letter requesting withdrawal,

- The withdrawal form accompanied by a statement of previous rescheduled loans according to the financier's (the financial institution receiving the loan rescheduling bears responsibility for the legality, honesty, and accuracy of the continued loans).

- Documents proving the legality and validity of expenditures for project activities.

Within five working days from the date of receipt of complete and valid documents, the Ministry of Finance (Department of Foreign Finance) will examine and sign the withdrawal request sent to the financier.

For projects funded by the World Bank (WB) and the Asian Development Bank (ADB), within five working days, the Ministry of Finance (Department of Foreign Finance) provides comments to the financial institution receiving the loan rescheduling and the servicing bank. Within two working days from the receipt of the Ministry of Finance's comments, the servicing bank and the financial institution receiving the loan rescheduling sign the withdrawal form to be sent to the financier.

1. Monthly, the servicing bank is responsible for sending a copy of the Special Account/Advance Payment Account statement to the Ministry of Finance (Department of Foreign Finance, Project Management Board).

2. Monthly, the Project Management Board is responsible for preparing a copy of the funds disbursed by the financier according to each withdrawal method and submitting it to the Ministry of Finance (Department of Foreign Finance) and the Expenditure Control Agency.

3. The investors of projects and programs using ODA funds must prepare quarterly/yearly reports on the implementation of investment capital plans or final accounts for administrative and public service expenditures, and reports on the final accounts of completed works. Accounting reports and final account reports must be carried out in accordance with the current regulations of the Ministry of Finance.

3. Depending on the requirements of each sponsor, annually, projects and programs using ODA funds must be audited by an independent auditing company approved by the Ministry of Finance. The audit outline, decision on selecting the auditing company, and the audit contract must comply with the sponsor'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 sponsored by the World Bank and the Asian Development Bank, the audit report must also be sent to the State Bank (Department of International Relations)).

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