Circular No. 97/2000/TT-BTC guiding the financial regime for grassroots people's credit funds and regional people's credit funds.

CIRCULAR

Guidelines for Financial Regime for Basic People's Credit Funds and Regional People's Credit Funds

Implementing Decree No. 166/1999/NĐ-CP dated November 19, 1999 of the Government on the financial regime for credit organizations, based on the scale and nature of operations of people's credit funds, the Ministry of Finance provides guidelines for the implementation of the financial regime for people's credit funds as follows:

 

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PART I

GENERAL PROVISIONS

Theapplicability of this Circular is to basic people's credit funds and regionalpeople's credit funds (collectively referred to as people's credit funds) established, organized, and operated in accordance with the Law on Credit Organizations, the Law on Cooperatives, and other relevant legal documents. Thefinancial activities of people's credit funds shall be carried out in accordancewith Decree No. 166/1999/NĐ-CP dated November 19, 1999 of the Government on thefinancial regime for credit organizations, the specific guidance provided in thisCircular, and other legal documents on financial management.

2 -People'scredit funds must publicly disclose their finances to state management agencies,shareholders, and economic entities and individuals related to the people's creditfunds.

3 -People'scredit funds are autonomous in finance, bear responsibility for their businessactivities, and fulfill their obligations and commitments in accordance with thelaw.

TheChairman of the Board of Directors and the Director of people's credit funds areliable under the law, before state management agencies, and the GeneralAssembly of Members for the implementation of the financial regime of people'scredit funds.

4 - SPECIFICPROVISIONS.

PART II

I/Management and Use of Capital and Assets

1-Management of Capital

1.1-Capital for operation of people's credit funds includes:

a)Charter capital is the amount of capital contributed by members recorded in thecharter of the people's credit fund.

b)Capital raised

c)Borrowed capital

d)Service capital entrusted by domestic and foreign organizations andindividuals

đ)Supplementary reserve funds for charter capital, development funds forbusiness operations, financial reserve funds, unemployment assistance funds,awards funds, welfare funds.

e)Undistributed profits.

g)Other types of capital.

1.2-During the course of operations, people's credit funds must maintain chartermember capital at no less than the statutory minimum capital level set by theGovernment for people's credit funds.

1.3-Self-owned capital of people's credit funds as prescribed by the Governorof the State Bank.

2-Use of Capital of People's Credit Funds: People's credit funds may use theiroperating capital for:

Investingin purchasing fixed assets serving operations according to the principle that theremaining value of fixed assets does not exceed 50% of the self-owned capital ofthe fund. People's credit funds must comply fully with state regulations oninvestment management and construction.

Lendingto members in accordance with the law.

Contributingcapital, purchasing shares. People's credit funds may use charter capital andsupplementary reserve funds for charter capital to contribute to the CentralPeople's Credit Fund in accordance with the law.

Participatingin capital adjustment within the system.

Usingfor other purposes as prescribed by law.

3-People's credit funds are responsible for monitoring all current assets andcapital, implementing accounting entries, opening and recording ledgers inaccordance with current accounting and statistical regulations; accurately andtimely reflecting the situation of capital and asset usage, loan amounts, andreceivables during business operations.

4-On a regular basis and at the end of the fiscal year, people's credit fundsmust conduct a comprehensive inventory of all current assets and capital. Accurately determine surplus and shortage of assets, debt status, overdue debts, difficult-to-collect debts, identify causes and responsibilities for handling. In cases of loss or damage to assets, the cause and responsibility of each department and individual must be clearly identified.

EnsuringSafety and Development of Capital: People's credit funds implement the followingmeasures to ensure capital safety:

5- a)Complying strictly with the legal regulations on the management and use ofcapital and assets.

b)Maintaining adequate safety ratios in operations as guided by the State Bank.

c)Purchasing insurance for assets as prescribed by law.

d)Participating in deposit insurance organizations or systemic safety guaranteeorganizations as prescribed by law.

đ)Being allowed to account for risk reserve expenses and use risk reserves forhandling risks in operations as prescribed by the Governor of the State Bank.

Allproperty losses of people's credit funds must be documented to determine thedegree, cause, responsibility, and handling method according to the followingprinciples:

6- Ifproperty losses are due to subjective reasons of a collective or individual, theparty causing the loss must compensate.

Insuredassets are handled according to the insurance contract.

Usingthe risk reserve extracted from expenses to offset losses as stipulated in Point5, Section I, Chapter II of this Circular.

Thevalue of the loss after recovery and offsetting with the above sources, ifshortfall, is covered by the financial reserve fund of the people's credit fund.If the financial reserve fund is insufficient to cover the shortfall, thedifference is accounted for as an expense in the period.

7-Sale and Liquidation of Assets.

People'scredit funds have the right to sell or liquidate unused, obsolete, low-quality,or damaged assets that cannot be restored to recover capital for businesspurposes.

Whenselling or liquidating assets, people's credit funds must establish a committee toassess the technical condition and appraise the value of the assets.

Thedifference between the proceeds from selling or liquidating assets and theremaining value and sale costs is accounted for in the operating results of thepeople's credit fund.

8-For assets leased, pledged, or mortgaged by people's credit funds, the fundsshall manage, preserve, or use them in accordance with the law and agreementswith customers.

II/Management of Revenue and Expenses

1-Revenue of people's credit funds consists of actual receipts from businessoperations and other activities as stipulated in Article 16 of Decree No. 166/1999/NĐ-CP dated November 19, 1999 of the Government, including the following revenues:

Interestfrom lending to customers.

Interestfrom deposits.

Revenuefrom contributing capital and purchasing shares.

Withdrawal of capital, purchase of shares.

Income from commission services of organizations and individuals both withinand outside the country.

Income from pawnbroking services (if any).

Other income, including income from the sale and liquidation of assets.

The People's Credit Fund shall be responsible for fully and promptly recordingincome from services provided when customers make payments. Strictly prohibitkeeping income off the books or failing to record it as revenue.

2- Management of expenses: The expenses of the People's Credit Fund are theactual expenditures during the period for business operations and other activitiesas follows:

2.1 - Expenses for business operations include:

a) Interest expense on deposits.

b) Interest expense on loans.

c) Interest expense on entrusted funds from organizations and individualsboth within and outside the country.

d) Other expenses for business operations.

2.2- Administrative expenses of the People's Credit Fund.

a) Expenses for staff working at the People's Credit Fund.

Wages and allowances with wage characteristics for staff working at thePeople's Credit Fund.

Annually, the Board of Directors of the People's Credit Fund bases on thereolutions of the General Meeting of Members to consider and decide on wages,allowances, and remuneration for staff based on the business results of theFund.

If the People's Credit Fund has implemented labor contracts or collectiveagreements, then wages, salaries, and allowances are determined according tolabor contracts or collective agreements.

If the People's Credit Fund has not implemented labor contracts orcollective agreements, then wages and salaries paid to staff working in thePeople's Credit Fund are based on the average income level of the industry asprescribed by the local People's Committee.

Social insurance, health insurance, and trade union fees for staff directlyworking at the People's Credit Fund that the employer must contribute accordingto current state regulations.

Labor protection costs for those who need protective equipment while working.

Lunch expenses for workers during work shifts as prescribed by the People'sCredit Fund, with each person's expenses not exceeding the minimum wage set bythe state for civil servants.

b) Asset-related expenses.

Depreciation expenses for fixed assets used in business operations accordingto the management, usage, and depreciation rules established by the Ministry ofFinance for enterprises.

Repair expenses for fixed assets aimed at restoring their capacity, whichare recorded directly or allocated gradually into annual operating expenses. Forunique fixed assets where repair expenses occur across periods and years, if thePeople's Credit Fund wishes to pre-record repair expenses into operatingexpenses, they must prepare a plan for pre-recording repair expenses and reportit to the Ministry of Finance for review and approval. After receiving writtenapproval from the Ministry of Finance, the People's Credit Fund must inform thedirectly managing tax authority. The People's Credit Fund must settle actualrepair expenses against pre-recorded repair expenses; if actual repair expensesexceed pre-recorded amounts, the difference is recorded directly or allocatedgradually into expenses for the period; if actual repair expenses are less thanpre-recorded amounts, the difference must be recorded into income for theperiod.

Rental expenses for assets recorded into operating expenses based on actualrental payments made annually according to lease contracts. In cases where rentis paid in advance for multiple years, rental expenses are allocated graduallyinto operating expenses based on the number of years the asset is used.

Insurance expenses for assets.

Expenses for the sale and liquidation of fixed assets (including residualvalue of fixed assets when sold or liquidated).

c) Tax, fee, and land rental payment expenses related to business operations(excluding corporate income tax), including: business license tax, land usetax or land rental fees, natural resource tax, bridge tolls, airport fees, andother taxes and fees.

d) External service expenses:

These include transportation, electricity, water, telephone, materials, printeddocuments, office supplies, labor tools, fire prevention and extinguishing, andother service expenses.

All such expenses must have valid receipts or invoices as prescribed by theMinistry of Finance.

e) Other expenses

Training expenses for staff working at the People's Credit Fund, includingorganizing training classes at the People's Credit Fund and sending staff fortraining at designated schools under state regulations.

Expenses for Party and mass organizations at the People's Credit Fund,which are taken from the organization's budget; if the organization's budget isinsufficient, the shortfall is recorded as an expense of the Fund.

Loss expenses remaining after compensation from sources as stipulated inpoint 6, section I, chapter II of this Circular.

Warehouse operation expenses.

Office security expenses.

Advertising, marketing, promotional, reception, ceremonial, transaction,conference, and other expenses that must have invoices or receipts as prescribedby the Ministry of Finance, linked to business results. The expenditure levelshall not exceed 7% of total expenses in the first two years for newly establishedPeople's Credit Funds, thereafter not exceeding 5% of total expenses.

2.3- Expenses to ensure safety for the operations of the People's Credit Fund.

a) Provision expenses in the operations of the People's Credit Fund as stipulatedin point 5, section I, chapter II of this Circular.

b) Expenses for participating in deposit insurance or organizing system safetyas prescribed by law.

3- The People's Credit Fund shall not include the following items in expenses:

Penalties for violations of laws such as traffic laws, tax laws, environmentallaws, labor laws, reporting and statistical financial accounting systems, andother laws.

Basic construction investment expenses, expenses for purchasing tangibleand intangible fixed assets, and expenses for supporting organizations andindividuals.

Travel expenses exceeding the state-prescribed standard.

All items covered by other funding sources such as expenses for public services that have been sponsored by the State Budget, superior agencies, or other organizations; interest payments on borrowed capital for basic construction projects during the period when the works are not yet completed, with such interest being recorded as part of the basic construction project costs.

Other unreasonable expenses.

III/ Profit Distribution and Establishment of Reserves.

1 - Profit Distribution.

The profits of the People's Credit Fund, after paying corporate income tax as prescribed by law, shall be distributed as follows:

Establishing a reserve fund to supplement the registered capital at 5%, with the maximum level of this fund not exceeding the amount of the registered capital of the People's Credit Fund.

Covering losses from previous years and fines for violations of the law which are not included in pre-tax profit.

The remaining profit, considered as 100%, shall be further distributed as follows:

Establishing a financial reserve fund at 10%, with the balance of this fund not exceeding 25% of the registered capital of the People's Credit Fund.

Establishing a minimum development investment fund at 30%.

Establishing a fund for unemployment assistance for the number of staff working at the Fund at 5%, with the balance of this fund not exceeding six months' salary of the People's Credit Fund in the year.

Establishing two funds for rewards and welfare, the annual contribution levels for these two funds are proposed by the Management Board and approved by the General Meeting of Members.

Distributing dividends to members based on their share contributions. The dividend rate for each member is determined by the Management Board of the People's Credit Fund, subject to approval by the General Meeting of Members annually but not exceeding the average loan interest rate of the People's Credit Fund for the year.

Any remaining amount (if any) shall be used to supplement the development investment fund.

2 - Principles for Using Reserves.

a) The reserve fund for supplementing the registered capital is used to increase the registered capital.

b) The development investment fund is used to expand business operations and modernize equipment and working conditions of the People's Credit Fund.

Based on investment needs and capabilities of the People's Credit Fund, the Management Board decides on the form and methods of investment according to principles of efficiency, safety, and capital growth.

c) The financial reserve fund is used to cover the remaining losses and damages to assets occurring during business operations after compensating with insurance payments and using risk reserves already deducted from expenses.

d) The unemployment assistance reserve fund is used to provide assistance to employees who have worked at the People's Credit Fund for at least one year and temporarily lose their jobs as stipulated by law; training costs for employees due to changes in technology or new job assignments; vocational training for female employees of the People's Credit Fund and upgrading skills for staff working in the People's Credit Fund. The level of assistance for specific cases is decided by the Management Board of the People's Credit Fund.

e) The reward fund is used for:

Year-end or regular bonuses for staff of the People's Credit Fund. The bonus level is decided by the Management Board based on the proposal of the director and the union (if any) of the Fund, considering labor productivity and work achievements of each staff member.

Special bonuses for individuals or groups within the People's Credit Fund who have innovative ideas improving techniques or procedures that bring benefits to business operations. The bonus level is decided by the Management Board of the People's Credit Fund.

Bonuses for members of the Fund; external units or individuals who have successfully fulfilled contractual conditions and contributed effectively to the business operations of the People's Credit Fund. The bonus level is decided by the Management Board of the People's Credit Fund.

f) The welfare fund is used for:

Investing in building or repairing welfare facilities of the People's Credit Fund.

Supporting sports, cultural, and public welfare activities for the collective of staff and members of the People's Credit Fund.

Contributing to social welfare funds.

Providing regular and emergency assistance to staff and members of the People's Credit Fund.

Other welfare activities.

The director of the People's Credit Fund coordinates with the Union Executive Committee (if any) to manage and utilize this fund.

IV/ Accounting, Statistics, Auditing, Reporting, and Financial Transparency.

1- The People's Credit Fund implements accounting and statistical systems as prescribed by law, maintaining complete original vouchers, updating accounting records, and accurately, timely, truthfully, and objectively reflecting all financial activities.

2- The fiscal year of the People's Credit Fund begins on January 1st and ends on December 31st of the Gregorian calendar.

3- The People's Credit Fund completes financial settlements and complies fully with regulations on financial reporting, preparing and submitting reports to state financial agencies, statistical agencies, tax authorities, and the State Bank as prescribed by laws on accounting and statistics and this Circular.

3.1- Content of Financial Reports.

Balance sheet and summary of assets of the People's Credit Fund.

Business results report and implementation of state budget revenue and expenditure.

3.2- The Chairman of the Management Board and the Director of the People's Credit Fund are responsible for the accuracy and truthfulness of these reports.

3.3- Deadline for submission of reports.

Quarterly reports must be submitted no later than 45 days after the end of the quarter.

Annual reports must be submitted no later than 60 days after the end of the fiscal year.

3.4- Recipients of reports.

People's Credit Funds submit financial reports to the Department of Finance and Price Control, statistical agencies, tax authorities directly managing them, and the State Bank.

4 - Auditing Work.

The People's Credit Fund organizes internal auditing in accordance with the Law on Credit Organizations and the scope and scale of its operations to audit its own financial reports.

5 - Financial Transparency for People's Credit Funds.

5 - Financial transparency for People's Credit Funds.

At the end of the fiscal year, in addition to preparing and submitting financial reports to state management agencies as stipulated in point 3 above, People's Credit Funds shall implement financial transparency for local authorities and shareholders in the Fund.

The content of financial transparency includes the following indicators:

Share capital situation, funds, raised capital, liabilities...

Capital utilization situation: Fixed assets, loan balances, debt collection situation...

Income and expense situation: Revenue items, business operation expenses, business results, state budget revenue collection situation; profits, planned profit distribution, establishment of various funds, and dividend distribution to shareholders.

Labor situation and income of staff within the People's Credit Fund, implementation of measures on thrift, waste prevention, and anti-corruption within the People's Credit Fund.

The deadline for financial transparency is 120 days from the end of the fiscal year.

V. Financial inspection, audit, and handling of violations against People's Credit Funds.

1-People's Credit Funds are responsible for the accuracy and honesty of their financial reports; Departments of Finance and Prices are responsible for inspecting compliance with financial regulations of People's Credit Funds. Financial inspections are conducted in the following forms:

Regular or surprise financial inspections.

Financial inspections according to specific topics at the request of financialmanagement work.

In cases where deemed necessary, the Ministry of Finance will conduct inspections on compliance with financial regulations of People's Credit Funds at the request of state financial management work.

2. Handling of violations.

People's Credit Funds violating state financial regulations will be subject to penalties as prescribed by law.

In cases where People's Credit Funds fail to comply with or fully comply with the reporting financial regulations stipulated in point 3, section IV, chapter II of this Circular, they will be subject to penalties as prescribed in Decree No. 49/1999/NĐ-CP dated July 8, 1999 of the Government on administrative penalties in the accounting sector.

 CHAPTER III

IMPLEMENTATION

This Circular takes effect 15 days from the date of signature; all previous regulations on financial management of People's Credit Funds that conflict with this Circular are abolished.

Any difficulties encountered during implementation should be reported to the Ministry of Finance for study, consideration, and resolution./.