CIRCULAR No CIRCULAR No.30-TC/VT OF JUNE 12, 1997 PROVIDING GUIDANCE ON THE STATE REGIME FOR FINANCIAL MANAGEMENT OF NON-REFUNDABLE AID In implementing the Law on State Budget adopted by the IX th National Assembly of the Socialist Republic of Vietnam at its Ninth Session on March 20, 1996, and Decree No.87-CP of December 19, 1996, of the Government which determines the delegation of authority in the management, elaboration, execution and accounting of the State Budget, the Ministry of Finance hereby provides the following State regime for the financial management of the non-refundable aid. I. GENERAL PRINCIPLES: 1. Non-refundable aid is a source of revenue for the State Budget and shall be accounted and managed in accordance with the Law on State Budget. 2. Non-refundable aid shall be used in the form of allocation or on-lending from the State Budget. 3. All non-refundable aid in cash or kind received and used by the Vietnamese side shall be processed through aid-certifying procedure. The certificate for the aid in cash or kind shall be used as basis to fill the formalities for acquiring the aid in cash and kind and accounting it into the State Budget at all levels. 4. The Ministry of Finance shall maintain a uniform State financial management over non-refundable aid, from giving financial consultation on determining the use of the aid to appraising projects, allocating the aid to projects, studying and recommending mechanisms for financial management, certifying the aid and accounting it into the State Budget, providing guidance for and control over the implementation of the financial and accounting regimes of the projects; to providing guidance for and control over executing units in their settlement of the property, materials and capital of the projects after their completion. + The financial and accounting units of the Ministries and branches shall assist their ministerial and branch heads in the financial management of all the non-refundable aid programs and projects received and executed by the Ministries and branches. + The Financial and Pricing Services of the provinces and cities directly under the Central Government shall assist the provincial and municipal People�s Committees in the financial management of all the non-refundable aid programs and projects received and executed by the units under their jurisdiction. 5. The Heads of the Ministries and branches, the Presidents of the People�s Committees of the provinces and cities, the Presidents of the unions, associations and people�s organizations shall guide and control the financial management at the units under their jurisdiction which are executing aid programs and projects. 6. The Directors of the programs and projects and the Heads of the units which are directly utilizing the non-refundable aid are fully answerable before law that the implementation of the programs and projects conform with their prescribed purposes, target beneficiaries and other commitments. They shall strictly observe the existing financial regimes, the Ordinance on Accounting and Statistics, the Regulation for Accounting Organization and Performance and the auditing regime of the State. II. CONCRETE STIPULATIONS: A. FORMULATING AND INCORPORATING BUDGET PROPOSALS: Each year, on the basis of the Circular providing guidance for the formulation of the State budget issued by the Ministry of Finance; the written commitments or agreements on and plans for the deployment of the programs, or the projects or announcement of the parent agencies on allocations of aid; and the execution of the projects within the year, the project owners shall make proposals on State budget revenues and expenditures of the non-refundable aid and their counterpart funds (if any) and send them together with the budget proposals of their units to the parent agencies of the projects and the financial agencies of the same level: - The proposals for ministerial and branch projects shall be sent to the financial and accounting bureaus of the Ministries and branches. - The provincial and municipal projects shall be sent to the provincial and municipal Financial and Pricing Services. The Ministries and branches at the Central Level and the provincial and municipal Financial and Pricing Services shall incorporate the State budget revenue and expenditure proposals for the non-refundable aid and the need for counterpart fund (if any) into the annual budget proposal to be submitted to the Ministry of Finance (AidRecep) for inclusion in the State Budget proposal to be submitted to the National Assembly for approval. The State budget revenue and expenditure proposal on non-refundable aid is formulated in line with the appendix form of this Circular. With regard to the proposal for counterpart funds (including expenditures on project formulation, reception, transport and storage of the aid goods and equipment, spending for project management, etc.), regardless of the kind of capital involved (for capital construction or public service, etc.), it must conform with the related commitments or treaties or agreements and with the progress of each project. With regard to projects in the field of production and business, the project owners must use their self-generated capital or take loans to meet the need for counterpart funds. B. RECEPTION AND MANAGEMENT: 1. Certifying the aid: 1.1. The units required of an aid certificate: All the units and project owners that receive goods and money as aid from overseas sources (including those to be spent in the form of State budget allocations or on-lending). 1.2. Scope of non-refundable aid to be certified: + Goods and equipment that the aid-granting party transfers to units inside the country through importation under programs and projects. + Goods and equipment that the aid-granting party orders inside the country and transfers to units under signed programs and projects. + Goods and equipment which are included in the list of the aid project, brought into the country by foreign experts and directly operated by the foreign party, but which are committed to be transferred to the local units after the conclusion of the aid program or project. + Goods and equipment of humanitarian aid unilaterally sent by a foreign party to a domestic unit. + Foreign exchange or Vietnamese currency given by the aiding party to units within the country to be directly spent for the aid program or project (including the financial assistance for operating and administrative expenses of the project management offices as committed in the documents of the projects); and the aid in cash permitted outside the project prescriptions. 1.3. Timing and location of certification: On notification of aid shipment and money (and after receiving the shipment ordered within the country), the concerned units shall report to the nearest of the following agencies to process the certification of aid: + The Ministry of Finance (AidRecep) at No 4 Phan Huy Chu street, Hanoi. + The Representative of the AidRecep at No 48 Pasteur street, Danang City. + The Representative of the AidRecep at No 138 Nguyen Thi Minh Khai street, District 3, Ho Chi Minh City. 1.4. Requirements of the aid certificate: The aid certificate shall be made into five copies: The recipient unit shall keep two copies to facilitate the reception of the aid goods or money and accounting; and AidRecep shall keep three copies for its own keep and circulation to concerned management offices. In case the aid is a motor vehicle or motor cycle, the recipient unit shall make another copy of the aid certificate to process traffic registration at the Office of Public Works and Transportation. The form of aid certificate is attached to this Circular. The recipient unit shall photocopy this form to facilitate their aid certification. 1.5. Procedure for aid certification: 1.5.1. Direct certification of aid: It is the form in which the aid-recipient and utilizing unit directly processes the certification at one of the locations indicated in Item 1.2. It is applied to the following cases: - The aid-recipient units are attached to the Ministries or branches at the central level. - The aid-recipient units are local units. 1.5.2. Indirect certification of aid: It is the form in which the aid certification is administered by the Financial and Pricing Services of provinces and cities. This form of certification is applied when the aid is delivered directly and separately by the donor to units under the direct control of localities. The procedure is as follows: - Upon reception of this separate aid delivery, the recipient unit shall immediately make a written notification to the Financial and Pricing Service of the province or city (its aid monitor and management unit) about the aid-giving unit, the name of the recipient unit and the purpose of the utilization of each of the aid items so that the latter may monitor and manage it. - The Financial and Pricing Service shall gather all papers on this separate aid delivery, control and examine their legality and file a detail account according to the form attached to this Circular. Subsequently, once every three months, the Financial and Pricing Service (its aid monitor and management unit) shall make a common certificate for the aid money (or goods) and attach it to the detailed account and send it to one of the (nearest) aid-certifying office of AidRecep for certification. - On the basis of the completed aid certificates, the Financial and Pricing Services of provinces and cities shall account the aid into the local budgets as provided for in this Circular. 2. The required papers for aid certification: 2.1. For aid goods: - The document of approval of the program or project issued by the competent authority. - The documents of the program or project, Treaty, Protocol or agreement officially signed with the foreign party which indicates clearly the goods items, amounts, categories and value of the approved goods. - The documents of approval of the commercial contracts as provided for by existing regulations, along with the invoice and insurance certificate. - The bill of lading or airway bill. - The packing list. 2.2. For aid money: - The documents of approval of the program or project issued by the competent authority. - The documents of the program or project, Treaty, Protocol or agreement officially signed and attached with an appendix which indicates clearly the monetary items in foreign and domestic currencies associated with the corresponding items in the program or project. - The bank notification or notice of money transfer from the foreign party of the aid money, along with an explanatory note of the expenditure plan for the money sum. 2.3. Cases which require additional papers: - With regard to long-term national programs, there must be papers which are officially signed every year with detailed provisions on the items, volumes and categories of the said goods or the amount of the said money. - In cases the signed document does not specify clearly the list of goods, the recipient unit shall explain clearly in writing the quantity or weight and value of the aid goods and its relation with the total value of the project, and this explanation shall be endorsed by the parent agency. With regard to goods which are banned from import, there must be a written approval from the Prime Minister. - In cases there are changes in the list or categories of the aid goods, or changes in the expenditure listed under each item of the project, there must be a new written approval by the Prime Minister or his/her mandated agency. - In cases the aid goods or money (in foreign or Vietnamese currency) in the form of check or cash is sent unilaterally by the aid-giving party to a domestic unit and is not included in the approved list, the recipient party shall receive it only after securing a written approval by the competent agency as delegated in Decision No.80-CT of March 28, 1991, of the Chairman of the Council of Ministers (now the Prime Minister). In this case, the documents required for certification shall include: + The written certification or proposal of the aid giver. + The permit for reception of the aid issued by the above-said competent agency. + For goods, a bill of lading, a notification for goods reception and a packing list are required. - In case a unit receives the aid package on behalf of many units, it must have a list of goods to be distributed to each of the units and their written mandates. - In case the foreign party orders a delivery of aid within the country for the recipient unit, this unit must have the original copy of the receipt from the sales party which is issued by the Ministry of Finance. - In case the goods or equipment listed in the aid package is directly brought in by the foreign experts for use and a later transfer to the aid-recipient unit after the close of the program or project, the unit shall file a request to AidRecep (at specified addresses) declaring the actually received amount for certification. - In case the bill of lading, receipt and packing list are not readily available (due to a late arrival), the recipient unit must present a notice of the airport or delivery unit. Within 15 days, the unit must hand in all the missing documents as described above to AidRecep or the office which has issued it the aid certification. - In case the project concerns an on-lending, there must be a bond or contract for on-lending from the General Department of Investment and Development system or the mandated Commercial Bank. 2.4. Modification of the aid certification: - In case there is a discrepancy in the actually received amount and the certified amount of the aid, or a discrepancy of categories or prices... the recipient unit shall send the expertizing minute to the office which administered the aid certification for consideration and modification within no more than 30 days from the first certification. - In case the received aid goods do not have a value specified in a convertible currency to be used as a basis for exchange into the Vietnamese Dong, its value shall then be temporarily determined by AidRecep on the basis of the import price of the similar goods. Within 30 days from the certification of the aid, the recipient unit shall send the record of the re-determination of the value of the goods to the certifying office for modification of its aid certification. The Evaluation Council set up by the recipient unit shall comprise a representative of the financial-pricing body of the same level (or of the provincial or municipal Financial and Pricing Service if the recipient unit is under a district or commune body). 3. Accounting into the State Budget: 3.1. All non-refundable aids in cash or kind shall be fully accounted into the State Budget after completing certifying procedure. 3.2. For the financial resources of the aid project which are directly administered by the foreign party such as expenses for experts, training, study tours, surveys and overseas practice, the expenses made overseas which have no receipts to verify shall not be accounted into the State Budget. 3.3. The value which is accounted into the State Budget in terms of a foreign currency shall be converted into Vietnam Dong on the basis of the goods and money certified as aid. The exchange rate used for this conversion is the buying rate announced by the Bank for Foreign Trade at the time of the aid certification. As for the goods ordered within the country by the foreign party to be handed to the recipient unit, the accounted value is the value described in the sales receipt issued by the Ministry of Finance. 3.4. Time for accounting: The accounting into the State Budget of non-refundable aid packages shall be done right after the recipient unit completes its aid certification procedure. 3.5. Forms of accounting into the State Budget: 3.5.1. The projects of budget-sourced finance: 3.5.1.1. Allocation of capital source for capital construction The Ministry of Finance or provincial or municipal Financial and Pricing Service shall proceed with the accounting as follows: + Record as revenue into the Central State Budget (or Local State Budget): Chapter 160 A (or 160 B), Category 10, Section 08 (or 09), Item 073, Sub-Item 01 (or 02 or 03) for the aid for investment in capital construction. + Record as advanced expenditure for capital construction through the General Department of Investment and Development (or Department of Investment and Development). At the same time, send a copy of the detailed list of utilizing units and aid sources so that the General Department of Investment and Development (or Department of Investment and Development) can issue the aid to the units and maintain its management over the aid in accordance with the existing regulations. 3.5.1.2. Issuance of finance for public service activities: - In case a unit directly under a Ministry or a central-level branch receives and utilizes the aid: the Ministry of Finance shall make the accounting as follows: + Record as revenue into the Central State Budget: Chapter 160 A, Category 10, Section 08 (or 09), Item 073 (or 074, 075 or 076) and Sub-Item 01 (or 02 or 03) the value of the aid goods or money for the recipient unit. + Record as Central State Budget expenditure into the corresponding chapter, category, section, item and sub-item of the unit listed in the expenditures of the State Budget Table. At the same time, make copies of the Statement of approval of the expenditure plan and send them to the Department of Administrative Finance of the Ministry of Finance for management coordination. - In case a local unit receives and utilizes the aid: The provincial or municipal Financial and Pricing Service shall make the accounting according to the following procedure: + Record as revenue into the local State Budget: Chapter 160 B, Category 10, Section 08 (or 09), Item 073 (or 074, 075 or 076), Sub-Item 01 (or 02 or 03) the aid received by the unit. + Record as expenditure from the local State Budget into the corresponding chapter, category, section, item and sub-item of the unit listed in the expenditures of the State Budget. At the same time, make copies of the Statement of approval of the expenditure plan and send them to the concerned units for management coordination. - In case an aid package is not yet designated to any utilizing unit, the Ministry of Finance (AidRecep) is responsible for managing and completing the procedure for accounting it into the Central State Budget and, at the same time, determine the utilizing plan in strict accordance with the commitments and targets agreed upon with the donor and submit it to the competent authority for approval and subsequently distribute it to the utilizing units and complete the issuing procedures as stipulated above. 3.5.2. Projects of budget for on-lending: The Ministry of Finance (AidRecep on mandate of the Minister) shall sign a contract to mandate the General Department of Investment and Development or allow Commercial Banks to provide on-lending funds for enterprises designated for use of aid capital. The accounting procedure is as follows: + Record as revenue into the Central State Budget: Chapter 160 A, Category 10, Section 08 (or 09), Item 75, Sub-Item 01 (or 02 or 03) the aid for on-lending. + Record as expenditure from the State Budget: Chapter 160 A, Category 10, Section 03, Item 151 (or 152), corresponding sub-item. At the same time, notify the General Department of Investment and Development or the Commercial Banks for execution of the on-lending transaction, management and recover of the on-lent money for the State Budget. 4. Management and accounting: In the course of utilizing the aid, the units shall reflect promptly and fully all the aid sources in cash or goods they have received (both volume and value) into records and books as required by the Law on State Budget, the Ordinance on Accounting and Statistics an

Circular 30/TC-VT