CIRCULAR guide financial management mechanisms for poverty reduction projects in the mountainous northern province _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ the Base: loan agreement No. 3572 between Vietnam SOCIALIST REPUBLIC and the International Development Association (IDA) for the project "reduction of the mountains of the North" signed on 6/11/2001;
DFID's aid agreements of TF 050050 on December 27, 2001 concluded between the Government of the Socialist Republic of Vietnam and the International Development Ministry.
Decree No. 177/CP dated 28/10/1994 of government regulations regarding the duties, powers and organization of the Ministry of finance;
Decree No. 17/2001/ND-CP dated 4/5/2001 of the Government regulations on issuing regulations and use of official development assistance resources;
Decree No. 51/1999/ND-CP on 08/07/1999 of the Government about issuing regulations on investment and construction; Decree No. 13/2001/ND-CP on 5/5/2000 added a score of Decree No. 51/1999/ND-CP. Decision No. 612/TTg dated 21 May 2001 of the Prime Minister approving feasibility study report of the project "reduction of the mountainous" circular 666/2001/TTLT-BKH-UBDTMN TC-on 23/8/2001 XD contact Ministry of planning and investment in UB ethnic and region the mountain-finance-Build Guide investment management and infrastructure construction in 135 program.
After the reunification with the Ministry of planning and investment, the Ministry of Finance shall guide financial management mechanisms for poverty reduction projects in the mountainous Northern Province as follows: i. GENERAL PROVISIONS: 1. Explanation of terms: the concept, the term used in this circular have the same meaning as in the loan agreements and are understood as follows : * international financial institutions financing for the project is the International Development Association (IDA) and The British Department for international development (DFID).
* Poverty reduction project is the project in the mountainous province north of IDA loans and are co-funding the non-refundable aid of DFID was approved by the Prime Minister in decision No. 612/QD-TTg on 21/5/2001.
* General Administration of the project is the Ministry of planning and investment.
* Implementers to invest: the province of Hoa Binh, Son La, Lao Cai, Yen Bai, Phu Tho and BAC Giang (here called the Drools project) * Central project management unit (Pmu) is established by the decision of the Ministry of planning and investment has the powers and responsibilities set forth in the decision.
* The project management unit (Pmu) is established by the decision of the people's Committee of the the implementation of the project have the responsibility and authority are regulated in the establishment decision.
* Project Management Committee and the District Social Development Board is established by the decision of the provincial PEOPLE'S COMMITTEE of the project on the basis of the instructions of the Ministry of planning and investment and the PEOPLE'S COMMITTEE of the project, has the powers and responsibilities set forth in the establishment decision.
* The Bank serving the project (abbreviated as the Bank serves) is the Bank of agriculture and rural development (NH NN & RURAL DEVELOPMENT) by decision No. 172/QĐ-NHNN dated Jan. 12/3/2002 of the State Bank.
2. principles of management:-the project is funded by the following sources: IDA loans, non-refundable aid on capital of the British Department for international development (DFID) and capital in the country.
-Capital of IDA and non-refundable aid of Britain (DFID) for the project is the source currency debt and foreign aid by the Government of Vietnam, so the entire amount of the loan and the aid must be a full accounting on the State budget. Finance Manager, monitor the implementation of the loan and the repayment for the IDA as to the term, under the terms stipulated by the loan agreements and in accordance with the current regulations of Vietnam.
-Poverty reduction projects in the mountainous northern province bearing the peculiarity is an investment for a special tough region (region 3) to build the infrastructure, mainly the small buildings dispersed, and strengthen management capacity, is managed according to the current mode on the management of basic construction investment and the State's policy on poverty reduction. The use of IDA and DFID aid funds for the project to be implemented in the form of allocations from the State budget according to the provisions of decision No. 612/QĐ-TTg dated 21 May 2001 of the Prime Minister.
-The method of budget accounting: Finance Ministry quarterly procedures for State budget revenue record of loan resources for poverty reduction projects in the IDA mountains to the North and the central budget record supplements that aim for the local budget to implement the project in the province and notes the chi for the Ministry of planning and investment for project implementation at the central level.
-The Ministry of planning and investment and the PEOPLE'S COMMITTEE of the project implementation is responsible for directing the proper capital use the purpose and content of the project has been approved, in accordance with the conditions in the agreement and pledged the current rules of Vietnam.
-Central Pmu is responsible for managing the withdrawal of foreign capital (capital of IDA and DFID's aid capital) and the payment of expenditure for the functioning of the central project management make project part of the Pmu.
-The Pmu is responsible for managing the withdrawal of foreign capital (IDA funds) for the operation of the project. The Pmu is responsible for provincial and district management, payment expenditure for the activities of the project in the province and the district plan and assigned in the project, provide adequate and timely documents, documents related to the project's spending in the district for the Pmu central-resources for project activities in six provinces by the Committee of the layout from the local budget or mobilized from different sources. Reciprocal capital by the Central Ministry of planning and investment in General according to the annual plan.
-The State Treasury (Central, provincial and district level) where the funding for the project is responsible for implementation of the financial management, testing, validation of the entire volume and allocate capital for direct application to the project.
-Serving banking project, perform the procedure to withdraw capital from IDA and DFID and the payment at the request of the central project management unit and the comments of the Ministry of finance. In the process, the Bank serves enjoy service fee according to the schedule of fees in accordance with the provisions of the State Bank of fee payment services through the Bank. The service fee is calculated in the total cost of the project.
-Budget development component of the project will be conducted starting the second year of the project and applied with the communes have sufficient capacity in a selection criteria will be agreed between the Ministry of planning and investment, Ministry of finance and the people's Committee of the the implementation of the project. The financial management for the social development budget components will be regulated in a separate text.
II. SPECIFIC PROVISIONS 1. Planning of capital projects in the Central and the Pmu Pmu province are responsible for establishing and planning of capital projects from the IDA funds, DFID and reciprocal capital of the country under the current regulation mode.
-Annually, based on the established mode, process and approve the State budget estimation, The Pmu capital investment plan for the project of the province from the IDA capital and capital for domestic applications (including expenditure for the activities of the Pmu, the PMU and the Social Development Board) the PPC and combined in the province's annual budget. This plan also was sent to the Ministry of planning and investment (Ban QLDATƯ) to synthetic base plan of the project)

-Pmu central planning of capital from capital to capital and DFID, IDA for the application of the project by the Central Pmu made for years of planning and the Ministry of planning and investment to sum up on the Department's investment plan, the Pmu is responsible for Central general plan of the project approved by the Government.
-Based on the investment plan was the Government Affairs, Ministry of planning and investment allocation of capital investment plans for the Pmu detailed central capital source: IDA loans, which DFID and reciprocal capital, at the same time submit a plan that capital allocation for the Ministry of Finance (Financial Services PR , Investment, the central State Treasury). On the basis of the announced plans of the Ministry of finance capital (investment), the Central Treasury control payment of capital expenditure for the project. The people's Committee 6 the project allocation of capital investment plans for the six Provinces, the Pmu PMU District, and the Social Development Committee details under capital source: IDA loan and venture capital in the country, at the same time submit a plan that capital allocation for the State Treasury and the district to implement control of the payment for the project.
2. Opening your account: (a) management of the Pmu and the 6 DATƯ the opening of the following accounts:-the central project management: (1) open a special account in foreign currency in the Bank's system serves to receive capital from the loan funds of the IDA; (2) a special account in foreign currency in the Bank serves to receive non-refundable aid of the British Department for international development (DFID); (3) a reciprocal capital allocation account by VND in the Central Treasury to spend the content specified in the approved project.
-Each project management Committee of the open: (1) a special account in foreign currency in the Bank served in the province to receive capital from the loan funds of the IDA (hereinafter collectively referred to as level 1 special account to spend on the activities of the project in part the responsibility of the province; (2) a reciprocal capital allocation accounts in Vietnam at the State Treasury from reciprocal capital in local budgets of The layout for the project.
(b) The project management District opened the following: account-an account in particular districts (special account level 2) Vietnam Dong at the Bank served the district for receiving capital from the special account of the province.
-An account of capital allocation for application in Vietnam at the State Treasury of the district to receive reciprocal capital allocated for the project.
(c). The Social Development Committee to open an account:-A reciprocal capital allocation account in the State Treasury in Vietnam to receive reciprocal capital allocated for the activities of the Social Development Committee.
3. single payment price and quota-price and payment limit by DFID aid was agreed between the donors and the Ministry of planning and investment and consistent with circular No. 70/2001/TT/BTC on 24/8/2001 directions financial management regime with respect to state aid are not refundable.
-The unit price and costs by IDA loans and capital sources for applications that apply to the project are made by the decision of the Minister of Finance No. 112/2001/QD-BTC dated 9/11/2001 on the promulgation of a number of costs apply for projects that use funds official development assistance (ODA) debt , and the unit price shopping and investment XDCB of each province.
-Operating costs for Social Development Board is made by reciprocal capital of the provinces under the project costs by the province people's Committee regulations after comments with Pmu Central.
4. Rates and payment rates for accounting expenses from special accounts level 1 applies to the Bank's purchase rates available at the time of payment.
Special account for level 2, the Pmu The use rates of purchase on the Bank served at the time of capital transfer to special account level 2 for the district and these rates will be used as additional working capital to the special account for the advance.
5. Withdrawal of capital and allocated to capital projects (a). Capital allocation for application:-the Central Treasury allocated part of capital for the central project management unit, the State Treasury The stake allocated for project management The State Treasury, the district allocated part of capital for the project management of the district and Town Development Board under the plan and according to the current rules on the capital management the State budget.
-Reciprocal Capital will be allocated according to the proportion of capital contribution for each category of project work under the loan agreement and the documentation project.
Sequence and specific billing procedures done under current regulations.
(b) manage the aid funds DFID for the operation of the project is the central project management made consistent with agreement on aid of TF 050050 was signed on 27/12/2001. Management processes DFID aid funds follow the provisions in circular 70/2001/TT/BTC on 24/8/2001 directions financial management regime with respect to state aid are not refundable. The withdrawal of capital from non-refundable aid capital DFID made according to the procedure, the procedure of withdrawal of capital stipulated in the circular of Finance-State Bank of 81/1998/TTLT/BTC-NHNN dated Jan. 17/6/1998 and decision No. 96/2000/QD/BTC dated 12/6/2000 of the Minister of finance.
(c) Withdrawal of capital and allocated loan funds from The IDA loan source IDA to pay for the operation of projects under the form of direct payment, form letters of commitment to follow the right process, the procedure of withdrawal of capital stipulated in the circular of Finance-State Bank of 81/1998/TTLT/BTC-NHNN dated Jan. 17/6/1998 and decision No. 96/2000/QD/BTC on 12/6/2000 of the Minister of finance. In addition to other forms of capital withdrawal provisions as follows: (i) the funds of the special account of the Pmu Central-first drawing on the special account of the Central: Pmu based account limit has been stipulated in the loan agreement and aid agreements, and is expected to spend the next time The Central Pmu, Ministry of Finance (Financial Services PR): * The suggested Exit menu exit.
Within 5 working days of receipt of a valid application, the Ministry of Finance (Financial Services PR) written comments submitted to the Central Bank and the Pmu serves. Within 2 working days from when the opinion of the Ministry of finance, the Bank serves the same Pmu sign central funds send IDA donors.
-Additional drawing special account of Pmu Pmu Central Central sent a document to the Ministry of Finance (foreign financial Services). Profile includes: * The suggested additional drawing special account of Central Pmu * spending statement because central Pmu established clearly the account had spent from a special account in the central level and a copy of the voucher price paid or complete lists of payments and advance proposals paper certified by the Central Treasury * Report statements against the special account established by the Central Pmu (Account Reconciliation Statement) * special account statements of the Bank of AGRICULTURE and RURAL DEVELOPMENT & TW within 5 working days of the Treasury (foreign financial Service) will have comments sent Pmu and Central Bank serves. Within 2 working days from when the opinion of the Ministry of finance, the Bank served the Central Pmu signed invoices funds send IDA. IDA review, accept will transfer the money to a special account (see the diagram 1) (ii) the funds of the special account of the Pmu the province.-first drawing on the special account of The Pmu:

Base account limit has been stipulated in the loan agreement, and is expected to spend the next time the Pmu sent central project management unit, Ministry of Finance (Financial Services PR): * The suggested Exit menu exit.
Within 5 working days of receipt of a valid application, the Ministry of Finance (Financial Services PR) written comments sent the Pmu, Pmu and Central Bank serves. Within 2 working days from when the opinion of the Ministry of finance, the Bank served the Pmu to drawing simple send IDA donors-supplementary funds to the special account of The Pmu (IDA Capital): The Pmu sent a document to the Ministry of Finance (foreign financial Service) and 1 Kit for Pmu. The records include the following: * The suggested additional drawing special account send the Finance Ministry and the Central Pmu.
* Copy The Pmu spend establishing clearly the account had spent from a special provincial accounts and voucher copies complete mass payment price or payment statement and suggested paper advance confirmation of the State Treasury the * special account-statement of bank services in the province;
* The report against the special account established by the Pmu (Account Reconciliation Statement) * special account statements the Bank's level of service statements * Pmu district spend clearly expenses from special accounts and voucher copies complete mass payment price or payment statement or the paper suggested the advance of the repository Silver State district of funds transferred to the special account level 2 are additional capital from the IDA on the basis of the actual expenses spending from special accounts level 2.
Within 2 working days from receipt of valid records full central Pmu confirmed sending the Finance Ministry (foreign financial Services). Within 5 working days of the Finance Ministry, after receiving confirmation of the Pmu Central will accept comments submitted drawing The Pmu and the Central Bank and the Pmu serves. Within 2 working days from when the opinion of the Ministry of finance, the Bank served with the Pmu The single exit sign posted IDA. IDA review, accept will transfer the money to a special account (see diagram 2) (iii) the payment from your account especially level 1 as suggested by Pmu PMU Central and provincial level.
The payment from the special account shall be made as follows: for the form of a checklist, the Central and the Pmu PMU the send vouchers according to the current rules for the Central Treasury and for the State Treasury. Within 5 working days, the Central Treasury and the Treasury check, confirm the value of work completed is eligible for payment and payment is part of capital for the contractor. Based on the comments of the Central Treasury and the Treasury, the central project management committee and the management committee procedure with the Bank serves to payment from the special account for the contractors or beneficiaries. (See diagrams 3 and 4), in the form of control after the follow way: within 5 days after the payments from the special account is made, the Pmu PMU central provincial level must be sent to the central State Treasury State Treasury and the voucher of payment records to do the following test procedure.
Each payment from the special account must adhere to the correct foreign capital/capital ratio in the country specified in annex 1, the development credit agreement.
Application for payment from the special account including: * the decision to approve the tender result of authority * economic contracts signed with suppliers and contractors and decided to approve the contract.
* Regular spending estimates for the activities of the Pmu Pmu or the central province has been approved by the authority.
* The guarantee contract fulfillment (in the case of advance contract) * minutes of testing, delivery and liquidation of the contract (If last payment) * valid financial bills about shopping goods.
* The documents, other necessary documents according to the current regulations in the country of payment for investment in basic construction.
(iv) payments from the special account level 2 as suggested by the Project Management Committee (See diagram # 5): Pmu Province quoting from special accounts level 1 of the IDA capital project at the Bank serves first advance to the account-level special funding IDA of Pmu District opened at the Bank served the district for a fee by 30% of the combined value copper construction. As for the other contract (goods, consulting ...) the transfer shall be made as specified in the contract.
-Payment from special accounts level 2 forms of control over spending as proposed by the Board of management of the district's previous form of control. When there is demand from special accounts level 2 to pay for construction contractors, who provide goods, services, project management district send the vouchers and documents related to the State Treasury, including: * The contract was in effect under the current rules.
* General statements require advance payment/payment of the complete works of categories at district and commune levels.
* The documents, other necessary documents according to the current regulations in the country of payment for investment in basic construction.
Within 5 working days from receiving the full record, the district Treasury voucher checks and confirms volume/value of work completed is eligible for payment on the voucher price paid or the billing statement, and reciprocal stake payout. Certified by the district Treasury must specify the total value paid, according to details of the loan capital and sources of capital in the country. The voucher price paid was the State Treasury district confirmed the basis for agriculture and rural development bank branch in the capital section IDA disbursements from account-level special projects for payment as required by the Project Management Committee of the district.
(v) addition of second-level special account IDA funds When the contract gained 50% of the value of contracts signed and was the initial advance, Pmu district formed in additional application-level special account send The Pmu. Profile includes: * dispatch send The project management Committee recommended the additional application-level special account of the district with equal amount of 35% of the value of the contracts signed * copy the voucher price paid or complete lists of the payment or advance proposal paper certified by the District Treasury achieved 50% of the value of the contract was signed.
* Expenses statements from special accounts level 2 of the district * the minutes collecting mass items, complete works have enough signatures of the parties concerned.
* Special account statements of the level 2 of the Bank serving the district within 5 working days from receiving the full profile, the Pmu the check and transfer money from the account the PMU's special supplement to the special account of the level 2 of the district with the amount equal to 35% of the value of the contract and the payment suggestion.
The addition of a special account at the second level of the next district will base on the minutes of the entire test 100% of the category of the work under the contract. PMU District formed in additional application which on special accounts level 2 includes the profile outlined above suggest next response 35% the value of the contract.
Special account interest rate levels 1 and 2 must be separated and moved to pay the State budget after deducting bank charge according to the current rules.

7. Reports, inspection, audit, a.-settlement report mode – monthly bank service is responsible for sending the report to the special account-statement level 1 for the Ministry of Finance (Service TCĐN and the State Treasury), Pmu Pmu and central province to do recording accounting base currency ceasing the State budget.
-Quarterly, and annually and upon completion of the project, the Central Pmu is responsible for general project spending situation, reported the Ministry of planning and investment and the Ministry of Finance (investment, the Central Treasury, foreign financial Service) the implementation of the project, stating the situation draws use of capital, IDA and reciprocal capital, quarterly and annual accounting report and the year of the project.
-Quarterly, annual project management The quarterly reports, nămtình reports the implementation projects, the use which the IDA, which is bad and do accounting year report, report completed projects delivered the PPC, the Ministry of finance, the Ministry of planning and investment, the central project management unit.
b. the accounting and property management-The project management has the responsibility to reflect the full and timely payment of expenses on accounting vouchers, bookkeeping in accordance with the provisions of the law on the State budget; Statistical accounting Ordinance; accounting mode the current state and the sponsor.
-The management of the use of the property, the equipment of the project must comply with the applicable regulations of the State. After the end of the project to proceed to the transfer of assets in accordance with the provisions stipulated in Decree No. 14/1998/ND/CP dated 6/3/1998 of the Government on the management of State assets and circular 42/TC-QLCS on 31/7/1996 of the Ministry of finance instructed the reception and handing over of the property between the administrative career the economic organization, as specified by the competent authority.
c. auditing the annual accounts – in particular, the account of the Central and the Pmu Pmu Province, books, vouchers, accounting records must be independent auditing company audit consistent with regulations of Vietnam and IDA.
-The selection of audit company made according to the method of bidding selection advisory service under the current rules. Results of selection must be approved by the Ministry of finance and the IDA.
-Central Pmu signed a contract with the independent audit company has been awarded the audit done for the entire project.
-Audit reports must be sent to the Ministry of Finance (finance, foreign investment, the central State Treasury), Ministry of planning and investment, the State Bank of Vietnam (international relations) and the World Bank.
d. check-periodic and irregular, Ministry of finance, the Ministry of planning and investment will examine the implementation of the project and the use of capital. If the use cases which are not properly regulated, the Finance Ministry will suspend the transfer of capital and handle breach under current rules.
e. finalization of reports made the investment and annual report of the investment project implementation as specified in circular No. 70/2000/TT-BTC on 17/7/2000 of the Ministry of finance capital investment guidelines and circular 70/2001/TT/BTC on 24/8/2001 directions financial management regime with respect to state aid are not refundable.
The PMU the implementation reports implementation of annual capital investment and end settlement project by the joint project implementation. The Central PMU is responsible for the general implementation report annual capital investment and investment-settlement when the project ends.
III. ENFORCEMENT of the PROVISIONS of this circular in force after 15 days from the date of signing. In the process, if there are problems, the Agency should reflect timely to the Ministry of finance study additional amendments.