Five principles in financial management of foreign aid

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The adjustment of revenue and expenditure estimates for development aid must be sent to the Ministry of Planning and Investment. Photo: Internet.

Rent and borrowing accounts to receive foreign aid is strictly forbidden

The draft circular stipulates three types of plan, including annual aid revenue and expenditure estimates, three-year financial plan of foreign aid and five-year financial plan of foreign aid.

The making of annual aid revenue and expenditure estimates must comply with a principle that aid amounts are only allowed to be included in estimates when they have been approved by authorities.

Regarding the adjustment of the annual aid revenue and expenditure estimates, the draft circular provides if the total aid estimate is higher than the initial estimate assigned to the managing agencies due to the arising of new programmes/projects/non-projects in the year, managing agencies must send the annual aid plan for recurrent expenditure to the Ministry of Finance and the plan for development aid to the Ministry of Planning and Investment to submit to the Government for consideration and a decision in accordance with the Law on State Budget and the Law on Public Investment.

The financial management of foreign aid must comply with the five principles as follows:

Firstly, aid belonging to the State budget revenue must be estimated, accounted and finalised in line with the Law on State Budget and related guiding documents. The Ministry of Finance shall manage aids under the central budget revenue. Local finance departments and State treasuries shall manage aids under local budget revenue, and work with the Ministry of Finance to record for revenues and expenditures added to localities.

The second is to ensure publicity, transparency and enhance the responsibility of project owners and managing agencies in receiving, managing and effectively using foreign aids.

Third, the use of personal accounts, hiring or use of other agencies’ accounts to receive foreign aid for projects is forbidden.

Fourth, expenditures from aid under the direct management of the Vietnamese side is controlled via the State Treasury system.

Fifth, aid owners will manage and use aid in accordance with the provisions of Vietnamese law and signed treaties and agreements.

If donor's aid regulations and conditions are different from those of Vietnamese law, management must comply with the provisions of Vietnamese law. If aid regulations and conditions are provided in an international treaty signed or acceded to by Vietnam, implementation shall be complied with the provisions of the international treaty.

Emergency aid will be included in the next year’s estimate if it has not been added in the estimate of the year

The draft circular stipulates the receipt of emergency international aid in cash for disaster relief will comply with provisions in Decree No. 50/2020/ND-CP.

The control and payment of aid capital for emergency international aid newly included in the estimate, allocated and assigned by agencies or made additional estimate, will comply with the provisions of Clause 1, Article 19 of Decree No. 50/2020/ND-CP.

If emergency aid that arises in the year but after the time of making the estimate or has not been added in the estimate, the aid recipient will include in the next year’s estimate to serve as a basis for accounting and making the State budget settlement.

The State Treasury will control expenditures but has not yet controlled the estimates. The project owner must complete the dossier for the State Treasury to control the estimate the following year.

The draft circular also regulates foreign currency aid under the direct support into the State budget shall be transferred the Foreign Currency Fund.

The sale of foreign currency to the State Bank of Vietnam must comply with the foreign currency sale plan approved by the Ministry of Finance. Expenditure on programmes, projects and non-projects shall comply with regulations on expenditure of state budget capital.

Control and payment of non-refundable ODA in cash shall comply with Clauses 1,2,3,4 and 6 of Article 79 of Decree No. 56/2020/NDCP.

Control and payment of non-refundable aid capital in cash that is not under the official development assistance provided to Vietnam by foreign agencies, organisations and individuals, shall comply with the provisions of Clauses 1, 2, 3 and 6 Article 23 of Decree No. 80/2020/ND-CP.