After one year of implementation, Circular 72/2017/TT-BTC on the management and use of revenue from project management activities by investors and project management boards using state budget funds has helped in the control and payment of project management costs, bringing about certain changes. However, there are still some difficulties in the current implementation that need to be addressed. By identifying the existing problems and difficulties, the article proposes several solutions to contribute to the improvement of processes and enhance the quality of control and payment of project management costs currently in Vietnam.
On July 17, 2017, the Ministry of Finance of Vietnam issued Circular 72/2017/TT-BTC regulating the management and use of revenue from project management activities (PMA) of investors, PMA boards using state budget funds (SBF). This Circular takes effect from September 15, 2017, and replaces Circular 05/2014/TT-BTC dated January 6, 2014.
Practical surveys indicate that although Circular 72/2017/TT-BTC has provided more specific regulations on the scope, subjects, management principles, and activities related to revenue and expenditure, payment, settlement concerning PMA, there are still some issues at local levels after nearly a year of implementation that need addressing as follows:
Regarding the preparation, appraisal, and approval of revenue and expenditure estimates for Group I project management in Vietnam
Article 9, Clause 1, Chapter II of Circular 72/2017/TT-BTC on the preparation of revenue and expenditure estimates for project management stipulates: "Investors, PMA boards managing a project with a total investment of less than 15 billion VND do not need to prepare and approve the revenue and expenditure estimate for project management; however, they must comply with the provisions of Article 11 of this Circular and not exceed the prescribed deduction rate." Thus, the specific interpretation of this provision is as follows:
- Investors authorized by competent authorities to decide on investments (except for cases where investors allocate to sector-specific PMA boards and regional PMA boards that act as investors) do not need to prepare and approve revenue and expenditure estimates for project management but must prepare expenditure content estimates (Form 04/DT-QLDA). For this content, when the competent authority decides to allocate projects to organizations and units as investors, there will be no project management revenue generated but will perform 18 expenditure tasks according to approved estimates to serve the investors' PMA tasks.
- PMA boards managing a project (according to Article 19, Decree 59/2015/ND-CP) with a total investment of less than 15 billion VND do not need to prepare and approve PMA revenue and expenditure estimates. However, according to Article 19 of Decree 59/2015/ND-CP, the investor has the authority to establish a PMA board to manage a large-scale project Group A with special construction works, applying high technology confirmed in writing by the Minister of Science and Technology, or national security projects requiring state secrets, and projects using other funds.
PMA boards managing a project are professional organizations affiliated with the investor, have independent legal status, are allowed to use their own seal, and can open accounts at the State Treasury (State Treasury) and commercial banks (NHTM) to perform PMA tasks assigned by the investor; they are responsible to the law and the investor for their PMA activities. Based on these regulations, it is understood that PMA boards managing a project with a total investment of less than 15 billion VND will not need to perform the full functions of a public service provider (as there is no revenue source), while also not constraining the project's minimum total investment.
- PMA boards managing a project with a total investment of 15 billion VND or more must prepare and approve PMA revenue and expenditure estimates. However, according to Clause 1, Article 12 of Circular 72/2017/TT-BTC, investors appraise and approve PMA revenue and expenditure estimates according to Form 01/QD-QLDA (regardless of the total investment amount). Similarly, Article 23 of Circular 72/2017/TT-BTC clearly regulates the responsibilities of investors and Group I PMA boards as follows: Prepare estimates, appraise, approve (for investors), or submit to competent authority (for PMA boards managing a single project) for approval of PMA cost estimates (this content also does not regulate the total investment amount below 15 billion VND, precisely 15 billion VND, or above 15 billion VND)... Thus, in cases where Group I PMA boards manage a project with a total investment of 15 billion VND or more, the investor will approve the PMA revenue and expenditure estimate, not only approve the PMA cost estimate.
In summary, the regulations between the articles of Circular 72/2017/TT-BTC are unclear, inconsistent, and challenging to implement concerning preparing and approving PMA revenue and expenditure estimates. For example, according to Articles 9, 12, and 23 of Circular 72/2017/TT-BTC, investors only need to prepare and approve expenditure estimates (Form 04/DT-QLDA), not PMA revenue and expenditure estimates for themselves (Form 01/QD-QLDA). However, they must appraise and approve PMA revenue and expenditure estimates for PMA boards managing a single project with a total investment of 15 billion VND or more.
The issue raised is that the revenue and expenditure estimate approval form (Form 01/QD-QLDA) is fundamentally similar between Circular 72/2017/TT-BTC and Circular 05/2014/TT-BTC. However, for PMA boards managing a project with a total investment of less than 15 billion VND, since there is no requirement to prepare and approve PMA revenue and expenditure estimates (Article 9, Circular 72/2017/TT-BTC), they cannot submit the decision approving the PMA revenue and expenditure estimate to State Treasury. In addition, as per the procedure for the first-time dossier and document submission under Clause 1, Article 8, Decision 5657/QD-State Treasury, investors are not required to submit PMA cost estimates (Form 04/DT-QLDA).
Regarding the management and use of revenue of Group II project management boards
Regarding the use of financial performance results of the year, according to Article 19 of Circular 72/2017/TT-BTC, PMA boards may use the funds as follows:
- Allocate a minimum of 25% to establish a Development Fund for public service activities;
- Allocate a supplementary income fund not exceeding three times the salary fund for grades, positions, and salary allowances for officials and public employees as prescribed by the State;
- Allocate a reward and welfare fund not exceeding three months of the average salary and wages implemented during the year;
- The remaining revenue surplus (if any) after allocating the funds under the regulations shall be supplemented into the Development Fund for public service activities.
Clause 2 of Article 20 of Circular 72/2017/TT-BTC also clearly regulates the use of supplementary income funds for the following cases: Advances for regular expenditures when there are no funding plans at the beginning of the year, no revenue sources, or no estimates; Supplementary income for employees during the year and reserve funds to supplement income for employees in the next year when revenue decreases. According to the actual situation, Group II PMA boards determine the total additional income payment for employees not exceeding three times the salary fund for grades, positions, and salary allowances for officials and public employees as prescribed by the State. This practice reveals the following issues that need resolution:
- Article 19 of Circular 72/2017/TT-BTC regulates the use of annual financial performance results without specifying "additional income" expenditure, while Clause 2, Article 18 of Circular 72/2017/TT-BTC regulates additional income for employees. Therefore, interpretation implies that using annual financial performance results, PMA boards first consider paying additional income not exceeding three times the salary fund for grades, positions, and salary allowances for officials and public employees as stipulated by the State, ensuring timeliness and motivating employees. The remaining funds will then be allocated to the priority funds.
According to Clause 2, Article 20 of Circular 72/2017/TT-BTC, the expenditure from the supplementary income fund does not include additional income but only specifies supplementary income payment in the following cases: Advances for regular expenditures when there are no funding plans, no revenue sources, or no approved estimates at the beginning of the year; once funding plans are assigned, estimates are approved, or revenue sources are available, they refund the supplementary income fund; supplementary income payments for employees during the year and reserve funds to supplement income for employees in the next year when revenue decreases.
- If no additional income is paid and supplementary income funds are established and allocated not exceeding three times the salary fund for grades, positions, and salary allowances for officials and public employees as prescribed by the State, then what is the level of the payment made in the year (instead of "additional income" expenditure) to employees? In this case, if expenditure follows the sequence prescribed in Article 19 of Circular 72/2017/TT-BTC, after allocating a minimum of 25% to establish the Development Fund for public service activities, supplementary income funds will be established, and other funds will be established as long as funds are available.
Thus, supplementary income expenditure for the year for officials and public employees will not be timely and challenging to reach the income level not exceeding three times the salary fund for grades, positions, and allowances to motivate employees. At the same time, it will be difficult to create a reserve fund from the supplementary income fund to pay additional income for employees in the next year in case of revenue reduction.
This situation requires the relevant agencies to consider, amend, and supplement some regulations in Articles 18, 19, and 20, Clause 2, Chapter II of Circular 72/2017/TT-BTC to ensure consistency in implementation and conformity with the provisions in Article 13 of Decree 16/2015/ND-CP dated February 14, 2015, of the Government of Vietnam.
Regarding the opening and use of accounts in Vietnam
Clauses 1 and 3, Article 6 of Circular 72/2017/TT-BTC and Circular 77/2017/TT-BTC dated July 27, 2017, of the Ministry of Finance stipulate that investors and PMA boards must open a transaction account at State Treasury (account 3731) to reflect the revenue and expenditure from PMA activities of all projects assigned for management. For regional PMA boards and sector-specific PMA boards with service activities, they are allowed to open deposit accounts at banks or State Treasury to reflect the revenue and expenditure of service activities. In cases where Group II PMA boards open deposit accounts at State Treasury (these units implement autonomous policies as per Decree 16/2015/ND-CP), they need to open accounts to track revenue from PMA activities according to the regulations in Article 2 Circular 77/2017/TT-BTC.
In practice, besides account 3731, PMA boards also open deposit accounts 3712 (to reflect the revenue and use of funds originated from retained fees) and account 3714 (to reflect the revenue and use of funds originated from other retained service revenue). However, regarding PMA cost payment control, in cases where "Investors, PMA boards managing a single project, without opening a deposit account at State Treasury... advance payment, and PMA cost payment are directly made from the payment account,” the regulation in Clause 2, Article 8, Chapter III, Decision 5657/QD-State Treasury is not consistent with Circular 72/2017/TT-BTC. For investors and sector-specific PMA boards, regional PMA boards managing two or more projects, they are allowed to open one or two deposit accounts. This causes difficulties for State Treasury, especially local State Treasury, in controlling the expenses of PMA boards' deposit accounts.
Therefore, adding amendments to the regulation on account opening according to Decision 5657/QD-State Treasury to be consistent with Circular 72/2017/TT-BTC of the Ministry of Finance, or amending Circular 72/2017/TT-BTC so that investors and PMA boards managing a single project are not necessarily required to open deposit accounts to reflect the revenue and expenditure from PMA activities of all projects assigned for management but make PMA cost payments directly from the project's investment payment account, ensuring consistency across legal documents and facilitating implementation at the grassroots level.
Regarding the control and payment of project management costs through deposit accounts at State Treasury
Circular 72/2017/TT-BTC on the use of annual financial performance results stipulates that a minimum of 25% may be allocated to establishing a Development Fund for public service activities; allocation of a supplementary income fund; reward and welfare funds; the remaining revenue surplus (if any) after the specified funds are allotted is added to the Development Fund. Thus, after completing assigned tasks and fulfilling related financial obligations, Group II PMA boards have the right to decide expenditure according to the provisions in Article 19 of Circular 72/2017/TT-BTC based on their internal spending regulations.
The challenge lies in allocating funds into appropriate accounts to facilitate Group II PMA boards’ use of these funds according to the following cases:
- If Group II PMA boards open additional account 3713 (other deposits not funded by SBF) to transfer surplus funds determined at the year's end from accounts 3731, 3712, 3714 to account 3713 for use under the provisions of Article 19 of Circular 72/2017/TT-BTC.
- State Treasury does not control expenditure but approves payment requests by the unit. However, according to Article 20 of Circular 72/2017/TT-BTC, Group II PMA boards may use funds according to internal spending regulations, and thus State Treasury controls expenditure based on the unit's internal spending regulations.
- For procurement, facility repairs, equipment purchases from the Development Fund, State Treasury faces difficulties controlling expenditures based on internal spending regulations. According to point b, Clause 3, Article 12 of Decree 16/2015/ND-CP, the Development Fund is used for “investment in facilities, equipment purchases, operations enhancement, scientific and technological application, professional training, joint ventures, investments aligned with the unit’s functions, and other expenditures”.
- If Group II PMA boards do not open account 3713 to establish funds but make direct expenditures from accounts 3731, 3712, 3714 following Article 19’s provisions, determining exactly how much may be distributed to the available accounts based on internal spending regulations may be challenging for PMA boards and State Treasury.
To ensure the use of state-funded revenues and revenue-originating funds, while enhancing the autonomy and accountability of Group II PMA boards, it is essential to review, amend, and supplement mechanisms concerning sources, provisions, and control of expenditures resulting from annual financial performance in the coming times. This would support Group II PMA boards and assist State Treasury in fulfilling its expenditure control duties effectively.
Source: Financial Magazine
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