Basic Contents of Construction Investment Capital Management from State Budget Sources at Provincial Level Localities

- Ensure publicity, transparency and fairness in the allocation of development investment capital;

- The level of development investment capital in the balance sheet of each locality must not be lower than the assigned budget estimate.

- For the criteria for allocating investment capital, there are the following criteria: population criteria (including 2 criteria: population of provinces and cities and number of ethnic minorities); criteria on development level (including 3 criteria: poverty rate, domestic revenue and regulation rate with the central budget); criteria on natural area; criteria on administrative units (including 4 criteria: number of district-level units, number of mountainous districts, highlands, islands and border areas). In addition to the above 4 types of criteria, there are additional criteria such as special cities, centrally-run cities, provinces and cities in key economic zones, regional and sub-regional centers.

According to the resolution of the People's Council, the People's Committee allocates and decides to assign investment capital plans to each project under its management that meets all prescribed conditions, ensuring that they are consistent with the assigned targets on total investment, domestic and foreign capital structure, economic sector structure, investment capital levels of important State projects and in accordance with the Resolution of the National Assembly and the direction of the Government on the management of the socio-economic development plan and the annual State budget estimate.

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The Department of Finance is responsible for working with the Department of Planning and Investment to plan the allocation of investment capital for each project managed by the province before reporting to the Provincial People's Committee for decision.

The District Finance and Planning Department is responsible for working with the district's functional agencies to advise the District People's Committee on allocating capital to each project managed by the district.

Capital allocation is an important and also very complicated matter because there are many influencing factors, especially human intervention, so it must be carried out according to a number of unified principles such as: Ensuring that the project is eligible for capital recording, in accordance with the direction of key focus, structure, and permitted level of the superior, in addition, it must follow an inevitable and definitive order such as: Payment of debts for projects that have been put into use, projects that have been settled, audit costs, etc.

Third , assign capital plans. Before officially assigning capital plans, the capital allocation plan must be reviewed by the financial agency. The provincial People's Committee's capital allocation plan for construction investment of the province complies with capital allocation principles such as conditions, structure according to the direction of projects and target programs... The Department of Finance and the Finance Department review the construction investment procedures of the projects. If it is correct, it is accepted by notification from the financial agency. If it is not in accordance with regulations or does not have enough procedures, the financial agency will issue a written request for adjustment.

After the financial authority has approved the Provincial and District People's Committees, they will assign the plan targets to investors for implementation. At the same time, they will be sent to the State Treasury where the project opens an account for monitoring as a basis for controlling capital payments.

During the project implementation process, there are often objective or subjective difficulties that affect the implementation progress and investment objectives of the project. Review and adjustment are conducted according to authority (regularly and periodically) to supplement and adjust the plan, transfer capital from unimplemented projects to implemented projects... Ensure to accelerate the disbursement progress to bring high efficiency in the management of construction investment capital. Create a legal environment for the management of planning, design and appraisal of projects for construction investment capital from the State budget.

Issue policies and economic mechanisms as the basis for managing capital expenditure for construction investment from the state budget.

1.2.2. Basic content of capital management for construction investment from the state budget at provincial level

1.2.2.1 Develop a list of projects and a plan for allocating capital for basic construction investment from the state budget.

Based on the socio-economic development plan of the country, region, industry and actual needs of the locality to develop and select a list of construction investment projects. Investment projects approved for funding must meet the following conditions:

- For planning projects: there must be an approved planning project outline or task or planning work estimate.

- For investment preparation projects: must be consistent with approved sectoral and territorial plans, with cost estimates for preparation work.

- For investment projects: must have investment decision before October 31st of the planning year, have design, estimate and total capital approved according to regulations.

In case the project only arranges a capital plan to implement the project, there must be an approved investment decision and estimate.

After being approved by the competent authority, the project is included in the planning and investment plan and capital is allocated in the annual investment plan. The arrangement of investment capital plan is carried out by authorities at all levels with the assistance of the planning agency (at the provincial level, the Department of Planning and Investment).

Capital investment planning is the content of planning work, is the process of determining the goals of investment activities and proposing the most optimal solutions so that the set goals of investment activities are achieved with the highest possible efficiency. Capital investment planning of each industry and each level must reflect the investment capital sources in the planning period of the industry and level.

The investment plan at the provincial level assigned by the provincial State management agency will synthesize and reflect all investment activities of economic sectors in the locality.

Investment plans using state capital at all levels must be arranged in accordance with existing capital plans and approved project progress.

1.2.2.2 Allocation of capital investment plan for basic construction from state budget sources

The process of establishing, approving and allocating capital for basic construction investment from the state budget is to: clearly define the principles for establishing and allocating capital for basic construction investment from the state budget; clearly define the responsibilities of the agencies participating in establishing and allocating capital for basic construction investment from the state budget; clearly define the steps for establishing and allocating capital for basic construction investment from the state budget.

Firstly, the decentralization and allocation of investment capital for construction from the state budget includes the following contents:

Principles of investment capital allocation: Capital allocation must ensure concentrated capital arrangement, ensure investment efficiency, prioritize allocation for important national projects and other large projects, allocate sufficient capital to pay for projects that have been put into use and have had their investment capital settlement approved for completed projects that still lack capital, counterpart capital for ODA projects, and not allocate capital for projects when the capital source is not clearly identified.

Conditions for capital allocation for investment projects: For projects preparing for investment, they must be consistent with the sector and territory development plan approved by the competent state management agency. For projects implementing investment, the investment decision maker must clearly identify the capital source and the ability to ensure capital balance.

Second , the authority to allocate investment capital: Currently, the authority to allocate investment capital is as follows: For investment capital under central management: Ministries allocate investment capital plans for each project under their management. For investment capital under local management: People's Committees at all levels develop investment capital allocation plans and submit them to the People's Councils at the same level for decision.

Third , steps to establish and allocate investment capital plan:

Step 1, guidance on planning and development: Based on the Prime Minister's Directive on developing socio-economic development plans and the inspection number on the annual budget estimate (usually issued in May every year), the Ministry of Planning and Investment shall preside over and coordinate with ministries, branches and localities in June every year to prepare for the development of the annual plan.

Step 2, Ministries, branches and localities develop and report plans: Based on the progress of project implementation and the priority targets, the Ministries, branches and localities coordinate with relevant agencies to specifically identify the portfolios and investment capital of the projects, arranged in order of priority. Propose necessary mechanisms to ensure the implementation of the investment plan.

Step 3, synthesize, balance and report on the national investment plan: The Ministry of Planning and Investment studies and proposes strategic goals, socio-economic development plans for regions, sectors and territories, including investment programs.

public investment, total level and structure of investment capital of the entire national economy, total investment capital and list of priority investment programs and projects under the State budget submitted to the Prime Minister in September before the planning year.

Based on investment programs and projects of ministries, branches and localities, the Ministry of Planning and Investment plans to allocate concentrated investment capital from the State budget to ministries, branches and localities and submits it to the Prime Minister in September every year.

Step 4, allocate investment capital plan: after being approved by the National Assembly, around November every year, the Prime Minister assigns the following targets to ministries, branches and localities:

- Total concentrated investment capital of the state budget, divided into domestic capital and foreign capital.

- Project implementation capital: includes capital according to investment capital structure according to some important sectors and targets; list and investment capital of works and projects in group A.

Based on the total capital and capital structure for project implementation assigned by the Prime Minister, the Ministry of Planning and Investment shall assign and guide the Ministries, branches and localities to arrange and allocate capital. The arrangement and allocation of capital in the Ministries, branches and localities shall be carried out no later than December 31 of each year.

Fourth , on adjusting the annual capital investment plan:

Periodically review the implementation progress and investment targets of projects during the year to adjust the investment capital plan according to authority or submit to the Prime Minister to adjust the investment capital plan, transfer capital from projects that cannot be implemented to projects that are ahead of schedule, have outstanding volume, and projects that can be completed ahead of schedule during the year.

1.2.2.3 Controlling the disbursement and settlement of capital for basic construction investment from the state budget

Payment of construction investment capital from the State budget is when the investor pays the contractor when the work volume is completed. Or advances the contractor after the contract takes effect. Payment and advances of state budget capital are carried out through the control of the State Treasury for investment projects.

Based on the approved contract and estimate, the implemented volume and the regulations on construction investment to control payment. For projects without completed volume, the advance payment is according to the contract agreement between the investor and the contractor, not exceeding 30% of the annual capital plan and not exceeding 50% of the contract value. The advance payment is recovered through payments for completed volume of the contract, the recovery level for each time is agreed upon by the investor and the contractor and specified in the contract and ensures that all is recovered when the payment value for completed volume reaches 80% of the contract value. In special cases where a higher advance payment is required, it must be approved by the investment decision maker. In cases where the investment decision maker is the Prime Minister, the decision on a higher advance payment level is decided by the Minister or Chairman of the Provincial People's Committee.

In case the project is allocated capital plan that does not have enough advance capital according to the contract, after paying for completed volume and recovering all or part of the previous advance capital, at the request of the investor, the State Treasury will continue to advance capital for the project.

The above-mentioned controlled advance payment level is the annual capital plan for the project. In case the project plan is adjusted, the advance payment level will be based on the adjusted plan. If the unrecovered advance payment level is higher than 30% of the adjusted plan, the investor is responsible for recovering to ensure that the total outstanding advance payment balance is at most 30% of the adjusted capital plan of the project.

Advance payment for compensation, site clearance and capital advance for some valuable construction components and semi-finished products that must be produced in advance to ensure construction progress and some materials that must be seasonally reserved shall be implemented in accordance with current regulations and instructions in Circular No. 08/2016/TT-BTC dated January 18, 2016 of the Ministry of Finance on management and payment of investment capital using state budget capital.

Payment and advance payment of capital allocated for the planning year must be given priority to the completed basic construction volume with outstanding debts from the year before the planning year. No payment or advance payment of capital allocated for the planning year shall be made for the volume

Basic construction to implement the planning year when not yet paid, advance payment for the completed volume of outstanding debt of the year before the planning year.

Final settlement of completed works and projects: When the works and projects are completed and handed over for use, the investor is responsible for preparing a final settlement report of the completed works and submitting it to the competent authority for approval.

Settlement of investment capital for construction from the State budget of a project is to summarize and synthesize the revenues and expenditures to clarify the implementation status of an investment project. The essence of settling the investment capital of a project, construction, or construction item is to determine the value of that project, construction, or construction item, or to determine the settled investment capital. The settled investment capital is all legal costs incurred during the investment process to put the project into operation. Legal costs are costs in accordance with the signed contract and approved design and estimate, ensuring compliance with standards, norms, unit prices, financial-accounting regimes, and current relevant state regulations.

This settlement content determines the legality of documents and investment capital figures from the start of construction until the end of the project, with investment capital allocated according to the source of formation; nature of project products: construction, equipment, etc.

Settlement requirements: is to determine the legality and clarity, therefore, incorrect expenditures cannot be accounted for and must be recovered for the State budget, debts must be clear and authentic; annual and cumulative figures must be accompanied by valid legal documents. The responsibility for reporting the completed settlement is the responsibility of the investors, the completion time is long or short depending on the project group.

Meaning: The process of reviewing and approving the final settlement excludes illegal and invalid expenses... for the State budget. After the final settlement, this data is the basis for recording and accounting for the formation of state assets put into use at the same time, solving issues related to the investment process of a project such as: payment, account settlement, debt determination, completion report to competent authorities. Creating conditions as a basis for evaluating the effectiveness of the investment process and having solutions for exploiting and using projects and works after the completion date.

1.2.2.4 Inspection, examination and supervision of management of basic construction investment capital from the state budget

Inspection is the control of the inspected subject on the basis of assigned authority to achieve certain purposes. The nature of inspection is regular and authoritative, so the result of inspection is often to detect and prevent things that are contrary to regulations.

Inspection is to examine the actual situation to evaluate, comment, and indicate the activities of the subject affecting the inspection object.

Supervision is a comprehensive review activity by an entity outside the system towards a client who is a subject of another system (in specific cases, it may not be affiliated), that is, between an agency and an agency subject to supervision that are not in a vertically affiliated system.

Inspection, examination and supervision of investment capital aims to:

Ensure that general investment activities and each specific project bring high socio-economic efficiency, in line with the development orientation of the Party and State and are carried out in accordance with the current legal framework.

Help state management agencies closely grasp and correctly assess the situation, investment performance results, investment project implementation progress and existing difficulties in the implementation process to have appropriate and timely solutions to prevent violations and negativity causing loss and waste in the investment implementation process.

1.2.3 Main tools in managing investment capital for construction from the state budget at localities

1.2.3.1 Legal system, policy mechanism on capital management of basic construction investment

In recent years, the National Assembly, the Government, and People's Committees at all levels have issued many mechanisms and policies on the management of capital for construction investment, aiming to improve the quality and efficiency of capital use, accelerate construction progress, put works into use on schedule, and prevent loss and waste in the management of capital for construction. These policies are expressed in legal documents such as the State Budget Law, the Construction Law, the Public Investment Law, and the Auction Law.

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