Lesson 1: Bad Debts

(Baonghean) - Since the Provincial Party Committee's Directive No. 15-CT/TU, the work of handling matters after inspections and audits has been given attention by all levels and sectors in the province and has seen positive changes. The results achieved in implementing decisions on handling matters after inspections have contributed to improving the effectiveness and efficiency of inspections. However, inspection work still has shortcomings that need to be addressed to improve the management and operational capacity of state agencies…

Directive 15-CT/TU of the Provincial Party Committee on “strengthening leadership in handling matters after inspection and audit” along with the involvement of relevant levels and sectors has improved the effectiveness and efficiency of decisions on handling matters after inspection. In just two years, 2011 and 2012, the entire province conducted 450 administrative inspections at 1,560 units (including 359 planned inspections and 91 unscheduled inspections).

Inspections revealed economic irregularities in 945 inspected units (primarily in the areas of basic construction, finance, budget, and taxation) totaling 64.664 billion VND and 4,431 hectares of land. 55 organizations and 121 individuals were found to have committed violations, and 3 cases involving 5 individuals were identified, with recommendations for disciplinary action. By the end of the year, 55.416 billion VND had been recovered, achieving an average recovery rate of 85.8%; 44 organizations and individuals were subjected to administrative penalties; and one corruption case was resolved, with one individual sentenced to 4 years in prison.

However, inspection work currently still faces shortcomings that need to be addressed, most notably the difficulties in urging and recovering funds from violations after inspections, which often result in "uncollectible debts".

In Quy Hop district, according to the economic assessment conclusions following the inspection, the total amount to be recovered is over 6.3 billion VND.

Of that amount, nearly 5.75 billion VND was recovered according to the provincial conclusions, and over 561 million VND according to the district's decision. The recovery results (including amounts exempted due to force majeure) according to the provincial decision were over 2 billion VND, reaching 35%. The recovery results according to the district's conclusions were higher, but only reached 60%.

Investigations in several localities and sectors reveal that the low rate of post-inspection enforcement and the resulting "uncollectible debts" stem from multiple causes. The fundamental reason is that some agencies, organizations, and individuals subject to inspection have not fully understood the importance of complying with legally binding conclusions and decisions made after inspections. They are still reluctant, citing objective reasons for delays or incomplete implementation of the inspection agency's conclusions and decisions.

Some entities, due to business losses and extreme difficulties, are unable to deposit funds into the escrow account awaiting processing. However, some entities employ loopholes, such as establishing a new company or selling it to someone else shortly after an inspection and subsequent decision to recover funds. It's easy to name companies and businesses falling under the category of "uncollectible debts," such as: Xuan Tung Co., Ltd. (Quynh Luu), Viet Thai Co., Ltd. (Vinh City), both operating at a loss; and Nghe An Agricultural Machinery Joint Stock Company, which, after an inspection and subsequent decision to recover 25 million VND due to tax violations, dissolved and established five companies in Nghi Loc, Dien Chau, Quynh Luu, and Vinh City.

Phuc Hang Co., Ltd. (Quy Hop) was ordered to recover 20 million VND after an inspection, but it was subsequently dissolved. Luong Vy Co., Ltd. (Quy Hop), when ordered to recover funds for violations, remained the same company, then was sold to another owner… Then, some units that were state-owned companies when ordered to recover funds for violations were subsequently privatized into new legal entities. Typical examples include Construction Company I, which was "sold" to the Vietnam Oil and Gas Group; and Construction Company II, which was "sold" to Hanoi Construction Company.

According to some inspection officials, post-inspection handling, especially in areas related to economic recovery, is similar to enforcement of judgments; this mainly involves uncollectible debts. This is particularly true for non-state-owned enterprises, as many lack Party organizations and trade unions, making it difficult to hold the head accountable, impose administrative penalties, and recover the economic losses after violations. Even freezing accounts is not feasible because those who are late in payment may have multiple accounts, making it very difficult to prosecute, not to mention that many businesses have empty accounts.

On the part of competent state agencies (directors, heads of departments, boards, and branches, chairmen of district People's Committees, etc.), some units have not been truly resolute in directing and organizing the implementation of handling, sometimes even neglecting to regularly supervise and remind. The advice on post-inspection handling measures from inspection organizations at the departmental and district levels is still limited. Some conclusions of the inspection teams are unclear, not rigorous, or based on inaccurate grounds for handling; they do not reflect the true nature of the events, or do not clearly assign responsibility to individuals and heads of departments. The handling and disciplinary action against officials has not been strict enough.

The lack of regular, continuous, and effective coordination among functional agencies and organizations in handling post-inspection matters is also a reason for the limited recovery of funds after inspections. More broadly and fundamentally, current legal regulations still lack sufficiently strong safeguards and sanctions. “Currently, there are no specific regulations or sanctions to deal with organizations and individuals who intentionally delay or fail to implement legally binding decisions and conclusions. The specific legal document on Inspection, such as the ‘Regulations on urging the implementation of post-inspection handling,’ only stipulates the responsibility of the inspection agency, while the inspected entity and the agencies coordinating the implementation of inspection decisions are not mentioned,” shared Mr. Le Van Dung, Head of the Citizen Reception and Post-Inspection Handling Department of the Provincial Inspection Agency.

Besides, it cannot be denied that objective reasons such as the difficult economic situation in recent times and the State's restrictions on disbursement have made it difficult for units to find funds to pay into the budget. However, the reality is that in budget-receiving units such as at the district level, recovering funds illegally misused from various funds (such as public welfare funds, flood and storm prevention funds, etc.) and preschool education funds often lacks the resources to implement the payment and processing after inspection. Some recovery conclusions issued in 2003, 2004, and 2005 have still not been processed.

Currently, the Provincial People's Committee is assigning the Department of Finance to review the misuse of funds by various units in order to adjust and reduce budget allocations. At the commune level, there are also many irregularities stemming from the arbitrary conversion of funds for other purposes, such as using funds intended for road construction to build schools and health clinics; or converting schools into commune People's Committee offices... For example, in Quy Hop district, there are currently 597,033,800 VND that have not been recovered, including 110,735,579 VND that was misused from cement loan support for rural road construction and has not yet been recovered.

The reason is that the violations occurred between 2001 and 2003, some former officials have retired, some have moved out of the area, and on the other hand, the commune's budget is limited, so despite repeated urging from the District People's Committee, they are still unable to pay. According to the Provincial Inspectorate's report on the results of implementing conclusions and recommendations for handling after inspections related to economic recovery, in 2012, the Provincial Inspectorate urged inspection teams that had decisions to recover funds from 2011 and earlier but had not yet recovered a total of 12,832,716,746 VND. Of this amount, 10,077,977,539 VND was carried over from 2011 to be processed; the amount to be recovered in 2012 was 2,729,624,175 VND. The total amount recovered is 2,100,000,000 VND, reaching 16.4%, and the amount to be collected and carried over to 2012 for continued follow-up is 10,732,716,746 VND.

The delay and procrastination in implementing post-inspection recommendations by numerous entities and units in many localities, particularly those facing difficulties in recovery, has been a persistent problem for the inspection sector.

Circular 01/2013/TT-TTCP, effective from May 1, 2013, stipulates:

The head of the state inspection agency or the head of the agency assigned to perform specialized inspection functions shall issue a decision to conduct an inspection when one of the following grounds exists: a) After the deadline for reporting the results of the follow-up, the subject being monitored, supervised, or inspected has not completed the implementation of the conclusions, recommendations, and decisions on handling the inspection; b) The subject being monitored, supervised, or inspected has not fulfilled its responsibility to report the results of implementing the conclusions, recommendations, and decisions on handling the inspection as prescribed by law; c) During the monitoring and supervision process, signs of obstruction, concealment of assets, destruction of documents, non-cooperation, or violations of the law by the subject being monitored, supervised, or inspected are detected.

Based on the inspection results, the head of the state inspection agency and the head of the agency assigned to perform specialized inspection functions are responsible for promptly considering and handling the inspection results as follows: a) Requesting the head of the agency directly managing the subject to monitor, supervise, and inspect to apply measures within their authority and according to the law to compel the subject to monitor, supervise, and inspect to complete the implementation of the conclusions, recommendations, and decisions on handling the inspection. In cases where the failure to complete the implementation of the conclusions, recommendations, and decisions on handling the inspection causes damage, the subject to monitor, supervise, and inspect shall be held responsible for compensation; b) Apply, within their authority, or recommend to competent authorities the application of disciplinary measures, administrative penalties, and other forms of sanctions as prescribed by law against the subjects under supervision and inspection who are responsible for failing to implement, implementing inadequately, or implementing outside the timeframe specified in the conclusions, recommendations, and decisions on inspection; c) Transfer the case to the investigating agency at the same level for consideration of criminal prosecution if the inspection process reveals signs of criminal offenses committed by individuals responsible for or involved in the implementation of the conclusions, recommendations, and decisions on inspection.

Khanh Ly - Mai Hoa