Decentralization of state financial management

(Baonghean) - Editor's note: In our country, economic restructuring, including restructuring state finance (SFC) and investment from SFC, plays an important role. The national finance has also been and is being reformed quite deeply, requiring continued decentralization of management and decentralization of responsibilities. Associate Professor, Dr. Dang Van Thanh, Chairman of the Vietnam Association of Accountants and Auditors, discussed with Nghe An Newspaper on this issue.

Transactions at Quy Hop State Treasury. Photo: Dang Cuong

PV:Dear Associate Professor, Dr. Dang Van Thanh, in your opinion, why do we have to continue to innovate the decentralization of management of state budget and state budget?

Assoc.Prof.Dr. Dang Van Thanh:First of all, it must be affirmed that the reality of socio-economic activities has created the need to innovate and strengthen the decentralization of state management of public finance, state budget, and public employee management, in order to strongly promote the dynamism, creativity, autonomy, and self-responsibility of all levels and sectors in managing and implementing financial and budgetary tasks in the field and in the locality. In recent years, we have had many positive and specific solutions to innovate and strengthen the decentralization of public finance management between levels, between the Central and local levels. However, up to now, the process of innovation and decentralization of public finance management in general has not yet met the urgent demands of reality and still has many limitations and unreasonableness. Accordingly, decentralization has not yet ensured unified management, and there are still signs of dispersion. The authority to decide on public finance is still overlapping, not creating conditions for localities to truly master their own public finance.

Second, we have not clearly and specifically defined the tasks, authority and responsibilities of each level in promulgating policies, standards and norms for state budget expenditure. According to regulations, the promulgation of policies, standards and norms for expenditure is issued by competent agencies at the central level. However, in reality, the regulations of central agencies are not comprehensive in content, many regulations on policies, norms and standards do not cover all areas, are not very close to reality, are not highly feasible, and are difficult for localities to implement; there are regulations that are suitable for one locality but not suitable for another.

Third, the decentralization of revenue sources and expenditure tasks still has many limitations. There are currently more than 10 revenue items divided among the levels of the State budget. In general, the revenue sources of most localities are small and low compared to the expenditure tasks, so the initiative and creativity of localities have not been promoted. In addition, the revenue sources and expenditure tasks of the local budget (NSDP) are determined and assigned stably for 3-5 years, but in reality, this stability has not been achieved.

Regarding expenditure tasks, in the context of limited national financial resources, the concentration of resources on the central budget (NSTW) is necessary, but still shows the tendency to be all-encompassing and make excuses, limiting the dynamism and positivity of localities. Many localities have difficult conditions, have not yet fully promoted their internal strength, economic development potential, and revenue development, but have not focused on important tasks, have not proactively arranged the budget, and still wait for support from the higher-level budget. The situation of using the budget beyond capacity and waste is still large.

Fourth, the authority to decide on the division ratio and the additional amount of the State budget is not clear and distinct. There are many criteria and criteria for allocating development investment capital to localities that are not really reasonable. Furthermore, the situation of running projects from capital sources and funding sources outside the state budget leads to inequality and lack of fairness and transparency in investment.

PV:So what is the fundamental cause of the above situation, Associate Professor, Doctor?

Assoc. Prof. Dr. Dang Van Thanh:The above limitations and shortcomings are due to many different causes, but mainly due to the unclear and inconsistent awareness and viewpoints on policies and solutions for financial decentralization, overlapping responsibilities and authorities, and fear of strong decentralization. State management decentralization is still fragmented. Therefore, the relationship between investment expenditure and regular expenditure nationwide as well as in each sector and each locality is not optimal and unreasonable; investment efficiency and use of investment capital are low. In addition, the organization and direction are still confused, lacking determination, and not paying attention to summarizing and evaluating practices to draw lessons. The legal system is not consistent.

That reality has raised the need to continue to promote decentralization of state budget management and decentralization of state budget management.

PV:And what are the key solutions we need to take?

Assoc.Prof.Dr. Dang Van Thanh:The goal of decentralizing state budget management innovation in the coming period is to increase the initiative and responsibility of localities and ministries and branches in managing budgets, especially implementing the responsibility regime of heads of budget-using units. To achieve the goal, we need to closely follow the principles, viewpoints, and goals of decentralizing state budget management and the contents of the 2015 State Budget Law, which will take effect from the 2017 budget year.

Accordingly, it is necessary to decentralize more strongly to local authorities in deciding on the budget. The National Assembly decides on the State budget estimate with total revenue, total expenditure, the level of State budget deficit and compensation sources; decides on the allocation of the central budget in terms of total revenue and expenditure for each field; the level of supplement from the central budget to each local budget. The People's Council decides on the State budget revenue estimate in the locality, the local budget revenue and expenditure estimate and the level of supplement for the lower-level budget. Doing so will significantly overcome the overlap in the right to decide on the State budget estimate between the National Assembly and the People's Council, between the People's Council at higher levels and the People's Council at lower levels. At the same time, it will ensure the centralized and unified nature of the State budget, strongly promote the proactiveness and positivity of local authorities at all levels in the field of State budget management.

Next, promote decentralization of decision-making power on regimes, standards, and norms in the direction that: the Central Government shall promulgate those types that must be implemented uniformly throughout the country to ensure fairness and equality; the Central Government shall promulgate the framework for those types that can be applied by localities; and the Provincial People's Councils shall promulgate those types that can only be implemented due to local characteristics. In addition to the regimes, standards, and expenditure norms promulgated by the Central Government, the Provincial People's Councils shall promulgate a number of regimes, standards, and expenditure norms that are suitable to the practical characteristics and budget capacity of the locality after being agreed upon in writing by the Ministry of Finance.

In addition, it is necessary to redistribute revenue sources and expenditure tasks between the central and local governments, ensuring the leading role of the central government and at the same time strengthening decentralization to localities in the direction of increasing revenue sources for local governments, creating mechanisms to encourage localities to take care of investment in socio-economic development, especially in dynamic localities, in order to foster revenue sources, prevent revenue loss, practice thrift to balance their own budgets and increase contributions to the central government. Localities that are self-balancing and contributing to the central government should strive to contribute more; localities that have not yet balanced their budgets should strive to balance themselves and contribute to the central government; localities facing difficulties and not yet balanced their budgets should strive to gradually reduce the level of support from the central government.

At the same time, increase resources in the central budget to increase targeted supplementary funding for infrastructure development, support economic restructuring, increase support for socio-economic development, and poverty reduction for mountainous, remote, and disadvantaged areas. Ensure the decentralization of revenue sources and expenditure tasks according to the principle that revenues are directly linked to the management work of each level. Ensure the leading role of the central budget and increase revenue sources for local budgets to proactively handle expenditure tasks related to localities. Encourage local initiative, strive to reduce the amount of additional funding from the central budget to local budgets.

In addition, it is necessary to be cautious and closely monitor the budget deficit at the provincial level of the local government to avoid placing a burden on the economy. The central government needs to control the budget deficit and the source of compensation for the budget deficit at the provincial level. It is necessary to clearly assign tasks in the development and implementation of monetary policies and the management of state financial and monetary funds. The State Bank participates with the Ministry of Finance in developing the budget estimate and coordinates with the Ministry of Finance to borrow to cover the budget deficit. The responsibilities of the financial sector in managing state financial funds and issuance sources are clearly defined. Foreign exchange reserves are the national reserves of the Government and need to be centrally managed.

Regarding decentralization in the field of budget execution, it is implemented through the coordination of 3 agencies: financial agency, competent agency and State Treasury (KBNN). To ensure the real initiative of the budget-using unit, enhance the responsibility of the unit as well as the State Treasury, it is necessary to comply with the new spending process, according to which the assigned state budget estimate is the highest legal framework, the implementation of the estimate is only the relationship between the head of the unit (the person who approves the expenditure) and the State Treasury (the person who controls the expenditure). The State Treasury is the center for processing information and organizing the accounting of the state budget, the state budget fund and the national treasury accounting. Clearly, clearly defining the rights and responsibilities of management and use of the state budget at all levels is the basic content of decentralization of financial management and state budget management.

PV:Thank you, Associate Professor, Dr.

Red River(Perform)