Financial Rules for Capital Construction (2017 Amendment PKULAW Version)

Financial Rules for Capital Construction (2017 Version)

(Promulgated by the Order No. 81 of the Ministry of Finance on April 26, 2016; and amended for the Decision of the Ministry of Finance to Amend Six Rules including the Measures for the Registration of Certified Public Accountants by the Order No. 90 of the Ministry of Finance on December 4, 2017)

Chapter I General Provisions
Article 1 These Rules are developed for purposes of regulating the financial activities of capital construction, strengthening the financial management of capital construction, enhancing the use benefits of fiscal funds, and guaranteeing the safety of fiscal funds.
Article 2 These Rules shall apply to the financial activities of capital construction of administrative entities and public institutions and the financial activities of capital construction conducted by state-owned and state-controlled enterprises using fiscal funds.
The term “capital construction” means new construction, continued construction, reconstruction and expansion, relocation, large-scale maintenance and reconstruction projects and relevant work mainly conducted for the purpose of increasing project benefits or expanding the production capability.
Article 3 In the financial management of capital construction, the relevant laws, administrative regulations and financial rules of the state shall be strictly implemented, thrift and economy, consistence with capabilities, and emphasis on actual effects shall be adhered to, and the relationship between fund use benefits and fund supply shall be correctly handled.
Article 4 The major tasks of financial management of capital construction are to:
(1) legally raise and use the construction funds for capital construction projects (hereinafter referred to as “projects”) and prevent financial risks;
(2) rationally prepare project fund budgets, strengthen budget examination, and strictly implement budgets;
(3) strengthen the administration of project accounting, and regulate and control construction cost;
(4) prepare final accounts of completed capital construction projects in a timely and accurate manner, and fully reflect the financial status of capital construction; and
(5) strengthen the financial control and supervision of capital construction activities, and conduct performance evaluation.
Article 5 The Ministry of Finance shall be responsible for developing and directing the implementation of rules on the financial management of capital construction.
Public finance departments at all levels shall be responsible for conducting the whole process administration and supervision of financial activities of capital construction.
Article 6 The competent project departments at all levels (including Level-1 budgetary entities, here and below) shall, in conjunction with public finance departments, strengthen the financial management and supervision of capital construction of their departments or sectors, and direct and urge project owners to effectively conduct the fundamental work of financial management of capital construction.
Article 7 A project owner shall effectively conduct the following fundamental work of financial management of capital construction.
(1) Establishing and improving its financial management rules and internal control rules for capital construction.
(2) Conducting separate accounting based on projects, and including accounting information in its account books and financial statements as required.
(3) Making project fund budgets as required, effectively conducting accounting management according to approved project estimates (budgets), obtaining the information on the construction progress in a timely manner, checking property and materials on a periodical basis, and effectively managing accounting materials and archives.
(4) Submitting financial statements and materials on capital construction to the public finance department and the competent project department as required.
(5) Conducting the settlement of project payment in a timely manner, preparing final accounts of the completed project, and undergoing the formalities for the delivery and use of assets.
(6) Conducting other work required by the public finance department and the competent project department.
Where the agency bookkeeping and agency project construction system are implemented as required, the agency bookkeeping entity and agency construction entity shall cooperate with the project owner in effectively conducting the fundamental work of project financial management.
Chapter II Administration of Raising and Use of Construction Funds
Article 8 The term “construction funds” means the funds raised and used for satisfying the needs of project construction and are divided into fiscal funds and self-raised funds based on sources. Fiscal funds include investment funds for capital construction and other special construction funds allocated by the general public budget, construction funds allocated by the government fund budget, construction funds obtained by governments from debt financing in accordance with the law, and funds for capital construction projects allocated by the budget for state-owned capital operation.
Article 9 Fiscal funds shall be managed under the principle of use for specified purpose only in strict accordance with the approved project budget, and fiscal funds shall not be seized or misappropriated.
The public finance department shall strengthen the supervision and administration of project fiscal funds together with the competent project department.
Article 10 Fiscal funds shall be paid according to the relevant provisions of the rules on centralized payment of the national treasury and the stipulations of contracts, and by taking into comprehensive consideration the project fiscal fund budget, the construction process, and other factors.
Article 11 The project owner shall control the size of project investment according to the approved project estimate (budget), annual investment plan and budget, and construction process, among others.
Article 12 The project owner shall specify in decision-making the source of construction funds, guarantee construction funds, and rationally control raising cost. The construction funds for a non-operating project shall be raised according to the relevant provisions of the state; and funds for an operating project may be raised through multiple channels under the premise of preventing risks.
The operating and non-operating nature of a specific project shall be assessed by the competent project department together with the public finance department according to the project construction purpose, operating mode, profitability and other factors.
Article 13 Where a project is determined as an operating one, the project owner shall, according to the provisions of the state on capital management of fixed-asset investment projects, raise a certain proportion of non-debt funds as project capital.
During the period of project construction, a project capital investor shall not withdraw investment in any form, unless that the project is transferred or terminated in accordance with the law.
Where the investor of an operating project makes capital contribution in the form of non-monetary assets, such as in-kind, intellectual property rights, and the right to use land, the investor shall authorize an asset appraisal institution with professional competence to assess the price in accordance with the law.
Article 14 The fiscal funds obtained by a project owner shall be handled according to the following circumstances separately.
An operating project with legal person status shall be handled according to the relevant provisions of the state on financial affairs of enterprises. If it has no legal person status, and falls under direct investment of the state, it shall be managed as project state-owned capital; and if it falls under investment subsidy and the state provides for its ownership when making appropriation, the relevant provisions shall apply, and in the absence of relevant provisions, the project shall be owned by the project investor; and if it falls under compensatory subsidy, it shall be managed as project debt.
The financial discount of an operating project shall be used to offset project construction cost if it is received during the project construction period, or shall be handled according to the relevant provisions of the state's financial and accounting rules if it is received after the completion of the project.
The fiscal funds of a non-operating project shall be handled according to the relevant provisions of the state's financial and accounting rules for administrative entities and public institutions.
Article 15 Social donation received for a project shall be handled according to the agreement or requirements, if there is a donation agreement or the donor has any specific requirements; or be handled according to the relevant provisions of the state's financial and accounting rules if there is no agreement or requirements.
Chapter III Budget Management
Article 16 A project owner shall prepare project budgets based on approved estimates and according to the actual requirements for construction funds of the project, and control the budgets within the approved total investment size, scope and standards of estimates.
The project owner shall specify project budgets, and decompose the demand for all annual budgets and fiscal fund budgets of projects. If government procurement is involved, the entity shall prepare government procurement budgets as required.
Project fund budgets shall be included in the department budget of the competent project department or the budget for state-owned capital operation for uniform management. The projects included in the department budget shall generally come from the project database.
Article 17 A project owner shall, according to project estimates, construction period, annual investment and self-raised fund plans, and the carryover of all kinds of funds of projects in previous years, among others, put forward the suggested amount of project fiscal fund budget, and report it to the public finance department upon the examination and summarization of the competent project department under prescribed procedures.
The project owner shall prepare the budget according to the amount of budgetary control assigned by the public finance department, and the competent project department shall examine and summarize the amount and report it to the public finance department, and implement it after examination and a reply is given under statutory procedures.
Article 18 A project owner shall strictly implement the project fiscal fund budget. If a project does need to be adjusted in the case of const......