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ORDER OF THE MINISTRY OF FINANCE OF THE REPUBLIC OF MOLDOVA

of November 3, 2015 No. 185

About approval of the Instruction for project management of capital investments

In ensuring execution of Art. 40 and 41 of the Law "About Public Finance and Budget and Tax Responsibility" No. 181 of July 25, 2014 and the Order of the Government RM No. 1029 of December 19, 2013. "About the state capital investments" PRIKAZYVAYU:

Approve:

The instruction for project management of capital investments (according to appendix).

Minister of Finance

Anatol Arapu

Instruction for project management of capital investments

I. General information

1. The instruction for project management of capital investments is intended for methodological regulation of processes of determination, preparation, approval, provisional estimate of projects of capital investment and preparation of the reporting under them, preparation of the project documentation, consideration and approval of financing of projects of capital investments from the national public budget (NPB) and determination of the obligations of the Parties participating in accomplishment of project cycle. The instruction does not extend to the investment projects financed by funds and programs which use is regulated by legal acts, and also on the external projects falling under action of the international treaties signed by the Republic of Moldova with partners in development.

II. Regulatory base

2. The instruction for preparation of projects of capital investments is developed on basis:

a) The law No. 181 of July 25, 2014. "About public finance and budget and tax responsibility";

b) The orders of the Government RM No. 1029 of December 19, 2013. "About the state capital investments";

c) Methodologies of the development, approval and change of the budget approved by the Order of the Minister of Finance of RM No. 191 of December 31, 2014 and other regulations.

III. The used concepts

3. Capital investments (capital investments) – the budgeted expenses intended for creation of fixed assets including construction and/or updating, reconstruction or expansion of the existing fixed assets.

4. Limits of costs – estimative maximum amounts of medium-term allocation of resources based on which the industry policy of expenditure of means and budget proposals are developed and their priority is determined.

5. Fixed assets – the tangible real estate assets put in operation, cost of each of which are exceeded by the cost threshold established by the tax legislation or the importance threshold established by the economic agent in the accounting policy.

6. The project of capital investments (investment project) – the task or group of the tasks having common goal and accurately certain results which shall be reached during fixed term and owing to which implementation new fixed assets will be created or are expanded, re-equiped and modernized existing.

7. The beneficiary of the project – the central or local body of public management or public institution providing preparation and implementation of the project of capital investments.

8. Project cycle of capital investments – the sequence of stages of identification, provisional estimate, the feasibility statement, approval, implementation, monitoring and assessment after implementation of projects of capital investments.

9. The analysis "costs – benefits" – the analytical tool of the feasibility statement which estimates and compares costs and benefits from social and economic and financial aspects of the project of capital investments.

10. Investments in the course of development – the projects of capital investments which are in process of accomplishment and executed less than for 100%.

11. Method of the weighed assessment – evaluation method in points of each of factors for reflection of its relative importance, determination by the gained number of points of efficiency of each option on each of factors in numerical expression and calculation of the weighed assessment for each of options.

12. The long-term program of capital investments represents the list placed on priority in the descending procedure for investment tasks which the body of public management intends to implement till three years.

IV. General aspects of management of capital investments

13. According to Art. 40 of the Law No. 181 of July 25, 2014. "About public finance and budget and tax responsibility", expenses on the capital investments financed from the government budget and local budgets are planned, performed and the reporting under them is performed as component of the relevant public budget or, respectively, local budgets.

14. Bodies of public management provide (on situation) initiation, planning, consideration, approval, implementation of investment projects on spheres of the competence, perform their monitoring and report on extent of their realization and effectiveness.

15. The order of the Government RM No. 1029 of December 19, 2013. "About the state capital investments" establishes the transparent and effective mechanism of preparation, approval, realization, monitoring and project evaluation of the capital investments financed from the national public budget.

16. Proceeding from the regulatory base, the central and local authorities of public management, and also organizations subordinated to them are considered as initiators (customers) of investment projects.

17. The projects of capital investments financed from the government budget are planned, affirm and controlled according to the following basic principles:

a) the principle of strategic planning which provides that project proposals of capital investments are subject to process of establishment of priorities in respect of influence on priorities the politician and the purposes stated in documents on strategic planning for the medium-term period;

b) the principle of effectiveness which assumes that allocation of resources for projects of capital investment and reports on their implementation are based on effectiveness;

c) the principle of the relation "cost quality" according to which beneficiaries of the project shall provide use of budget resources economically, effectively and productively, providing the high level of the relation "cost – quality";

d) the principle of stability which assumes that in planning process and approvals of projects of capital investments are considered also operating costs and servicing of these projects after their completion;

e) the principle of realism which assumes that project planning of capital investments considers availability of budget resources and potential for implementation of the project.

18. Resource allocation on capital investments is made according to the following principles: (1)

_______________________________________

(1) Art. 40 of item 3 (a, b) The law No. 181 of July 25, 2014. "About public finance and budget and tax responsibility"

a) first-priority allocation of resources for completion of already begun projects;

b) conditionality of new investment projects the priorities of Governments/bodies of local public authority established in documents of strategic planning.

19. Any project cycle of capital investments, irrespective of type and the size, includes the following obligatory stages (Appendix No. 1):

a. identification and provisional estimate of the project;

b. preparation of the project documentation;

c. consideration and approval of financing;

d. implementation and monitoring;

e. final assessment (after implementation).

20. Planning of capital investments in the context of budget process assumes:

1. establishment of general limit of costs for capital investments;

2. the analysis and assessment of the available project portfolio of capital investments;

3. determination of priorities in the field of capital investments;

4. establishment of general limit of costs for capital investments. (2)

______________________________________

(2) the Methodology of development, approval and change of the budget approved by the Order of the Minister of Finance of RM No. 191 of December 31, 2014 (252-256)

21. The general limit of costs for capital investments is set on the basis of overall assessment of amount of resources and the analysis of how the repeating costs and capital investments correspond to tasks of medium-term costly policy. The Ministry of Finance determines potential limit of budgetary funds which will be allocated for capital investments. As a rule, this limit relies on the decisions made on future planned targets of investment costs as percent from the gross domestic product (GDP).

22. The Ministry of Finance together with bodies of public management under which authority projects of capital investments are makes the analysis and assessment of the available portfolio of investment projects and estimates resource requirement for their completion (the basic line). The basic line of capital investments is estimated taking into account balance of currency costs for the end of the year according to investment projects in the course of execution and terms of their execution and/or completion, and also cost of yet not begun new projects on which obligations were already assumed and which were approved within the previous medium-term budget.

23. The analysis covers:

a) recent tendencies of costs for capital investments (share from GDP, from the national public budget (NPB) and from the government budget, structure on industries);

b) total quantity of the existing projects and their disaggregation on completeness degree;

c) total cost of projects in the course of execution and amount of the resources necessary for their completion (the basic line);

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