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"Strengthening Corruption Prevention and Monitoring" Grant No. TF013945

MONGOLIAN NATIONAL

AUDIT OFFICE

FINANCIAL AUDITING REPORT

The Financial and Auditing Statement for December 31, 2015 of "Strengthening Corruption Prevention and Monitoring11

Project Grant No.TF013945

June- 2016

Ulaanbaatar city

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GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT FUND Strengthening Corruption Prevention and Monitoring

Grant No.TF013945

ANNUAL FINANCIAL REPORT

Strengthening Corruption Prevention and Monitoring Grant No.TF013945

AUDITOR'S REPORT

If you need more information, please Contact us with the following address:

Director of Department: Enkhzaya.S

Phone: 263533

Audit-manager: Tumurkhuu.S

Phone: 261885

Auditor: N.Nyamdavaa

Phone: 260512

Mongolian National Audit Office

Address: Government Building IV,

BagarToiruu-3

Chingeltei district, 15160

Ulaanbaatar, Mongolia

Web-site: www.audit.mn

CONTENT

Foreword

Financial International Control

Auditing opinion

Financial Reports

Project Balance sheet

PAGES

Statement of Sources and Uses of funds

Summary of Withdrawal Applications

Designated Account Statement

Notes to the Financial Monitoring Reports

June-2016

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MONGOLIAN NATIONAL AUDIT OFFICE

Governmenl Building 11 Saga to1ruu 3 Chingeltei dislrict. Ulaanbaatar 15160, MONGOLIA,

Tel (976·51) 26 04 37, Fax (976) 6226 3230, E-mail info@audit gov mn. hltp //www audit mn

Date o20J~. Q 6 . 0 6l Ref. #.-9 31

Audit certificate

TO: MR. GALBADRAKH.S, PROJECT COORDINATOR OF "STRENGTHENING

CORRUPTION PREVENTION AND MONITORING• PROJECT

We have audited the accompanying Balance Sheet of implementation of Strengthening Corruption Prevention and Monitoring ("the Projecn as of 31 December 2015 and related statement of sources and uses of funds pursuant to the letter of agreement for the Grant No.TF013945, dated on 11 November 2013 between the Government of Mongolia ("GOM") and International Development Association ("IDA"). Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standard on Auditing issued by International Auditing and Assurance Standard Board of the International Federation of accountants. These standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Also it includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 2(a), Project Management's policy is to prepare the accompanying financial monitoring reports on cash receipts and payments basis of accounting. On this basis, funds are recognized when received rather than when earned and disbursements are recognized when paid rather than when incurred.

In our opinion, the financial reports present fairly, in all material respects, the financial position of the implementation of "Strengthening Corruption Prevention and Monitoring" project as of December 31, 2015 and its receipts and expenditures made for the financial year 2015 in accordance with cash receipts and payments basis of accounting as set out in Note 2(a).

DIRECTOR OF FINANCIAL AUDIT DEPARTMENT: ~- S.ENKHZAYA

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MONGOLIAN NATIONAL AUDIT OFFICE

Government Building 11, Baga to ruu 3. Chingeltei district, Ulaanbaatar 15160. MONGOLIA

Tel (976-51) 26 04 37, Fax (976) 6226 3230 E-mail· info@audit.gov.mn, http //www.audit mn

Date cl2..J:>/6 . o~. lP .e. Ref. ~ L 93'2. ,

Audit certificate

TO: MR. GALBADRAKH.S, PROJECT COORDINATOR OF ·sTRENGTHENING

CORRUPTION PREVENTION AND MONITORING'" PROJECT

We have audited the accompanying Designated Account Statement of the implementation of Strengthening Corruption Prevention and Monitoring ("the Project") as of 31 December 2015, pursuant to the letter of agreement for the Grant No. TF013945, dated on 11 November 2013 between the Government of Mongolia ("GOM") and International Development Association ("IDA"). Our responsibility is to express an opinion on Designated Account statements based on our audit.

We conducted our audit in accordance with International Standard on Auditing and World Bank Disbursement Guidelines for Projects. Those standards and World Bank Disbursement Guidelines require that we plan and perform the audit to obtain reasonable assurance that the Designated Account Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in Designated Account statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion.

The Designated Account Statement was prepared on the basis of cash deposits and withdrawals for purpose of complying with the above mentioned Letter of Agreement.

In our opinion, the receipts were properly accounted for and withdrawals were made for the purpose intended in the Letter of Agreement dated on 11 November 2013. The Designated Account statement presents fairly, in all material respects, the ending balances as of 31 December 2015 and the account activities during the financial year on the basis of accounting described in the preceding paragraph.

DIRECTOR OF FINANCIAL AUDIT DEPARTMENT: ~-----S.ENKHZAYA

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MONGOLIAN NATIONAL AUDIT OFFICE

Government Building 11 Baga to1ruu 3 Chingeltei district. Ulaanbaatar 15160. MONGOLIA

Tel. (976-51) 26 04 37. Fax (976) 6226 3230. E-mail inro@audit gov mn, http //www audit mn

Date o!l..D/6. 0 6. o tZ

Ref. .S / 9 .3.3 I

Audit certificate

TO: MR. GALBADRAKH.S, PROJECT COORDINATOR OF "STRENGTHENING

CORRUPTION PREVENTION AND MONITORING0 PROJECT

In addition to our audit of the project financial reports. we have audited the statements of expenditures submitted to the IDA during the financial year 2015 in support of applications for replenishment and direct payments under the letter of Agreement for Institutional Strengthening Corruption Prevention and Monitoring Grant No.TF013945 dated on 11 November 2013.

The management of the project is responsible for the preparation of the statements of expenditures. Our responsibility is to express an opinion on the statements of expenditures, on the basis of our audit.

We conducted our audit in accordance with generally accepted auditing standard that accordingly included examination, on a test basis, evidence supporting the amounts and disclosures in the statements of expenditures. An audit also includes assessment of the accounting principles used and significant estimates made by management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the statements of expenditures submitted together with the internal controls and procedures involved in their preparation can be relied upon to support the application for grant disbursements for the financial year 2015.

DIRECTOR OF FINANCIAL ~ ,----AUDIT DEPARTMENT: r S.ENKHZAYA

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GOVERNMENT OF MONGOLIA- INTERNATIONAL DEVELOPMENT FUND Strengthening Corruption Prevention and Monitoring

Grant No.TF013945

FOREWORD

We introduce to the World Bank and the Project Management the Auditor's Report on financial statements of "Strengthening Corruption Prevention and Monitoring" project as of December 31, 2015 accordance with the agreement of the GRANT NUMBER TF013945, which was signed between Mongolian Government and International Development Fund on 11 November 2013.

FINANCIAL INTERNAL CONTROL

We have audited the Financial Report to obtain reasonable assurance, free from material misstatements.

During the course of audit, we assessed the financial risks by considering the Project Management Internal Control System and implemented by comparing to our information on control.

THE MAIN FINDINGS AND SOLUTIONS

An audit involved the performing procedures to obtain evidence about disclosures in the financial statements and financial instruments. We are confident with auditing conducted by us will provide sufficient information and reliable justification for opinion and conclusion to financial statements due to the inspection of the project as of December 31, 2015, annual year's Financial Transaction Records, designated account expenditures which are spent compliance by the agreement of the grant and whether the expenditure per Project Activity is under the qualified Internal Control.

Thus, the following are the designated account.

1. The funds were used to the Project Activities according to the purpose.

2. In order to fund the all costs under the Grant, Transactions were transferred from the Designated Account.

3. All those Designated Account Receipts are shown the Implementation of the Project correctly and fairly.

4. Financial statements did not prepared in accordance with World Bank's designed template on cash basis and in USO.

An Audit involved the designated account, relevant documents, procedures to prepare the report and Internal control system; the relevant disbursements of the Grants are included in these statements according to the Agreement.

We confirm that the designated account is shown the annual year's Implementation of the Project correctly and fairly based on the explanatory notes involved in the audit and the procedures of the Audit.

AUDITOR'S OPINION

In our opinion, the Financial Statements of the "Strengthening Corruption Prevention and Monitoring" project which is funded by the World Bank and comprised balance Sheet, summary of sources and uses of funds, designed account statement of December 31, 2015, was represented fairly and prepared in accordance with International Financial Reporting Standards.

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GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT FUND Strengthening Corruption Prevention and Monitoring

Grant No.TF013945

BALANCE SHEET AS AT DECEMBER 31, 2015

ASSETS

Cash and cash equivalents Cumulative project expenditures

TOTAL ASSETS

FUNDS

IDA Funds Net Interests Earned

TOTAL FUNDS

Notes

5 6

7 8

12/31/2014

42,511.60 94,780.94

137,292.54

136,774.51 518.03

137,292.54

(USO)

12/31/2015

1,077.85 137, 168.09

138,245.94

136,774.51 1,471.43

138,245.94

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GOVERNMENT OF MONGOLIA- INTERNATIONAL DEVELOPMENT FUND Strengthening Corruption Prevention and Monitoring

Grant No.TF013945

SUMMARY OF SOURCES AND USES OF FUNDS As of December 31, 2015

Note

Sources of Funds

IDF Funds 7

Interest Earnings 8

Total sources of Funds

Goods Consultants' Services 6

Training and Workshops Bank Service Charge 8

Audit service fees 6

Total uses of Funds

Excess of sources over uses of funds

Cash balances at 31 Dec 2015 Cash balances at 31 Dec 2014

Designated Account 5

Cumulative Cumulative 31.12.2014 31 .12.2015

136,774.51 136,774.51

608.73 958.49

137,383.24 137,733.00

11,119.81 15,065.99 40,287.41 67,048.16

43,373.72 55,053.94 90.70 95.79

407.54

94,871.64 136,655.15

42.511.60 1,077.85

1,077.85 42,511.60

42,511 .60 1,077.85

SUMMARY OF WITHDRAWAL APPLICATIONS As December 31, 2015

WA No.

Advance Up to

31/12/2014 Replenishment

Claimed date

17.02.2014

Credited date

25.02.2014

(USO) . Credited amount

50,000.00

86,774.51

136,774.51

GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT FUND Strengthening Corruption Prevention and Monitoring

Grant No.TF013945

I DESIGNATED ACCOUNT STATEMENT

As of December 31 . 2015 Previous Current

Notes year year

PART A. ACCOUNT ACTIVITIES

Beginning balance 42,511 .60

Add:

First advances from IDA 7 50,000.00

Total replenishments from IDA 7 86,774.51

Interest earnings 8 608.73 958.49

Other revenue 137,383.24 43,470.09

Deduct:

Eligible expenditure 6 94,780.94 42,387.15 Bank charges 8 90.70 5.09 Foreign exchange loss

94,871.64 42,392.24

Ending balance 42.511.60 1.077.85

PART B. ACCOUNT RECONCILATION

Amount advanced by the IDA 501000.00 50,000.00 Balance of the Designated Account at the end of year 42,511.60 1,077.85

Add: Bank charge 8 90.70 95.79 Amount withdrawn but not yet claimed 8,006.43 50,393.58

Deduct: Interest earned 8 (608.73) (1 ,567.22)

Other Total reconciled balance 50,000.00 50,000.00

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GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT FUND Strengthening Corruption Prevention and Monitoring

Grant No.TF013945

Notes to the financial monitoring reports for the financial year 2015

1. Introduction

Financing Agreement of the Project Grant No TF013945 was signed between the International Development Fund ("World Bank") and Government of Mongolia on 11 November 2013. The project implementation has started on November 11, 2013.

The objective of the Project is to build capacity of the IAAC to: (a) effectively implement the AID and the Col; and (b) improve the methodology, analysis, and usage of the IAAC's corruption perception surveys.

The project consists of the following parts:

Part I: Capacity building of the IAAC's staff on the AID and the COi regulations through comprehensive training and learning from international good practices; technical assistance in oversight and analyses of the AID and the COi and in outreach; and assistance in communication to public officials and the general public on the AID and the COi, including through the IAAC's website and a hotline.

Part2: Improving inter-agency cooperation through the provision of technical assistance, workshops on inter-agency collaboration and related procedures, study tour for senior management of the IAAC, Office of the Prosecutor General, tax authority, asset registration, procurement agencies on national and municipal levels, to enable them to observe inter-agency cooperation in practice, and to establish a working relationship with counterparts in such country.

Part 3: Strengthening corruption monitoring and evaluation through the provision of technical assistance to focus on the MCI methodology and improvement of analyses, data examination and interpretation, and dissemination of survey findings, public outreach and media engagement.

Part 4; Provide Project implementation monitoring and support, including Grant audit.

In accordance with the letter of Agreement signed on 11 November 2013 for Strengthening Corruption Prevention and Monitoring Project Grant No.TF013945, the project is funded by a grant in the amount of USO 293,550 provided by Institutional Development Fund through IDA/World Bank.

The eligible expenditures that may be financed out of the proceeds Grant and allocations of the amounts of the Grant to categories of expenditures are as follows:

(USD)

Category Amount of the Grant allocated Percentage of expenditures to be financed

Goods 20,800 100% Consultants' services 170,000 100% Training and Workshops 72,750 100% Audit 30,000 100% Total Amount 293,550

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GOVERNMENT OF MONGOLIA- INTERNATIONAL DEVELOPMENT FUND Strengthening Corruption Prevention and Monitoring

Grant No.TF013945

THE PROJECT IMPLEMENTATION

The following main activities were conducted since its commencement:

• Improving anti-corruption assessment. Under the project, the consultants with professional skills and experiences were hired in order to improve the methodology of Mongolian Corruption Index survey and Survey on Integrity Level of Public officials. The improved and updated methodologies were introduced to the specralists and experts during the discussion organized by the project.

• Training and seminars on declaration system. Regional seminars were organized in 5 aimags covering all the competent officials in charge of collecting and storing asset and income and private interest declarations. The regional seminar served as an platform for IAAC and the competent officials for dissemination of important messages, information as well as experience on asset and income and private interest declaration system.

• Improving the Asset and Income and Private Interest Declaration System. The international consultant delivered report and recommendations on improvement and upgrade of the declaration system which is regarded as the main document for improving the declaration system.

• Improving the software of Asset and Income and Private Interest Declaration System. The Term of Reference for improving the declaration system is finalized and the draft contract is under review by IAAC and the World Bank.

• The project is planning to procure I BM statistics professional for improving the anti­corruption capacity of IAAC. This procurement would enable IAAC to process the data of all 4 surveys including of Mongolian Corruption Index survey and Survey on Integrity Level of Public officials and would boost the analytical and research capacity of the institution.

2. Summary of Significant accounting policies

(a) Accounting basis

The financial statements, expressed in United States Dollars ("USO"), have been prepared on a cash receipts and payments basis of accounting. On this basis, receipts are recognised when received or direct payment to creditors are made rather than when earned and disbursements are recognised when paid rather than when incurred.

(b) Foreign currency translation

The project financial statements are stated in USO. Transactions in currencies other than USO during the year have been translated into USO at FIFO rates ruling at the transaction dates. Exchange differences arising therefrom are taken up in the Statement of Sources and Uses of Funds.

The statement of designated account is presented in USO. The amounts in USO are the actual amounts debited or credited to the Designated Account.

The summery of statements of expenditure is also presented in USO. The amounts in USO are the actual amounts applied for replenishment from the IDA.

(c) Sources offunds

The funds received are recognized as source of funds when received at the Designated Account plus the inter-bank charges deducted from the remittance.

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GOVERNMENT OF MONGOLIA- INTERNATIONAL DEVELOPMENT FUND Strengthenlng Corruption Prevention and Monitoring

Grant No.TF013945

Based on reconciliation of Designated Account and actual expenditures, the withdrawal Application are prepared and submitted to the IDA for reimbursement of eligible expenditures.

(d) Uses of funds

The expenditure eligible for the Project is recognized as use of funds when actual disbursements are made for project activities.

3. Designated Account

In accordance with Standard Condition for Grant made by the World Bank and under the provision of Grant Agreement, the Project should open and maintain a United States Dollar Designated Account. This account is used for eligible expenditures in accordance with the Grant Agreement and is replenished from time to time from the grant account.

4. Procurement

The goods and consultants' services required for the project and to be financed out of the proceeds of the Grant are procured in accordance with Section I of the "Guidelines: Procurement of Goods, Works and consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011 and Section I and IV of the "Guidelines: Selection and Employment of Consultants under IBRD Loans and JOA Credits and Grants by World Bank Borrowers" dated January 2011.

5. Cash and cash equivalents

Petty cash Cash at Operating Account Cash at Designated Account

6. Project Cumulative Expenditures

Goods Consultants' Services Training and Workshops Audit

For 2015

3,946.18 26,353.21 11 ,680.22

407.54 42,387.15

31 Dec 2014

42,511.60 42.511.60

Cumulative up to 31 .12.2014

11 ,119.81

40,287.41 43,373.72

94,780.94

(USO) 31Dec2015

1,077.85 1,077.85

(USO)

Cumulative up to 31 .12.2015

15,065.99

66,640.62 55,053.94

407.54

137, 168.09

The amount above represents the actual expenditure eligible for the project and based on actual payments made during the financial year.

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GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT FUND Strengthening Corruption Prevention and Monitoring

Grant No.TF013945

The breakdown of Consultants' Services expenditures can be shown in the following:

(a) Consultants' Services

International consultant National consultant

7. IDA Funds

Advance to designated account

For2015

21,000.0 5,353.21

26,353.21

For2015

Replenishment to designated account

8. Interest earned

Cumulative up to 31.12.2014 32,006.43

8,280.98 40,287.41

(USO) Cumulative up to

31.12.2015 53,006.43 14,041 .73 66,640.62

(USO)

Cumulative up to Cumulative up to 31.12.2014 31.12.2015

50,000.00 50,000.00

86,774.51 86,774.51

136,774.51 136,774.51

The amount represents the interest earned on the balances of designated account.

(USO)

For 2015 Cumulative up to Cumulative up to

31.12.2014 31.12.2015 Interest earned 958.49 608.73 1,567.22 Bank charges (5.09) (90.70) (95.79)

Net interest earned 953.40 518.03 1,471.43

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GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT FUND Strengthening Corruption Prevention and Monitoring

Grant No.TF013945

9. Amount withdrawn but not yet claimed

The amount represents the disbursements were made from the account up to 31 December 2015 but have not been claimed from IDA as of 31 December 2015.

International Consultant service National Consultant service Goods Training and Workshops Audit

10. Summary of expenditure per activity

Amount of the

For 2015 21,000.0 5,353.21 3,946.18

11,680.22 407.54

42,387.15

Actual

31.12. 2014 8,006.43

8,006.43

(USO) 31.12. 2014

29,006.43 5,353.21 3,946.18

11,680.22 407.54

50,393.58

USO

Cumulative up Cumulative up Category Grant expenditure in to 31 .12.2014 to 31.12.2015 allocated 2015

Goods 20,800 3,946.18 11,119.81 15,065.99 Consultants' services 170,000 26,353.21 40,287.41 66,640.62 Training and 72,750 11 ,680.22 43,373.72 55,053.94 Workshops Audit and others 30,000 407.54 - 407.54 Total Amount 293,550 42,387.15 94,780.94 137, 168.09