$ 1MONGOLIAN NATIONAL A I IAUDIT OFFICE 4DcW01 Il FINANCIAL AUDITING REPORT The Financial and Auditing Statement for December 31, 2014 of "Institutional strengthening for Donor Assistance Management" Project Code of auditing: YAF-CAr/2015/07/CTA-TX I June 2015 Ulaanbaatar city AV M .G , a4jj o NATIONAL. AUDIT OFFICE RefJfff June 19, 2015 To: Ms. Enkhmaa.B, Project Coordinator of "Institutional Strengthening for Donor Assistance Management" Project. We have audited the accompanying Balance Sheet of implementation of Institutional Strengthening for Donor Assistance Management ("the Project") as of 31 December 2014 and related statement of sources and uses of funds pursuant to the letter of agreement for the Grant No.TF01 1622, dated on 5 April 2012 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 "Institutional Strengthening for Donor Assistance Management" project as of December 31, 2014 and its receipts and expenditures made for the financial year 2014 in accordance with cash receipts and payments basis of accounting as set out in Note 2(a). DIRECTOR OF FINANCIAL AUDIT DEPARTMENT SENKHZAYA Gn gTel +976-51-261745 Fax +976-62 263230 Ubr6 nE ma! inlo@aud t gov mn -L SM 4'MONGOLIAN ic 0 NATIONAL a AUDIT OFFICE F Ref:.- f June 19, 2015 To: Ms. Enkhmaa.B, Project Coordinator of "Institutional Strengthening for Donor Assistance Management" Project. We have audited the accompanying Designated Account Statement of the implementation of Institutional Strengthening for Donor Assistance Management ("the Project") as of 31 December 2014, pursuant to the letter of agreement for the Grant No.TF01 1622, dated on 5 April 2012 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 5 April 2012. The Designated Account statement presents fairly, in all material respects, the ending balances as of 31 December 2014 and the account activities during the financial year on the basis of accounting described in the preceding paragraph. DIRECTOR OF FINANCIAL AUDIT DEPARTMENT ,SNKHZAYA Un gTel +976-51-261745 Fax +976-62-263230 E-mail info@audit gov mn /V MONGOLIAN SO NATIONAL AUDIT OFFICE Ref- S fA June 19, 2015 To: Ms. Enkhmaa.B, Project Coordinator of "Institutional Strengthening for Donor Assistance Management" 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 2014 in support of applications for replenishment and direct payments under the letter of Agreement for Institutional Strengthening for Donor Assistance Management Grant No.TF011622 dated 5 April 2012. 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 2014. DIRECTOR OF FINANCIAL AUDIT DEPARTMENT S.ENKHZAYA Li G r n udn no4 Tel +976-51-261745 a u - hn Fax +976-62-263230 U ar 156 o F-mail mfo@audit gov mn I U GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT ASSOCIATION Institutional Strengthening for Donor Assistance Management Grant No.TF01 1622 o ANNUAL FINANCIAL REPORT Institutional Strengthening for Donor Assistance Management Grant No.TF01 1622 AUDITOR'S REPORT If you need more information, please Contact us with the following address: CONTENT PAGES Director of Department: Enkhzaya.S Foreword 2 Phone: 263533 Financial International Control 2 Audit-manager: Ts.Oidov Auditing opinion 2 Phone: 260512 Financial Reports Analyst: N.Nyamdavaa Project Balance sheet 6 Phone: 261885 Statement of Sources and Uses of funds 7 Summary of Withdrawal Applications 7 Designated Account Statement 8 Notes to the Financial Monitoring Reports 9 I Mongolian National Audit Office Address: Government Building IV, BagalToiruu-3 Chingeltei district, 15160 Ulaanbaatar, Mongolia Web-site: www.audit.mn May-2015 1 Il LI GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT ASSOCIATION Institutional Strengthening for Donor Assistance Management Grant No.TF01 1622 FOREWORD We introduce to the World Bank and the Project Management the Auditor's Report on financial statements of "Institutional Strengthening for Donor Assistance Management" as of December B 31, 2014 accordance with the agreement of the GRANT NUMBER TF01 1622, which was signed between Mongolian Government and International Development Association on April 5th, 2012. 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. I 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, 2014, 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. Ten (10%) percent of personal income tax of 2.2 thousand US dollars were subtracted from international consultant remuneration in fiscal year 2014. But these amount of tax have not been paid yet. 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 "Institutional Strengthening for Donor Assistance Management" which is funded by the World Bank and comprised balance Sheet, summary of sources and uses of funds, designed account statement of December 31, 2014, was represented fairly and prepared in accordance with International Financial Reporting Standards. 2 U GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT ASSOCIATION Institutional Strengthening for Donor Assistance Management Grant No.TF01 1622 BALANCE SHEET AS AT DECEMBER 31, 2014 1213112013 12131/2014 Notes (USD) (USDI ASSETS Cash and cash equivalents 5 53,924.27 59,813,26 U Cumulative project expenditures 6 91,680.76 163h678.66 I TOTAL ASSETS 145,605.03 223,491.92 FUNDS IDA Funds 7 145,239.67 222,828.90 Net Interests Earned 8 367.29 664.95 Foreign Exchange Difference (1,93) (1,93) TOTAL FUNDS 145,605.03 223,491.92 I I GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT ASSOCIATION Institutional Strengthening for Donor Assistance Management Grant No.TF01 1622 SUMMARY OF SOURCES AND USES OF FUNDS As of December 31, 2014 Cumulative Cumulative Note as at as at 31.12.2013 31.12.2014 IUSD) (USD) Sources of Funds IDA Funds 7 145,239.67 222,828.90 Interest Earnings 8 408.90 714.75 Other revenue 29.19 Total sources of Funds 146,648.57 223,572.84 Goods 6,309.65 Consultants' Services 6a 43,164.46 107,452.60 Training and Workshops 48,516.30 48,51630 Bank Service Charge 8 41.61 78.99 Foreign exchange rate difference 1.93 1.93 Financial audit fee 1400.11 Total uses of Funds 91,724.30 163,759.58 Excess of sources over uses of funds 53,924.27 59,813.26 Cash balances at 31 Dec 2014 53,924.27 59,813.26 Designated Account 5 53,924.27 59,813.26 SUMMARY OF WITHDRAWAL APPLICATIONS As December 31, 2014 'USD Claimed Credited Credited WA No. date date amount WA 3 Replenishment 30.04.2014 16.05.2014 47,920.13 WA 4 Replenishment 14.10.2014 30.10.2014 29,669.10 77,589.23 4 U GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT ASSOCIATION Institutional Strengthening for Donor Assistance Management Grant No.TF01 1622 DESIGNATED ACCOUNT STATEMENT n As of December 31~ 2014 Notes Previous year Current year PART A. ACCOUNT ACTIVITIES Beginning balance Add: 53,924.27 Add: First advances from IDA 7 80,000.00 - Total replenishments from IDA 7 65,239.67 77,589.23 Interest earnings 8 408.90 305.85 Other revenue 29.19 145,648.57 131,848.54 Deduct: Eligible expenditure 6 91,680.76 71,997.9 Bank charges 41.61 37.38 Foreign exchange loss 1.93 91,724.30 72,035.28 Ending balance 53,924.27 59,813.26 PART B. ACCOUNT RECONCILATION Amount advanced by the IDA 80Q0000 00.00 Balance of the Designated Account at the end of year 53,924.27 59,813.26 Add: Bank charge 41.61 78.99 Amount withdrawn but not yet claimed 9 26,443.02 20,851.69 Deduct: Interest earned 8 (408.90) 714.75 Other 29.19 Total reconciled balance 80,000.00 80.00 U I Li GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT ASSOCIATION Institutional Strengthening for Donor Assistance Management Grant No.TF01 1622 Notes to the financial monitoring reports for the financial year 2014 1. Introduction I Financing Agreement of the Project Grant No TF011622 was signed between the International Development Association ("World Bank") and Government of Mongolia on April 5, 2012. The project implementation has started on February 1, 2013. The objective of the grant is to strengthen the government's ability to manage development projects funded by the Official Donor Assistance (ODA) in Mongolia, through a) Establishing result-oriented Monitoring and Evaluation (M&E) systems with a focus on effective and efficient delivery of intended results of development projects, b) Strengthening M&E network and capacity, and c) Enhancing the quality and accessibility of information for decision makers and stakeholders. The project consists of the following parts: Part 1. Develop result-oriented M&E system for ODA-funded projects. 1.1 Carrying out of a diagnostic study of existing M&E practice for the development projects: 1.2 Developments of result-oriented M&E framework, based on the results of the diagnostic study, including consultative and brainstorming workshops and seminars among key stakeholders, and formulation, piloting and implementation of relevant M&E regulations and guidelines: 1.3 Development of a result-oriented M&E Management Information System (MIS) for relevant M&E department of selected ministries, including the carrying out of a needs assessment, training of M&E staff of the national network, procurement, installment, piloting and implementation of computerized M&E MIS, and development and implementation of a Financial Management Information System for ODA- funded project; and 1.4 Project management. Part 2. Strengthening of M&E capacity at National and local levels. 2.1 Training of key staff of the M&E network at the national level on M&E strategy, principles and practices, including south-south learning activities for key stakeholders from the Ministry of Finance, Cabinet Secretariat, selected line ministries and the provincial M&E networks; 2.2 Training of staff of project management units and local M&E staff on M&E guidelines, Procedures and good practices; and 2.3 Design and implementation of a knowledge sharing and public awareness program for various stakeholders, covering, inter alia, M&E principles, quality and transparency of information, communications strategy, usage of information for decision-making, third party monitoring and community participation 6 U GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT ASSOCIATION Institutional Strengthening for Donor Assistance Management Grant No.TF01 1622 Part 3: Support utilization of M&E results to inform strategic and operational decision making. Carrying out of workshops to disseminate findings and recommendations for M&E activities in key sectors and to summarize and share lessons and experience from the Project implementation. In accordance with the letter of Agreement signed on 5 April 2012 for Official Donor Assistance Project Grant No.TF01 1622, the project is funded by a grant in the amount of USD 350,000 provided by Institutional Development Fund through IDAANorld 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: Amount of the Grant Percentage of Category allocated expenditures to be financed Consultants' services, Goods and non-consulting services, Audit, Training and Workshops, 350,000 100% THE PROJECT IMPLEMENTATION Part 1: j In order to develop a result-oriented M&E Management Information System (MIS), the Ministry of Finance hired the IT expert, and made contract with him on June 13, 2014 under the project. IT expert has been drafted system design together with Project coordinator (National consultant) and finalized it based on the comments provided by the Financial Policy and Debt Management Department, Monitoring, Evaluation and Internal Auditing Department, IT Department of MOF, Ministry of Economic Development, Head of the Monitoring, Evaluation and Internal Auditing Department of the Cabinet Secretariat. Based on the World Bank's no objection on the TOR for consultancy service for developing the M&E Management Information System, dated September 10, 2014, a vacancy announcement for the IT firm. The selection of the Consultant has been conducted in accordance with the Consultants' Qualifications (CQS) method set out in the Consultant Guidelines of the Worldbank and the evaluation was carried out based on the qualification criteria, stated in the REOI and the TOR for the National Consultant firm. The best qualified firm (ITZone LLC) from the four consultant firms who have submitted proposals has been invited to submit the technical and financial proposals in October 30, 2014 and awarded a contract on November 21, 2014 The ITZone LLC submitted system development plan on December 1, 2014 and finalized the design report of the system on December 12, 2014. U 7 GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT ASSOCIATION Institutional Strengthening for Donor Assistance Management Grant No.TF011622 2. Summary of Significant accounting policies (a) Accounting basis The financial statements, expressed in United States Dollars ("USD"), 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 USD. Transactions in currencies other than USD during the year have been translated into USD 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 USD. The amounts in USD are the actual amounts debited or credited to the Designated Account. The summery of statements of expenditure is also presented in USD. The amounts in USD are the actual amounts applied for replenishment from the IDA. (c) Sources of funds The funds received are recognized as source of funds when received at the Designated Account plus the inter-bank charges deducted from the remittance. Based on reconciliation of Designated Account and actual expenditures, the withdrawal Application are prepared and submitted to the IDA for reimbursement of eligible expenditures. I (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 IDA Credits and Grants by World Bank Borrowers" dated January 2011. 8 GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT ASSOCIATION Institutional Strengthening for Donor Assistance Management Grant No.TF01 1622 5. Cash and cash equivalents At 31 Dec At 31 Dec 2013 (USD) 2013 (USD) I Petty cash Cash at Operating Account Cash at Designated Account 53,924.27 59,813.26 53,924.27 59,813.26 o 6. Project Cumulative Expenditures (USD) Cumulative up Cumulative up to 31.12.2013 to 31.12.2014 Consultants' Services 64,288.14 43,164.46 107,452.60 Training and Workshops - 48.516.30 48,516.30 Goods 6,309.65 - 6,309.65 Financial audit fee 1,400.11 - 1,400.11 71,997.90 91,680.76 163,678.66 The amount above represents the actual expenditure eligible for the project and based on actual payments made during the financial year. The breakdown of Consultants' Services expenditures can be shown in the following: (a) Consultants' Services Cumulative up to Cumulative up to For 2014 31.12.2013 (USD) 31.12.2014 (USD) International consultant 24,818.93 19,364.46 44,183.43 National consultant 28,560.00 23,800.00 52,360.00 IT expert 4,909.17 - 4,909.17 Consultant firm 6,000.00 - 6,000.00 I 64,288.14 43,164.46 107,452.60 1 LJ GOVERNMENT OF MONGOLIA - INTERNATIONAL DEVELOPMENT ASSOCIATION Institutional Strengthening for Donor Assistance Management Grant No.TF01 1622 fl 7. IDA Funds Cumulative up to Cumulative up to For 2014 31.12.2013 (USD) 31.12.2014 (USD) Advance to designated account - 80,000 80,000 Replenishment to designated account 77,589.23 65,239.67 142,828.90 77,589.23 145,239.67 222,828.90 8. Interest earned The amount represents the interest earned on the balances of designated account. Cumulative up to Cumulative up to For 2014 31.12.2013 (USD) 31.12.2014 (USD) Interest earned 305.85 408.90 714.75 LI Bank charges (37.38) (41.61) (78.99) Other income* 29.19 29.19 Net interest earned 297.66 367.29 664.95 Note:* Bank charges have been credited back into the designated account from previous year. 9. Amount withdrawn but not yet claimed The amount represents the disbursements were made from the account up to 31 December 2013 but have not been claimed from IDA as of 31 December 2013. Cumulative up to Cumulative up to L 31.12.2013 (USD) 31.12.2014 (USD) International Consultant service 19.301.09 National Consultant service 7,140 13,140.00 Goods 6,309,65 Financial audit service 1,400.11 Foreign exchange difference 1.93 26,443.02 20,851.69 [I 10