S "OD BURTGEL AUDIT" LLC INDEPENDENT AUDITOR'S REPORT MINING INFRASTRUCTURE INVESTMENT SUPPORT PROJECT CREDIT NM4888-MN GRANT NgTF016382 Audited financial statements as at December 31, 2018 Ulaanbaatar city AUDITING, WARRANT, ACCOUNTING, CONSULTING INDEPENDENT AUDITOR'S REPORT TO: SANJAADORJ. M, PROJECT DIRECTOR OF MINING INFRASTRUCTURE INVESTMENT SUPPORT PROJECT Opinion We have audited the Financial Statements comprising the Balance Sheet, the Statements of Project Sources and Uses of Funds, the Statements of Expenditure and the Designated Account Statements of Mining Infrastructure Investment Support Project funded by International Development Association (Credit No: 4888-MN) and Mongolia-Australia Partnership for Sustainable Development Trust Fund (Grant No: TFO 16382-MN) for the year ended December 3 1, 2018. In our opinion, the Financial Statements of Mining Infrastructure Investment Support Project as at December 31, 2018, has been accurately and objectively disclosed in accordance with the requirements of International Public Sector Accounting Standard (IPSAS) issued by the Public Sector Committee of Federation of Accountants, the Financing Agreements (IDA Credit No: 4888-MN and AUSAID Grant TF016382-MN). the Project implementation manual and other relevant guidelines and procedures. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor 's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountant's Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Mongolia, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment. were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and auditor has not determined the key matters that required to be disclosing a separate. and not provide a separate opinion on these matters. Responsibilities of Management for the Financial Statements The project management is responsible for the preparation and fair presentation of the Financial Statements according to the requirements of the IPSAS, the IDA Financing Agreement, the Grant Agreement, the Project implementation manual and other relevant instructions and procedures and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material misstatement if. individually or in the aggregate. they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: r Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. > Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. r Evaluate the appropriateness of accounting policies used under the project and the reasonableness of accounting estimates and related disclosures made by management. > Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, the project determines whether a material uncertainty exists that may cast significant doubt on the Project's ability to continue as a going concern within a specified period of time. E [valuate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a mainer that achieves fair presentation. We communicate with project management reLarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our,audit. GENERAL DIRECTOR OYUNAA. U Date:e. "Mining Infrastructure Investment Suipport Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the year ended December 31, 2018 The Government of Mongolia & The International Development Association Credit S4888-MN Mongolia-Australia Partnership for Sustainable Development Trust Fund Grant TF016382-MN Mining Infrastructure Investment Support Project: P118109 BALANCE SHEET For the year ended December31, 2018 (in USD) Cumulative to Cumulative to Note Dec 31, 2018 Dec 31, 2017 ASSETS 1. Cash and cash equivalent: 3,117,771.49 2,790,275.65 1.1 Cashon hand 4 1.04 1.04 1.2 Cash at bank Designated account-IDA 4888-MN 4 2.742,570.81 2.408,334.52 Designated account-AUSAID TF016382 4 368,429.28 2,096.77 Operating accoUnt-PIU 4 6,770.37 379,211.21 Operating account-RBA 17 4 - 324.06 Operating account-RBA 18 4 - 205.92 Operating account-RBA 20 4 - 102.13 2. Cumulative project expenditures: 18,910,049.89 18,155,294.52 2.1 International development association 15,335,809.98 14,814,761.94 1. Goods and non consulting services 1 284,073.02 1,281.076.98 2. Consultant's services 11,137,847.12 10,814,631.62 3. Training and workshops 1,839,422.27 1,799,722.92 4. Incremental operating costs 1,074,467.58 919,330.42 2.2 Trust fund 3.574,239.91 3,340,532.58 1. Goods and non consulting services 1, 19,557.79 1,119,557.79 2. Consultant's services 2.025,139.30 1,791,431.97 3. Training and workshops 309,602.21 309,602.21 4. Incremental operating costs 11 9,940.61 119,940.61 TOTAL ASSETS 22,027,821.38 20,945,570.17 SOURCES 1. Project funds 21,712,941.55 20,688,945.09 IDA Funds - 4888-MN 17,814,635.52 17,005,563.80 AUSAID TFO1 6382 3,898,306.03 3,683.381.29 2. Net interest earnings 316,428.25 258,545.52 3. Foreign exchange difference (1,619.99) (1,992.01) 4. Other revenue 71.57 71.57 TOTAL SOURCES OF FUNDS 22,027,821.38 20,945,570.17 Prepared by Approved by Narangarav B aadorj t PMU FMS Project director "01) 13VRTGFL AIIT" LI,C. a member firm of Moore Steplicis lnternational AUDITING, WARRANT, ACCOUNTING, CONSULTING INDEPENDENT AUDITOR'S REPORT TO: SANJAADORJ. M, PROJECT DIRECTOR OF MINING INFRASTRUCTURE INVESTMENT SUPPORT PROJECT Opinion We have audited the accompanying Statements of Project Sources and Uses of Funds of Mining Infrastructure Investment Support Project funded by International Development Association (Credit No: 4888-MN) and Mongolia-Australia Partnership for Sustainable Development Trust Fund (Grant No: TFO16382-MN) for the year ended December 31, 2018. In our opinion, the Statements of Project Sources and Uses of Funds of Mining Infrastructure Investment Support Project for the year ended December 31, 2018, has been accurately and objectively disclosed in accordance with the requirements of the Financing (IDA Credit No: 4888-MN and AUSAID Grant TFO 16382-MN). the Project implementation manual and other relevant guidelines and procedures. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor 's Responsibilities for the Audit of the Project Statements section of our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountant's Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Mongolia, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management for the Financial Statements The project management is responsible for the preparation and fair presentation of the Statements of Project Sources and Uses of Funds in accordance with the IDA Financing Agreement. the Grant Agreement, the Project implementation manual and other relevant instructions and procedures and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibilities for the Audit of the Project Statements Our objectives are to obtain reasonable assurance about whether the Statements of Project Sources and Uses of Funds as a whole are free from material misstatement, whether due to fraud or error. and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance. but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material misstatement if, individually or in the aggregate. they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. We communicate with project management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. GENERAL DIRECTOR - OYUNAA. U Date: y "Mining Infrastructure nN estment Support Project" Credit No: 4888-MVIN & Grant No: TF016382 Financial Statements for the \ear ended December 31, 2018 The Government of Mongolia & The International Development Association Credit JN4888-MN Mongolia-Australia Partnership for Sustainable Development Trust Fund Grant TF016382-MN Mining Infrastructure Investment Support Project: P118109 SOURCES AND USES OF FUNDS For the year ended December 31, 2018 (in USD) Cumulative to For 2018 Cumulative to Dec 31, 2018 Dec 31, 2017 SOURCES Funds 21,712,941.55 1,023,996.46 20,688,945.09 IDA 4888-MN 17.814,635.52 809,071.72 17,005,563.80 AUSAID TF016382 3.898,306.03 214.924.74 3,683,381.29 Other sources 314,879.83 58,254.75 256,625.08 Net interest earnings 316.428.25 57,882.73 258,545.52 Other revenue (1,548.42) 372.02 (1,920.44) TOTAL SOURCES OF FUNDS 22,027,821.38 1,082,251.21 20,945,570.17 USES OF FUNDS Uses of IDA Funds: 15,335,809.98 521,048.05 14,814,761.94 Goods and Non cornsulting services 1,284.073.02 2,996.04 1.281,076.98 Consultant's services 11,137,847.12 323,215.50 10,814,631.62 Training and Workshops 1,839,422.27 39,699.35 1,799,722.92 Incremental operating costs 1,074467.58 155,137.17 919,330.42 Uses of AusAID Funds: 3,574,239.91 233,707.33 3,340,532.58 Goods and Non consulting services 1,119,557.79 - 1,119,557.79 Consultant's services 2,025,139.30 233,707.33 1,791,431.97 Training and Workshops 309.602.21 - 309,602.21 Incremental operating costs 119,940.61 - 119,940.61 TOTAL USES OF FUNDS 18,910,049.89 754,755.38 18,155,294.52 Surplus of receipts over expenditure: Cash on hand 1.04 - 1.04 Cash at bank Designated account-IDA 4888-MN 2,742,570.81 334,236.29 2,408,334.52 Operating account-PMU 6770.37 4,673.60 2.096.77 Designated account-AUSAID TF016382 368,429.28 (10,781.94) 379.211.21 Operating account-RBA 17 - (324.06) 324.06 "O1) 11IRITUH. NtDIT" 1.1,C, a ummber firm (if Noore Stephens International Y7 "Mining Infrastructure Investment Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the year ended December 31, 2018 Operating account-RBA 18 - (205.92) 205.92 Operating account-RBA 20 - (102.13) 102.13 Balance of cash and cash equivalents 3,117,771.49 327,495.84 2,790,275.65 Prepared by Approved by Narangar anjaadorj. PMU F Project director "OD BURTGEL. AUDIT" LLC, a member firm of Moore Stephens International AUDITING, WARRANT, ACCOUNTING, CONSULTING INDEPENDENT AUDITOR'S REPORT TO: SANJAADORJ. M, PROJECT DIRECTOR OF MINING INFRASTRUCTURE INVESTMENT SUPPORT PROJECT Opinion We have audited the accompanying Statements of Expenditures (SOEs) of Mining Infrastructure Investment Support Project funded by International Development Association (Credit No: 4888- MN) and Mongolia-Australia Partnership for Sustainable Development Trust Fund (Grant No: TF016382-MN) for the year ended December 31, 2018. In our opinion, the Statements of Expenditures of Mining Infrastructure Investment Support Project as at December 31, 2018, has been accurately and objectively disclosed in accordance with the requirements of the Financing Agreements (IDA Credit 5487-MN & SDC Grant TF0A0794-MN), the Project implementation manual and other relevant guidelines and procedures. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Project Statements section of our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountant's Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Mongolia, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management for the Financial Statements The project management is responsible for the preparation and fair presentation of the Statements of Expenditures in accordance with the requirements of the IDA Financing Agreement, the Grant Agreement, the Project implementation manual and other relevant instructions and procedures and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibilities for the Audit of the Project Statements Our objectives are to obtain reasonable assurance about whether the Statements of Expenditures as a whole are free from material misstatement. whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material misstatement if, individually or in the aggregate. they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. We communicate with project management regarding, among other matters. the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. GENERAL DIRECTOR ( tOYUNAA. U r Date . .. ....... "Mining Infrastructure investment Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the Near ended December 31, 2018 The Government of Mongolia & The International Development Association Credit N4888-MN Mongolia-Australia Partnership for Sustainable Development Trust Fund Grant TF016382-MN Mining Infrastructure Investment Support Project: P118109 STATEMENT OF EXPENDITURES (IDA Withdrawals) For the year ended December 31, 2018 (in USD) WA Application Claimed Credited Amount Amount Difference Numbers type date date claimed credited IDA 4888-MN withdrawals Up to December 31, 2017 (WA 1-42) 17,315,233.48 17,005,563.80 309,669.68 WA-43' Replenishment 2017.12.31 2018.02.14 309,669.68 309.669.68 - WA-44 Replenishment 2018.06.30 2018.09.11 233,213.45 233,213.45 - WA-45 Replenishment 2018.09.30 2018.11.28 188,288.54 188,288.54 - WA-46 Replenishment 2018.11.30 2018.12.18 77,900.05 77,900,05 - WA-47 Replenishment 2018.12.31 - 21,174.51 - 21,174.51 For the reporting period 2018 (WA 43-47) 830,246.23 809,071.72 21,174.51 Up to December 31, 2018 (WA 1-47) 18,145,479.71 17,814,635.52 330,844.19 1. The expenditure of USD 309,669.68 expensed in 2017, was claimed and credited through WA-43 in 2018. -01) Bl,RTGFI, AUPT )IT" I1C. a memuber firm of Moore Stephens I nternational "Minin- Infrastructure Investment Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the Near ended December 31, 2018 STATEMENT OF EXPENDITURES (TF Withdrawals) For the year ended December 31, 2018 (in USD) WA Application Claimed Credited Amount Amount Difference Numbers type date date claimed credited AUSAID TF016382 withdrawals Up to December 31, 2017 (WA 1-27) 3,740,532.56 3,683,381.29 57,151.27 WA-27' Replenishment 2017.12.31 2018.02.14 57.151.27 57,151.27 - WA-28 Replenishment 2018.06.30 2018.09.11 31,605.26 31,605.26 - WA-29 Replenishment 2018.09.30 2018.11.28 38,935.80 38,935.80 - WA-30 Replenishment 2018.11.30 2018.12.18 87,232.41 87,232.41 - WA-31 Replenishment 2018.12 31 - 75,933.80 - 75,933.80 For the reporting period 2018 (WA 27-31) 290,858.54 214,924.74 75,933.80 Up to December 31, 2018 (WA 1-31) 4,031,391.10 3,898,306.03 133,085.07 1.The expenditure of USD 57.151.27 expensed in 2017. was claimed and credited through WA-27 in 2018. 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I . ...'.. . i С! � � � � � � � С � С • � .� � ... � � ��� . ��. � � � г-- � .. . ... ® �. . . .... .. .... . , ��. � � � � � � _ � � �� N i �_ . €�-. ОС +S ',� �- � 'г�` ... 71' .�+°j 'Е,�' �` е,,,° N N 4Ч . м м Г � ", � ° `_' � ^ �'% д � �С � �д � ц � � _ � = � Q � � � е� �в � сС г� � О . �1 AUDITING, WXRR.%LNT, ACCOUNTING, CONSULTING INDEPENDENT AUDITOR'S REPORT TO: SANJAADORJ. M, PROJECT DIRECTOR OF MINING INFRASTRUCTURE INVESTMENT SUPPORT PROJECT Opinion We have audited the accompanying Designated Account Statements of MininO Infrastructure Investment Support Project funded by International Development Association (Credit No: 4888-MN) and Mongolia-Australia Partnership for Sustainable Development Trust Fund (Grant No: TFOI 6382-MN) for the year ended December 31, 2018. In our opinion, the Designated Account Statements of Mining Infrastructure Investment Support Project as at December 3], 2018, has been accurately and ol jectlvely disclosed in accordance with the requirements of the Financing Agreements (IDA Credit No: 4888-N4N and AUSAID Grant TF016382-N4N), the Project implementation manual and other relevant Lguidelines and procedures. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors Responsibilities ft)r the Audit ( fthe Project Statements section of our report. We are independent of the Project in accordance with the'International Ethics Standards Board for Accountant's Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Mongolia, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management for the Financial Statements The project management is responsible for the preparation and fair presentation of the Desionated Account Statements in accordance with the requirements of the IDA Financing Agreement, the Grant Agreement, the PrQject implementation manual and other relevant instructions and procedures and for such ]Internal control as management determines is necessarv to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibilities for the Audit of the Project Statements Our objectives are to obtain reasonable assurance about whether the Designated Account Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance. but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material misstatement if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. We communicate with project management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. / GENERAL DIRECTOR - OYUNAA. U Date: ............. "Mining Infrastructure Investment Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the year ended December 31. 2018 The Government of Mongolia The International Development Association Credit N24888-MN Mining Infrastructure Investment Support Project: P118109 DESIGNATED ACCOUNT STATEMENT For the year ended December 31, 2018 (in USD) At Dec 31, 2018 At Dec 31, 2017 Part A- Account transactions Beginning balance 2,408,334.52 2,497.507.26 Add: Total amount deposited by the IDA for the year 809,071.72 2.112.470.84 Total interest earned 75,784.81 71.070.10 Transferred to DA-B 17,518.79 29,373.44 Transferred from OAs - 11,619.02 Returned interest income disbursement 1,830.00 Returned costs - 28,921.42 Total amount 902,375.32 2.255,284.82 Deduct: Total expenditure 306,717.96 2,014,892.69 Transferred to DA-B - 5,839.81 Transferred to OAs 233,873.70 132,790.39 Total bank charges 339.18 278.90 Expenditure on accrued interest earned 27,208.19 190,655.77 Total amount 568,139.03 2,344,457.56 Closing balance 2,742,570.81 2,408,334.52 Part B - Account reconciliation Amount advanced by the IDA 2.500.000.00 2,500,000.00 Balance of the Designated account at the end of the year 2,742,570.81 2,408,334.52 Add: Amount withdrawn and not yet claimed 21,174.51 309,669.68 Bank charges 3,268.23 2,929.05 "01) BIRT1FL AUDIT" 1,LC, a nember firm of Moore Stephens International "Mining Infrastructure inNestmient Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the Near ended December 31. 2018 Foreign exchange loss 1,619.99 1,992.01 Balance of OAs 6,770.37 2,728.88 Balance of Petty cash 1.04 1.04 Tender expense 1.623.44 1,623.44 Expenditure on accrued interest earned 217,863.97 190,655.77 Total amount 252,321.55 509599.87 Deduct: Amount claimed and not yet withdrawn - 471.56 Net interest earned 491,487.53 415,702.72 Net tender material sale revenue 1.695.00 1,695.00 Designated account - AUSAID-TFO16382 1,644.72 - Received from OAs 65.11 65.11 Total amount 494,892.36 417,934.39 Total advance to Designated account 2,500,000.00 2,500,000.00 Prepared by Approved by Naranga v. Sanjaadorj. M PMU F Project director "0D BURTGEL, AUDIT" LL C. a member firm of Moore Stephens International "Mining InfrastructUre Investment Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the year ended December 31, 2018 The Government of Mongolia Mongolia-Australia Partnership for Sustainable Development Trust Fund Grant TF016382-MN Mining Infrastructure Investment Support Project: P118109 DESIGNATED ACCOUNT STATEMENT For the year ended December 31, 2018 (in USD) At Dec 31, 2018 At Dee 31, 2017 Part A- Account transactions Beginning balance 379211.21 63,272.35 Add: Total amount deposited by the AUSAID for the year 214,924,74 825,563.63 Net interest earned 9,749.21 9,325.08 Transferred from DA-A - 5,839.81 Transferred from OA PMU - 1,523.96 Transferred from RBA-18 - 7.52 Transferred from RBA-20 - 25.44 Returned costs - 1,688.27 Foreign exchange gain 0.03 - Total amount 224,673.98 843,973.71 Deduct: Total expenditure 217,833.23 473,027.08 Transferred from Designated account of IDA 17,518.79 29,373.44 Transferred to OAs - 25,451.55 Total bank charges 103.87 182.78 Foreign exchange loss 0.02 - Total amount 235,455.91 528,034.85 Closing balance 368,429.28 379,211.21 Part B - Account reconciliation Amount advanced by the AUSAID 400,000.00 400,000.00 Balance of the Designated account at the end of the year 368,429.28 379,211.21 Add: -00 R[!RTCVIL AUDIT" LL1K, a menher firm oif Moore Stephenis International "Mining Infrastructure Investment Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the year ended December 31, 2018 Amount withdrawn and not yet claimed 75,933.80 57,151.27 Bank charges 825.65 721.78 Foreign exchange gain 0.03 - Total amount 76,759.48 57,873.05 Deduct: Amount claimed and not yet withdrawn - 604.95 Net interest earned 45,188.74 35,439.53 Received from OAs - 32.96 Amount withdrawn in 2015 and not yet received - 1,006.82 Foreign exchange loss 0.02 - Total amount 45,188.76 37,084.26 Total advance to Designated account 400,000.00 400,000.00 Prepared by Approved by Narangara B Sanjaadorj. 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G � � W � г�. .-н v �+ . � . � .. . . л л . . � ^ � ... .. . . ... . . . - v ..! . �д� J ,�� " .� �.i J - ..J......� J :... - � ��. � � _ � ... °'L - � � ^ � - н �� N �� м. , � �г, � h- 3С - гА .. д� f,' Г1�Г1 Г1 М Г� °°�' 1F, Г� .� .� - г'ь в^ �.. � � � � � ... ^ .® � - ..... . .. . ... . . ... .. ... . ... .. .,.. . . V ... � . r:.>__- ..,. _,.. ._..........,.., _г..,��,е�... . . ,.. � , .. . � . "Mining I nfrastructure I it 1k estinent Sup port Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the year ended December 31, 2018 NOTES TO THE FINANCIAL STATEMENTS 1. Project background On May 24., 2011, the International Development Association and the Governinent of Mongolia (represented by the Ministry of Finance) signed the Financing Agreement Credit No: 4888-N/IN to assist in financing Mining Infrastructure Investment Support Pr ject. The credit amounted to SDR 16.000.000 (equivalent to original approved amount of US$25,000,000). A grant agreement dated on April ' )0, 2014 for additional funding of Mongolia-Australia Partnership for Sustainable Development Trust Fund which is managed by International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA) (World Bank) shall grant an amount of 2.1 million (two point one million) US dollars as requested by Government of Mongolia The grant agreement amended on April 14. 2015., there the grant amount was increased to 4.05 (four point zero five) million US dollars. The closing date of the project is September 30. 2019. The objectives of the Project are to facilitate investments in infrastructure to support mining and downstream processing activities, regardless funding sources, and to build local capacity to prepare and of transact infrastructure projects. The PrcJect consists of the following parts: Component 1: Support for infrastructure investments a) Planning, Feasibiliti,, and Business Cases 1. 1. Prepare regional infrastructure investments plans, including the determination of priority infrastructure needs based on mineral development plarmed for a particular region, sequencing of their implementation, and identification of required feasibility studies for specific investments, 1.2. Conduct feasibility studies for priority mining-related infrastructure projects in the energy, transport', information technology and communications, water. housing and social sectors, logistics and border crossing facilities and downstream and value-added activities, including., inter alia: technical assessments, such as engineering designs. geotechnical SUrVeNIS, economic and financial analyses, environmental and social impact evaluations, and reviews of specific aspects of the Recipient's legal, regulatory and institutional frameworks; L' . Develop business cases for projects proposed to be developed with private investments, including PPPs, including, inter alia: review of government priorities for potential projects, identifying oovemment commitments and obligations under various investment structures, developing investment and financing plans, reviewing the Recipient's legal and regula.torv framework In goverrung private investment, determining appropriate allocation of risks and underlying commercial principles for transactions, and undertaking market soundings to gauge investor appetite. h) Rap id R csl)onse to A ddress Em erging Priorities Carrv out activities in response to existing or emerging priority issues affecting the potential for private investment in infrastructure facilities and services, and facilitate the export of mineral resources, including support to, inter alia: finalizing ongoing transactions with investors. strengthening the legal frameworks, developing national standards for infrastructure 1,01) B(!RTCV1, AUDIT" 11C, a mernbcr firrn (if Moore Stepheiis Ititcrnational L I U "Mining Infrastructure Inxestment Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the Near ended December 31, 2018 development, facilitating transnational agreements, and establishing mechanisms to coordinate regional Development and ensure that investors are adequately addressing their corporate social responsibilities Component II: Capacity Building and Knowledge Transfer 2.1. Training and Advocacy Programs V Carry out staff skills development, including Training and Workshops, for relevant ministries and agencies, on basic principles, practices techniques on project preparatory activities, including, inter alia: i) technical and engineering reviews, ii) technical designs, drawings and specifications; iii) economic evaluations and cost-benefit analysis; iv) financial assessments and forecasting; v) environmental and social impact evaluations; vi) legal and regulatory reviews; vii) further assessments of potential PPPs to determine viability and viii) market soundings; V Carry out staff skills development, including Training and Workshops, for relevant ministries and agencies in preparation for transactions with investors. including PPP transactions; V Carry out conferences and other communication mechanisms to promote awareness of government officials and the local business community about investment opportunities and the use of PPPs. 2.2 Consultants V Contract full-time and part-time consultants to strengthen abilities of government officials to prepare terms of reference and carry out feasibility studies, including support to- inter alia: strategic planners, engineers, technical specialists. economists. and environmental and social experts, V Contract full-time and part-time consultants to develop the capacity of government officials to prepare transactions with the private sectors, including inter alia: legal counsel, institutional specialists, economic and financial specialist implementation specialist and local staff to support preparation of PPPs transactions. / Contract full-time and part-time consultants to, inter alia: develop a framework to manage contingent liabilities, develop methodology and criteria for issuing guarantees, a process for approving them, and structure to limit the Government's overall exposure. 2.3 Contract Administration Provision of support and training to government officials in ensuring that investors and the government are in compliance with contractual terms and conditions. including, inter alia: ascertaining that required investment, operational and maintenance standards are being met: measuring performance based on pre-determined criteria, calculating payments based on performance, and determining that environmental and social obligations are being fulfilled. Component III: Strengthening Groundwater Management Provide support to strengthen the capacity of local authorities to manage groundwater resources in Southern Mongolia by making operational a new institutional structure in Southern Mongolia with responsibly for. inter cilia: establishing at least two (2) groundwater management council and at least "10D BURICGUL AUDIT" LI C. at membecr firm oif )ioore Stephens Interiiitional "Mining Infrastructure Investment Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the Near ended December 31, 2018 two (2) groundwater management administrations in water basins 17. 18 and 20, preparing groundwater management and monitoring plans, carrying out groundwater explorations. developing a data exchange protocol, monitoring bore hole installations, monitoring and enforcing cornpliance with licenses to abstract groundwater and reviewing water resource pricing based on economic principles. Component IV. Projects management Establishment of a Project Management unit at the Ministry of Finance to implement and manage the Project. Framework of the Financing Agreement, a Project Steering Committee (PSC) and a Project Management Unit (PMU) have been established. PSC is responsible for inter alia: a. Providing guidance on the use of Project funds and approve procurement plans; b. Soliciting input and cooperation from the relevant ministries and government agencies to prepare infrastructure projects that have cross-sectorial impacts., and c. For projects involving private investment, providing policy guidance to ensure that these are planned, developed and implemented in a comprehensive and coordinated manner. PMU is responsible for inter alia: a. All aspects associated with implementing the Project, including inter alia procurement of all goods and services; financial management and reporting. and disbursements; b. The effective and timely implementation of the environmental and social management framework and all other environmental and social safeguards requirements; and c. Project monitoring and reporting. Following state sector support the PMU in the management of all technical aspects associated with their respective activities including, inter alia, preparing terms of references for their respective infrastructure projects, and monitoring: V Ministry of Energy, V Ministry of Finance, / Ministry of Mining and Heavy Industry, / Ministry of Road and Transport Development of Mongolia, / Ministry of Environment and Tourism, V National Development Agency, / National Water Committee etc., Project Steering Committee The Project Steering Committee is newly established as the Minister of Finance order XLI157 as of 27th of June. 2018. PSC Head: / State secretary of MOF PSC Members: / Director of Development Financing Department of MOF, / Director General of Financial Control and Risk Management Department of MOF, / Director of Policy and Planning Department of Ministry of Energy, "0OD BURTC[H, AUDIT" [[C. ai member firm of Moore Stephens Interoamional Or "Mining Infrastructure inNestment Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the year ended December 31, 2018 / Director of Land Utilization. Integrated Water Policy and Regulatory Department of Ministry of Environment and Tourism. V Head of Sector Development Policy and Co-Ordination Division of National Development Agency, V Director of Environmental evaluation and Audit Department of Ministry of Environment and Tourism, $ Director of Financial Division of Public Administration Department of Ministry of Mining and Heavy Industry, v Director of Legal Division of Public Administration Department of Ministry of Mining and Heavy Industry. V Specialist of Development Financing Department of MOF, and / Specialist of Policy and Planning Department of Ministry of Energy. PSC Secretary: V Coordinator of Mining Infrastructure Investment Support project (No voting right). 2. Summary of significant accounting policies a) Statement of compliance The Financial Statements include following statements which are accepted by World Bank. I. Balance Sheet: 2. Statements of Project Sources and Uses of Funds; 3. Statement of Expenditures; 4. Designated Account statement; and 5. Notes to the Financial Statements. b) Basis of preparation The Financial Statements are prepared in accordance with International Public Sector Accounting Standards (IPSASs) issued by the International Federation of Accountants. The Project's financial statements are prepared on the cash basis of accounting. The recording of the Project accounting should be made according to Financial Management Manual approved by the World Bank. The Project utilizes financial software named "PACS" accounting system developed by "Infosvstems" LLC, which is designed for accounting of project activity. c) Basis of measurement The Financial Statements are presented in US Dollar ("USD"). Transactions denominated in currencies other than USD are translated at rates at the dates of the transactions stated by the depository bank. Any gains and losses are reflected in the Statements of Project Sources and Uses of Funds. The Project records its transactions on "PACS" accounting system in dual currencies, which are USD and MNT. d) Basis of presentation "on) Bt1RTGVI,AUtPIT"' Lit a meinber firni of MIoore Stephetis Intertiltionall "Mining Infrastructure investment Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the year ended December 31. 2018 The account balance should be presented by the cumulative amount for the period January 1, 2018 to December 31, 2018 in the Project financial statements. e) Bank account and petty cash account Designated Account in USD accounts in should be opened in banks after World Bank's approval. The ceiling of the Bank Accounts are as follows: 1. IDA Credit - 2,500.000 USD 2. AUSAID Grant - 400,000 USD PMU opened Designated Accounts and Operating Accounts to manage and use the project funds. The eligible expenditures of training and incremental operating costs and local consultant service have been paid from the operating account. The ceiling of the PMU operating account is MNT 27,000.000 and the ceiling of the RBA operating accounts is MNT 13,600,000 according to the Financial Management Manual. 3. Disbursement progress a) Disbursement of IDA Credit 4888-MN As of December 31, 2018, the project had received $17,814,635.52 (80.06% of the total credit) through the DA as financing from IDA Credit 4888-MN and had disbursed $15,335,809.98 (68.92% of the total credit). The amount of the IDA Credit re-allocated per the amendment to the agreement dated September 28. 2014 has been compared with the actual disbursements as of December 31, 2018. Amount of the fund re- Actual disbursement X2 Category allocated In USD* In SDR In USD In SDR* Goods and non- coslig evcs 1,954,059.95 1.405.000.00 1 284,073.02 923.268.81 consulting services 2 Consultant services 17,099.763.05 12,295,000.00 11,137,847.12 8,008,288.18 Training and Workshops 1,898,428.35 1,365,000.00 1 839,422.27 1,322,573.69 4 Operating costs 1,300,388.65 935,000.00 1.074,467.58 772,559.18 Total 22,252,640.00 16,000,000.00 15,335,809.98 11,026,689.86 t4ctual disbursement in USD as of December 31, 2018 have been translated into SDR at the exchange rate stated at https .'/ iiw. inforg Also, the amount of the fund re-allocated in SDR as of December 31, 2018 have been translated into USD at the exchange rate stated at https:/'riw.hn oro,. b) Disbursement of AUSAID Grant TF016382-MN As of December 31, 2017, the project had received $3,898.306.03 (96.25% of the total grant) through the DA as financing from AUSAID Grant TF016382-NN and disbursed $3.574,239.91 (88.25% of the total grant). "GD1 H3URTGHI, -XUPIT" I C. a inember firmn of Moore Stephens International -Mining Infrastructure Investment Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statenients for the %ear ended ecenber 31, 2018 Mongolia - Australia Partnership for Sustainable Development Trust fund (TF016382) re- allocated per the amendment to the agreement dated April 14. 2015 has been compared with the actual disbursements as of December 31. 2018. /USD/ Amount of the Actual disbursement & Category fund re- allocated In USD Percentage I Goods and non-consulting services 1,120,000.00 1,119,557.79 99.96% 2 Consultant services 2.500,000.00 2,025,139.30 81.01% 3 Training and Workshops 310,000.00 309.602.21 99.87% 4 Operating costs 120,000.00 119.940.61 99.95% Total 4,050,000.00 3,574,239.91 88.25% 4. Items in the balance sheet a) Cash and cash equivalents Summary of transaction statements of Operating Bank Accounts and Petty Cash Accounts for the period between 2018.01.01 and 20 18.12.31 are indicated as follow: 1. Operating bank account of PMU Credit N24888-MN At Dec 31, 2018 At Dec 31, 2017 (in USD) (in USD) Beginning balance 2.096.77 5,732.98 Add: Received from DA-A 180,517.86 42,970.17 Received from DA-B - 25,451.55 Received from OA-RBA 17 385.73 Received from OA-RBA 18 848.88 - Received from OA-RBA 20 104.07 - Total interest earnings - 111.45 Accounts receivable 2,805.36 6,2 13.96 Total amount 184.661.90 74,747.13 Deduct: Total expenditure 177,208.54 627721 .88 Transferred to petty cash - - Transferred to DA-A - 7,465.67 Transferred to DA-B - 1,523.96 Total bank charges - 51.99 "GD) BU'RTGE1, AUDIT" LiC, a mnember firm (if Moore Stephens International "Mining Infrastructure Investment Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the %ear ended December 31, 2018 Disbursement of interest income 397.57 Account receivable 2,779.76 6,213.96 Foreign exchange loss - 8.31 Total amount 179,988.30 78,383.34 Closing balance 6,770.37 2,096.77 II. Operating account for the RBA Galba-Unsh-Dolood's Gobi At Dec 31, At Dec 31, 2018 (in USD) 2017 (in USD) Beginning balance 205.923 82.23 Add: Transferred to DA-A 17,703.39 33992.05 Total interest earnings - 68.06 Foreign exchange gain 352.30 - Total amount 18,055.69 34,060.10 Deduct: Total expenditure 17,412.73 30,982.62 Transferred to DA-A - 3.246.10 Transferred to DA-B - 7.52 Transferred to OA 848.88 - Total bank charges - 0.16 Total amount 18,261.61 34236.41 Closing balance 0.00 205.92 III. Operating account for the RBA Altain Uvur Gobi At Dec 31, 2018 At Dec 31, 2017 (in USD) (in USD) Part A- Account transactions Beginning balance 102.13 84.49 Add: Transferred to DA-A 18,050.20 27,812.23 Total interest earnings - 53.73 Foreign exchange gain 1.86 26.64 Total 18,052.06 27,892.60 1,0D BURTG [I, AUDIT" LI,C. a member firmi oif Moore Stephens International L 0'9 "Mining Infrastructure Investment Support Project Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the Year ended December 31. 2018 Deduct: Total expenditure 18,050.12 26,928.77 Transferred to DA-A - 889.75 Transferred to DA-B - 25.44 Transferred to OA 104.07 - Total bank charges - 31.00 Total 18,154.19 27,874.96 Closing balance - 102.13 IV. Operating account for the RBA Umard Goviin Guveet At Dec 31, At Dec 31, 2017 2018 (in USD) (in USD) Part A- Account transactions Beginning balance 324.06 1,071 .80 Add: Transferred to DA-A 17.602.27 28,015.94 Total interest earnings - 128.36 Total 17,602.27 28,144.30 Deduct: Total expenditure 17,532.85 27,686.34 Transferred to OA 385.73 17.50 Transferred to DA-A - 1,184.00 Total bank charges - - Foreign exchange loss 7.75 4.20 Total 17,926.33 28,892.04 Closing balance - 324.06 V. Petty Cash Account of PMU At Dec 31, At Dec 31, 2017 2018 (in USD) (in USD) Beginning balance 1.04 1.04 Add: Transferred from OA - 1.184.00 Total amount 1,184.00 "OD IllRTGUL AUDIT" LLC.a member firm of Moore Stephens International 30 "Mining Infrastructure Investment Support Project" Credit No: 4888-MN & Grant No: TF016382 Financial Statements for the Near ended December 31, 2018 Deduct: Total expenditures - 1,184.00 Total - 1,184.00 Closing balance 1.04 1.04 5. Procurement contracts In order to assure whether procurement of the project had been conducted in compliant with the Procurement Guidelines issued by the World Bank, we have reviewed one contract procuring consulting services (100%) in 2018. This procurement was conducted according to the procurement Guidelines issued by the World Bank. 6. Events after reporting period Below expenditure of USD 21.174.51. which refers to the reporting year, had not been claimed to the World Bank as of December 31, 2018. However, it was claimed and replenished in January 2019. International Development Association Credit: IDA 4888-MY Amount in Category USD Goods and non-consulting services - Consultant services 16,015.46 Training and Workshops - Operating costs 5,159.05 Total 21,174.51 Below expenditure of USD 75,933.80, which refers to the reporting year, had not been claimed to the World Bank as of December 31, 2018. However, it was claimed and replenished in January 2019. Mongolia - Australia Partnership for Sustainable Development Trust fund (TF016382) Amount in CategoryUS USD Goods and non-consulting services - Consultant services 75,933.80 Training and Workshops - Operating costs - Total 75,933.80 -GI) BURTCULI AtTDIT" 1.1 C.a iieniber firin (f Wort Ste phens International