"NIISLEL AUDIT" LLC 1 - Certified audit, appraisal and accounting consultancy company Date:JLA. , 6W INDEPENDENT AUDITOR'S REPORT To: Mrs. Khishigbuyan.D, Chief Technical Advisor Education Quality Reform Project Credit No: 5488-MN We have audited the project Financial Statements comprising the Balance Sheet, the Statement of Project Sources and Uses of Funds, Disbursement Report by project activity and the Designated Account Statement of the Education Quality Reform Project (Credit No:5488-MN) for the period from December 31, 2017 to December 31, 2018. These reports are the responsibility of the project management. Our responsibility is to express an opinion thereon based on our audit. We conducted our audit in accordance with the International Standards on Auditing issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the project financial statements are free of material misstatement. An audit includes examining on test basis, evidence supporting the amounts and disclosures in the annual financial reports. 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 our audit provides a reasonable basis for our opinion. The management policy of Education Quality Reform Projects is to prepare the project Financial Statements on the cash receipts and payments basis in conformity with the International Public Sector Accounting Standards (IPSAS). On this basis, cash receipts are recognized when received and cash expenditures are recognized when paid rather than when incurred. In our opinion, the project Financial Statements have been prepared in accordance with the IPSAS issued by the Public Sector Committee of the International Federation of Accountants, present fairly the cash receipts, and payments of the project during the year ended December 31, 2018 and, in all material respects expenditures have applied to the purpose intended in the Financing Agreement, Credit No: 5488-MN IISLEL U LC Ulaanbatar city, Sukhbaatar district, Baga toiruu-44 Phone/Fax: 31-89-18, 7 12009 _ tc--' ' t E-mail: info@nfislelauditmn CERT' The Government of Mongolia The International Development Association Credit N2: 5488-MN Education Quality Reform Project BALANCE SHEET For the period from December 31, 2017 to December 31, 2018 /In USD/ Notes 2018.12.31 2017.12.31 ASSETS: Cash and cash equivalents 3.1 1,587,987.62 2,774,701.50 Designated account 1,587,518.97 2,774,153.50 Sub-Account 468.65 548.00 Advance 3.2 997.52 997.52 Cumulative Project Expenditures 3.3 10,145,806.13 6,653,159.12 Goods 3.3(a) 4,562,178.61 2,229.288.63 Non Consulting services 3.3(b) 96,484.19 75,580.67 Consultant services 3.3(c) 1,894,471.19 1,241,001.93 Training 3.3(d) 535,345.20 335,185.87 School Grants 3.3(e) 2,954,414.88 2,699,298.07 Incremental Operating Costs 3.3(f) 102,912.06 72,803.95 TOTAL ASSETS 11,734,791.27 9,428,858.14 FUNDS: 3.4 IDA's fund 11,520,800.00 9,270,800,00 Other source of funding 213,991.27 158,058.14 TOTAL FUNDS 11,734,791.27 9,428,858.14 Prepared by: i1pprovedb, b N.ENKHCHIMEG D. ISHIGBUYAN Financial Management Specialist Chi a ILC, "NIISLEL AUDIT" LLC - 4Certified audit, appraisal and accounting consultancy company Date: 4 Pq INDEPENDENT AUDITOR'S REPORT To: Mrs. Khishigbuyan.D, Chief Technical Advisor Education Quality Reform Project Credit No: 5488-MN We have audited the accompanying Statement of Sources and Uses of Funds of Education Quality Reform Project submitted to the World Bank for the period from December 31, 2017 to December 31, 2018 in support of credit withdrawals under the Financing Agreement for Credit No:5488-MN. We conducted our audit in accordance with generally accepted auditing standards that included examination, on a test basis, of evidence supporting the amounts and disclosures in the Statement of Sources and Uses of Funds. 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 our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Sources and Uses of Funds submitted together with the internal controls and procedures involved in their preparation can be relied upon to support the application for credit withdrawals. "NISLEL-AUDIT" LL T ,TT 72i7- Ulaanbaatar city, Sukhbaatar district, Baga toiruu-44 Phone/Fax: 31-89-18, 7912009§ E-mail: info@nfislelaudit.nn - .3 The Government of Mongolia The International Development Association Credit X2: 5488-MN Education Quality Reform Project STATEMENT OF PROJECT SOURCES AND USES OF FUNDS For the period from December 31, 2017 to December 31, 2018 /in USD/ Cumulative to Dc Cumulative to 31,2018 Dec 31, 2017 SOURCES OF FUNDS: IDA's fund 3.4 11,520,800.00 9,270,800.00 Other source of funding 3.4 213,991.27 158,058.14 TOTAL SOURCESOF 11,734,791.27 9,428,858.14 FUNDS USES OF FUNDS: Advance payment for rent 3.2 997.52 997.52 Goods 3.3(a) 4,562,178.61 2,229,288.63 Non Consulting services 3.3(b) 96,484.19 75.580.67 Consultant services 3.3(c) 1,894,471.19 1,241,001.93 Training 3.3(d) 535,345.20 335,185.87 School Grants 3.3(e) 2,954,414.88 2,699,298.07 Incremental Operating Costs 3.3(f) 102,912.06 72,803.95 TOTAL USES OF FUNDS 10,146,803.65 6,654,156.64 SURPLUS OF FUNDS OVER 1,587,987.62 2,774,701.50 USES Prepared by: Approved by' ENKHCHIMEG.N Y Financial Management Specialist Ch+ ecialAAdviAsor - NHSLEL-AUDIT Co.,Ltd CERTIED ACCOUNTNG о о а а о \ \ \ \ \ о oq ц� И h! 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АЭ . .. , _ � г � _, ' � .. _ . _.г "TVIISLEL AUDIT" LLC Certified audit, appraisal and accounting consultancy company Date: vq INDEPENDENT AUDITOR'S REPORT To: Ms. Khishigbuyan.D, Chief Technical Advisor Education Quality Reform Project Credit No: 5488-NM We have audited the accompanying Statement of Expenditures (SOEs) of Education Quality Reform Project submitted to the World Bank for the period from December 31, 2017 to December 31, 2018 in support of credit withdrawals under the Financing Agreement, Credit No: 5488-MN. We conducted our audit in accordance with generally accepted auditing standards that includcd examination, on a test basis, of evidence supporting the amounts and disclosures in the Statement of Expenditures. 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 our audit provides a reasonable basis for our opinion. 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We conducted our audit in accordance with generally accepted auditing standards that included examination, on a test basis, of evidence supporting the amounts and disclosures in the Designated Account Statement. 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 our audit provides a reasonable basis for our opinion. In our opinion, the Designated Account Statement submitted together with the internal controls and procedures involved in their preparation can be relied upon to support the application for credit withdrawals. AYg"HT Ulaanbaatar city, Sukhbaatar district, Baga toiruu-44 PhonelFax- 31-89-18, 120095, E-mail: info@nfisielaudit.mn The Government of Mongolia The International Development Association Credit NL,: 5488-MN Education Quality Reform Project DESIGNATED ACCOUNT STATEMENT For the period from December 31, 2017 to December 31, 2018 /in USD/ Dec 31, 2018 Dec 31, 2017 PART A - Account transactions Beginning balance 2,774,153.50 773,937.09 Add 11,731,615.96 6,349,401.84 IDA Advance 11,520,800.00 6,270,800.00 Earned Interest 210,815.96 78,601.84 Deduct 10,144,096.99 4,349,185.43 Goods 4,559,490.76 2,136,051.97 Non Consulting services 40,912.78 Consultant services 1,586,514.84 690,808.62 Training 317,641.34 114,988.44 School Grants 2,954,414.88 1,220,854.99 Transferred to sub account 681,569.88 186,293.59 Bank charges 0.00 187.82 Operating costs 3,552.51 Ending balance 1,587,518.97 2,774,153.50 PART B - Account reconciliations Amount advanced by the IDA 11,520,800.00 6,270,800.00 Ending balance of the designated account at the end of year 1,587,518.97 2,774,153.50 Add 10,144,096.99 4,349,185.43 Amount claimed and withdrawn for this year 10,144,377.01 4,349,185.43 Deduct 2,984,969.46 852,538.93 Earned Interest 210,815.96 78,601.84 Beginning balance of the designated account at 2,774,153.50 773,937.09 the Jan 01,2017 Total advance to Designated account for 11,520,800.00 6,270,800.00 Prepared by: Approved by: ENKHCHIMEG.N 11HISfHGBUYAN. D Financial Management Specialist h ef cniqal Advisor cjiz "NIISLEL AUDIT" LLC '14i Certified audit, appraisal and accounting consultancy company Date: INDEPENDENT AUDITOR'S REPORT To: Mrs. Khishigbuyan.D, Chief Technical Advisor Education Quality Reform Project Credit No: 5488-MN We have audited the accompanying Operating Account Statement of Education Quality Reform Project (Credit No:5488-MN) submitted to the World Bank for the period from December 31, 2017 to December 31, 2018 in support of credit withdrawals under the Financing Agreement, Credit No: 5488-MN. We conducted our audit in accordance with generally accepted auditing standards that included examination, on a test basis, of evidence supporting the amounts and disclosures in the Operating Account Statement. 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 our audit provides a reasonable basis for our opinion. In our opinion, the Operating Account Statement submitted together with the internal controls and procedures involved in their preparation can be relied upon to support the application for credit withdrawals. "NIISLEL-AUDIT" LLC Ulaanbaatar city, Sukhbaatar district, Baga toiruu-44 Phone/Fax: 31-89-18, '120095 E-mail: info@nislelaudit.mn 40 The Government of Mongolia The International Development Association Credit X: 5488-MN Education Quality Reform Project OPERATING ACCOUNT STATEMENT For the period from December 31, 2017 to December 31, 2018 /in USD/ Dec 31, 2018 Dec 31, 2017 Beginning balance 548.00 10,385.81 Add 146,437.55 187,600.73 Other Income 0.00 800.00 Interest Earning 0.00 507.14 Advances from Designated account 142,519.75 186,293.59 Returned unspent expenditure 3,917.80 - Deduct 146,516.90 197,438.54 Advance payment for rent 0.00 997.52 Goods 0.00 2,286.78 Non Consulting services 3,545,02 34,774.27 Consultant services 92,486.74 98,454.77 Training 16,596.90 32,239.41 Operating cost 33,888.24 28,685.79 Ending balance 468.65 548.00 Prepared by: Approved by ENKHCHIMEG.N SHI VAN. Financial Management Specialist efiTehnical Advisor AUD!T,'. ry NOTES TO THE FINANCIAL STATEMENTS 1. PROJECT BACKGROUND BRIEF INTRODUCTION OF "EDUCATION QUALITY REFORM" PROJECT The project has been implemented by MECSS since the signing of the Financing Agreement between the government of Mongolia and the International Development Association to provide the soft loan of equal to USD 30 million. The project development objective is to improve the quality of primary education through increasing the outcome of primary level teaching of language, math and science and strengthening school level planning. The project beneficiaries are students, parents, teachers and school administrators of all 635 secondary schools. Under the component 1 on "Improving learning outcomes, the following activities will take place: Provide open source and training materials for native language, mathematics and natural science lessons; Increase the provision of scientific, literature and mathematics books and improve the libraries; Prepare and distribute books and training materials for disabled children; Develop a monitoring and evaluation strategy to evaluate native language, mathematics and creative-thinking skills and test it at the national level. By now, the primary level math and language assessment using international instruments have been developed and piloted. 8000 primary grades in all 609 schools have provided with STEM learning tools. All primary grades in schools of soums and aimags have been provided with reading book procured through the voucher scheme. Under the component 2 on "Prepare teachers and improve teacher's skills", the following activities are planned: Renew the primary school teacher pre-service training program and prepare for the international education accreditation, use training materials for native language, math and natural sciences, train teachers to improve their teaching methodology and skills, provide professional training for city, aimag, district education department professionals, methodologists and teachers; and support activities to develop and implement world standard criterion to evaluate teachers' teaching methodology and use of lesson hours and learning tools. By now, teacher's time-on-task study has been developed and piloted. The review of the pre-service teacher training program was completed. Training for primary teachers in reading methodology has been completed. Under the component 3 on "School Grants Program", USD 2000- USD 3000 funding will be provided to each school to develop the quality of elementary education, enrich the content of creative activities that support training program. Grants will be administered in 3 cycles providing in total 1100 grants. So far, three cycles have been implemented providing 1100 grants, including 200 grants for the first cycle, 450 grants on the second cycle and 450 grants on the third cycle. S ERTLIIErA;NL,L AUJDiT L ATPf pq Under component 4 on "System management, monitoring and evaluation", the following activities are planned: Integrate information of elementary education assessment and each child's development in the education management and information systems and support improvements of the education administration and management. By now, the Education Sector Information System has been working on integrating EGRA/ EGMA results into the online system. BRIEF PROGRESS REPORT ON ACTIVITIES OF 2018 Activities done under the Component 1 Under the component 1 on "Improving learning outcomes" * In the scope of improving the quality ofprimary education: Provide training tools on native language, science, and mathematics; Increase availability of scientific, literature and mathematics books; Increase classroom libraries; develop and distribute booksand training materials for disabled children: Develop assessment methodology to evaluate native language on mathematics skills and pilot the assessment at national level. Currently, the base line data for EGRA/EGMA international assessment tools have been collected and analyzed. * In the scope of increasing availability of books in 5,779 primary classroom libraries using the voucher scheme: "Deaf Education" NGO was contracted to provide management support to the Ministry of Education, Culture, Science, and Sports (MECSS) in increasing book availability of aimag and soum primary classrooms. Request for proposal to suggest books to be included in the best children's book collection was announced publicly on May 17th, 2018. On June 13-15"', 2018, 976 books were received from 20 publishing houses. 20 teachers from Ulaanbaatar, provinces and soums were invited to review and read submitted books and 584 books were selected. The catalogue was prepared on selected books. Online book order application was developed and received order of 463,926 books from 511 schools. * In the scope ofproject impact evaluation using randomized selection: "MMCG" LLC was contracted to collect data on August 22nd, 2018 and collected surveys from 5,007 students of 168 schools located in provinces and 1,440 students of 48 schools located in Ulaanbaatar. * In the scope ofdeveloping training modules on native language and training of60 national level trainers and 8,900 primary teachers: The Mongolian Institute of Education Research (MIER) was contracted in December 2018 to develop the teacher training modules and carry out Master trainers' training. Single source selection was used with approval of the World Bank. MIER conducted the training for 105 national level trainers with cooperation of Primary Education Policy Department of the MECSS. Follow-up training for primary teachers were organized for 1,787 primary teachers from 108 schools located in 21 provinces and 9 districts of Ulaanbaatar by Institute for Teacher Professional Development (ITPD). * In the scope of providing support to the Education Evaluation Center (EEC) and starting ground work for joining the PISA: The Education Evaluation Center prepared system analysis mapping for adaption of research analysis software and organization of training for 160 professionals in item development for primary grades. In preparation ofjoining the PISA, the preparatory activities are taking place under OECD schedule. * In the scope of providing equipment to the Education Evaluation Center: "SCJ Scanform Solution Pvt" Ltd was contracted through direct contracting and supplied 24 test scanners to EEC. * In the scope of providing training tools and books to sight and hearing impaired primaiy students: National consultant was contracted and prepared list of special training equipment. Additional list was received from school #29 and 116 and final list is prepared. Activities done under the Component 2 Under the component 2 on "Pre- and in-service professional development of teachers" * In the scope of developing training methodology to improve reading skill based on assessment results on native language skills of primary students: The MIER expert team was contracted the designed training modules based on the results of EGRA assessment on native language. * In the scope of providing equipment to MSUE for preparation of primary teachers: Classroom lesson observation room equipment were supplied to the Mongolian State University of Education. * In the scope of conducting professional development trainings: The Leadership Training for 30 specialists of Primary Education in Education and Cultural Departments of 21 provinces and 9 districts was organized with cooperation of Primary Education Policy Department of the MECSS. Activities done under the Component 3 Under the component 3 on "School Grants Program * In the scope of the school grants program: USD 2,000-3,000 is given to 450 schools under cycle 3 to fund projects initiated by them to improve quality of primary teaching. The grants were administered in 3 cycles providing total of 1,100 projects. At 1" stage in 2016, 200 schools, at 2nd stage in 2017, 450 schools and 450 schools received grant at the 3rd cycle. At 3rd stage in 2018, 450 schools from 21 provinces and 9 districts of Ulaanbaatar received 20 percent of the funding and completed the grant implementation. Monitoring of grant project implementation has been conducted by the MECSS and the World Bank team. Co.,Ltd * Monitoring of grant projects: Monitoring of grant project implementation has been conducted by project team, Education and Cultural Department of 21 provinces and Ulaanbaatar, as well as the MECSS and the World Bank team. Mr. Juan Prawda, Task team member of World Bank conducted monitoring at 6 schools of Umnugobi and Tuv provinces and 9 schools of Ulaanbaatar in cooperation with the Ministry team. Activities done under the Component 4 Under component 4 on "System management, monitoring and evaluation * System management monitoring and evaluation: Integrate information of elementary education assessment and each child's development in the education management and information system and support improvements of the education administration and management. The short-term local consultant prepared the DLI report and was sent to the World Bank. As specified in the financing agreement, day-to-day activities are managed by the project director and three key consultants. The consultants are responsible for project disbursement, procurement and financial operation, filing of project documents, contract management and project reporting. The project team consists of three qualified consultants, including Chief Technical Advisor, Procurement Consultant, and Financial Management Specialist, and one support staff, driver. In 2018, the procurement officer resigned and replacement was made. II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a) Compliance of statements The project financial statements comprise the Balance Sheet, the Statement of Project Sources and Uses of Funds, Disbursement Report by project activity, the Statement of Uses of Funds, and the Designated Account Statement. The Financial statements are prepared in accordance with the financial reporting guidelines for borrowers, issued by the World Bank, b) Basis ofpresentation The Financial statements are prepared in accordance with International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants (IFAC) and source of funding and expenditures were reported under cash based accounting method. Income is recognized when cash is received and disbursement is recognized when paid rather than at the time when expenses incurred. Project Management Unit uses Financial Management Manual approved by the World Bank and financial operations comply with this manual. c) Reporting measures The currency used for project reporting is USD. MNT incurred transactions are converted to USD using FIFO method when recorded and reported. d) Reporting period The financial statements reflect financial activities from the project effectiveness date of August 17, 2015 to December 31, 2018. The account balances of the financial statements as of December 31, 2018 were compared with the balances as of December 31, 2017. III. ITEMS IN THE BALANCE SHEET 3.1 Cash and cash equivalent The Project opened a designated account (DA) in USD and an operating accounting (OA) in MNT at the State Bank of Mongolia with permission of the Ministry of Finance and as specified in the Disbursement letter dated June18, 2015. Eligible expenditures of school grants program, procurement of goods, and international consulting service is paid directly from the designated account. Eligible expenditures of project operating costs and national consultancy services are paid from the operating account. According to the 10/6988 order of the State Secretary of Ministry of Finance, 13 December, 2017 from the beginning of the finance year 2018, the Sub account MNT bank location was opened in Treasury bank of MOF. The balances of cash and cash equivalents as of December 31, 2018 are as follow: CATEGORY 2018.12.31 (in USD) Petty cash At the commercial bank: Operating account 468.65 Designated account 1,587,518.97 TOTAL CASH T 1,58,87.62 3.2 Advance payment The Project Management Unit moved to "Khuvsgut lake" office building in 2017 and paid rental fee of USD 997,52 in advance. (Rent Deposit) 3.3 Cumulative Project Expenditures a) Goods In 2018, the project spent USD 1,583,962.61 for increasing availability of books in 5,779 primary classroom libraries using voucher method, USD 560,230.00 for last payment of STEM program, USD 110,372.88 for supply of 24 test scanners to the Education Evaluation Center, and USD 78,324.49 for supply of equipment to the Mongolian State University of Education. b) Non- consulting services Monitoring visits to schools by ECDs have been conducted under the Component 3 in 2018 on which USD 14,455.14 was spent. c) Consulting services ~~1,6 In compliance with the project activity plan, additional 4 international and national consultancy service contracts were established in 2018. 7 consultancy service contracts, including contracts established in 2018 and prior to 2018, were concluded and paid total of USD 567,480.49 for their services There have been no contract delayed. All consultants have performed on time. d) Training In the scope of carrying out 3d stage of School Grant Program, project proposal writing and project implementation training was organized for directors and training managers of 450 schools with cooperation of local Education and Culture Departments. In 2018, the project spent USD 183,617.90 for teacher development trainings of 1,787 primary teachers from 108 schools located in 21 provinces and 9 districts of Ulaanbaatar, professional development training for 30 officers of Education and Cultural Departments, and project proposal writing and project implementation training for directors and training managers of 450 schools. e) School grants program In 2018, 450 schools participated in the Cycle 3. All projects were implemented between September 2017 and May 2018. The project spent USD 215,116.81 for last payment of 3rd cycle of the grant program (20%). Based on observations during the program implementation, interview with school directors and officers of Education and Cultural Departments, and recommendations given from the MECSS, the guideline for school grant program was updated with approval of the World Bank. In compliance with the new guideline, project implementation reports of 2nd and 3rd cycles of the School Grant Program was received from project schools electronically through Education and Cultural Departments. We reviewed project implementation reports of 28 schools which is 13% of total project schools and total spending was USD 169,825.67 of which 79% or USD 135,611.88 spent for procurement of equipment, 5.9% or USD10,035.11 spent for trainings, and 14.06 % or USD 23,880.25spent for other expenses. All 450 schools submitted their reports. In accordance with the new guideline, original financial documents are required to be kept at project schools therefore we were unable to review those and provide confirmations. f) Incremental Operating Costs Following expenditures are recorded in the financial statements as operating expenses: Compensations of the project staff 28,088.33 Social Insurance Premium paid by the Project34,591.76 Project Office rental fee 23,985.90 Fuel 5,683.50 Stationary, communication costs and other 8,763.88 Rent deposit 1,798.70 TOTAL AMOUNT 102,912.06 3.4 Project source of funding a) Financing from the World Bank As of December 31, 2018 the project had received USD 11,520,800.00in 2 tranches from the World Bank since the commencement of the project and disbursement of USD 6,901,381.76was financed by the World Bank. The replenishment of the designated account: b) Other source offunding The bank account interest income and income from sale of bidding documents are reported as other sources of funding. Interest income 212,691.27 Other income 1300,00 TOTAL AMOUNT 213,991.27 V ,~iLP :vv Co.,Ltd CE RTI'