Ulaanbaatar Clean Air Project Credit No:5039-MN Financial statements as of December 31, 2018 Ulaanbaatar2019 "NIISLEL AUDIT" LLC Certified audit, appraisal and accounting consultancy company Date: $ ( . INDEPENDENT AUDITOR'S REPORT To: PMU Director N.Bayartogtokh Ulaanbaatar Clean Air Project Credit No: 5039-MN We have audited the project Financial Statements comprising the Balance Sheet, Project Sources and Uses of Funds by project activity, Disbursement Report and the Designated Account Statement of the Ulaanbaatar Clean Air Project Credit No: 5039-MN for the year ended 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 Ulaanbaatar Clean Air Project is to prepare the project Financial Statements on the cash receipts and payments basis in conformity with International Public Sector Accounting Standards (IPSAS). On this basis, cash receipts 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 International Public Sector Accounting Standard issued by the Public Sector Committee of the 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 expenditure have applied to the purpose intended in the Financing Agreement, Credit No: 5039-MN NIISLEL AUDIT LLC The Government of Mongolia The International Development Association Credit N: 5039-MN Ulaanbaatar Clean Air Project BALANCE SHEET For the period from December 31, 2017 to December 31, 2018 /In USD/ Balance category Notes Dec 31, 2018 Dec 31, 2017 ASSETS: Cash and cash equivalents 3 362,480.65 695,353.16 Designated account 332,889.18 524,315.46 Sub-Account 26,726.87 167,895.28 Management fee account 1,682.67 1,919.70 PMU Debt Cart Account 1,180.24 1,166.19 Cash on hand MNT 1.69 56.53 Cumulative Project Expenditures 4 13,196,370.05 11,638,662.69 Subsidies under part-A of the Project 4.1 5,154,078.67 4,830,157.75 Goods, Works, Consultants' services, Training and 4.2 6,130,374.12 5,095,450.17 Workshops, and Operating Costs under the Project Management Fee under Part C(3)(b) of the Project 4.3 1,849,865.56 1,651,198.42 Other expenditure 4.4 62,051.70 61,856.35 TOTAL ASSETS 13,558,850.70 12,334,015.85 FUNDS: 5 IDA's fund 13,471,663.25 12,251,642.59 Net interest earned 5.1 39,489.50 34,675.31 Other income 5.2 47,697.95 47,697.95 TOTAL FUNDS 13,558,850.70 12,334,015.85 e by:y: D.D/KEN .AY OGTOKH PMU Accountant PMU Director "NIISLEL AUDIT" LLC Certified audit, appraisal and accounting consultancy company Date: . . INDEPENDENT AUDITOR'S REPORT To: PMU Director N.Bayartogtokh Ulaanbaatar Clean Air Project Credit No: 5039-MN We have audited the accompanying Statement of Sources and Uses of Funds of the Ulaanbaatar Clean Air Project submitted to the World Bank during the year ended December 31, 2018 in support of credit withdrawals under the Financing Agreement, Credit No: 5039-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. NIISLEL AUDIT LLC The Government of Mongolia The International Development Association Credit N2: 5039-MN Ulaanbaatar Clean Air Project STATEMENT OF PROJECT SOURCES AND USES FUNDS For the period from December 31, 2017 to December 31, 2018 /In USD/ Cumulative Cumulative to Sources and Uses Funds Notes to Dec 31, For 2018 Dec 2018 31, 2017 SOURCES OF FUNDS: IDA's fund 13,471,663.25 1,220,020.66 12,251,642.59 Net interest earned 5.1 39,489.50 4,814.19 34,675.31 Other income 5.2 47,697.95 - 47,697.95 TOTAL SOURCES OF FUNDS 13,558,850.70 1,224,834.85 12,334,015.85 USES OF FUNDS: Subsidies under part-A of the 4.1 5,154,078.67 323,920.92 4,830,157.75 Project Goods, Works, Consultants' services, Trainig and Wrkshos, and eing Cs 4.2 6130,374.12 1,034,923.95 5,095,450.17 Workshops, and Operating Costs under the Project Management Fee under Part 4.3 1,849,865.56 198,667.14 1,651,198.42 C(3)(b) of the Project Other expenditure 4.4 62,051.70 195.35 61,856.35 TOTAL SOURCES OF FUNDS 13,196,370.05 1,557,707.36 11,638,662.69 SURPLUS OF FUNDS OVER 362,480.65 (332,872.51) 695,353.16 USES Prered by: App D.D I REN . AYARTOGTOKH PMU Accountant PMU Director "NIISLEL AUDIT" LLC Certified audit, appraisal and accounting consultancy company Date/4e . W INDEPENDENT AUDITOR'S REPORT To: PMU Director N.Bayartogtokh Jlaanbaatar Clean Air Project Credit No: 5039-MN We have audited the accompanying Statement of Expenditures (SOEs) of the Ulaanbaatar Clean Air Project submitted to the World Bank during the year ended December 31, 2018 in support of credit withdrawals under the Financing Agreement, Credit No: 5039-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 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. In our opinion, the Statement of Expenditures 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 The Government of Mongolia The International Development Association Credit N2: 5039-MN Ulaanbaatar Clean Air Project 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 Up to December 31, 2017 (WAl-27) 12,576,699.60 12,251,642.59 WA-281 Replenishment 28/Feb/2018 09/Mar/2018 325,057.01 325,057.01 WA-29 Replenishment 13/Jun/2018 08/Aug/2018 352,989.52 352,989.52 WA-30 Replenishment 27/Sep/2018 10/Oct/2018 119,144.65 119,144.65 WA-31 Replenishment 18/Oct/2018 30/Oct/2018 422,829.48 422,829.48 WA-3 22 Replenishment 26/Mar/2019 19/Apr/2019 466,230.26 (466,230.26) WA-3 33 Replenishment 03/May/2019 10/Ju L n/2019 194,459.52 (194,459.52) For the reporting period 2018 (WA28-33) 1,880,710.44 1,220,020.66 (660,689.78) Up to December 31, 2018 (WAl-33) 14,457,410.04 13,471,663.25 (660,689.78) 1. The expenditure of USD 325,057.01 expensed in 2017, was claimed and credited through WA-28 in 2018. 2. The expenditure credited through WA-32, which is amounting USD 466,230.26 expensed in 2018, but was claimed to World Bank in 2019. 3. The expenditure credited through WA-33, which is amounting USD 194,459.52 expensed in 2018, but was claimed to World Bank in 2019. Pr ared by: pp : D.D ISUREN .B TO TOKH PM Accountant PMU Director The Government of Mongolia The International Development Association Credit .N2: 5039-MN Ulaanbaatar Clean Air Project DETAILED STATEMENT OF EXPENDITURE (IDA Withdrawals) For the reporting period 2017 /In USD/ Claimed Credited Categories Categories (2)Goods, Works, (2)Goods, Works, WA (1)Subsidies Consultants' services, (3)Management Consultants' (3)Management Numbers under part- Training and Fee under Part Total (I)Subsidies services, Fee under Part Total Difference A of the Workshops, and C(3)(b) of the under part-A of Training and C(3)(b) of the Project Operating Costs Project the Project Workshops, and Project under the Project Operating Costs under the Project WA-282 34,016.89 268,456.64 22,583.48 325,057.01 34,016.89 268,456.64 22,583.48 325,057.01 WA-29 3,391.18 298,558.02 51,040.32 352,989.52 3,391.18 298,558.02 51,040.32 352,989.52 WA-30 11,007.92 50,945.49 57,191.24 119,144.65 11,007.92 50,945.49 57,191.24 119,144.65 WA-31 95,882.43 300,807.21 26,139.84 422,829.48 95,882.43 300,807.21 26,139.84 422,829.48 WA-322 74,432.76 357,462.48 34,335.02 466,230.26 74,432.76 357,462.48 34,335.02 466,230.26 (466,230.26' WA-333 135,155.71 29,889.30 29414.51 194,459.52 (194,459.52 Total 319,870.00 1,037,662.50 198,120.93 1,555,653.43 144,298.42 918,767.36 156,954.88 1,220,020.66 (660,689.78) 1. The expenditure of USD 325,057.01 expensed in 2017, was claimed and credited through WA-28 in 2018. 2. The expenditure credited through WA-32, which is amounting USD 466,230.26 expensed in 2018, but was claimed to World Bank in 2019. 3. The expenditure credited through WA-33, which is amounting USD 194,459.52 expensed in 2018, but was claimed to World Bank in 2019. Prepared by: Approved by: D.DARISUREN N.BAYARTOGTO PMU Accountant PMU Directo "NIISLEL AUDIT" LLC Certified audit, appraisal and accounting consultancy company Date:j . INDEPENDENT AUDITOR'S REPORT To: PMU Director N.Bayartogtokh Ulaanbaatar Clean Air Project Credit No: 5039-MN We have audited the accompanying Designated Account Statement of the Ulaanbaatar Clean Air Project submitted to the World Bank during the year ended December 31, 2018 in support of credit withdrawals under the Financing Agreement, Credit No: 5039-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 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. NIISLEL AUDIT LLC The Government of Mongolia The International Development Association Credit N: 5039-MN Ulaanbaatar Clean Air 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 524,315.46 782,321.29 Add 1,224,705.78 1,296,547.95 IDA Advance 1,220,020.66 1,212,853.09 Interest Earning 4,685.12 7,590.69 Transferred from Management Fee Account - 25.00 Deduct 1,416,132.06 1,554,553.78 Subsidies under part-A of the project - 10,660.24 Goods, Works, Consultants' services, Training and 916,743.74 803,871.87 Workshop, and Operating Costs under the Project Management Fee 4,327.46 Bank charges 136.24 217.36 Transferred to Management Fee account 193,163.65 227,856.85 Transferred to Sub Fee account 301,760.97 505,737.46 Transferred to Cash and Hand - 2,250.00 Transferred to Debt Card - 3,960.00 Ending balance 332,889.18 524,315.46 PART B - Account reconciliations Amount advanced by the IDA 1,000,000.00 1,000,000.00 Ending balance 332,889.18 524,315.46 Add 706,600.32 510,359.85 Management Fee account and cash on hand 2,864.60 3,142.42 Sub account 26,726.87 167,894.28 Amount withdrawn but not claimed yet 660,689.78 325,057.01 Bank charges 4,764.13 2,710.20 Foreign Exchange Loss 11,554.94 11,554.94 Deduct 39,489.50 34,675.31 Interest earning 39,489.50 34,675.31 Total advance to Designated account for 1,000,000.00 1,000,000.00 Preared by: A d D.D IS . Y T H PM Accountant PMU Director "NIISLEL AUDIT" LLC Certified audit, appraisal and accounting consultancy company Date: -Wz ~,2O~ INDEPENDENT AUDITOR'S REPORT To: PMU Director N.Bayartogtokh Ulaanbaatar Clean Air Project Credit No: 5039-MN We have audited the accompanying Sub Account Statement of the Ulaanbaatar Clean Air Project submitted to the World Bank during the year ended December 31. 2018 in support of credit withdrawals under the Financing Agreement, Credit No: 5039-NIN. 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 Sub 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 The Government of Mongolia The International Development Association Credit N: 5039-MN Ulaanbaatar Clean Air Project SUB 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 171,037.70 20,468.33 Add 495,307.19 740,703.98 Interest Earning 382.57 350.50 Transferred to Designated Account 494,924.62 739,804.31 Foreign Exchange Gain 549.17 Deduct 636,753.42 590.134.61 Subsidies under part-A of the project 442,929.38 294,240.07 Goods, Works, Consultants' services, Training and Workshop, and Operating Costs under the Project 51,536.79 Management Fee under Part C(3)(b) of the Project 193,342.68 243,174.15 Bank charges 25.06 110.11 Foreign Exchange Loss 1,048.49 Transferred to Sub account 456.30 25.00 Ending balance 29,591.47 171,037.70 DY.Kove H PMU Accountant PMU Director The objectives of the Project are to enable consumers in ger areas to access heating appliances producing less particulate mnatter emissions and to further develop selected medium- term particulate matter abatement measures in Ulaanbaatar in coordination with development partners. The Pro~~~ject consists of the folloiworiatoiihdeeomn partners. The Pro cossto t owing parts, subject to such modifications thereof, as the Recipient and the Association may agree upon from time to achieve the objectives of the Project. Part A. Ger Area Particulate Matter Mitigation Implementation of a stove replacement program and a low pressure boiler replacement program, i ncludi ng: (1) Provision of capital subsidies to eligible households for the purchase of selected heating appliances including stoves (beginning September 2013 or upon completion of the stove component of the Millennium Challenge Corporation's Energy and Environment Project, whichever comes earlier), stoves for heating walls and low pressure boilers from eligible stove and pressure boiler producers and suppliers, and stove replacementp (2) technical support to stove and a low pressure boiler suppliers, includirngth (a) goods, technical assistance, and Operating Costs for the Stove Emissions and Efficiency'nesting Laboratory; (b) technical assistance and equipment for technical advice in addressing problems with the design and production of the stoves and low pressure boilers (c) technical assistance in the development of emissions standards for stoves mid low pressure boilers; (d) market development support and technical assistance to design and implement adjustment to the stove replacement program and for accomrmodating low pressure boilers; and (e) technical assistance in the establishment of a system of monitoring the quality of products supported by the Project, (3) monitoring and evaluation, and (4) Training for knowledge exchange. Part B. Central U'laanbaatar Particulate Matter Mitigation () Mitigation of Fugitive dust from lack of city greening Preparation of an action plan for city greening, and preparation and i dplementation of pilot, including: (a) assessment of greening programs in tJlaaiibaatar, evaluation of options and development recommrendation to improve greening, (b) preparation of a pilot project including support for bid document preparation; and (c) investment support for the supply and in stallation of grass and other eligible plants and trees in Ulaanbaatar on a pilot basis. (2) Mitigation of dust firm power plant emissions and ash ponds Carrying out of feasibility study for:(a) the installation of improved emission controls in Ulaanbaatar's combined heat and power plants-, and (b) the mitigation of dust from power plant ash ponds, the study of their environmental impacts, and recommending cost effective solutions. (3) District heating feasibility study and knowledge building (a) Carrying out of feasibility study for rehabilitation and sustainable expansion of district heating in Ulaanbaatar, (b) Complementary training on district heating policy, regulation and management. (4) Affordable housing policy technical assistance (a) Carrying out of assessments of current policies, laws and practices for affordable housing provision in Ulaanbaatar. evaluation of effectiveness towards meeting policy objectives, and introduction of lessons from international experiences on affordable housing. (b) Development of an affordable housing strategy for lIaanbaatar. Part C. Public Awareness Raising, Program Coordination, and Project Management (1) Air quality monitoring, management and analysis (a) Air quality monitoring and analysis equipment, including for the Ulaanbaatar Air Quality Agency. (b) Training urban air quality analysis and management. (2) Program Coordination support (a) Consultants' services to assist Ulaanbaatar's air pollution program coordination, including to maintain links with stakeholders, collect, synthesize and archive information on air quality for use by decision makers and the public; and provide to support to air quality working groups or coordination mechanism to improve effectiveness and sharing of information. (b) Training on air quality management and policy-making. (3) Project management, public awareness, and monitoring and evaluation. (a) Assistance to the development of a communication program for the Project. (b) Management Fee for Project management services. (c) Monitoring and evaluation. The Closing Date is June 30, 2019. The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Financing ("Category"), the allocations of the amounts of the Financing to each Category, and the percentage of expenditures to be financed for Eligible Expenditures each Category: Amount of the Financing Percentage of inancing Expenditures to be Category Allocated (expressed in Eindius of USD) Financed (inclusive of Taxes) (1)Subsidies under part-A of the Project 6,912,371.00 100% (2) Goods, Works, Consultants' services, Training and Workshops, and 6,092,784.00 100% Operating Costs under the Project (3) Management Fee under Part C(3)(b) 1.39 1,753.00 100% of the Project (4)Unallocated 603,093.00 100% TOTAL AMOUNT 15,000,000.00 a) Statement of compliance The financial monitoring reports comprise the balance sheet a summary of source and uses of funds, the statement of expenditures and the special account reconciliation statement. These financial monitoring reports have been prepared in accordance with Financial Monitoring Reports for World Bank financed Projects: Guidelines for Borrowers. b) Basis of preparation The financial monitoring reports are prepared in accordance with International Public Sector Accounting Standards (IPSASs) issued by the International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants and cash receipts and disbursement basis of accounting has been applied. On this basis, receipts are recognized when received or direct payment to creditors are made rather than when income is earned and disbursements are recognized when paid rather than when expenses are incurred. c) Basis of measurement The financial monitoring reports are presented in USD. Cash balances denominated in currencies other than USD are translated into USD at year end rates of exchange stated by the Bank of Mongolia. Transactions denominated in currencies other than USD are translated at rates at the dates of the transaction stated by the depository bank. Any gains and losses are reflected in the statement of sources and uses of funds d) Basis of presentation The accounts balances in the Financial Monitoring Reports as December 31, 2018 have been presented on December 31, 2017. e) Designated account In according to the Disbursement Letter, the project opened the Designated Account which is one segregated account for the loan financing at the Ulaanbaatar City Bank acceptable to the World Bank. The designated account presents in USD acceptable to the Word bank. The PMU opened the Designated, Sub-account. Management fee account, PMU Debt Cart account and Cash on hand for carrying out project activities. As of December 31, 2018 the cash and cash equivalents are as follows: /In USD/ 31-Dec-2018 31-Dec-2017 Designated account 332,889.18 524,315.46 Sub-Account 26,726.87 167,89528 Management fee account 1,682.67 1,919.70 PMU Debt Card Account 1,180.24 1,166.19 Cash on hand MNT 1.69 56.53 362,480.65 695,353.16 4.1 The expenditures for Subsidies under part-A of the Project /In USD/ Cumulative Dec 31, 2018 The cumulative project expenditure prior to the reporting period 4,850,081.44 Subsidies A 291.026.79 Subsidies B 42,936.41 5,154,078.67 4.2 The expenditures for Goods, Works, Consultants', training and Workshops, and Operating Costs under the Project /in USD/ Cumulative Dec 31, 2018 The cumulative project expenditure prior to the reporting period 4,240,041.51 Goods 917,542.65 Works 819,451.43 Consultants' services 145,381.74 Training and Workshops 7,956.79 Operating Costs - Total 6,130,374.12 CER' 4.3 The expenditures for Management Fee under Part C(3)(b) of the Project /In USD/ Cumulative Dec 31, 2018 The cumulative project expenditure prior to the reporting period 1,651,136.89 PMU Staff Salary 147,984.6 Stationary 326.19 Transportation and Fuel Cost 6,213.99 Rental 19,642.25 Communication and Telephone Cost 3,302.99 Office Supply and Administration 8,706.00 PMU Staff travel Cost Public Awareness Cost 10,603.04 Advertisement Cost 74.61 Auditing 1,875.00 Good for Project Managernent(office equipments) Total 1,849,865.56 4.4 Other expenditure /In USD/ 31-Dec-2018 31-Dec-2017 Bank Service Charges 2,932.96 2,710.20 Foreign Exchange Loss 11,587.65 11,615.06 Tender expense 1,65999 1,659.99 Other expenditure 45,871.1 45,871.1 62,051.70 61,856.35 For this reporting year, $1,220.020.66 finance was received by the WB. 5.1 Net interest earned -_-_ /In USD/ 31-Dec-2018 31-Dec-2017 Net interest earned 39,489.50 34,675.31 Total 39,489.50 34,675.31 5.2 Other income /In USD/ 31-Dec-2018 31-Dec-2017 Foreign Exchange Gain 128.26 128.26 Other Funds 47,569.69 47,569.69 Total 47,697.95 47,697.95 In the year of account, 8 new contracts were signed, contract payments worth 772,653.35USD from the previous year was made. Auditing inspections in accordance with international standards inspected all contracts and preliminary documents pertaining to the supplier selection and purchasing procedures and established that no violations were made. The project's end date has been extended to June 30, 2019 as requested by the Ministry of Finance.