The World Bank 1818 H Street N.W. (202) 477-1234 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS - March 3 0, 2012 H.E. D. Khayanhyarvaa L Minister of Finance J4U (1tEA Ministry of Finance (dAOAAr/ ' Government Building 2 Corpus D S. Danzangyn Gudamj 5/1 Ulaanbaatar, 15160 Mongolia Re: Mongolia: IDF Grant for Institutional Strengthening for Donor Assistance Management Project LDF Grant No. TF011622 Excellency: In response to the request for financial assistance made on behalf of Mongolia ("Recipient"), I am pleased to inform you that the International Bank for Reconstruction and Development ("World Bank") proposes to extend to the Recipient a grant from the World Bank's Institutional Development Fund ("IDF") in an amount not to exceed three hundred fifty thousand United States Dollars (U.S.$350,000) ("Grant") on the terms and conditions set forth or referred to in this letter agreement ("Agreement"), which includes the attached Annex, to assist in the financing of the project described in the Annex ("Project"). The Recipient represents, by confirming its agreement below, that it is authorized to enter into this Agreement and to carry out the Project in accordance with the terms and conditions set forth or referred to in this Agreement. Please confirm the Recipient's agreement to the foregoing by having an authorized official of the Recipient sign and date the enclosed copy of this Agreement, and returning it to the World Bank. Upon receipt by the World Bank of this countersigned copy, this Agreement shall become effective as of the date of the countersignature; provided, however, that the offer of this Agreement shall be deemed withdrawn if the World Bank has not received the countersigned copy of this Agreement within ninety (90) days after the date of signature of this Agreement by the World Bank, unless the World Bank shall have established a later date for such purpose. Very truly yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Klaus Rohland Country Director, Mongolia H.E. D. Khayanhyarvaa Page 2 March 30, 2012 AGREED: MONGOLIA By Authorized Reprentave Name 13. HNYAKHYAR\JAA- Title 4\V6 eY o( Fin\avce, Date W Wi2 Enclosures: (1) Standard Conditions for Grants Made by the World Bank Out of Various Funds, dated February 15, 2012. (2) Disbursement Letter of the same date as this Agreement, together with World Bank Disbursement Guidelines for Projects, dated May 1, 2006. H.E. D. Khayanhyarvaa Page 3 March 30, 2012 IDF Grant No. TF011622 ANNEX Article I Standard Conditions; Definitions 1.01. Standard Conditions. The Standard Conditions for Grants Made by the World Bank Out of Various Funds dated February 15, 2012 ("Standard Conditions") constitute an integral part of this Agreement. 1.02. Definitions. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the Standard Conditions or in this Agreement. Article II Project Execution 2.01. Project Objectives and Description. The objective of the Project is to strengthen the government's ability to manage development projects funded by the Official Donor Assistance (ODA) in Mongolia, through: (a) establishing result-oriented Monitoring and Evaluation (M&E) systems with a focus on effective and efficient delivery of intended results of development projects; (b) strengthening M&E network and capacity; and (c) enhancing the quality and accessibility of information for decision makers and stakeholders. The Project consists of the following parts: Part 1. Development of Result-Oriented M&E System for ODA-funded Projects 1.1 Carrying out of a diagnostic study of existing M&E practice for the development projects; 1.2 Development of a result-oriented M&E framework, based on the results of the diagnostic study, including consultative and brainstorming workshops and seminars among key stakeholders, and formulation, piloting and implementation of relevant M&E regulations and guidelines; 1.3 Development of a result-oriented M&E Management Information System (MIS) for relevant M&E departments of selected ministries, including the carrying out of a needs assessment, training of M&E staff of the national network, procurement, installment, piloting and implementation of computerized M&E MIS, and development and implementation of a Financial Management Information System for ODA-funded projects; and 1.4 Project management. Part 2. Strengthening of M&E Capacity at National and Local Levels 2.1 Training of key staff of the M&E network at the national level on M&E strategy, principles and practices, including south-south learning activities for key stakeholders from the Ministry of Finance, Cabinet Secretariat, selected line ministries and the provincial M&E networks; 2.2 Training of staff of project management units and local M&E staff on M&E guidelines, procedures and good practices; and H.E. D. Khayanhyarvaa Page 4 March 30, 2012 2.3 Design and implementation of a knowledge sharing and public awareness program for various stakeholders, covering, inter alia, M&E principles, quality and transparency of information, communications strategy, usage of information for decision-making, third party monitoring and community participation. Part 3. Support for the Utilization of M&E Results to Inform Strategic and Operational Decision- Making Carrying out of workshops to disseminate findings and recommendations for M&E activities in key sectors and to summarize and share lessons and experience from the Project implementation. 2.02. Project Execution Generally. The Recipient declares its commitment to the objectives of the Project. To this end, the Recipient shall carry out the Project through the Development Financing and Cooperation Department of the Ministry of Finance in accordance with the provisions of: (a) Article II of the Standard Conditions; (b) the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011 ("Anti-Corruption Guidelines"); and (c) this Article II. 2.03. Institutional and Other Arrangements. The Recipient shall establish and maintain, throughout the period of Project implementation, a Steering Committee, chaired by the State Secretary of the Ministry of Finance and consisting of the Director-Generals of M&E Departments of line industries and the Cabinet Secretariat, responsible for providing overall guidance to the Development Financing and Cooperation Department to better coordinate activities among government M&E networks. 2.04. Project Monitoring, Reporting and Evaluation. (a) The Recipient shall monitor and evaluate the progress of the Project and, upon the World Bank's request, prepare Project Reports, in accordance with the provisions of Section 2.06 of the Standard Conditions and on the basis of indicators acceptable to the World Bank. Each Project Report shall cover such period as shall be indicated in the World Bank's request and shall be furnished to the World Bank not later than one month after the date of such request. (b) The Recipient shall, upon the World Bank's request, prepare the Completion Report in accordance with the provisions of Section 2.06 of the Standard Conditions. The Completion Report shall be furnished to the World Bank not later than five (5) months after the Closing Date. 2.05. Financial Management. (a) The Recipient shall ensure that a financial management system is maintained in accordance with the provisions of Section 2.07 of the Standard Conditions. (b) The Recipient shall ensure that interim unaudited financial reports for the Project are prepared and furnished to the World Bank as part of the Project Report not later than thirty (30) days after the end of each calendar quarter, covering the quarter, in form and substance satisfactory to the World Bank. H.E. D. Khayanhyarvaa Page 5 March 30, 2012 (c) The Recipient shall have its Financial Statements audited in accordance with the provisions of Section 2.07 (b) of the Standard Conditions. Each such audit of the Financial Statements shall cover the period of one (1) fiscal year of the Recipient. The audited Financial Statements for each such period shall be furnished to the World Bank not later than six (6) months after the end of such period. 2.06. Procurement (a) General. All goods, non-consulting services and consultants' services required for the Project and to be financed out of the proceeds of the Grant shall be procured in accordance with the reqbirements set forth or referred to in: (i) Section I of the "Guidelines: Procurement of Goods, Works and Non- consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011 ("Procurement Guidelines"), in the case of goods and non-consulting services; (ii) Sections I and IV of the "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011 ("Consultant Guidelines") in the case of consultants' services; and (iii) the provisions of this Section, as the same shall be elaborated in the procurement plan prepared and updated from time to time by the Recipient for the Project in accordance with paragraph 1.18 of the Procurement Guidelines and paragraph 1.25 of the Consultant Guidelines ("Procurement Plan"). (b) Definitions. The capitalized terms used in the following paragraphs of this Section to describe particular procurement methods or methods of review by the World Bank of particular contracts, refer to the corresponding method described in Sections II and III of the Procurement Guidelines, or Sections II, III, IV and V of the Consultant Guidelines, as the case may be. (c) Particular Methods of Procurement of Goods and Non-consulting Services. Goods and non-consulting services shall be procured under contracts awarded on the basis of Shopping. (d) Particular Methods of Procurement of Consultants' Services (i) Except as otherwise provided in item (ii) below, consultants' services shall be procured under contracts awarded on the basis of Quality- and Cost-based Selection. (ii) The following methods may be used for the procurement of consultants' services for those assignments which are specified in the Procurement Plan: (A) Selection based on Consultants' Qualifications; and (B) Selection of Individual Consultants. (e) Review by the World Bank of Procurement Decisions. The Procurement Plan shall set forth those contracts which shall be subject to the World Bank's Prior Review. All other contracts shall be subject to Post Review by the World Bank. H.E. D. Khayanhyarvaa Page 6 March 30, 2012 Article HI Withdrawal of Grant Proceeds 3.01. Eligible Expenditures. The Recipient may withdraw the proceeds of the Grant in accordance with the provisions of: (a) Article III of the Standard Conditions; (b) this Section; and (c) such additional instructions as the World Bank may specify by notice to the Recipient (including the "World Bank Disbursement Guidelines for Projects" dated May 2006, as revised from time to time by the World Bank and as made applicable to this Agreement pursuant to such instructions), to finance Eligible Expenditures as set forth in the following table. The table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Grant ("Category"), the allocations of the amounts of the Grant to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category: Category Amount of the Grant Percentage of Allocated Expenditures to be (expressed in USD) Financed (inclusive of Taxes) (1) Consultants' services 175,830 100% (2) Goods and non-consulting 70,000 100% services (3) Audit 9,000 100% (4) Training and Workshops 95,170 100% TOTAL AMOUNT 350,000 For the purposes of this Section, the term "Training and Workshops" means reasonable expenditures incurred by the Recipient for the carrying out of training, workshop and seminar activities, including expenditures for facilities rental, materials printing and photocopying, supplies, course fees, and travel and subsistence of trainees. 3.02. Withdrawal Conditions. Notwithstanding the provisions of Section 3.01 of this Agreement, no withdrawal shall be made for payments made prior to the date of countersignature of this Agreement by the Recipient. 3.03. Withdrawal Period The Closing Date referred to in Section 3.06 (c) of the Standard Conditions is three years after the date of countersignature of this Agreement by the Recipient. Article IV Recipient's Representative; Addresses 4.01. Recipient's Representative. The Recipient's Representative referred to in Section 7.02 of the Standard Conditions is its Minister of Finance. 4.02. Recipient's Address. The Recipient's Address referred to in Section 7.01 of the Standard Conditions is: H.E. D. Khayanhyarvaa Page 7 March 30, 2012 Ministry of Finance Government Building 2 Corpus D S. Danzangyn Gudamj 5/1 Ulaanbaatar, 15160 Mongolia Facsimile: (976-11) 32-02-47 4.03. World Bank's Address. The World Bank's Address referred to in Section 7.01 of the Standard Conditions is: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable: Telex: Facsimile: INTBAFRAD 248423 (MCI) or 1-202-477-6391 Washington, D.C. 64145 (MCI)