AUDITOR'S REPO RT Mongolia Improved Governance of Extractives Project Financial statements as of December 31, 2018 Ulaanbaatar 2019 "NIISLEL AUDIT" LLC Certified audit, appraisal and accounting consultancy company Date: . . INDEPENDENT AUDITOR'S REPORT To: PIU Coordinator Sh.Tsolmon Mongolia Improved Governance of Extractives Project Grant No: TFOA2830 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 Mongolia Improved Governance of Extractives Project Grant No: TFOA2830 for the period ended December 31, 2018. The management of Mongolia Improved Governance of Extractives 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 are recognized when received and cash expenditures are recognized when paid rather than when incurred. Our responsibility is to express an opinion thereon based on our audit. We conducted our audit in accordance with 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 interim financial reports are free of material misstatement. An audit includes examining on test basis, evidence supporting the amounts and disclosures in the interim 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. In our opinion, the Project Financial Statements have been prepared in accordance with the International Public Sector Accounting Standard issued by the Public Sector Committee of the Federation of Accountants, presented fairly the cash receipts and payments of the project for the period ended December 31, 2018 and furthermore in all material respected, expenditure have applied to the purpose intended in the Grant Agreement, Grant No: TF0A2830 "us -A it" LLC Ulaanbaatar city, Sukhboatar district, Baga toiruu-44 Phone/Fax: 31-89-18, 20095IISLEL-AUDIT Co,Ltd E-mail: info@nislelaudit. mn CERTIFED ACCOUNTING AUDIT t APPPA:-AL The Government of Mongolia The International Development Association Crant No: TF0A2830 Mongolia Improved Governance of Extractives Project BALANCE SHEET For the period from Dec 31, 2017 to Dec 31, 2018 (in USD) Balance category Notes Dec 31, 2018 Dec 31, 2017 ASSETS: Cash and cash equivalents 28,848.45 12,081.55 Designated account 4.1 27,546.79 10,450.16 Sub-Account 4.1 1,301.66 1,631.39 Cumulative Project Expenditures 423,000.73 219,357.38 Goods 4.2 (a) 2,930.88 2,102.20 Consulting services 4.2 (b) 274,777.00 160,292.46 Non consulting services 4.2 (c) 48,702.22 2,335.71 Training and Workshop 4.2 (d) 42,113.76 26,546.43 Incremental Operating Costs 4.2 (e) 54,476.87 28,080.58 TOTAL ASSETS 451,849.18 231,438.93 FUNDS: IDA's fund 4.2 450,000.00 230,067.73 Interest Earned 4.2 (f) 1,849.18 1,371.20 TOTAL FUNDS 451,849.18 231,438.93 Prepared by, Approved by: A.OTGONT NGALAG SH.TSOLMON Financial Officer Project Coordinator cd "NIISLEL AUDIT" LLC Certified audit appraisal and accounting consultancy company Date: M . z/g INDEPENDENT AUDITOR'S REPORT To: PIU Coordinator Sh.Tsolmon Mongolia Improved Governance of Extractives Project Crant No: TF0A2830 We have audited the accompanying Statement of Sources and Uses of Funds of the Mongolia Improved Governance of Extractives Project submitted to the World Bank for the period ended December 31, 2018 in support of credit withdrawals under the Grant Agreement, Grant No: TF0A2830. We conducted our audit in accordance with generally accepted auditing standards that accordingly 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 Ulaanbaatar city, Sukhbaatardistrict,8 aga toiruu-44 Phone/Fax: 31-89-18, 70120095 - L E-mail: info@nfislelaudit.mn R C 3 The Government of Mongolia The International Development Association Mongolia Improved Governance of Extractives Project Crant No: TFOA2830 PROJECT SOURCES AND USES FUNDS For the period from Dec 31, 2017 to Dec 31, 2018 (in USD) Sources and Uses Funds Notes Cumulative to 2018 Dec 31, 2017 Dec 31, 2018 SOURCES OF FUNDS: IDA's fund 4.2 450,00000 219,932,27 230,06773 Interest earned 4.2 (f) 1,849,18 47798 1,371,20 TOTAL SOURCES OF FUNDS 451,849.18 220,410.25 231,438.93 USES OF FUNDS: Goods 4.2 (a) 2,93088 82868 2,102,20 Consulting services 4.2 (b) 274,777-00 114,48454 160,292,46 Non consulting services 4.2 (c) 48,702.22 46,36651 2,335,71 Training and Workshop 4.2 (d) 42,113,76 15,567.33 26,546.43 Incremantal Operating Costs 4.2 (e) 54,476.87 26,396,29 28,080.58 TOTAL SOURCES OF FUNDS 423,000.73 203,643.35 219,357.38 SURPLUS OF FUNDS OVER USES 28,848.45 16,766.90 12,081.55 Prepared by: Approved by: A.OTGONTU GALAG SH.TSOLMON Financial fficer Project Coordinator C ER 4 с� � � о � � � \ ° :, г, t� ,а. � �� �:. ,.. �ч ,Т :� � .- � eh С t^ �' � � '�' N м г-� r� м С ьr.�ы п N. � � О О �гу � г��-, 4�^. �� � !*7 еи} � . <� � � t4 н Dt1 - 4С? r�� � � ,' п°�^, м к�`- ''f �j � с и �, � tr ` � z �. �А� �. �' � ��в�. � �� и �г � д � � � � � � и :: :: `�' ° ,,rj C.i � оя � м �" � �'' � � � о r; ,; мi �- .] ..� er � �_ � м � ^ � ` . т м � � �S ... ,�' .��" � " � � � : с� ц � � м ' �� ц1 � в•-, па � � � и _ n1 л� V N '� 0. � �.,iC � .. ы � � о с �цн � 4�"а � г� � � 3 м й '� й w х т � �"� `}� � :� U и ,о �' ^G� � 4�� '4. � ►г, <' С.. � �и . �n "' ',� � ч. �� ч✓� �. � зс % G �р С� г l`, ',� `л тt �, м [� G � Г3 О�,,1 �^'� � С�.г л cr [� р м, М С Г р � � й � N Г'�` ^ ? га �т^.' � г'�-- у Q S''.г Q гв 4.+ О Й [Ч !Ч � ; � � � � G с� х, С. � � � � � а^.. ❑ � аа'г�, � 4 и � �,.. �i Cf? 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PYU Coordinator Sh.Tsolmon Mongolia Improved Governance of Extractives Project Crant No: TFOA2830 We have audited the accompanying the Statement of Expenditures (SOEs) of Mongolia Improved Governance of Extractives Project submitted to the World Bank for the year ended December 31, 2018 in support of credit withdrawals under the Grant Agreement, Grant No- TFOA2830. 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 '_Ltd Ulaanbaatar city, Sukhbaatar district, Baga toirvu-44 PhonelFax, 31-89-18, i,0120096- E-mail., info@ndslelauditmn CfFFZT The Government of Mongolia The International Development Association Mongolia Improved Governance of Extractives Project Crant No: TFOA2830 STATEMENT OF EXPENDITURES (IDA Withdrawals) For the period from Dec 31, 2017 to Dec 31, 2018 WA Application Claimed Credited Amount Amount credited Difference numbers type date date claimed in USD in USD Beginning balance 230,067.73 230,067.73 - WA-7 Replenishment 2018.01.19 2018.0122 39,289.65 39,289.65 - WA-8 Replenishment 2018.04.30 2018.05.01 29,698.90 29,698.90 - WA-9 Replenishment 2018.06.05 2018.06.06 30,781.47 30,781.47 - WA-10 Replenishment 2018.07.06 2018.07.09 31,596.97 31,596.97 - WA-11 Replenishment 2018,08.21 2018.08.22 39.327.35 39,327.35 - WA-12 Replenishment 2018.11.14 2018.11.15 32,665.51 32,665.51 - WA-13 Replenishment 2018.12.26 2018.12.26 16,572.42 16,572.42 - Sub-total amount 219,932.27 219,932.27 - Total 450,000.00 450,000.00 - Prepared b Approved by: A.OTGONTJ GALAG SH.TSOLMON Financial officer Project Coordinator n i ~ I - CRT! 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L� � . � � � ,�, . � 2"r�� � � � � 3 � � �� G .. �Ег�, _ €-ы`� $ '�. _Aft "-a k,., "NIISLEL AUDIT" LLC Certified audit, appraisal and accounting consultancy company Date: .-49Y.10" . -0/9 - INDEPENDENT AUDITOR'S REPORT To: PIU Coordinator Sh.Tsolmon Mongolia Improved Governance of Extractives Project Crant No: TFOA2830 We have audited the accompanying Designated Account Statement of the Mongolia Improved Governance of Extractives Project submitted to the World Bank for the year ended December 3 1. 2018 in support of credit withdrawals under the Grant Agreement, Grant No: TFOA2830. 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. "NiislerAukit" LLC Lfd Ulaanbaatar city, Sukhbaatar district, Baga toiruu-44 PhonelFax. 31-89-18, 70120095 1 q I E-mail, info@nfisfelaudit.mn E R- The Government of Mongolia The International Development Association Crant No: TF0A2830 Mongolia Improved Governance of Extractives Project DISIGNATED ACCOUNT STATEMENT For the period from Dec 31, 2017 to Dec 31, 2018 (in USD) Notes Dec 31, 2018 Dec 31, 2017 PART A - Account transactions Beginning balance . Add 451,849.18 231,438.93 IDA Advance 4.2 50,00000 50,000.00 Replenishment 4.2 400,000.00 180,067.73 Interest Earned 4.2 (f) 1,84918 1,371,20 Deduct 423,000.73 219,357.38 Goods 4.2 2,930.88 2,102.20 Consulting services 4.2 274,777.00 160,292.46 Non consulting services 4.2 48,702.22 2,335,71 Training and Workshop 4.2 42,113.76 26,546,43 Incremantal Operating Costs 4.2 (e) 54,476.87 28,080.58 Total deductions 28,848.45 12,081.55 PART B - Account reconciliations Amount advanced by the IDA 4.2 50,000.00 50,000.00 Ending balance 4.1 27,546.79 10,450.16 Add 24,302.39 40,921.04 Sub-accounts (USD and MNT) ending balance 4.1 1,301.66 1,631.39 Amount withdrawn but not claimed yet 23,000.73 39,289.65 Claimed in previous WA not yet credited - Deduct 1,849.18 1,371.20 Interest earned 4.2 (f) 1,849.18 1,371.20 Total advance to Designated account for 50,000.00 50,000.00 Prepared by: Approved by: A.OTGONT NGALAG SH.TSOLMON Financial Officer Project Coordinator "NIISLEL AUDIT" LLC Certified audit, appraisal and accounting consultancy company Date: . INDEPENDENT AUDITOR'S REPORT To: PIU Coordinator Sh.Tsolmon Mongolia Improved Governance of Extractives Project Crant No: TF0A2830 We have audited the accompanying Sub Accounts Statement of the Mongolia Improved Governance of Extractives Project submitted to the World Bank for the period ended December 31, 2018 in support of credit withdrawals under the Grant Agreement, Grant No: TF0A2830. 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 Sub Accounts 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 Accounts 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, 70120095 L - E-mail: info@niislelaudit.mn The Government of Mongolia The International Development Association Crant No: TF0A2830 Mongolia Improved Governance of Extractives Project SUB ACCOUNTS STATEMENT For the period from Dce 31, 2017 to December 31, 2018 (in USD) Dec 31, 2018 Dec 31, 2017 Opening balance 1,631.39 - Balance of Operational account - Add Advance from Designated account 315,727.59 176,932.46 Other Net interest earnings 456.75 453.61 Total additions 316,184.34 177,386.07 Deduct 316,514.07 175,754.60 Goods 267.58 177.96 Consulting services 225,263.16 122,613.47 Non Consulting services - - Training and Workshop 36,636.39 24,942.67 Operating costs 54,346.94 28,020.50 Transferred to petty cash - Uses of interest earning Exchange rate (loss or gain) - Total deductions 316,514.07 175,754.60 Closing balance - - Balance of Operational account 1,301.66 1,631.39 Balance of Treasury Account 1,301.66 1,631.39 Prepared by: by' A.OTGONTUGALAG SH.TSOLMON Financial officer Project Coordinator The Government of Mongolia International Development Association Grant Nb: TF0A2830 Mongolia Improved Governance of Extractives Project (MIGEP) NOTES TO THE FINANCIAL STATEMENTS As of December 31, 2018 . PROJECT BACKGROUND The grant agreement (TF0A2830) to implement the project in 2016-2018 was established between the Government of Mongolia and International Development Association on July 6 h 2016. The grant amount is 450,000 USD and project completion date is December 31 , 2018. The objective of the project is to enhance transparency and accountability in the management of Mongolia's extractives sector through an inclusive and sustainable EITI process. The project consists of the following parts: Component #1: Building stakeholders capacity to engage through training and conferences (i) capacity building of stakeholders in the EITI process; (ii) training; (iii) sub-national conferences in four regions; (iv) training and awareness raising workshops for civil society members and cormnunity leaders on the EITI; and (v) support for dissemination and awareness campaigns, including television campaign, articles and interviews through daily newspapers, websites and radio channels, and printing of EIT1 reports and other promotional materials. Component #2: Strengthening Mongolia ELTI Secretariat's communication and knowledge base through the provision of a study tour for the Mongolia EITI; and training and promotion of the EITI. Component #3: EITI Secretariat operational needs. Provision of support to the Mongolia EITI Secretariat for purposes of carrying out of the day-to-day Project activities including financial management, procurement, environmental and social management, communication and monitoring and evaluation of Project activities. Component #4: Capacity building support for local EITI sub-councils' members and other stakeholders through training, including EITI soum level roadshows for local conununity and other stakeholders. Eligible expenditures shall be financed out of the grant proceeds and allocated financing and percentages of each expenditure category are shown in the table below: Category Amount allocated Percentage of expenditures (in USD) (including tax) Goods, Non-Consulting Services, Consultants Services, Training, Workshop 450,000 100% and Incremental Operating Costs TOTAL AMOUNT 450,000 100% C-ERT:.Li.J 2I MIGEP Secretariat was established and headed by the Prime Minister of Mongolia. MIGEP secretariat and national council provide strategic and policy guidance to the project management unit (PMU). The PMU within the Cabinet Secretariat is responsible for the project implementation, financial management, monitoring, and reporting. The PMU consists of Project coordinator, Financial management specialist, IT specialist, and comnunications specialist. 2. SUMMARY OF SIGNIFICANT POLICIES Financial report consists of following reports: 1. Balance sheet 2. Statement of funding source and expenditures I Financial reporting 3. Statement of expenditures 4. Statement of expenditures (detailed) 5. Statement of designated account 6& Statement of operational account Project Management Unit reports its source of funding and expenditures under cash based accounting method in accordance with International Public Sector Accounting Standards (IPSAS) issued by the International Federation 2 Basis of presentation of Accountants (TFAC). The Project Implementation Manual includes financial management section. The section contains detailed guidelines approved by the World bank on project accounting and preparation of financial reporting . RThe currency used for project reporting is USD. MNT incurred costs shall be converted to USD at rate set by the Bank of Mongolia The account balances and transactions of the financial statements between January 1R, 2018 and December 3P, 2018 were audited- 5 Accounting- software "Microsoft excel" software were used to keep financial records and prepare financial reports. 6 Income Income is recognized when cash is received. Income consists of the funding transferred by the World Bank and bank account interest earning. Disbursement is recognized when paid rather than at the time expenses 7 Expenditureinurd incurred. A. Designated account In accordance with the Disbursement Letter of the Grant No. TFOA2830, the Project shall maintain one segregated USD account at a commercial bank acceptable to the Bank with the ceiling lirmit of USD 50,000 Bank account and petty cash B. Operating account As specified in the Disbursement Letter, the Project shall maintain Operating Account (OA) in MNT with ceiling equivalent to USD 20,000. The OA shall be used to pay eligible expenditures of training and incremental operating costs with approval of the Project coordinator. Based on annual approved CELR- budget the PMU replenishes the OA quarterly- The Ministry of Finance directed projects funded by the international organizations to use Government treasury system. In compliance with this decision, the operating account balance at the State bank was transferred to the State Treasury Account on December 15th, 2017. C. Petty cash Limited amount of cash withdrawn from the OA and kept as petty cash for immediate payments. Petty cash should not exceed MvfLNT 500,000 and use of petty cash is subject to Project coordinator's approval. In some cases, petty cash was used to pay per diem, transportation and accommodation cost of local missions. The Guidelines for Procurement of the World Bank shall be followed for procuring goods, works and services. Following methods should be used for Goods: 1. International Competitive Bidding >=USD 1,000,000 2. National Competitive Bidding =USD 5,000,000 2. National Competitive Bidding