110711 CONFIDE~Ct: • AlfDIT Ulaanbaatar 2016 lf# r CONFIDENCE -AUDIT To: Mr. N.Enkhbold Director of Auditing, Accounting, Training, Tax Consalting Ulaanbaatnr city, Chingcltci district, 3rd khoroo, Ulaanbaatar Clean Air Project Capital center, IOth floor# 1005 Phone 976-11-322431 , Fax 976-70119100 E-mail: info@conlidcnccuuditmn 20-t6. o( 0$ N~ o f /06 o9 INDEPENDENT AUDITORS' REPORT We have audited the accompanying balance sheet of "Ulaanbaatar Clean Air" Project, pursuant to the Financing Agreement (Credit number 5039-MN) entered between the International Development Association and Government of Mongolia dated 4 April 2012, as of 31 December 2015 and its statements of source and uses of funds, the statement of expenditures and the special account reconciliation statement for the year then ended. The preparation and presentation of these financial statements are the responsibility of Project management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating overall financing statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, (A) the financial statements referred above and the disclosures to these financial statements present fairly, in all material respects, the financial position of the "Ulaanbaatar Clean Air" Project as of 31 December 2015 and the result of operation for the year then ended in accordance with IPSAS; (B) the Borrower has utilized all proceeds of the loan withdrawn from the International Development Association only for purposes of the project as agreed between the International Development Association and the Government of Mongolia in accordance with the Financing Agreement; and no proceeds of the loan have been utilized for other purposes; and (C) the Borrower was in compliance as at the date of the balance sheet of the year of audit with all financial covenants of the Financing Agreement. -~ ~. - ""=- - - - In addition: (a) (1) With respect to Statements of Expenditures, adequate supporting documentation has been maintained to support claims to the International Development Association for replenishments of expenditures incurred; and (2) which expenditures are eligible for financing under Financing Agreement 5039-MN. (b) (I) The Imprest Account (page 7) give a true and fair view of the receipts collected and payments made during the year ending 31 December 2015; and (2) these receipts and payments support Imprest Account replenishments during the year. Ulaanbaatar, Mongolia • - ---- _! - - ...... .. The Government of Mongolia The International Development Association Credit No.5039-MN Ulnnnbnatnr Cleon Air Project BALANCE SHEET As at December 31, 2015 As nt Dec 31, As at Dec 31, Balance items Note 2015 In US 2014 In US Dollars Dollars ASSETS Cash and cash equivalents Cash at bank: Designated account 2600074753 USO 368,441.00 411,866.54 Sub-Account 5001017400 USO 15,734.62 121,049.18 Management fee account 34000381960 MNT 7,932.20 13,581.54 Cash on hand MNT 190.31 767.33 Total cash and cash equivalents 392,298.13 547,264.59 Receivable from TF099673 Project 311.17 Cumulative project expenditures ( 1) Subsidies under part-A of the Project 3 4,525,257.44 3,868,762.94 (2) Goods, Works, Consultants' services, Training and 4 3,707,319.98 2,575,418.71 Workshops, and Operating Costs under the Project (3) Management Fee under Part C(3)(b) of the Project 5 l, 129,017.28 843,382.86 Other expenditure 6 61,500.38 14,243.20 Subtotal cumulative project expenditures 9,423,095.08 7,301,807.71 TOTAL ASSETS 9,815,393.21 7,849,383.47 FUNDS IDA's fund 9,749,675.69 7,835,271.57 Net interest earned 18,147.83 11,102.95 Tender Income 873.45 822.56 Other Income 46,696.24 2,186.39 TOTAL FUNDS 9,815,393.21 7,849,383.47 Prepared by: The Government of Mongolia The International Development Association Credit No.5039-MN Ulaanbaatar Clean Air Project SOURCES AND USES OF FUNDS For the year ended December 31, 2015 Current year Previous year Total US Dollars US Dollars US Dollars FUNDS IDA's fund l,914,404.12 7 ,835,271.57 9,749,675.69 Net interest earned 7,044.88 11,102.95 18,147.83 Tender Income 50.89 822.56 873.45 Other Income 44,509.85 2,186.39 46,696.24 TOTAL FUNDS 1,966,009.74 7,849,383.47 9,815,393.21 USES OF FUNDS (1) Subsidies under part-A of the 656,494.50 3,868,762.94 4,525,257.44 Project (2) Goods, Works, Consultants' services, Training and Workshops, and 1, 131,901.27 2,575,418.71 3,707,319.98 Operating Costs under the Project (3) Management Fee under Part C(3)(b) 285,634.42 843,382.86 1,129,017.28 of the Project Bank Service Charges 287.65 1,072.03 1,359.68 Tender expenditure 1,044.25 615.74 1,659.99 Foreign exchange loss 54.18 12,555.43 12,609.61 Receivable from TF099673 (311.17} 311.17 Other expenditure 45,871.10 45,871.10 TOTAL USES OF FUNDS 2, 120,97 6.20 7,302,118.88 9,423,095.08 Surplus offunds over uses (154,966.46) 547,264.59 392,298.13 .. ... ~· ~\ Prepared by: ~ I The Government of Mongolia The International Development Association Credit No.5039-MN Ulannbaalar Clean Air Project STATEMENT OF EXPENDITURES (Withdrawals) For the year ended December 31, 2015 Amount climed in US dollars (2) Goods, Works, Number Claimed Credited Consultants' services, (3) Management Amount credited Application type ( 1) Subsidies Differences of WA date date Training and Fee under Part in US dollars Advance under part-A of Totnl Workshops, and C(3)(b) of the ~ the Project Operating Costs Project under the Project n ... 0 ::I :!I "" Q. Beginning balance 1,000,000.00 3,868,762.94 2,571,454.04 836,940.68 8,277.157.66 7,835,271.57 441 ,886.09 "" • : ::I n GI WA 16 Replenishment 12-Jan-15 15-Jan-15 - - - - - 441,886.09 (441,886.09) !~~ WA 17 Replenishment 22-Mar-15 25-Mar-15 - 411,089.79 162,919.59 - 574,009.38 574,009.38 ; ; Q. ;;:' WA 18 Replenishment 7-Jul-15 9-Jul-15 - 153,409.92 584,791.70 160,307.03 898,508.65 898,508.65 ~ WA19 Total Re2lenishment 16-Feb-16 25-Feb-16 - 1,000,000.00 91,994.79 4,525,257.44 388,209.47 3,707,~74.80 131,769.57 _ _ 1J.l9;&1'7..28_,.. 611,973.83 10,361,649.52 - 9,749,675.69 611,973.83 6U,973.83 Prepared by: l11c Government of Mongulia l11c lnte.mallooal DcvcJu11meo1 ~aauon Cttdil No.SOJ9-MN Ulaanbular Clean Air Prvjtcl STATEMENT OF E.~PENDITIJRJ!S (Comparison or WB nport •nd dknt ttport) fur the )Cal cndo.I Do..-.:alhct 31. 2tJ IS An101.mt cl1Jmcd 10 US dolbn An1011111 Financial Stalemcnt ill US dolbn Ill Goods, Worls, (2) GooJs, Worb, Nwnl>cr aaimcJ Cia.lit& Consultants' saviccs. (3) Muagcmcnt CoosulWllS' saviccs. (3) Management Arfllicalion l)'l'C (I) Subs11bcs (l)Suhsidic:s DiITCttlltt.'l ufWA dale dale Training and Fee under Part Training and Fee undcr Part AJ•-ancc un.lct part·A Total Advance unJupan-A 111 Total Worbhops,anJ qJ)(b)ufthc Wotbho115, and C(J)(b) orlhc or Ille l'IOjcct the Projccl O(!cr:&ting Cnsts Pmjccl Op:nling Cnl~nishmrnl 12-Jm.JS IS·J.n-IS . . . ts WA 17 Rq>knishmrnt 22-Mu-15 25·Mar· l5 ·Ul,089.79 162,919.59 574.009.38 411,089.79 162.91959 574,009.38 WA 18 Rc11lcnishn.,,n1 7-JuJ.IS '1-Jul·U . 1Sl,4U9.Y2 S84,791.7U 160.3ll7.0J H98.Sll8.6S . 153,4U9.Y2 S98.6J2.IJI l'.l6,45UI HH.49).74 IU,Ul4.YI WA 19 Rq>lc:ni.-16 91 .994.79 JRK.211'.1.47 13 1.71\CJ..57 611.973.RJ . 91.994.79 370.349.67 149,1112.61 611.527.07 446.76 Tol21 I .000,000.00 4,525,2S7.44 J,707.374.IO 1.129,017.ll 10,361,649-51 1.000.000.00 4,525,2S7.44 J,707.319.91 l.119.017.21 10,361.594.70 54.11 0 4.525 .2.:17•.u J,7U7.J74 au u17.28 I.I 21J. . 0 WBR!Jldn 1.uuu.oou.ou IU.361.649.Sl 3a DilfU'fl>Ct:S 54.12 . 54.12 . '11 "' Cl a. ::I o n : [O\> : c: i ~ I r OJ _, ·\ Prepared by: E ;f The Government of Mongolia The International Development Association Credit No.5039-MN Ulaanbaatnr Clean Air Project SPECIAL ACCOUNT RECONCILIATION STATEMENT Account number 2600074753, with Ulaanbaatar city bank As at December 31, 2015 In US dollars 1 Total advanced by the IDA 1,000,000.00 2 Less: Total amount recovered by the IDA 3 Equal present outstanding amount advanced to the special account 1,000,000.00 4 Balance of special account per attached bank statement as of date 2015/12/31 368,441.00 5 Total amount withdrawn but not yet claimed 6 Amount claimed but not yet credited at date of bank statement (WA 19) 611,973.83 7 Interest earned (18,147.83) 8 Bank charge 1,359.68 9 Total advance accounted for 963,626.68 10 Difference between total appearing on lines 3 and 9 36,373.32 Explanation of any difference between the totals appearing on lines 3 and 9 All items should be indicated on the bank statement Sub-Account /5001017400 USO/ As at December 31, 2015 15,734.62 Management fee account /34000381960 MNT/ As at December 31, 2015 7,932.20 Cash on hand MNT 190.31 Tender Income (873.45) Other Income (46,696.24) Tender Expenditure 1,659.99 Foreign Exchange Loss 12,609.61 Other expenditure 45,871.10 Amounts over claimed WA 19 (54.82) 36,373.32 Prepared by: ("/,? Confidence Audit LLC (~/ .1:...... J p -- The Government Of Mongolia International Development Association Credit Ng5039-MN Ulaanbaatar Clean Air Project NOTES TO THE PROJECT FINANCIAL STATEMENTS For the year ended December 31. 2015 1. Project background The objectives of the Project are to enable consumers in ger areas to access heating appliances producing less particulate matter emissions and to further develop selected medium-term particulate matter abatement measures in Ulaanbaatar in coordination with development partners. The Project consists of the following parts. subject to such modifications thereof, as the Recipient and the Association may agree upon from time to 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, including: (1) provision of capital subsidies to eligible 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 low pressure boiler producers and suppliers, and old stove replacement; (2) technical support to stove and low pressure boiler suppliers, including: (a) goods, technical assistance. and Operating Costs for the Stove Emissions and Efficiency Testing Laboratory; (b) technical assistance and equipment for technical advice in addressing problems with the design and production of stoves and low pressure boilers; (c) technical assistance in the development of emissions standards for stoves and low pressure boilers; (d) market development support and technical assistance to design and implement adjustments to the stove replacement program and for accommodating 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 Ulaanbaatar Particulate Matter Mitigation (1) Mitigation of fugitive dust from Jack of city greening Preparation of an action plan for city greening. and preparation and implementation of a pilot. including: (a) assessment of greening programs in Ulaanbaatar. evaluation of options and development of recommendation to improve greening. (b) preparation of a pilot project including support for bid document preparation; and (c) investment support for the supply and installation of grass and other eligible plants and trees in Ulaanbaatar on a pilot basis. (2) Mitigation of dust from power plant emissions and ash ponds Carrying out of a 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 a feasibility study for the 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 Ulaanbaatar. Part C. Public Awareness Raising, Program Coordination, and Project Management ( l) Air quality monitoring, management and analysis (a) Air quality monitoring and analysis equipment, including for the Ulaanbaatar Air Quality Agency. (b) Training in 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 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, 2017. 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 in each Category: \/,? Confidence Audit LLC (64 Page ?........ . Percentage of Amount of the Expenditures to Financing Category be Financed Allocated (inclusive of I (expressed in USD) Taxes) (1) Subsidies under Part A of the Proiect 6,912,371 100% (2) Goods. works, consultants' services, Training and Workshops, and Operating Costs under 6,092,784 100% the Proiect (3) Management Fee under Part C(3)(b) of the 1,391,753 100% Project (4) Unallocated 603.093 TOTAL AMOUNT 15,000.000 2. Summary of significant accounting policies 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/or World Bankfinanced Projects: Guidelines/or 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 U.S.Dollar ('USO'). Cash balances denominated in currencies other than USO 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, 2015 have been presented on December 31 , 2014. 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 USO acceptable to the Word bank. The Government of Mongolia The International Development Association Credit No.5039-MN Ulnnnbaatar Clean Air Project NOTES TO THE PROJECT FINANCIAL STATEMENTS (continued) For the year ended December 31, 2015 3. Subsidies under part-A of the Project Subsidies was following as at 31December2015. 31-Dec-15 31-Dec-14 Subsidies for Royal Ocean Co.,Ltd 3,069,811.40 2,497,309.19 Subsidies for Selenge Construction Co.,Ltd 1,231,747.88 1,217,994.56 Subsidies for Ikh Tengeriin Khuch Co.,Ltd 195,805.70 150,854.30 Subsidies for Khanbayan Co.,Ltd 69.28 69.28 Subsidies for Tom khorol Co.,Ltd 27,823.18 2,535.61 Total 4,525,257.44 3,868,762.94 4. Goods, Works, Consultants' services, Training and Workshops, and Operating Costs under the Project Goods, Works, Consultants' services, Training and Workshops, and Operating Costs was following as at 31December2015. 31-Dec-15 31-Dec-14 CLTA-01 TA for Laboratory Testing and Store Development Center 230,032.00 143,770.00 CLTA-02 Supervision of Lab equipment instaJlation 79,818.00 40,250.53 CPLG-01 Study for City Greening & Preparation of Pilot Project 282,374.36 282,374.36 CPAS-01 Support for PR campaign 180,758.81 180,758.81 GLEQ-01 TS to Store Producers: Laboratory Equipment 50,000.00 50,000.00 GLEQ-02 TS to Store Producers: Laboratory Equipment 122,400.00 120,600.00 GLEQ-03 TS to Stove Producers: Laboratory Equipment 156,820.59 CAHS-01 Affordable Housing study 593,023.00 457,120.64 CDHS-01 FS for Rehabilitation & Expansion of DH system 796,182.52 682,239.36 CSVC-01 Verification and quality control 43,643.09 43,643.09 CSVC-01 A Verification and quality control 3,971.96 3,971.96 CSVC-02 Verification and Quality Control 29,830.99 CSTS-01 QAA Transportation cost 6,007.53 WPLT-01-A Micro garden in Tasganii Ovoo-Lot-1 135,401.03 WPLT-01-B Micro garden in Tasganii Ovoo-Lot-2 99,949.10 CSMST-01 Clean stove sales, monitoring and SS 18,380.03 ("A? , Confidence Audit LLC fM P ~f ... CHWS-01 Heating Wall Consultant 11,953.23 11,953.23 CWHB-01 Low Pressure Boiler Market Study 69,737.87 42,998.63 CPAP-01 FS for Improved Emission Control and Ash Ponds 482,971.00 289,782.40 CPC-01 A Support Operational Work of Coordination 32,180.38 24,890.81 CPC-01 B Support Operational Work of Coordination 32,953.24 25,028.97 TL-OperCost SEET Laboratory Operation Cost 53,319.11 10,275.95 GLEQ-04 Equipment for Stove Emissions and Efficiency Testing 76,030.00 76,030.00 Laboratory SEET CAHS-01 Study tour to USA 62,688.23 44,918.96 CDHS-01 Study tour to Europe 56,893.91 44,811.01 Total 3,707,319.98 2,575,418.71 5. Mnnngement Fee under Port C(3)(b) of the Project Management Fee was following as at 31 December 2015. 31-Dec-15 31-Dec-14 Stationary Cost 4,952.73 3,610.37 Transportation and Fuel Cost 24,010.43 15,009.23 Rental cost 98,154.54 61,855.00 Communication and Telephone Cost 7,405.04 5,144.11 Office Supply and Administration Cost 20,109.93 15,394.66 PMU Staff's Travel Cost 32,282.02 30,033.18 Public Awareness Raising Cost 141,827.65 100,803.09 PMU Staft's Salary 638,782.42 462,296.37 PMU Staff's Salary TAX 57,060.05 47,243.74 PMU Staffs Salary INSURANCE 9,584.86 8,672.32 Goods for Project Management (office equipments) 25,096.48 25,096.48 Goods for Project Management (vehicles) 63,485.83 63,485.83 Advertising Expenses UBCAP 597.10 429.80 Local Training Cost 1,375.49 1,375.49 Auditing 4,292.71 2,933.19 Total 1,129,017.28 843,382.86 6. Other expenditure Other expenditure was following as at 31December2015. 31-Dec-15 31-Dec-14 Bank Service Charges 1,359.68 1,072.03 Tender expenditure 1,659.99 615.74 Foreign exchange loss 12,609.61 12,555.43 Other expenditure 45,871.10 Total 61,500.38 14,243.20 rr=========~====~. CA:'J 1 Confidence Audit LLC . ((Jd~ Pago ...~!-:..... j