"NIISLEL-AUDIT" LLC AUDITOR'S REPORT EDUCATION QUALITY REFORM PROJECT No. 54880-MN Financial statements as of December 31, 2016 Ulaanbaatar 2017 6"NIISLEL AUDIT" LLC Certified audit, appraisal and accounting consUltancy company Fl ~ ~~Datae: -~o INDEPENDENT AUDITOR'S REPORT Mr. D.Batmagnai Project Director Education Quality ReformProject Credit No: 5488-MN comprsingthe balance sheet, statement of project We have audited the project Financial Statements comprisi activity and the designated account sources and uses of funds, disbursement report by project activiy and the desiod ount statement of the Education Quality Reform Project (Credit No:o r the perOd ftosibilit 17, 2015 to December 31, 2016. These reports are the responsibilit of the project. Our responsibili 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 unts and sin ifant 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 Projectis 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 International Federation of Accountants, present fairly ments of the project during the year ended December 31, 2016 and, in all material respects expenditure have applied to the purpose intend UWAr, 1rement, Credit No: 5488-1N "NHK 14 EA -- L TTr.:72.5003766-n~s-~ Ulaanbaafar city, Sukht m.esttar ditrict Baga tairu-44 phone/Fax 31.89-18, 70109 IE-maii. info@nasMeaudkmn "Education Quality Reform Project" Credit No: 5488-MN Financial statements for the period from August 17, 2015 to December 31, 2016 The Government of Mongolia The International Development Association Credit N2: 5488-MN Education Quality Reform Project AUDITED BALANCE SHEET For the period from Aug. 17, 2015 to Dec. 31, 2016 (in USD) BALANCE CATEGORY Notes At Aug17, 2015 At Dec31,2016 ASSETS: Cash and cash equivalents: 1 - 784,322.90 Cash on hand - Cash at bank: Designated account 773,937.09 Operating account 10,385.81 Cumulative project expenditures: - 2,293,826.26 Goods 4-a 90,949.88 Non consulting services 40,806.40 Consultant services 4-b 451,738.54 Training 187,958.02 School grants 5 1,478,443.08'/ Operating costs 6-a 43,930.34.- TOTAL ASSETS - 3,078,149.16 SOURCES: Funds and other sources - 3,078,149.16 IDA funds 3,000,000.00/ Interest earning 77,649.16 Other income 500.00 TOTAL SOURCES - 3,078,149.16 Prepared by: Ap ro Ms. N.Enkhchimeg Mr. . tmagnai Financial Management Specialist Project Director "NIISLEL AUDIT" LLC Certified audit, appraisal and accounting consultancy company INDEPENDENT AUDITOR'S REPORT To: Mr. D.Batmagnai Project Director Education Quality ReformProject 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 Augustl7, 2015 to December31, 2016. 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 accordingly included examination, on a test basis, of evidence supporting the amounts and disclosures in the Statement of Sources and User 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. YAAAkC..t~tHATAPxaT~ "NIISLE I" LLC Ulaanbaafar city, Sukhbaafar district, Baga toimu-44 Phone/Fax: 31-89-18j-70120095 E-mail:, info@nlis1elaudt.mn J7. "Education Quality Reform Project" Credit No: 5488-MN Financial statements for the period from August 17, 2015 to December 31, 2016 The Government of Mongolia The International Development Association Credit N: 5488-MN Education Quality Reform Project AUDITED STATEMENT OF PROJECT SOURCES AND USES OF FUNDS For the period from Aug. 17, 2015 to Dec.31, 2016 (in USD) Cumulative to At Aug 17,2015 Dec 31, 2016 SOURSES: IDA funds: 3,000,000.00 Interest earned 77,649.16 Other income 500.00 TOTAL SOURCES OF FUNDS 3,078,149.16 USES OF FUNDS: Goods 90,949.88 Non consulting service 40,806.40 Consultant services 451,738.54 Training 187,958.02 School grants 1,478,443.08 Operating costs 43,930.34 TOTAL USES OF FUNDS 2,293,826.26 SURPLUS OF RECEIPTS OVER EXPENDITURE 784,322.90 Composed of: Cash on hand - Cash at bank: Operating account 10,385.81 Designated account 773,937.09 BALANCE OF CASH AND CASH 784,322.90 EQUIVALENTS Prepared by: Approv Ms. N.Enkhchimeg magnai Financial Management Specialist Project Director "NIISLEL AUDIT" LLC Certified audit, appraisal and accounting consultancy company Date: INDEPENDENT AUDITOR'S REPORT To: Mr. D.Batnagnai Project Director Education Quality ReformProject Credit No: 5488-MN We have audited the accompanying Statement of Expenditures (SOEs) of Education Quality Reform Project Credit No: 5488-MNsubmitted to the World Bank for the period from August 17, 2015 to December 31, 2016.in support of credit withdrawals under the Financing Agreement, Credit No: U 5488-MN. 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 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. Li Li "NI EL" L Ulaanbaatar city, Sukhbaaar district, Baga toiruu-44 Phone/Pa: 31-89-18, iMM0595- E-mail: info@niislelauditmn "Education Quality Reform Project" Credit No: 5488-MN Financial statements for the period from August 17, 2015 to December 31, 2016 The Government of Mongolia The International Development Association Credit N2: 5488-MN Education Quality Reform Project AUDITED STATEMENT OF EXPENDITURES (IDA Withdrawals) For the period from Aug. 17, 2015 to Dec. 31, 2016 (In USDj WA Application Claimed date Value date Amount Amount Amount Numbers type claimed credited documented WA-I' Advance Nov 23, 2015 Dec 15, 2015 3,000,000.00 3,000,000.00 WA-2 Documentation Aug 15, 2016 Aug 30, 2016 195,177.96 Up to December 31, 2016 3,000,000.00 3,000,000.00 195,177.96 1. Advance of funds of USD 3,000,000.00 received from the International Development Association on December 15, 2015 was not replenished as of December 31, 2016. Prepared by: Approved : Ms. N.Enkhchimeg Mr. ai Financial Management Specialist Project Director LJ l} 尸 ！中：蘿 鎰 ［」一一不 口一＇－一 "NIISLEL AUDIT" LLC 11hQJ Certified audit, appraisal and accounting consultancy company Date: INDEPENDENT AUDITOR'S REPORT To: Mr. D.Batmagnai Project Director Education Quality ReformProject Credit No: 5488-MN We have audited the accompanying the Designated Account Statement of Education Quality Reform Project (Credit No: 5488-MN)submitted to the World Bank for the period from August 17, 2015 to December 31, 2016. 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 accordingly 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 submiUed together with the internal controls and procedures involved in their preparation can be relied upon to support the application for credit withdrawals. Yn.w, -ATAF XOT 10 y N I WL E 1A U 91TF; 'L L C L L Ulaanbaafar city, Sukhbaatar district, Baga toiruu-44 PhonelFax: 31-89-18-.-70,20095 E-mail.- info@niistelaudit.mn LA "Education Quality Reform Project" Credit No: 5488-MN Financial statements for the period from August 17, 2015 to December 31, 2016 The Government of Mongolia The International Development Association Credit N2: 5488-MN Education Quality Reform Project AUDITED DESIGNATED ACCOUNT STATEMENT For the period from Aug 17, 2015 to Dec. 31, 2016 In USD) ITEMS At Dec31,2016 Part A-Account transactions Beginning balance 0.00 Add: Amount deposited by the IDA for the period 3,000,000.00 Total interest earned 77,649.16 Total other income 500.00 Total 3,078,149.16 Deduct: Total amount withdrawn 2,293,826.26 ENDING BALANCE 784,322.90 Part B-Account reconciliation Amount advanced by the IDA 3,000,000.00 Balance of the Designated account at the end of the year 784,322.90 Add: Amount withdrawn and not yet claimed 2,293,826.26 Deduct: Net interest earned 77,649.16 Other income 500.00 TOTAL ADVANCE TO DESIGNATED 3,000,000.00 ACCOUNT FOR Prepared by: Approved : Ms. N.Enkhchimeg . Financial Management Specialist Pyject Direct r Li IU "EDUCATION QUALITY REFORM PROJECr' Credit No: 5488-MN Financial statements for the period from August 17 2015 to December 31, 2016 NOTES TO THE FINANCIAL STATEMENTS I. Project background On June 18, 2015, the International Development Association and the Government of Mongolia (represented by the Ministry of Finance) signed a Financing Agreement for Credit N2:54880-MN for the amount of USD 30 million to finance the Education Quality Reform Project. 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 the elementary school education quality", 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. Within in the reporting period, the primary level math and language assessment using international instruments have been developed and piloted. 8000 primary grades in all 616 schools have been provided with STEM learning tools. Under the component 2 on "Preparing teachers and improving 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. Within in the audited period teachers' time-on-task study has been developed and piloted. The review of the pre- service teacher training program is underway. Under the component 3 on "School Grants Program", USD 2000- USD 3000 funding are being 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, two cycles have been implemented providing650 grants, including 200 grants for the first cycle and 450 grants for the second cycle. 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. I H. Summary of significant accounting policies L "EDUCATION QUALITY REFORM PROJEcr' Credit No: 5488-MN Financial statements for the period from August 17 2015 to December 31, 2016 1) Statement of compliance The project Financial Statements comprise the balance sheet, the statement of project sources and uses of funds, disbursement report by project activity, the designated account statement. These reports have been prepared in accordance with the financial reporting requirements stipulated in the project Financing Agreement and further elaborated in the Project Operational Manual. 2) Basis of preparation The project financial statements are prepared in accordance with International Public Sector Accounting Standards (IPSASs) issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. Cash basis of accounting has been adopted. On this basis, receipts are recognized when received or direct payments to creditors are made rather than when income is earned and disbursements are recognized when paid rather than when expenses are incurred. The Project has its own Operational Manual which has been accepted by the World Bank and its financial management system is being operated consistently in accordance with this manual. 3) Basis of measurement The project financial statements are presented in US Dollar ("USD"). Transactions denominated in Mongolian Tugrug ("MNT") are recorded using the FIFO method for conversion and reporting on the financial statements. 4) Basis of presentation The financial statements reflect the project's financial activities from the project effectiveness date of August 17, 2015 to December 31, 2016. III. Items in the balance sheet 1) Cash and cash equivalents In accordance with the Disbursement Letter dated on June 18, 2015, the Project opened a Designated Account and an Operating Account at the State Bank of Mongolia to manage and use the project funds. Payments for eligible expenditures for procuring goods and international consultants' services are paid from the Designated Account. The eligible expenditures of training, project operating costs of the project and local consultant service fees have been paid from the Operating Account. As at December 31, 2016; the balances of cash and cash equivalents were as follows: Cash and cash equivalents: At Dec 31, 2016(in USD) Cash on hand - Cash at bank: "EDUCATION QUALITY REFORM PROJECT" Credit No: 5488-MN Financial statements for the period from August 17 2015 to December 31, 2016 Operating account 10,385.81 Designated account 773,937.09 Total 784,322.90 Since the effectiveness of the project, as of December 31, 2016, the Project had not claimed from the World Bank expenses for the total of $ 2,293,826.25 but USD 195,177.96 had een documented and approved by the Bank. 2) Other sources The balance of other sources comprises of interest income and net tender material sale revenue. Other sources At Dec 31,2016 (USD) Interest income 77,649.16 Net tender material sale revenue 500.00 Total 78,149.16 3) Designated account replenishment policy. Disbursement Linked Indicators (DLIs) are applied to the EQRP. Achievement of DLIs, according to the project documents for the EQRP (as of May 2014), has yearly targets distributed over the consecutive period of 5 years. DLIs are applied only to the two components of the project: Component I and Component 3. The project achieved the DLI targets for the first two years. For DLII on Improved Learning Outcomes, the actual expenditure was USD 252,130.42 and for DLI 2on Implementation of the School Grant program, the actual expenditure is USD 1,666,660.36. 4) ProcurementContracts a) Goods The project disbursed USD 90,949.88 equivalent to MNT 116,862,475 in purchasing automobile, office furniture and office equipment. The procurement of goods was completed in accordance with the World Bank's Procurement Guidelines through competitive selection procedures. b) Consultant Services 14 contracts for consultancy services had been made under the project, out of which 7 contracts had been completed for the total amount of USD 258,947.92. The remaining 7 contracts were ongoing and to be continued in 2017. There were no contracts that had been delayed or cancelled; all consultants had completed the activities in the planned timeframe. The payments of three contracts had not been started, whereas other payments were in progress at 10%-80%. As of L December 31, 2016, USD 451,738.54 had been paid for consulting services. 5) School Grants L "EDUCATION QUALITY REFORM PROJECT" Credit No: 5488-MN Financial statements for the period from August 17 2015 to December 31, 2016 a) School Grant Implementation The first phase of the school grant program was fully implemented in 2016 followed by the starting of the second phase in the same year. The first phase of the program included beneficiaries of 110,406 students from 200 schools from Ulaanbaatar and the 21 provinces providing a total of USD 547,273.56 in grants. The second phase of the program included 450 school and provided total financing of USD 9,311,69.52 as of December 31, 2016. b) School Grant Funds Flow Schools that submitted winning proposals have been selected and signed the school grant agreements to become entitled to receiving 80% of the grant funding. The remaining 20% of funding is provided based on submission of mid-term reports by schools to the local Education and Culture Departments according to the School Grant Manual, which was endorsed by the MECSS in consultation with the World Bank task team. The audit team selected 57 reports produced by participating schools, from UB and aimags, from the first phase of school grants and reviewed them. It was found that the majority of the schools selected submitted their reports in line with the templates given in the School Grant Manual. However, 17.5% or 10 of the schools' reports did not have the required attachment of financial reports on the assets purchased by project funds, procurement quotations from suppliers and agreements. Therefore, it is strongly recommended that the project team clarifies the content of the financial reporting relating to the disbursement of the grant funds that should be submitted by the participating schools in the manual in order to improve monitoring over disbursement of the funds. 6) Project Expenditures a) Project incremental operating costs Operating costs by the project during project implementation: N Expense Category At Dec 31,2016 (USD) I Project staff fees including the driver 8,097.53 2 Social Insurance Premium paid by the Project 13,005.29 4 Office rent 17,499.35 5 Fuel 1,484.72 6 Stationary, communication, and other 2,563.32 7 Rent deposit 1280.13 8 Total 43,930.34,- b) Project disbursement progress by activity at December 31, 2016 U "EDUCATION QUALITY REFORM PROJECT" Credit No: 5488-MN Financial statements for the period from August 17 2015 to December 31, 2016 Total Budget Disbursement at Performance Xs Project activity (USD) Dec 31,2016 (USD) percentage I Component I: Improving 14,900,000.00 252,130.41 1,7% learning outcomes 2 Component 2: Pre- and in- 3,300,000.00 40,111.57 12,15% service professional development of teachers 3 Component 3: Implementation 6,100,000.00 1,666,660.36 27,3% of a school support program 4 Component 4: System 5,700,000.00 334,923.91 5.9% management, monitoring and evaluation 5 Total 3,000,000.00 2,293,826.25 7.6% Li' L J U"