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IN DEPENDEN l DITOR'S REPORT

TO: ENKIBOLD.D HEA D OF STEERING CO ITTI[EE OFCAPACI T YBI ILDING FOR THL NONGOLIANNATIONAL AI DIT OFFI(L NINAO) PROJECT

Opinion

Wc have audiled Ilie Financial Statcc ees comprling hl e Balance Sheet, the Statements ofProject Sources and Uses o [ the Statenents of Uses of lunds by Project Acui ity. theDisbursenent reports and the )esinated AccounI Statements of Capacitl Btdine bu for thel\AO project funded b\ Supreme Audit lislition 1arpacn D)exelopment Vund (Grant Nw1 A 1 838) for the year ended December 31, 2, 18

ln our opinion, the Financial Statements of Capacir\ Btulding for the \1\,\O pro'lect as atDecember 31, 2018, has been accurtely and objecti ely disclosed in accordance with therequirenents of Inlernational Public Sector Accouting Standard 1i IPSA) issued by the PublicSector c(ommittee of Federation of Accountanits the 1inancnL Agreement iGrant NoiiTJA 1 838 the Project implementtion Manual and other relev ant gideliries and procedures

Basis for Opinionwe conducted our audit in accordance 'ith International Standards on Auditn, (ISAst Outresponsibilities under those staidards are fuiher described in he A ///r R'p.i '/u

4he ItI of/h 1/-fUmna/ .NIt aen section of our report \e are independent of the ProJeclin accordance kvith the International Ethics Staindards Board for Accouniants Code of 1Ethicsfor Professional Accountants (IFSBA Code) tog2ether Nvith the etlhical requirernents that arerelexant to our audit of the linancial statements in Mongoa. and xke haxe fulfilled our otherethileal responsibilities in accordance miwith these rcquireients and the ILSBA Code. We behexethat the audit exiderice xe haxe obtained is sufficient and appropriate to pro ide a basis for ouropinion.

Key Audit MattersKeN audit matten are hus umicis fat, in ou pr ofossonal _udgidment, \kere ol mostsi-n]i icance in our audit of the financial statements ofilc et ponkld 1hese matter \Nereaddressed in the conte\t of our audt of the flnancial statemens as a U hole. and in forming ouropinion thereon, and auditor has not detenined the kex matlers that reguired to be diselosinga separate and not prox ide a separate opinion on Ihese mnuites.

Responsihilities of Management for Ilie Financial Statements

The prolect managernent is responsible for the preparation and fair presentation of the FinancialStatements according to the recquirements of the IPSAS. the IDA Financing Agreement. IlieGrant Ag,reeienit. the Project implemenlation ianual and other relexant instructions and

procedures and for such internal control as management determines is necessarx to enable thepreparation of financial statements that are frec Crom material miiisstatement, xxhether due tofraud or error.

Auditor's Responsibilities for tie Audit of the Financial Statements

Our objectixes are to obtain reasonable assurance about whether the financial statements as axxhole are free from material misstatenent, wxhether duc to fraud or error, and to issuc anauditors report that includes our opinion, Reasonable assurance is a high leel of assurance,but is not a guarantec that an audji conducted in accordance wx mih ISAs vill alxways detect amaterial misstatenent xhien it exists. Misstatements can arise Iron fraud or error and areconsidered material misstatenent if indiv idual l or in the aggregate, theY could reasonably beexpected to iniluence the economic decisions of users taken on the basis of these financialstatemenits.

As part of an audit in accordance \x ith ISAs, we exercise professional judgnient and maintainprolessional skepticism throughout the audit. We also:

Identify and assess the risks of material rmistatement of the financial statements,whether due to fraud or error. design and perform audit procedures responsixe to thoserisks, and obtain audit eidence that Is sufficient and appropriate to pm de a basis forour opinion. The risk of not detectin a material misstatement resuffimj from fraud ishiglher than for one resulting fr-om error, as fraud max inxoKe collusion, forgeryintentional omissions, misrepresentations. or the ox erride of internal control.Obtain an understanding of internal control relexant to the audit in order to designaudil procedures that are appropriate in the circumstances,Ex aluate the appropriateness of aceounting pohces used under the prolect and thereasonableness of accouni m 1 estimates and 1elated dit losures made bv manacement

rConiclude on the appropriateness of management-s use of the going concern basis ofaccounting and, ased on the atidli ex idence obtamed, the project deterrnines wxhethera material uncertaintx exists that may east sign ficant doubl on the Project's abi lit tocontine as a going concern xw ithin a specified period of time.

- Ev aluate the overall presentation. structure and content of the financial statements.including the disclosures, and wxhether the financial statemenis represent the

underlying transactions and ex ents in a manner that achieves fair presentation.

We communicate with projcet mana-enent recarding, am n other matters. the planned scope

and timing of the audit and significant audit findings including any sigil-fieant deficiencies ini

internal control that we identi fv during our audit.

GENFRAL DIRECTOR OYNNAA. U

Date: .. ..

"Capacity Buildiig for tile .longolin Nationl Audit Ofirc' Granit N: TFI1 838Fmnjal Statnements for ile y,ear emded Decemh er 3st. 2018

T he Gove%rnnent of Nlon;golia &

SuJreIC AUdit Institution Capacity Devel(iio)ieit Fund

G ranti No. TFQ X1838Caa yBuilding for thle \lonigolia,n National Audit O-ffice ("NJNO"

Project: P155305

BALANCE SHEEUTFor tte period ended Decemb:er 31, 2018

(in V SD)

Note As at 2(118.12.31 As at 2017.12,31

ASSETS

1. Cash and cash equi%alent: 4a 4,996.98 6,003.78l l Cash on hand g7g 781 2 (ash at baiik

Designated acFcount-TFOA 183 4.069 5 25 00

2. CumulatNie projecrt e penditures: 4(12,562.29 203,482.052 I Trust F tud 41 %22 9 2 34 1. 0

l Goods and no-consuJting sen ices 733 37 13 353 4542 C onsuham's serv ices I 70 660 S 8 95 03 Trmin and workshops i 14.27 35 56242 704 increnenial eera,u cosis 3i 88 44 231 g .2

T OTA L XSS E TS 407,559.27 209,485.83SO R IRE

1. Project funds 40)5,000.00 207,615.71SAl1 - CDF TiA81838 40.000.00 2076 157

2. Net interest carnings 4b 3,244.10 2,554.953. Foreign exchange gain (lossj 4b) (684.83) (684.83)TO1AL %O[RCES OV FlNDS 407,559.27 209.485.83

Approved by Prepared by

Ganbolød.TI1s Sa an

Hcad of Administration GeneraL Finance of \ I\AOD)epartmecnt ofL MNAO

1mi I)IIIG \ allyxa, 1. X, (0111 NIJ(;.,(1),lj 1, l 0ä

INDEPENDENT AUDITOR'S REPORT

TO: ENKH1BOLD.D, IIE ) OF STEE RING COMM ITEL OFCAPACITV Bl ILDING FOR TIE NIONGOI,IANNATIONAL AUDIT OFFICE (NINAO) PROJE(T

OpinionWe have audited the accompanying Statements of Protect Sources and Uses of Funds ofCapacity Building for the INAO) project funded b\ Supreme Audit Institution CapacityDexelopmenit Fund Grant No: litA 1838 for the yiear ended December 3] - 2)18.

In our opinion. the Statements of Project Sources and Uses of Funds of Capacity Building fortle MNAO project for the year ended Deceimber 31 201 8. has been accurately and objectivelydisclosed in accordance \xitih thc req[uirements of the Financing Agreement irant No:TFOA 1838), the Project implementation manual and other relevant guidelines and procedures.

Bassi for Opinion

We conducted our audit in accordance with Iniematioal Standards on Audiui NISAst (urresponsibilities under ihose standards are further descibed in the 1ahter b W Respræshdme rthe dit, uj th/ s FmIe 1tteeUU section o f our reJpori We are ndependent of the Project inaccordance xith the International Ethics Standards Board for \coumnuants Code of lhics torProlessional Accountants [6SBA Code togetlher wih the ethical requirements that arerelevant to our audit of the financial statements in Mongolia. and kie hase Iuliled our otherethical responsibilities in accordance ith these reuirenents and the IESBA Code We believethat the audit ek idence wke have obtained is sufficient and appropriate to proxide a basis for ouropinion.

Responsibilities of Management for the Financial StatementsThe project management is responsible for the preparation and flair presentation of theStatements of Project Sources and Uses of Funds in accordance wvith the IDA FinancingAgreement. the Grant Agrecient, the Prolect implementation nanual and other relexantinstructions and procedures and for such internal control as manaement determines is

necessar\ to enable the preparation of financial statements that are frec from materialmisstatemnenit w. hether due to fraud or error-

Auditors Responsibiliities for tlie Audit of the Project Statements

()ur objectin. es are to obati reasonable assurance about wÅhether the Statemeuts of ProjectSources and Uses of Funds as a \k hole are frec front material misstatement, wcfhether duc tofraud or error, and to issue an auditor-s report that includes our opinion. Reasonable assurance

is a higb le el of assurance. but is not a guarantee that an audit conducted in accordance xkitl

ISAs äill aknvas detect a material risstatement wlien it exsts. Mlisstatements can arise from

fraud or error and are coiådered material n misstatemnt t' md idually or in ihe a Cregatethey could reasonaby be xpected to influence ihe ecnomic decisions of users taken on thebasis of these fiancial stalements

We comm iunicate k it h pret iana ement reg ardi n. amon u (ther maiters. the painned scopeand tiiiniignu of the audit and signifi-can audit findings ncluding any significant deficiencies ininernal control that we identify during our audit

GlNE-RAL [)IRECTOR OYLNAA .U

Date:

-Capaøity Building for the MoIgoiamn National Audit Offie- Granit No: TF0Ak1838Fininci Il ten]el,ts for the yea r ended i )eceimber 31st, 2118 S

The Go%ernment of ilongolia &

Supreme Audit INstiutiJon (apacity Devxeloplmeuit Fund

Grant No. TFA1838

(apacitx Building for the M1ongoian National Audit Office ("MNAO")

Project: P155305

STATEMENT OF PROJECT SOL RCES ANID USES OF F ND(For the year ended December 31, 2018)

(in LSD)

Itens (umuu %e to For 2018 Cuniult-Ke toDre 31. 2018 Dec 31, 2017

SOL RC ES

Funds 405,000.00 197,384.29 207,615.71S A1 - CDF [ FA0 838 40550 0M 197,384.29 207.615 71

Other sources 2,559.27 689.15 1,870.12Net inteies Carnings 3,244 l6u 8.I 5 2.55495Forign exhchag gain ( s)(68483 8

TOT AL SOL R CvS OF I ) N 407,559.27 198,073.44 209,485.83

(svS OF Ft NI

tSes of Fund: 402,562.29 199,080.24 203,482.05Gocds and Non consuiiig ser ice 73,37.13 37,742.63 35394.50Co7su)a(, sn ice I 7607 e) L 702. 44 87.q57.93

Training and Woikshops I 14.27635 58.033.65 5.242.71)Incremental operating costs 35,488.44 1 1.601.52 23.886,Q2

TOT L I -SES OF FL N DS 402,562.29 199,080.24 203,482.05Surplus of receipts over expendiUure:

Cash on hand (878K78) 878 78Sash ai bank

Designaled account -S A-C 4) 96 ( l 282) 1 2 00TFOA l838

B~e oem c an d casi eW ents 4,996,98 (1.006.80 6,003.78

Appro'ed by Prepared by

Gianhold.s Saran,

Hiad of Administration Departicnt of \NAO Genei all iancer of \lAO

INDEPENDENT , A DITORCS REPORT

TO: ENKIIBOLD.D. IIEAD O1; SI I RING ( O\Il I OFCAPACIT1 BU ILDING FOR Tl HLtIONGOLIANNATIONAL A UDIT OFFICE (NINAO) PRO.JECT

Opinion

W e ha\e audited 'the acconmpanyingi Statement ofEpenditures (SOEs ) of Capacity Budingfor the MNAO projeet funded by Suprene Audit Institution C'apacity Dexelopinent Fund(Grant No: TIFOA 1 838 for the \ear ended December 3 L 2018

In our opinion, the Statement of Expenditures (OE ) of Capacity Building for the MNAOproject for the year ended December 3 1 2018. has been accurately and objecti\ el diselosedin accordance with the requirements of the Financing Agreement (Grant No: T1F0A 1 838). teProJect implementation manual and other relevant guidehnes and procedures.

Rasis for Opinion

We conducted our audit in accordance wii International Standards on Auditiiin (ISAs. Ourresponsibilties under ihose standards are íhrther descrlbed in the ? w / ResponsibI/me' foiiw Alt ä >/ Inqet Stateent section of our report We are independent of the Profject inaccordance with the International Ethics Standards Board for \ccountant's Code of Etfhies IorProfessional Accountants (IVSBA Code) tog)ethei mith the ethical requireenits that arerele%,ant to our audit of tlie financial statenents in Mongola and xxe hav,e fullilled our otherethical responsibilities in accordance w\ih these recquirements and the IESBA Code. We believlethat the audit ev idence xe ha\ e obtained is suficient and appropriate to proN ide a basis 6ör ouropirn[On.

Responsibilities of Management for the Financial StatementsThe project mnagement is responsible for the preparation and fair presentation of theStatement of Expenditures in accordance with the IDA,\ Financing Agreement, the (irantAgreement, the Projeet implementation manual and other relevanlt instructions and proceduresand 1or such internal control as management detenmnes is neceswan to enable the preparationof 'inancial staternents that are [rec from material mistatement, wx hether duc to fraud or error

Attlitor's Responibilities for the Xudit of the Project Statements

Out objecii es are (o obtai reasonable assurance abou w h her the Siatement ofF.\pendi i esas a x hole are hree from material misstatement. x hlhei duc to fraud or error. and to issuC anaudito s report that imieludes our opinton Neasonabic awunmie is a higi leel oi assurance.but i, not a guarantec that an audit condueted in accordance x I\SV, xxill alxay s detect amaterial misstatement when it exists lisstatements can anse from fraud or error and areconsidered material misstatement if mdi\ iduall or in the alregate tlex could reasonabl be

expected to influence the ecotiomic decisions of users taken on the basis of these financialstatements.

W`e coimunicate wviti pro ject management reparding, among other nimters, Ilie planned scopeand timing of the audit and sgLnilcant audit findngs neluding an significant deficiencies ininternal control that Nw identify during outr audit

GE.NERAL DIRLTOR OYUNAA

Dat

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MR VN1, \CC01 NTl\G, CONSA LTINCI

INDEPUNDLINI kl DITOWS REPORT

TO: ENKI1BOLD.1), 11LAD 01-- STEESING COMMITTVE 01-7CAPACITY BUILDING FORTHE MONGOLIANNATIONALAUD11~0141CE (NINAO) PROJECT

Opinion

kVe haNc audited ilie,,icconii)any-iii,ý4 Desägnated Statement ol'Capacrty Building, 6orthe MNA0 projeet funded by, Supreme Audit lnstittrtý,,n Capacity r)e\clopiiierii Fund (GraniNo:Jf OA1838ý flor the year ended December 3L 2018.

In our opinion- the Desi.-tviated Account Statenient c)t'C',ipýtcityý Building, I'or- thePVINAO projectfim- flie year ended Decernber 31, 2018. lias heen accurately and olýjecti\ely diselosed inaccordance xvilh the requirenients o[ the Financing (Grant Xo: 1 K38)_ theProýject iniplementation manutal and other relc\ ani guidel inc,ý arid procedures.

Basis 170r Opinion

W'e conducted our audit m mfli International Standards, on Atidning i ISÄSý, (-)Lit-

resporisibilitics underthose stan(kirds are INher deseribed in theAmhurå AlVnm%tduwppýl'

éS Amhi r4 the /ävem Samum~ section ofour report Wo are independent oftlic Project in

accordancc wiiii the ýi,ý,nal 'ýtandards Roard Iii- Accotitilatit's Code ofFtlnes for

Prol`csý,ronal Accountants SESBA Code) togellier Nch the ethical recItur .rernews thar arerelexant lo our audå of the tämncial statenients ni Nämmha. and Nxe haxe fulfilled our other-

elhical respunsibilnies I acetnikuice mih thK!5erequbaH mu andOwIKSHACkte Webebese

opinion,

Ftesp<)nsibihties of idana2enlent for the lärtandal Sialements

Ilie prycel management is responsible är the mrumri mul Sir lweserumti .on of theDesignated meomvi Stammw in a~dancc ivirh die IDiN 1-inancing Aý7,recnient, [lic (ii-anl

Agiveernerrt. de Projeet iniplernentation vrianual and other rekvant instritetions allt] procedum,

and är such internal control as managernent deternaner is nccessar.k to enable flic preparalimi(If financial staternews tMi are dec dom immenal niämmement- xxlietlier due to J-raud or ervor,

AudhuiSs Resl)onsibilides for the Audit (if the Project Staternerits

Our olýjecti\es are lo obla.in reasonable asstur-ancc abow uhether the Demgnwed Accutuit

Statement as a utole ma frec fr-orn material mismaternent uhellier duc to fraud or error- and to

issue an audåtoCs repon Sat inJudes our opåln läc~naNc asmixance is a high lexel of

assumnce. bta is not a gum-antec Oml an audit conlicted in accordancc m db ISAs mill aksavs

deteel kr inalerial tvisstaien-rent mhen ii exists. Misstatements can arise from ['rand or error ankl

are considered inaterial misstatement i K indix iduallv or in the aggregate. they, cotäl reasmiably

be expected to influence the ecnonie decision, of users taken on tlie basis of these financiastatCients,

We colmnitlicate 0ith prioect managlent rding. among other matters, the planned scopeand timing of the audit and significant audit fint--,- ínclidiniìg ai\ significant deflicencies ininternal control that we identiR durine our audit.

GENERAL DIRECTOR OYUNAA.

Date: fi~

SCapads Building for tle loigolian Naionauldit Offler- Gran~ No: TFOAI838FI UeCal Statemrints for the year ended December 31st 20 8

The Go%ernment of Alongolia &Supreme Audit Institution Capacity Developmenti F und

Grant No. TFOA 1838C apacity Building for the longoiian National Adtiit Office ("NINAO")

Project: 1155305DESIGNATED ACCOt NT STA T 1ENT

For the period ended December 31, 2018

-iin USD)At Dec3_. 2018 A t Dec 31, 2017

Part Å Accotnt transactions

Beginning halance 5,125.00Add:

Total anounr deposited by the SA Ä - 10738120 20615 71CDF for the yea8

Total ineres eaned 09 15 1.59495Tal bank chwes 1 40 0UMTotat 198,73.44 210,170.66

Deduct:

Goods and noii-coisultiin serk ices .7 7423 35 394 50C'onsltami's sen ices 91, d7j2 44 87, 9579

raining and workshops 003315 557 1335Inremeal operating Costs 10722.74 729&20Translfered to petty cash g I b81OTotal 198211.46 205,045.66

Closing balance 4.996.98 5.125.101

Part B -,Account reeonciliation

Amount advanced by the IDA 75,000.00 75,000.00Balance of the Designated Account at 4996.98 5.125M0

the end of the Near

AddAmpunt Withdrawn and not e6claimned 7863

Balance of pen cash 878.78Bank charges 4 00Total - 71,785.12

Deduct:

Toal interest carned 1,244 0 2594 95Fåreign exchange Joss (084s 83 (684k8å

Tota_ 2,559.2 1,910.12Total advaice to Designated account 2.437.71 75.000.00

Approved by Prepared by

Ganhold. Ts Srian.Head of Administration General 1-inancer o MNA)

Deparmnent of 0 \ A0

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-C'alMcitx Bilildi"2 fot- tile Mojigtilian National Xwlä Officc- G ra 11 t No: T VO k l 838Notes to the Vinancial for Ilie ýcar entled t)eceiisftk,m- 31s(. 7018

2.NOTESTOT111, FT\ÄNCM,STATEMLNTS2.1 Project backgroundOn Januarý 22, 2016, Ilie Dcýelopnient A-ssociallon and Ilie Gmerninent ofX4011-olja (represented bx the Urx of Fnuanec) si,,ticd the Grant ALýi,cciiieiii No. TFOA1838 to,issist in financing Capacný [3itildiiiý-, I'or the National Audit Officc v-KINAO~) Pr(ýjcct,Tlic Granl aurcement kva,, declared a,, ell-ective 1'rom f chruarx 04 20 16 \k illi the orlulvlal aniolint ofUI)S 380.000 and 1111C CIOSi112 date ol'the projeet xxas AuLtist 30, 20 Pvi, During the financial Near endedDecember 3 1 `. 1~0 18, addlitý>nal financinu, tij,USý `,.000 it) conduct oll-tile~*ob tralninu, 1,61- financialatiditorsand the extension ofpro*cctclomnuý date until tlic ene] of'tlic calendarwar 20 1` 8 \Nas appro dby Ilie International Deyelopment Associalion (-XX`orlj BanV) onluiie 2T'å. 20 18 111 accordancc mtliflie requesi subniitted hy Ilie Minjster o11`inancc.

Die e of- the Pro.leel, os to strcwýthcn KINA0's cajxicity - primari 1,, in finaricial ýimflä and auditfirin ind okct-ýw ht, 111r4>511--'11 cfc\clý-spiiielit an..1 itill)ICIIICI]titý'<)t) ol'a atij,-Nx stematic coniiiiiiiiiý-, prolessional dex clopnienl sinncm iogetlier xk Ii h a time-bound action plan tflatis necd,-drlýen_ tallored and flic ProJeet conm--,t,, tWific 1'()lioxkiiiL,

Coloponent 1. Conducting a peer ol' W'NAWs financial audit actiiities to pro.-ide änt,objectis-e, third-partv aýý,cosment of its stresigtlis, ike.li,nesses and priority improvement nceds

Conduct a pcer re\lew oC 1%1NAO's finaneiii atidit aetjýltics 0 -k an e\perlciicci SAI using fficINTOSAVs SÅ1 PNIý'riietliodolo,-,-, aý dectued appropnate (USD 65,000 f`hr SM personnel and Ira\clcosn A pecr rekiexk Ila,, nexer been performed on MNMTs financial atidit capabllftlesýerillealk nceds, and its nianagement suppotis- a pcer rcxicýx conccntratin,ý,. on lts financial attåtcapacitvand rclale4ldotiiiiiiis, ýkould Igt-okideatl()biccli\C.third-paii-ýýa,,,ses,,,iiietitc)li .(s strenoths, makricsses and priontx iniproxement nceds These finoritv, arcas fot- iiilprý)xelllellt\k-ould ihen he incorporated in (lic oi-i,ýiiiizýitioii-s UPI) strategx and (lic re[ekanl kiio\klcd,,e andlearning prograni.

Component 2. Carr-ing outa coeiil)t-ehensi,,e NINA0 kn(iwletl<ye and learning nceds assessnientcoverino (tie entire organization, incitidin- its locil branch office staff to identify capacity gaps

In parallel to the SAI pcer re\ iex\, a coiiil)relien,,1\c NINA0 kriox%,lccl,-ye and Icarning nceds assc.1,,sillcntsx ill be carried otit covering the enlire on.,anization. ineltiding its local branch office staff f USD30,000, local eolisultanl,ý) 1 lic -nokk leduc and leiriilri.-,

1,, a,,sessi-nent kkill be carried otit toldcntifý capaci .tv gaps from xýithin the oi-,)atiii.atit)n, l hi- xkil( emerall MNA0 stat -f' bothat the central and local branch offices and uliljze \ariouý tir\ching metliod-s such eriqLilIA,questionnan-e, foetv, group discusmowý and i ncliý idtial i nter\ i .evý s etc.

Component 3. Developing a conipi-chenki,.e, nee(K-drixcn and sustiinable contintlin-professiortal (te-, clopment- (UVD) strategy 10(1 detailled action plan hased on the pcer reviem andthe kno-,vled«w and Icarnino net-d% a,;scssment Carried out under the Projeet

A lieede,,-(1r-ikcll anj Conlinuflig projcý,,,,ional de,,cj(»1)illcnt ,trategktogether kkith a detniled action plan l`ov flirce wars k\ill tie (,L,\elup-ý-J on the pcer rekicMCIc(ýii(ikieteýi at MNA0 and the kvwxvlejue allel leal mw, w ;,,,1 - ;, -,,ment (LJý-ý ) 05,00o t`ov intet riational

constillant : local corvmltanoý

('oiili)(>iierit 4. Developing a custonlized traillim-, material taflored to ýMNAO,s cajiacity. tiffilldingnceds and dellivering training to MNAO personnell in theareas identified by the aförenientionedasse,mucnts. strategy and action titan

lapi Building fot Ilie Ningl ian Nartiomaj Atii n)llh Grmant No: TFO A 1838Notes to tihe Financial Starmnems i thie eai ened I)e(cmlw 31 . 218

1Dc\Qilpmlt 01 customted framme ny aIcil tiord 1o \1 \( > capacit bldityued dcsrddin the (PD) stratei and kno edge and ca;nii proc ran and dehir i e lithe adual traning to NIN \(personnel duing most ol the thrc-s ear period of the O"PD progran I SI) 12.u00 fInternationaland local consultants, local and retional traing meluding some hui mimmal traxel costs»L Whilethe specilic coent and depth of topies to be cox erd under the trainm program ute laruel to beldenilied and tallored as per the awefimes to be arried out, an cark indication of capacitk gapsrexeals such areas as \INAC staff knoxx ledge and undestandng of the relevant standards. le.IPSAS and ISSAls (IPSAS implementation guidance and irain is hein dex,eloped and delixeredbv IOF: ISSAI trajinu materials ull be translated into the Monriolian lanuage and adapted ftothe Moniohan conte\t). quality control. contracti t and managiement of priate aud iirmengagements. and auditn of the consoldated financial statements of the Cox einmet AI the end ofprolect period, trafnnt coxerage of e er 90 percenl of the total auditin staff or approximatel 350atditors is expected Trainin deliecry is expected to inelude mfnoxatise modalhties such asonlne xirtual tramng umnc a neuxli eslablished \VN connection axadable ilroughout MNA)OffiCes. f immze propee costs LINAS l seek to ul/e. translate and custotmze for the localcontext as necessaty eusn ISSA and other ratnme materials that ma, be ax ailable from IDI orother SA Is.

Component 5. Provision of technical assistance to estbilisi an efficient and fully transparentand dociumented procurement process for contracting private audit firms and to strengthenand streanline INAO's private audit firm selection processes

ecehnical assistance to establish an efficient and fuly transparent and documented procurementprocess for contracting pri\are audit firms tSD ?000 for international consultant - localconsultait interpreter). As part of the proect. the current MNAO practice of enamging pri\ate auditfirms to conduct the annual financial audits of budet entities and state-owx ned enterpri ses on belial Cof MNAO iII be analyzed to inprox c documnentation and transparency. Such eftorts i1 be timeixand beneficial as. in addition to budget entities. 1FI-fimnded projects are staring to engage in a similarpractice xhere MNA0 carrnes out auditor selection for the projeets but by folioxxitig the IFIS ownprocurement procedures. 1This proposed project wNill am at strengthening and streamlning MNAO'spris ate audit firm selection processes carried out for budge enttties and I1-fuinded projects. fr theseaudits conducted by private audit firms MNAO xwilli appl its quality control and quality assuranceframexork, hich may need improx ement if identiled as priority areas otcapacity dev elpment asper the continuing professional decelopmenrt strategy and the relexant tramning program.

The amount of the grant allocated has been cotmpared nxith the actual disbursemets as of December

\mnouni of ther( aieon11 < Imii Finanmec Actual dishursement

_ae r ___ ri iD Allocaied ljiii i11 piet-celkmntn (expressed ini L SD)l

(bods ( onsultanis SCI ices1 rainamu and \\ orkshops and 4' i51 s" mi 4i% tl on1llercmcntal Opc anlin (, oss

10otal a05i000.>o 100% 405a300.00

ln the 1ramexxork of the Grant \Vgreement for Capacit 13o1d1mf thei Ii m hm National \udiOffice (MNA OI Prolect. \IN \() is responsible lövr the ox eall coordnmaion and management of theProjeet implementation.

"apacity Building for the Nongolian Nalional Audit Ofice- Grant No: TFA k1838Noies to the Financial Statemens for the ear ended December 31. 20 i8

Vh Project Steerm Commiee a estalished bv the order ,N·\ X91 in ?017 oftfhe Audnor Generalof Monolia. The Project Steeringi Committee, led bs the Ad sor Io Auditor General of Nongolia.consists of the following members

• Head of le Administration Department of Monao]ian National Audit Office

• Head of Strategic Managermntiii Department of Mongolan National Audit Office

• Head of Financial Audit Departmnent of onglian National Audiå Office

• 1 Head of Perförmance Audit Department of Mongolian National Audit Offiee

• 1 ead of Compliane Audit Department of\Moneolian National Audit Office

• Director of Dex elopment lämancing Departnient of Mnistry of Finance

The Project Steering Committee il need to proside poles giidance and to ensure inter-sectoralcoordination and efficient preject acti,es, niid-teri plans fotr the project. detalled plans -or theparticuar year, procurement and financial plans based on them, the implementation of the plan andits monitoring reports on a semiainnual basis, to rex iex the projeels annual progress report on thefirst quitarter of the next sear. and to ensuire that the MNAO has the atihority to monitor theiri mplementat ion.

2.2 Summary of significant accountling policiesa) Statement of compliance

The Financial Statements comprise the Balance Sheei, the Statement of Project Sources and Uses ofFunds, the Statement of Expenditiures. the Disbursemen Report and the Designated AccointStatement. These reports haxe been prepared in the accordance with the requirements and guidelinesissued by the World Bank

b) Basis of 1)reparation

The Financial Statements haxe been prepared in accordance with the International Public SecorAccounting Standards (IPSASs) issned bs the International Auditig and Assurance Standards Boardof the International Federation ot' Acc'uiitatits. Cash basis of accounting has been adopied On thisbasis, receipts are recognized x hen recei ed or direet payment to creditors are made rather thanxhen income is carned and disbursements are recoized xxhen paid raiher than wkhen expenses areincurred.

e) Basis of measurement

The Finrancial Statements are presented in IS Dollan ' SD). Expenditure tiansaconsdenoininated in currencies otier than U SD are translated at rates of the respectie lund transationfrom Designated Account to Petty Cash or operating account. \r gains and losses are relleeted inthe Statement of Sources and U'ses of unds

( apacitY 13uiilding for thle Mongolian Natiomna Audii Offlce" Grait No: TFOA1838Noics io the Finanxcial St;ITeIts for th0 year ended Decernber 31st. 2018

(1) Basis of prese1ation

The account balances in the Financial Statements as of December 31 2018 ha\ e been comparedwxitli such balances as ol December 31 20 17.

e) Designated account

In accordance wxith the Disbursenient 1Letter of the Girant Agreemenl SACDF Grant No. TFOA838dated on Januarn 22. 2016. the proct opened the Desjignated Account (DA x Wiich is Ilie seLregatedaccount for the credit financng acceptable to the WVor ld Bank. Tie account has been naintalned atState Bank xwith the account number of 106 Ö37392. of xwhich the denominated currenc is UnitedStates dollar 1 SD Ilie pax ments for the elgible c\penditures of procuring goods, internationaland national consultants sCrx ices,. ri[ni ng and xkorkshops and neremental operatino costs haxe beenmade from the DesiLnated Accouni Tlie ceilin of the DA is defined as LSD 75000 as per theDisbursenent Letter of the Grant Areement.

2.3 Disbursement progress of SA1- DF Grant No. 11OA838As at December 3 1. 21018. Ilie Project had receixed USD 40,000 00 1 100%0 ofthe total Lrant througfhthe )esiLnated Account as financim- from IDA Grant No. TFOA1838 and had disbursed UISD402,562 29 ( 99.4% of the total grantr

2.4 Items in the balance sheeta) Cash and cash equivalents

Summary of transaction statement of Pettv Cash Account for Ilie xyear ended December 3 1 2018 isas folloxws:

Pettv cash account (in USD)As at As at

__-Dec 31,2018 Dec 31,2017Part A- Account transactions

Beginning balance 878 78

Add:Transferred from Designated account 1868 1 8Total 18,681.68

DedcietTraining and xorkshops 529.35Inciemental operating costs 878 78 16.588.72Foreign exchange loss 684.83Total 878.78 17,802.90

Closing balance 878.78

b) Other souirces

The balance of other sources Comprises of interest ieoie and forein e\cliange !alm loss.

(in U SD)Items Cuiuiati e to Cumulative to

Dec 31, 2018 31Dec3, 20171 otal interest carned 24 1. 10 2594.95Foreign e\changie gain [loss 684.83i 684 83)

STI AL 2559.27 1,910.12

"Capacity Building for the Nlongolian \mtional Aidit Office- Grant No: TFOA1838Notes to the Financial Statemiients for the ear ended December 31si. 2018

2.5 ProCurenent contractsFor the reporling periodl the Project had entered Into total of t\ enty i-three procurements followingthe market approach stated by the procurement plan approx ed by World Bank- Procurements arecomposed of txo contracts in relation to the progcurmnnt o ods., fotr contracts in relation to theconlsultant serv ices, four trainng aciI ities were iplemned and 3 Ineremental operating costs hadineurred which comprises of I I distinet contracts.

\Ve ha\ e audited all of the prociureentsic fu goods, conIulLtnt seices, training expenditures and theolter Ineremental operati ng costs as the coniracts deeied natrial to the auditor's opinion Theseproeureents wýere condueted in accordance with the procurement guidelines issued b the WorldBank.

2.6 Fvents after reporting periodAs at the end of the reporting period, The proleet had dturscd ihe total h gie grant of tJSI) 405,00()althouh hax e not \et submited the supporting documents Ior the disbursenents amounted to l MDS288.3 In total to the \\orld Bank and wýhich had en dratted as \\ \-09 and \\.\-10 b- the

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