FINANCIAL MANAGEMENT ASSESSMENT I. Executive Summary

Vegetable Production and Irrigated Agriculture Project (RRP MON 51423-002)

FINANCIAL MANAGEMENT ASSESSMENT

I. Executive Summary

1. The overall assessment of the project financial management pre-mitigation risk is moderate. Inherent risks concern the volatility of the national economy based on mineral sector, which causes optimistic macroeconomic parameters and weak fiscal management. However, these are being addressed by the government with coordinated assistance from the donor community, in parallel with efforts to improve the economy through support in agriculture. Project risk comprise of the unavailability of Ministry of Food, Agriculture, and Light Industry (MOFALI) staff to be assigned to the Project Implementation Unit (PIU) to perform day to day project management work.

2. Identified control risks in implementation of financial management are (i) limited knowledge of PIU staff on ADB disbursement procedures and (ii) limited knowledge of MOF internal audit staff on ADB rules and procedures, and (iii) PIU staff not familiar on ADB’s and MOFALI’s requirements on project monitoring and reporting. These weaknesses will be mitigated by the recruitment of long-term consultants on an individual basis for staffing of the PIU which will be established to assist implementation of the project, including a finance specialist who is familiar with accounting and disbursement for ADB projects. These consultants will be appropriately qualified and experienced in project management. Additional training will be provided as required to introduce the PIU staff to ADB requirements and procedures.

II. Introduction

3. The Financial Management Assessment (FMA) was prepared in accordance with Asian Development Bank’s (ADB) Technical Guidance of Financial Management Assessment (2015). The purpose of this FMA to determine the robustness of accounting procedures, financial controls, audit arrangements and the capacity of MOFALI. The FMA was conducted with the aid of the ADB financial management assessment questionnaire and was undertaken between June–July 2019 by the financial management specialist engaged for the project transaction technical assistance and included the personnel of MOFALI’s Accounting Division, MOFALI’s Crop Production Development Policy Coordination Department (CPDPCD). In addition to the FMA conducted for the project, additional information was derived from: (i) a Public Financial Management Performance Report1 prepared by the World Bank for Mongolia; (ii) a report by the International Monetary Fund;2 and (iii) ADB’s Country Partnership Strategy (CPS).3 ADB’s CPS finds that efforts to improve public financial management are still needed, though Mongolia has succeeded in recent years to rein in fiscal imbalances.

III. Project Description

4. The project will help farmer groups and farming households, highly vulnerable to climate change, access agricultural facilities and increase crop outputs. The project will focus on the upgrading, modernizing irrigation and drainage infrastructure of the 12 selected irrigation systems. The required works will involve upgrading of irrigation schemes. Upgraded irrigation systems will

1 World Bank. 2015. Mongolia: Report on Public Expenditure and Financial Accountability. Ulaanbaatar. 2 International Monetary Fund. 2018. Staff Report for Mongolia. Ulaanbaatar. 3 ADB. 2017. Country Partnership Strategy: Mongolia, 2017–2020—Sustaining Inclusive Growth in a Period of

Economic Difficulty. Manila.

http://www.adb.org/Documents/RRPs/?id=51423-002-3

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also be equipped with water saving irrigation equipment, which is critical for efficient crop production, especially vegetable production, under expected climate change.

5. The project will support 4 regional research centers for improvement of productivity and resilience of agricultural production, focusing specifically on financing investments to improve the production of high-yielding and climate-resilient vegetable seeds. The support will include provision of equipment and facilities such as climate-controlled growth chambers, storage cool rooms, sheds, fencing, mechanization packages, seed cleaning and packaging equipment, conservation farming equipment and teaching facilities.

6. The project will strengthen farmer groups by providing technology packages to vegetable farmer groups in target schemes including mechanization technologies such as tractors, rotary hoes and spraying equipment, all-weather greenhouses with solar-powered heating and long-life films, and small cool room for product storage.

IV. Implementation Arrangements

7. The project will be financed by a blend of ADB ordinary capital resources loans ($14.7 million as a regular loan and $25.3 million as a concessional loan), a Japan Fund for Poverty Reduction (JFPR) grant for $2.0 million, and Government of Mongolia in-kind contributions. The government will be the borrower and will be responsible for the repayment of the loans, through the Ministry of Finance (MOF).

A. Executing and Implementing Agencies

8. MOFALI will be the executing agency responsible for overall project implementation. MOFALI’s CPDPCD will be the implementing agency for the project. Guidance and sector coordination will be through a project steering committee4.

9. A PIU will be established with one central office (Ulaanbaatar). The PIU will be responsible for daily project management, including accounting, procurement, training, monitoring, and reporting. The PIU will be chaired by the director general of CPDPCD. The executing and implementing agencies lack the personnel and resources needed to fully implement the project, and the PIU staff will comprise consultants recruited for the administrative and technical tasks.

10. The project duration will be six years: tentatively, October 2020 to September 2026. Part of the loan proceeds will be used to: (i) establish the administrative framework for the project, including the PIU; and (ii) finance the specialist support and PIU operational costs required to implement outputs 1–3.

4 Regulation 196: establish Project Steering Committee based on decision of Budget General Managers of Project

Implementing Agencies.

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B. Funds Flow

The funds flow mechanism of the project and project fund flow arrangements are shown in Figure 1 with ADB loan proceeds disbursed through an advance account.

Figure 1: Project Funds Flow Arrangements

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C. Disbursement Arrangements

11. Loan and grant proceeds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2017, as amended from time to time), and detailed arrangements agreed upon between the government and ADB. MOF will maintain separate accounts and records for the loan. The PIU will be responsible for project implementation, including daily management, accounting, procurement, training, monitoring, and reporting.

12. The project will use a combination of direct payment, reimbursement, statement of expenditures, and advance account procedure of ADB. Three separate advance accounts (one for the regular loan, one for the concessional loan, and one for the JFPR grant) will be established in the Treasury Single Account (TSA) at MOF. The currency of the advance accounts will be in US dollar. The loan and the grant proceeds will be paid into the advance accounts, which will be operated by MOFALI, the executing agency. The advance accounts will be used exclusively for ADB’s share of the eligible expenditures. MOFALI, with support of the PIU, will be responsible for the management, monitoring, and reconciliation of the advance accounts. The PIU will process the invoices of contractors and will generate requests for replenishments of the advance accounts and provide detailed reporting of all financial flows. MOF will establish 2 sub-accounts in MNT (one for the 2 loan advance accounts and one for the JFPR grant advance account). These sub-accounts will be held under the TSA at MOF. The sub-accounts will be maintained by the PIU on behalf of MOFALI and will be for daily expenditures including for payment to contractors, suppliers, and consultants. MOFALI’s will ensure that every liquidation and replenishment from the project accounts is supported by documentation in accordance with ADB’s Loan Disbursement Handbook (2017, as amended from time to time). Co-signing responsibilities are as follows: (i) withdrawal applications submitted to ADB will be co-signed by MOF and MOFALI; (ii) disbursements from the advance and sub-accounts will be co-signed by MOFALI and PIU project coordinator.

13. Statement of expenditures (SOE) procedures may be used for reimbursement of eligible expenditures or liquidation of advances to the advance accounts. Supporting documents and records for the expenditures claimed under the SOE should be maintained and made readily available for review by ADB’s disbursement and review missions, upon ADB’s request for submission of supporting documents on a sampling basis, and for independent audit.

V. Country and Sector Financial Management Issues

14. Mongolia’s long-term prospects are promising but faces short-term challenges due to fiscal vulnerabilities and external risks. With an investment and mining boom, Mongolia was the fastest growing economy in 2011, but the collapse of foreign direct investment demanded sharp adjustments.5 Mongolia is in a considerably stronger position than two years ago. Due to booming tax revenues and relatively contained expenditures, the fiscal balance has improved by 18 percentage points and public debt has fallen 13 percentage points to 75 percent of GDP (IMF definition). On external side, the Bank of Mongolia has used the strong turnaround in exports and FDI to increase net foreign exchange reserves by $3 billion since end-2016..6 ADB’s CPS for Mongolia 2017–2020 is focused on addressing key challenges by supporting investments, policy

5 Project Appraisal Document, World Bank, 2017, report No. PAD2269, Strengthening Fiscal and Financial Stability

Project May 18, 2017 6 IMF Staff Completes 2019 Article IV Mission to Mongolia, https://www.imf.org/en/News/Articles/2019/06/28/pr19251-

imf-staff-completes-2019-article-iv-mission-to-mongolia

https://www.imf.org/en/News/Articles/2019/06/28/pr19251-imf-staff-completes-2019-article-iv-mission-to-mongolia

https://www.imf.org/en/News/Articles/2019/06/28/pr19251-imf-staff-completes-2019-article-iv-mission-to-mongolia

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reforms, capacity building, and knowledge sharing to sustain growth in a period of economic difficulty. ADB will help the Mongolian Government by promoting economic and social stability, developing infrastructure for economic diversification, and strengthening environmental sustainability.

15. The 2015 World Bank Public Financial Management Performance Report noted that the budget of the Government of Mongolia (State Budget) has low credibility with high deviations in 2011-2013 between planned expenditures, approved by the Parliament of Mongolia, and actual expenditures. The reasons of such deviation are high mineral resource dependency, and political imperative to expand budget spending and optimistic forecast of economic parameters. Mongolia has made good progress in increasing the budget transparency and comprehensiveness of information in the budget. Treasury single account (TSA), having local treasury officers, coordinates cash management, tighten expenditure controls, and improves the quality of fiscal reports and the expenditure limits exercised through the government financial management information system (GFMIS). The accounting, reporting and recording are strong through the TSA, Bank of Mongolia and Treasury Department monthly consolidated balance.

16. The GFMIS is the central system at treasury, which controls the budget allocation and payments. According to the Public Financial Management Performance Report (World Bank, 2015), GFMIS has the following functions: (i) process, record and report transactions, (ii) provides monthly information on budget allocations and expenditures, (iii) allows cash management as it is connected to the Central Bank electronically.

17. All entities of central government are audited annually, either by the Mongolian National Audit Office or by auditing private firms. A full range of financial audits and some aspects of performance audit are performed and generally adhere to auditing standards, focusing on significant and systemic issues, and audit reports are submitted to legislature in a timely manner, with clear evidence of follow up on Mongolian National Audit Office’s audit recommendations. Parliament, however, only does a cursory review of these audit reports and approves the reports with no recommendations.

18. ADB Country Partnership Strategy 2017–2020 notes that ADB will continue its efforts to improve the transparency, accountability, and integrity of financial management throughout the public sector. ADB will pay attention to the public procurement system and public debt management in the period of the current economic difficulties.

VI. Project Financial Management System

A. Organisation and Personnel

19. MOF operates the Treasury and is responsible for the management and supervision of the Government’s budget, supervises ministerial budgets across Government and monitors their financial reporting and accounting, provides training to staff in all ministries in accounting and financial reporting procedures, and coordinates overseas development assistance (ODA) funding. The MOF also directly implements some externally funded projects, including the current ADB-funded project to strengthen tax administration (MOF Regulation 196). MOF includes the following Departments: Treasury, Budget, Development Finance, and Debt Management.

20. Executing agency (MOFALI) is responsible for the agriculture sector, operates nine departments, which focus on various topics of agriculture, and include the project implementing

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agency, Crop Production Policy Implementation and Coordination Department (CPDPCD). The Finance Division (FD) comprises staff qualified in financial management and accounting, responsible for reviewing, auditing, monitoring, and reporting on MOFALI financial expenditures, including donor-supported projects, across all of MOFALI’s Departments. In cooperation with donor-supported projects, MOFALI’s has seven ongoing projects in sub-sectors including vegetables (2), pasture management (1), livestock (1), meat (1), agricultural raw material processing (2). Two of the projects under current MOFALI management are ADB-funded.

21. MOFALI have units and staffing which are appropriate for project execution. The finance and accounting functions of both MOFALI and MOF are staffed adequately by permanent employees.

22. The PIU will be responsible for project implementation including accounting, monitoring and reporting. CPDPCD will be responsible for reviewing project invoices and withdrawal applications prepared by the PIU for onward review by the MOFALI’s FD and submission to the MOF and the ADB for their respective subprojects.

B. Information Systems

23. As a Government Ministry, MOFALI is connected to the government accounting system and uses the Government’s integrated accounting software, which conducts transactions directly with the government consolidated account, the TSA. Financial reports are produced centrally through the GFMIS (Mongolia’s treasury system). The cash balances in the TSA, which accounts for all government transactions are reconciled daily. MOF’s financial accounting is automated through GFMIS and the Official Development Assistance Management Information System. Financial data are integrated on a monthly basis.

C. Accounting Policies and Procedures

24. MOFALI uses the accrual basis of accounting and follows the public sector accounting standards7. For externally funded projects, Regulation 1968 regulates the utilization of proceeds of foreign loans of government and requires adequate financial management through proper accounting and timely financial reporting in accordance with international financial reporting standards.

D. Internal and External Audit

25. MOFALI’s Inspection and Internal Auditing Department and MOF’s internal audit division are responsible for internal auditing of their respective ministries, which is conducted annually. The internal auditing functions are adequately staffed. Internal audit functions had been established since 2014 in all line ministries and agencies. The Internal Audit Division of MOF reports to the Budget Control and Risk Management Department of MOF. Public sector internal

7 International Federation of Accountants (https://www.ifac.org/about-ifac/membership/country/mongolia) states that:

in 2015, establishes IPSAS as public sector accounting standards in Mongolia for all budget entities. The Mongolian Institute of Certified Public Accountants supports the standard-setting process by providing translations of the standards and reports that the 2003 version of IPSAS has been translated and is being applied. No further information is available on plans to review and adopt the latest IPSAS.

8 Minister of Finance. 2015. Resolution 196 (10 July 2015). Regulation on utilization of proceeds of foreign loans of the Government; implementation, administration, financing, monitoring and evaluation of projects and programs funded by such proceeds. Ulaanbaatar.

https://www.ifac.org/about-ifac/membership/country/mongolia

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auditing is still relatively weak9 and more auditors need to be trained to achieve better audit coverage in ministries.

26. The Mongolia National Audit Office (MNAO) conducts an external audit of the MOFALI financial accounts annually in accordance with International Standards of Supreme Audit Institutions. MNAO audits portfolio minister’s financial statements, and the consolidated year-end financial statements of the Government. At the project level, an external auditing company, assigned by MNAO, will be hired to audit the project financial statements.

27. The audit report for the project financial statements will include a management letter and auditor’s opinions, which cover (i) whether the project financial statements present an accurate and fair view or are presented fairly, in all material respects, in accordance with the applicable financial reporting standards; (ii) whether the proceeds of the loans were used only for the purpose(s) of the project; and (iii) whether the borrower or executing agency was in compliance with the financial covenants contained in the legal agreements (where applicable).

E. Budgeting

28. MOFALI’s Finance Division is responsible for reviewing, monitoring, and reporting to the MOF its financial expenditures, including those for donor-supported projects, under budgeting systems and procedures that are mandated by MOF. Under Regulation 196, MOF ensures that capital resources provided from external and internal sources are included in ministerial budget portfolios as part of the draft medium-term fiscal framework statement, annual budget ceilings, annual draft budgets, annual budget amendment drafts, and budget schedules.

F. Financial Reporting

29. MOFALI’s Finance Division is responsible for reviewing, monitoring, and reporting to the MOF and external auditors on MOFALI financial expenditures, including donor-supported projects. Financial reports compare actual expenditures with budgeted and programmed allocations.

G. Internal Control

30. Functional responsibilities for internal control include authorization to execute a transaction, recording of the transaction, custody of assets involved in the transaction, and reconciliation of bank accounts and subsidiary ledgers. The functions of ordering, receiving, accounting for, and paying of goods and services are appropriately segregated.

H. Safeguard over Assets

31. Rules are generally followed in order to safeguard assets. MOFALI keeps records of fixed assets, in accordance with government rules. The Asset Safekeeping Commission carries out semi-annual and annual stocktaking of fixed assets and keep records of the stocktaking and submits the stocktaking report to the Government Agency for Policy Coordination on State Property.

32. Per Regulation 196, assets established through the project will be registered in the capital assets of the project executing agency.

9 Public Financial Management Performance Report, 2015, World Bank

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33. Strengths. MOFALI has been implementing ADB loan projects and has experience managing ADB-financed projects. MOFALI has a Finance Division staffed by qualified personnel and will provide close monitoring and supervision of the implementing agency in project administration and financial reporting. The Finance Division operates a GFMIS system that integrates its accounts well with the central government, with policies and procedures in place on budgeting, accounting, safeguarding of assets, accounting and internal control. A PIU will be established to support project implementation, which will be staffed by qualified financial specialist experienced in ADB procedures, working to support the executing agency and the implementing agency. The PIU will operate project accounts using accounting software, acceptable to the ADB and compatible to the government’s centralised accounting system,

34. Weaknesses. Despite MOFALI having qualified personnel, it does not have staff that can be assigned to the PIU to perform day to day project management. Internal audit of the PIU is managed by the Internal Audit Division of MOF. Duties are appropriately segregated but training and capacity on ADB policies and procedures need to be strengthened. The implementing agency will require full support from the executing agency and appropriate expertise in the PIU recruited for project implementation. Internal auditing functions in MOF are guided by the public sector internal audit standards, but staff needs to be further trained with ADB’s disbursement guidelines and procedures.

VII. RISK DESCRIPTION AND RATING

Table 1: Table of Risk Description and Rating

Risk Type Risk

Assessment Risk Description

Mitigation Measures

A. Inherent Risk

1. Country specific risks

S Overall PFM system is functioning, but there are some challenges in the fiscal management such as the mismatch of strategic priorities and actual expenditure, short construction season, and lack of policy continuity.

ADB should continue to support the GOM’s effort to further support and improve the PFM system through capacity development

35. 2. Entity specific risks

L MOFALI has systems in place and MOFALI’s Finance Division has qualified staff experienced in financial management and been involved in the execution of numerous donor-supported projects.

.

3. Project specific risks

M Unavailability of MOFALI staff that can be assigned to the PIU to perform day to day project management.

A fully staffed PIU will be recruited (funded from the project) which will assist MOFALI in the day to day project management.

Overall Inherent

Risk

M

B. Control Risk

1. Funds Flow M Limited knowledge of PIU staff on ADB disbursement procedures.

Recruitment of Finance Specialist who has knowledge and experience on ADB projects as required in the TOR and provide training on ADB’s Loan Disbursement Handbook (2017, as

amended from time to time). 2. Staffing L MOF and MOFALI has adequate

capacity to support the PIU, particularly on financial management, to properly implement this project in

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Risk Type Risk


Mitigation Measures

compliance with ADB processes and procedures.

3. Accounting policy and procedures

L Accounting policies and procedures are in place in MOFALI.

Risk Type Risk


Mitigation Measures

4. Internal Audit M The Internal Audit Division of the MOF has limited knowledge on ADB requirements & procedures.

Provide training on ADB policies and procedures.

5. External Audit L External audit will be conducted by the engaged private auditing firm in accordance with national auditing standards

6. Reporting & Monitoring

M PIU staff not familiar on ADB’s and MOFALI’s requirements on project monitoring and reporting.

Provide training to PIU staff on project monitoring and reporting.

7. Information systems

L PIU will use an accounting software that is acceptable to ADB.

Overall Control Risk

M

ADB = Asian Development Bank, GoM = Government of Mongolia, MOF = Ministry of Finance, MOFALI = Ministry of Food, Agriculture and Light Industry, PIU = project implementation unit, L = Low, M = moderate, H = high S = substantial.

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VIII. CONCLUSION

48. The overall pre-mitigation financial management risk of the executing and implementing agencies is moderate (defined as “likely to occur, will have low impact if occurs”)10 based on unavailability of MOFALI staff to be assigned to the PIU to perform day to day project management tasks, wherein errors or deficiencies in project management will likely occur. This risk will be mitigated by the recruitment of a fully staffed PIU and the overall guidance of MOFALI’s Finance Division.

49. The project will implement the following mitigation measures (Table 2), which will effectively mitigate the identified financial management risks.

Table 2: Financial Management Action Plan Risk Action Responsibility Timing

Unavailability of MOFALI staff that can be assigned to the PIU to perform day to day project management.

A fully staffed PIU will be recruited (funded from the project) which will assist MOFALI in the day to day project management.

MOFALI Immediately after loan effectiveness

Limited knowledge of PIU staff on ADB disbursement procedures.

Recruitment of Finance Specialist who has knowledge and experience on ADB projects, as required in the TOR, and provide training on ADB’s Loan Disbursement Handbook (2017, as amended from time to time).

ADB, MOFALI Immediately after loan effectiveness

The Internal Audit Division of the MOF has limited knowledge on ADB requirements & procedures.

Provide training on ADB policies and procedures.

ADB, MOF, MOFALI During project implementation

ADB = Asian Development Bank, MOFALI = Ministry of Food, Agriculture and Light Industry; MOF = Ministry of Finance, PIU = project implementation unit.

10 ADB. 2015. Financial Management Technical Guidance Note. Financial Management Assessment. Manila.

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Financial Management Assessment Questionnaire for the Vegetable Production and Irrigated Agriculture Project

This Financial Management Assessment Questionnaire has been completed for MOFALI in accordance with ADB’s Financial Management and Analysis of Projects (2005) and Financial Management Assessment Guidelines (2010).

Topic Response Remarks

1. Executing / Implementing Agency

1.1 What is the entity’s legal status / registration? MOFALI is the executing agency of the project and is a line ministry of the Government of Mongolia

1.2 How much equity (shareholding) is owned by the Government?

100%

1.3 Obtain the list of beneficial owners of major blocks of shares (non-governmental portion), if any.11

N/A

1.4 Has the entity implemented an externally-financed project in the past? If yes, please provide details.

Refer to Annex 1

1.5 Briefly describe the statutory reporting requirements for the entity.

Regulation 196 and ADB policies and procedures provides the reporting requirements.

1.6 Describe the regulatory or supervisory agency of the entity.

MOFALI report to the cabinet and national parliament.

1.7 What is the governing body for the project? Is the governing body for the project independent?

MOFALI is the governing body for the project.

1.8 Obtain current organizational structure and describe key management personnel. Is the organizational structure and governance appropriate for the needs of the project?

Refer to Annex 4

1.9 Does the entity have a Code of Ethics in place?

Yes12.

1.10 Describe (if any) any historical issues reports of ethics violations involving the entity and management. How were they addressed?

None.

2. Funds Flow Arrangements

2.1 Describe the (proposed) project funds flow arrangements in detail, including a funds flow diagram and explanation of the flow of funds from ADB, government and other financiers, to the government, EA, IA, suppliers,

Included in the FMA report.

12 Code of Ethics. https://www.legalinfo.mn/annex/details/9237?lawid=14044

https://www.legalinfo.mn/annex/details/9237?lawid=14044

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contractors, ultimate beneficiaries, etc. as applicable.

2.2 Are the (proposed) arrangements to transfer the proceeds of the loan (from the government / Finance Ministry) to the entity and to the end-recipients satisfactory?

Yes. MOFALI receives and reviews the withdrawal application, and then submits to MOF, then MOF approves the withdrawal application and submits to ADB.

2.3 Are the disbursement MOFALI hods appropriate?

Disbursement will be in accordance with Treasury Guideline dated 4th May 2005, approved by Resolution 123 of Minister of Finance

2.4 What have been the major problems in the past involving the receipt, accounting and/or administration of funds by the entity?

None.

2.5 In which bank will the Imprest Account (if applicable) be established?

Advance accounts will be established at the BOM. For all expenditure categories under ADB loans (Regular and COL) and JFPR grant, operational sub-accounts will be established at a commercial bank.

2.6 Is the bank in which the imprest account is established capable of −

• Executing foreign and local currency transactions?

• Issuing and administering letters of credit (LC)?

• Handling a large volume of transaction?

• Issuing detailed monthly bank statements promptly?

Yes, commercial banks are capable of executing foreign and local currency transactions, issuing and administering letters of credit, handling a large volume of transaction, and issuing detailed monthly bank statements.

2.7 Is the ceiling for disbursements from the imprest account and SOE appropriate/required?

No ceiling will be set, unless there is a ceiling set by ADB.

2.8 Does the (proposed) project implementing unit (PIU) have experience in the management of disbursements from ADB?

A new PIU will be established for the project. The PIU will be set up for this project based on the recruitment of individual consultants using project funds.

2.9 Does the PIU have adequate administrative and accounting capacity to manage the imprest fund and statement of expenditure (SOE) procedures in accordance with ADB’s Loan Disbursement Handbook (LDH)? Identify any concern or uncertainty about the PIU’s administrative and accounting capability

The PIU will be composed of staff that have experience in dealing with international financing institutions. The staff will have adequate administrative and accounting capacity to manage the Advance Account and SOE procedures in accordance with ADB’s Loan

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which would support the establishment of a ceiling on the use of the SOE procedure.

Disbursement Handbook. The staff will be hired by the ADB and MOFALI staff according to TORs.

The procurement officer should have the experience and training on ADB procedures and guidelines.

2.10 Is the entity exposed to foreign exchange risk? If yes, describe the entity’s policy and arrangements for managing foreign exchange risk.

Yes. Per Regulation 196, transactions in foreign currency shall be converted in MNT and registered based on Mongol Bank closing exchange rates one day prior to the date of transaction.

2.11 How are the counterpart funds accessed?

through tax exemption.

2.12 How are payments made from the counterpart funds?

Payments or in kind contribution based on the agreed procedure between ADB and MOFALI.

2.13 If project funds will flow to communities or NGOs, does the PIU have the necessary reporting and monitoring arrangements and features built into its systems to track the use of project proceeds by such entities?

Under one of the components of the current project, agricultural machinery and equipment will be provided to cooperatives and farmer groups. The executing agency/PMU will established necessary reporting and monitoring system to track the use of project proceeds.

2.14 Are the beneficiaries required to contribute to project costs? If beneficiaries have an option to contribute in kind (in the form of labor or material), are proper guidelines and arrangements formulated to record and value the labor or material contributions at appraisal and during implementation?

No.

3. Staffing

3.1 What is the current and/or proposed organizational structure of the accounting department? Attach an organization chart.

Refer to Annex 2

3.2 Will existing staff be assigned to the project, or will new staff be recruited?

New staff (financial management expert) will be hired immediately after ADB loan

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becomes effective (estimated at June 2020).

3.3 Describe the existing or proposed project accounting staff, including job title, responsibilities, educational background and professional experience. Attach job descriptions and CVs of key existing accounting staff.

The TORs of the Finance Specialist will be agreed with ADB during the fact-finding mission.

3.4 Is the project finance and accounting function staffed adequately?

No. Finance specialist staff will be hired under the PIU to assist in managing the project during implementation.

See remarks in 2.9

3.5 Are the project finance and accounting staff adequately qualified and experienced?

Qualified and experienced finance specialist will be hired.

3.6 Are the project finance and accounting staff trained in ADB procedures, including the disbursement guidelines (i.e., LDH)?

No. Finance Specialist hired will be trained on ADB procedures.

Moderate risk as expert may not be familiar with the new loan disbursement guidelines (2017) or LDH

3.7 What is the duration of the contract with the project finance and accounting staff?

To be determined.

3.8 Identify any key positions of project finance and accounting staff not contracted or filled yet, and the estimated date of appointment.

Selection process for PIU Finance Specialist will start after the approval of the project.

3.9 For new staff, describe the proposed project finance and accounting staff, including job title, responsibilities, educational background and professional experience. Attach job descriptions.

The job description/TOR of Finance Specialist is defined in the PAM.

3.10 Does the project have written position descriptions that clearly define duties, responsibilities, lines of supervision, and limits of authority for all of the officers, managers, and staff?

The job description/TOR is defined in the PAM.

3.11 What is the turnover rate for finance and accounting personnel (including terminations, resignations, transfers, etc.)?

Turn-over rate is low. The Finance Division of MOFALI has 8 employees, and the division further plans to expand.

3.12 What is training policy for the finance and accounting staff?

Training with Treasury Department staff shall be organized regularly. ADB training will be needed for finance and accounting staff.

Moderate risk – new LDH

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3.13 Describe the list of training programs attended by finance and accounting staff in the last 3 years.

N/A

4. Accounting Policies and Procedures

4.1 Does the entity have an accounting system that allows for the proper recording of project financial transactions, including the allocation of expenditures in accordance with the respective components, disbursement categories, and sources of funds (in particular, the legal agreements with ADB)? Will the project use the entity accounting system? If not, what accounting system will be used for the project?

Yes, MOFALI has an accounting system in place.

Regulation 196 – which sets the guidelines on the utilization of proceeds of foreign loans of government – cites the need to conduct adequate financial management through proper accounting and timely financial reporting in accordance with international financial reporting standards (Section 8.2.3).

Section 14.1.3 of Regulation 196 also states the need to administer payments and settlements related to appropriation of loan proceeds and budget funds expediently and in accordance with intended purpose, ensure accurate accounting and financial reporting in accordance with relevant rules, regulations and guidelines.

4.2 Are controls in place concerning the preparation and approval of transactions, ensuring that all transactions are correctly made and adequately explained?

Yes. There are two types:

For foreign currency transactions, the Development Financing Department verifies requests in terms of their compatibility with project procurement plans, etc. and forwarded to Treasury Department for verification and approval.

For local currency, the project team leader/financial officer of the PIU processes the payment and will be reviewed by the project team leader/coordinator.

4.3 Is the chart of accounts adequate to properly account for and report on project activities and disbursement categories? Obtain a copy of the chart of accounts.

Yes, the chart of accounts is adequate. Under Regulation 196, there is fiscal classification chart (recurrent cost – administrative and training, consultancy services, etc; investment – investment activities). Each category will have classifications.

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4.4 Are cost allocations to the various funding sources made accurately and in accordance with established agreements?

Yes. The Treasury Department will ensure that cost allocations are accurate and in accordance with agreements.

4.5 Are the General Ledger and subsidiary ledgers reconciled monthly? Are actions taken to resolve reconciliation differences?

Yes.

4.6 Describe the EA’s policy for retention of accounting records including supporting documents (e.g., ADB’s policy requires that all documents should be retained for at least 1 year after ADB receives the audited project financial statements for the final accounting period of implementation, or 2 years after the loan closing date, whichever is later). Are all accounting and supporting documents retained in a defined system that allows authorized users easy access?

Each project keeps accounting records. Government entities must keep the reconciliation of accounting data.

For the entire duration of the project, the IA will keep the financial records. By the end of the project, the financial documents are transferred to MOF archive. The information is provided to MOF on yearly basis for financial documentation. For the MOF, archive documents are available in digital form. Archived documents are retained until the end of the archiving lifecycle.

The project submits invoices and requests for withdrawal, so this information is kept with MOF. Two copies are produced – one is with IA and one with the MOF.

4.7 Describe any previous audit findings that have not been addressed.

N/A

Segregation of Duties

4.8 Are the following functional responsibilities performed by different units or persons: (i) authorization to execute a transaction; (ii) recording of the transaction; (iii) custody of assets involved in the transaction; (iv) reconciliation of bank accounts and subsidiary ledgers?

Yes, these functional responsibilities will be performed by different units:

authorization to execute transaction – Development Financing Department;

recording of transaction – Development Financing Department and Treasury Department;

custody of assets involved in the transaction – Project Unit; and

reconciliation of bank accounts and subsidiary ledgers – Project Unit (MOF

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has a copy, but the original is with the Project Unit)

4.9 Are the functions of ordering, receiving, accounting for, and paying for goods and services appropriately segregated?

Yes.

Budgeting System

4.10 Do budgets include physical and financial targets?

Yes.

4.11 Are budgets prepared for all significant activities in sufficient detail to allow meaningful monitoring of subsequent performance?

Indicators and tools are agreed using project design and monitoring framework and the progress and performance tracked using them. Reports provide details on physical and financial targets and reviewed by the relevant officer.

4.12 Are actual expenditures compared to the budget with reasonable frequency? Are explanations required for significant variations against the budget?

Reports provide details on actual expenditures on quarterly basis, the reports are reviewed by MOFALI and MOF accordingly.

4.13 Are approvals for variations from the budget required (i) in advance, or (ii) after the fact?

In advance.

4.14 Is there a ceiling, up to which variations from the budget may be incurred without obtaining prior approval?

N/A

4.15 Who is responsible for preparation, approval and oversight/monitoring of budgets?

The overall project budget will be prepared by MOFALI.

For this project, working budgets and cost estimates will be prepared by the PIU under the supervision of the IA.

4.16 Describe the budget process. Are procedures in place to plan project activities, collect information from the units in charge of the different components, and prepare the budgets?

Yes. The PIU will be responsible for project implementation, monitoring of progress, and preparation of reports.

4.17 Are the project plans and budgets of project activities realistic, based on valid assumptions, and developed by knowledgeable individuals?

Is there evidence of significant mid-year

revisions, inadequate fund releases against

Yes. Under Regulation 196 (Section 9.1.8), MOF is tasked to ensure the inclusion of capital resources provided from external and internal sources under various agreements into respective budget portfolios as part of draft medium-term fiscal framework statement, annual budget ceilings, annual draft budgets,

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allocations, or inability of the EA to absorb/spend released funds?

Is there evidence that government

counterpart funding is not made available adequately or on a timely basis in prior projects?

What is the extent of over- or under-budgeting

of major heads over the last 3 years? Is there a consistent trend either way?

annual budget amendment drafts and budget schedules.

Payments

4.18 Do invoice-processing procedures require: (i) Copies of purchase orders and receiving reports to be obtained directly from issuing departments? (ii) Comparison of invoice quantities, prices and terms, with those indicated on the purchase order and with records of goods actually received? (iii) Comparison of invoice quantities with those indicated on the receiving reports? (iv) Checking the accuracy of calculations? (v) Checking authenticity of invoices and supporting documents?

Yes. For foreign currency invoice, copy of each financial document is required. For operational financial account, the project unit can submit bank statements. For other payments (payments to international consultant, consultancy firms, etc.), invoices, reports, and acceptance notices by IA are required.

Yes.

Yes.

Yes.

4.19 Are all invoices stamped PAID, dated, reviewed and approved, recorded/entered into the system correctly, and clearly marked for account code assignment?

Yes

4.20 Do controls exist for the preparation of the payroll? Are changes (additions/deductions/modifications) to the payroll properly authorized?

Under Regulation 196, MOF sets wages for each individual project unit staff. When they submit request to MOF on quarterly basis, they submit payrolls made and also budget for these in the future. Once it is verified, then the budget is approved and submitted to IA. For the following month, the budget and expenditure are checked against each other, making sure that they do not exceed the approved budget and approved budget lines.

Policies And Procedures

4.21 What is the basis of accounting (e.g., cash, accrual) followed (i) by the entity? (ii) By the project?

Accrual accounting

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4.22 What accounting standards are followed (International Financial Reporting Standards, International Public Sector Accounting Standards – cash or accrual, or National Accounting Standards (specify) or other?

International Public Sector Accounting Standards – accrual will be followed.

4.23 Does the project have adequate policies and procedures manual(s) to guide activities and ensure staff accountability?

Apart from Regulation 196, Treasury Regulations will be used to guide activities and ensure staff accountability. Each project financial officer has a consultancy contract and the contract stipulates the rights and responsibilities of the staff. ADB guidelines will be followed. Major laws (budget law, debt law, fiscal policy law) will also apply.

4.24 Is the accounting policy and procedure manual updated regularly and for the project activities?

Procedures and manuals are regularly updated. Regulation 196 was approved in 2015.

4.25 Do procedures exist to ensure that only authorized persons can alter or establish a new accounting policy or procedure to be used by the entity?

As per Regulation 196, the Minister of Finance can make changes to policies and procedures.

4.26 Are there written policies and procedures covering all routine financial management and related administrative activities?

Yes, Regulation 196 and the Treasury Regulation.

4.27 Do policies and procedures clearly define conflict of interest and related party transactions (real and apparent) and provide safeguards to protect the organization from them?

There is a law on conflict of interest. The staff of PIU are individually contracted. The national regulation will apply to the contracted PIU staff.

4.28 Are manuals distributed to appropriate personnel?

Yes. Training and manuals – rules and procedures using glass law, budget law, etc. –will be provided to the staff.

4.29 Describe how compliance with policies and procedures are verified and monitored.

As for financial procedures, daily transactions are monitored and controlled by the Development Financing Department. Each PIU staff must have a contract with IA, which is evaluated annually.

Cash and Bank

4.30 Indicate names and positions of authorized signatories for bank accounts. Include those persons who have custody over bank passwords, USB keys, or equivalent for online transactions.

Signatories for disbursements from the sub-accounts will be the PIU Project Coordinator and MOFALI.

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4.31 Does the organization maintain an adequate and up-to-date cashbook recording receipts and payments?

Yes, after project is approved. MOFALI keeps cashbooks regarding receipts and payments for each project.

4.32 Describe the collection process and cash handling procedures. Do controls exist for the collection, timely deposit and recording of receipts at each collection location?

The regulation from financial institutions indicates that the transactions are done by bank transfer. The Treasury Department has a special regulation on petty cash.

4.33 Are bank accounts reconciled on a monthly basis? Or more often?

Is cash on hand physically verified, and reconciled with the cash books? With what frequency is this done?

Under the GFMIS, the budget is reconciled by the Treasury Department. Each project submits its monthly report to IA, and the IA submits is it to the Treasury Department of MOF.

4.34 Are all reconciling items approved and recorded?

Yes.

4.35 Are all unusual items on the bank reconciliation reviewed and approved by a responsible official?

Bank reconciliation will continue to be closely reviewed by PIU.

4.36 Are there any persistent/non-moving reconciling items?

No.

4.37 Are there appropriate controls in safekeeping of unused cheques, USB keys and passwords, official receipts and invoices?

Yes.

4.38 Are any large cash balances maintained at the head office or field offices? If so, for what purpose?

No.

4.39 For online transactions, how many persons possess USB keys (or equivalent), and passwords? Describe the security rules on password and access controls.

2 persons: Project Coordinator and Finance Specialist.

Safeguard over Assets

4.40 What policies and procedures are in place to adequately safeguard or protect assets from fraud, waste and abuse?

Yes, an inventory record system will be maintained with codes and person who used and date of usage are properly recorded.

4.41 Does the entity maintain a Fixed Assets Register? Is the register updated monthly? Does the register record ownership of assets, any assets under lien or encumbered, or have been pledged?

Per Regulation 196, assets established through the project shall be registered in capital assets of the Project Executing Agency.

4.42 Are subsidiary records of fixed assets, inventories and stocks kept up to date and reconciled with control accounts?

Subsidiary records of fixed assets, inventories and stocks will be closely reviewed by PIU.

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4.43 Are there periodic physical inventories of fixed assets, inventories and stocks? Are fixed assets, inventories and stocks appropriately labeled?

Periodic physical inventories of fixed assets, inventories and stocks will be closely reviewed by PIU.

4.44 Are the physical inventory of fixed assets and stocks reconciled with the respective fixed assets and stock registers, and discrepancies analyzed and resolved?

Periodic physical inventories of fixed assets, inventories and stocks will be closely reviewed by PIU

4.45 Describe the policies and procedures in disposal of assets. Is the disposal of each asset appropriately approved and recorded? Are steps immediately taken to locate lost, or repair broken assets?

The Policy and Coordination Department on State Property (under the Prime Minister) registers the asset for disposal.

There is a policy to locate lost assets or repair broken assets. There is also a Local Asset Ownership Law. There is a regulation on responsibilities for person who is in charge of assets (bookkeeper).

4.46 Are assets sufficiently covered by insurance policies?

Yes, assets will be insured on a yearly basis.

4.47 Describe the policies and procedures in identifying and maintaining fully depreciated assets from active assets.

There are different depreciation periods for different items. So the calculations are made based on the period of depreciation

Other Offices and Implementing Entities

4.48 Describe any other regional offices or executing entities participating in implementation.

No regional offices.

4.49 Describe the staff, their roles and responsibilities in performing accounting and financial management functions of such offices as they relate to the project.

The project financial officer is responsible for accounting functions and for delivering the financial report which is checked by the project team leader. The financial report is to be delivered to the general accountant and the head of treasury division of the IA. Financial management will be done at the Development Financing and Treasury Departments of MOF.

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4.50 Has the project established segregation of duties, controls and procedures for flow of funds and financial information, accountability, and reporting and audits in relation to the other offices or entities?

For financial transactions, there are two signatories: (i) the first signatory is assigned by MOF (usually the state secretary of ministries); and (ii) the second signatory may be the project team leader.

Each project staff has TOR which defines specific functions and responsibilities.

The Development Finance Department is mandated to monitor project financing.

4.51 Does information among the different offices/ implementing agencies flow in an accurate and timely fashion? In particular, do the offices other than the head office use the same accounting and reporting system?

According 196, there is a system ODAMIS – all the project related information must be reflected in it. For financial transactions, according to glass law, all the transactions must be reported in glass information. The project is reported.

4.52 Are periodic reconciliations performed among the different offices/implementing agencies? Describe the project reporting and auditing arrangements between these offices and the main executing/implementing agencies.

On a quarterly basis, each IA for each individual project provides the statement on foreign loan and grant utilization. As for monitoring type report, monitoring reports should be uploaded to ODAMIS system on a semi-annual basis. The MOF officials are present during project monitoring meetings.

4.53 If any sub-accounts (under the Imprest Account) will be maintained, describe the results of the assessment of the financial management capacity of the administrator of such sub-accounts.

Local currency account is a sub-account. It is maintained and signatories are assigned. The Development Finance and Treasury Departments are monitoring financial activities. The actual transactions are carried out by individual ministries.

Contract Management and Accounting

4.54 Does the agency maintain contract-wise accounting records to indicate gross value of contract, and any amendments, variations and escalations, payments made, and undisbursed balances? Are the records consistent with physical outputs/deliverables of the contract?

Each individual project must have its own system. Contract-wise accounting records, including the contract value and payments made, are monitored by the Development Finance Department and checked by the Treasury Department.

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4.55 If contract records are maintained, does the agency reconcile them regularly with the contractor?

The IA must have its own records. The project has procurement plan and annual work plan. For each transaction, the PIU should indicate the activity, contract number, etc.

Other

4.56 Describe project arrangements for reporting fraud, corruption, waste and misuse of project resources. Has the project advised employees, beneficiaries and other recipients to whom to report if they suspect fraud, waste or misuse of project resources or property?

There is a whistle blower system. 11-11 call center receives any kind of complaints. Other agencies that handle the issue of fraud/corruption/misuse include the Anti-Corruption Division and National Auditing Department.

Each ministry has monitoring and internal auditing departments, which carry out audit of the project under the budget line.

5. Internal Audit

5.1 Is there an internal audit (IA) department in the entity?

Not in PMU. However, Internal Audit (IA) and Monitoring Department of MOF audit the project implementation on annual basis. PMU is sending quarterly operational report and financial statements to MOF and MOFALI.

5.2 What are the qualifications and experience of the IA staff?

The Internal Audit Department has ten (10) staff, most with 3-5 years’ experience in conducting internal audit. The Department has IA training materials and manuals.

5.3 To whom does the head of the internal audit report?

Internal Audit and Monitoring Department of MOF is reporting to MOF State secretary.

5.4 Will the internal audit department include the project in its annual work program?

Yes. Every project is monitored once a year.

5.5 Are actions taken on the internal audit findings?

After the internal audit findings are submitted, the IA issues recommendations.

5.6 What is the scope of the internal audit program? How was it developed?

The IA work plan and guidelines for the implementation of actions are approved by MOF.

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5.7 Is the IA department independent? Yes.

5.8 Do they perform pre-audit of transactions? No.

5.9 Who approves the internal audit program? The Internal Audit Department of MOF approves the internal audit program.

5.10 What standards guide the internal audit program?

An international auditing manual with templates is followed by the IA Department.

5.11 How are audit deficiencies tracked? Quality assurance for auditors is undertaken once every 2 years.

5.12 How long have the internal audit staff members been with the organization?

One staff has 9 years’ experience, three with more than 5 years’ experience, and six with less than 5 years’ experience.

5.13 Does any of the internal audit staff have an IT background?

Yes. Some IA staff have sufficient IT background.

5.14 How frequently does the internal auditor meet with the audit committee without the presence of management?

There is a quarterly meeting with IA Committee, without the presence of management.

5.15 Has the internal auditor identified / reported any issue with reference to availability and completeness of records?

No.

5.16 Does the internal auditor have sufficient knowledge and understanding of ADB’s guidelines and procedures, including the disbursement guidelines and procedures (i.e., LDH)?

The internal auditor does not have sufficient knowledge of ADB’s guidelines and procedures.

Moderate risk

6. External Audit – entity level

6.1 Is the entity financial statement audited regularly by an independent auditor? Who is the auditor?

Yes, Mongolia National Audit Office

6.2 Are there any delays in audit of the entity? When are the audit reports issued?

By law, there should be no delay. Each institution should have audit reports by March 15. There should be English translations of the audit reports available to international organizations by June.

6.3 Is the audit of the entity conducted in accordance with the International Standards on Auditing, or the International Standards for Supreme Audit Institutions, or national auditing standards?

Yes, the audit of the entity is in accordance with international standards on auditing.

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6.4 Were there any major accountability issues noted in the audit report for the past three years?

No.

6.5 Does the external auditor meet with the audit committee without the presence of management?

The external auditor sees all the financial documents. If needed, they can meet with the officials responsible for financial reporting. MNAO are allowed to audit but due to staff constraints audit work is outsourced to private auditing firms.

6.6 Has the entity engaged the external audit firm for any non-audit engagements (e.g., consulting)? If yes, what is the total value of non-audit engagements, relative to the value of audit services?

No. By law, only official auditing companies can carry auditing.

Baseline surveys – auditing companies can apply and if they are selected, they can carry out this work.

6.7 Has the external auditor expressed any issues on the availability of complete records and supporting documents?

No. The contract specifies that all the data must be provided to the auditor.

6.8 Does the external auditor have sufficient knowledge and understanding of ADB’s guidelines and procedures, including the disbursement guidelines and procedures (i.e., LDH)?

Yes.

6.9 Are there any material issues noted during the review of the audited entity financial statements that were not reported in the external audit report?

No.

External Audit – project level

6.10 Will the entity auditor audit the project accounts or will another auditor be appointed to audit the project financial statements?

As per national procedures, MNAO will assign an external auditor to audit the project.

6.11 Are there any recommendations made by the auditors in prior project audit reports or management letters that have not yet been implemented?

N/A

6.12 Is the project subject to any kind of audit from an independent governmental entity (e.g. the supreme audit institution) in addition to the external audit?

Yes. The project may be subject to random selection for auditing by the National Audit Office.

6.13 Has the project prepared acceptable terms of reference for an annual project audit? Have these been agreed and discussed with the EA and the auditor?

No. MNAO will hire the external private auditing firm to audit the project.

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6.14 Has the project auditor identified any issues with the availability and completeness of records and supporting documents?

N/A

6.15 Does the external auditor have sufficient knowledge and understanding of ADB’s guidelines and procedures, including the disbursement guidelines and procedures (i.e., LDH)?

The external auditor to be hired should have knowledge of ADB guidelines.

6.16 Are there any recommendations made by the auditors in prior audit reports or management letters that have not yet been implemented?

N/A

[For second or subsequent projects] 6.17 Were past audit reports complete, and did

they fully address the obligations under the loan agreements? Were there any material issues noted during the review of the audited project financial statements and related audit report that have remained unaddressed?

N/A

7. Reporting and Monitoring

7.1 Are financial statements and reports prepared for the entity?

Financial statements and reports will be prepared by the project for MOFALI, MOF and ADB

7.2 Are financial statements and reports prepared for the implementing unit(s)?

Two types of financial statements are to be prepared for the project: one for the government and other for ADB.

7.3 What is the frequency of preparation of financial statements and reports? Are the reports prepared in a timely fashion so as to be useful to management for decision making?

Per Regulation 196, PIU shall integrate on monthly, quarterly, semi-annual and annual basis, project and program budget execution data and reports into data and reports of the General Budget Governor of the Project Executing Agency.

7.4 Does the entity reporting system need to be adapted for project reporting?

Per Regulation 196, the reporting system is designed in accordance with ADB and MOF requirements.

7.5 Has the project established financial management reporting responsibilities that specify the types of reports to be prepared, the report content, and purpose of the reports?

Per Regulation 196, the financial management reporting system will be designed in accordance with MOF requirements.

7.6 Are financial management reports used by management?

Per Regulation 196, the management will regularly use reports in the course of EA administration.

7.7 Do the financial reports compare actual expenditures with budgeted and programmed allocations?

Per Regulation 196 (14.1.1), the PIU has to formulate project’s operational, procurement, and financial management

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plans, ensure implementation thereof, prepare performance data and report.

7.8 How are financial reports prepared? Are financial reports prepared directly by the automated accounting system or are they prepared by spreadsheets or some other means?

The automated accounting system is used by MOFALI as well as other government agencies.

7.9 Does the financial system have the capacity to link the financial information with the project's physical progress? If separate systems are used to gather and compile physical data, what controls are in place to reduce the risk that the physical data may not synchronize with the financial data?

Yes. No separate system is used to gather and compile physical data.

7.10 Does the entity have experience in implementing projects of any other donors, co-financiers, or development partners?

Yes. WB, JBIC, etc.

8. Information Systems

8.1 Is the financial accounting and reporting system computerized?

Financial accounting is automated such as GFMIS and ODAMIS. Projects usually have accounting software. Different departments have information systems: (i) Treasury – GFMIS; (ii) Budget – FISCAL, BPIS; (iii) Development Implementation – ODAfin and ODAMIS;

8.2 If computerized, is the software off-the-shelf, or customized?

GFMIS and ODAMIS are both customized.

ODAMIS, which can be accessed by the public online, is designed and developed by a local company. GFMIS is web-based.

8.3 Is the computerized software standalone, or integrated and used by all departments in the headquarters and field units using modules?

GFMIS is online and integrated. It is only accessible by authorized personnel from the Development Finance Department, and major ministries and agencies.

8.4 How are the project financial data integrated with the entity financial data? Is it done through a module in the enterprise financial system with automatic data transfer, or does it entail manual entry?

Financial data is integrated on a monthly basis. The Ministerial general accountant reviews it and provide information for processing by both accounting and treasury departments.

8.5 Is the computerized software used for directly generating periodic financial statements, or does it require manual intervention and use of Excel or similar spreadsheet software?

The automated accounting system is used by MOFALI as well as other government agencies. Financial reports are prepared using this software.

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8.6 Can the system automatically produce the necessary project financial reports?

Yes.

8.7 Is the staff adequately trained to maintain the computerized system?

The Project Finance Specialist to be hired will be a qualified individual trained in ADB procedures.

8.8 Do the management, organization and processes and systems safeguard the confidentiality, integrity and availability of the data?

PIU will ensure those by giving access to financial system to only team leader and financial management specialist. Every file will be protected by a password.

8.9 Are there back-up procedures in place? Yes

8.10 Describe the backup procedures – online storage, offsite storage, offshore storage, fire, earthquake and calamity protection for backups.

Yes

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Annex 1. List of current externally financed projects administered by MOFALI No.

Project Duration Executing

agency Donor

Sustainable Agriculture

1 Food Security and Sustainable Farming – phase II

2016-2018 MOFALI EC

2 Support to employment creation in Mongolia (SECiM): Piloting quality private sector work in selected livestock and vegetable value chains GCP/MON/014/EC

2016-2019 MOFALI EU

3 Agriculture and Rural Development Project 3288-MON

2016-2020 MOFALI, MOF ADB

Crop Production

4 Inclusive and sustainable vegetable production and marketing (VEGI)

2016-2019 MOFALI SDC

5 Community Vegetable Farming for Livelihood Improvement 50278-001

2018-2022 MOFALI ADB

Livestock Management

6 Sustainably managed pastures and healthy animals: Mongolia's 'green gold'

2017-2020 MOFALI SDC

Pasture Management

7 Market and pasture management 2018-2022 MOFALI IFAD ADB = Asian Development Bank, EC = European Commission, EU = European Union, SDC = Swiss Agency for Development Cooperation, IFAD = International Fund for Agricultural Development.

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Annex 2. Organizational Structure of Accounting Division of Ministry of Finance 36.

37.

Annex 3. Organizational Structure of Finance Division of MOFALI

38.

Public Administration Department -

Accounting Division (1 head)

Financial IT Division (5 staff)

Financial Division (4 staff)

Administrative Division (4 staff)

Bookkeeper (1 staff)

Policy and Planning Department

Finance Division (1 head)

Chief Accountant

(1 staff)

Investment and Expenditures

Officer (2 staff)

Treasury Officer (2 staff)

Budget payment Officer (1 staff)

Bookkeeper (1 staff)

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Annex 4. MOFALI Organizational Chart

Minister

Board of Directors

Deputy Minister

State Secretary

Science and Technology Council

Policy and Planning

Department

Finance Division

General

Administration Department

International Relations Division

Legal Division

Livestock Policy

Implementation and

Coordination Department

Crop Production

Policy Implementation

and Coordination Department

Light Industry Policy

Implementation and

Coordination Department

Food Production

Policy Implementation


SME Policy Implementation


Food Production and Trade Division

Monitoring, Evaluation,

Auditing and Control

Department