Report No: ICR00006396 IMPLEMENTATION COMPLETION AND RESULTS REPORT TF-B0063 ON A SMALL GRANT IN THE AMOUNT OF EUR 2.50 MILLION TO Mongolia FOR Strengthening Governance in Mongolia (P168248) December 31, 2023 Governance Global Practice East Asia And Pacific Region The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT CURRENCY EQUIVALENTS (Exchange Rate Effective {Oct 23, 2024}) Currency Unit = = US$1 US$ = SDR 1 FISCAL YEAR January 1 - December 31 Regional Vice President: Manuela V. Ferro Country Director: Mara K. Warwick Regional Director: Lalita M. Moorty Practice Manager: Alma Kanani Task Team Leader (s): Badamchimeg Dondog ICR Main Contributor: Kris Kauffmann The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT ABBREVIATIONS AND ACRONYMS BE Bank Executed BEPS Base Erosion and Profit Shifting FHF Future Heritage Fund FHFC Future Heritage Fund Corporation FSC Fiscal Stability Council EU European Union FM Financial Management GAP Glass Account Portal GDP Gross Domestic Product GFMIS Government Financial Management Information System GoM Government of Mongolia IMF International Monetary Fund M&E Monitoring and Evaluation MED Ministry of Economy and Development MNAO Mongolia National Audit Office MoF Ministry of Finance MTFF Medium Term Fiscal Framework OBI Open Budget Index OECD Organization for Economic Cooperation and Development PFM Public Financial Management PEFA Public Expenditure and Financial Accountability PIM Public Investment Management PIU Project Implementation Unit PPP Public Private Partnership RE Recipient Executed RETF Recipient Executed Trust Fund RF Result Framework SFFS Strengthening Fiscal and Financial Stability SGM Strengthening Governance in Mongolia SOE State-Owned Enterprise TF Trust Fund US$ United States Dollar WB World Bank The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT TABLE OF CONTENTS DATA SHEET ................................................................................................................................................. i I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ......................................................................... 1 II. OUTCOME ......................................................................................................................................... 4 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME..................................................... 8 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME ..................... 10 V. LESSONS LEARNED AND RECOMMENDATIONS ................................................................................. 12 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ................................................................................................ 14 ANNEX 2. PROJECT COST BY COMPONENT ................................................................................................................ 26 ANNEX 3. SHARED ELEMENTS OF THE SGM AND SFFS PROJECTS ................................................................. 27 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT DATA SHEET @#&OPS~Doctype~OPS^dynamics@icrbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P168248 Strengthening Governance in Mongolia Product Operation Short Name Investment Project Financing (IPF) Strengthening Governance (RE) Operation Status Approval Fiscal Year Closed 2019 Current ESRC Small Grant Type Low Country/CMU Specific CLIENTS Borrower/Recipient Implementing Agency Mongolia Ministry of Finance of Mongolia DEVELOPMENT OBJECTIVE Original Development Objective (Approved as part of Approval Package on 25-Apr-2019) The Project Development Objective is to support the Government’s efforts to improve fiscal discipline, public financial management (PFM), and transparency and accountability processes for strengthened governance of public resource management in Mongolia. s s @#&OPS~Doctype~OPS^dynamics@icrfinancing#doctemplate FINANCING Financing Source Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) i The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT World Bank Administered 2,657,076.19 2,675,570.17 2,682,500.00 Financing TF-B0063 2,682,500.00 2,657,076.19 2,675,570.17 Total 2,682,500.00 2,657,076.19 2,675,570.17 RESTRUCTURING AND/OR ADDITIONAL FINANCING Amount Disbursed Date(s) Type Key Revisions (US$M) • Components • Results 02-Jan-2022 Portal 1.01 • Disbursement Estimates • Loan Closing Date Extension @#&OPS~Doctype~OPS^dynamics@icrkeydates#doctemplate KEY DATES Key Events Planned Date Actual Date Concept Approval 30-Jan-2019 Approval 28-Feb-2019 26-Apr-2019 Additional Financing and or Restructuring Sequence.01 Not Applicable 02-Jan-2022 ICR Sequence.01 (Final) -- 06-Nov-2024 Operation Closing 28-Feb-2023 28-Feb-2023 @#&OPS~Doctype~OPS^dynamics@icrratings#doctemplate RATINGS SUMMARY Outcome Bank Performance M&E Quality Substantial ISR RATINGS Actual Disbursements No. Date ISR Archived DO Rating IP Rating (US$M) 01 25-Jun-2020 Satisfactory Satisfactory 0.46 ii The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT 02 02-Feb-2021 Satisfactory Satisfactory 0.72 03 15-May-2022 Satisfactory Satisfactory 1.01 @#&OPS~Doctype~OPS^dynamics@icrsectortheme#doctemplate SECTORS AND THEMES Sectors Adaptation Mitigation Major Sector Sector % Co-benefits Co-benefits (%) (%) Central Government (Central Public Administration 100 0 0 Agencies) Themes Major Theme Theme (Level 2) Theme (Level 3) % Macroeconomic & Economic Growth and Planning Structural Policy 34 Economic Policy Modelling Fiscal Policy Fiscal sustainability 34 Public Assets and Investment 100 Management Public Administration Transparency, Accountability and Good 70 Public Sector Governance Management Debt Management 34 Domestic Revenue Public Finance Management 34 Administration Public Expenditure 70 Management iii The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT ADM STAFF Role At Approval At ICR Practice Manager Alma Kanani Alma Kanani Regional Director Lalita M. Moorty Lalita M. Moorty Global Director Arturo Herrera Gutierrez Arturo Herrera Gutierrez Practice Group Vice President Pablo Alfonso Saavedra Costas Pablo Alfonso Saavedra Costas Country Director Mara K. Warwick Mara K. Warwick Regional Vice President Manuela V. Ferro Manuela V. Ferro ADM Responsible Team Leader Badamchimeg Dondog Badamchimeg Dondog Co-Team Leader(s) ICR Main Contributor {to be added} I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES Context 1. Mongolia is a resource rich country with vast mineral resources, but it faces short-term challenges due to fiscal vulnerabilities and external risks. From being the fastest growing economy in the world in 2011 (GDP expanded by 17.3%), Mongolia saw its growth rate slide to 1% in 2016. External borrowing on the bond market expanded (by over US$3.6 billion between 2012 and 2016), domestic debt doubled 2012-2014, and the debt-to-GDP ratio exceeded 80%, shattering the debt ceiling. While external factors were noted as being beyond Mongolia’s control, policy compliance to past and ongoing reforms were not and identified as being much needed to address macroeconomic imbalances to avoid higher adjustment costs. 2. Despite past reforms in Public Financial Management (PFM), Mongolia still faced challenges related to the efficiency, effectiveness, and transparency of the PFM system. Specifically, the country needed to work towards addressing the lack of alignment of expenditures and revenue outturns with the originally approved budget, the poor quality of cash flow forecast, and the unpredictability in availability of funds, which all in all have weakened budget credibility and diminished public policy effectiveness. 3. The Medium-Term Fiscal Framework (MTFF) was not achieving its objective of providing a hard budget constraint. The challenges faced included: (a) exclusion of extra-budgetary expenditures from the MTFF; (b) weak forecast of main fiscal aggregates; and (c) weak links between subsequent MTFFs and between the MTFF and the annual budget. In addition, the planning documents produced by several central government agencies were Page 1 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT not reconciled with the MTFF, not formulated within a realistic fiscal envelope, and did not include reasonable costing of investments and recurrent expenditures. This compromised the effective allocation of resources and the efficiency of government expenditures. Moreover, efficiency of public investments in Mongolia appeared to have considerable scope for improved performance as Mongolia had relatively high level of investments but low level of outputs. This was partly due to lack of mid/long-term planning capacities. 4. Institutional problems of non-prudent fiscal policy in Mongolia were associated with a more general and widespread problem of weak governance including: (i) policies in election campaigns with promises combining general social benefits and more specific ‘club goods’ that benefit certain groups of citizens; (ii) weak legislative processes that have led to enactment of laws without sufficient policy analysis and risk assessment; and (iii) some forms of state capture with frequent shifts following changes in parliamentary majorities. 5. Public participation was low in the country despite efforts to institutionalize existing mechanism for the involvement of citizens in policy decision making. Legislation reinforced the national legal environment required consultation with citizens on public matters, including (a) the Law on Development Policy and Planning (2015); (b) the Law on Public Hearings (2015); and (c) the Law on Legislation (2016). However, in practice the implementation of these laws and the quality of the consultative process had varied significantly across agencies, and the required process was often bypassed when strong interests were involved. 6. While external oversight had progressively improved in Mongolia, there was still a need to reinforce the capacity of the oversight institutions to perform their functions efficiently and effectively. In this regard, a financial audit peer review of the Mongolia National Audit Office (MNAO) carried out in December 2016 and the Learning and Development Strategy and the Action Plan for MNAO approved in October 2017, identified opportunities to strengthen core functions of the SAI to conduct government audits. 7. In order to support the ongoing efforts of the government to tackle the aforementioned challenges towards achieving fiscal stability, enhancing PFM and strengthening transparency and citizen engagement, the Bank set up a hybrid Trust Fund (TF) funded by the European Union (EU, TF073029). The TF intended to serve two main purposes. The first was to complement and expand the technical assistance the Bank was providing through the concurrent Strengthening Fiscal and Financial Stability (SFFS) 1 Project with a number of activities that are deemed critical to support Mongolia in achieving the objectives the country has agreed to in its Economic Recovery Plan as well as the development partners’ support including the Economic Management Support Operation of the World Bank (WB) and the Extended Fund Facility of the International Monetary Fund (IMF). The second purpose of the TF was to support the Government of Mongolia (GoM) in advancing efforts toward increasing transparency, participation, and accountability in fiscal matters as well as in strengthening its capacity to deal with non-technical drivers of the reform process that prevent state agencies from implementing policies and regulations as intended. 8. The TF-financed operation had intended to build on the long-standing relationship existed between the Bank and the government of Mongolia, particularly in PFM. As highlighted in the Performance and Learning Review of the Country Partnership Strategy (CPF, FY13-18) for Mongolia (Report No. 139667-MN); one of the main emerging lessons was the need to address the country’s PFM challenges and to foster continued partnerships with development partners. Within this context, it was agreed that the TF-financed Strengthening Governance 1 See Annex 3 for an overview of areas of focus shared by the CGM and SFFS projects. Page 2 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT in Mongolia (SGM) Project would cover improving public and economic governance areas to support the government's fiscal stability efforts. This implementation completion report covers the Recipient Executed (RE) part of the TF while the enclosed Project Final Report also includes complementary activities carried out under the Bank Executed (BE) part of the TF. Project Development Objectives (PDOs) 9. The Project Development Objective was to support the Government’s efforts to improve fiscal discipline, public financial management (PFM), and transparency and accountability processes for strengthened governance in Mongolia. Key Expected Outcomes and Outcome Indicators 10. The outcome targeted by the project was enhanced fiscal stability, stronger PFM and improved transparency and citizen engagement, which was reflected in the following PDO indicators: i. A comprehensive PFM strategy adopted and under implementation to support the achievement of fiscal discipline and strategic budget planning and execution as set forth in the Fiscal Stability Law and the Integrated Budget Law. ii. Fiscal Stability Council (FSC) fully operational and producing independent fiscal reports towards increased transparency and accuracy of government macroeconomic and fiscal policy formulation. iii. Improved budget transparency by making available to the public key budget documents in accessible and user-friendly formats, as measured by the OBI. Components 11. The RETF-funded SGM Project was designed with three components, of which two are technical and one is in project management as follows: i. Component 1: Strengthening Macroeconomic and Fiscal Management (EUR 0.42 million) focused on supporting the institutional capacity of the FSC and its operationalization for improved macroeconomic and fiscal forecasting and upstream budget planning in the country. It also helped to strengthen the capacity of MoF in areas such as debt management and revenue forecasting. ii. Component 2: Improving the Efficiency of Public Financial Management (EUR 1.95 million) aimed primarily to support the design and implementation of a PFM reform plan. It focused primarily on supporting the specific needs of the GoM to establish sound fiscal discipline, improve expenditure management by strengthening the credibility of the budget, strengthen the medium-term budgeting practices, and to re- orient public investment to strategic projects linked to diversification of the economy. iii. Component 3: Project Management (EUR 0.10 million) provided technical and operational support for Project implementation, coordination, monitoring, and evaluation, including, inter alia, audit arrangements, reporting requirements, procurement, and financial management activities. Page 3 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT 12. As for the technical components 1 and 2, they included activities aimed at strengthening the macro-fiscal management of the country while cementing budgeting practices in a way that is not only conducive to better results but also to reinforce the macro-fiscal framework. For this reason, traditional top-down activities (such as the establishment of fiscal rules, the design of medium-term debt management strategy and the creation of hard fiscal ceilings for spending agencies) were part of Component 1. Traditional bottom-up activities related to fiscal management (such as the establishment of forward estimates, budget guidelines, results-based budgeting, gender-informed budgeting and fiscal transparency) are entirely part of Component 2. II. OUTCOME Assessment of Achievement of Each Objective/Outcome 13. The project outcome can be assessed against it objective of strengthening key areas of governance to support the Government’s efforts to improve fiscal discipline, PFM, and transparency and accountability processes, in particular as measured by the PDO indicators discussed below. Further details on the PDO as well as intermediate result indicators are included in the Result Framework (RF). 14. Comprehensive PFM Reform Strategy and Action Plan was adopted and under implementation (Achieved). Indicator Result Unit Baselin End Actua Measure e Target l A comprehensive PFM strategy adopted and under Achieved Yes/No No Yes Yes implementation to support the achievement of fiscal discipline and strategic budget planning and execution as set forth in the FSL and the IBL. 15. The PFM strategy and the associated action plan were approved in 2019 with the aim to create a budget and financial system that is efficient, effective, sustainable, and ethical in managing public resources, delivering public services, and meeting public financial needs. The progress of the PFM Reform Action Plan was monitored through the MoF’s internal “Leader Monitoringâ€? system which, at the end of the Project, recorded an execution rate at 85%. 16. A Public Expenditure and Financial Accountability (PEFA) assessment at national level was undertaken in 2021 with the support of the Project, which identified many of the improvements in the PFM system realized under the PFM Reform Action Plan (and prior reforms) but also identified gaps and areas of weakness. In particular, the assessment results concluded that Mongolia scored well in relation to access to public information, the budget preparation process, financial data integrity, and external audit. The assessment suggests that further reforms are needed in next phases of PFM reform in the areas of the application of international accounting standards, fiscal risk management, medium-term budgeting, and the use of performance evaluation to enhance government service delivery in order to enhance fiscal discipline, ensure resources are allocated as intended, and improve service delivery. In the meantime, the overall improvements observed in the PEFA assessment suggest enhanced capacity for the Government of Mongolia to proactively engage with citizen based on more timely and transparent information and with enhance accountability. Page 4 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT 17. The PEFA informed an update of the PFM Reform Action Plan, which as at the end of the project is understood to be ready to progress through internal approval processes, pending clarification of the availability of support from development partners. Specific reforms in the PFM Reform Action Plan worth noting that were supported by the Project are as follows: 18. In accordance with the existing PFM Reform Action Plan, Mongolia made significant steps towards achieving greater engagement with the multilateral taxation regime, by becoming a signatory to several key international conventions. In this area, the Project (and complementary support from the SFFS Project) assisted to achieve: • Signing of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS); • Promulgation of the law on ratification of the Multilateral Convention on Mutual Administrative Assistance for Tax Matters of the Organization for Economic Cooperation and Development (OECD); and • Implementation of international best practices for the exchange of information on request and on a voluntary basis for tax purposes, as well as the “Procedure for exchange of information on request and on a voluntary basis with a foreign authority for tax purposesâ€?. 19. As a result of the enhanced engagement in international tax conventions, Mongolia is in a stronger fiscal position, due to its ability to ensure that large taxpayers are not able to engage in profit shifting and tax avoidance. 20. In addition, the project supported the MoF in undertaking assessment of the revenue policy responses to the COVID- 19 global pandemic, which resulted in short term taxation relief measures (such as penalty exemptions), which assisted in mitigating the negative impact on businesses of the pandemic-induced economic downturn. 21. Enhancing the usefulness of the Government Financial Management Information System (GFMIS) was another key objective of the PFM Reform Action Plan. Following a review of strategic options to enhance the system functionality, the project assisted the MoF in the development of a Treasury Portal which enhanced connectivity between the GFMIS and other PFM systems and digitized manual payment processes, including the implementation of digital payment vouchers and associated identity verification and user access controls. The project supported the development and implementation of an Integrated Service Platform to assist with the exchange of data between the various systems of the MoF, including the GFMIS, irrespective of their underlying architecture. This has enabled the MoF to retain and/or build separate systems for specific functions (such as payroll, budget, Public Investment Management (PIM) and the transparency portal) whilst ensuring effective exchange and compilation of the associated data. The availability of more complete and timely data on budget execution from the FMIS is a foundational element for more effective fiscal management. 22. In recognition of the fiscal risk posed by contingent liabilities, the Project also supported appropriate amendments to the relevant regulations to improve the process for issuing government debt guarantees, sub-loans, and recording of contingent liabilities and to establish mechanisms for regular monitoring and evaluation and timely repayment. This included support by the Project for the drafting of the Government guarantees regulation and Government on-lending regulation, as well as recording of contingent liability information from SOEs in the debt management system. The Project also supported the implementation of enhanced macroeconomic models, including training, which enabled improved forecasting of the external sector and balance of payments, which are key inputs to fiscal strategy setting and budget planning. Page 5 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT 23. Furthermore, the Project assisted the MoF with the design and implementation of a roadmap to enhance PIM and to improve the efficiency of public investment, a methodology for estimating the total capital costs of the public investment projects was successfully implemented resulting in better public investment planning. An analysis of existing project appraisal methodology was conducted to set a standard of works and services rendered by sectors to be used in economic and financial analyses of the new projects. A methodology for pre-screening public investment projects was developed and fully integrated into the PIM system. Accordingly, projects submitted via the PIMS system will be selected depending on their economic efficiency and social significance and financed by the state budget investment. Online training was held on public investment involving all relevant officials in charge of public investment from aimags, capital city, agencies, and ministries. While the new institutional arrangements create some challenges for coordination, the enhanced project appraisal methodology should enhance the value for money realized from public investment spending. 24. Moreover, the Project assisted the MoF in examining the nature of existing concession agreements entered into under the Law on Concessions, including their impact on the budget and associated risks. Reports were prepared and recommendations were presented to the Cabinet in 2021. Based on this analysis, the MoF began drafting the Law on Public- Private Partnership (PPP) in July 2021, with input from the Project and other international development partners. The draft was prepared with reference to the United Nations (UN) Commission on International Trade Law model PPP law. The MoF prepared drafts of the law and submitted the draft law to Parliament, which was then promulgated in December 2022 and is anticipated to provide a stronger foundation for ensuring beneficial outcomes from PPPs, including appropriate management of associated risks. 25. Fiscal Stability Council (FSC) was made operational and producing fiscal reports (Achieved): Fiscal Council fully operational and producing Achieved Yes/No No Yes Yes independent fiscal reports towards increased transparency and accuracy of government macroeconomic and fiscal policy formulation. 26. The FSC has been instituted, with operational procedures embedded which enabled implementation of the FSC operational rules and the pre-existing enabling legislation. Capacity of the FSC was enhanced as a result of the activities of the project including in relation to macro- fiscal modelling and analysis, which enabled annual and mid- term budget opinions to be developed and presented to the Parliament and relevant committees, which were aimed at supporting transparent and rational development of the Government's macroeconomic and fiscal policies. Nonetheless, based on examination of existing regulations and practices, and having regard to international standards of good practice for parliamentary budget offices (and a study tour undertaken), a draft law was prepared to enhance the legal status of the FSC's to better enable it to perform its mandate effectively and independently. 27. Fiscal transparency improved as evidenced by the increase in the OBI score to 60 (Not fully achieved despite significant progress): Improved budget transparency by making available to Not Number 46 61 60 the public key budget documents in accessible and fully user-friendly formats, as measured by the Open achiev Budget Index (OBI). ed despit e Page 6 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT signifi cant progr ess 28. By increasing the transparency of the budget and the participation of citizens, the discipline, efficiency, and control of the budget were improved, and the trust of the citizens in the Government was increased. To provide information about Mongolia's budget to the citizens in a transparent, open, and understandable manner, the MoF initiated the "Citizens' Budget" compilation, which is now in its sixth year of preparation. To provide citizens with more comprehensive and accessible financial and budget information, the Project supported the MoF in developing new tools for conveying information through the use of websites, visual information, and infographics. The introduction of the citizens' budget website (www.iltod.mof.gov.mn) and the improvement of the content and structure of budget documents have yielded results. The Budget Transparency Index, released every two years by the International Budget Partnership, reached 60 points in the 2021 assessment, one point lower than the project target (but an improvement of 14 points from the baseline assessment in 2017). Mongolia was ranked 38th out of 120 countries in the survey, 3 places higher than the previous survey's results and 18 places higher than the base year when the project was started. 29. In order to create opportunities for citizens and the public to obtain information in accordance with open information standards, to make the system fully compliant with the law and easy to use, the web-based Glass Account Portal (GAP) was redeveloped and introduced for rollout starting from January 1, 2023. The system has been developed in such a way that it is possible to exchange information in connection with other systems used in budget and financial activities, such as the State Information Exchange System and the Electronic System of State Procurement. This will not only improve the accuracy and completeness of the data, but also reduce manual data entry into the system. Citizens, the public, and non-governmental organizations have been given the opportunity to receive and process reports and information in accordance with international open digital data standards through the Open Database. A total of 5,466 organizations and 8,897 users have registered in the updated system and have successfully published data in accordance with the law. As a result of the Project, the practice of broad dissemination of data to the public has been enhanced and embedded in standard business processes. The expected result of this transparency is improved engagement of citizens in policy-making and budget setting and enhanced accountability for results. Overall Outcome Rating 30. The overall outcome rating for the Project is Satisfactory. The project remained highly relevant to the realization of enhanced fiscal stability, stronger PFM and improved transparency and citizen engagement. In terms of the project development indicators, the project achieved excellent results in relation to the adoption and implementation of the PFM reform strategy, and the operationalization of the FSC. However, there was a minor shortcoming in the realization of the specific target related to transparency as the Budget Transparency Index for Mongolia, issued by the International Budget Partnership, which reached 60 points in the 2021 Open Budget Index, only one point lower than the project target of 61 points (increasing from a baseline of 46 at the start of the Project). 31. The intermediate indicators point to the project having realized substantial positive outcomes which supported Mongolia’s capacity to attain its development objectives, including the development of core documents to support the operationalization of the FHF, establishment of operational procedures of the FSC, improved Page 7 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT monitoring of contingent liabilities, better planning of public investment, implementation of PFM Action Plan, and enhanced reporting in the GAP. Other Outcomes and Impacts 32. The project activities evolved over the life of the project to support the implementation of the PFM Reform Action Plan, including solutions which emerged during the course of the project. This included, for example, the development of the Treasury Portal and Integrated Service Platform solution to address the issues associated with lack of automation and poor integration of various stand-alone PFM systems. In addition, as significant changes were made to intergovernmental fiscal relations (2022), the project supported further development of budget systems to enhance the integration of subnational government budget data. As a result of this evolution, the project produced outputs which contributed to the desired outcome – of enhancing the data available for fiscal planning while also encouraging stronger accountability for results. 33. In response to the PEFA assessment, which identified weaknesses in budget preparation, the project supported the MoF in conceptualizing an appropriate methodology for transitioning the budget towards a Medium-Term Expenditure Framework approach which better integrates performance information and a medium-term approach. The project assisted in developing budget guidelines and templates which required budget governors to provide enhance performance metrics for their budget programs. As a result, Mongolia is closer to its ambition to transition away from a single-year inputs-oriented budget process towards a functioning Medium Tern Expenditure Framework approach. This has included conceptualizing an approach to Gender Responsive Budgeting suitable for the Mongolian context and piloting its introduction (primarily supported by the BE part of the TF but complemented by the RETF activities). 34. The COVID-19 global pandemic had a major impact on the fiscal position of Mongolia and on the nature of work within the MoF, which resulted in some unanticipated work streams for the project. As an example, to support the MoF in responding to the pandemic, the project assisted the MoF in modelling the impact of taxation relief measures designed to mitigate the impact of business and the project consultants in the Treasury assisted in digitizing transactions to facilitate social distancing. As face-to-face training was not possible during the pandemic, the project assisted the Treasury in implementing virtual training modules to support the roll-out of the treasury portal (complemented by the introduction of an online learning management system supported by the SFFS Project). Nonetheless, despite the pandemic having a negative impact on the overall fiscal position, the project support development of enhanced the tools which the government can use in managing towards greater fiscal stability in future. III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME 35. Several key factors affected the Project’s implementation progress and achievements as discussed below. 36. Government ownership. To promote ownership of the Project by the MoF, the project took the approach of supporting the government in independently developing its own PFM Reform Action Plan. This involved coordinating engagement within the MoF regarding key reform priorities, most of which emerged from within each of the key general directorates. This approach ensured a high degree of ownership of the reforms supported by the Project, which was further reinforced by the MoF embedding the action plan within its Leader Monitoring Page 8 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT system (an internal personnel performance monitoring system). Such arrangement ensured a high level of transparency and accountability for the progress realized. The project also benefited from a very high level of interest and engagement from the leadership of the MoF through the Project Steering Committee and the Project Director, who sought to maximize the beneficial impact realized from the project support made available. 37. Complementary with other operations. A further positive contributing factor for the Project was its link to the EU budget support. The disbursement conditions set forth for the budget support operation helped incentivize the development and implementation of some of the priority activities of the PFM Reform Action Plan. Also, the SGM project was implemented in parallel to the Bank-financed SFFS Project, including common and shared resources within the Bank as well as the Project Implementation Unit (PIU). This helped ensure that the SGM Project complemented the SFFS Project, and in practice a high degree of coordination and collaboration was achieved between the two projects, which promoted mutual success. Annex 3 provides an overview of elements of PFM reform supported by both the SGM and SFFS projects, which includes: public investment management, enhanced transparency and information technology development. Under the leadership of the Project Director and the Project Coordinator, the PIU played a significant role in ensuring effective day-to-day coordination among the project beneficiaries at the MoF and the Bank as well as between the two projects it supported and contributed to the success of both projects. 38. Impact of COVID-19. The COVID-19 pandemic occurred during the implementation of the Project. This created a number of issues, including lockdowns limiting the engagement, the need for key MoF staff to engage in urgent COVID response activities, and inability to deliver traditional face-to-face training as planned. However, the Project and the MoF developed innovative approaches, which addressed some of these limitations, including digital and virtual modes of training delivery. In addition, the pandemic was conducive to the transition to digital ways of working, including the digitization of the Treasury processes. The resistance to change normally associated with such digital transformation was lower as a result of general change in work practices that resulted from the pandemic. 39. Project restructuring. In December 2021, the Government requested and received approval for a restructuring of the Project in order to allow additional time to carry out the pending activities already commenced but delayed due to the COVID-19 global pandemic and a change in government and to grant additional funding required to be able to fully complete and institutionalize some of the structural reforms. The additional funding was requested by the government to bridge a financing gap identified at the time for implementing the envisioned priority activities on the Public Financial Management Strategy and the Action Plan. The associated restructuring involved: (i) an extension of the project closing date by 14 months from December 31, 2021 to February 28, 2023; (ii) an increase of the financing amount available to the project by a total of EUR 0.44 million to cover a financing gap for the planned activities and accordingly, to fully achieve the project’s objectives and results and effectively utilize the remaining funds; and (iii) to revise the RF to ensure full alignment between the performance indicators and the emerging project focus. 40. The change in the RF was related to the establishment of the Future Heritage Fund (FHF). The pandemic and consequential impacts on the economic and fiscal context resulted in some changes in the operation of the FHF. Specifically, a decision was taken by the government to postpone the establishment of the entity undertaking FHF investments (the Future Heritage Fund Corporation, FHFC) until 2025, with funds being invested by the Treasury in the interim period. As a result, the intermediate result indicator 1.2 changed from “Develop a business plan of the investment/asset management entity of the Sovereign Wealth Fund called the Future Heritage Fund Corporation (FHFC)â€? to “Develop core documents and guidelines to support Future Heritage Fund’s transition into the Page 9 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT operational stageâ€?. The changes did not impact on the Project Development Objective or the higher -level PDO Indicators. IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME 41. Bank performance is rated as Satisfactory. The Bank has a track record of successfully supporting the development of PFM systems in Mongolia, and a relationship of trust with key counterparts, which was reflected in the delivery of the pre-existing SFFS Project as well as the SGM Project. Also, having set up a hybrid TF, the Bank utilized the BE part of the TF to mobilize the needed technical assistance complementary to the support provided under the RETF. As a result, the Bank was able to ensure that the SGM Project achieved the intended development outcomes. There were no shortcomings to note in identification, preparation, or appraisal of the Project. Due to the depth and strength of this ongoing partnership with counterparts, the Bank team was also able to proactively identify and respond to opportunities and resolve most threats to achieving developmental and fiduciary outcomes during the project implementation, including those risks to project outcomes that emerged during the COVID-19 pandemic. The achievement of almost all objectives of the project despite the pandemic is evidence of the proactive response of the Bank team to those opportunities and threats. Therefore, the quality of Bank performance and the quality of supervision are both rated as Satisfactory. 42. Fiduciary and safeguard compliance of the Project has been Satisfactory. The Project maintained acceptable financial management (FM) systems and practices and complied with the Bank’s financial reporting requirements on time and also kept appropriate FM arrangements in place including timely documentation of expenditures through submission of Statements of Expenditures. Audit reports of the Project were timely submitted to the Bank for review and had unqualified opinions were expressed by the auditors throughout the project implementation period with no material issues noted on the Management Letters. The Project funds were almost fully utilized with the cumulative disbursement rate at closing recorded at 99.11%. Procurement implementation of the Project was Satisfactory throughout implementation, based on the quality work of the PIU team and strong leadership of the MoF. There was no delay in procurement operations despite the large number of contracts on the project procurement plan and the associated workload due to the Project’s heavy reliance on the modality of hiring individual consultants. Furthermore, the PIU prepared a project level GRM as part of the Environmental and Social Commitment Plan to guide the stakeholder grievance redress processes during the project implementation. The GRM has been created to allow the stakeholder grievances, feedback and comments to be considered in a systematic manner that will allow the various stakeholders and beneficiaries express their individual opinions and for the SGM Project to respond to them appropriately. 43. The monitoring and evaluation (M&E) quality is assessed as Substantial . The M&E indicators in the RF were adequate and straight forward to track. They were designed to specifically measure the project outcomes with clear targets set. A minor shortcoming in the design and definition of one of the M&E indicators was subsequently amended as part of the project restructuring. This demonstrated the agility of the team to make modifications and adjustments to ensure the project outcomes are adequately measured and targets are achieved. At the Project's closing, the data collection, verification, and analysis for the indicators were well monitored and managed by the client, beneficiary agencies as well as the Bank. The M&E data collected and shared by the client in the government’s final report for the Project (enclosed) have been utilized as input to this implementation completion report for the Project. 44. Nonetheless, there are residual risks associated with the project that are rated as Moderate. There were some Page 10 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT minor residual threats to development outcomes which remain at the end of the Project, including: • There was a high degree of success in developing the PIM capacities of the MoF. However, the establishment of the Ministry of Economy and Development (MED) during the course of the project created ambiguity as to the institutional roles and responsibilities related to PIM, which are yet to be fully resolved. As at the end of the Project, the Bank has provided advice to the GoM regarding clarification of responsibilities and is preparing a dedicated chapter of a ongoing Public Finance Review, which addresses outstanding issues regarding PIM. • The FSC is operational but is still building its capacity and not yet achieving maximum impact on Parliament’s engagement with fiscal policy issues. The Project prepared a range of inputs to enhance the future impact of the FSC, including proposed revisions to the legal framework to better align with international models of good practice. Yet, as at the end of the Project these have not been promulgated. • The deteriorating fiscal and economic position which occurred during the pandemic resulted in a change to the operation of the FHF, including a delay to the establishment of independent investment arrangements (funds are held in the Treasury until 2025). While the project has provided some needed support to the establishment of the FHF, its full operation will occur beyond the closing date of the project and any further deterioration in fiscal conditions may pose a threat. • In recognition of the significant role played within the MoF by consultants funded by the SGM project (as well as by the SFFS Project), an appropriate arrangement should be sought to ensure that all new systems and processes created are embedded within the usual/normal capabilities of the counterpart institutions. This should mitigate the risk that the MoF will not be able to deliver the enhanced capacities on an ongoing basis after the completion of the Project. 45. More generally, Mongolia’s economic and fiscal position, which remains vulnerable to external shocks, presents some risks to the project outcomes. The pandemic impacted negatively on revenue flows and the government’s response to the pandemic involved significant new expenditure, resulting in a deteriorating fiscal position. In addition, restrictions in international trade and global price inflation that are residual to the pandemic, and also associated with the current conflict in Ukraine, contribute to ongoing economic and fiscal challenges post- pandemic. Achieving fiscal discipline, which is an element of the overall development objective, as measured by indicators such as debt and deficit, is challenged by these circumstances. However, the enhanced PFM system and tools introduced by the Project better equip the government to understand and respond to these risks. The reforms realized under the Project will form the foundation for further reforms required to enable the government to respond to external shocks. In fact, the enhancement to fiscal systems and institutions realized as a result of the Project should become further imbedded as they are drawn upon by the government in responding to fiscal and economic risks. 46. There also remains some political risk associated with the project, noting that some of the key reforms introduced, including those associated with public investment project selection, citizen’s engagement, transparency mechanisms, as well as budgeting processes, require ongoing buy-in from the Cabinet – which is subject to change as a result of democratic processes. Page 11 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT V. LESSONS LEARNED AND RECOMMENDATIONS 47. Mongolia’s economy and fiscal position has for some time been susceptible to external shocks. A growing revenue base has enabled successive governments to expand both capital and recurrent expenditures to address increased demand for social services and infrastructure. Growth in revenue has therefore not translated to improved fiscal sustainability and the ambition to set aside and investments surplus funds for future generations has not been fully realized. Furthermore, unexpected downturns in revenues could not be accommodated without increasing deficits and associated debts. These characteristics continued throughout the period of the Project, with the economic volatility associated with the COVID-19 global pandemic and subsequent impacts of the conflict in Ukraine and global inflation ultimately resulting in a general deterioration in fiscal performance. 48. In this context, despite the improvement in fiscal governance realized from this Project, there remain limitations in the capacity of the PFM system to support effective and sustainable medium term fiscal planning. The current approach to budgeting, which can be characterized as being incremental and having a single-year focus, has required increasing total expenditure to respond to and solve emerging policy challenges given the lack of ability to reprioritize spending. Furthermore, recent experience has shown that significant changes are required to be made to the budget during the year to address issues not identified or resolved during budget planning. The Project has made meaningful progress in some of these areas since the 2021 PEFA assessment, including in relation to transparency of off-budget funding, enhanced legal framework for PPPs, operationalization of the FSC (noting some weaknesses as mentioned before) and in incorporating additional performance elements into the budget process. 49. Furthermore, it was observed that roles and responsibilities between the MoF and MED in relation to PIM are not clearly defined. The Bank team has recommended that the MED manages the roles of program and project planning in liaison with line ministries and agencies, as well as providing technical support through project development while the MoF manages the quality assurance (or ‘gateway’) system and provides the ‘review and challenge’ function to all projects. This would follow good international practice, provide definition and clarity for both ministries, and ensure that complementary rather than conflicting functions and roles develop in the short and medium term. This arrangement would resolve a long-standing efficiency issue in Mongolia’s efforts to reform its PIM framework. 50. It is evident that there are further opportunities to strengthen policy and performance orientation and risk management across the budget cycle. These opportunities include institutionalizing a Medium-Term Budget Framework (MTBF) that embeds policy and performance orientation and risk management into the budget cycle, including the fiscal relationships with subnational governments and SOEs. Such reforms would seek to make the budget process the key medium term policy setting mechanism of the government, better integrate capital and recurrent spending elements, improve budget reliability, and enhance the capacity of the Government to fund major projects and policy changes within a sustainable fiscal envelope. This would enhance capacity, both at the national and subnational level, to strategically reallocate resources, including recurrent and capital investments, within the budget process for better service delivery based on an enhanced understanding of how existing policies, programs, and projects impact on performance. 51. A functioning MTBF, which incorporates performance elements would be a precursor to the next stages of gender responsive budgeting, whereby assessment of the impact of new and existing policy on closing gender gaps, and ability to set appropriate performance metrics, would be a key decision criterion for allocation of new funding. An effective MTBF would also enable the planning of capital spending over the medium term, ensuring the full Page 12 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT consideration of recurrent cost implications and various alternative funding sources in the context of the budget process. Given the integration of national and sub-national budgets, the MTBF approach would support greater performance orientation in the allocation of intergovernmental transfers. There is an opportunity for the Bank to engage further with the Government to progress such reforms. Also, opportunities for further partnership with the EU in this endeavor could be pursued leveraging and building on the successful collaboration with the donor in advancing these past PFM reforms under the SGM Project. Page 13 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS @#&OPS~Doctype~OPS^dynamics@icrresultframework#doctemplate A. RESULTS FRAMEWORK PDO Indicators by Outcomes Not Categorized Indicator Name Baseline Closing Period (Original) Closing Period (Current) Actual Achieved at Completion Result Month/Year Result Month/Year Result Month/Year Result Month/Year No Jan/2019 Yes Dec/2021 Yes Jun/2021 Comments on achieving targets Achieved: To help operationalize and implement the 3-year PFM Strategy approved by the Finance Minister's Order No. 234 in September 27, 2018, with the support of the Project, the A comprehensive PFM strategy MOF revised and obtained approval for a higher order objective level Action Plan by the adopted and under implementation Ministerial order No. 192 on August 30, 2019. Subsequently, a more detailed Action Plan at to support the achievement of fiscal the activity level was also prepared with the Project support and was approved by the State discipline and strategic budget planning and execution as set forth in Secretary of the MOF on September 30, 2019 (Order No. A281). Currently, the PFM Strategy the FSL and the IBL. (Yes/No) and Action Plans continue to be under implementation, with progress being tracked as a management tool within the MOF. A refresh of the action plan is currently under preparation and anticipated for consultation ad approval in Q1 of 2022, reflecting the results of the PEFA assessment and the agenda of the new Government. No Jan/2019 Yes Feb/2023 No Mar/2022 Fiscal Council fully operational and Comments on achieving targets Delayed but back on track: In 2019, 2020, and 2021, the FSC issued a number of producing independent fiscal reports towards increased transparency and independent recommendations and reports on fiscal and socio-economic issues and accuracy of government submitted them to the Standing Committee on Budget and other structural units of macroeconomic and fiscal policy Parliament. Improvement has been made in terms of analytical (macro-fiscal forecasting formulation. (Yes/No) approaches) capacity of staff of FSC and Budget Analysis Department of Parliament Page 14 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT Secretariat with the support of consultants hired under the project. Also, an advisory note has been developed on possible options of monitoring and evaluation for the FSC operations. 46.00 Jan/2019 61.00 Feb/2023 56.00 Mar/2022 Comments on achieving targets On track: Mongolia's score on the 2019 OBI was increased to 56, approximately a 20- Improved budget transparency by percentage point increase from the Project baseline in 2017. The Project continues to making available to the public key support the MOF in further improvement on the OBI score including the production of online budget documents in accessible and booklet version of the Citizen's Budget (2018-2021), first interactive web-based Citizen's user-friendly formats, as measured by the Open Budget Index (OBI). Budget partially launched in February 2021 and further development is currently underway, (Number) BOOST historical dataset creation and maintenance for Mongolia, and revamping of the Glass Account Portal, which promotes "Open by Default" principle. These efforts are expected to be reflected in Mongolia’s score in the next Open Budget Survey. Intermediate Indicators by Components Not Categorized Indicator Name Baseline Closing Period (Original) Closing Period (Current) Actual Achieved at Completion Result Month/Year Result Month/Year Result Month/Year Result Month/Year No Jan/2019 Yes Dec/2022 No Mar/2022 Comments on achieving targets Partially met. Within the current legal context of the FHF, the project supported the development of FHF’s interim investment program as a primary step to start off FHF’s Develop core documents and investment management activities. The program covers transition from interim management guidelines to support Future Heritage arrangements into FHF Corporation-led investment activities. To further advance in Fund’s transition into the operational implementation of the FHF effort, the project will concentrate the support on the stage (Yes/No) development of select core documents and guidelines. As required by the FHF legislation, there are 10 documents to be adopted by the Minister for Finance and/or the Cabinet such as the Articles of Incorporation of FHF Corp., methodology for calculation and depositing of FHF’s sources/inflow, investment mandate etc. No Jan/2019 Yes Dec/2022 No Mar/2022 Page 15 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT Fiscal Council has developed and Comments on achieving targets On track: Final drafts of the operational plan and proposed legislative amendments for adopted its operational procedures. approval by the Parliament are currently underway. (Yes/No) No Jan/2019 Yes Dec/2021 Yes Mar/2022 Comments on achieving targets Achieved: Methodology and mechanisms for monitoring and registering contingent liability were developed and approved/adopted at the MOF. SOEs are registered in the DMFAS to Improved monitoring of contingent facilitate improvement in monitoring of contingent liabilities. A government degree was liabilities by consolidating balance approved to improve the legal environment of contingent liabilities. Thus far, with support of sheets of SOEs and improving the consultants hired under the project, balance sheets of 83 SOEs have been retrieved and fiscal sensitivity analysis. (Yes/No) compiled from the E-balance system, and a database of financial ratio analysis was created. Further, a risk assessment methodology was developed to determine entity's profitability, debt ratio, and liquidity. Based on the methodology, risk assessment was conducted for SOEs with regards to on-lent loans from the government. No Jan/2019 Yes Dec/2020 Yes Dec/2020 Comments on achieving targets Achieved: The following regulations were developed and approved by the Ministerial Order # 2018/295 and being implemented: 1. Regulation on assessing, prioritizing and selecting the projects and activities to be financed by the state budget investment; Better planning of capital 2. Methodology for re-evaluating the projects being implemented by state budget investments by adopting a new PIM investment; guideline that includes the Government of Mongolia´s 3. Methodology for estimating the economic benefits and social significance of a project to investment strategies fully costed be financed by the state budget investment; and (capital, recurrent operational and 4. Methodology for assessing, prioritizing and selecting the new projects to be financed by maintenance). (Yes/No) the state budget investment. Moreover, a simple yet effective pre-screening methodology and tool was developed and built into the Public Investment Management System (PIMS) as part of the overall appraisal, selection and rationalization methodology adopted by the MOF. This way, all proposals entering the PIM system would be subject to the same level of scrutiny and only those projects that are needed and viable are considered for possible financing. No Mar/2019 Yes Dec/2020 Yes Dec/2020 Page 16 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT Comments on achieving targets Achieved: PFM Strategy and Action Plan for the operationalization and overall implementation of the 3-year PFM Strategy was approved by the Ministerial Order#234 in September 27, 2018. The MOF with the support of the Project, finalized the higher order, 5- year Action Plan accompanying the PFM Strategy approved by the Ministerial order No. 192 A new PFM plan has been adopted by fiscal year 2020. (Yes/No) in August 30, 2019 and the more detailed Action Plan approved by the State Secretary of the MOF in September 30, 2019 (Order No. A281). Currently the Strategy is under implementation with 74% of achieved results. The World Bank and the MOF completed the Public Expenditure and Financial Accountability (PEFA) assessment, which will be an input to a planned update to the Government's PFM Reform Strategy. No Mar/2019 Yes Dec/2022 No Mar/2022 Comments on achieving targets On track: Important advances were made regarding revamp of the GAP including finalization The Glass Account Portal publishes at least annual data on programs as of the beta version of the front-end development of the Portal and internal and user testing defined by the new program on the Module-2, which is the core module for information entry. Advances were also made classification. (Yes/No) with regards to starting the system integrations/connectivity of external and internal sstems. Page 17 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT B. ORGANIZATION OF THE ASSESSMENT OF THE PDO Objective/Outcome 1: to support the Government’s efforts to improve fiscal discipline, public financial management (PFM), and transparency and accountability processes for strengthened governance of public resource management in Mongolia. 1. A comprehensive PFM strategy adopted and under implementation to support the achievement of fiscal discipline and strategic budget planning and execution as set forth in the Fiscal Stability Law and the Integrated Budget Law. 2. Fiscal Stability Council fully operational and producing independent Outcome Indicators fiscal reports towards increased transparency and accuracy of government macroeconomic and fiscal policy formulation. 3. Improved budget transparency by making available to the public key budget documents in accessible and user-friendly formats, as measured by the OBI. 1. Develop core documents and guidelines stipulated in the FHF legislation. 2. FSC has developed and adopted its operational procedures. 3. Improved monitoring of contingent liabilities by consolidating balance sheets of SOEs and improving the fiscal sensitivity analysis. 4. Better planning of capital investments by adopting a new PIM Intermediate Results Indicators guideline that includes the GoM s Ì? investment strategies fully costed (capital, recurrent operational and maintenance). 5. PFM Reform Strategy and the Action Plan developed and started to be implemented by FY2020. 6. The GAP publishes at least annual data on programs as defined by the new program classification. Component 1: Strengthening Macroeconomic and Fiscal Key Outputs by Component Management Page 18 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT 1.1 Fiscal Stability Council • The model and system requirements of the Economic Policy Platform of the FSC (FSC) developed. • A template for macroeconomic and fiscal forecasting and analysis prepared based on IMF Financial Programming Modelling. • Best practices of foreign countries (OECD) of Independent Budget Institutions presented to the FSC. • Documents defining the status and legal status of the FSC improved. 1.2 Asset and Liability Management • A comprehensive Initial investment program and its implementation roadmap developed - highlighting the governance framework, structures, investment process, and functions with practical proposals for implementation of needed activities. • FHF’s specific core documents and guidelines developed. 1.3 Taxation and Revenue Management • Supported the MoF in preparing Mongolia in becoming a signatory to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the BEPS Convention) in 2022. • The draft law on ratification of the Convention on Mutual Administrative Assistance in Tax Matters and other relevant legal was documents developed and submitted to the Parliament, with the draft law was approved on January 3, 2020. • “Procedure for exchange of information on request and voluntarily for tax purposes with foreign authoritiesâ€? was Page 19 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT approved by the Order No. 175 of Minister of Finance on September 10, 2020. • Training on information exchange standards organized for tax auditors. • Support provided to representatives of Mongolia participating in the 2019 meeting of the OECD and the Intergovernmental Forum and signed the Convention on Mutual Administrative Assistance in Tax Matters. • Support the internal processes by which Mongolia became the 14th member of the Asia Initiative, which aims to combat tax evasion and other unlawful financial activities. • Funded the translation of key documents which support Mongolia in its participation in international tax arrangements. • Supported MoF participation in the Joint Mock Peer Review undertaken by the Global Forum and Asian Development Bank's Team in Augustn2022, which included a preliminary evaluation of the execution of mutual information sharing activities in accordance with international standards. 1.4 Research and Analysis Capacity for Sound Fiscal and Financial management • Models on balance of payments and external sector analysis and projection were developed. • Mongolia’s fiscal stance was analysed; and • Trainings were organized to improve the research and analytical capabilities of the staff of the MoF. Component 2: Improving the Efficiency of Public Financial Management Page 20 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT 2.1 Budget Preparation and Execution • A local budget planning module of the Fiscal B system, web- based version of Fiscal system, have been developed and tested and 2023 annual budget proposal of local budget has been received by Fiscal B system. • Supported budget systems enhancements which enabled the monthly budget expenditure allotment schedule proposals of 9 general budget governors and 7 central budget governors were received in the Fiscal B system. • Supported the update of the economic classification to the update of the chart of account so that it can be used not only in budgeting processes but also in financial reporting. 2.2 Budget Reporting and Transparency • The project supported a series of discussions were held to determine the needs and suggestions of citizens, legal entities, civil society and public organizations, and GAP users regarding current laws and regulations on glass accounts and updating the unified GAP. • A working group was established to develop amendments to the law in accordance with the needs of users, and a total of 17 meetings and discussions were organized. • "The draft concept of the revision of the Law on Glass Accounts" was developed and approved by the Minister of Finance and the Minister of Justice and Home Affairs. Based on the concept, a draft of the Revision of the Law on Glass Accounts was developed. • A draft of amendments to the "Procedure for establishing common standards and content of information to be posted on the web-based GAPâ€? was developed. Page 21 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT • The updated version of the unified web-based GAP was introduced throughout the country starting from January 1, 2023. • The "Budget your Future" campaign was organized to support the measures taken by the Government to publicize the opportunity for citizens to submit their opinions in the budget approval process, and to stimulate public participation. 2.3 Contingent Liabilities • Created a database by recording the information of contingent liabilities in the DMFAS system. • Enabled the exchange of information of Mongolian business entities and organizations between the DMFAS and the E- balance and arranged the classification of legal entities’ registration to register them for obtaining, analysing, and monitoring information on liabilities of state and locally owned, partly state and locally owned legal entities. • Strengthened the professional capacity of the Debt Management Division staff through local and overseas capacity-building training. • Collected balance sheets of SOEs from the E-balance system and prepared a database of financial indicators calculations. 2.4 Public Investment Management • Upon assessing 20 concession agreements funded by the public investment, relevant reports and policy recommendations were made to enhance the management of PPPs. • Pursuant to the Resolution issued by the GOM, the project supported the MoF, in collaboration with national consultants, lawyers and other development partners, prepare a draft law on Public Private Partnership starting from Page 22 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT July 2021, which was subsequently approved by the State Great Khural in December 2022. • Supported a working group assigned to draft and develop relevant regulations and guidelines that fall within the function of the MoF under the law on PPP, including: o A draft regulation on “Government support and issuance of government guaranteeâ€?. o A draft regulation on “Granting approval for monitoring comprehensive analysis of a PPP project, entering into and amending a PPP agreementâ€?. • A draft project on “A model for estimating impact and risk of partnership on the budgetâ€? was developed. • The Public Fiscal Risk Assessment Model 2.0 /PFRAM 2.0/ guidebook developed by the WB and IMF has been translated from English into Mongolian to assist the MoF in developing the secondary regulations for the newly enacted PPP law. • Activities to support implementation of the “Regulation on assessing, prioritizing, and selecting projects and activities to be financed by the state budget investmentâ€? and other accompanying methodologies. • Supported the delivery of training on PIM, which involved relevant officials in charge of public investment from aimags, capital city, agencies, and ministries. • Supported the drafting of amendments and changes to the 2023 Budget law have been formulated. • A draft resolution of the State Great Khural, and draft amendments and changes in the State Savings Law were developed along with a presentation. Page 23 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT 1. A comprehensive PFM strategy adopted and under implementation to support the achievement of fiscal discipline and strategic budget planning and execution as set forth in the FSL and the IBL. 2. Fiscal Council fully operational and producing independent fiscal reports PDO Indicators towards increased transparency and accuracy of government macroeconomic and fiscal policy formulation. 3. Improved budget transparency by making available to the public key budget documents in accessible and user-friendly formats, as measured by the Open Budget Index (OBI). 1. Key Outputs 2. (linked to the achievement of the PDO Outcome) 3. 4. Page 24 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT 1. Develop core documents and guidelines to support Future Heritage Fund’s transition into the operational stage 2. Fiscal Council has developed and adopted its operational procedures. 3. Improved monitoring of contingent liabilities by consolidating balance sheets of SOEs and improving the fiscal sensitivity analysis. Intermediate Results Indicators 4. Better planning of capital investments by adopting a new PIM guideline that includes the Government of Mongolia´s investment strategies fully costed (capital, recurrent operational and maintenance). 5. A new PFM plan has been adopted by fiscal year 2020. 6. The Glass Account Portal publishes at least annual data on programs as defined by the new program classification. 1. Key Outputs 2. (linked to the achievement of the Component) 3. 4. Page 25 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT ANNEX 2. PROJECT COST BY COMPONENT Amount at Approval Actual at Project Components Percentage of Approval (EURM) Closing (EURM) Component 1: Strengthening Macroeconomic and Fiscal 427,613.00 421,930.16 98.67% Management Component 2: Improving the Efficiency of Public Financial 1,966,300.41 1,953,262.31 99.34% Management Component 3: Project 104,561.47 101,080.22 96.67% Management Total 2,498,474.88 2,476,272.69 2.95 Page 26 The World Bank Strengthening Governance in Mongolia (P168248) ICR DOCUMENT ANNEX 3. SHARED ELEMENTS OF THE SGM AND SFFS PROJECTS SGM: Assisted in the overall development and implementation of PFM PFM Reform Strategy reform strategy itself and the related action plan SFFS: Assisted implementation of selected elements of PFM action plan SGM: www.iltod.mof.gov.mn, Citizens Budget Booklets until 2023, competitions, BOOST data set cleaning Budget transparency SFFS: Continuation of the SGM (after completion) - Citizens Budget booklet 2024 and Citizen Engagement menu SGM: PIM guideline, standardized sectoral analysis, pre-screening methodology incorporated into PIMS Public Investment Management SFFS: PIMS system, methodology and regulation SGM: Support up to signing of the Convention BEPS SFFS: Continuation of the SGM work – Ratification of the Convention, draft law SGM: GRB pilot initiatives were started, and roadmap was developed Gender Responsive Budgeting SFFS: Continuation of the SGM activities after project close Integrated Payroll System SGM provided functional support to the SFFS initiatives SGM provided functional support to the SFFS initiatives, including design ISP – Intermediate service platform and development of ISP Page 27