I. Credibility of the Budget
Scores by Dimension
Overall Indicator Score
1. Aggregate expenditure out-turn compared to original approved budget
D
Notes:
1.1 The difference between actual primary expenditure and the originally budgeted primary expenditure (i.e. excluding debt service charges, but also excluding externally financed project expenditure)
D
Notes:
The deviations in percent to original budgeted expenditure were -28.8%, -18.1% and -19.2% in 2011, 2012 and 2013 respectively. Therefore, in each of the last 3 years actual expenditure deviated from budgeted expenditure by more than an amount equivalent to 15% of budgeted expenditure. (p. 25)
2. Composition of expenditure out-turn compared to original approved budget
C+
Notes:
2.1 Extent of the variance in expenditure composition during the last three years, excluding contingency items (the methodolodgy to rate this dimension is set out in the footnote of the PFM PMF booklet)
C
Notes:
Variance was: 14.3% in 2011; 13.2% in 2012; and 25.8% in 2013. Therefore, variance in expenditure composition exceeded 15% in one of the last three years. (p. 27)
2.2 The average amount of expenditure actually charged to the contingency vote over the last three years
A
Notes:
The actual expenditure charged to contingency funds was 1.3% in 2011, 0.7% in 2012, and 0.4% in 2013, and therefore less than 3 percent of the original approved budget in each of the three years. (p. 27)
3. Aggregate revenue out-turn compared to original approved budget
D
Notes:
3.1 Actual domestic revenue collection compared to domestic revenue in the originally approved budget
D
Notes:
Actual domestic revenue collection was 125.6% in 2011, 69.8% in 2012, and 88.1% in 2013 of budgeted revenue respectively. Actual domestic revenue was therefore below 92% or above 116% of budgeted domestic revenue in all the last three years. (p. 28)
4. Stock and monitoring of expenditure payment arrears
C
Notes:
4.1 Stock of expenditure payment arrears (as a percentage of actual total expenditure for the corresponding fiscal year) and any recent change in the stock
C
Notes:
The stock of expenditure arrears constitutes 3.9% of total expenditures. Arrears have increased over the last two years. (p. 29)
4.2 Availability of data for monitoring the stock of expenditure payment arrears
C
Notes:
Data for the stock of arrears is generated annually, but is only complete for recurrent expenditures. (p. 29)
II. Comprehensiveness and Transparency
Scores by Dimension
Overall Indicator Score
5. Classification of the budget
C
Notes:
5.1 The classification system used for formulation, execution and reporting of the central government's budget
C
Notes:
The budget formulation, execution and reporting is based on administrative and economic classification using GFS standards. (p. 30)
6. Comprehensiveness of information included in budget documentation
A
Notes:
6.1 Share of the listed information under PI-6 in the PFM PMF booklet in the budget documentation most recently issued by the central government (in order to count in the assessment, the full specification of the information benchmark must be met)
A
Notes:
Recent budget documentation fulfils 7-9 of the 9 information benchmarks. (p. 32)
7. Extent of unreported government operations
D+
Notes:
7.1 The level of extra-budgetary expenditure (other than donor funded projects) which is unreported i.e. not included in fiscal reports.
D
Notes:
The level of unreported extra-budgetary expenditure — DBM financed capital projects — constitutes 28% of total central government expenditures. (p. 33)
7.2 Income/expenditure information on donor-funded projects which is included in fiscal reports.
C
Notes:
Complete income/expenditure for all loan financed projects is included in fiscal reports; however, no information on grants is included. (p. 33)
8. Transparency of inter-governmental fiscal relations
A
Notes:
8.1 Transparent and rules based systems in the horizontal allocation among SN governments of unconditional and conditional transfers from central government (both budgeted and actual allocations);
B
Notes:
Transfers that are based on transparent and rule-based mechanism accounted for 81.2% of total transfers, or more than 50% but less than 90% of all transfers. (p. 36)
8.2 Timeliness of reliable information to SN governments on their allocations from central government for the coming year;
A
Notes:
SN governments are provided reliable information on the allocations to be transferred to them before the start of their detailed budgeting processes. (p. 36)
8.3 Extent to which consolidated fiscal data (at least on revenue and expenditure) is collected and reported for general government according to sectoral categories.
A
Notes:
Fiscal information (ex-ante and ex-post) that is consistent with central government fiscal reporting is collected for 90% (by value) of SN government expenditure and consolidated into annual reports within 10 months of the end of the fiscal year. (p. 36)
9. Oversight of aggregate fiscal risk from other public sector entities.
C+
Notes:
9.1 Extent of central government monitoring of AGAs and PEs.
C
Notes:
Monthly, quarterly and annual reports on financial status and budget execution of the HDF and the SIF are prepared as part of the general budget. All public enterprises have their audited financial statements consolidated into the annual Government Financial Statement, which is presented to parliament. However, no consolidated overview of fiscal risks on public enterprises is prepared by the Government. (p. 38)
9.2 Extent of central government monitoring of SN government's fiscal position
A
Notes:
The fiscal position of local governments is monitored quarterly by the MoF as part of the budget execution reports and covers both levels of local governments. No debt incurrence of local governments is possible without permission of the central government. (p. 38)
10. Public access to key fiscal information
A
Notes:
10.1 Number of the above listed elements of public access to information that is fulfilled (in order to count in the assessment, the full specification of the information benchmark must be met)
A
Notes:
The Government makes available to the public 6 of the 6 listed types of information. (p. 40)
III. Policy-Based Budgeting
Scores by Dimension
Overall Indicator Score
11. Orderliness and participation in the annual budget process
A
Notes:
11.1 Existence of and adherence to a fixed budget calendar;
B
Notes:
A clear budget calendar exists but some delays are often experienced in its implementation. For the preparation of the 2014 budget, the actual calendar gave five weeks to the entities to elaborate their estimates. (p. 41)
11.2 Clarity/comprehensiveness of and political involvement in the guidance on the preparation of budget submissions (budget circular or equivalent);
A
Notes:
A comprehensive and clear budget circular is issued to budget entities, which reflects ceilings approved by the Government (Cabinet) prior to the circular distribution to the entities. (p. 41)
11.3 Timely budget approval by the legislature or similarly mandated body (within the last three years);
A
Notes:
For the last 3 budgets (2012, 2013 & 2014) the budget was always approved prior to the beginning of the fiscal year. (p. 41)
12. Multi-year perspective in fiscal planning, expenditure policy and budgeting
C
Notes:
12.1 Preparation of multi -year fiscal forecasts and functional allocations
C
Notes:
Forecast of fiscal aggregates (on the basis of the main categories of economic classification) are prepared for at least two years on a rolling annual basis. (p. 44)
12.2 Scope and frequency of debt sustainability analysis
A
Notes:
DSA for external and domestic debt was undertaken yearly during the three-year period 2011-2013. (p. 44)
12.3 Existence of sector strategies with multi-year costing of recurrent and investment expenditure;
D
Notes:
Sector strategies have been prepared for some sectors, but none of them have substantially complete costing of investments and recurrent expenditure. (p. 44)
12.4 Linkages between investment budgets and forward expenditure estimates.
D
Notes:
Budgeting for investment and recurrent expenditure are separate process with no recurrent cost estimates being shared. (p. 44)
IV. Predictability and Control in Budget Execution
Scores by Dimension
Overall Indicator Score
13. Transparency of taxpayer obligations and liabilities
C+
Notes:
13.1 Clarity and comprehensiveness of tax liabilities
B
Notes:
Mongolia is a self-assessment based system and tax obligations are clear for most laws, with the exception of VAT. Discretionary powers of the GDT are limited to a proportion of audits. (p. 46)
13.2 Taxpayer access to information on tax liabilities and administrative procedures.
A
Notes:
Taxpayers have easy access to information from the website of the tax authority and customs authority and from public service desks in each of the local tax offices. (p. 46)
13.3 Existence and functioning of a tax appeals mechanism.
B
Notes:
There is a tax appeals mechanism authorized in law, but has many weaknesses and requires a substantial redesign to be fair and transparent. (p. 46)
14. Effectiveness of measures for taxpayer registration and tax assessment
B
Notes:
14.1 Controls in the taxpayer registration system.
C
Notes:
There are multiple taxpayer registration systems by tax type, and these are weakly linked to other registration and licensing systems. (p. 49)
14.3 Planning and monitoring of tax audit and fraud investigation programs.
C
Notes:
Audits apply to all self-assessed taxes. 60% of audits in 2013 were based on an annual audit plan using clear risk criteria, and the remaining were ad hoc audits. Ad hoc audits have been increasing in number since 2011. The high proportion of ad hoc audits imply that audits are not overall based on a clear risk assessment criteria. (p. 49)
14.2 Effectiveness of penalties for non-compliance with registration and declaration obligations
B
Notes:
Penalties are clearly specified in the primary tax legislation, but are too small for large taxpayers to deter non-compliance. (p. 49)
15. Effectiveness in collection of tax payments
C+
Notes:
15.1 Collection ratio for gross tax arrears, being the percentage of tax arrears at the beginning of a fiscal year, which was collected during that fiscal year (average of the last two fiscal years).
C
Notes:
The average debt collection ratio in the two years is 70% and the total amount of arrears is significant. (p. 50)
15.2 Effectiveness of transfer of tax collections to the Treasury by the revenue administration.
A
Notes:
Funds are transferred at the end of each business day from the accounts of the commercial banks to the TSA held in the central bank. (p. 50)
15.3 Frequency of complete accounts reconciliation between tax assessments, collections, arrears records and receipts by the Treasury.
A
Notes:
Complete reconciliation of tax assessments, collections, arrears, and transfers to Treasury takes place monthly at the end of every month. (p. 50)
16. Predictability in the availability of funds for commitment of expenditures
D+
Notes:
16.2 Reliability and horizon of periodic in-year information to MDAs on ceilings for expenditure commitments
D
Notes:
MDAs are provided monthly expenditure allocations at the beginning of the year, but these ceilings are changed five or six times a year and only two weeks in advance. Commitments are not recorded. (p. 52)
16.3 Frequency and transparency of adjustments to budget allocations, which are decided above the level of management of MDAs.
C
Notes:
Parliament makes significant in-year adjustments to budget allocations once or twice a year and amendments are done with only some transparency. (p. 52)
16.1 Extent to which cash flows are forecast and monitored
D
Notes:
While a cash flow forecast is prepared for the fiscal year, and is updated monthly, it is of poor quality and does not provide a reliable forecast of the availability of funds. (p. 52)
17. Recording and management of cash balances, debt and guarantees
C
Notes:
17.1 Quality of debt data recording and reporting
C
Notes:
Domestic and foreign debt records are complete, updated monthly and reconciled semi-annually. Data quality is considered fair, but some gaps and reconciliation problems are recognized. Reports on debt are produced quarterly. (p. 54)
17.2 Extent of consolidation of the government’s cash balances
B
Notes:
Most cash balances are calculated and consolidated daily, but some extra-budgetary funds (SIF, DBM) remain outside the arrangement. (p. 54)
17.3 Systems for contracting loans and issuance of guarantees.
D
Notes:
Government’s incurrence of debt (issuance of securities and contracting of loans) and issuance of guarantees are approved by MED and MoF without a unified overview mechanism. (p. 54)
18. Effectiveness of payroll controls
D+
Notes:
18.1 Degree of integration and reconciliation between personnel records and payroll data.
D
Notes:
Personnel records and payroll are decentralized in each of the 5000+ budgetary organizations. Payroll is on the basis of budgeted positions and not actual positions, resulting in inconsistencies between the payroll and the personnel records. (p. 55)
18.2 Timeliness of changes to personnel records and the payroll
D
Notes:
Aggregate personnel records are only updated annually and there are significant inconsistencies in the data reported to the different central agencies. (p. 55)
18.3 Internal controls of changes to personnel records and the payroll.
B
Notes:
Authority and basis for changes to personnel records and the payroll are clear. (p. 55)
18.4 Existence of payroll audits to identify control weaknesses and/or ghost workers.
C
Notes:
Partial payroll audits or staff surveys have been undertaken within the last 3 years. (p. 55)
19. Transparency, competition and complaints mechanisms in procurement
D+
Notes:
19.1 Transparency, comprehensiveness and competition in the legal and regulatory framework
B
Notes:
The legal framework meets 4 of the six (6) listed requirements. (p. 58)
19.2 Use of competitive procurement methods
D
Notes:
No documented regulations on procurement under DBM-financed projects. Under PPLM open competition is the preferred method and the conditions for use of less competitive methods are clearly stipulated. (p. 58)
19.3 Public access to complete, reliable and timely procurement information
C
Notes:
There is limited access to information on contracts financed by DBM. However, procurement plans, bidding opportunities and award of contracts are published for contracts under the PPLM which account for 50% of public procurement by value. (p. 58)
19.4 Existence of an independent administrative procurement complaints system
D
Notes:
There is no documented complaints mechanism for contracts financed by DBM. The complaints mechanism under PPLM is robust but there is no representation from the private sector and civil society on the 2 complaints bodies. (p. 58)
20. Effectiveness of internal controls for non-salary expenditure
D+
Notes:
20.1 Effectiveness of expenditure commitment controls.
D
Notes:
There is no formal system of commitment controls and control is largely reliant on containing cash payments within approved budget allocations. (p. 59)
20.2 Comprehensiveness, relevance and understanding of other internal control rules/ procedures
B
Notes:
Other internal control rules and procedures incorporate a comprehensive set of controls, which are widely understood, but may be excessive causing delays. (p. 59)
20.3 Degree of compliance with rules for processing and recording transactions
B
Notes:
Compliance with rules is high. Simplified procedures are not contemplated by the current legislation and no emergency procedure has been identified. (p. 59)
21. Effectiveness of internal audit
C+
Notes:
21.1 Coverage and quality of the internal audit function.
B
Notes:
As of year-end 2013, around 80% of line ministries and government agencies have full time internal auditors. Audits are at least 50% systemic in nature. Steps need to be taken to be able to confirm that internal audit conforms to international standards. (p. 61)
21.2 Frequency and distribution of reports
C
Notes:
Distribution of audit reports to both MOF and MNAO has not been established as a regular practice. MOF receives only some audit reports and audit reports are not distributed to the MNAO. Audit reports are shared with the MNAO auditors at the time of the annual audit. (p. 61)
21.3 Extent of management response to internal audit findings.
C
Notes:
Average action period is four months after delivering the internal audit report to the audited department. There are no indications on the quality of actions in the IA databases. (p. 61)
V. Accounting, Recording and Reporting
Scores by Dimension
Overall Indicator Score
22. Timeliness and regularity of accounts reconciliation
B+
Notes:
22.1 Regularity of bank reconciliations
A
Notes:
Bank account reconciliations for the TSA and for the accounts held in commercial banks are done on a daily basis between the Treasury department and the Central Bank. (p. 63)
22.2 Regularity of reconciliation and clearance of suspense accounts and advances.
B
Notes:
Suspense accounts are not permitted for budget entities and suspense transactions through the GFMIS are rejected, returned to the remitting bank and closely controlled. Account analysis review of suspense accounts is done twice yearly within two months of end of period. As Mongolia is working towards IPSAS accrual basis the carrying of advance balances at year-end is normal. The number of advances and values are reasonable. (p. 63)
23. Availability of information on resources received by service delivery units
A
Notes:
23.1 Collection and processing of information to demonstrate the resources that were actually received (in cash and kind) by the most common front-line service delivery units (focus on primary schools and primary health clinics) in relation to the overall
A
Notes:
The GFMIS provides monthly information on budget allocations and expenditures, which are used to produce monthly budget execution reports. These reports reveal that front-line service delivery units spend most of their budgets. (p. 64)
24. Quality and timeliness of in-year budget reports
C+
Notes:
24.1 Scope of reports in terms of coverage and compatibility with budget estimates
C
Notes:
Comparison of the budget is possible by administrative and economic classification. Expenditure is captured at the payment stage only. (p. 65)
24.2 Timeliness of the issue of reports
A
Notes:
Monthly reports are issued within ten days after the end of the month; quarterly reports are issued within two weeks after the end of the quarter. (p. 65)
24.3 Quality of information
C
Notes:
Manual data entry and the lack of integration between the accounting and payment systems create some concerns about the quality of the data in the reports. These data issues are not highlighted in the reports. However, this does not compromise their basic usefulness. (p. 65)
25. Quality and timeliness of annual financial statements
C+
Notes:
25.1 Completeness of the financial statements
B
Notes:
A consolidated government financial statement is prepared annually. They include, with few exceptions, full information on the revenues, expenditures, assets, liabilities and net assets. (p. 67)
25.2 Timeliness of submission of the financial statements
A
Notes:
The annual consolidated government financial statement is submitted for external audit within six months of the end of the fiscal year. (p. 67)
25.3 Accounting standards used
C
Notes:
Financial statements have been prepared in a consistent format but accrual based IPSAS is only partially applied. (p. 67)
VI. External Scrutiny and Audit
Scores by Dimension
Overall Indicator Score
26. Scope, nature and follow-up of external audit
B+
Notes:
26.1 Scope/nature of audit performed (incl. adherence to auditing standards).
B
Notes:
All entities of central government are audited annually covering revenue, expenditure and assets/liabilities. 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. The only exception is the parliament which is not regularly audited. (p. 70)
26.2 Timeliness of submission of audit reports to legislature.
B
Notes:
Audit reports are submitted to legislature within 8 months of end of period covered and in the case of financial statements from their receipt by the auditor. (p. 70)
26.3 Evidence of follow up on audit recommendations
A
Notes:
There is clear evidence of effective and timely follow up. (p. 70)
27. Legislative scrutiny of the annual budget law
B+
Notes:
27.1 Scope of the legislature’s scrutiny.
A
Notes:
The parliament’s review covers fiscal policies, the MTFF, and details of expenditure and revenue. (p. 72)
27.2 Extent to which the legislature’s procedures are well-established and respected.
A
Notes:
The parliament’s procedures for budget review, involving internal organizational arrangements, are firmly established by Law and are strictly abided by. (p. 72)
27.3 Adequacy of time for the legislature to provide a response to budget proposals both the detailed estimates and, where applicable, for proposals on macro-fiscal aggregates earlier in the budget preparation cycyle (time allowed in practice for all stag
B
Notes:
The 2013 budget is submitted by the executive on October 1st and approved by November 15th, giving the parliament 6 weeks to deliberate. (p. 72)
27.4 Rules for in-year amendments to the budget without ex-ante approval by the legislature.
A
Notes:
Clear rules are specified in the IBL and they put strict limits on in-year budget amendments by the executive. These rules are always respected. (p. 72)
28. Legislative scrutiny of external audit reports
D+
Notes:
28.1 Timeliness of examination of audit reports by the legislature (for reports received within the last three years).
B
Notes:
Scrutiny of audit reports is usually completed by the legislature within 6 months from receipt of the reports. (p. 73)
28.2 Extent of hearings on key findings undertaken by the legislature.
B
Notes:
In-depth hearings on key findings take place with responsible officers from the audited entities as a routine, but may cover only some of the entities, which received a qualified or adverse audit opinion. (p. 73)
28.3 Issuance of recommended actions by the legislature and implementation by the executive.
D
Notes:
No recommendations are issued by the parliament. (p. 73)
Donor Practices
Scores by Dimension
Overall Indicator Score
D-1 Predictability of Direct Budget Support
NA
Notes:
D-1.1 Annual deviation of actual budget support from the forecast provided by the donor agencies at least six weeks prior to the government submitting its budget proposals to the legislature (or equivalent approving body).
NA
Notes:
There has been no direct budget support in the last three fiscal years. (p. 74)
D-1.2 In-year timeliness of donor disbursements (compliance with aggregate quarterly estimates)
NA
Notes:
There has been no direct budget support in the last three fiscal years. (p. 74)
D-2 Financial information provided by donors for budgeting and reporting on project and program aid
D
Notes:
D-2.1 Completeness and timeliness of budget estimates by donors for project support.
D
Notes:
Not all major donors provide budget estimates for disbursement of project aid for the government’s upcoming fiscal year. (p. 75)
D-2.2 Frequency and coverage of reporting by donors on actual donor flows for project support.
D
Notes:
Grant financed projects are not included in the budget and no disbursement information for these is available to the Government. Disbursement information from loan financed projects from the largest donors is made available within two months of the end of the quarter, but does not follow the budget classification. (p. 75)
D-3 Proportion of aid that is managed by use of national procedures
D
Notes:
D-3.1 Overall proportation of aid funds to central government that are managed through national procedures
D
Notes:
None of the aid funds to central government are managed through national procedures. (p. 75)
