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LAW OF MONGOLIA ON STATE AUDIT
Article 1. Purpose of the Law
1.1 The purpose of this Law is to define the state audit system, powers of the state audit implementation organization and legal framework of its activity and to regulate relations pertaining to implementation of the state audit.
Article 2. Legislation on State Audit
2.1. The legislation of Mongolia on state audit shall consist of the Constitution, this Law, Public Sector Management and Financing Law, and other acts of legislation.
Article 3. Main principle of the State Audit
3.1. The state audit shall comply with the generally accepted principles and standards of the state audit, the rule of law, ensuring fairness and justice, transparency and objectivity.
Article 4. Scope of the Law
4.1 This Law shall be applied to performing financial statement audits and performance audits, making assessments and recommendations on performance of budget organizations, legal persons with state and local ownership or with state and local property ownership participation, projects and programs, which received financial support from the budget.
Article 5. Forms of the State Audit
5.1 The state audit organization shall conduct financial statement audits and performance audits. The forms of audit shall be improved and applied in the work in connection with the achievements of financial management, science and technology.
5.2 Financial statement audits provide reasonable assurance about whether the financial statements of an audited entity present fairly the financial position, results of operations, and cash flows in conformity with generally accepted accounting principles, and international and national accounting standards.
Performance audits include audits of the economy, efficiency and effectiveness, with which the audited entity uses its resources in carrying out its functions, and providing assessment and recommendations.
Article 6. System of the State Audit Organization
6.1 The system of the state audit organization shall consist of central and local state audit organizations. The central state audit organization shall be the National Audit Office, and local organizations shall be audit offices of aimags and the capital city.
Article 7. National Audit Office
7.1 The National Audit Office shall consist of the Auditor General of Mongolia, Deputy Auditor General, and a staff. The Deputy Auditor General and a staff shall have a duty to assist the Auditor General of Mongolia in exercising the powers vested by this Law. The Auditor General of Mongolia, Deputy Auditor General and a staff of the National Audit Office shall be government special service officers.
7.2 The National Audit Office shall be the supreme audit institution of Mongolia and shall comply with the laws of Mongolia and other decisions of the State Great Hural. The organizations and officials, except the State Great Hural and the Chairman of the National Security Council, shall be prohibited to exercise supervision over the National Audit Office and performance of the Auditor General of Mongolia and to give assignments.
7.3 The Deputy Auditor General shall act as Auditor General of Mongolia in the event of temporary absence, suspension of powers or removal from the post of the Auditor General of Mongolia
7.4 The National Audit Office shall be located in Ulaanbaatar city, shall use stamp, seal and printed letterhead in compliance with established procedure.
7.5 In order to ensure fairness in the activity of the National Audit Office, the Auditor General of Mongolia shall approve and pursue a Code of Ethics.
7.6 The Code of Ethics shall be pursued equally by the Auditor General of Mongolia, staff of the National Audit Office and any persons who are involved in the state audit activity on behalf of the National Audit Office.
Article 8. Budget of the National Audit Office
8.1 The budget of the National Audit Office shall be discussed and approved by the State Great Hural based on the proposal of the National Audit Office. The budget shall ensure the requirement of independent activity of the National Audit Office.
Article 9. Audit offices of aimags and the capital city
9.1 The audit office of aimag or the capital city shall consist of the Auditor General of aimag or the capital city and a staff. The Auditor General of aimag or the capital city and a staff of audit offices shall be government special service officers.
9.2 The Auditor General of aimag or the capital city shall be appointed and removed by the Auditor General of Mongolia upon consultation with the Chairman of Presidium of Hural of Citizens’ Representatives of respective aimag or the capital city. The term of office of the Auditor General of aimag or the capital city shall be 6 years.
9.3 The requirement stipulated by provision of the Article 13.2 of this Law shall apply equally to Auditors General of aimags and the capital city and the powers specified in clauses 13.4.2, 13.4.7, 14.2 and 14.7 of this Law shall be exercised at the aimag and the capital city level.
9.4 Auditors General of aimags and the capital city shall participate with consultative vote in sessions of the Hural of Citizens’ Representatives of respective aimag or the capital city and meetings of their Presidium.
9.5 Audit offices of aimags and the capital city shall report annually about their activity to the Hural of Citizens’ Representatives of respective aimag or the capital city and shall submit the reports to the National Audit Office.
9.6 The year-end financial statements of audit offices of aimags and the capital city shall be audited by the auditor appointed by the Presidium of the Hural of Citizens’ Representatives of respective aimag or the capital city.
Article 10. Budget of Audit Offices of Aimags and the Capital City
10.1 The budget of audit offices of aimags and the capital city shall be discussed and approved by the Hural of Citizens’ Representatives of respective aimag and the capital city based on the proposal of the audit offices of aimags and the capital city. The budget shall ensure the requirement of independent performance of audit offices of aimags and the capital city.
Article 11. Oath-Taking by Staff of the State Audit Organization
11.1 A staff of the state audit organization shall take an oath: “I, an officer of the state audit organization, swear to carry out my work without any outside influence and to abide by law only, to abide strictly by code of ethics of auditor and to exercise my duties honestly and faithfully. If I breach this oath, I shall be held liable by law”.
11.2 An oath-taking ceremony shall be arranged in compliance with the “Procedure of Oath-Taking by Government Administrative Officers”.
Article 12. Grades and Ranks of Staff Posts of the State Audit Organization
12.1 The posts of the state audit organization shall be classified as follows:
12.1.1 state audit leading officer;
12.1.2 state audit entrusted officer;
12.1.3 state audit advising officer;
12.1.4 state audit senior officer;
12.1.5 state audit officer;
12.1.6 state audit assistant officer.
12.2 The state audit leading officer, entrusted officer, advising officer, senior officer, officer and assistant officers shall have each first grade, second grade, third grade and fourth grade respectively.
12.3 The procedure for granting ranks and grades of posts of the state audit organization and supplementary rank and degree remuneration shall be established by the Auditor General of Mongolia.
Article 13. Auditor General and Deputy Auditor General
13.1 The Auditor General of Mongolia shall be appointed by the State Great Hural upon the proposal of the Chairman of the State Great Hural for the term of 6 years and may be re-appointed once.
13.2 The person appointed as an Auditor General of Mongolia shall meet the following eligibility requirements:
13.2.1 to be a citizen of Mongolia;
13.2.2 to be over 40 years old;
13.2.3 not to have reached the ceiling of civil service age;
13.2.4 must not have been convicted of any crime;
13.2.5 to have an educational degree related to the fields of economics, finance, accounting, law, public administration or other relevant fields;
13.2.6 to have worked in civil service for more than 10 years;
13.2.7 not to hold any positions and hold jobs in conflict with the powers of the Auditor General of Mongolia, and not to have a financial interest in business entities of all types of ownership and professional and non-governmental organizations;
13.3 A person appointed as an Auditor General of Mongolia shall give up any party affiliation.
13.4 The Auditor General of Mongolia shall exercise the following powers:
13.4.1 to represent the National Audit Office in internal and external relations;
13.4.2 to revise and approve audit plans and programs;
13.4.3 to supervise disbursement of budget of the National Audit Office;
13.4.4 to participate with consultative vote in the sessions of the State Great Hural and meetings of the Cabinet;
13.4.5 within the powers stipulated by this Law to direct and make decisions on all audit, accounting, administrative, financial and staffing activities;
13.4.6 to approve the structure and staffing of the National Audit Office;
13.4.7 to issue ordinances on issues within his/her competence;
13.4.8 other powers specified by legislation.
13.5 An Auditor General of Mongolia may delegate the exercise of any of his/her powers to the Deputy Auditor General and other staff. But such delegation shall not serve a ground for removing his/her responsibility and accountability undertaken by this Law.
13.6 An Auditor General of Mongolia shall be accountable for the National Audit Office complying with all laws of Mongolia and operating in accordance with generally accepted accounting, auditing and business practices, and operating in an honest, objective, fair, economic, efficient, and effective manner.
13.7 The Deputy Auditor General shall be appointed and removed by the State Great Hural by the proposal of the Auditor General of Mongolia. A candidate to the Deputy Auditor General shall meet equally the requirements set forth for the Auditor General of Mongolia in paragraph 13.2 of this Law. If the State Great Hural finds the proposed person as unacceptable, the Auditor General of Mongolia shall recommend another person.
13.8 An Auditor General of Mongolia and Deputy Auditor General may submit to the State Great Hural a request for resignation.
13.9 In the event of a failure to fulfill in proper way his/her duties or inability to perform duties due to health reasons the State Great Hural may release the Auditor General of Mongolia and Deputy Auditor General from his/her duties.
13.10 If the Auditor General of Mongolia or Deputy Auditor General is suspected of convicting a crime, he/she shall be suspended from his/her post by the State Great Hural until a court decision is made and removed from the post upon proof of committing a crime and upon court decision becoming valid.
13.11 The amount of remuneration, grades and ranks of the Auditor General of Mongolia and Deputy Auditor General shall be established by the State Great Hural.
13.12 If the Auditor General of Mongolia or Deputy Auditor General is detained during committing a crime or at the place of crime with evidencing facts, the relevant official shall notify the Chairman of the State Great Hural thereof within 24 hours. In other cases, except the above, it shall be prohibited to detain, arrest, or to impose administrative sanctions on the above officials in compliance with court procedure, to conduct a search at their home, office and personal search.
13.13 In case of an open vacancy of Auditor General of Mongolia or Deputy Auditor General the State Great Hural shall take actions to fill such vacancies within 15 days or, in case of period between sessions, within 15 days after the start of the session of the State Great Hural.
Article 14. Staff of the National Audit Office
14.1 The Auditor General of Mongolia shall recruit, promote and dismiss staff, except for the Deputy Auditor General, within the limits of approved budget.
14.2 The Auditor General of Mongolia may engage or otherwise involve any external experts and consultants for the audit work and to obtain their services and advice in exercising his/her powers.
14.3 While carrying out human resource management of the National Audit Office within the framework of the common legislation on government service, the Auditor General of Mongolia shall develop and pursue a system designed to suit the specific nature of this Office.
14.4 The system of remuneration and bonuses of staff of the National Audit Office shall be within the framework of the legislation on government service and suit the specific nature of this Office.
14.5 All staff of the National Audit Office shall be of proven capacity and competence in the performance of their respective duties. For this purpose, the Auditor General of Mongolia shall develop and implement a continuing training program for staff of the National Audit Office.
14.6 The staff of the state audit organization shall be provided with the following additional guarantees in addition to the guarantees specified by the legislation on government service:
14.6.1 to get reimbursement from the relevant audit organization of personal expenses incurred in relation with using public transport (except taxi) within the city or settlement, while exercising his/her powers of conducting audit, in compliance with the procedure approved by the Auditor General of Mongolia;
14.6.2 to receive an allowance for temporary loss of labor capability and the supplementary remuneration of the post throughout the period of loss of labor capability in case of temporary loss of labor capability, while exercising his/her powers of conducting audit, and to receive a disability pension and the supplementary remuneration of the post throughout the period of getting the disability pension;
14.6.3 in case of losing life in connection with exercising his/her powers of conducting audit, one time grant aid in the amount equal to the salary due to his/her post for three years shall be given to the family of the victim.
14.7 The pension, allowance, supplementary remuneration of the post, and the grant aid specified in clauses 14.6.2 and 14.6.3 of this Law shall be paid from the state budget, which shall then be recovered from the guilty person.
14.8 The Auditor General of Mongolia shall be prohibited to recruit as staff of the National Audit Office a member of his/her family and relatives or that of staff.
Article 15. Audit Jurisdiction
15.1 The audit jurisdiction of the National Audit Office shall include:
15.1.1 Performing audits of activities of state organizations, except the State Great Hural, no matter what the source of their funding. Only the financial statement audit of the State Great Hural shall be conducted and an audit of its other activities may be carried out, if the State Great Hural requests so;
15.1.2 Performing audits of activities of legal persons that are financed from budget, generated revenues to the budget, or have state ownership or state ownership participation;
15.1.3 Performing audits of activities of organizations, business entities, projects and programs that are financed by international organizations or foreign countries upon their request;
15.1.4 Performing audits of utilization, disbursement and outcome of special purpose funds of the Government, financial support from budget, budget funds used on repayment term, loans, aid and donations from international organizations, Governments and people of foreign countries to the Government of Mongolia and other budget organizations;
15.1.5 Performing audits of state budget investment and its outcome;
15.1.6 Audits of disbursement of budget funds allocated for the intelligence agency, armed forces and police department shall be conducted by the Auditor General of Mongolia and an auditor authorized by the State Great Hural;
15.1.7 Performing audits of consolidated year-end financial statements of the Government;
15.1.8 Performing audits and assessment on specific issues, if deemed necessary;
15.1.9 Development of proposal for submitting to the State Great Hural on the draft state budget and raising the efficiency of budget funds and increasing revenues;
15.1.10 Approval of standards, rules, procedures and guidelines on issues of its work, organization and activity, providing professional and methodological guidance of audit offices of aimags and the capital city;
15.1.11 To have the audit offices of aimags and capital city to conduct audits on matters within its competence;
15.1.12 To issue an assessment on settlement of payments and violations revealed in the course of audit, to put forward a demand, to submit to relevant organizations a proposal on improvement of legislation and other decisions establishing legal norms;
15.1.13 If in the course of audit it was established that a government officer carried out activities prohibited by law, failed to fulfill his/her duties, or abused the powers vested by the post, to submit to competent organization and officials the issue of imposing disciplinary sanctions on him/her. The competent organization and official shall notify the National Audit Office of resolution of this issue in compliance with established procedure within 10 working days.
15.1.14 To perform audit and assessment of utilization and disbursement of state and local property;
15.1.15 Other jurisdiction specified by legislation.
15.2 The audit jurisdiction of audit offices of aimags and capital city shall include:
15.2.1 Performing audits of activities of local administrative organizations;
15.2.2 Performing audits of activities of legal persons that are financed from local budget, generated revenues to the budget, or have local ownership or local ownership participation;
15.2.3 Performing audits of consolidated year-end financial statements of the local budget;
15.2.4 Development of proposal for submitting to the Hural of Citizens’ Representatives of aimag or the capital city on the draft local budget and raising the efficiency of budget funds and increasing revenues;
15.2.5 Audit jurisdiction specified in clauses 15.1.4, 15.1.5, 15.1.8, 15.1.12, 15.1.13, 15.1.14, 16.1 of this Law and other jurisdiction specified by legislation.
Article 16. Audit Planning
16.1 The National Audit Office shall develop long term and annual audit plans.
16.2 In developing long term and annual plans, the National Audit Office shall give due consideration to:
16.2.1 Suggestions made by the State Great Hural and its Standing Committees;
16.2.2 proposals by other domestic and foreign organizations;
16.2.3 audits conducted and planned to be conducted by internal audit organizations;
16.2.4 audits conducted and planned to be conducted by international organizations;
16.2.5 unforeseen emergencies that may arise in the course of events.
Article 17. Audit and Reporting Standards
17.1 The National Audit Office shall establish auditing and reporting standards that will be followed by auditors of the State Audit Organization, internal auditors and any other professional auditors performing audits on behalf of the National Audit Office. The standards shall meet generally accepted auditing standards and principles, including those established by the International Organization of Supreme Audit Institutions and the International Federation of Accountants.
Article 18. Financial Statement Audits and Reports
18.1 The Government and other organizations shall submit end of year financial statements to the National Audit Office in accordance with accounting standards within the time established by the Public Sector Management and Financing Law.
18.2 The National Audit Office shall conduct a financial statement audit and assessment within the time established by the Public Sector Management and Financing Law and shall send a report to the Portfolio Minister and a copy of the report to the central government administrative organization in charge of finance and budget.
18.3 The National Audit Office may rely on and make assessment based on the audits performed by internal and independent audit organizations, if the National Audit Office deems that the audits and reports of those organizations are accurate, reliable and meet the international and national auditing standards.
18.4 The Auditor General of Mongolia may decide not to perform annually a financial statement audit of an organization, several audits of which proved that it has good accounts and records and internal control. The Auditor General of Mongolia shall advise thereof the State Great Hural and other relevant organizations.
18.5 The National Audit Office may contract other audit organizations to exercise its function of performing financial statement audits and shall be responsible for the quality of audit performed in this manner before the State Great Hural. The procedure of performing audit on a contract basis shall be approved by the Auditor General of Mongolia.
18.6 The National Audit Office may charge the audited organization a fee to cover direct and indirect costs for financial statement audits it performs. The amount and rate of audit service fees shall be established each year by the central government organization in charge of finance and budget upon the proposal of the National Audit Office and shall be reflected in the budget of organizations. The revenue from fees charged for audit by the National Audit Office shall be transferred to the state budget and payment of fee for an audit performed on a contract basis shall be made to the relevant audit organization.
18.7 The procedure of performing financial statement audits shall be approved by the Auditor General of Mongolia.
Article 19. Performance Audits and Reports
19.1 The National Audit Office may conduct a performance audit of any entity and program under its audit jurisdiction.
19.2 Before starting the audit, the National Audit Office shall advise the entity to be audited of the audit objectives and scope.
19.3 Upon completion of the audit and preparation of the report, the National Audit Office shall undertake the following measures:
19.3.1 submit to the audited entity the draft report and to request to comment within 10 working days;
19.3.2 include and give consideration to comments received from audited entity in the final report, if they are deemed to have ground, or to undertake measures to verify the conclusion by additional evidences, if the comments are found to have no ground;
19.3.3 to send the final report to the State Great Hural, audited entity and other relevant organizations and officials.
19.4 The procedure for conducting performance audits shall be approved by the Auditor General of Mongolia.
Article 20. Proposals, Recommendations and Information
20.1 The Auditor General of Mongolia may prepare information, report and presentation on any matter relating to the National Audit Office’s functions to give to relevant organizations and officials.
20.2 The Auditor General of Mongolia may prepare proposals and recommendations and submit to the State Great Hural, its Standing Committees, and other relevant organizations on any matter that, in the Auditor General’s opinion, is in the State’s interest.
Article 21. Access to Information
21.1 The state audit organization and its employees shall have free, full, and immediate access to any data that is deemed necessary to exercise their powers. The organizations and officials specified in paragraph 15.1 of this Law shall have a duty to provide in due time without hindrances any information requested by the National Audit Office.
21.2 The employees of the state audit organization shall have a right to be provided by the audited entity and official without fee required information, study, explanation, reference and other relevant documents.
Article 22. Protecting Confidentiality of Information
22.1 Any secret information relating to the state, entity, or individual, obtained by the state audit organization in the course of performing an audit, shall be given the same level of confidentiality and protection as is required by the entity from which obtained.
22.1.1 If the Auditor General of Mongolia believes, that the not disclosing violations on the pretext of confidentiality is not in the best interest of the State, he/she may disclose the information to a person or entity authorized to know about such information and request resolution of the issue.
22.2 The staff of the National Audit Office shall be subject to the same penalties for unauthorized disclosure or use of confidential information as employees of the entity from which the information was obtained.
Article 23. Freedom to Distribute Reports
23.1 Unless otherwise stipulated by law, the National Audit Office may publish or make available to the public and media any performance audit and other reports.
Article 24. Publishing Lists of Reports
24.1 The National Audit Office shall have published each quarter a list of reports on audits performed by it and shall inform thereof through means of mass media and electronic network.
Article 25. Providing Information
25.1. Upon request by anyone, the National Audit Office shall, except when it violates the disclosure of confidential information, provide the audit reports in printed form or copies of such reports.
25.2. The National Audit Office may charge a fee for the publication and reproduction of audit reports.
Article 26. Reporting of the National Audit Office
26.1 The National Audit Office shall report about its activities to the State Great Hural. The annual report shall include the output report and financial statement of the report year.
Article 27. Auditing of the National Audit Office
27.1 The year-end financial statement of the National Audit Office shall be audited by an auditor appointed in compliance with provision of paragraph 63.1 of the Public Sector Management and Financing Law and the audit results shall be reported to the relevant Standing Committee of the State Great Hural.
27.2 The appointed auditor shall perform an audit in compliance with the standards and procedures approved by the National Audit Office. The appointed auditor shall have the same powers concerning gathering of information during the auditing as the staff of the National Audit Office.
27.3 The appointed auditor shall be prohibited to influence the activity of the National Audit Office.
Article 28. Liabilities for Breach of the Legislation
28.1 Any person, who breached the legislation on state audit, shall be imposed the following administrative penalty by the judge, unless a breach does not involve criminal liability:
28.1.1 a penalty of 10,000-20,000 tugrugs on the officer, who failed to send the relevant material or to fulfill the demand within established time;
28.1.2 a penalty of 30,000-60,000 tugrugs on the officer, who posed hindrances to the state audit activities, influenced or tried to influence negatively the reliability and accuracy of audit;
28.1.3 a penalty of 40,000-60,000 tugrugs on the officer, who evaded from auditing, refused without ground to provide or destroyed intentionally required information and documents, or provided false documents.
Article 29. Entry of the Law into Force
29.1 This Law shall come into force on January 3, 2003.
Chairman of the State Great Hural S.Tumur-Ochir
