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Mongolia's 2012 EITI Report

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Mongolia's 2012 EITI Report ɆONGOLIA EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE ɆONGOLIA SEVENTH EITI RECONCILIATION REPORT - 2012 December 2013 This report has been prepared at the request of Mongolia EITI Secretariat charged with the implementation of the Extractive Industries Transparency Initiative in Mongolia. The views expressed in the report are those of the Independent Reconcilers and in no way reflect the official opinion of Mongolia EITI Secretariat. This report has been prepared exclusively for use by Mongolia EITI Secretariat and must not be used by other parties, nor for any purposes other than those for which it is intended. Mongolia Seventh EITI Reconciliation Report 2012 CONTENTS EXECUTIVE SUMMARY ............................................................................................................... 5 Principal findings arising from reconciliation work ...................................................................... 5 1. INTRODUCTION .................................................................................................................... 11 1.1 Extractive Industries Transparency Initiative (EITI) ........................................................... 11 1.2 EITI in Mongolia............................................................................................................... 11 1.3 The national context of the extractive sector in Mongolia .................................................. 12 2. OBJECTIVES, APPROACH & METHODOLOGY OF THE ENGAGEMENT ............................ 19 2.1 Objectives of the engagement ......................................................................................... 19 2.2 Approach & Methodology................................................................................................. 19 3. RECONCILIATION SCOPE .................................................................................................... 23 3.1 Extractive companies involved in the EITI reconciliation ................................................... 23 3.2 Government entities involved in the EITI reconciliation ..................................................... 23 3.3 Payment flows included in the EITI reconciliation ............................................................. 24 3.4 Reporting templates......................................................................................................... 30 4. RECONCILIATION RESULTS ................................................................................................ 31 4.1 Reconciliation by extractive Company .............................................................................. 31 4.2 Reconciliation by revenue stream .................................................................................... 37 4.3 Adjustments..................................................................................................................... 40 4.4 Contributions and other information declared unilaterally.................................................. 53 5. FINAL UNRECONCILED DIFFERENCES .............................................................................. 56 5.1 Unreconciled differences by extractive company .............................................................. 56 5.2 Unreconciled differences by payment stream ................................................................... 60 6. ANALYSIS OF KEY FIGURES IN THE EITI REPORT ............................................................ 63 6.1 Contributions of extractive companies in the 2012 EITI report .......................................... 63 6.2 Contribution of flows in the 2012 EITI report..................................................................... 63 6.3 Contribution of activities in the 2012 EITI report ............................................................... 64 6.4 Analysis of payments to the Local Budget ........................................................................ 64 6.5 Analysis of donations and assistance paid to state entities ............................................... 64 7. OTHER SPECIFIC REQUIREMENTS ..................................................................................... 65 7.1 Survey on implementation of the Mining Activity Plan ....................................................... 65 7.2 Survey on environmental protection and remediation activities ......................................... 68 7.3 Agreements between local authorities and extractive companies ..................................... 78 8. RECOMMENDATIONS ........................................................................................................... 79 ANNEXES ................................................................................................................................... 86 Annex 1: Final unreconciled differences ................................................................................ 87 Annex 2: List of companies involved in the 2012 EITI Report ................................................ 91 Annex 3: Production data declared by extractive companies ................................................. 98 Annex 4: Breakdown of licences by extractive company...................................................... 102 Annex 5: Implementation of international standards on accounting and auditing for the extractive companies ........................................................................................... 123 Moore Stephens LLP & Dalaivan Audit LLC | Page 2 Mongolia Seventh EITI Reconciliation Report 2012 Annex 6: Detail of taxes, fees and other payments made by the extractive companies to the Local Budget .................................................................................................. 130 Annex 7: Detail of donations and assistance made by extractive companies to state entities ................................................................................................................. 132 Annex 8: Implementation of the Mining Activity Plan by extractive company ........................ 134 Annex 9: Environmental protection and remediation activities by extractive company .......... 140 Annex 10: List of companies having agreement with local authorities .................................... 143 Annex 11: Detail of Agreements/Contracts concluded by the extractive companies with local authorities .................................................................................................... 147 Annex 12: Extractive companies personnel contacted or involved in the reconciliation work .................................................................................................................... 155 Annex 13: Government entities personnel contacted or involved in the reconciliation work .... 162 Annex 14: Reconciliation team ............................................................................................. 164 Moore Stephens LLP & Dalaivan Audit LLC | Page 3 Mongolia Seventh EITI Reconciliation Report 2012 LIST OF ABBREVIATIONS BOM Bank of Mongolia GDP Gross Domestic Product GoM Government of Mongolia Govt Government Ha Hectare IAS International Accounting Standards IFAC International Federation of Accountants IPSAS International Public Sector Accounting Standards ISA International Standards on Auditing JSC Joint Stock Company Km / sq. km Kilometre / Square kilometre LLC Limited Liability Company MEGD Ministry of Environment and Green Development (MEGD) MNT / K MNT Mongolian Tugrik / Thousand Mongolian Tugrik MoF Ministry of Finance MRAM Mineral Resources Authority of Mongolia MSWG Multi-Stakeholders Working Group MTA Mongolian Tax Authority NSOM National Statistical Office of Mongolia PAM Petroleum Authority of Mongolia PSC Production Sharing Contract ToR Terms of Reference USD / K USD United States dollar / Thousand United States dollar VAT Value Added Tax Note: Companies were referenced with numbers (No.) from 1 to 200 for easy and quick search throughout the document. Moore Stephens LLP & Dalaivan Audit LLC | Page 4 Mongolia Seventh EITI Reconciliation Report 2012 EXECUTIVE SUMMARY The reconciliation of cash and in-kind flows relating to the exploration and exploitation of Oil and Solid Minerals for the 2012 fiscal year covering the period 1 January to 31 December 2012 was carried out by the Consortium Moore Stephens and Dalaivan Audit between 29 July and 19 November 2013. Our reconciliation work was carried out in accordance with the Terms of Reference annexed to our contract approved by the Multi-Stakeholder Working Group. The terms and the proposed reconciliation scope were approved by the EITI Mongolia National Council in its meeting of 28 November 2012. The overall objective of the reconciliation exercise was to assist the Government of Mongolia and other stakeholders involved to determine the contribution that the extractive sector has made to the country’s economy and social development, and to improve transparency and responsibility in the extractive industries’ sector. Principal findings arising from reconciliation work The main results arising from our work are as follows: 1. Two Hundred (200) extractive companies were selected for the 2012 reconciliation exercise. All companies except Dongsheng Petroleum LLC submitted their reports according to the template approved by the National Council. However, details of payments were not annexed to the reports and only annual figures for each tax were declared. All companies were contacted to send their detailed schedules after the start of the reconciliation work. This situation
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