Financial Crime World

Improving Fiscal Management in Mongolia: Key Recommendations

Special Funds Governance Concerns

Mongolia has 29 special funds that have raised substantial governance concerns due to financial mismanagement and lack of oversight. The Future Heritage Fund Law (FHF) is particularly concerning as it will increase significantly in the coming years.

  • Financial Mismanagement: The report highlights the need for greater disclosure and accountability for each special fund.
  • Lack of Oversight: Ensuring strong governance and independence of the FHF is crucial to prevent financial mismanagement.

Public-Private Partnerships (PPPs)

Mongolia has used PPPs extensively, often bypassing parliamentary oversight and deficit constraints. Safeguards related to contract management, integration with the budget, risk allocation, and government guarantees need formalization through a new PPP Law.

  • Contract Management: Formalizing safeguards for contract management is essential to ensure transparency and accountability.
  • Integration with Budget: Ensuring that PPPs are integrated into the annual budgetary process is crucial for effective fiscal management.
  • Risk Allocation: Allocating risks between the government and private partners in a transparent manner is vital to prevent potential losses.

Procurement Rules

While Mongolia has a strong framework for procurement, there are still gaps in enforcing these rules. The report recommends ensuring that the Procurement Agency is independent, adequately funded, and staffed with well-qualified personnel to effectively manage procurements.

  • Independence: Ensuring that the Procurement Agency is independent from political influence is crucial for effective management.
  • Adequate Funding: Providing adequate funding for the Procurement Agency is essential for it to perform its duties effectively.
  • Well-Qualified Personnel: Staffing the Procurement Agency with well-qualified personnel is vital for ensuring that procurements are managed in a transparent and accountable manner.

Fiscal Transparency

Enhancing fiscal transparency is crucial for reducing rent-seeking activities. Key recommendations include undertaking regular dialogue with members of the public during budget formulation and monitoring its implementation, holding legislative hearings on the annual budget, and ensuring that audit processes are reviewed by an independent agency.

  • Regular Dialogue: Regularly engaging with members of the public during budget formulation and monitoring its implementation is essential for building trust in fiscal management.
  • Legislative Hearings: Holding legislative hearings on the annual budget helps to ensure transparency and accountability in fiscal management.
  • Independent Review: Ensuring that audit processes are reviewed by an independent agency is crucial for preventing potential biases in financial reporting.

Mining Sector Transparency

Mongolia is compliant with the Extractive Industries Transparency Initiative (EITI) but needs to strengthen EITI compliance by disclosing many important contracts for publicly owned oil, gas, and minerals.

  • Disclosure: Strengthening EITI compliance by disclosing important contracts for publicly owned oil, gas, and minerals is essential for promoting transparency in the mining sector.
  • Transparency: Ensuring that contracts are transparent and publicly available helps to prevent potential corruption and promotes accountability in the mining sector.