MN-Strengthening Capacity of the SAIC Objectives: The purpose of the grant is to assist  SAIC to better assess the accountability of public finances through the enhancement of its financial audit capabilities.  Capacity building of SAIC staff in conducting attest audits should help provide the skills needed to audit Government accounts and enhance their knowledge of public sector International Accounting Standards (IASs) and International Standards for Auditing (ISAs). Implementation status: Subsequent to grant approval, two missions took place in October 2002 and February 2003, respectively. One of the recent development is the approval of the State Audit Law on January 3, 2003 by the State Great Hural (the Parliament) of Mongolia.  The new law has been translated into English . In connection with the enactment of the Law, the following major changes have occurred in government auditing system: -  The former State Audit and Inspection Committee (SAIC) has been replaced by the recently established National Audit Office (MNAO), which is the Supreme Audit Institution of Mongolia (SAI).  In addition, provincial Audit and Inspection Committees will be replaced by provincial Audit Offices headed by provincial Auditor Generals. -  While the former SAIC functioned as a SAI of a Board Model, the new MNAO will have a structure of Auditor General based on Westminster Model. -  On January 10, 2003, the Parliament nominated Mr. Javzmaa Lkhamsuren as the Auditor General of Mongolia for a six year term of office. Mr. Javzmaa was formerly the Chairman of the SAIC since 1995. -  Also on January 10, 2003, the Parliament nominated Mr. Batbayar Badamdorj  as the Deputy Auditor General of Mongolia. Prior to his nomination, Mr. Batbayar was the Secretary General of the SAIC since 1998.    In accordance with the State Audit Law, the MNAO has a mandate to conduct performance and financial statement audits of government programs and public agencies. This arrangement is consistent with the recommendations of Public Sector Management and Finance Law (PSMFL).    Organization Review:  This component has been successfully completed. A comprehensive review of SAIC.s organization set-up, existing audit policies and procedures, and current staff skill levels has been carried out. Based on the assessment, a professional development plan including preliminary recommendations for improvement has been prepared, approved by the SAIC Board and finalized.    Developing an Audit Procedures Manual:  A consultant has been identified and a terms of reference is being prepared. The IDA expects to review and clear the ToR in the next couple of  weeks. MNAO informed the IDA of its interest to start the work as soon as possible.    Preparing Auditing Standards Handbook in Mongolian : A video conference with Ms. Joan Tazir, a Translation Specialist from Germany,  was held on February 6, 2003. The purpose of the video conference was to discuss the translation process and quality control of translation of accounting/auditing standards into Mongolian language. The conference was joined by Mr. Batbayar, Mr. Dondog, Mr. Ronald Points and Ms. Nancy Chen.  It was agreed that a quality control framework for the translation process must be established. This includes: -  Screening the human resources - translators, revisers, terminologists, knowledge resource persons; -  Deciding on translation standards; -  Training human resources in keeping to specific standards at all levels - translation, revision, and  terminology; -  Screening of the document for key terminology; -  Deciding on what IT tools are to be used; -  The quality control consists of monitoring adherence to standards, ongoing adjustments to process to keep in line with new circumstances and timely monitoring.    The government has recently decided to move forward with the translation work after careful consideration of the results of the video conference. A draft contract and terms of reference is being prepared.    Training: This component would commence upon completion of the component 2 and 3.    Financial management review will be separately carried out by the designated Financial Management Specialist.