PUBLIC AUDIT IMPLEMENTATION IN THE REPUBLIC OF KAZAKHSTAN

CAPITAL – Astana (since December 10, 1997). Population – 852,985 people (as of ). GEOGRAPHICAL LOCATION – Kazakhstan is located in Central Asia, deep in the Eurasian continent TERRITORY – 2,724,900 sq.km (1,049,150 sq. miles). In terms of the area, Kazakhstan ranks No. 9 in the world, being behind Russia, China, the United States, Argentina, Brazil, Canada, India and Australia; it occupies the second largest territory among the CIS countries POPULATION – 17 million 584 thousand people. Population density: 6.5 persons per 1 sq.km. STATE LANGUAGE – Kazakh, in public institutions and local self-governing authorities the Russian language is officially used on a par with the Kazakh language POLITY – Republic of Kazakhstan is a unitary state with presidential form of government. The head of the state is the President Nursultan Nazarbayev (since 1991) GENERAL INFORMATION ABOUT THE REPUBLIC OF KAZAKHSTAN 2

PUBLIC AUDIT STATE FINANCIAL CONTROL EXTERNAL AUDIT SELECTIVE CONTROL BASED ON RMS ANALYSIS, ASSESSMENT, VALIDATION OF EFFICIENT AND LAWFUL MANAGEMENT OF NATIONAL RESOURCES FOR ENSURING DYNAMIC GROWTH OF THE QUALITY OF LIVING CONDITIONS OF THE POPULATION AND THE COUNTRY’S HOMELAND SECURITY DETECTION OF CAUSES, RESERVES AND CAPACITY OF THE STATE ASSETS MANAGEMENT CONTINUOUS (operational) CONTROL THE BASIS FOR EXTERNAL PUBLIC AUDIT INTERNAL AUDIT UNIFORM STANDARDS OF PUBLIC AUDIT Public audit uniform database (responsibility for accuracy, completeness and timeliness of the data entered) Coordination of activities with the supreme public audit body and through the Coordination Council UNIFORM STANDARDS OF PUBLIC AUDIT Public audit uniform database (responsibility for accuracy, completeness and timeliness of the data entered) Coordination of activities with the supreme public audit body and through the Coordination Council INDEPENDENT EXTERNAL ASSESSMENT INDEPENDENT EXTERNAL ASSESSMENT SELF-ASSESSMENT ALLOWING THE GOVERNMENT TO CORRECT ERRORS IN TIME AUDITEE FEEDBACK (COMPLAINTS, RESPONSES, PROPOSALS BASED ON THE RESULTS OF THE PUBLIC AUDIT) THE SCOPE OF PUBLIC AUDIT AND FINANCIAL CONTROL 3

THE ACCOUNTS COMMITTEE (141 units) AUDIT COMMISSIONS (654 UNITS) THE MOF AUDIT COMMITTEE (86 UNITS) THE MOF AUDIT COMMITTEE REGIONAL DIVISIONS (655 UNITS) INTERNAL AUDIT SERVICES OF THE LOCAL PUBLIC BODIES (254 UNITS) CURRENT SYSTEM OF THE STATE FINANCIAL CONTROL CURRENT SYSTEM OF THE STATE FINANCIAL CONTROL According to BC- Supreme Audit Institution CENTRAL GOVERNMENT BUDGET CENTRAL GOVERNMENT BUDGET LOCAL BUDGET LOCAL BUDGET CONTROL ACTIVITIES OF THE AUDIT COMMITTEE IN 2015: -covered about 30%, or KZT 2.4 trillions of the state budget spending; -conducted 6,168 audits which revealed violations totalling KZT 718 billions (among them - violations of the law on public procurement worth KZT 287 billions). According to the results of applications consideration and RMS-based controls, 381 rights of suppliers were protected. INTERNAL AUDIT SERVICES OF THE CENTRAL PUBLIC BODIES (169 UNITS) 4

LEGAL SUPPORT ON NOVEMBER 12, 2015, THE HEAD OF STATE SIGNED THE LAW ‘ON PUBLIC AUDIT AND FINANCIAL CONTROL’ AND ‘ON AMENDMENTS AND ADDENDA TO SOME LEGISLATIVE ACTS OF THE REPUBLIC OF KAZAKHSTAN ON PUBLIC AUDIT AND FINANCIAL CONTROL’); 30 REGULATIONS WERE DEVELOPED AND APPROVED; TO AVOID DUPLICATION, THE LIST OF AUDITEES WAS AGREED UPON WITH THE ACCOUNTS COMMITTEE AND THE AUDIT COMMISSIONS. 5

Accounts Committee Audit Commissions AuthorizedInternal Audit Body Internal audit services of the central and local public bodies FUNCTIONS OF PUBLIC AUDIT FINANCIAL CONTROL BODIES FUNCTIONS OF PUBLIC AUDIT FINANCIAL CONTROL BODIES The Accounts Committee for control over the Central Government Budget implementation: Audit of consolidated financial statements (the Central Government Budget) Performance audit Compliance audit (in case of absence or poor compliance audit by internal audit bodies) Control over public audit bodies’ compliance with the standards Audit Commissions: Audit of consolidated financial statements (the local budget) Identical to the Accounts Committee functions at the level of the local budget except for preliminary assessment of the draft budget Authorized agency for internal audit (CFC): Mandatory annual audit of financial statements of the central and local public bodies; Truncated compliance audit (by orders of the President, the Government and parliamentary queries, control of the provision utilization, costs associated with increased budgetary investment projects, compliance with the laws on the state property, public procurement, accounting and auditing, operational control of the complaints and appeals of businesses and individuals); In-house audit; Coordination of IAS activity. IAS: Compliance audit on all directions on an ongoing basis in accordance with the Risk Management System; Performance audit on all directions. 6

7 UNIFORM DATABASE ON PUBLIC AUDIT AND FINANCIAL CONTROL INTEGRATION WITH ‘E-GOVERNMENT’ SYSTEM AND INFORMATION SYSTEMS OF PUBLIC AUTHORITIES OPTIMIZATION OF MANAGEMENT PROCESSES DUPLICATION MINIMIZATION ENSURING RECOGNITION OF PUBLIC AUDIT RESULTS FOR OPERATION OF THE PUBLIC AUDIT UNIFORM DATABASE THE LEGAL FRAMEWORK WAS PREPARED ( REGULATORY DECREE NO. 7-NK OF THE ACCOUNTS COMMITTEE OF NOVEMBER 28, 2015 ). WORK ON THE DATABASE PROVISIONING AND INTEGRATION WITH OTHER GOVERNMENT INFORMATION SYSTEMS IS CURRENTLY UNDERWAY. administered by THE ACCOUNTS COMMITTEE THE BASIS OF THE ELECTRONIC AUDIT ARCHIVE OF AUDITS AND RECOMMENDATIONS

LAST YEAR, IN-HOUSE AUDITS IMPLEMENTED ALLOWED IT TO PREVENT UNJUSTIFIED USE OF THE BUDGETARY FUNDS IN THE AMOUNT OF KZT 2.7 BILLIONS; AND TO SAVE 8,800 AUDITOR-DAYS IN-HOUSE AUDITS ALLOWED IT TO REVEAL VIOLATIONS AT THE EARLY STAGE PRIOR TO CONTRACTS CONCLUSION; 3,000 EMPLOYEES INVOLVED IN THE SYSTEM OPERATION WERE TRAINED; MEASURES TAKEN MORE THAN 300 LETTERS OF CLARIFICATION ON THE STATUS OF IAS WERE SENT (ACQUAINTED WITH MODEL PROVISION ON IAS UNDER A NEW FORMAT); AUDIT AND RISK COUNCILS AT THE PUBLIC BODIES ARE BEING ESTABLISHED; THE MINISTRY STRUCTURE IS BEING REVISED. WORK ON REDISTRIBUTION OF THE STAFF NUMBER AMONG THE DEPARTMENTS REQUIRED TO ENSURE THE NEW FUNCTION - AUDIT OF FINANCIAL STATEMENTS AND IN-HOUSE AUDIT - IS UNDERWAY; AUTOMATED ACCOUNTING COMPARISON WITH THE DATA OF THE STATE ASSETS REGISTER DURING 2 MONTHS OF 2016, 34 THOUSAND PROCUREMENTS WERE AUDITED AND VIOLATIONS WORTH KZT 66 BILLIONS WERE PREVENTED 8

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