Organizational Assessment Guideline
IRF
Think Tank Development Initiative (TTDI)
Date: 12 March 2014
By:
Contents
Introduction and Outline ............................................................................................................ 3
PART A: Methodology .............................................................................................................. 4
1. Why organizational assessment? ........................................................................................ 4
2. Methodology .......................................................................................................................... 5
PART B: Governance and Operations ....................................................................................... 7
3. Governance and Organizational Structure ............................................................................. 7
4. Strategic Planning ................................................................................................................ 14
5. Annual Planning and Operations .......................................................................................... 16
6. Risk Management ................................................................................................................. 18
7. Human Resources (HR) ....................................................................................................... 19
8. Communications ................................................................................................................... 20
PART C: Financial Systems ..................................................................................................... 22
9. Budgeting ............................................................................................................................. 22
10. Financial Reporting ............................................................................................................ 24
11. Audit ................................................................................................................................... 27
12. Accounting ......................................................................................................................... 29
13. Authorizations and payments ............................................................................................. 31
14. Procurement ....................................................................................................................... 34
15. Anti-Corruption .................................................................................................................. 35
Introduction and Outline
This Guideline aim at supporting the IRF staff members when conducting organizational
assessments of potential partner think tanks under the joint IRF- Sida Think Tank
Development Initiative (TTDI).
The Guideline has a practical focus and is intended to provide insights in the core thematic
fields of an organizational assessment. It will further provide practical tips for methodology
and links to useful readings. It also summarizes the TTDI criteria for its partner organizations.
The Guideline includes three sections:
Part A focuses on methodology and tips for conducting an organizational assessment.
Part B focuses on governance and organization.
Part C focuses on financial systems.
PART A: Methodology
1. Why organizational assessment?
The organizational assessment of potential TTDI partner organizations has two main aims:
to assess the CSO (Civil Society Organization)’s readiness to receive core support
from the TTDI, and
to raise the organizational capacity and maturity of the CSO.
Those CSOs with experience of working with international donors often have well developed
project management system and systems for financial reporting to their donors. However,
their internal control systems can be rudimentary and only allow the organizations to comply
with the minimum requirements of the law of Ukraine.
At the same time, the systems relevant for managing project funding are often not enough for
a CSO to be ready to receive core support. While project funding is provided against a
detailed budget where the CSO often reports back by providing receipts for each payment
done under each budget line, core funding relies on the existing systems of the CSO. Core
funding means funding the organization itself, and not its specific project activities. Instead,
the funding should help the CSO to achieve its strategic goals.
The second aim of the organizational assessment is to identify weak areas where the CSOs
need to improve their organizations further. Thus, an organizational assessment has the
ambition to help CSOs to become even more democratic, legitimate and sustainable.
The main questions to answer in an organizational assessment are:
- Does the organization fulfill the established criteria for a TTDI partner
organization?
- Does the organization fulfill the legal requirements of the law they are governed by?
- Does the organization have a sufficient set of rules and regulations in line
with best practice?
- Does the organization implement its own charter and other established
procedures?
2. Methodology
This chapter aims at giving some practical advice and tips on how to conduct an
organizational assessment.
Documentation and implementation:
The organizational assessment focuses on the systems established within the organization.
The systems could be:
Documented but not implemented (e.g. a written policy that is not used)
Implemented but not documented (e.g. a procedure used that does not exist in writing)
Documented and implemented (e.g. a written procedure that is used by all staff
members)
Ultimately, a good system would include procedures that are both documented and
implemented. The assessment should preferably look at both aspects.
Gathering data: Triangulation of data:
In simple words, the triangulation of data means using data and input from two or more
sources to make a general conclusion. A short article about triangulation and how it can be
useful for assessments can be found here:
http://www.write.com/writing-resources-articles/research-writing/research-process/data-
triangulation-how-the-triangulation-of-data-strengthens-your-research
For the TTDI organizational assessments, it is important to base recommendations on at least
two sources of data: combining information from interviews with collection of written
documentation as evidence/validation.
Example: You wish to assess the procurement system of a CSO. To triangulate data, you can
read the procurement policy (if existing), analyze a random selection of protocols or
documents from performed procurements, and interview relevant staff members to let them
describe the system and how it is used.
Gathering Data: Conducting spot-checks
The organizational assessment does not include a complete review of all operational measures
taken in the organization. However, conducting spot-checks is important as an evidence tool
of how well the CSO implements its procedures. As a rule of thumb, even if you chose
random examples, always select the examples for spot-checks yourself (do not let the
organization pick them for you). This to ensure maximum objectivity.
Providing Recommendations:
To give support to the CSO’s further development, the TTDI assessments should also include
recommendations to the CSO for its organizational development. Recommendations could be:
“must have”, i.e. what the CSO needs to do to fulfill the requirements to receive core
support from TTDI, or
“should have”, i.e. what the CSO needs to improve to become a more efficient, stable
and transparent organization
To be useful for the organization, the recommendations need to be practical, concrete and
realistic. Remember that it should be possible for the TTDI team to come back and measure if
the CSO has implemented the recommendation or not.
Example:
Vague recommendation: “The CSO should improve its governance structure”
Concrete recommendation: “The CSO should establish an independent Supervisory Board”
The practical steps to conduct an organizational assessment for TTDI
The organizational assessment of a potential partner for the TTDI is done in four steps:
1. Limited call for potential qualified participants of TTDI and request documentation
2. Initial analysis of documentation
3. Visits and interviews with the CSO governing bodies, management and staff members.
4. Analysis and conclusions
Further readings
ICAC Corruption Prevention Department Hong Kong: Best Practice Checklist for
Governance and Internal Control in NGOs
http://www.icac.org.hk/filemanager/en/content_1031/ngo_e.pdf
PART B: Governance and Operations
This section of the Guideline gives thematic insights in good governance principles and CSO
operations. Each chapter includes:
a thematic introduction and practical examples,
a table of useful documentation to request from the CSO,
links to further reading, and
an overview of the established TTDI criteria for partner CSOs.
3. Governance and Organizational Structure
Introduction to Good Governance
The governance of an organization does not equal the management of an organization.
While management is about managing the daily operations, governance includes:
• Oversight of the organisation
• Responsibility for achieving aims and objectives
• Decision-making processes
• Accountability
• Delegated authority
In some CSOs, governance and management are not clearly separated in different functions.
This is not in line with principles of good governance, which includes:
• Clearly defined decision-making powers: the charter should define the decision-
making authority of the different governing bodies.
• Separation between oversight/governance and management: no person has both
management and governance function. This principle is often referred to as
segregation of duties.
• Defined roles for members, Board and staff: the documentation of the CSO
should give clear roles for the different functions, their mandate and their
authority
• Transparency: the CSO should function in a transparent manner towards its
members, its staff and the general public
• Accountability: the governance model should ensure that there is accountability
from lower governing bodies to higher, and from the General Assembly to the
target group.
Examples of how a CSO can have a mixed governance and management function:
- The Executive Director is also the chairman of the Board
- There is no external Board = staff are also board members
- The Board is involved in daily management tasks
Examples of potential influence of a lower governing body on a higher governing body:
- The Executive Director approves the agenda for the General Assembly
- New members are approved by the Board (according to best practice, the General Assembly
should approve new members)
- The Executive Director has voting rights in the Board and/or the General Assembly
While implementing a good governance model with clear segregation of duties can be a
cumbersome process, there are clear gains for the organization to establish good governance
structures:
• It safeguards the public interest: A CSO works with money from others, often
tax payer’s money from donor organizations. As a result, there is a public
interest that the CSO uses the funds in a good way. By having a transparent
system, the CSO can ensure a better protection of these funds.
• It demonstrates integrity and encourages trust and confidence.
• It provides for organizational stability through establishing governing bodies
instead of “one-man-shows.”
• It ensures objective decision-making where the CSO gets external input from
outside the management team.
• It increases likelihood of fulfilling aims and objectives by having bodies that
take strategic views on the daily operations.
• It prevents corruption as it establishes higher levels of internal controls.
In practice, the segregation of duties between governance and management often means that
the CSO has a General Assembly as its highest governing body, an independent Board and an
Executive Director appointed by the Board:
Remember that each organization has its own personal features and needs. There is no given
model that fits all. What is important is to ensure that the main principles of good governance
are kept to.
Membership
The good governance models discussed above assume that the CSO has members who
represent the target group for the CSO activities: a media CSO might have media companies
as members, a CSO working for a vulnerable group might have representatives from this
group among its members etc. having members of the target group as members means that the
CSO has legitimacy i.e. the credibility to talk on behalf of its target group.
In Ukraine, it is quite common that the CSO GA members consist of employees or consultants
working in the CSO. This creates a significant problem in terms of segregation of duties. At a
minimum, it should be ensured that those receiving salary from the CSO are not a majority of
the CSO members.
Not all CSOs have members. Some CSOs do not aim to speak on behalf of a specific group of
people. Think tanks could be found in this category. If a CSO does not have members, it
needs to find its credibility and roots in the Ukrainian civil society in another way, for
example through its Board members.
Decision-Making
The Board of a CSO should, in line with good governance, be external and independent. This
means that it should consist of persons that are not part of the management or staff team of the
organization, i.e. those that are financially remunerated by the CSO. To be able to provide
guidance to the CSO, a mix of different backgrounds and expertise can be fruitful. The
Executive Director should be hired by the Board and report to the Board.
The decision-making within the organization should be well documented and clear. In
general, the decision-power should have its starting point with the General Assembly and
thereafter be delegated to the Board and to the Executive Director. This delegation of power
should be established in the charter. Further delegation of decision authority from the
Executive Director to other managers or staff members should be documented and kept to.
Example: According to the charter of CSO X, the Executive Director has the right to sign
agreements on behalf of the CSO. During his leave, he delegates this right to his Deputy
Director. This is documented in a Power of Attorney.
Example: The table below shows an example of a governance model and a scheme of
delegation. The first table sets out the roles and responsibilities of each body.
Roles and Responsibilities
Subject General Assembly Board Executive
Director/Management
team
CSO governance
Approval of statute
and subsequent
amendments
Election/appointment
of Board members
Approval of
governance framework
including scheme of
delegation, Board
terms of reference
Abides by its role
as set out in the
statute
Strategy Receives strategic plan Sets and provides
management team
with overall
strategic direction
Receives direction from
Board
Preparation of strategic
plan for approval by
Subject General Assembly Board Executive
Director/Management
team
Consideration and
approval of
strategic plan
Board
Annual plans and
budgets
Consideration and
approval of annual
plans and budgets
Approval of
changes to
plan/budget
having a
significant impact
on strategy or
financial position
Preparation of annual
plans and budgets in line
with the strategic plan for
approval by Board
Identify and submit
proposals to Board where
changes in work plans or
budgets have a
significant impact.
Financial
monitoring
Receive regular
financial reports
indicating actual
financial
performance to
budget and cash
flow forecasts
Closely monitor overall
financial position
(including cash flow)
and performance against
budget.
Provide regular financial
reports to Board
Modes of operation: this table sets out some of the practical ways that each body operates
Subject General Assembly Board Executive
Director/Management
team
How members
appointed?
Approved by GA Board Members
elected/appointed by
GA members
Open recruitment
processes. Appointment
of Executive Director
made by Chair of Board
Frequency of
meetings
Annual (but
additional meetings
can be requested by
percentage of
members)
At least quarterly Meet as management
team at least once a
month
Chaired by?
Usually Chair of
Board
Chair elected by
Board members
n/a
Remuneration of
members
No remuneration
paid to members
Board members paid
only in exceptional
circumstances (eg if
appointed to carry out
a specific, time-bound
project for the Board)
Staff paid salaries
approved by the Board
Useful documentation to request from the CSO
Document Purpose
Copy of registration Confirm that the organization is properly
registered with the Ukrainian authorities
Charter Review governance model
Review decision-making model
Meeting minutes from recent General
Assembly and Board meetings
Review if the governing bodies work
according to the governance model
Organizational chart Review organizational model
Job description for the Executive Director Review if it matches the charter and does
not give the Executive Director a governing
role
Links and further readings
The Central and Eastern Europe Working Group on Non Profit Governance: A Handbook on
NGO Governance:
http://www.dochas.ie/pages/resources/documents/Governance_Handbook.pdf
The Corporate Governance Association of Ireland: Code of Corporate Governance:
http://www.dochas.ie/Shared/Files/4/CGAI_Governance_Code__FINAL.pdf
Andrea Moncada: Think Tank Boards: Composition and Practices:
http://onthinktanks.org/2013/03/25/think-tank-boards-composition-and-practices/
John Carver and Miriam Carver: Carver's Policy Governance® Model in Nonprofit
Organizations:
http://www.carvergovernance.com/pg-np.htm
TTDI criteria
Criteria “Must” for mini
grant
“Must” for
organizational
grant
“Should” for
further
development
Be mission-driven Have a written
mission/purpose
Have a written
mission/purpose in
the strategic plan
Have a written
mission/purpose
that matches the
strategic plan and is
well-rooted in the
organization
Have an independent
board
Be prepared and
willing to establish
an independent
Board during the
mini-grant period
Have an established
independent Board
Have a well-
functioning Board
that implements its
role as supervisory
body and reports to
the highest
governing body.
Conflict of Interest Have knowledge
and understanding
of Conflict of
Interest issues
Have a documented
Conflict of Interest
policy
n/a
Legal Status The CSO is
properly registered
with Ukrainian
Authorities
n/a n/a
Registered as Think
Tank
The CSO’s charter
allows for public
policy work
n/a n/a
Clear decision-making
processes in the
organization
n/a The CSO has a
documented
delegation of
authority in line
with the charter
The CSO has a
documented
delegation of
authority that is
relevant for its size
and type of
operations
Established formal
structure
Have a staff and an
office
n/a n/a
4. Strategic Planning
The charter of the CSO should include a purpose or objective for the organization. Often, the
CSO establishes an additional mission and a vision statement.
A mission statement should explain the core reason why the organization exists and the
target group. It should give an indication to what the organization should do and what makes
the organization special or unique, and spread the organizational values and ideas of the
organization among stakeholders and staff. The vision statement should be a future-looking
statement that sets the targets the organization wants to reach, either in a decided time frame
or in a long-term future without a time frame.
The mission and vision statements are the starting points for the strategic planning of the
CSO. An outline for a strategic plan could be as follows:
Structure for a Strategic Plan
VISION
• beliefs – expectations – long term wishes
MISSION
• internal and external communication
BUSINESS CONCEPT
• my wishes/company’s competence
• simple – understandable-controlling-delimiting
GOALS (should be SMART – Specific, Measureable, Achieveable, Realistic and Timely)
• financial goals
• financing – financial balance donatinos, contracts
• market shares – new customers – positioning
• organization – recruitment – succession plan
• personnel – personnel development
STRATEGY
(how we achieve our goals)
RISK EVALUATION
(Competitors, threats in the market, opportunities)
(Our weaknesses and how to overcome them, what to focus on)
ACTIVITIES AND PLANS
(which should lead to strategic goals)
• financial plans, budget, etc.
• market plan – market activities
• product development
• plan for personnel and organization
• plan for Board of Directors and top management
•Possible changes in long-term financing
Possible changes in owner/Board of Directors
COMPANY BOTTLENECKS
• which are the most important activities which lead to measureable results
Swedish Development Advisers
It is recommendable to have a strategic budget attached to the strategic plan, indicating the
financial and human resources needed to implement the plan. It would also be important to
ensure that staff members, members of the Supervisory Board and other stakeholders are
actively involved in the development of a strategic plan to ensure a direct ownership.
Based on the strategic plan, the strategic planning needs to be linked to the operational
planning of the CSO as follows:
The strategic plan should be broken down into annual plans and thereafter into project plans.
This way, the organization creates a chain of results where the individual projects support the
overall implementation of the strategic plan.
The RBM Guideline from SDA provides more detailed input on how to establish a result-
focused, measurable strategic plan and a result assessment framework (RAF).
Useful documentation to request from the CSO
Document Purpose
Mission and vision statement Review if the mission and vision statements
are updated and well established in the
organization
Review if the mission and vision statements
align with the Strategic Plan
Strategic Plan Review if the Strategic Plan covers the
planned organizational support period
Review if the Strategic Plan has measurable
indicators and identified outcomes
Annual Plan Review if the Annual Plan is linked to the
Strategic Plan and focuses on results
Links and further readings
Denise McNerney (iBossWell, Inc.), Dominic Perri (Essential Conversations Group) and
Margaret Reid (University of Arkansas): Strategic Planning Practices Result in Higher
Performing Nonprofits
http://www.strategyplus.org/Non-Profits.shtml
Rick James, INTRAC: How to do Strategic Planning: A Guide for small and diaspora NGOs
http://www.intrac.org/data/files/resources/729/Strategic-Planning-A-PLP-Toolkit-
INTRAC.pdf
TTDI criteria
Criteria “Must” for mini
grant
“Must” for
organizational
grant
“Should” for
further
development
Strategic Plan
n/a The CSO has a
result-focused
updated strategic
plan and a RAF
valid for at least the
time period of the
organizational
grant.
The CSO has a
system to ensure
that it measures
results rather than
activities, including
an monitoring &
evaluation plan for
its RAF
5. Annual Planning and Operations
To move from the strategic level to the operational project level, an annual plan is needed.
The annual plan should be an operational road map for the year to ensure that the CSO is
moving forward in its implementation of the strategic plan, and be linked to an annual budget.
An annual plan should not be confused with an annual activity plan, listing the planned
events/products to be done during the year. Instead, the annual plan should focus on the
results that the CSO intends to have during the year.
Linked to its strategy, the CSO needs to have a system to ensure that it can properly plan,
report and follow-up on its results. Thus, it needs a monitoring & evaluation plan that
established how it intends to measure its results on project level and on consolidated level,
including identification of those responsible for the task.
Useful documentation to request from the CSO
Document Purpose
Annual plan Alignment with strategic plan
Monitoring and evaluation plan Alignment with strategic plan
TTDI criteria
Criteria “Must” for
mini grant
“Must” for
organizational
grant
“Should” for
further
development
Annual Planning and
Reporting
n/a The CSO plans its
operations on an
annual basis
The CSO has an
annual report
The CSO has an
annual plan that
establishes annual
expected results in
line with its
Strategy.
The CSO publishes
its annual report
online
Project Management n/a n/a The CSO has some
project management
templates and
planning tools at
hand
The CSO has a joint
server for all its
materials
Policy work and Networks The CSO has
policy work as
its main
activity
The CSO TT
has analytical
staff members.
The CSO has an
implemented
quality control
procedure
n/a
The Think Tank Index Have a think
tank index of
at least xxx
points
Have a think tank
index of at least xxx
points
Have a think tank
index of at least xxx
points
6. Risk Management
While the future is difficult to predict, the CSO can actively identify, analyze and address
main risks for the CSO and the implementation of its strategic plan. Therefore, the CSO needs
a structured manner of conducting risk management at the strategic, operational and project
level. These would need to be documented and systemic on an organizational level.
The first steps on the way to start up more strategic risk management work would be to
prepare a SWOT1 analysis and a risk strategy, including:
Identification of risks
Estimation of the consequences of each risk.
Estimation of the likelihood that each risk will occur.
A strategy for how risks will be mitigated, weighting costs vs. benefits.
A system for documenting and tracking risks happening and the actions taken.
N.B It is the risks to not achieving the Strategic Plan’s results, the results of the Annual Plan
or the risk of project failing that should be the focus of the risk assessment.
The decision on how to mitigate the strategic risks is the task of the Board and should be
followed-up by management. The top management needs to assess operational and financial
risks regularly and what activities to budget for and carry out. Project risks should be
considered in each project design but this analysis can be made more explicit and documented
in the progress reports to donors.
Useful documentation to request from the CSO
Document Purpose
SWOT analysis Review its alignment with the strategic plan
Risk management policy Review its alignment with the strategic plan
Board meeting minutes Review if risk assessment is part of the
discussions
Links and further readings
Better Evaluation: SWOT analysis:
http://betterevaluation.org/evaluation-options/swotanalysis
PM4NGOs: Project Management for NGOs, Discipline 4: Risk Management
http://www.pm4ngos.org/index.php/discipline-4-risk-management
TTDI criteria
Criteria “Must” for
mini grant
“Must” for
organizational
“Should” for
further
1 Strengths, Weaknesses, Opportunities and Threats
grant development
Risk Management
procedures
n/a Have a risk analysis
and plan for risk
mitigation in its
strategic plan
An implemented
risk management
procedure
7. Human Resources (HR)
“-What if I invest in the development of my staff and they leave?
-What if you don’t and they do?”
For a think tank, its employees and consultants are the main asset; it is the team and its
competence that allows the think tank to produce high level results. Keeping its good staff
members and having systems for staff development is therefore important for the
sustainability of the think tank (and ultimately for a successful implementation of its strategic
plan).
It is not unusual that HR is seen as a support function, focusing on producing contracts and
ensuring the legal aspects of the employment are fulfilled. However, the CSO should
preferably establish systems for a good human resource management, documented in an HR
policy and/or HR procedure. The HR system should at a minimum include rules and
procedures for:
Performance management, including regular staff assessments and development
measures for staff
Procedures for hiring and firing staff
Rules and procedures for vacation and leaves of absence
Rules for compensation
General rules for the office
Useful documentation to request from the CSO
Document Purpose
HR policy or HR procedure Review its quality and content
Links and further readings
HR Council.ca HR Toolkit: Developing HR Policies
http://hrcouncil.ca/hr-toolkit/policies-guideline.cfm
TTDI criteria
Criteria “Must” for
mini grant
“Must” for
organizational
grant
“Should” for
further
development
HR procedures The CSO hires
its staff and
consultants
with written
contracts
n/a The CSO has an HR
policy and
procedure
Have gender and
nondiscrimination policy
n/a Awareness of the
gains of having a
gender and non-
discrimination
policy
Have gender and
nondiscrimination
policy
Job descriptions n/a TheCSO has job
descriptions for its
top managers.
The CSO has job
descriptions for all
its staff members.
8. Communications
Having a strategy for the communication work is very important for a successful
implementation of the strategic plan. Without external exposure and public usage of the think
tank’s ideas, the efforts of the work is to a large extent in vain. The CSO should have a
communication policy (that covers both external and internal communication). While the
outline of a communication policy can differ from one organization to the other, the
communication policy could include:
General principle of communication
Target groups of the organization and key messages to convey
Communication channels
General principles for using e-mails and other channels of communication
Communication responsibilities and monitoring of communication activities
How to handle media requests
Principles for speaking on behalf of the organization
Preferably, the CSO should also have a communication strategy for the same time period as
the strategic plan where it in detail plans for the concrete communication goals and plans for
the period.
Useful documentation to request from the CSO
Document Purpose
Communication Policy Review of content and suitability for the
organization
Communication Strategy Review of content and suitability for the
organization
Review of linkages to the Strategic Plan
Links and further readings
The Overseas Development Institute (ODI): How to write a communication strategy
http://www.odi.org.uk/publications/5186-communications-strategy-planning
TTDI criteria
Criteria “Must” for
mini grant
“Must” for
organizational
grant
“Should” for
further
development
Communication strategy n/a n/a Have a
communication
strategy which
include internal and
external
communication and
is aligned with the
strategic plan. .
PART C: Financial Systems
Having a solid and transparent financial system that ensures good internal control in the CSO
minimizes the risks of funds being misused. There is, however, a clear difference between
assessing the financial systems and conducting a financial audit. Assessing the financial
systems includes an analysis of whether or not there are documented procedures and systems
to ensure directive, preventative and detective financial controls. The systems need to ensure
that these types of control exist in order to ensure that core support-type of funds are managed
appropriately.
Links and further Readings:
Secure the Future: NGO Financial Management Pocket Guide:
http://www.securethefuture.com/our_experience/archive/financemng.pdf
TTDI criteria
Criteria “Must” for
mini grant
“Must” for
organizational
grant
“Should” for
further
development
A documented financial
system
The CSO has
basic
procedures for
its financial
management
The CSO has a
financial manual or
similar
documentation of
its financial systems
n/a
9. Budgeting
For the implementation of the strategic plan, the CSO needs to develop a consolidated
annual budget for the organization (not project by project). Since core funding ultimately is
about funding the organizational development and the implementation of the strategic plan,
the CSO also needs to have a consolidated annual budget that gives an overview of all its
foreseen income and expenses.
A Strategic Budget, covering the whole strategic period should establish, on a general level,
the budget needed to reach the strategic objectives. Thereafter, a more detailed Annual Budget
should be developed in line with the annual plan.
¨
The consolidated annual budget should:
in a transparent manner include all foreseen income and expenses of the organization
during the year,
divide the income and expenses according to source of funding,
preferably include activities that are yet to be financed,
use a structure that allows it to be compared with the annual financial report.
Thus, it should be a document reflecting the strategic plan rather than a document reflecting
the existing income sources. It should be approved by the Supervisory Board and be regularly
monitored by both Supervisory Board and the Director. The budget development process and
the budget monitoring procedures needs to be documented.
Useful documentation to request from the CSO
Document Purpose
Annual budget Review its transparency and clarity,
inclusion of all sources of income and
expenditure
Review its linkage to the annual plan and
the Strategic Plan
Strategic budget Review its linkage to the strategic plan
Documentation of budget procedures Review its compliance with the statute
Ensure that the procedure ensures approval
of the budget on Board level and regular
budget monitoring
Project budgets, administrative budgets
(If no consolidated annual budget exists)
Review their outline and content
Fundraising plan Review linkage to identified funding
shortages in strategic and annual plan
Links and further readings:
Funds for NGOs: Some Tips on Financial Planning and Budget Management for NGOs
http://www.fundsforngos.org/featured-articles/tips-financial-planning-budget-management-
ngos/
TTDI criteria
Criteria “Must” for
mini grant
“Must” for
organizational
grant
“Should” for
further
development
Annual consolidated
budget
The CSO has
project
budgets for all
its projects
The CSO has an
annual consolidated
budget that aligns
with the strategic
plan.
The CSO has a
budget policy and
performs regular
budget monitoring
on board and
management level.
Fundraising n/a n/a The TT has a
fundraising plan and
a staff member
responsible for the
fundraising
10. Financial Reporting
The annual financial report of the CSO should give a transparent overview of all sources of
income and expenses. It should be done on a regular basis and be compared to the annual
budget. The process to develop a financial report should be documented and the reports
should have been approved by the correct governing body. It should be possible to easily see
what income sources the organization has had and how the funds from each income source
have been used.
To pass a financial audit, the organization needs to produce annual financial reports, i.e. a
balance sheet and a profit & loss statement for the organization. Preferably, the CSO has a
financial system that allows for automatic development of financial reports. However, among
Ukrainian CSOs, many do not have an accounting software of this sophistication. Instead,
they develop their reports manually in Excel.
When assessing the financial reports, ask yourself:
• WHAT reports exists today?
• WHO developed the report?
• HOW was the report developed? (Where did the data come from?)
• WHO uses the report and how?
Besides own financial reports for use in the organization, the CSO also needs to regularly
report to the Ukrainian authorities. The tax report should be done on a quarterly basis and
is in a cumulative way reporting on income and expenses. Thus, the report for the fourth
quarter equals the annual income and expenses.
A CSO only needs to report on the total income and the total expenses. A typical tax report
from a CSO thus looks as follows:
It should be noted that the tax reports are cash-based i.e. “cash-in” and “cash-out” (please see
chapter on Accounting for a more detailed overview of methods for accounting). If a CSO
performs cash-based accounting, its end of the year records should equal the tax report. If
the CSO performs accruals-based accounting, the end of the year records is likely to have
some mismatch with the end of the year tax reports. In this case, the financial staff members
of the CSO should be able to provide you with a clear overview of the different numbers and
their origin.
Useful documentation to request from the CSO
Document Purpose
Annual financial report (if existing) Assessment of clarity and transparency
Review how well it correlates to the annual
plan (if existing)
Documented procedure for production of
financial reports
Review appropriateness of procedure and if
it involves people with the right level of
knowledge of what is needed in the
organization
Links and further readings
Mango: Financial Management Essentials- Handbook for NGOs
http://www.mango.org.uk/Guide/CourseHandbook
TTDI criteria
Criteria “Must” for
mini grant
“Must” for
organizational
grant
“Should” for
further
development
Have clear transparent and
reliable financial reports
The TT
provide proper
and timely
financial
reporting to
the Ukrainian
authorities
The TT produces
balance sheets and
profit and loss
statements, which
are approved by the
Board.
n/a
11. Audit
External Audit
As the organizational assessment does not include a full financial audit, it is of vital
importance that the CSO has undergone a financial audit for its total operations before core
support is provided. The audit of the CSO’s financial statements means that its financial
statements have been checked by a qualified auditor, external to the CSO. The underlying
accounting records have been checked and the auditor has issued an opinion on whether or not
the financial statements reflect the actual financial situation in the CSO.
For TTDI partners, Sida requires that the CSO’s financial statements are auditedOften, the
CSOs lack funds to finance such audit and would need financial support to implement this
requirement, for example through the TTDI mini grant.
The Sida requirements for core support organizations include:
core activities shall be audited annually,
audits shall be carried out by an external, independent and qualified auditor using
IFAC or INTOSAI standards,
audit reports shall express an opinion whether the financial account is correct and
gives a true and fair view of the core activities of the organization,
the auditor shall submit a management letter, which shall communicate any
deficiencies and weaknesses in the organizational structure and the status of the
organization’s internal control system, and
the organization should formally reply on the conducted audit with a management
response.
To document the audit processes, the CSO needs a separate audit policy on external audit.
Such policy should include:
rules for the frequency and scope of the external audit,
Terms of Reference for the auditors
how the auditor is to be procured,
who within the organization is responsible for responding to the Auditors’ findings
and recommendations,
rules establishing that the General Assembly should review the financial audit and
management letter, and
systems and procedures of internal audit including reporting lines and responsibilities.
Internal Audit
Many Ukrainian CSOs have an audit committee established in their charter (a requirement
under the former NGO law). The audit committee should report to the General Assembly.
The Chartered Institute of Internal Auditors (www.iia.org.uk) provides the following
overview of the different roles and objectives of an external and internal audit:
External audit Internal audit
Objectives
Add credibility and reliability
to financial reports from the
organization to its
stakeholders by giving
opinion on the report
Evaluate and improve the effectiveness of
governance, risk management and control
processes. This provides members of the
boards and senior management with
assurance that helps them fulfil their duties
to the organization and its stakeholders.
Coverage Financial reports, financial
reporting risks.
All categories of risk, their management,
including reporting on them.
Responsibility
for improvement
None, however there is a duty
to report problems.
Improvement is fundamental to the
purpose of internal auditing. But it is done
by advising, coaching and facilitating in
order to not undermine the responsibility
of management.
Links and further readings
Sida: Audit Manual
http://www.sida.se/Publications/Import/pdf/sv/Audit-Manual_1006.pdf
Chartered Institute of Internal Auditors: What is internal audit? Information to help you
understand the role and value of internal audit:
http://www.iia.org.uk/media/91287/0731_what_is_internal_audit_dec_2012.pdf
Mango: Example of an Internal Audit Checklist for a small NGO:
http://www.mango.org.uk/Guide/InternalAuditChecklist
TTDI criteria
Criteria “Must” for
mini grant
“Must” for
organizational
grant
“Should” for
further
development
Financial audit n/a Has undergone a
financial audit
according to IFAC
standards
Has an audit policy
or established
routine for
conducting regular
organizational
audits according to
IFAC standard with
a defined ToRs for
the auditor
12. Accounting
Accounting systems
While the organizational assessment should not review the complete accounting records, it
should assess the accounting system. CSOs in Ukraine are likely to use one of the following
accounting methods:
- Manual accounting (on paper): this is foremost likely to be found in very small and
informal CSOs.
- Accounting in Excel: some CSOs do the accounting in own-constructed Excel sheets.
While this at least provides an electronic accounting, it has several flaws including:
o A high risk of human errors when entering numbers
o A possibility to erase, change or add numbers without any traces in the book-
keeping
- Accounting software: the preferred and recommended way for accounting. In Ukraine,
the software “1C” is used by a majority of the CSOs. Newer versions of this software
offers possibilities to create financial reports automatically, and to conduct project
accounting (i.e. to be able to set up separate accounts for each project), while older
and simpler versions does not allow for this.
CSOs that do not have an accounting software that allows for project accounting often
combine the accounting software (for overall accounting) with Excel sheets to keep an
overview of each project account.
Accruals-based and cash-based accounting
Foremost for the analysis and assessment of the financial reports, it is important to understand
the two main approaches to accounting, accruals-based and cash-based, and what effects these
have on the financial reporting of the CSO.
Investopedia.com describes the difference between accruals-based and cash-based
accounting as follows: “The main difference between accrual and cash basis accounting is the
timing of when revenue and expenses are recognized….The cash method accounts for
revenue only when the money is received and for expenses only when the money is paid out.
On the other hand, the accrual method accounts for revenue when it is earned and expenses
goods and services when they are incurred. The revenue is recorded even if cash has not been
received or if expenses have been incurred but no cash has been paid.”
Example from Investopedia.com: Let's say you own a business that sells machinery. If you
sell USD 5,000 worth of machinery, under the cash method, that amount is not recorded in the
books until the customer hands you the money or you receive the check. Under the accrual
method, the USD 5000 is recorded as revenue immediately when the sale is made, even if you
receive the money a few days or weeks later. The same thing occurs for expenses. If you get
an electric bill for USD1700, under the cash method, the amount is not added to the books
until you actually pay the bill. However, under the accrual method, the USD 1700 is recorded
as an expense the day you get the bill.
While the Law on Accounting in Ukraine establishes accrual-based accounting as the
principle, in practice most CSOs uses thet cash-based accounting method. In some ways it is
an easier approach to use, and it is in line with the requests for reports to tax authorities
(which are produced with cash-based data). However, it also creates a less transparent view
on the financial situation of the CSO.
Example: CSO X uses cash-based accounting. In November 2013, it pays the office rent for
the next three months; November 2013, December 2013 and January 2014. The total cost is
UAH 30,000. The accountant records the total amount as a cost in November 2013.
By the end of 2013, the accountant summarizes the costs of the year in the annual financial
report. Since the total paid rent amount has been recorded during the month of November
2013, she will include all the UAH 30,000 as a cost for the year of 2013. In reality though,
this amount also includes costs for 2014 (i.e. office rent for January 2014).
If CSO X instead would have used accruals-based accounting, the accountant would have
recorded UAH 10,000 as a pre-paid expense = not a cost during 2013. The rent for January
2014 would be recoded in January 2014 as would be correct.
Useful documentation to request from the CSO
Document Purpose
Accounting policy Review if the policy provides clear rules and
responsibility
Review if the policy provisions for the use
of an accounting software
Examples of payments conducted and
entries in the book-keeping
Spot-checks if the established system is
properly implemented
TTDI criteria
Criteria “Must” for
mini grant
“Must” for
organizational
grant
“Should” for
further
development
Accounting system The CSO has
a trained
accountant
that performs
accounting
according to
an established
system
The CSO uses an
accounting software
for recording
transactions
The CSO performs
accruals-based
accounting
13. Authorizations and payments
Authorization of an invoice means that the document is properly signed by the person with
the authority to decide on the payment. Thereby the authorization is proving that the payment
can be made. Conducting the payment means to send out the money from the account/pay out
the money in cash.
Example: The CSO receives an invoice from an event company after arranging a round table.
First, the responsible project manager signs the invoice as approval that the costs are eligible
and the event has taken place. Thereafter, the Executive Director signs as the person with
legal status to authorize payments. This is the authorization process.
The Accountant thereafter enters the payment in the internet bank client and approves the
transfer with his/her electronic signature. Thereafter the Executive Director approves the
payment with his/her electronic signature. At this stage, the money leaves the CSO account.
This is the payment process.
Why is this aspect so important for a CSO? When handling public funds (from donors,
member fees etc.), the CSO is de facto managing funds that have been granted to the CSO for
a specific purpose. While in a private business, the owner or the director could perform
payments on his/her own, a CSO handling funds from the public needs to have a higher level
of control and transparency in its processes.
As a general rule, the CSO should have a “four-eyes principle” in each step. This means that
no one should be able to authorize or pay an invoice/cost without involvement of a second
person. This is a crucial principle to establish good internal controls: it should be impossible
for one person to authorize and/or pay anything on behalf of the CSO without a second
signature.
Example: The Accountant at CSO X does not have her own electronic signature for the
internet bank client system, but borrows the flash drive from the Executive Director tolog in
and enter the payments.. Thereafter the payments are signed by the Executive Director and the
transfer is performed. CSO X thus lacks a “four-eyes principle” both in terms of payment.
The CSO should have an established system of second signatures to ensure that no one
authorizes or conducts payments on his/her own. For authorizations, an authorization list or a
similar type of document needs to be established that defines who signs what.
Signature rights needs to be clearly documented. The right of first signature should be
given to the Executive Director in the charter. If the Executive Director has delegated this
right to someone else in the organization, this needs to be documented in a Power of Attorney.
Example: At IRF, the first signature right is held by its Executive Director according to its
Charter Thereafter, the first signature right has been delegated to the Finance Director up to a
limited amount. This delegation is documented in a Power of Attorney signed by the
Executive Director. The first signature (from the Executive Director or the Finance Director)
should always be accompanied with second signatures in line with the IRF policies.
While it is not a requirement according to the Ukrainian law, it is advisable for internal
control and transparency to establish a system where the Board approves very large payments
jointly with the Executive Director.
Payments should only be made once the proper authorizations have been documented, and
should be done by two persons with separate internet bank signatures in the bank client
system. This to avoid that one person has the possibility to clean the bank accounts of the
organization.
Cash payments generally means higher risks than bank transfers and should therefore be
minimized. Using cash opens up for possibilities of fraud and weakens the control, as cash
transfers are less traceable than bank transfers. If the CSO handles cash, it needs to have a set
of safe cash transfer procedures that at a minimum should include:
Established end-of-day cash limits
Proper documentation and book-keeping of cash transfers
Regular internal controls for the cash box
Example of a CSO without cash handling: CSO X does not handle cash. Salaries, invoices and
business travel expenses are all paid through bank transfer. The CSO also performs many
round table events in various regions in Ukraine. To avoid handling large amounts of cash and
have high costs for administration, they use regional event organizers that invoice the costs
directly to the head office in Kiev.
The processes of authorization and payment needs to be documented in a policy, either a
separate policy or as part of for example a financial manual.
Specific regulations also need to exist for business travel: if there are no joint rules on choice
of travel, per diems levels etc., the system does not protect from potential misuse. No manager
or employee should have the authority to authorize his/her own travel expense report.
Useful documentation to request from the CSO
Document Purpose
Documentation on authorization rights and
processes
Review that the authorization process is
documented and in line with good practice
Documentation on the payment process,
including rules for business travel
Review that the payment process is
documented and in line with good practice
Examples of conducted bank and cash
transfers
Cross-checks of how well the system is
implemented
TTDI criteria
Criteria “Must” for mini
grant
“Must” for
organizational
grant
“Should” for
further
development
High level of internal
control for
authorizations and
payments
The CSO has an
established system
to perform
authorizations and
payments/transfers
of funds
The CSO has an
authorization
system and a
system for
payments that
ensures at least two
signatures.
All signature rights
are properly
documented.
The CSO has a
business travel
policy
14. Procurement
Procurement is the purchase of goods and services. Conducting a proper procurement before a
purchase provides the organization with two important aspects;
- It allows the organization to properly analyze the market and get the best product for
the best price, and
- It establishes a fair and open competition that minimizes exposure to fraud.
The lack of a proper procurement process opens up for misuse of funds by over-paying for the
required service/goods (purposely or non-purposely). Internal controls are weak if one person
can decide on purchases for the organization.
Without a procurement policy, there are no formal restrictions to prevent a person with
signature rights to purchase anything at any cost. Therefore, the CSO needs rules around the
purchase process. A good procurement policy should at least include:
- The establishment of procurement thresholds: depending on the size of the purchase,
the organization can create different levels of procurements. While smaller purchases
can be done with no procurement, larger purchases needs an open tender with a joint
decision by several persons.
- The establishment of a step-by-step procurement process: the policy should give a
clear overview of how the procurement should be implemented under each threshold
level
- The establishment of a tender committee: For larger procurement, a tender committee
should jointly analyze the incoming bids and take a decision on reward. The tender
committee can include both finance and operations management representatives, but
could also with preference select new representatives for each procurement. There
should be a developed template for conducting the evaluation and document the
decision.
- The definition of rules for exemption from the policy: the policy should define under
which special circumstances the organization can make an exemption from the
procurement policy.
Many Ukrainian CSOs does not have a procurement policy. Instead, they use the different
procurement rules or policies of each donor financing its projects. However, for core support,
the CSO needs to have its own organizational procedures, including a procurement policy.
For the TTDI, the Sida’s procurement rules need to be implemented with the partner CSOs.
The rules can be found as annex to this guideline and incorporates the main aspects mentioned
above.
Useful documentation to request from the CSO
Document Purpose
Procurement Policy To review the system, its appropriateness,
its alignment with Sida’s procurement rules,
and its implementation
Documentation from conducted
procurement processes
To confirm that the procurement procedures
are followed in a random selection of
procurement processes
Links and further readings:
Report Annex 1: Procurement by Non-Governmental Organisations in the context of
Sida-financed projects/programmes, version of 2013
TTDI criteria
Criteria “Must” for mini
grant
“Must” for
organizational
grant
“Should” for
further
development
Procurement policy n/a Has a written
procurement policy
in line with Sida’s
requirements
Has implemented
the procurement
policy
15. Anti-Corruption
No organization is immune to corruptive behavior and fraud. Organizations using public
funds should have an additional focus on ensuring that there are protective measures taken to
protect the CSO from fraud and misuse of funds.
“There are generally three requirements for fraud to occur - motivation, opportunity and
personal characteristics. Motivation is usually situational pressures in the form of a need for
money, personal satisfaction, or to alleviate a fear of failure. Opportunity is access to a
situation where fraud can be perpetrated, such as weaknesses in internal controls, necessities
of an operating environment, management styles and corporate culture. Personal
characteristics include a willingness to commit fraud. Personal integrity and moral standards
need to be “flexible” enough to justify the fraud, perhaps out of a need to feed their children
or pay for a family illness. It is difficult to have an effect on an individual’s motivation for
fraud. Personal characteristics can sometimes be changed through training and awareness
programs. Opportunity is the easiest and most effective requirement to address to reduce the
probability of fraud. By developing effective systems of internal control, you can remove
opportunities to commit fraud.”2
By establishing effective and efficient operations, a reliable financial system, and be in
compliance with the law, a CSO can ensure a good internal control structure to prevent fraud
or misuse of funds. However, the CSO also needs to be prepared on how to deal with reports
on fraud if these would occur, and provide a context where its stakeholders would feel
2 University of California: “Understanding Internal Controls”, p. 3
comfortable to be whistle blowers. This is typically done through the establishment of an anti-
corruption policy that defines what the organization considers as corruption and establishes
how the organization should deal with incoming reports on possible misconduct.
For TTDI, Sida has a set of requirements that are to be followed by all organizations receiving
Sida funds:
The organization should have a documented and implemented anti-corruption policy
The anti-corruption policy should establish a possibility to report suspicions on
corruption anonymously
The anti-corruption policy should ensure protection of the whistle blower
The anti-corruption policy should establish clear steps of investigation
Sida’s position vis-à-vis corruption and financial mismanagement
NEVER ACCEPT!
ALWAYS ACT!
ALWAYS INFORM!
Sida’s view is that corruption is a serious hindrance to development. Corruption:
– undermines the rule of law
– demoralises political systems and democracy
– distorts competition in the market system
– results in the inefficient allocation of scarce resources
– affects the poor disproportionately
– undermines respect for human rights
– contributes to environmental degradation
– affects the will to invest
– destroys predictability and hope for the future
Useful documentation to request from the CSO
Document Purpose
Anti-Corruption Policy Review if the policy fulfills the Sida’s
requirements
Review if the policy is well implemented
and known in the organization
Code of Ethics Review if the policy is well implemented
and known in the organization
Conflict of Interest Policy for the
Supervisory Board
Review if the policy is well implemented
and known in the organization
Links and further readings:
University of California: Understanding Internal Controls
http://www-bfs.ucsd.edu/blink/ocbfs/acc/UnderstandIC.pdf
Sida: Sida’s Anti-corruption Regulation
http://www.sida.se/Publications/Import/pdf/sv/Sidas-Anticorruption-Regulation.pdf
Chr. Michelsen Institute, U4 Brief 2013:10: Donor anti-corruption strategies: Learning from
implementation
http://issuu.com/cmi-norway/docs/131219125823-
d5dae6e243ef40a88f1742f349ca7c05/6?e=1246952/6173581
Transparency International: International Principles for Whistleblower Legislation
http://issuu.com/transparencyinternational/docs/2013_whistleblowerprinciples_en
TTDI criteria
Criteria “Must” for
mini grant
“Must” for
organizational grant
“Should” for
further
development
Anti-corruption policy n/a The TT has an anti-
corruption policy that:
a) Gives
possibilities to
report
anonymously
b) Provides
protection for the
whistle blower
c) Gives clear
instructions on
how the
investigation
should be
performed and
by whom
The TT’s staff
members and
consultants knows
how to report a
potential
misconduct.
Annex 1
Procurement by Non-Governmental Organisations in the context of
Sida-financed projects/programmes, version of 2013
1. General principles
If the implementation of a Project/programme requires procurement by the Cooperation
Partner, the contract must be awarded to the tenderer with the most economically
advantageous tender (i.e. the tender offering the best price-quality ratio), or, in case of supply
contracts not involving after-sales service, the sole award criterion should be the price.
Contracts must be awarded in accordance with transparency and fair competition avoiding
any conflicts of interest. Contracts must not be split artificially to circumvent procurement
thresholds.
To this end, the Cooperation Partner must comply with the rules set out in sections 2 to 6
below, subject to section 7. These lay down the minimum procedures to be followed and it is
not precluded that other procedures offering more competition are utilised.
Sida will carry out ex post checks on the Cooperation Partner´s compliance with these rules.
Failure to comply with these rules would render the related expenditure ineligible for Sida
funding.
2. Eligibility for contracts
2.1.1. Nationality
Participation in tender procedures administered by the Cooperation Partner is open on equal
terms to all natural and legal persons.
2.2 Grounds for exclusion from participation in procurement
Candidates or tenderers will be excluded from taking part in a procurement procedure if:
(1) they are bankrupt or being wound up, are having their affairs administered by the
courts, have entered into an arrangement with creditors, have suspended business
activities, are the subject of proceedings concerning those matters, or are in any
analogous situation arising from a similar procedure provided for in national
legislation or regulations;
(2) they have been convicted of an offence concerning their professional conduct by a
judgment which has the force of res judicata;
(3) they have been guilty of grave professional misconduct proven by any means which
the Cooperation Partner can justify;
(4) they have not fulfilled obligations relating to the payment of social security
contributions or the payment of taxes in accordance with the legal provisions of the
country in which they are established or with those of the country of the Cooperation
Partner or those of the country where the contract is to be performed;
(5) they or persons having powers of representation, decision making control over them
have been the subject of a judgment which has the force of res judicata for fraud,
corruption, involvement in a criminal organisation, money laundering or any other
illegal activity detrimental to Sidas/Swedens financial interests;
Candidates or tenderers must certify that they are not in one of the situations listed above.
Points (1) to (4) do not apply to the purchase of supplies on particularly advantageous terms
from either a supplier which is definitely winding up its business activities, or the receivers or
liquidators of a bankruptcy, through an arrangement with creditors, or through a similar
procedure under national law.
2.3 Exclusion from award of contracts
Contracts may not be awarded to candidates or tenderers which, during the procurement
procedure:
(a) are subject to a conflict of interests;
(b) are guilty of misrepresentation in supplying the information required by the Cooperation
Partner as a condition of participation in the contract procedure or fail to supply this
information.
3. Common procurement rules
The tender documents must be drafted according to best international practice.
Sida will not publish notices and tender documents issued by the Cooperation Partner.
The time-limits for tenders must be long enough to give interested parties a reasonable and
appropriate period to prepare and submit their tenders.
An evaluation committee must be set up to evaluate tenders on the basis of the exclusion,
selection and award criteria published by the Cooperation Partner in advance in the tender
documents. This committee must have an odd number of members, at least three, with all the
technical and administrative capacities necessary to give an informed opinion on the tenders.
4. Specific rules for service contracts
4.1. Contracts from € 300 000 and above
Service contracts from € 300 000 and above must be awarded by means of an international
restricted tender procedure following publication of a procurement notice.
The procurement notice is to be published in all appropriate media, in particular on the
Cooperation Partner´s web site, in the international press and the national press of the country
in which the Project/Programme is being carried out, or in other specialist periodicals. It must
state the number of candidates which will be invited to submit tenders within a range of four
to eight candidates, and must be sufficient to ensure genuine competition.
All would-be service providers fulfilling the conditions referred to in section 2 may take part
but only candidates satisfying the published selection criteria and invited in writing by the
Cooperation Partner may submit a tender.
4.2. Contracts of less than € 300 000 but more than € 60 000
Such contracts must be awarded by means of a competitive negotiated procedure without
publication, in which the Cooperation Partner consults at least three service providers of its
choice and negotiates the terms of the contract with one or more of them.
4.3 Contracts of € 60 000 or less
For services of a value of € 60 000 or less, the procedures established by the Cooperation
Partner may be used, while respecting the rules and principles laid down in articles 1, 2 and 3
of this annex.
5. Specific rules for supply contracts (goods)
5.1. Contracts from € 300 000 and above
Supply contracts (goods) worth € 300 000 and above must be awarded by means of an
international open tender procedure following publication of a procurement notice.
The procurement notice is to be published in all appropriate media, in particular on the
Cooperation Partner´s web site, in the international press and the national press of the country
in which the Project/Programme is being carried out, or in other specialist periodicals.
Any would-be supplier which fulfils the conditions referred to in section 2 may submit a
tender.
5.2. Contracts between € 100 000 and less than € 300 000
Such contracts are awarded by means of an open tender procedure published locally: the
procurement notice is published in all appropriate media but only in the country in which the
Project/Programme is being carried out.
A local open tender procedure must provide other eligible suppliers with the same
opportunities as local firms.
5.3. Contracts of less than € 100 000 but more than € 60 000
Such contracts must be awarded by means of a competitive negotiated procedure without
publication, in which the Cooperation Partner consults at least three suppliers of its choice and
negotiates the terms of the contract with one or more of them.
5.4. Contracts of € 60 000 or less
For supply contracts of € 60 000 or less, the procedures established by the Cooperation
Partner may be used, while respecting the rules and principles laid down in articles 1, 2 and 3
of this annex.
6. Use of negotiated procedure
The Cooperation Partner may decide to use a negotiated procedure on the basis of a single
tender in the following cases:
(a) for the purposes of humanitarian aid and civil protection operations or for crisis
management aid. Crisis situations may be invoked only when they have been formally
recognised by Sida. Sida will inform the Cooperation Partner if a crisis situation has been
declared and the period for which the declaration will be in force.
(b) in which the services are entrusted to public-sector bodies or to non-profit institutions or
associations and relate to activities of an institutional nature or designed to provide
assistance to peoples in the social field;
(c) in which contracts extend on-going activities:
(i) not included in the main service contract which have become necessary to perform
the contract for unforeseen circumstances, and provided that the additional services
cannot be technically and economically separated from the main contract without
serious inconvenience for the Cooperation Partner and the aggregate amount of
additional services does not exceed 50% of the value of the principal contract; or,
(ii) which consist in the repetition of similar services entrusted to the contractor
providing services under the main contract, provided that:
(a) a contract notice was published for the first service and the possibility of
using the negotiated procedure for new services for the Project/Programme
and the estimated cost were clearly indicated in the contract notice
published for the first service; and
(b) the extension of the contract for a value and duration not exceeding the
value and the duration of the main contract.
(d) for additional deliveries by the original supplier intended either as a partial replacement
of normal supplies or installations or as the extension of existing supplies or installations,
where a change of supplier would oblige the Cooperation Partner to acquire equipment
having different technical characteristics which would result in either incompatibility or
disproportionate technical difficulties in operation and maintenance;
(e) in which the tender procedure has been unsuccessful, that is where no qualitatively and/or
financially worthwhile tender has been received. In such cases, after cancelling the tender
procedure, the Cooperation Partner may negotiate with one or more tenderers of its
choice, from among those that took part in the tender procedure, provided that the initial
terms of the tender procedure are not substantially altered;
(f) where, for technical reasons, or for reasons connected with the protection of exclusive
rights, the contract can be awarded only to a particular service provider;
(g) where warranted by the nature or particular characteristics of the supplies, for example,
where performance of the contract is exclusively reserved for the holders of patents or
licences to use patents;
(h) for contracts declared to be secret, or for contracts whose performance must be
accompanied by special security measures or when the protection of the essential
interests of Sida/Sweden or the partner country so requires;
(i) for contracts in respect of supplies quoted and purchased on a commodity market;
(j) for contracts in respect of purchases on particularly advantageous terms, either from a
supplier which is definitively winding up its business activities, or from the receivers or
liquidators of a bankruptcy, an arrangement with creditors, or a similar procedure under
national law;
(k) where a new contract has to be concluded after early termination of an existing contract.
Such a decision has to be substantiated by reason of non-performance by the supplier or
by reasons for termination similar to grounds for exclusion as mentioned under section
2.2.
7. Special cases
Different rules than those specified in this annex may apply in the following cases, with the
exception of the principles described in section 1 which always apply.
7.1. Central Buying Offices
Where the Cooperation Partner uses a central buying office as service provider, it must be
selected in conformity with the procedures set out above for service contracts.
This central buying office applies the rules imposed on the Cooperation Partner.