ATTACHMENT J.1.06.pdf

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LOCAL ORGANIZATION

PRE-AWARD SURVEY

REVISED 10 January 2012

LOPAS v.7.2 January 10, 2012 Page 1

Purpose of the Local Organization Pre-award Survey (For annual awards <$5,000,000)

USAID has designed three tools to support local capacity development. Missions may amend them as appropriate for their local or regional context.

1. Mapping Exercise - conducted for the identification of potential partners, clients and other stakeholders.

2. Local Organization Pre-award Survey (LOPAS) - a selection tool, to determine a potential partner’s responsibility and whether special award conditions may be required.

3. Organizational Capacity Assessment (OCA) - conducted after award is made, as a guided capacity self-assessment tool.

Conducting a Local Organization Pre-award Survey (LOPAS) is recommended as a tool for making a responsibility determination of a nongovernmental local (meaning a non-U.S., host country organization, as further defined below) organization that is being considered for a USAID-supported award or acquisition (grant or contract).

The pre-award survey precedes an award and is used in the selection process. Additionally, it is not intended as a substitute for an organizational capacity assessment (OCA), or the associated capacity development action plans as contemplated by USAID Forward’s Local Capacity Development (LCD) reform efforts.

The LOPAS and OCA are complementary tools designed for different purposes and time periods. The results of a pre-award survey should inform a subsequent

OCA.

A LOPAS, using the following matrix, should be performed for awards under $5,000,000 per year (ADS 591.3.2.1, Foreign Organizations, effective 03/18/2010). Over that amount, the local organization must undergo a formal audit as required by the Guidelines for Financial Audits Contracted by Foreign Recipients and the Mandatory Standard Provisions for Non-U.S. Nongovernmental Recipients (see a Mandatory Reference for ADS 303 revised 06/22/2011).

1. LOPAS objectives:To determine whether the organization has sufficient financial and managerial capacity to manage USAID funds in accordance with U.S. Government and USAID requirements, and

2. To determine the degree of support and oversight necessary to ensure proper accountability of funds provided to the recipient.

The LOPAS will help determine whether the accounting system is adequate to protect the U.S. Government’s interests. In addition, it will determine if the organization has the financial management capacity to handle a USAID activity, and it will help evaluate and obtain a sufficient understanding of an organization’s internal controls related to a USAID activity. It provides the Agreement Officer with relevant and appropriate information to evaluate the capacity of a local organization in terms of its ability to perform the terms of an award, and provide a tool to aid in the selection of potential local partners.

If an organization does not meet certain minimum requirements (i.e., Scoring a “1”), and otherwise is found responsible, the AO or CO can use special award conditions to find the organization responsible (FAR 9.103[b]). Not all sub-criteria will necessarily be of equal weight as each award and prospective partner presents unique circumstances. The “responsibility determination” calls for the application of professional judgment based on all relevant facts and circumstances known to the AO.

LOPAS v.7.2 January 10, 2012 Page 2

To be considered a “local” organization, an entity must:

• Be organized under the laws of the recipient country;

• Have its principal place of business in the recipient country;

• Be majority owned by individuals who are citizens or lawful permanent residents of the recipient country or be managed by a governing body, the majority of whom are citizens or lawful permanent residents of a recipient country; and

• Not be controlled by a foreign entity or by an individual or individuals who are not citizens or permanent residents of the recipient country.

The term “controlled by” means a majority ownership or beneficiary interest as defined above, or the power, either directly or indirectly, whether exercised or exercisable, to control the election, appointment, or tenure of the organization’s managers or a majority of the organization’s governing body by any means, e.g., ownership, contract, or operation of law.

“Foreign entity” means an organization that fails to meet any part of the “local organization” definition.

Government controlled and government owned organizations in which the recipient government owns a majority interest or in which the majority of a governing body are government employees, are included in the above definition of local organization.

Scale of Assessment:

Appropriate (Scoring 4) On an overall basis, a strong control framework is in place given the inherent business risks. Some improvements may be recommended to routine detailed control activities. (Has no risk or low risk.)

Adequate (Scoring 3) Although a control weakness was noted, compensating controls and other factors exist to reduce the residual risk within the organization to acceptable levels. (Has at least one medium risk.)

Weak (Scoring 2) Significant control weaknesses could expose the organization to unacceptable/inadequate levels of unmanaged risk. (Has at most one high risk.)

Inadequate (Scoring 1) Significant control weaknesses could expose the organization to significant financial or other loss or otherwise significantly impair its ability to manage USAID funds. (Has more than one high risk.)

Instructions for using the survey:

LOPAS v.7.2 January 10, 2012 Page 3

Assemble the right team for the LOPAS. In most situations, the scope of the LOPAS will be quite broad, encompassing legal structure, accounting and other financial systems, procurement systems, human resources, performance management and organizational sustainability indicators. The assessment needs to be undertaken by a multi-disciplinary team of reviewers with the appropriate expertise and experience (including FSN staff). A typical team (ADS 303.9.1c) consists of:

An AOT member The AO or designated OAA specialist A financial officer/analyst from the Mission or Regional Controller’s office, and One or more representatives of the cognizant RIG/A, if possible.

Prior to conducting the LOPAS, each reviewer should be familiar with the description and requirements of the award as well as the country conditions within which it will be implemented.

If a certain criterion is not relevant given the nature, scope and requirements of the award and the country situation or context, the LOPAS should be modified to meet Mission’s explicit requirements and interests. Missions are encouraged to add areas to be evaluated based on their specific needs.

The illustrative capabilities and attributes listed under each of the four columns (1.1 through 6.2) need not be present in all cases to support a particular score.

Low scores in areas considered critical to comply with USAID requirements, or considered to be a priority to the Mission and/or program, may prevent the organization from receiving an award, or the AO may choose to make an award with special award conditions. In the event a local organization receives an award with special award conditions, the Mission should develop a plan to support and monitor progress of the recipient in satisfying the special award conditions. The plan would complement the organizational capacity assessments (OCA) and the associated capacity development action plans contemplated by USAID Forward’s Local Capacity Development (LCD) reform efforts.

Other elements affecting a determination of responsibility can be taken into consideration such as: performance, education, knowledge and experience of finance staff, tone of management, sensitivity to internal controls, and commitment of management and employees to the organization’s mission.

Items to Request from the Organization:

During the Mapping Exercise, Mission may have requested documentation from the potential partner. For the LOPAS, these items should be provided by the organization for USAID review:

Articles of Incorporation or Charter

Record of legal Registration; other material licenses and permits

By-laws

Mission Statement

Organizational Chart with supporting documentation as to the delegation of authority

Name of commercial bank and account numbers

Chart of Accounts and corresponding General Ledger

One or more annual financial statements (income and expenditure report and balance sheet)

LOPAS v.7.2 January 10, 2012 Page 4

Audit report of the most current audit

Written procurement policies

Personnel manual/time sheets/activity reports or other personnel time tracking systems

Copy of travel policies and procedures

List of funding sources (current year)

Any additional data needed to conduct prudential ratios (specific to the organization, such as current ratio, acid test ratio, defensive interval or working capital ratio)

Definitions:

For the purposes of the Local Organization Pre-award Survey, the following definitions are applicable:

“Capacity” refers to the ability of a prospective recipient to perform and achieve the objectives of the award in accordance with applicable requirements:

technical, operational, financial management and reporting, procurement, sub-award management, legal, policy, and other requirements of the award including any special award conditions.

“Deficiency” is a material failure to meet a requirement of the award or a combination of “Significant Weaknesses” that increases the risk of unsuccessful performance of the award to an unacceptable level.

“Responsibility determination” (for USAID grants and cooperative agreements) refers to the pre-award process for making a determination in accordance with

ADS 303 (Grants and Cooperative Agreements to Non-Governmental Organizations) that a prospective recipient is “responsible” ─ that the prospective recipient is eligible for the award and (as stated in ADS 303.3.9) “has the capacity to adequately perform the award in accordance with the principles established by USAID and the Office of Management and Budget (OMB).”

“Risk” refers to the probability of occurrence and the potential magnitude of the impact of an adverse attribute, vulnerability, threat, transaction, or other event that will or may have an adverse impact on the achievement of objectives or otherwise result in loss or harm.

“Risk management” refers to the overall process concerned with the systematic identification, analysis, measurement, control, and minimization of risks with an expectation of decreasing the probability of their occurrence.

“Weakness” means a flaw or adverse attribute, including a deficit in capacity, that increases the risk of unsuccessful performance of the award. A “Significant

Weakness” is a significant flaw or attribute, including a significant deficit in capacity, that appreciably increases the risk of unsuccessful performance of the award.

LOPAS v.7.2 January 10, 2012 Page 5

Table of Contents

First Criterion: Legal Structure

1.1 Local Organization Definition

1.2 Compliance with Registration and Other Legal Requirements

1.3 Legal Structure

1.4 Governance

1.5 Control Environment

Second Criterion: Accounting/Financial Systems

2.1 Banking Relationship and Accounts

2.2 Payments – Segregation of Duties

2.3Financial Management Personnel

2.4 Accounting Cycle – Segregation of Duties

2.5 Accounting/Bookkeeping System

2.6 Chart of Accounts, General Ledger and Financial Statements

2.7 Financial Reporting

2.8 Audit and Review of Financial Statements

2.9 Variance Analysis (Budget to Actual Cost)

2.10 Financial Records Management

2.11 Sources of Funding

2.12 Allowable and Unallowable Cost

2.13 Direct and Indirect Cost

Third Criterion: Procurement Systems

3.1 Procurement Policies, Procedures and Practices

3.2 Procurement and Sub-awards

3.3 Compliance with Policies and Procedures – Reasonableness

Fourth Criterion: Human Resources Systems

4.1 Overall HR Policies and Procedures

4.2 Payroll System

4.3 Labor Activity System

4.4 Travel Policies and Procedures

Fifth Criterion: Program Performance Management

5.1 Technical Evaluation Criteria

5.2 Project Management Capacity

Sixth Criterion: Organizational Sustainability

6.1 Absorptive Capacity

6.2 Cash Flow Management

LOPAS v.7.2 January 10, 2012 Page 6

CAPACITY

AND

RISK AREAS

TO REVIEW

SCORING 4 (HIGHEST SCORE)

Strong Capacity

No Deficiencies or SW

LOW RISK

SCORING 3

Adequate Capacity

No Deficiencies SW (if any) Remediable Before

Award

LOW TO MODERATE RISK

SCORING 2

Weak Capacity

Some Deficiencies and SW Not Easily Remediable Before Award

MODERATE TO HIGH RISK

SCORING 1

Inadequate Capacity

Key Deficiencies and SW Not Remediable Before Award

HIGH RISK

1.1 Local Organization Definition:

Confirm compliance with USAID 'local organization' definition.

[Only applicable if the Mission intends to limit competition to local organizations.]

Organization meets the definition and has stable conditions for maintaining such status.

Organization meets the definition and there are some contingencies or conditions that make maintaining such status challenging or uncertain.

Organization does not meet the definition and has a plan by which it will meet the definition within 2 – 4 months.

Organization does not meet the definition and has no plan or capacity to change.

1.2 Compliance with Registration

and Other Legal Requirements:

Confirm compliance with legal registration requirements and other material licenses, permits, laws and regulations.

Organization is legally registered;

has, and is fully compliant with, all required permits and licenses to operate; is aware of its tax status and is fully compliant with applicable tax, labor, occupational health and safety, environmental, and other material laws and regulations relevant to its operations.

Organization is legally registered and has all required permits and licenses to operate. Organization is aware of its obligations under its licenses and permits and applicable tax, labor, occupational health and safety, environmental, and other material laws and regulations; is in substantial compliance with all such legal obligations. The oganization is taking (or plans to take,) corrective action where needed.

Organization has applied for legal status and is not yet a legally recognized entity in the country in which it operates. Organization has applied for and has not yet obtained one or more required permits or licenses to operate. Organization is aware of its obligations under required licenses and permits or applicable tax, labor, occupational health and safety, environmental, or other material laws and regulations.

Organization is not legally registered or registration has expired. Organization lacks one or more required permits or licenses to operate. Organization is not aware of its obligations under required licenses and permits or applicable tax, labor, occupational health and safety, environmental, or other material laws and regulations.

1 Capacity refers to the ability of the organization to perform in accordance with applicable requirements: technical, operational, financial management and reporting, procurement, sub-award management, legal, policy, and other requirements of the award including any special award conditions.

2 See Guidance for definitions of “Deficiency,” Significant Weakness,” and “Weakness.” SW = Significant Weakness (es).

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AND

Adequate Capacity

No Deficiencies SW (if any) Remediable Before

Award

LOW TO MODERATE RISK

SCORING 2

Weak Capacity

Some Deficiencies and SW Not Easily Remediable Before Award

MODERATE TO HIGH RISK

SCORING 1

Inadequate Capacity

1.3 Legal Structure:

Confirm that the organization’s charter, by-laws and other foundational/operational documents support its mission and goals.

Organization has a strong organizational structure, well designed and higly relevant to its mission and goals, roles and responsibilities of departments or functions and lines of communication are well-defined and highly appropriate.

Organization has an adequate organizational structure, adequately designed and relevant to its mission and goals, roles and responsibilities of departments or functions and lines of communication are adequately defined and appropriate.

Organization has less than an adequate organizational structure;

roles and responsibilities of departments or functions and lines of communication are not well defined, and the organization does not have a defined mission.

Organization has no formal organizational structure; there are clearly inadequate or entirely missing definitions of departmental or functional responsibilities and lines of responsibility; lines of communication among departments or key functions are weak. The organization has no defined mission.

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AND

Adequate Capacity

No Deficiencies SW (if any) Remediable Before

Award

LOW TO MODERATE RISK

SCORING 2

Weak Capacity

Some Deficiencies and SW Not Easily Remediable Before Award

MODERATE TO HIGH RISK

SCORING 1

Inadequate Capacity

1.4 Governance*

Confirm that the organization emphasizes the importance of and practices good corporate governance in all key areas.

[Refer to OECD Principles of Corporate Governance: right and equitable treatments of shareholders (only used for public organizations), interests of other stakeholders, role and responsibility of the board, integrity and ethical behavior, disclosure and transparency.]

Organization’s management regularly and consistently emphasizes the importance of and practices good corporate governance (as broadly defined) in all key areas.

Organization’s management addresses the importance of good corporate governance in key areas, and there are a few weaknesses in one or more areas of corporate governance. Those are remediable.

There is marginal involvement by organization’s management in addressing the importance of good corporate governance in key areas.

Deficiencies and SW** in one or more key areas of corporate governance may not be easily remediable.

Management of the organization does not adequately emphasize and the organization does not practice good corporate governance in key areas.

Deficiencies and SW in key areas of corporate governance are not remediable prior to award.

1.5 Control Environment

Confirm that adequate safeguards exist within the organization to ensure fidelity to fiduciary obligations and prevent officials from obtaining financial or non-financial benefits on the basis of decisions made or actions taken in their official capacity.

Board has clear TOR** and a good understanding of its key functions and those key functions are carried out consistently well. Board term limits are defined and reasonable. Board members and officers are elected/appointed / removed in accordance with applicable laws and approved, written procedures.

Organization has fiduciary risk controls covering Board members, officers, and employees; effective mechanisms for enforcement of such policies and controls are in place.

Board has adequate TOR and an adequate understanding of its key functions and those functions are carried out generally well. Board term limits are defined and reasonable. Board members and officers are elected/appointed/ removed in an acceptable manner.

Organization has fiduciary risk controls covering Board members, officers, and employees; adequate mechanisms for enforcement of such policies and controls are in place.

Board has incomplete or otherwise inadequate TOR and lacks an adequate understanding of its key functions; key functions are carried out inconsistently.

Board term limits are not defined or are unreasonable. No approved process for electing, appointing or removing Board members and officers is in place.

Organization has inadequate fiduciary risk controls covering Board members, officers, and employees; there are inadequate mechanisms for enforcement of such policies and controls.

Board does not have TOR or a clear understanding of its key functions. Board term limits are not defined or are unreasonable. There is no approved process for electing/ appointing/ removing Board members and officers.

Organization has no or negligible fiduciary risk controls covering Board members, officers, and employees; there are no credible mechanisms for enforcement of such policies and controls. The control environment is so deficient it presents an unacceptable level of risk.

Note:

*Good corporate governance includes adequate standards of ethical conduct, internal controls, financial reporting and disclosure, well-defined roles and responsibilities of management (board members and officers), recognition of the rights and interests of stakeholders (shareholders, members, others), and measures to ensure compliance with applicable laws, codes, regulations, ordinances, permits and licenses.

** Terms of Reference (TOR) include applicable roles and responsibilities (fiduciary and mangement) specified by law and in the organization’s charter, articles of incorporation, bylaws or other organizational documents.

LOPAS v.7.2 January 10, 2012 Page 9

Second Criterion: Accounting/Financial Systems

AND

Adequate Capacity

No Deficiencies SW (if any) Remediable Before

Award

LOW TO MODERATE RISK

SCORING 2

Weak Capacity

Some Deficiencies and SW Not Easily Remediable Before Award

MODERATE TO HIGH RISK

SCORING 1

Inadequate Capacity

2.1 Banking Relationship and

Accounts

Confirm the organization has a banking relationship with a registered commercial bank in country, and that the organization has adequate policies, procedures and practices in place to ensure regular reconciliation of bank accounts with the accounting records.

Organization has bank accounts in a registered commercial banking institution that are appropriate for its mission/goals.

Bank accounts are accurately reconciled on a monthly basis.

Documentary evidence exists to determine, review and approve monthly bank reconciliation. [Note:

This includes credible financial management records sufficient for internal and external audit trail purposes.]

Polices stipulate sound requirements covering regular bank reconciliation.

Appropriate action is taken on any outstanding item over 60 days.

Organization has a bank account in a registered banking institution and the account is adequate for its mission/goals.

Opening and maintaining additional accounts limited to specific purposes may be beneficial.

Bank accounts are reconciled on a monthly basis.

Adequate documentary evidence exists to determine, review and approve monthly bank reconciliations.

Policies stipulate adequate requirements covering regular bank reconciliation.

Adequate action is taken on outstanding items over 60 days.

Organization has no banking relationship, and plans to establish a bank account in a registered banking institution prior to an award.

Bank accounts are periodically reconciled.

Documentary evidence does not exist to determine, review and approve monthly bank reconciliations.

Policies do not stipulate requirements for regular bank reconciliation.

Less than adequate action is taken on outstanding items over 60 days.

Organization has no banking relationship.

Organization uses the bank account of a senior employee and funds are commingled with personal funds.

Bank accounts are rarely or never reconciled.

Overall, the organization’s policies, procedures and practices in this area are not adequate.

2.2 Payments - Segregation of

Duties

Confirm that the organization has policies, procedures and practices in place regarding segregation of duties to ensure that funds above a certain threshold can only be disbursed with dual signatures and are supported by documentation.

[Note: the person who authorizes payment should not record the payment in the books and records, nor should they disburse the checks. Three different individuals are required, respectively, for authorization, recording, and disbursement.]

There are well thought out and documented policies, procedures and practices that safeguard the payment process.

Approved policies and procedures are consistently followed.

Payments are supported by adequate documentation.

Policies, procedures and practices may fall short of best practices.

Approved policies and procedures are generally followed.

Payments are not supported by complete documentation (e.g.

missing vendor invoices).

Adequate written financial practices (e.g. internal controls and audit) are absent or deficient.

There are Deficiencies and SW in the payments cycle that lack proper segregation of duties.

Written policies and procedures do not exist, or those that do, are clearly inadequate.

LOPAS v.7.2 January 10, 2012 Page 10

AND

Adequate Capacity

No Deficiencies SW (if any) Remediable Before

Award

LOW TO MODERATE RISK

SCORING 2

Weak Capacity

Some Deficiencies and SW Not Easily Remediable Before Award

MODERATE TO HIGH RISK

SCORING 1

Inadequate Capacity

2.3 Financial Management

Personnel

Confirm that the individuals responsible for discharging accounting and other financial management functions within the organization have the requisite accounting and other financial management qualifications and experience.

The accountant/bookkeeper has professional accounting qualifications that clearly meet the needs of the organization.

The accountant/ bookkeeper has strong ability to apply concepts, principles and practices of management and financial accounting and reporting.

The accountant/bookkeeper has strong technical capacity and experience to prepare and monitor appropriate budgets including cash flow projections and statements.

The accountant/ bookkeeper is adequately trained and has adequate qualifications and experience.

The accountant/ bookkeeper is able to articulate and apply basic concepts, principles and practices of management and financial accounting and reporting.

The accountant/ bookkeeper has adequate capacity to prepare and monitor budgets including adequate cash flow projections and statements.

The accountant/ bookkeeper is not professionally trained as an accountant and has a limited understanding of management and financial accounting standards, principles and practices.

The accountant/ bookkeeper is unable to articulate and apply important concepts, principles and practices and lacks the technical capacity to prepare and monitor operational and project budgets.

The day-to-day financial management is done by a person with neither formal accounting training nor finance related experience.

The individuals responsible for discharging accounting and financial management functions do not have the minimum acceptable level of qualifications and experience needed.

2.4 Accounting Cycle - Segregation

of Duties

Confirm that the organization has adequate policies, procedures and practices in place to ensure proper segregation of duties associated with the accounting cycle.

[Note: The adequacy of segregation of duties will vary according to the size of the organization and complexity of its operation.]

Organization has a sound and well documented delegation of authority system appropriate to the size of the organization to ensure that no one person does all the work relating to a full accounting cycle transaction.

Organization has sound policies, procedures and practices to ensure that all approvals are documented prior to cash disbursements.

Organization has an adequate delegation of authority system to ensure that no one person does all the work relating to a full accounting cycle transaction.

Approval is usually obtained prior to disbursement of funds and approvals are adequately documented.

The organization does not have adequate policies, procedures and practices in place for purposes of the award to ensure proper segregation of duties associated with the accounting cycle.

Funds are disbursed without prior approvals and documentation is inadequate.

Organization does not have the minimum acceptable set of policies, procedures and practices to ensure proper segregation of duties in relation to the management and disbursement of funds.

2.5 Accounting/ Bookkeeping

System

Confirm that the organization has an accounting/ bookkeeping system, and that financial transactions are entered into the system on a consistent basis in accordance with applicable standards, policies and procedures.

Organization has a reliable double entry accounting/ bookkeeping system that meets its needs and is otherwise appropriate.

Financial transactions are entered into the system on a daily basis.

The bookkeeping system has functionalities to automatically reconcile subsidiary ledger to the main ledger.

Organization has an adequate double entry accounting/ bookkeeping system.

Financial transactions are entered into the system on a regular basis.

The bookkeeping system has some functionality to automatically reconcile subsidiary ledgers to the main ledger.

Organization’s accounting/ bookkeeping system is weak.

Financial transactions are not entered into the system on a regular or consistent basis.

The bookkeeping system lacks some functionality to automatically reconcile summaries of transactions to the detailed transactions.

Organization does not have an adequate accounting/ bookkeeping system.

Note: For very small organizations and awards, a manual (handwritten in books) double entry accounting system may be acceptable provided it is established and used regularly and consistently in accordance with acceptable accounting principles, standards, policies, procedures, and practices and is regularly kept up-to-date, reconciled and reviewed by appropriately trained, experienced, and otherwise competent personnel.

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AND

Adequate Capacity

No Deficiencies SW (if any) Remediable Before

Award

LOW TO MODERATE RISK

SCORING 2

Weak Capacity

Some Deficiencies and SW Not Easily Remediable Before Award

MODERATE TO HIGH RISK

SCORING 1

Inadequate Capacity

2.6 Chart of Accounts, General

Ledger and Financial Statements

Confirm that the organization has a chart of accounts and corresponding General Ledger that are used to prepare financial statements on a regular and consistent basis.

[Note: Request the Chart of Accounts to perform a detailed review to ensure that the organization has a logical sequence of accounts, assets, liabilities and owners’ equity. Confirm there is a code to capture “unallowable” costs.]

Organization has a chart of accounts and corresponding General Ledger that meet its needs and are otherwise appropriate.

The General Ledger numbering system follows statutory country requirements (if any) with no exceptions.

All financial transactions are recorded regularly and consistently in accordance with approved and otherwise appropriate accounting standards, principles and practices.

Financial Statements are regularly and consistently derived from the General Ledger (trial balance).

Financial statements are prepared in accordance with applicable national and international standards.

Organization has a chart of accounts and corresponding General Ledger that is adequate.

The General Ledger numbering system follows statutory country requirements (if any) in all material respects.

Financial Statements are derived from the General Ledger (trial balance) in an adequate manner.

Material financial transactions are recorded regularly and consistently in accordance with approved and otherwise adequate accounting standards, principles and practices.

Financial Statements are prepared in accordance with national standards.

Organization has an incomplete and otherwise weak chart of accounts and General Ledger.

The General Ledger numbering system does not follow all applicable statutory country requirements (if any).

Financial Statements are not derived from the General Ledger (trial balance) in an acceptable manner.

Material financial transactions are not recorded regularly and consistently in accordance with approved standards.

Financial Statements are not prepared on a consistent basis in accordance with approved accounting standards.

Organization does not have a chart of accounts or General Ledger or those are not adequate for purposes of the award.

The General Ledger numbering system does not follow applicable statutory country requirements (if any).

Financial Statements are not produced, or if produced, are not derived from the General Ledger (trial balance) in accordance with acceptable accounting standards.

Material financial transactions are not recorded regularly and consistently in accordance with approved accounting standards.

2.7 Financial Reporting

Confirm that the organization has adequate written policies, procedures and practices in place to produce reliable monthly and year-to-date financial statements (income and expenditure report and balance sheet).

Organization consistently and accurately produces reliable monthly financial statements from the General Ledger in accordance with its written procedures.

The financial statements are reviewed by organization’s management and corrective actions are taken when necessary.

Organization produces reasonably adequate financial statements on a regular basis that meet the needs of the organization.

Financial statements are reviewed by management.

Management generally takes corrective actions based on its review of financial statements.

Financial statements are seldom reviewed by management.

Management seldom takes corrective actions based its review of financial statements.

Organization does not have the minimum acceptable set of written policies, procedures and practices in place to produce reliable monthly financial statements (income and expenditure report).

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AND

Adequate Capacity

No Deficiencies SW (if any) Remediable Before

Award

LOW TO MODERATE RISK

SCORING 2

Weak Capacity

Some Deficiencies and SW Not Easily Remediable Before Award

MODERATE TO HIGH RISK

SCORING 1

Inadequate Capacity

2.8 Audit and Review of

Financial Statements

Confirm that the organization has adequate policies, procedures and practices in place to ensure that its financial statements are audited or reviewed on a regular basis by a third party recognized under the laws of the country such as a chartered accounting firm or regulatory body or both.

Organization has appropriate policies, procedures and practices in place. Its financial statements are audited annually by a third party recognized under the laws of the country.

Audited financial statements receive an unqualified (unmodified) audit opinion (no Qualified Opinion, Adverse Opinion, or Disclaimer of Opinion).

No auditor, accountant, regulatory body or other third party has communicated any “Deficiency” or “Significant Deficiency” in internal control.

Organization has appropriate policies, procedures and practices in place for managing and closing audit findings and recommendations.

Organization has adequate policies, procedures and practices in place.

Its financial statements are audited or reviewed on a regular basis by a third party recognized under the laws of the country.

When financial statements are audited, a Qualified Opinion is acceptable as long as the audit issues raised are not material to financial management and pose either no or very low fiduciary or performance risk.

No auditor, accountant, regulatory body or other third party has communicated any “Deficiency” or “Significant Deficiency” in internal control.

Organization has adequate policies, procedures and practices in place for managing and closing audit findings and recommendations.

Organization has incomplete and otherwise weak policies, procedures and practices in place.

Financial statements are seldom audited or reviewed on a regular basis by a third party recognized under the laws of the country.

Organization has received a Qualified Opinion, Adverse Opinion, or Disclaimer of Opinion.

An auditor, accountant, regulatory body or other third party has communicated a “Deficiency” or “Significant Deficiency” in internal control. Management is unable to represent that no Deficiency or Significant Deficiency in internal control presently exists.

Organization’s policies, procedures and practices for managing and closing audit findings and recommendations are weak.

Financial statements are not usually audited or reviewed.

Organization produces internal financial statements with limited or no Notes to the Financial Statements.

If Financial Statements were to be audited, an audit firm would be unable to issue an opinion due to the quality of the financial records.

If audited, Organization would most likely receive, a Qualified Opinion, Adverse Opinion, or Disclaimer of Opinion.

An auditor, accountant, regulatory body or other third party has communicated a “Deficiency” or “Significant Deficiency” in internal control that cannot be easily remedied.

Review of the financial statements reveals “Going Concern Issues.”

2.9 Variance Analysis (Budget to

Actual Cost)

Confirm that the organization has adequate policies, procedures and practices in place to ensure regular variance analysis (budget to actual cost) of program and operating financial data.

Appropriate financial reports are accompanied by budget data and variance analysis (budget to actual cost) reports.

Program managers consistently review financial reports and take corrective action.

The organization has appropriate policies, procedures and practices in place to ensure appropriate regular variance analysis (budget to actual cost) of program and operating financial data.

Adequate financial reports are accompanied by budget data and variance analysis (budget to actual cost) reports.

Program managers generally review financial reports and take corrective action.

The organization has adequate policies, procedures and practices in place for adequate variance analysis (budget to actual cost) of program and operating financial data.

Financial reports are accompanied by incomplete or otherwise weak budget data and variance analysis (budget to actual cost) reports.

Program managers do not have the necessary knowledge, skills, and abilities to objectively review the reports and take corrective action.

The organization’s policies, procedures and practices for variance analysis are weak.

Organization does not have any or adequate systems to analyze actual data verses budget data.

Management is unable to articulate the necessity of variance analysis or to institutionalize the process.

Overall, the organization does not have adequate policies, procedures and practices in place.

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AND

Adequate Capacity

No Deficiencies SW (if any) Remediable Before

Award

LOW TO MODERATE RISK

SCORING 2

Weak Capacity

Some Deficiencies and SW Not Easily Remediable Before Award

MODERATE TO HIGH RISK

SCORING 1

Inadequate Capacity

2.10 Financial Records

Management

Confirm that the organization has adequate policies, procedures and practices in place to ensure proper filing and management of financial records and their ease of access.

Organization has sound policies, procedures and practices in place to safeguard important documents including financial records. [This includes offsite storage of copies of financial records.]

Management emphasizes and supports standard, practical, efficient and effective filing and records management practices.

Organization has a contingency plan for the organization that includes procedures for backup/recovery for financial and operational continuity.

Organization has adequate policies, procedures and practices in place to safeguard important documents including financial records. [The filing system is not necessarily centralized or optimal.]

Management supports adequate filing and records management practices throughout the organization.

Organization has an adequate contingency plan in place for financial and operational continuity.

Organization has incomplete and relatively weak policies, procedures and practices to safeguard financial records. [The filing system operates on an ad-hoc, informal basis.]

Management does not require filing and records management practices.

Organization has a weak contingency plan that has significant gaps in procedures for backup/recovery of financial data for financial and operational continuity.

Organization does not have adequate policies, procedures and practices in place to ensure proper filing and management of financial records and their ease of access.

Organization has no contingency plan that includes procedures for backup/recovery of financial data for financial and operational continuity.

2.11 Sources of Funding

Confirm that the organization has other activities/programs and/or potential sources of funding adequate for continuity of operations during the period of the award and for long term sustainability.

[Note: This system can be as simple as having a separate bank account for each funding source.]

Organization has an effective system in place to track sources of funding.

Finance personnel have an appropriate level of professional knowledge, skills and experience in job cost accounting, fund accounting, etc.

Organization has good sources of funding from other activities/programs and/or from other potential sources of funding.

Management clearly articulates the importance of diversification of sources of funding.

Organization has good practices in place for business development and has a reputation for good work.

Organization tracks the sources of funding through offline records.

Organization’s accounting/ bookkeeping system adequately tracks sources of funding.

Finance personnel have an adequate level of professional knowledge, skills and experience in job cost accounting, fund accounting, etc.

Organization has adequate sources of funding from other activities /programs and/or from other potential sources of funding.

Management articulates the importance diversification of sources of funding.

Organization has adequate practices in place for business development and it has a satisfactory reputation for satisfactory work.

Organization does not have a system in place to track sources of funding.

Organization’s bookkeeping system tracks sources of funding through one revenue account.

The level of professional knowledge, skills and experience of finance personnel in job cost accounting, fund accounting, etc. is weak.

Organization has weak sources of funding from other activities /programs.

Organization has weak business development practices in place.

Organization does not have procedures in place to track sources of funding and lacks the capacity to develop and implement such procedures within a reasonable timeframe.

The level of professional knowledge, skills and experience of finance personnel in job cost accounting, fund accounting, etc. is negligible.

Organization has insufficient sources of funding from other activities /programs and/or from other alternative potential sources of funding.

LOPAS v.7.2 January 10, 2012 Page 14

AND

Adequate Capacity

No Deficiencies SW (if any) Remediable Before

Award

LOW TO MODERATE RISK

SCORING 2

Weak Capacity

Some Deficiencies and SW Not Easily Remediable Before Award

MODERATE TO HIGH RISK

SCORING 1

Inadequate Capacity

2.12 Allowable and Unallowable

Cost adequate policies, procedures and practices in place to segregate allowable and unallowable and to otherwise satisfy donor requirements.

[Note: The system can be as simple as a spreadsheet.]

Organization finance/program personnel have an appropriate level of understanding of the concept of allowable and unallowable costs from a donor restriction perspective.

Organization has an appropriate system to track unallowable cost.

Organization has effective policies, procedures and practices in place to ensure clear lines of communication between finance and program staff relative to allowable and unallowable cost.

Organization finance/program personnel have an adequate level of understanding of the concept of allowable and unallowable costs from a donor restriction perspective.

Organization has an adequate system (formal or informal) to adequately track unallowable cost.

Organization finance/program personnel have weak understanding of the concept of allowable and unallowable costs from a donor restriction perspective.

The ability of the organization to track unallowable cost is weak.

Organization’s finance personnel or management do not have an adequate understanding or are unable to articulate the concepts surrounding allowable or unallowable cost.

Organization does not have adequate policies, procedures and practices in place to segregate allowable and unallowable cost nor to otherwise satisfy other donor requirements.

2.13 Direct and Indirect Costs

Confirm that the organization's accountants/bookkeepers have an understanding of direct costs and indirect costs (including cost allocation principles).

Organization’s accountants/ bookkeepers have an appropriate understanding of direct costs, indirect costs and cost allocation principles.

Organization’s accountants/ bookkeepers have an appropriate understanding of the concept of “cost objectives” in relation to intermediate and final “cost objectives.”

Organization’s accountants/ bookkeepers have the requisite level of knowledge, skills and experience in this area to accurately allocate indirect cost to grants, projects, and other cost objectives according to causal beneficial relationships.

Organization’s skill in accumulating direct and indirect costs by project in an appropriate manner is strong.

Organization’s accountants/ bookkeepers have an adequate understanding of direct costs, indirect costs and cost allocation principles.

Organization’s accountants/ bookkeepers have an adequate understanding of the concept of “cost objectives” in relation to intermediate and final “cost objectives.”

Organization’s accountants/ bookkeepers can accurately allocate indirect cost to grants, projects, and other cost objectives according to causal beneficial relationships.

Organization has adequate capacity to accumulate direct and indirect costs by project.

Organization’s accountants/ bookkeepers have a weak understanding of direct costs, indirect cost s and cost allocation principles.

Organization’s accountants/ bookkeepers have a weak understanding of the concept of “cost objectives” in relation to intermediate and final “cost objectives.”

Organization’s accountants/ bookkeepers ability to accurately allocate indirect cost to grants, projects, and other cost objectives according to causal beneficial relationships is weak.

Organization’s capacity to accumulate direct and indirect costs by project in an acceptable manner is weak.

Organization's accountants/bookkeepers do not understand direct costs, indirect costs or cost allocation principles.

Organization’s accounting records are maintained by personnel with negligible knowledge about direct and indirect costs.

The overall capacity of the organization’s accountants/ bookkeepers to accurately allocate indirect cost to grants, projects, and other cost objectives according to causal beneficial relationships is negligible.

The organization lacks the ability to develop or acquire the minimum acceptable level of capacity in accumulating direct and indirect costs by project.

LOPAS v.7.2 January 10, 2012 Page 15

Third Criterion: Procurement Systems

AND

Adequate Capacity

No Deficiencies All SW (if any) Remediable Prior to

Award

LOW TO MODERATE RISK

SCORING 2

Weak Capacity

Some Deficiencies and SW Not Easily Remediable Prior to Award

MODERATE TO HIGH RISK

SCORING 1

Inadequate Capacity

Remediable Prior to Award

3.1 Procurement Policies, Procedures and Practices

Confirm that the organization has procurement policies, procedures and practices in place that are adequate.

[Note: Procurement policies, procedures and practices include those relating to processes for purchasing, resolving and settling disputes and claims; safeguards and controls over assets; and related records management.]

Organization complete and well documented procurement policies, procedures and practices that are appropriate to the country conditions.

Organization’s procurement policies, procedures and practices are known and understood by trained staff and are consistently adhered to, reviewed and updated as necessary.

Organization has adequate procurement policies, procedures and practices in place that are generally appropriate given the country conditions. Any minor exceptions are easily remediable.

Organization’s procurement policies, procedures and practices are known to staff and are generally adhered to.

Organization has less than adequate procurement policies and procedures and practices. In some cases, they are incomplete or otherwise inadequate.

Organization’s procurement policies, procedures and practices are not well known to staff and are not consistently followed.

Staff needs additional training, and management needs to emphasis the importance of procurement procedures.

Organization has no or highly inadequate procurement policies, procedures and practices.

Staff has not received any or sufficient training in this area.

Management has not emphasized the importance of this area.

3.2 Procurement and Sub-

awards

Confirm that the organization has adequate policies, procedures and practices in place for procurement and sub-award processes using arm’s length bargaining.

Organization has well documented and communicated policies and procedures that are effective in practice, guiding appropriate sub-grant awards and management.

Organization’s policies, procedures and practices in this area reflect arm’s length bargaining principles and avoid the potential for conflicts of interest.

Employees are well trained and consistently follow the organization’s policies and procedures.

Organization has adequate policies and procedures that are adequately communicated and generally effective.

Employees are expected to avoid conflicts of interests and achieve value for money in this area, by acting in a manner consistent with the best interests of the organization.

Employees have been trained and generally follow policies and procedures.

Organization has incomplete and relatively weak policies and procedure covering sub-grant awards and management.

Policies, procedures and practices are inappropriate and may lend themselves to potential conflicts of interest and actions that are not in the best interests of the organization.

Formal training in this area is non-existent or weak. .

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