Organisational capacity assessment before a grant

Before handing over money a donor wants to know two things: whether the organisation can do what it promised, and whether the money will get lost along the way. The first is called operational capacity, the second financial and management capacity. A capacity assessment (pre-award assessment) answers both questions.

Do not confuse it with due diligence. Due diligence establishes who you are: whether the legal entity exists, who controls it, whether there are grounds for exclusion. A capacity assessment establishes how you work: what systems, procedures and people you have. In practice donors often run both checks as one package, but the questions and documents differ.

What is checked

• Governance: statutes, composition of governing bodies, division of powers, minutes.
• Financial system: accounting policy, separate accounting per project, budgeting, report preparation.
• Internal control: who approves expenses, who signs payments, whether these roles are separated.
• Procurement: a written procedure and examples of it being applied.
• Staff: employment contracts, job descriptions, time recording.
• Experience: previous projects of comparable size, audit results.

How the EU does it

Article 201 of Financial Regulation 2024/2509 requires the applicant to have stable and sufficient sources of funding (financial capacity) and the necessary competencies and qualifications (operational capacity). Operational capacity is assessed from the application: team profiles, previous projects, an activity report.

Financial capacity (the Financial Capacity Assessment) is checked through the portal's Participant Register, to which the PIC is linked. Under version 5.0 of the portal rules:

• the check is not done for public bodies and international organisations, nor for low-value grants. In call documents this usually means a requested amount of not more than EUR 60,000;
• the profit and loss account and the balance sheet for the last two closed financial years are requested;
• an audit report is required where more than EUR 750,000 is requested for an action grant or more than EUR 100,000 for an operating grant. Where no report is available and no statutory audit is required, a declaration on the validity of the accounts is submitted;
• the assessment is valid for 18 months from the closure date of the most recent assessed accounting period.

Other donors and operators

Foundations, UN agencies and regranting operators use their own questionnaires. A common format is a scored self-assessment across several areas, known as OCA (Organizational Capacity Assessment), followed by a development plan. UN agencies register partners through the UN Partner Portal. Each donor has its own list of questions, but the areas are almost the same.

What to prepare in advance

• an accounting policy and the order adopting it;
• a procurement procedure;
• an anti-corruption policy and a conflict of interest policy;
• a policy on protection from sexual exploitation and abuse (PSEA) and a code of conduct;
• a record-keeping procedure;
• financial statements for two years, and an audit report if there is one.

A typical mistake is adopting policies a week before the check. The assessor asks not only for the document but for evidence that it works: tender committee minutes, a completed conflict of interest declaration, timesheets.

What follows from the result

A weak result does not always mean a refusal. EU call documents provide that where financial capacity is unsatisfactory the granting authority may ask for further information, pay pre-financing in instalments, require a guarantee for it, offer no pre-financing at all, or reject the proposal. Other donors write special conditions into the agreement: a remediation plan, more frequent reporting, smaller tranches. Where institutional support is available, it is exactly what lets an organisation close the gaps found.