<\/p>\n
Procurement is the area where auditors of donor-funded projects find the largest number of issues. A cost can be genuine, fully documented and necessary for the project, yet if the organisation cannot show how the supplier was chosen, the donor is entitled to treat it as ineligible and ask for the money back.<\/p>\n
The reason is straightforward: donor money must be spent economically and without conflicts of interest, and the only way to prove that is a procedure recorded in documents. Below we set out which rules apply, which documents are needed and what the auditor looks at.<\/p>\n
Ukrainian public procurement law generally does not apply to grant funds held by a non-profit: the organisation is not a contracting authority within the meaning of that law. Instead, the donor’s rules apply, as set out in the grant agreement or in the general conditions it refers to.<\/p>\n
So the first thing to do after signing an agreement is to extract the procurement requirements into a separate working document: thresholds, the number of quotations, the format of the justification, rules on the origin of goods, rules on related parties. An organisation working with several donors will have a different threshold table for each project, and confusing them is a classic source of findings.<\/p>\n
Most donors build their rules on the same logic: the larger the contract, the more demanding the procedure. A typical scheme looks like this.<\/p>\n
| Value band<\/th>\n | Procedure<\/th>\n | What to keep<\/th>\n<\/tr>\n |
|---|---|---|
| Low-value<\/td>\n | Direct purchase without quotations<\/td>\n | Invoice, acceptance act or delivery note, payment document<\/td>\n<\/tr>\n |
| Medium value<\/td>\n | Comparison of at least three quotations<\/td>\n | Requests, quotations received, comparison table, justification of the choice<\/td>\n<\/tr>\n |
| High value<\/td>\n | Tender with a public notice and tender documents<\/td>\n | Notice, documentation, committee minutes, notifications to bidders, contract<\/td>\n<\/tr>\n<\/table>\n The exact limits are set by the donor and differ substantially. The key rule: thresholds are assessed against the total value of the procurement subject within the project, not against a single payment. Splitting one requirement into several small contracts to avoid a competitive procedure is treated by donors as a breach even when the price is at market level.<\/p>\n Justifying the choice<\/h2>\nThe cheapest offer does not always have to win, but choosing another one requires an explanation. Acceptable criteria include value for money, delivery time, technical compliance and the supplier’s experience. These criteria must be defined before quotations are collected, not afterwards.<\/p>\n In practice a single page is enough: the list of suppliers approached, the prices received, the criteria, the final scoring, and a signature of the responsible person or the minutes of the selection committee. Such a document answers most of the auditor’s questions.<\/p>\n Conflict of interest<\/h2>\nDonors require that procurement is not made from related parties: board members, staff, their relatives, or companies in which they hold a stake. If such a supplier is objectively the only option, this must be agreed with the donor in writing before the contract is signed.<\/p>\n A practice that helps: a conflict of interest declaration signed by the members of the selection committee for every procurement above the threshold. It is one sheet of paper that removes an entire block of questions during the review.<\/p>\n What the auditor checks<\/h2>\nFor ITA projects the last point is critical: departing from the registered plan also creates a tax risk, as covered in our article on the audit of an international technical assistance beneficiary<\/a>.<\/p>\n The working approach is a file for every procurement above the threshold containing the full set: request, quotations, comparison, conflict of interest declaration, contract, acceptance act, payment. The file is built during the procurement, not before the audit. In the accounts, the cost is tagged with the project and the budget line at the moment it is posted, as described in our article on project-based grant accounting<\/a>.<\/p>\n The second element is an internal procurement policy approved by the board, setting out thresholds and procedures. Donors read it as a sign of organisational maturity, and during a capacity assessment its existence is often a separate question in the questionnaire.<\/p>\n |