Giving Grades

It's that time of year again when I need to grade my students on their abilities while in my class.  I used to find this task somewhat difficult.  What kind of grade do you give to a student who still can't count to three at the age of 20 in math? A lot of my colleagues at work give straight A's down the board.  This just didn't seem right to me since not all kids try to do their best. In the past few years I have come up with a system that seems to works for me.  Here's how it goes:

A = If you try your best you get an "A".  How can I give any less if they are working to the highest of their ability?

B = If I know you can do better (because you have showed me) and don't because you would rather talk or play you get a "B". (symptoms of your disability will never lower your grade).

C = I rarely give C's and if I do it is in either in PE or work skills.  If you refuse to participate because you would rather be doing something else, or are being lazy (yes my kids can be lazy) than you get a "C".  

I have never given a "D" or an "F".  Frankly I think If I was having to do that I would have to re-evaluate myself and my teaching.  

We also evaluate their citizenship.  1, 2, or 3 for each grade.

So, I'm interested in knowing, how do you grade your students?