NGO support toolkit (English)  >  Partner and project selection  >  Project design and selection 

Grants, contracts and MOUs

Grant agreements, contracts or memorandums of understanding (MOUs) are used to stipulate the terms and arrangements for providing support between the NGO/CBO support provider (NSP) and the NGOs and CBOs implementing projects with the community. The type of support covered by such agreements may range from small grants for short-term activities, such as needs assessments or exchange visits, to larger grants for funding long-term project work and may include grants-in-kind in the form of technical support.

Once a grant proposal has been approved, NSPs need to manage the grant-making process. This involves drawing up contracts, administering and monitoring the grants. It is an area of work that requires close collaboration between the NSP’s programmatic, finance and administration staff. Many organisations develop a grant management manual to assist their staff in this area of work.

Agreements are contractual and serve the purpose of legally binding documents to outline respective responsibilities, including timeframes for advances of money and reporting requirements. As NGOs and CBOs grow or change over time, staff and management often refer back to agreements to help clarify the nature of the relationship that was agreed and to help think how such relationships need to be managed in the future to reflect the change.

Issues to consider

• Different kinds of legal documents are used for different legal systems and organisations. There is no general consistency in approach, and each NSP should find out which kind of documents are appropriate to the local environment and to the strategy / approach of the programme
• NSPs should ensure that sufficient financial controls are in place with the NGO/CBO to meet the statutory requirements of the agreement.
• As NSPs are often contractually bound to their donors, they need to establish which of the donor regulations also apply to their contracted NGOs/CBOs. The NSP should clarify with its donors to what extent these issues also apply to its NGO/CBO partners and would need to be incorporated into grant agreements.
• It is important that NSPs ensure that partner organisations have clear governance structures (for example, clear responsibilities for financial liability) to honour the terms of the legal documentation.
• NSPs and their partners need to agree on what is and is not negotiable within a legal document at the onset of the agreement.
• Agreements should clarify whether NGO/CBO partners need to be audited. To audit their own financial systems, NSPs need to be able to audit the grants provided, however, it may be that the simplified book keeping systems used by many CBOs are not adequate for auditing. In such cases, the NSP can support such a CBO, but must either:
• Use alternative systems which mean that CBOs do not need to be audited. E.g. Obtaining receipts and supporting documentation for expenditure from the CBO to show as expenditure in the NSP’s accounts
• Help CBO staff develop a financial system that can be audited.

Related themes

Grant management

Collecting & reporting data