Funding Agreement Checklist For Charities

Receiving a grant can feel like a huge win for your charity or not-for-profit. It can mean a new program, more staff hours, better equipment or the breathing room to reach more people.

Then the funding agreement lands in your inbox, and suddenly the excitement can turn into a long list of questions. What exactly are you promising to deliver? What reports do you need to submit? Could you be asked to repay the money if something changes?

A funding agreement doesn't need to be scary, but it does need a careful review before you sign. Small wording choices can create very real obligations for your organisation.

Is A Funding Agreement Legally Binding?

Yes, a funding agreement is usually a legally binding contract once it's signed, even if the funder calls it a grant, deed, letter of offer or funding schedule.

For a charity or not-for-profit, that means you're not just accepting money. You're agreeing to perform certain obligations, often within set dates and budgets. These may include:

• delivering a project or service to a defined standard under the agreed service agreement terms
• spending the funds only on approved items
• keeping records and receipts
• submitting progress reports and acquittal documents
• acknowledging the funder in publications or events, including any sponsorship recognition
• returning unspent or wrongly used funds

If your organisation is a registered charity, your board or committee also needs to think about its governance duties under the Australian Charities and Not-for-profits Commission Act 2012 and the ACNC Governance Standards. Signing a funding contract that your organisation can't realistically perform can create governance issues, not just contract risk.

If you're a company limited by guarantee, your directors also need to consider their duties under the Corporations Act 2001, where those duties apply.

The practical point is simple: don't treat a grant agreement as admin. Treat it like any other commercial contract your organisation is relying on.

What Should Be In Your Funding Agreement Checklist?

Your funding agreement checklist should help you confirm exactly what you're receiving, what you're promising, when things are due and what happens if the project doesn't go to plan.

Here is a practical outline you can use when reviewing a charity funding agreement or not-for-profit grant agreement. This isn't a finished legal document, and a lawyer should tailor it to your project before you rely on it.

1. Parties: Check the correct legal name, ABN, ACN if relevant, and registered charity details for your organisation.
2. Funding Amount: Write the total amount, instalment dates, payment conditions and whether GST applies.
3. Purpose: Describe the project, program or activity the funding can be used for.
4. Deliverables: List the services, outputs, events, materials or milestones you must deliver.
5. Budget: Set out approved expense categories, spending limits and any items that are excluded.
6. Reporting: Record due dates for progress reports, financial reports, audits and final acquittal.
7. Record Keeping: State what records you need to keep and for how long.
8. Intellectual Property: Confirm who owns new materials, existing content, branding, data and project resources.
9. Repayment: Identify when funds can be withheld, reduced, clawed back or returned.
10. Variation And Termination: Set out how changes are approved and what happens if either side ends the agreement early.

A grant agreement review should focus on the clauses that affect your day-to-day delivery. If the agreement says you must run 10 workshops, reach 300 participants and lodge a final report by 30 June, your team needs to know that before you accept the funds.

How Do Deliverables And Milestones Create Risk?

Deliverables and milestones create risk when they're too vague, too ambitious or too strict for the way your charity actually operates.

A deliverable is what you're promising to produce or do. A milestone is usually a point in time when part of the project must be completed. These clauses often look harmless, but they can affect whether you get paid, whether you keep the funding and whether you're in breach.

For example, say Bright Steps, a small youth charity in Newcastle, receives $80,000 to run 20 mentoring workshops by 30 June. The agreement says $20,000 is paid upfront, $30,000 is paid after 10 workshops, and $30,000 is paid after the final acquittal.

If Bright Steps only delivers 16 workshops because venue availability falls through, the outcome depends on the contract wording. The funder might:

• withhold the final $30,000 payment
• ask for part of the first instalment back
• approve a new deadline if the agreement allows variations
• treat the missed workshops as a breach

Before signing, check whether the deliverables are tied to best efforts or strict outcomes. There's a big difference between promising to promote the program to local schools and promising to enrol 300 students, especially if sign-ups depend on factors outside your control.

You should also check whether milestones depend on the funder doing something first, such as approving materials, paying an instalment or giving access to a venue. If your deadline starts before the funder has done its part, ask for the timing to be adjusted.

What Reporting And Acquittal Obligations Should You Check?

You should check every reporting and acquittal obligation before signing, because these clauses can be just as demanding as the project itself.

Reporting usually means telling the funder what you've done and how the funds were used. Acquittal is the process of showing that the funds were spent properly, often with financial records, receipts, payroll records or a signed declaration.

Look closely at:

• Due dates: Are reports due monthly, quarterly, at milestones or after the project ends?
• Format: Do you need to use the funder's template or reporting portal?
• Evidence: Do you need receipts, timesheets, attendance sheets, photos, surveys or case studies?
• Financial detail: Do you need line-by-line expenses, bank statements or audited accounts?
• Record retention: How long must you keep project records after the agreement ends?
• Privacy: Can you share participant information with the funder, and have you told participants how their information may be used?

Privacy can be a major issue for charities working with health, disability, youth, family violence, housing or other sensitive services. The Privacy Act 1988 may apply if you're an APP entity, such as where your organisation has annual turnover above the Privacy Act threshold, provides a health service, trades in personal information or is otherwise covered. Some smaller charities still choose to follow the Australian Privacy Principles because funders, partners and communities expect it.

If the agreement asks you to provide identifiable participant data, check whether you can give de-identified information instead. If identifiable data is genuinely needed, make sure your privacy notices, consents and internal access controls support that use.

Can Your Charity Be Asked To Repay The Money?

Yes, your charity can be asked to repay funding if the agreement gives the funder that right and the trigger has been met.

Repayment clauses are sometimes called clawback, recovery, refund or set-off clauses. They matter because grant money is often spent quickly on wages, suppliers, venue hire and program materials. If a repayment claim comes later, your organisation may not have spare funds sitting there.

Common repayment triggers include:

• spending money on expenses that weren't approved
• failing to deliver key milestones
• not lodging reports or acquittals on time
• making a false or misleading statement in the application
• receiving duplicate funding for the same activity
• becoming insolvent or unable to complete the project
• ending the agreement before the project is complete

Not all repayment clauses are equal. A fairer clause may limit repayment to the unspent amount or the part of the project that wasn't delivered. A harsher clause may let the funder demand all funding back for any breach, even if most of the project was delivered well.

If the agreement says repayment is required for any breach, ask whether there can be a cure period. For example, you might request 10 business days to fix a late report before repayment rights kick in. The exact period depends on the project, but the idea is to avoid a technical slip turning into a major financial problem.

You should also check whether the funder can withhold future instalments or offset money against other grants. If your organisation relies on multiple funding streams from the same funder, that wording can have a bigger impact than it first appears.

Who Owns The IP And Data From The Project?

IP and data ownership depends on the wording of the agreement, so don't assume your charity owns everything just because your team created it.

Grant-funded projects often produce valuable materials, including training manuals, videos, research reports, survey results, logos, toolkits, templates, software, photographs and case studies. Your agreement should separate three types of material:

• Pre-existing IP: materials your organisation already owned before the grant started
• Project IP: new materials created using the funding
• Funder IP: the funder's branding, templates, data or materials you're allowed to use

A common risk is accidentally giving away ownership of your pre-existing resources. For example, if your charity already has a facilitator guide and simply adapts it for the funded program, you probably don't want the funder to own the whole guide. A better approach may be to let the funder use the adapted version for the funded purpose, while your organisation keeps ownership of the original materials.

Also check whether the funder can publish, edit or reuse your project content. This can matter if the content includes photos of participants, quotes, stories or culturally sensitive materials.

Data needs the same careful treatment. The agreement should say:

• what data you must collect
• whether data is identifiable, de-identified or aggregated
• who can access it
• where it will be stored
• what happens if there's a data breach
• what happens to the data when the project ends

If you're handling sensitive personal information, get privacy advice before signing. A funding contract lawyer can help line up the grant terms with your privacy policy, participant consent forms and internal data practices.

What Happens If The Project Changes Or Ends Early?

If the project changes or ends early, the agreement should tell you how to vary the work, pause deadlines, deal with unspent funds and close out reporting.

Community projects and collaboration arrangements rarely run exactly as planned. Staff leave, volunteers become unavailable, demand changes, supplier costs rise, venues cancel or a partner organisation pulls out. Your agreement should give you a practical way to deal with those changes without automatically putting your organisation in breach.

Check the variation clause first. A useful clause will say changes must be in writing and approved by authorised people from both sides. Be careful with informal approvals. A friendly email from a program officer may not be enough if the agreement says only a senior authorised representative can approve changes.

You should also check termination rights. The funder may be able to end the agreement if you breach the contract, lose required registrations, become insolvent or fail to meet milestones. Your organisation may also need a right to terminate if the funder doesn't pay, the project becomes unsafe or a legal change means you can't continue.

Before signing, look for answers to these questions:

• Can you request a no-cost extension if delivery is delayed?
• Can you move funds between budget categories without approval?
• What happens to staff and supplier costs if funding is terminated early?
• Do you need to return unspent funds within a set time?
• Do confidentiality, privacy, record keeping and IP clauses continue after termination?

If the agreement is silent on these issues, ask for them to be added. Clear exit terms can protect your organisation from disputes later, especially where you need to make hiring, volunteer or supplier commitments to deliver the funded project.

Key Takeaways

• A funding agreement is usually a binding contract, not just a grant approval letter.
• Your funding agreement checklist should cover deliverables, milestones, budget, reporting, acquittal, repayment, IP, data, variations and termination.
• Strict deliverables can create risk if outcomes depend on participant numbers, partner support or funder approvals.
• Reporting and acquittal clauses can be time-consuming, so check dates, evidence requirements and record keeping before signing.
• Repayment clauses should be reviewed carefully, especially if they let the funder recover all funding for a minor breach.
• IP and data clauses should protect your existing materials, participant privacy and future use of project resources.

If you'd like help with reviewing your charity funding agreement, checking your reporting and acquittal obligations, negotiating repayment clauses or protecting your IP and project data, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.