Grant Agreements: Terms and Conditions Explained

Getting a yes is the start of a grant, not the end. When a funder offers you money, it comes with an offer letter and terms and conditions, sometimes called a grant agreement. These set out what you have promised, what the funder will do, and what happens if things change. Many groups sign them quickly in the excitement of winning. This guide explains what the terms usually cover, using examples from funders' own guidance, so you know what to look for before you sign. It is general guidance, not legal advice, and every funder's terms are different, so always read your own.

What a grant agreement is

A grant agreement is the document that turns your application into a commitment. It usually includes:

• the amount and what it is for, often by reference to your application or an agreed budget
• the start and end dates
• how and when the money will be paid
• reporting and monitoring requirements
• conditions you must meet before or during the grant
• what happens if you need to change anything
• when the funder can withdraw the grant or ask for money back

The important point is that your application becomes part of the deal. Funders expect you to do what you said you would. The National Lottery Community Fund, for example, says it wants to make sure the funding is spent the way you said it would be in your application.

Some funders publish their terms with the guidance, and the National Lottery Heritage Fund's checklist asks you to confirm you have read the terms and conditions for the programme before you apply. That is a good habit with any funder.

Starting the project

Many agreements set a deadline for starting. For grants over £20,001, the National Lottery Community Fund says your project has to start within six months of the date it offered the funding, and that date is on your offer letter. If you are waiting on match funding, recruitment or permissions, check whether you can meet the start date before you accept.

Most funders will not pay for work already done. Paul Hamlyn Foundation says it cannot cover costs that have already been incurred, and City Bridge Foundation says its funding cannot be used for work that has already been completed. Wolfson Foundation says your project must not have been completed when it makes its decision. Do not sign contracts or commit spending until the agreement is in place, unless the funder has agreed in writing.

How payments work

Payment terms vary a lot. Small grants are often paid in one go. For National Lottery Awards for All grants up to £20,000, the Community Fund says you should see the money in your account within a couple of weeks.

Larger grants are usually paid in stages. For grants over £20,001, the Community Fund says most of the funding comes through regular payments agreed with your funding officer, and you can ask for an earlier payment if you need money to get started. Capital costs work differently: for vehicles, land or buildings, it says you claim the money back when you need it, with invoices and, for vehicles, normally at least two quotes.

If payments are in arrears, you need enough cash to pay suppliers first. Build that into your project budget and cash flow. Our guide to capital grants covers claims for building work.

Bank accounts

Funders usually pay into an account in your organisation's name. For grants over £20,001, the Community Fund asks for a bank statement dated within the last three months so it can check the account. Make sure the name matches your governing document exactly.

Records you must keep

Expect to keep records of what you spend. The Community Fund's guidance for grants up to £20,000 says it could ask to see receipts, invoices and bank statements relating to your funding for at least seven years, or at any time during the project. It also says that any cash withdrawal from the grant must be agreed by two people running the project, and you cannot withdraw more than £100 at a time.

Simple habits help:

• keep the grant in a separate budget line or account code
• save every receipt and invoice, digitally if possible
• note which budget line each cost belongs to
• keep records for as long as the terms require

Our guide to grant monitoring and reporting explains how to collect the evidence you will need for reports at the same time.

Reporting

Your agreement will say what reports you need to send and when. For grants over £20,001 on projects lasting two years or more, the Community Fund says it asks for a progress update every year, timed from your project start date. Other funders ask for an end-of-grant report only. Put every reporting date in a shared calendar on the day you sign.

When you must tell the funder about changes

Projects change. Funders know this, but most want to hear about significant changes before they happen. The Community Fund is a useful example because its guidance is so specific.

For grants up to £20,000, it says small changes to activities or spending are fine as long as you are still carrying out the project you described. You only need to contact it if, for example:

• your main or senior contact changes
• you need more time to finish
• you have finished with more than £1,000 left over
• completely different people are going to benefit
• you want to spend the money on very different things
• you cannot carry out the project

If you have up to £1,000 left over, it says you can use it to run the project for longer or run similar activities.

For grants over £20,001, it says you should tell it about bigger changes as soon as you know. Examples include anything that goes against your terms and conditions, such as merging with another organisation, changes to staff costs, and changing your main contact or bank account. It asks you to run changes to your organisation past it first, such as changing your organisation type, governing document or name.

If you are thinking about changing structure, for example from a charity to a CIO, check every live grant agreement first.

Acknowledging the grant

Most funders want you to say they funded you. The Community Fund says grant holders are required to recognise National Lottery support, using its grant holder logo on websites, social media and printed materials. When recruiting staff with a grant over £20,001, it asks you to advertise openly, use its logo in job adverts, give people at least two weeks to apply and include your registered charity number if you have one.

The National Lottery Heritage Fund says that if it offers you a grant, it will publish information about you and the activity funded, including the amount, and you will support its publicity activities when asked.

Withdrawal and repayment

Every agreement says what happens if things go wrong. Typical reasons a funder might withdraw a grant or ask for money back include not using the money for the agreed purpose, not reporting, giving misleading information or breaching a specific condition. The Community Fund publishes separate guidance on withdrawing grants over £20,001, including how to request a review of a decision.

The best protection is to talk to your funder early. If you can see that a target will slip or a cost has risen, raise it before the report is due. A risk register helps you spot these problems in time.

A checklist before you sign

Before your trustees or directors accept a grant, check:

1. The amount, purpose and budget match what you can deliver.
2. You can meet the start date and any pre-conditions.
3. You know how and when payments arrive, and can manage cash flow.
4. You know what records to keep and for how long.
5. Reporting dates are in the calendar.
6. You understand what changes need the funder's agreement.
7. You can meet the publicity requirements.
8. The signatory is authorised under your governing document.

If anything is unclear, ask the funder before you sign. Most would much rather answer a question now than deal with a problem later. When you are ready for the next grant, browse what is open in our grants for community groups and National Lottery funding listings.