Good decision-making

Best value for money?

Make sure that public resources are being used for the maximum public benefit.

Consider various ways of achieving your objectives - which is best value for money?

Measure the impact, especially before you renew a contract. Impact measures can be difficult to agree on.

Work with the provider to ensure that both funder and provider are confident that the funded activity is meeting the agreed outcome.

Consider desired outcomes

The funding body needs to be clear about what the funding arrangement is meant to achieve. As a funder, which of the following outcomes do you want:

• particular services
• input to the policy process
• managing relationships between you and end-users of your services
• capacity building
• something else?

State the purpose clearly

If a stated purpose for the funding arrangement is capacity building, be clear about what that capacity building is meant to achieve.

Consider the best form of funding

Is a contract for services is the best way to achieve the outcome, or is some kind of conditional grant more appropriate? Some contracts rely more on achieving agreement about desired outcomes and the general approach rather than the contractual detail. This might be better expressed as a conditional grant. With a conditional grant, it must still be clear what is expected from the provider.

Take a risk-management approach

A risk-management approach helps to concentrate resources into the areas of key political, financial, or performance risk.

• Identify the key political, financial, and performance risks.
• Plan the management of the funding arrangement in sufficient detail to mitigate those risks.
• Acknowledge organisations that are low risk because of their past history of good performance and their sound controls.

Make sure that arrangements are fair and open

You will need to document the decision-making process with this in mind.

Be clear who is accountable for what

The arrangements should clearly state who is accountable.

There are some things you can do to make sure your management of funding arrangements with NGOs reflects these principles, and ensures good management of public money.

These include:

Review governance and accountability arrangements

All government entities and other funding bodies should have procedures to review the governance and accountability arrangements of organisations applying for funding, particularly if funding is substantial (or if particular risks have been identified, eg, if the organisation has recently been established).

The following checks should be made.

Check the legal status of the organisation

• Review constituting documents - for example, identification of beneficiaries, clauses relating to distribution of assets on winding up, and how trustees/board members are engaged by the organisation.
• Establish whether the organisation is a registered charity and has charitable status for tax purposes. You can check this with the Charities Commission.
• Assess the potential for personal gain on the part of trustees/board members.

Check the governance arrangements

• View the current list of trustees/board members and beneficiaries. 
• Ensure the duties of the governing body and management are segregated.
• View procedures and policies for addressing potential conflicts of interest.
• Determine regularity of governing body meetings.
• Check the nature of financial and non-financial reporting.
• Assess the ongoing financial viability of the organisation, including a copy of the audited financial statements, particularly where a trust deed or constitution requires these to be completed.

Document the decision-making process

Carefully document the decision-making process. This is especially important where standard policies and procedures are not followed. You should fully document:

• the reasons for departing from the standard policies and procedures
• the effects of the changes
• any additional procedures that have been put in place to mitigate risk, for example, more intensive monitoring.

Identify potential conflicts of interest

Identify potential conflicts of interest (eg, assess the potential for personal benefit to any of the trustees), and develop procedures to address these over the duration of the contract.

Ensure there is no double-dipping

• Ensure the funded organisation confirms what, if any, funding has been received from other funding entities (both during the application process and at each contract renewal stage).
• Check whether the funded organisation has applied to other government agencies for the same or similar purposes.
• Check that the service that is being contracted is not already being provided by another agency. If it is being provided by another agency, ascertain the scope and nature of any funding.

Use appropriate policies and procedures

Agencies should take precautions when making decisions about which organisations to fund.

• Assess other funding contributions to the project, including whether the organisation being funded is making an appropriate contribution to the project itself.
• Obtain independent substantiation of proposal information, particularly where a degree of expertise is needed to assess the soundness of the proposal, eg, business development plans.
• Follow guidelines to select providers and negotiate and monitor contracts.
• Follow any directives (including Cabinet decisions) with respect to a funding decision.
• Ensure any deviation from a Cabinet decision is first discussed with the Cabinet.

The following reports from the Auditor-General set out issues that government agencies need to consider when contracting with NGOs. Much of the advice on this page is drawn from the findings in these reports.