How to Write a Grant Agreement
A grant agreement records money given for a purpose rather than in exchange for something. Unspent funds usually go back, which is the clause to read.
What a grant agreement is
A grant agreement records funding given by one organisation to another for a stated purpose.
It differs from a commercial contract in a way that shapes the whole document. A contract exchanges money for goods or services the payer wants. A grant provides money so the recipient can do something the funder wishes to see happen. The funder receives no direct benefit, which is why grants come with conditions about use rather than specifications for delivery.
The practical consequence is restriction. Grant money is usually tied to the stated purpose, must be spent within a period, and anything unspent or misapplied is typically returnable. A grantee who treats grant funds as general income discovers this at the reporting stage.
For Nigerian non profits this is familiar territory, and it comes with compliance obligations beyond the agreement: incorporated trustees status, annual returns, and for many organisations SCUML registration, which funders increasingly ask about during due diligence.
Who needs one
Foundations, companies and individuals funding non profit work.
Non governmental organisations and incorporated trustees receiving grant funding.
Corporate social responsibility programmes making structured donations rather than ad hoc ones.
Anybody giving a substantial sum for a specific purpose who wants it applied to that purpose.
Where the funder is buying a service and expects a deliverable in return, that is a services contract rather than a grant, and calling it a grant does not change what it is.
Before you start
Both sides should establish these first.
Exactly what the money is for, described narrowly enough to be measurable.
How much, and whether it is paid in one payment or in tranches against progress.
By when it must be spent.
What reporting the funder expects, and in what form.
What happens to anything unspent.
And on the funder's side, whether the grantee is properly constituted, with its CAC registration and annual returns in order.
The walkthrough
Filling in the form, step by step
Every question you will be asked, what it means, and an example of a good answer.
Step 1 of 2
Grant Agreement
The parties and what kind of organisations they are
The agreement names both organisations and, unusually, asks what type each is. That question is doing real work.
A funder needs to know what the grantee actually is, because it determines whether they can receive and account for the money properly. In Nigeria a non profit is typically registered as incorporated trustees with the Corporate Affairs Commission, which gives it legal personality and the ability to hold funds in its own name. An unincorporated association cannot do that in the same way, and funding one means the money sits in somebody's personal account, which is a governance problem for both sides.
The funder's own type matters for the grantee. A foundation, a company making a corporate social responsibility grant, and an individual donor each bring different reporting expectations and different reputational considerations.
A funder doing due diligence should also check the grantee's annual returns are current and, for many categories of organisation, that it holds SCUML registration, since incorporated trustees fall within the designated non financial businesses regime.
- Date on the Agreement
- When the grant agreement takes effect. Where work has begun in anticipation of funding, note that, since expenditure before the grant period may not be covered.
- Grantor's name
- The organisation or person providing the funds, using the registered name where it is an entity.
- What type of organization is the grantor?
- What kind of funder this is: a foundation, a company making a corporate social responsibility grant, a development partner or an individual. Each brings different reporting expectations, which the grantee should understand at the outset.
- Grantee's Name
- The organisation receiving the funds, using its registered name exactly as it appears on the CAC certificate.
- What type of organization is the grantee?
- What the grantee is constituted as, for example incorporated trustees registered with the CAC. This matters practically: an unincorporated association cannot hold funds in its own name, which means grant money sits in a personal account and creates a governance problem for both sides.
Step 2 of 2
Grant Agreement
The mission, the purpose, the money and the deadline
This step is the substance, and the distinction between mission and purpose is worth drawing.
The grantor's mission explains why this funder gives money at all. It frames the grant and, in practice, it constrains it: a foundation whose mission is girls' education is on difficult ground funding something unrelated, and a grantee should understand the mission because future funding depends on fitting within it.
The purpose of this particular grant should be narrower and measurable. To train two hundred secondary school teachers in Kano State in digital instruction over twelve months is a purpose against which spending can be assessed. To support education is not, and vagueness here serves neither party: the funder cannot tell whether the money achieved anything, and the grantee cannot demonstrate that it did.
The payment timing question is more consequential than it looks. Funds paid in tranches against milestones protect the funder and create cash flow difficulty for a small organisation that must spend before being reimbursed. Grantees should be honest about whether they can operate that way.
The expenditure deadline is the one grantees underestimate. Unspent funds are typically returnable, and organisations that underspend because a programme started late find themselves handing money back rather than extending. Where an extension might be needed, agree the mechanism now.
- What is the grantor's mission?
- What the funder exists to achieve. It frames and constrains the grant, and a grantee should understand it, since future funding depends on the work fitting within that mission.
- What is the purpose for the grant
- What this specific grant funds, described narrowly enough to measure. Training two hundred teachers in a named state over twelve months is assessable; supporting education is not, and vagueness leaves the funder unable to see impact and the grantee unable to demonstrate it.
- How much is the grant being donated?
- The total amount. Where it is denominated in foreign currency, say which and note who bears exchange risk, since a naira budget against a dollar grant can move considerably over a year.
- Within how many days will the grant be paid out?
- How quickly the funds are released after signature. Where payment is staged against milestones, set that out, and grantees should be honest about whether they can spend before being reimbursed.
- Date by which the grant is supposed to have been expended if not returned?
- The spending deadline, after which unspent funds are returnable. Grantees underestimate this: a programme that starts late frequently ends with money handed back. If an extension might be needed, agree the mechanism now rather than asking later.
- Which state's law will govern this grant agreement?
- The state whose law governs, normally where the grantee operates. For a foreign funder, note that the grantee's obligations under Nigerian law, including reporting and anti money laundering requirements, apply regardless of the governing law chosen.
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Keep grant funds separately identifiable
A dedicated account or clearly tagged ledger. Grant money mixed into general funds cannot be reported on, and reporting is what secures the next grant.
Report on time and in the format asked
Late or informal reporting is the most common reason funders decline a second grant, regardless of how well the work went.
Keep the CAC filings current
Funders check. Annual returns for incorporated trustees, and SCUML registration where the organisation falls within the designated categories.
Raise underspend early
If the money will not be spent by the deadline, say so before it arrives rather than after. Extensions are negotiable; unexplained underspend is not.
Questions people ask
What is the difference between a grant and a contract?
A contract exchanges money for goods or services the payer wants. A grant funds something the funder wishes to see happen, with no direct benefit to them, which is why it comes with conditions on use rather than specifications for delivery.
What happens to unspent grant funds?
They are typically returnable at the end of the spending period. Organisations that start a programme late frequently end up handing money back rather than extending, so raise any underspend early.
Can grant money be used for anything else?
No. Grant funds are tied to the stated purpose, and applying them elsewhere is a breach that usually triggers repayment. Treating a grant as general income is a common and costly mistake.
What should a Nigerian NGO have in place before applying?
Incorporated trustees registration with the CAC, current annual returns, and for many organisations SCUML registration, since incorporated trustees fall within the designated non financial businesses regime.
Should grant funds be kept in a separate account?
Ideally yes, or at least separately identifiable in the ledger. Grant money mixed into general funds cannot be properly reported on, and reporting is what secures future funding.
Who bears exchange rate risk on a foreign currency grant?
Whoever the agreement says. It matters: a naira budget against a dollar grant can move substantially over a twelve month programme, so the position should be stated rather than assumed.
Documents that go with this
Terms used on this page
Grant
A grant is money given for a stated purpose and not repayable, subject to conditions. Nigerian NGOs and social enterprises live on them, and the grant agreement decides how much freedom you actually have.
Incorporated Trustees
Incorporated trustees is the legal structure Nigerian NGOs, churches, foundations and associations register under at the CAC. It gives the organisation its own legal identity, separate from the people who founded it.
SCUML Registration
SCUML registration is required for designated non financial businesses under Nigerian anti money laundering law. Banks ask for the certificate, which is how most businesses discover they need one.
Annual Return
An annual return is the yearly filing every registered Nigerian business makes to the Corporate Affairs Commission confirming who runs it and where it operates. Skip it long enough and the CAC can treat your company as inactive.
Audit
An audit is an independent examination of a company's financial statements. CAMA 2020 exempted small companies from needing one, which most Nigerian founders do not realise.
Corporate Affairs Commission (CAC)
The Corporate Affairs Commission is the federal agency that registers and regulates companies, business names and incorporated trustees in Nigeria. If a business is legally registered here, the CAC is where that happened.
Money Laundering
Money laundering is disguising the origin of criminal proceeds. Nigerian law places obligations not only on banks but on estate agents, car dealers, jewellers, NGOs and consultants.
Due Diligence
Due diligence is the investigation you carry out before committing to a deal. You are checking that what you are buying, funding or partnering with is actually what it was described to be.
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