Beware — strings attached! Some thoughts on funding agreements

LG Leader August 2020

Many councils have been successful in obtaining funding from the State or Federal Governments, which is great news for our local communities. However, councils should ensure that they are not getting more than they bargained for when signing up to the funding agreements that come with the cash.

In our experience, there are a number of issues that councils should be aware when reviewing funding agreements. These include:

  • insurance requirements (because State and Federal Governments don’t always remember that councils manage their risk through LGRS);
  • reporting requirements (which can be quite onerous);
  • clawback arrangements for the funding and the ability for the funding partner to terminate the arrangement for no reason, putting the project in jeopardy;
  • what restrictions are put on any subcontracting arrangements;
  • what restrictions are in place for the assets once they are completed; and
  • indemnities (because they are often very onerous but not easily amended).

While there is often not much room to manoeuvre in negotiating a funding agreement, and they are often finalised under time restrictions, councils should ensure that they are not signing up for more than they can deal with. A little thought at the front end can help councils to ensure that the cash does not come with strings attached which puts the project at risk, or the staff managing the project under unnecessary pressure.

If you would like assistance with a funding agreement, please contact Mark Henderson on 08 8113 7107 or mhenderson@kelledyjones.com.au.