I recently reviewed a draft contract between a nonprofit and a Washington State agency that required some significant edits. The nonprofit expected this to be a cost reimbursement grant with the work and expense to be spread fairly evenly through-out the period of performance. However, each expense line in the contract provided by the government agency had different invoicing and payment terms. Here are a few examples:
Payroll expense to be invoiced quarterly, backed up with payroll reports, with 100% of the payroll budget to be invoiced by the 75% point of the contract
Professional fees expense to be invoiced one time, mid-contract, for 100% of the budget amount, supported by vendor invoices
Indirect expense to be paid 100% at the end of the contract, if performance is deemed sufficient by the grantor, supported by vendor invoices
Do you see anything confusing? Fortunately, the Executive Director of this organization found these discrepancies before she signed and we looked through the contract together to find and correct the language and terms.
Staff who are more focused on the non-financial pieces of the grant, might not notice discrepancies or confusing language in payment terms.
Your organization should have a grant policy that includes review by key program and finance staff before contracts are signed. Following a process that makes sure key items are reviewed beforehand will reduce errors, amendments, edits and headaches down the line!