Business Strategy

Understanding Contribution Agreements in Government Funding

For those who are interested in government funding or have begun the application process for a government grant or loan, the term “contribution agreement” is one you’ll need to be aware of. A contribution agreement, essentially, is an agreed-upon document that outlines the terms of a grant or loan transfer. Although there are a lot of terms associated with the government funding process, a contribution agreement is a key concept to understand because it holds the recipient organization accountable for the proposed project’s impacts, reimbursements, timelines, budget, and contingencies.

“The Organization shall be responsible and accountable for the procurement of goods, equipment and services for the project and shall respect the principles of transparency, integrity, competition, fairness and value for money.”

-Government of Canada, Contribution Agreement – General Terms and Conditions

However, once understood, government funding is a powerful tool for Canadian businesses that allows them to capitalize on business expansion, research and development, and more thanks to financial support from the government. Regardless of the large breadth of government funding programs and application processes available, there are a few steps that commonly appear in the application process; one of which, being a contribution agreement.

What Is a Contribution Agreement?

As a funding vehicle, contribution agreements align funding agencies’ and applicants’ terms, expectations, and what is expected of each party. A good example of this would be government grants and loans, much like the Jobs and Growth Fund (JGF). The JGF strives to help Canadian businesses grow their organizations and recover from the COVID pandemic.

“A contribution agreement is a legal document that will lay out the conditions surrounding the transfer of an asset from one party to another.”

-UpCounsel

Moreover, government funding programs that support collaborative research projects between companies and post-secondary institutions often require contribution agreements. When the Canadian government decides to invest in a program, they want to ensure that the allotted money is being spent well. Typically, to prove a contribution agreement is yielding tangible results. Therefore, grant-receivers must publish reports outlining project outputs.

“Grants and Contributions: All institutions subject to the Policy on Transfer Payments are required to publish reports on Grants and Contributions within the Government of Canada.”

-Government of Canada website

Contribution agreements often outline the following:

  • Sum of contribution: the dollar amount and type of contribution
  • Date of contribution agreement
  • Agreement title
  • Description of the agreement
    • The description outlines a brief summary of project activities, budget, timelines, and impacts.
  • Organization name and details
  • Program name and reimbursement details and timelines
  • Requirements and commitments of both the funding agency and applicant(s)

Review a full description of a typical Canadian contribution agreement.

What Benefits Do Contribution Agreements Offer?

When Canadian organizations are given repayable or non-repayable capital, the purpose is to produce a good, service, or specific results without being acquired by government departments. The key concept here is “without being acquired,” as Canada’s intent is not to acquire businesses but to give businesses the means they need to come up with unique solutions to Canadian challenges. This approach lends a freedom referred to as an “Arm’s Length Relationship,” therefore benefitting the country as a whole.

“Arm’s Length Relationship” (Relation sans lien de dépendance) – means a relationship whereby in the implementation of the Project, the Organization has entered into a contract with a Subcontractor and where the Organization and the Subcontractor are independent of each other and are not controlled by the same person or group of persons.”

-Government of Canada, Contribution Agreement – General Terms and Conditions

Government funding initiatives are complex in nature and therefore applicants should perform due diligence prior to engaging in any formal agreement. An example of a Canadian contribution agreement vehicle is the Innovation for Defence Excellence and Security (IDEaS) Program. During the COVID pandemic, the government of Canada has received over 450 proposals for projects looking to find solutions to challenges posed by the virus. Of the 450, submissions the Department of National Defence (DND) has issued 48 contribution agreements with approximately $8.64 million in funding and more in review.

“Contribution agreements […] enable innovators to generate solutions to defence and security challenges without acquisition by the Government of Canada of any goods, services or assets. This is different than previous calls for proposals under Competitive Projects, where the Department had used a procurement contract.”

Government of Canada website

To read additional material on contribution agreements, please refer to this Open Government resource.

Want to Learn More About Government Funding?

Please consider government funding as a tactic for funding your next project. To make the most of this process, reach out to a Mentor Works representative today. For more information on current funding programs, visit Mentor Work’s comprehensive government funding list.

If your organization is looking to apply for government funding programs to drive capital & tech adoption, hiring & training, or other organization activities, we would be happy to help.

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