What is a sub-grant?
A sub-grant is money that you, as the main recipient of a donor grant, pass to another organisation to carry out part of the work. The partner is often a local organisation that is closer to the community.
You stay responsible to the donor for the whole grant, including the part you pass on. That is why a sub-grant needs more than a transfer and a hope.
How do you assess a partner first?
Before you sign, check:
- legal registration and governance,
- the bank account in the organisation’s name,
- who can approve payments, and whether duties are split,
- how they record income and spending,
- their history with other donors,
- any conflict of interest with your staff.
Keep the findings in a short assessment. Where the partner is weak, plan support, such as finance training, or choose smaller payments with closer review.
What goes into the sub-agreement?
A clear agreement covers:
- The purpose and the activities.
- The budget by line, and rules on moving money between lines.
- The amount, the tranche plan and the payment conditions.
- Reporting dates and formats, for narrative and finance.
- Allowed and disallowed costs, copied from the donor’s rules.
- Procurement rules the partner must follow.
- Record keeping, access for audit and your right to visit.
- What happens with unspent money or a breach.
How do you pay and monitor?
Use tranches. Pay the first amount after signature, and release each later amount after you review the previous report. For each award, track:
| Item | What to track |
|---|---|
| Budget | Approved amount by line |
| Paid | Tranches released |
| Reported | Spending the partner has reported |
| Advance held | Paid minus reported spending |
If the advance held is large, the partner is holding money it has not yet justified. Ask why.
Review reports against supporting papers on a sample basis, and visit the partner. A site visit often finds what a report hides. Our article on monthly grant budget monitoring describes a routine that you can use for each award.
How do you close a sub-grant?
At the end of the award:
- Receive the final narrative and finance reports.
- Reconcile payments to reported spending.
- Agree the treatment of any unspent money: return it or reuse it, within the donor’s rules.
- Confirm that the partner keeps its records for the required period.
- Record the closure, with a short lessons note for future awards.
A worked example
A national NGO gives a local partner a sub-grant of 60,000 for 12 months. The agreement sets four tranches of 15,000. The first is paid after signing. Before each later tranche, the partner sends a narrative report and a finance report for the previous quarter.
After quarter one, the partner reports 11,000 spent. The NGO’s finance officer samples invoices and bank records for 40 percent of that amount and finds all in order. Advance held is 4,000, which is acceptable, so the second tranche is released as 15,000.
After quarter two, the partner reports only 6,000 spent. Advance held rises to 13,000. The finance officer visits the partner and finds that a supplier delivery was delayed. She agrees on a revised plan, and holds the third tranche until the report shows more progress. The agreement covers this step, so no one is surprised.
Building the partner’s capacity
- Share the donor’s cost rules in plain words, with examples.
- Offer a short training on vouchers, records and reporting formats.
- Give a simple template for finance reports.
- Name a contact person in your finance team who answers questions fast.
- Plan for the cost of this support in your own budget.
Signs of trouble
Late reports, round numbers with no records, one supplier for every purchase, staff who cannot explain the numbers and requests for cash outside the tranche plan are all signs to look closer. A single sign does not prove a problem, but a pattern deserves a visit and a clear conversation. Check your donor’s rules on reporting suspected fraud, since some donors require quick notice.
How to record sub-grants in your books
Treat a sub-grant payment as an advance to the partner until the partner reports spending. When the report is accepted, record the spending against the grant and budget line. Keep one file per award that holds the agreement, the budget, the payment record, each report and your review notes. At year end, list every partner with an open advance and confirm the balance with the partner in writing.
Where EMPOBase fits
EMPOBase has a Sub-Grants feature in the Finance module, next to Grant Finance and Budget vs Actual. That lets you keep awards to partners within the same ledger as the rest of the grant, with each line tagged to a project, grant and fund. EMPOBase does not make bank transfers and has no settlement or proof-of-payment record, so you confirm the actual payment through your bank. See the platform overview.