When approval has been confirmed at the appropriate level of delegated authority, DFID formalises its approved project proposals to development partners (governments, international organisations, bilateral donors or civil society organisations) by setting out in writing the understanding reached on development objectives, respective obligations and how we will work together.
DFID provides development partners with Financial Aid or Technical Assistance (mainly in the form of personnel, research, training or goods and equipment) purchased by DFID. Different options require different arrangements for accounting and audit (for more information on this, see the Formal Exchanges Flowchart B9 and Text B10). Approved project proposals must be formalised using one of the appropriate non-legally binding exchanges. Staff must download the appropriate model document from office templates available on Word (in the folder File>New>Templates on my computer>Project Management).
Memorandum of Understanding (MoU): For all aid to a partner government the standard model, including conditionality and any specific conditions governing the funding must be used. For aid of £1m and above provided to bilateral donors/international organisations/Whitehall departments when there is no existing Framework Arrangement, standard MoUs can be used for each type of partner. Where the partner's alternative MoU format is being used, the MoU must contain details of the financial contribution, tranching, reporting, management and audit arrangements.
Delegated Co-operation Arrangement: DFID Project Managers are encouraged to use this when co-financing with like-minded bilateral donors (see 'Working with Others' under Tools and Processes).
Frameworks: DFID has concluded Framework Arrangements with several international organisations (IADB, UNDP, UNIDO, UNICEF and WFP) and plans others. Where a Framework Arrangement is in place, there is no need for an individual MoU or Official Letter at country level, but the standard 'Administration' or 'Contribution Arrangement' should be prepared to formalise a specific approved project proposal.
Grant Arrangements to Civil Society: There are two main types of grants given to civil society organisations/Non-Government Organisations or Not-for-profit organisations. These are strategic-type, high-level grants in the form of Partnership Programme Arrangements and Accountable Grants.
Official Letter: For projects of less than £1m to bilateral donors, international or other organisations there is no set format but essential information must be included (see Compliance Task 6). For funding of any size to a partner government you must use the MoU format.
1. Staff must not formalise DFID support until financing authority has been obtained at the appropriate level of delegated authority.
2. Any subsequent changes to the approved spending proposal (for example, a change to the financial contribution or period of the arrangement) must be recorded in an Amendment Letter (the format of the Amendment Letter can be found in the Word directory as outlined above).
3. Approved project proposals and amendments must be formally recorded with partners in writing using the appropriate format. Copies of all formal exchanges and Amendment Letters must be recorded in Quest and the originals sent to Financial Management Group.
4. Any proposal to use a MoU/Official Letter drafted by a donor partner must be checked against the MoU explanatory note and checklist. Any amendments necessary to ensure that it meets DFID's mandatory requirements must be made. If there are any specific areas on which guidance or legal advice is required, email the FCPD Information Desk.
5. All Financial Aid (including General and Sector Budget Support) paid directly to a partner government must be channelled through Crown Agents Bank. Crown Agents Bank must be provided with copies of the signed MoU and of any subsequent Amendment Letters as they are agreed.
6. Approved project proposals of less than £1m to bilateral donors or international organisations confirmed by means of an Official Letter must include the scope and extent of DFID funding and where appropriate the following:
7. If any approved project proposal is subsequently increased to £1m or above, an MoU is required and other project management disciplines, including managing portfolio performance, monitoring, reporting and review, must be applied.
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