Partnering with another organization: MOUs and agreements

This guide is for small charities that are about to work closely with another organization: a food pantry teaming up with a clinic, a tutoring program running sessions in a library, two charities applying for a grant together. Partnerships can reach more people than either of you could alone. They also go wrong in predictable ways, usually because two groups had different ideas about who would do what. After reading, you'll know how to put a partnership in writing, what to cover, and when to bring in a lawyer.

Why write it down

When a partnership starts, everyone is enthusiastic and the details feel obvious. A year later, the people who shook hands may have moved on, and the details are no longer obvious at all. A short written agreement protects the relationship. It makes you talk through the hard questions early, gives new staff and board members something to read, and gives both sides a fair way to end things if they need to.

MOUs and contracts

A memorandum of understanding (MOU) is a written agreement between two or more organizations about how they will work together. HeadStart.gov, a federal Department of Health and Human Services site, describes an MOU as defining each party's roles, responsibilities and desired outcomes, and what each organization will contribute. It also says that, unlike a contract, an MOU is not a legally binding document or a legally enforceable agreement.

A contract is an agreement that the law will enforce. It's the right tool when one organization pays the other for goods or services, when either side needs to be able to rely on a promise legally, or when there is real money or risk involved.

In practice:

• Use an MOU for a partnership based on goodwill and shared goals, where each side contributes its own time, space or services: referring families to each other, sharing a venue, co-hosting an event.
• Use a contract when money changes hands for a service, when you are hiring the other organization to do something, or when you're passing on part of a grant.
• Don't rely on the title alone. A document called an MOU that includes payments or firm promises may be treated differently from what you intended. If it matters, ask a lawyer.

What an MOU usually covers

HeadStart.gov's tips for writing an MOU are to identify the parties and their roles, describe the purpose and desired outcomes, list what each organization commits to do, add other terms such as protecting the confidentiality of the families you serve, set how long the MOU lasts and how you'll review progress, and sign and date it. For a small charity, a practical MOU covers:

• Purpose. What you are trying to achieve together, in a sentence or two.
• Roles. What each organization will do, and who the contact person is on each side.
• Money and in-kind contributions. Who pays for what, and what each side contributes in space, staff time, equipment or supplies. If no money changes hands, say so.
• Data sharing. What information about people you will share, why, how it's protected, and what happens to it when the partnership ends.
• Branding and credit. How each organization's name and logo may be used, and how you'll credit each other in reports, social media and grant applications.
• Insurance and liability. Whose insurance covers activities on whose premises, and whether either side must name the other on its policy. Talk to your insurer. Our guide to insurance basics can help.
• Term, review and exit. Start and end dates, when you'll review how it's going, and how either side can end it with notice.
• Disagreements. Who talks to whom first if something goes wrong.

Our memorandum of understanding template lays these out as a fill-in form.

When to get a lawyer

A simple MOU between two small organizations sharing space or referrals may not need a lawyer. Get legal advice when:

• money changes hands, or you're passing grant money to the partner
• you'll share sensitive personal information, such as health, immigration or children's records
• one side's staff or volunteers will work with vulnerable people on the other's premises or programs
• the partnership involves property, equipment loans, or anything with significant value
• either side wants exclusivity, or the agreement runs for several years
• you're joining or creating a new jointly run program, which may raise questions about who controls it

If you don't know a lawyer who works with small charities, ask a member charity through the Exchange who they use.

Sharing data responsibly

Partnerships often involve passing information about people between organizations: referrals, attendance lists, outcomes. Treat that information with care:

• Share only what the partner truly needs.
• Tell people their information will be shared, and get their permission where your policies or the law require it.
• Agree how it's sent and stored, who can see it, and when it's deleted.
• Check whether either organization works under special rules, such as for health or education records.

Our guide to data privacy basics explains the essentials.

Fiscal sponsorship is a different thing

A partnership is two independent organizations working side by side. Fiscal sponsorship is different: an established charity takes on a project that doesn't have its own tax-exempt status, and accepts donations and grants for it. The legal and tax questions are not the same.

Collaborative grant applications

Funders often welcome partnerships, and some require them. When you apply together:

• Agree who is the lead applicant. The lead usually signs the grant agreement, receives the money and is answerable to the funder for the whole project.
• Put the split in writing before you apply: who does which part of the work, and how much of the budget each partner will receive.
• Plan the reporting. The lead will need information from partners on time to write reports.
• Expect the funder's terms to flow down. Rules in the grant agreement usually apply to the partner's part of the work too.

Federal money passed to a partner

If the grant is federal money, whether from a federal agency or passed through a state or city, the federal Uniform Guidance applies. Under 2 CFR 200.331, the organization passing on the funds must decide, case by case, whether its partner is a subrecipient (carrying out part of the program itself, with responsibility for program decisions and federal program rules) or a contractor (providing goods or services for the lead organization's own use, as part of its normal business and often to many other buyers).

If the partner is a subrecipient, 2 CFR 200.332 sets duties for the lead, now called the pass-through entity. They include checking that the partner isn't excluded from federal funding (for example in SAM.gov), clearly identifying the subaward and its required information, evaluating the partner's risk of fraud and noncompliance, and monitoring the partner's activities. Those are real obligations. Read the award terms and get advice before you pass federal money to anyone.

Partnership checklist

• We agreed the purpose and each side's role in writing
• We chose an MOU or a contract to fit the relationship
• We covered money, in-kind contributions, data, branding and insurance
• Each side has a named contact person
• The agreement has a review date and a way to end it
• Data sharing is limited to what's needed and protected
• We got legal advice where money, sensitive data or vulnerable people are involved
• For a joint grant, the lead, the split and the reporting are agreed

If you'd like to talk to a charity that has made a partnership work, ask a member charity for help through the Exchange.

General information, not legal, tax or financial advice. Rules change and every situation is different, so check the official sources and talk to a qualified professional before you act.