The Treasury

Global Navigation

Personal tools


The Government provides funding to a large range of NGOs, for a wide range of public purposes, through a number of portfolios and Government agencies. Many of these funding relationships are with not-for-profit organisations (including community and voluntary sector organisations, iwi, hapu and other Maori organisations). The Government has expressed a clear wish for a good working relationship with the community and voluntary sector, and these guidelines are intended, among other things, to help support this relationship.[2]

These guidelines outline some general expectations, and offer some general advice to departments and Crown entities about managing the establishment, administration and monitoring of arrangements with NGOs to fund services (“outputs”) that support the Government’s objectives. The guidelines are not intended to apply to the routine purchase of Government agency inputs (e.g. stationery or I.T. services), for which ample advice exists already and which involve straightforward commercial contracts.[3]

The guidelines focus particular attention on relationships with not-for-profit organisations, but will also be relevant to contractual relationships with other NGOs. They do not contain any mandatory requirements, but departments and Crown entities (henceforth referred to as “Government agencies”) should think very carefully before they decide to take a different approach, and be clear about their reasons for doing so. If a Government agency chooses to take a different approach, they should explain their reasons for doing so to the NGOs they are funding. It may be best to document these reasons to prevent misunderstandings.

All these funding arrangements involve an agreement of some kind. That agreement is usually a contract that can be legally enforced by either party (and hence the term “contracting” is used generally throughout these guidelines), but in some cases may involve a conditional grant. The agreement represents an exchange of undertakings by the parties to each provide something of value to the other, although in practice that benefit may be provided to a third party. The agreement should provide:

  • Clarity about the undertaking of each party to the other.
  • Certainty about the performance of those undertakings by each party.
  • Justification for the payment of public money and subsequent accountability for that money.
  • A clear legal underpinning to the relationship.

Contracting, however, involves more than agreeing the terms of a contract. It is important that Government agencies see the contract as embedded in a contract management system or cycle that involves:

  • Planning
  • Selecting a provider
  • Negotiating the contract
  • Managing the contract and monitoring
  • Review and evaluation
  • Starting over

It is also important that Government agencies recognise that the Government’s relationship with an NGO normally extends beyond the requirements of the contracting process. Some Government agencies are now heavily dependent on NGOs for the provision of services, and NGOs can be important sources of innovation, information, and useful policy and operational advice. Where these relationships exist, the Government agency concerned needs to see contract management in terms of supporting the wider relationship with the NGO.

Principles of Good Contract and Funding Management

A number of principles underpin these guidelines:

Services purchased through contracts and other types of funding relationships should contribute to the achievement of Government outcomes and objectives.

NGOs will similarly expect contracting arrangements to contribute to the achievement of their objectives.

Contracting should reflect the needs of the ultimate users or recipients of the service.

Contracts should provide appropriate accountability for public money

The information required is likely to vary depending on the amount of money involved.

Contracts should represent value for the public money

The taxpayer should obtain the appropriate quality and quantity of service, and pay a reasonable price, for services that are effective in contributing to the achievement of the desired outcomes. The quality of service delivery will usually be of central importance.

The Crown and its organisations should act in good faith

Acting in good faith requires actively consulting NGOs about their needs and views, considering what to do about what NGOs suggest and providing relevant information that helps NGOs to approach issues in an informed manner. In short, it is a “no surprises” approach which will help build up trust.

The Crown should act in good faith in its dealings with iwi and hapu, and ensure that decisions it takes are well informed, which will usually imply a requirement to consult with iwi and hapu in those dealings. Where a service has been developed with Maori explicitly as Treaty partners (as opposed to a service delivered to Maori as citizens) there will be an added dimension to take account of Treaty partnership.

Government agencies should understand the nature of the organisations they contract with. Contracting and funding relationships with the community organisations should be consistent with the relationship the Government seeks to have with the community and voluntary sector.

This implies:

  • Recognising the objectives of both parties
  • Respecting the autonomy of the voluntary sector
  • Communicating in an open and timely manner
  • Working constructively together
  • Recognising the responsibilities of each party to its stakeholders.


  • [2]Further resources and material on good practice when working with community, voluntary and tangata whenua organisations is available from (MSD ( Resources on good practice funding are also planned.
  • [3]Government Purchasing in New Zealand (Ministry of Economic Development, 1994), and A Guide to the Management of Departmental Purchasing (Treasury, 1991). For more information on contracting generally, see Procurement: A Statement of Good Practice (Office of the Controller and Auditor General (
Page top