Appendix B: Elements of a Service Agreement with a Non-profit Entity

Local Authority Governance of Subsidiary Entities.

In paragraph 655 on page 91 we suggest that all local authorities develop formal agreements with their non-profit entities. These agreements can then be a means of holding the entities to account for their delivery of services.

Our suggested elements for a service agreement with non-profit entities include:

  • Obligations of the entity, such as –
    • Definition of the scope of services to be provided and service objectives – including timeliness, quantity and quality, and the means by which performance will be measured and recorded. The entity may be engaged to provide advice to the local authority where requested to do so.
    • Definition of key performance criteria to be met in fulfilment of the agreement terms.
    • Specification of the obligations of the parties.
    • Meetings with local authority officers at (say) 6 monthly intervals to discuss progress with the agreement.
    • Requirements to collect data for economic monitoring, statistics, and other research.
    • Requirements for consultation with the community and specified stakeholders.
    • Provisions for termination of the agreement.
  • Legal and managerial aspects of the relationship, including –
    • term, scope and intent of the agreement;
    • requirement to prepare an annual business plan, and to consult with the local authority on its content and format;
    • lines of communication with the local authority, including the naming of designated officers where appropriate and an outline of those circumstances in which consultation should occur;
    • the entity’s association with the local authority, including its ability to act as its agent or acknowledge local authority support;
    • provision for a periodic audit of compliance with the terms of the agreement; and
    • provision for arbitration in case of agreement variations, nonperformance, or dispute.
  • Issues covering funding, reporting, and monitoring, including –
    • applications for local authority funding to be made on the basis of a cost/benefit analysis, with an accompanying detailed work programme;
    • requirement to provide the local authority with regular reports (containing financial and non-financial information) on the achievement of objectives outlined in the business plan, including reporting on performance, achievements, activities, issues and initiatives;
    • provision of financial statements in relation to the annual plan and budget, within a specified timeframe following the end of the financial year; and
    • the basis for payment for the performance of services.

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