Who Pays First
Prefunding supplies money before the partner incurs the relevant expenditure. Reimbursement repays the partner after it has financed expenditure itself, subject to the applicable review and approval. Direct payment pays the supplier without that money first passing through the partner.
Those distinctions identify cash-flow questions, not three options available under every grant. The controlling agreement and funder's authorized decision determine which route is permitted. A planned budget alone does not supply permission, liquidity or a completed payment.
Comparison Table
The institutional examples below come from UNDP's Health Implementation Manual for its Global Fund implementation arrangements. Its procedures are not adopted as NGO-wide rules.
| Modality | Who Finances First | What the Funder Checks in This Example | Open Question for Actual Terms |
|---|---|---|---|
| Prefunding | UNDP advances money to the partner before expenditure | Request and work-plan basis; later expense reporting has a different function from authorization | What advance and subsequent accounting are actually agreed? |
| Reimbursement | Partner uses its own funds | UNDP verifies and approves the request before disbursement; the manual addresses prior consultation | Does the partner have cash, and was this route agreed? |
| Direct payment | UNDP pays the vendor on the partner's behalf | UNDP verifies and approves the request; backing documents may be requested for greater oversight | Who is responsible for procurement, evidence and approval under this agreement? |
In this UNDP example, direct payment leaves procurement with the sub-recipient; moving the payment function does not automatically move all purchasing responsibility. Reporting spending is also distinct from certifying it or authorizing a request.
One Fictional Cost Three Ways
An invented agreement expressly allows each of three alternative routes for one venue cost of 1,200 USD, without tax, fees or exchange effects.
- The funder advances 1,200 USD; the partner pays the venue 1,200 USD.
- The partner pays the venue 1,200 USD from its own funds, then requests the agreed reimbursement. Only an approved request leads to repayment.
- The funder pays the venue 1,200 USD directly; the partner receives no cash for that payment.
Each alternative finances the same 1,200 USD cost. They are not three cumulative costs totaling 3,600 USD. Under route 2, a partner lacking cash cannot simply assume it can prefinance or will receive reimbursement.
Questions That Stay Open
The actual funder and delegated owners decide the permitted modality, request and evidence. Check their agreement; this page sets no deadline, threshold or collection requirement. The procurement policy worksheet concerns separate purchasing authority. Advance completion and settlement addresses what happens after an advance, not which route is permitted.
Sources and Scope
UNDP's transfer-modality, reimbursement and direct-payment sections were checked November 1, 2026. CC8, November 2024, concerns England and Wales charity controls. The Charity Commission's 2011 partnership checklist, section 5 raises agreement-finance questions, not model terms. ACNC's Australian record examples, checked the same day, include contracts and grant/acquittal records; they prescribe no modality.