A funding agreement is the formal contract between a funding government (federal or provincial) and a recipient municipality specifying terms and conditions for grant money. These legally binding documents detail: the amount and timing of payments, eligible expenditures, reporting requirements, project milestones and deadlines, audit rights, cost-sharing obligations, procurement requirements, communications and acknowledgment requirements, and consequences for non-compliance. Funding agreements protect both parties—recipients know what they're receiving and what's expected, while funders ensure accountability for public money. Agreements may be project-specific (for individual initiatives) or program-wide (covering multiple projects under a funding stream). Municipalities should carefully review funding agreements before signing, ensuring they can meet all conditions. Non-compliance with agreement terms can result in funding clawbacks, ineligibility for future programs, and reputational damage.