What is a Memorandum of Understanding (MOU)?

“MOU, IOU or a raincheck, what’s the difference?

Recently at the last SF City Council informational meeting, (FF 2:40) Councilor Kermit Staggers and Parks director Don K. brought up MOUs. Well what are they?

A Memorandum of Understanding (MOU) is a signed non-obligating and legally non-binding document that describes the intentions of the alliance members to work together to address a shared development challenge. In some cases, companies (and particularly their legal departments) may use the term MOU to refer to a legally binding document. In this situation it is imperative that all parties understand and agree that the document is non-legally binding; if helpful, you may change the term “MOU” to a term used by the organization to refer to a non-legally binding document (e.g., “letter of intent” or “partnership agreement”).

Do I Need To Have A MOU For My Public-Private Partnership?

MOUs are not required for public-private partnerships, but they are strongly recommended. They are frequently used when USAID and a resource partner are providing parallel funding to a common implementing partner. They are not typically used when a resource partner is receiving USAID funds through a Collaboration Agreement, because the Collaboration Agreement itself addresses the kind of information set forth in an MOU. They are also typically not used when the alliance consists only of a gift from a resource partner to USAID, where the resource partner is providing no other in-kind contributions and does not expect to be involved in the alliance activities. Consult with your Regional Legal Advisor or the General Counsel’s office to determine whether a MOU is appropriate for your proposed alliance.

What Are The Benefits Of Using A MOU?

There are many benefits to formalizing your partnership through a MOU. The MOU

  • Ensures that all parties are in agreement on the partner roles and activities, thereby decreasing misunderstandings and future conflicts.
  • Outlines how decisions about the partnership will be made during implementation.
  • For many alliances, represents the only document that formalizes the relationship between USAID and a private sector partner (that is not also an implementer).
  • Can help keep the partnership on track and focused on the original objectives/activities.
  • Provides an easy framework to allow additional partners to join and expand the partnership.

The key words here are ‘non-obligating and legally non-binding document‘ and it seems the city is moving forward with MOUs when it comes to financially supporting special interests and club sports. This is unfortunate. Why? Because when these ‘groups‘ don’t come up with the money they promised to raise there is NOTHING legally binding them to come up with it. What does that mean? That means taxpayers are on the hook for the shortfalls. Councilor Staggers suggests that we get away from MOUs and require the clubs to ‘show us the money’ before we cut them a check, he says it is about ‘Accountability’. Of course Donny K. doesn’t have a problem with them, well, because it’s not his money that is on the hook when these ‘groups’ fail to hold up their end of the deal. I think the whole conversation ended perfectly with Staggers telling Donny K. “Then they better get it together.”

10 comments ↓

#1 rufusx on 09.16.12 at 10:35 am

The notion that government employees are not also “the taxpayers” (or “it’s not their money – it’s the taxpayers’”) see previous – doesn’t hold water. It’s simply a specious anti-government propaganda meme. It’s too easily bought into.

On closer examination, I believe you will discover that government employees are also taxpayers and they are also working with “their money” just as much as it is any other taxpayer’s money; in some cases – even more so – as they tend to actually pay more taxes to the “average” taxpayer.

Okay – off THAT soapbox and onto the other one. If the city is using MOUs as the basis for cutting checks – that’s wrong.

#2 cr on 09.16.12 at 11:46 am

MOUs are NOT legally binding.

However, before any agreement with Jr. football, ice sports, tennis, and swimming, ETC., is finalized they would proceed from the MOU status to a formal legal contract with the City (taxpayers).

Herein lies the problem, and a perfect example of this is Jr. football.

According to both the MOU, AND the legal agreement between the City (taxpayers) and the South Dakota Junior Football Association, this group was NOT to take possession of the fields until their 1.5 million dollar commitment was FULFILLED!

But Munson’s City Attorney wrote the LEGAL agreement in such a way that there were so many loopholes for Jr. football they NOW have possession of the fields and still owe the taxpayers approximately $400,000.

I was at the Council meeting in 2009, when Councilor Staggers suggested that South Dakota Junior Football Association, “show us the money” before the taxpayers stepped up to bond for the additional $4.2 million to complete the football complex.

NOW, the question is……..will this commitment ever be met??!!

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With the precedent of Jr. football being set, it is of utmost importance, that when the MOUs proceed into formal contracts between the City and ISA (Ice Sports Association), and SFTA (Sioux Falls Tennis Association) taxpayers need to monitor that these are definitive agreements.

For example:

The following is taken directly from the MOU between the Taxpayers and the ISA:

2. Purchase and Ownership of Equipment. The City will use its best efforts to include in its 2013 Capital Improvement Plan, the CAPITAL acquisition of $1.5 million of equipment for the ice facilities. A preliminary list of the equipment that may be purchased by the City is attached to this Memorandum as Exhibit B. The equipment will be owned by the City and become capital assets on the City’s balance sheets.

EXHIBIT B EQUIPMENT

1. Compressor and 3 Rink Pad Systems

**Alternate Items Based on Bid Results:

2. Dasher Board Systems for 3 Rinks

3. 2 Electric Zambonis and 2 Electric Edgers

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I believe this equipment should be “donated” to ISA, and that the City should NOT retain ownership. This would open THE TAXPAYERS up to future expenses for repair and replacement.

In return for the ONE-TIME donation, taxpayers will receive Open Public Skating as spelled out in the MOU:

5. Open Public Skating. ISA will reserve ice for open public skating at no cost to the City. The number of hours of open public skating per week will be determined by mutual agreement of ISA and the City and set forth in a definitive agreement. It is ISA’s intent that open public skating hours will EXCEED the number of hours currently available at the Sioux Falls Ice and Recreation Center.

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There is a similar four-page MOU between the City (taxpayers) and SFTA.

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The $1.5 million to ISA, and the $500,000 to SFTA are one-time donations BY THE TAXPAYERS to these organizations. We are NOT bonding for these projects, they are CIP dollars.

As taxpayers, we HAVE MADE our investment in Jr. Football, ISA, and SFTA. Councilor Entenman has already warned them…..DO NOT COME BACK TO THE TAXPAYERS if they encounter financial difficulties later.

ULTIMATELY, it is the Council’s responsibility, as the stewards of our tax dollars to insure that an “air-tight” contract is drawn up between the City and the ISA, and the City and SFTA!!

#3 cr on 09.16.12 at 11:57 am

rufusx…..

In 2013, Parks and Rec will control $20.1 million tax dollars for capital and operating expenses.

You need to start attending monthly Park Board meetings….

Some of this City’s most “wildly extravagant spending decisions” are made by the Director, Don Kearney, and the Park Board!!!

I’ve been at these meetings on a regular basis for the past six years, it certainly has changed my perspective,

and, it might change your’s also…..

#4 Detroit Lewis on 09.16.12 at 10:18 pm

Ruf, I know city employees and elected officials pay taxes also, but they are also collecting pay from taxdollars, so I look at them a little differently. Also, there are many city employees that don’t even live in Sioux Falls.

#5 John on 09.16.12 at 10:38 pm

Whoa, Sportsfans! Whoa! By any other definition a memorandum of understanding (MOU) can often be legally binding. When courts hold an MOU binding they use contract law to enforce its provisions. And courts love to hold government to its promises (MOUs).

Check the Wikipedia definition: http://en.wikipedia.org/wiki/Memorandum_of_understanding

Check how Virgina and Michigan courts applied a private MOU: http://www.google.com/url?sa=t&rct=j&q=%22memorandum%20of%20understanding%22%20%26%20appeal%20%26%20court&source=web&cd=33&cad=rja&ved=0CCsQFjACOB4&url=http%3A%2F%2Fstatecasefiles.justia.com%2Fdocuments%2Fvirginia%2Fcourt-of-appeals-unpublished%2F2299024.pdf%3Fts%3D1323968383&ei=2JNWUJXTC-SZyAHdhYHwAQ&usg=AFQjCNGh47KFNfdtiOCDsAovjnB6h2iHQg

http://www.google.com/url?sa=t&rct=j&q=%22memorandum%20of%20understanding%22%20%26%20appeal%20%26%20court&source=web&cd=57&cad=rja&ved=0CEAQFjAGODI&url=http%3A%2F%2Fstatecasefiles.justia.com%2Fdocuments%2Fmichigan%2Fcourt-of-appeals-published%2F20040812_C248321_26_162O.248321.OPN.COA.PDF%3Fts%3D1323898305&ei=b5VWUN3-IMeayQGomYHQCA&usg=AFQjCNGL0wkxrZKG1oUAL0rJn-vO7W8cpQ

http://www.google.com/url?sa=t&rct=j&q=%22memorandum%20of%20understanding%22%20%26%20appeal%20%26%20court&source=web&cd=62&cad=rja&ved=0CCMQFjABODw&url=http%3A%2F%2Fwww.michbar.org%2Fopinions%2Fappeals%2F2011%2F042611%2F48698.pdf&ei=X5ZWUOOiGKH5ygGIqIHABQ&usg=AFQjCNH5jHH51-4tPmiL-RnQZ0gHEmg2GQ

Here’s where Rapid City was held to an MOU they made with their firefighters: http://rapidcityjournal.com/news/judge-rules-in-favor-of-firefighters-in-wage-dispute/article_3a1dbee8-47b3-11e1-a70b-001871e3ce6c.html

and: http://www.google.com/url?sa=t&rct=j&q=%22rapid+city%22+%26+firefighters+%26+court+%26+2012&source=web&cd=5&cad=rja&ved=0CDUQFjAE&url=http%3A%2F%2Fwww.rcgov.org%2Fpdfs%2FHuman-Resources%2FUnion%2520Contracts%2FMOU_fire.pdf&ei=4phWUI_uO8WDywHch4GoAg&usg=AFQjCNElCqLX7Nf-ucdpqOxhlLo4vkxPMA

Tread very carefully. Never assume a court will not hold the government to its promises.

#6 cr on 09.17.12 at 6:04 am

Many times…..

Both at Park Board meetings and when he is giving input to the Council, Director Kearney has made the statement that the Jr. Football, ISA, and SFTA MOUs are NOT legally binding until they proceed to a formal legal contract.

#7 rufusx on 09.17.12 at 10:19 am

Does the language of the MOUs specifically state that they are not legally binding? If so, are the signing entities legally bound to that language? (Catch 22 at its finest).

#8 rufusx on 09.17.12 at 10:26 am

cr – I personally believe, and IIRC DL agrees, that parks and recreation are probably one of the most directly beneficial “expenses” that governments can make on behalf of the citizens. I for one am pleased as punch at the improvements that have been made along the river through the years. I used to go down to Falls Park back in the 80′s, and personally physically remove debris from the dam and sluice gate impoundment – because it was SO DISGUSTINGLY NEGLECTED – I just could not stand it.

#9 Joan on 09.17.12 at 8:44 pm

How many city employees live outside the city limits?
The same also applies to city school employees.

#10 Detroit Lewis on 09.17.12 at 8:47 pm

Joan, if my memory serves me right, it is around 400 city employees that live outside of SF. I may be wrong, but I think when Staggers was running for mayor he sent out a little bit over 700 letters to city employees that live in the city limits. Maybe he will read this and shoot me an email.

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