Yet more on percentage-based fundraising - AFP ups the ante

Just other day I posted an email exchange I had in which my correspondent argued that, contrary to what AFP (Association of Professional Fundraisers) and others may say, there are times when when contingency or percentage-based fundraising fees may actually be more ethical than flat fee or hourly rates. The argument was essentially that small organizations (indeed, most any nonprofit) can ill afford to pay up front for grant writing or other fundraising services that may or may not result in donations or grants to the organization. The impact of such charging, according to my anonymous letter writer, was detrimental to the sector.

Well, now the AFP has upped the ante in this ongoing discussion, by trying to raise it from being an ethical question, to being a legal one. AFP has now renewed it's call on Congress to officially ban the practice of all percentage-fee based fundraising. This comes on the heals of AFP conducting a survey in which they found that the organizations with the highest fundraising costs were those that paid their fundraisers by percentage.

According to Paulette V. Maehara, CFRE, CAE, president and CEO of AFP:

These are causes that are near and dear to the hearts of all Americans, but the public's generosity is being abused. Congress needs to act to ban percentage-based fundraising so that the public can rest assured that charities and their fundraising firms are putting the needs of donors first.

Now, let me reiterate, that I have always followed the AFP code, and have never charged a contingency fee for grant writing or any other services. But let's take a look at the last few words of that paragraph: "... [put] the needs of donors first.".

Donors first, eh? Not the sustainability of the nonprofit organizations that don't have the cash-flow to pay upfront for fundraising with no guarantee of success? Not ... oh, I don't know ... the clients and communities served by the nonprofit sector?

Again, I still believe that a set fee for services is the proper way to go in most situations, but more and more I'm convinced that a compromise can be reached where nonprofits are not bankrupted by fundraising costs, and contingency fees, with set caps, may be used that meet the needs of everybody involved.

And I also firmly believe that it's about time that donors put the needs of nonprofits ahead of their own.

A different point of view...

One of the most popular posts on this blog is one the earliest. It is also the one that seems to upset the most people. I'm referring, of course, to my posting on nonprofit grant writing fees versus commissions. In that posting, I explained why I follow the AFP Code of Ethics and refuse to write grants on a contingency basis.

Many people have written to me, or commented on the posting, that they don't understand why contingency payment is bad, and I've tried to explain and re-explain the AFP position (see the links for details). It's not that contingency payment is illegal, it's just against the industry standard, considered an ethical violation by many, and (perhaps most important) frowned upon by the very funders that we're applying to.

But, so far, nobody has given me a compelling reason to question that position. Until last week...

Here's an excerpt from an email conversation I've been having (since it involves a potential ethics violation, I'm keeping the author anonymous - if the author wants to take credit in the comments, that's up to them):

I'll add some comments on the "ethics" of contingencies. Standards set up by grantwriting boards and societies are generally self-serving. Many of the ministries that I support cannot afford Ph.D level research and writing but their causes do merit funding. For example, I am working with a group building a rap studio for positive, drug-free support in one of the most crime ridden neighborhoods in Minneapolis. They don't have the money to risk $50-75 per hour on grants that may not get funded.

Our resolution is to bill at $20 per hour which they can afford, and then bill at $75 for time after the award, if and when it comes. Quite frankly, the discussion of ethics that I have researched regarding these issues have all centered around putative issues of the appearance of integrity on behalf of the grantwriter (is it or is it not a kickback) and no dialogue has been forthcoming about the IMPACT our services have on the organizations we help support and the clients they serve.

Clients that can afford to pay full scale on the front end are billed in this manner, but those that cannot should not be ignored in the funding process because of self-serving billing practices developed by "grant writing professionals." If that is the standards developed by these societies then I will take the position of Groucho Marx, "I wouldn't join any club that would have me as a member."

I certainly cannot dispute the self-serving aspect of the AFP code; after-all, I need to pay my mortgage and bills and can ill afford to wait months on payment for my work - a payment that may or may not ever materialize.

But I certainly hear the point about the impact on our clients loud and clear. This is not something I've been blind to, and have felt guilty and shamed in times when my work for a client has not immediately resulted in grants that far exceeded my fees. This frustration is part of why I've lately been trying to minimize the amount of grant writing I do as opposed to other services.

I still feel there are valid points to the AFP prohibition against contingency fees, and until the funder community comes to a consensus to the contrary, the grant writers are not likely to change their practices.

But what about those smaller nonprofits that can ill afford to pay for fundraising upfront? How does a startup start up if they cannot raise those first dollars on a contingency? In a very real way, our insistence on the purity of our image is yet another roadblock that grassroots organizations face in their struggle to serve our communities.

About Grant Writing Fees & Commissions

As a professional grant writer, I usually charge an hourly fee, or sometimes a flat fee per project. Never do I charge a percentage of funds received or in any other way work on spec or contingency.

First off, this is just accepted professional practice in the nonprofit industry. Second, as a professional I need to be paid fairly for my work. But, most importantly, it is a matter of ethics.

I always strive to fully abide by the code of ethics published by the AFP (Association of Fundraising Professionals), which states, "Members shall not accept compensation that is based on a percentage of contributions; nor shall they accept finder's fees."

Still, there are some organizations that will expect to pay for proposal writing only when it is successful, and there are those consultants who will accept that. I have often had conversations where I've had to explain why this is considered an unethical practice.

Yesterday I came across an essay by Goodwin Deacon, founder of the Puget Sound Grantwriters Association, that goes beyond simply saying "it's unethical" to explaining why funders frown upon the practice.

The bottom line in her essay is, as I've also always said, even if a grant writer doesn't mind being paid on contingency, "such an arrangement is basically a kick-back, and therefore unethical." Would you want to support a charity that gave kick-backs? Didn't think so.