Often nonprofit administrators are faced with the decision of whether or not it is appropriate to undertake percentage based fundraising. Many times over recent years numerous reputable professional groups such as the Association of Fundraising Professionals and the American Grant Writers Association have denounced the practice, and therefore one would think it should be a dead issue, however the debate continues. Thus, information delineating the reasoning is imperative.
Percentage based fundraising is closely coupled with percentage based grant writing. In both cases the nonprofit being served promises to pay the fundraiser or grant writer a “commission” on all donations or grant awards received. In other words, the grant writer or fundraising professional would be pocketing a percentage of every dollar that is meant to be directed to the organization. Many nonprofit professionals argue that abolishing this practice and paying such individuals an up-front flat fee will greatly augment the chances that the organization will expend funds for which they will receive no return on their investment. This argument is understandable on the surface, but to get a clear idea of just why this practice has been condemned you must fully analyze the potential ramifications. Some simple examples should suffice.
Think about this. A grant writer is promised a 10% commission on any awards received from their proposal. The grant writer then spends 20 hours working diligently to prepare the proposal, hoping for success. The proposal is submitted to a small community foundation with a request for $25,000. Had the proposal been funded as written, the grant writer would then receive $2,500 for their 20 hours of work. Not bad at all. But consider the reward if the community foundation happens to have a donor advised fund that was established specifically for the purposes outlined in that proposal and that donor recommends a donation of $250,000. The grant writer would then get $25,000 for the same 20 hours of work. That’s a bonanza for the writer, but is that really in the best interest of the organization’s constituents? In the opinion of most nonprofit administrators, donors, and clients the excess $22,500 should be used to feed the hungry, clothe the homeless, educate the children--whatever the organization’s mission may be.
Nonprofits, particularly 501(c)(3) organizations, must keep in mind, regardless of how financially strapped they might be, that they exist to fulfill their charitable mission and serve the public. Nonprofits are not charged with serving their insiders, not the grant writers, nor the fundraisers. In order to assure that the charitable mission endlessly prevails over personal interest, percentage based fundraising must be eliminated. Hopefully soon Congress will enact the ban on such activities that has been proposed and this will, in fact, become a dead issue.
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