Can My Nonprofit Pay a Fundraising Consultant a Percentage of What They Bring In?
The short answer is, you should not. It is best to work with consultant on a fixed fee basis for a body of work agreed upon in writing or on an hourly basis with some stipulation on how hours will be approved. The Association of Fundraising Professionals (AFP) Code of Ethical Standards forbids its members from working on a percentage basis because it is seen as a path to impropriety. “Members shall not accept compensation or enter into a contract that is based on a percentage of contributions; nor shall members accept finder’s fees or contingent fees.” The practice of paying fundraisers (consultants, staff, or otherwise) on a percentage basis is also not permitted under the Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector which states “Resource development personnel, including both employees and independent consultants, should not be compensated based on a percentage of the amount raised or other commission formula.” Some reasons why percentage-based compensation is discouraged:
- The practice puts short term needs ahead of long term needs/success/stability of the organization,
- This practice encourages conflicts of interest,
- This practice does not take into consideration the professional nature of the fundraising field.
In some cases, a nonprofit may engage a fundraiser to write a grant or organize a fundraising campaign and, due to factors out of the control of the fundraiser (e.g. the grantmaker changes its priorities unexpectedly for instance, a tornado hits the area the day of the annual fundraising event is taking place, etc.), the grant may not be successfully funded. The weeks, months, and hours of time the fundraiser invested in the effort should be compensated regardless of these outside factors.
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From the Standards for Excellence®: An Ethics and Accountability Code for the Nonprofit Sector. The Standards for Excellence code, developed by the Standards for Excellence Institute, includes specific benchmarks and measures that provide a structured approach to building capacity, accountability, and sustainability in your nonprofit organization. The code identifies 6 major areas of nonprofit governance and management: Mission, Strategy, and Evaluation; Leadership: Board, Staff, and Volunteers; Legal Compliance and Ethics; Finance and Operations; Resource Development and Fundraising; and Public Awareness, Engagement and Advocacy.
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