December 20, 2007
Debating a Ban on Percentage-Based Fund-Raising Fees
The Association for Fundraising Professionals’ renewed call for Congress to ban percentage-based fees for fund raisers has Ken Goldstein pondering a contrary view on his Nonprofit Consultants Blog.
In an previous blog entry, Mr. Goldstein posted an e-mail exchange in which his correspondent argued that small charities may have trouble paying a flat fee to seek grants that may or may not be won. In such cases, the anonymous correspondent argued, “there are times when when contingency or percentage-based fund-raising fees may actually be more ethical than flat fee or hourly rates,” summarizes Mr. Goldstein.
He notes the Association of Fundraising Professionals’ recent plea to Congress to ban the practice of percentage-based pay, quoting the association’s president, as saying that legislation is needed “so that the public can rest assured that charities and their fund-raising firms are putting the needs of donors first.
Mr. Goldstein stumbles over those last words: “Donors first, eh? Not the sustainability of the nonprofit organizations that don’t have the cash-flow to pay upfront for fund raising with no guarantee of success? Not … oh, I don’t know … the clients and communities served by the nonprofit sector?”
Though he stresses that he supports the association’s ethical rules, “I also firmly believe that it’s about time that donors put the needs of nonprofits ahead of their own.”
Is percentage-based fund raising always a bad thing for nonprofit groups? Share your views by clicking on the “comments” link below.
—Heather Joslyn
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As in most issues, there is a middle ground that often benefits all sides.
Clearly there have been unethical companies that have offered services on a percentage basis, even taking 75% or more. And there are consultants who charge flat fees and accomplish nothing. It is hard to see why the latter is any more ethical than the former.
I think that a low flat fee, one that covers the consultants expenses and is affordable to small charities, with reasonable bonuses for achievement is a reasonable compromise that benefits all parties.
That even benefits donors who care that the charity they support is operated efficiently and prudently.
In truth, I think there are few in our field who put the donor’s needs above those of their employer. I’m not sure it is realistic to expect everyone to do that.
Personally I have found that fundraising is most rewarding when I connect a donor to his/her values and that results in a gift to my client/employer. For me, that is the heart of our business.
Joshua C. Karlin
Aliya Marketing & Fundraising Group
— Joshua Karlin Dec 21, 10:37 AM #
As a member of AFP, I support the position of not having percentage based remuneration. However, I would be very concerned with getting Congress into the matter. Remember the old story of the camel getting his nose into the tent. It is hard to keep the camel from coming all the way in. Be careful what you ask for.
— Lee Carter Dec 21, 11:06 AM #