You’re looking for ways to raise money for your new nonprofit, and want to hire a pro to help you win grants. Your budget is tight now, but if you’re awarded the grant, you’ll have tens of thousands of dollars. So, why not pay your grant writer a percentage of the grant you receive, since it’s the grant writer’s job to get you that money anyways, right?
This is a question that I see asked frequently. In fact, paying a grant writer a percentage of the grant funding they secure for your organization only if the grant is won is a practice that is generally unethical, and, in some cases, illegal.
Developing a grant proposal takes time, talent, and resources. If you want to work with a grant writer to shape your proposals, consider it an investment in the growth of your organization. Here’s why:
Most funders won’t pay for grant writing fees
The cost of fundraising is a basic part of running an organization. Most grant funders want their dollars to go directly toward your programs, not organizational overhead. In fact, many funders explicitly do not pay fundraising expenses and you will not be able to incorporate the cost of a grant writer into your proposal budget. If you end up winning a grant and using the funds to pay your writer, you could be in violation of your grant agreement and risk having to pay back the funding.
It goes against accounting rules
Generally Accepted Accounting Principles (GAAP) - the accounting principles, standards, and procedures that your organization must follow when compiling your financial statements - clearly state that fundraising services should be paid “at the time the services are provided.” It’s typical for funders to take several months to make a decision and disburse funds after they receive your grant, meaning there will be a significant gap between when your grant writer prepares your grant and when you receive the money. Not paying your grant writer when they’ve completed their work could ding your audit (which in turn may be a red flag for future grant proposals).
Fundraisers frown on it
The Association of Fundraising Professionals is clear about this, stating that members may “not accept compensation or enter into a contract that is based on a percentage of contributions; nor shall members accept finders’ fees or contingent fees.” The Grant Professionals Association also says “members shall not accept or pay a finder's fee commission, or percentage compensation based on grants and shall take care to discourage their organizations from making such payments.”
Given the strong stance of these two professional organizations, a grant writer who works on commission either isn’t aware of these ethical standards or is ignoring them, both of which should be red flags.
It could cost you more
If a grant writer spends 20 hours on a grant and charges $75 an hour - a fee that reflects the time and talent it takes to produce a strong grant proposal - they’d bill you $1,500. If you win a $50,000 grant and award them 5%, their fee would be $2,500. Since you can’t use the grant money to pay for that fee, where is the money going to come from? You’re better off paying the $1,500 upfront.
Grant writers aren’t responsible for your success
Receiving grant funding is about far more than writing a grant. Many variables will impact whether your proposal is funded. Foundations look at the strength and sustainability of your
proposed project, if your proposal aligns with their funding priorities, your reputation, track record, and financial history as an organization, your leadership, your relationship with them, and more.
These elements are not within the control of a grant writer, and your writer shouldn’t be penalized if your organization isn’t a good fit for a proposal.
Read More: 7 Reasons You Aren’t Getting Grant Funding
You should pay professionals what they are worth
Grant writing is a skill, and preparing a grant takes significant time and effort. Grant writers perform an important service, and as a nonprofit, you should pay them for their skills.
If, as a startup or small nonprofit, you’re wondering how you can afford a grant writer, you may not be ready to apply for grants. Before you dive into your next grant application, make sure your annual fundraising plan has a clear roadmap and look at other ways to raise the initial funds to get your organization off the ground.
P.S. Need more help kickstarting your fundraising? Download our free Fundraising 101 White Paper today.