Thursday, March 25, 2010
Faux-Ethics Debate on Percentage Contingency Fees in Grant Writing
Paying grant writers a percentage of the grant funds is often presented as a black and white issue in the nonprofit world. Whether paying a contingency fee is ethical depends on whether the percentage represents a reasonable amount of money for the work involved; the same principle that applies to a flat fee for services. I argue that if a contract for services is negotiated ethically and it results in a reasonable level of payment, there is absolutely nothing unethical or sinister about the practice of percentage contingencies. I suggest to you that a contingency arrangement can actually increase grant writer accountability.
Fundamentally, paying a percentage fee would only be ethically wrong if it were ethically wrong to pay for a grant writer’s services. It is self-evident that the amount of money paid to a writer should be proportionate to the work involved. A flat fee would be unethical if a grant writer were to accept a guaranteed grant writing fee and then do a poor job of writing the grant. It would also be unethical for a grant writer to accept a flat grant writing fee for a grant that they were fairly certain the organization would not receive.
A reasonable contingency percentage is very ethical because the writer has to do the best job possible to get the grant funded. The writer is also not likely to accept a grant that has a low likelihood of funding because on a percentage, the writer takes all the risk! If the grant isn’t funded, they don’t get paid! What is more ethical on the part of a grant writer than that?
The bottom line in any contract for services is reasonableness. The reasonableness in consulting fees is based upon the market and upon the value of the work. Only a non-profit administrator gets to decide what’s reasonable and their Board should be reviewing these decisions. If a grant writing contract results in a fee of $5,000 being paid to the writer for say, a $95,000 proposal, would it be a more ethical fee just because it was guaranteed to be paid whether or not the grant was funded? I say absolutely not, there is no nexus between ethics and reasonableness, and a flat fee for services.
I once heard of contingency fees being charged in the field by a consultant that I felt were out of line and unreasonable. This consultant was not successful and the natural market forces drove her out of the business. Such abuse is probably where the ethics of the practice has come into question; however, to paint contingency fees with a broad brush as unethical is just silly and unfair.
Many grant writers work diligently with agencies to obtain funding for them on contingency arrangements. This is helpful to agencies with cash flow problems. It is up to each non-profit to establish contracts for grant writing services that are reasonable and representative of the market rates in their area no matter what the form of payment.
I’ll go one step further in my argument by suggesting that the entire debate is faux-ethical in nature. American Association of Grant Professionals (AAGP) member regulations state that, “Members may accept performance-based compensation, such as bonuses, provided such bonuses are in accordance with prevailing practices within the members’ own organizations and are not based on a percentage of grant monies.”
The AAGP regulation that approves bonus (which is a contingency) proves their regulation against contingencies as faux-ethical. AAGP means to argue that nobody involved in the process of giving a bonus is whipping out the calculator to determine the bonus amount as a percentage of the grant funds received to determine reasonableness? A bonus amount based on “prevailing practice” amounts must be calculated on something or how could it be supported as mathematically reasonable?! A percentage contingency fee and a bonus contingency are no different, they are both performance-based.
The AAGP needs to stop treating Executive Directors as mathematically-challenged greenhorns who need to be protected from city-slickers with unreasonable contingency contracts. Unethical fees can be charged in any format and I trust that ED's know what is exorbitant when they see it.
The issue of percentage fees simply can’t be painted as black or white; come on folks, I was born on a Sunday, but it wasn’t last Sunday.
About Creative Resources & Research
- Grant Goddess
- Woodland, CA, United States
- Creative Resources and Research is a consulting firm specializing in grant writing, grant seeking, program evaluation and professional development training. We have worked with hundreds of clients including public and private schools, school districts, universities, non-profit organizations, and social service agencies throughout California, securing over $155 million from federal, state and private foundation funding sources over the past decade. Our primary grant writers and program evaluators have over 50 years of combined experience in the education and social services fields. At CRR we prefer a personal approach to the clients we work with; by developing long term relationships, we are better suited to match client’s needs with available funding sources. We provide a variety of services to help assist you, including grant writing, evaluation consulting, professional development opportunities, and workshops.