Monday, February 16, 2015

Can you pay for grant writing via commission payments?

Every grant writer gets letters or emails like this:

" We are looking for a grant writer to help us get funds for (fill in the blank). We will only pay for awarded grants, but we will pay 10% of the grant award. We anticipate you writing at least three grants a month."

Ethical grant writers normally refuse this arrangement, and it's not because they are greedy capitalists who don't "get" nonprofits.

The grant writer understands that the nonprofit doesn't normally mean to do anything illegal or unethical. They just don't understand the process or the consequences. The organization does know they have no money, so to them only paying for a positive outcome just makes sense. They reason that if the grant writer's income is dependent on getting grants they will try harder.

So, what's the problem?

That's the organization's side of the fence. What about the other side?

Put aside the fact that these folks are asking for a minimum of 30 hours a month in free labor. Also disregard the high probability that the organization may not qualify to apply to three grants a quarter, much less three each month. We can also ignore the statistical fact that there are approximately 100 nonprofits that need money for every grantor that has money to give. Those are all drawbacks for the grant writer, but they aren't unethical or illegal.

What is unethical and possibly illegal is the process necessary to collect the commission. It almost always requires both the grantee and the grant writer to commit fraud.

With rare exception, grant funding never allows the recipient to pay for expenses incurred before the grant was funded. In addition funding is often restricted, i.e. it can only be used for the direct expenses of a program. The grantee has to attest to the use of the funds in a "use-of-funds" report or statement to grantor, and the grantor can ask for the return of funds not used as specified in the grant.

At the very least, commission arrangements often result in nasty little social media spats over payment once the grantee discovers they can't use the grant funds for that purpose. At worst, it could result in a filing in small claims court.

Assuming that the grant writer actually get does paid, he/she will have to bill for the commission after the funds are awarded (which can be as much as a year later), and he/she usually can't state on the invoice that the funds are for writing the grant. Instead the invoice would have to attest that the funds are for some allowable expense of the program.

In other words, you have to assist the grantee in lying to the grantor to get your money.

There are a very few usually government-funded grants that might allow for grant preparation. I think in fifteen years I've seen three that specifically stated that there was an allowance for "application preparation". This amount is often as little as one to three percent of the awarded funding, putting a 10% commission out of the realm of possibility.

What's the alternative?

So what's a brand-new, broke nonprofit to do? Ask for a volunteer, making it clear that there is no financial compensation. Some students or recent graduates might do it just for the experience, or perhaps it is a way for a volunteer to support that specific charity. Some online job boards that cater to nonprofits have a section for people to ask for volunteers. That's absolutely fine, and totally ethical.
If you want to get your feet wet in the world of grant funding at no cost to you, post an ad for a volunteer or visit your local college or even civic groups and ask for help. You could even take some of the comparatively inexpensive online introductory courses and do it yourself.

You can pursue other fund-raising strategies until you have enough funding available to employ the services of a grant writer. Grantors also like applicants that have proven that they can raise funds in several ways.
Caveat Emptor

There is no specific universal law against soliciting or performing grant writing services on a commission basis, although some professional organizations do include such a prohibition in their professional code of ethics, for all the reasons stated above.

Are there people out there who will accept your invitation to write grants on a commission basis?  Sure. A few of them may even be qualified to write grants. They may write grants for big award amounts, hoping against hope that one will connect. Or they might write dozens of low-dollar appeals hoping to keep a little money coming in to pay the bills. In the meantime, they may ignore other revenue-generating opportunities such as in-kind or product donations, since there is no commission to be earned.

Eventually the lack of income will result in fewer and fewer grants being written. In the meantime, the organization is racking up a pretty consistent history of being denied funding, and that can hurt their chances with future grantors.

If, and it's a big if, the grant does allow for post-award grant writing reimbursement, and the grant writer agrees to the arrangement, then the commission-based arrangement may work out. If so, include that information when you solicit services on a commission basis. Just be sure that you understand the pitfalls before entering into the arrangement.

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