As a consultant I have an opinion on just about anything you ask me! That is part of my job. However, nothing makes water boil faster that the subject of hiring a professional fundraiser or grant writer and how you go about paying that individual. As far as I know I have never heard of any state or federal statute that prevents nonprofits from paying a fundraiser and/or grant writer from the amount collected or based on a percentage on what is actually collected. While it might be legal to do so there is a huge heated argument as to if it is actually considered ethical.
The Association of Fundraising Professionals is one group that says it is unethical to do so and its members will not work on a commission basis. The AFP was founded in 1960 and it has over 25,000 members who help raise money on behalf of a wide variety of nonprofit charitable organizations across the U.S.
As you might imagine there are strong arguments on both sides of this issue and people will draw comparisons justifying being paid a percentage just as someone like an attorney or a real estate agent would receive.
The real question I think that often goes unanswered has nothing to do actually with how the person is paid but what effect does paying a commission or percentage have on the nonprofit and its ability get the funds it needs or raise the funds in the first place.
Lastly, it seems the funders themselves have remained deaf to this issue. I truly believe if some of the major foundations in the U.S. took a firm stand forbidding grantees paying commissions or percentages to professional grant writers this discussion would be over.
DISCLAIMER: This information is not intended to provide legal or accounting advice, or to address specific situations. Please consult with your legal or tax advisor to supplement and verify what you learn here.