Early in my career in nonprofit leadership, one of the people who trained me in fundraising said that the practice of paying staff and consultants/contractors on a commission basis to fundraise for you was “frowned upon,” though perhaps less so than in the past. In other words, rather than paying a salary to an employee or a monthly retainer to a fundraising consultant, they would be paid as a percentage of funds they raised. I figured that one possible way to do this would be to have anyone being paid on commission to pro-actively disclose that to people they solicited for donations.
In recent times, a number of my clients have proposed or considered this kind of arrangement and asked my views about it. This is especially common among cash-strapped nonprofits and ones where some or all of its leaders come from parts of the world where paying people on commission is more commonly practiced (and in more fields) than it is here in the United States.
I had been meaning to research the current positions of the fundraising and nonprofit professions on this practice and whether it is considered ethical. Fortunately, my job became easier when someone in a terrific Facebook group I am part of – Change the World or Bust created by the effective, generous and energetic nonprofit leader Amber Melanie Smith – asked about it. One helpful member posted a link that led me to other resources related to this matter.
The bottom line is that this practice is still discouraged. To make it easier for others to get a quick sampling of current ethical standards related to fundraising on commission, I have quoted some policies and guidance below.
The first place I went to was the National Council of Nonprofits page on ethical fundraising. The relevant section reads: “It is NOT appropriate for a nonprofit to compensate a fundraising professional based on a percentage of the money raised.” [Emphasis in original.]
The Council’s section also directs readers to the Association of Fundraising Professionals Code of Ethical Standards, which says the following: “Members shall … not accept compensation or enter into a contract that is based on a percentage of contributions; nor shall members accept finder’s fees or contingent fees [and] be permitted to accept performance-based compensation, such as bonuses, only if such bonuses are in accord with prevailing practices within the members’ own organizations and are not based on a percentage of contributions … [and members shall also] not pay finder’s fees, commissions or percentage compensation based on contributions.”
Finally, the Council also directs readers to the Pennsylvania Association of Nonprofit Organizations (PANO) Standards of Excellence which includes this: “Resource development personnel, including both employees and independent consultants, should not be compensated based on a percentage of amount raised or other commission formula.”
It does appear that paying fundraisers on commission is legal, though since states regulate fundraising it is wise to check the laws in states you fundraise in to be sure. A helpful page on a website created in part by the state government of Pennsylvania says this, “While commission-based fundraising is legal, it is generally considered to be a bad practice and/or unethical.” It then goes on to explain why it is not considered proper.