Fundraising Costs: Some Thoughts on Percentages

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There may come a time when your department, community or another nonprofit you're connected to may need to hire a professional fundraiser on retainer to coordinate a fundraising campaign. How should that person be paid?

The international Association of Professional Fundraisers, (AFP) includes 28,000 members across the world. Their members are prohibited from accepting percentage-based compensation or finder's fees. The reasons why include:

1. IRS-recognized 501 (c ) (3) nonprofits are prohibited by law from operating for any private benefit. Having a fundraiser's pay directly to the amount raised could be construed as undue benefit for that employee or contractor.

2. As explained in the 2001 AFP Ethics Committee position paper on the topic,  "Charitable organizations rely on donations voluntarily given. There is no comparable exchange in the business world. In a commercial transaction, tangible value passes directly from one party to the other for a stated price.... The motivating factor in charitable behavior is social benefit. What may be proper motivation in commerce is inappropriate in the nonprofit sector."

3. Because the primary motivation of charitable behavior is social benefit, it's reasonable to expect the best possible work from any fundraiser you hire regardless of his or her direct personal stake in the outcome. 

4. Hiring fundraisers for your campaign based on a clearly-outlined monthly retainer, project or hourly fee ensures the focus remains where it should be: on your donors and volunteers who make your progress and mission work possible. 

5. Effective, committed fundraisers know their real role is to help you and your organization "open" gifts from donors connection to your mission, not employ commercial sales tactics and put his or her own interests first. 

The bottom line:  If hiring a fundraiser for a campaign, project or any other reason is in your future, do not agreed to compensation that based on a percentage of the funds raised.


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