Compensation of Outside Fundraisers

Payments to an ECFA member’s outside fundraiser (as well as payments to employees of the ministry) on a percentage-of-funds-raised basis is forbidden by Standard 7.5 because of the potential for conflicts and the opportunities for abuse:

An organization may not base compensation of outside stewardship resource consultants or its own staff directly or indirectly on a percentage of charitable contributions raised.

If the fundraising consultant receives a percentage of the amount raised, the motivation of the professional to raise additional dollars naturally increases. Why, then, cannot a fee be agreed upon which represents a percentage of the dollars raised? Givers have a right not to be pressured into giving to any ministry, and to know that all appeals for funds are truthful and accurate. Outside consultants who receive a percentage of funds raised as their fee for conducting the solicitation may violate these guidelines. The fundraiser must be motivated by the purpose of the ministry’s work and the desire to do a good job, not by the compensation that will come from raising additional funds.

Why has fee-for-service become the standard and the position that ECFA is advancing as a basis of payments to outside fundraisers?

Charitable mission must always be primary to the self-interest of fundraisers. The long-term interest(s) of the ministry may become secondary to the consultant’s financial interests if a percentage-based compensation arrangement is used.

Every effort must be made to keep giver trust. Giver attitudes can be unalterably damaged in reaction to undue pressure and/or in being made aware that a direct commission will be paid to a fundraising agent from the giver’s gift. This can compromise the trust upon which the ministry relies.

The giver’s best interests must always prevail over any incentives for self-dealing. Givers may choose from a variety of donation paths. While the percentage-paid fundraiser may influence giver choice so as to benefit the greatest immediate need, this may not preserve the giver’s assets for the best long-term benefit to either the giver or the ministry.

Compensation should be based on merit. Percentage compensation arrangements can provide reward without merit. Contributions that materialize at a given moment are often the culmination of the efforts of many people, including volunteers, over long periods of time. The person whose compensation rests on commission or percentage would wish to include such gifts within calculations for his or her own compensation.

Compensation practices should encourage giver liberality. Savvy givers will inevitably ask pertinent questions about fundraising compensation arrangements. Upon learning that the fundraiser will receive a percentage of the gift, what giver would want to give more so the fundraising agent could receive more? In most instances, the ministry will lose an increased gift and the credibility of the ministry will suffer. Wise givers fully understand the need to appropriately compensate qualified, competent professionals. They know that professionals generally receive commensurate fees and that, indirectly, a portion of their gift is going to pay the fees of a fundraiser. The potential negative impact results when the giver learns that the fee to the fundraiser will be paid as a commission of the gift.

Compensation practices should promote ethical fundraising behavior. Percentage compensation arrangements can foster unethical behavior or inappropriate conduct by individuals whose self-interest is oriented to immediate results, irrespective of the giver’s best interests.

Multiple-year commitments. To serve the ministry and to enable givers to be as generous as possible, fundraisers should challenge givers with multiple-year commitments. Why would a consultant who is compensated on a commission basis encourage multiple-year gifts unless the compensation agreement includes payment, even if the consultant has moved on to another employer?

Standard 7.5 does not prohibit performance-based compensation such as bonuses, provided that the performance-based pay is not based on a percentage of philanthropic funds raised.

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.