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Of Percentage Fees and Prevacid:
Or What Part of Commitment Don’t You Understand
The song asks, “What’s it all about?” (Alfie). Ethical dilemmas are almost always encountered first in the pit of one’s stomach. So when we hear that something is unethical yet can’t quite figure out why, it may be appropriate to Why does the Association for Fundraising Professionals (AFP), American Association of Grant Professionals (AAGP) and other similar organizations have a Code that explicitly outlaws what is called “percentage fee fund raising”? Most especially, why do these groups readily acknowledge that this subject constantly re-emerges as an issue, both for the organizations and the employers represented by each of the members? Could it be this supposed “code violation” just doesn’t pass the belly tolerance test? When one (me!) confronts AFP or AAGP officials with the simple question, “Why is it unethical for people to raise funds or write grants on a contingent fee basis”, we are usually met with a series of specious, if not ridiculous, alleged reasons. These range from: the practice might undermine volunteer services; to the fund raiser/grant writer might be tempted to increase the size of the gift/award. Okay, so what’s wrong with my employer getting a larger amount and why do percentage fees annoy volunteers more than big salaries or --- bonuses!!! --- which are allowed? Another great excuse says that the IRS code explicitly outlaws payments that inure to individual benefit. So, salaries be damned? What about legal percentage payments to tele-marketers by non- profits? And the really good one: if percentage fees are paid from the federally-negotiated A-87 indirect cost allocation, it’s fraud to use these for contingent fee payment. Even though we know that indirect costs, while negotiated following a careful formula assessing actual administrative expenses, flow to the recipient as unrestricted dollars into the general operating account, where they could even be used to pay DIRECT program expenses, and often are! Clearly, these points represent a panoply of excuses but offer little logic, rational thought or careful judgment. So what then is really driving this debate by those who, despite their inability to advance even one clear and cogent reason the practice might be unethical, nonetheless persist in their wild and baseless There are actually two somewhat linked issues I believe are very much in play. First, let’s remember that AFP, like any other trade association or union, exists first and foremost for members’ protection. This is often taken to mean “keeping others out” and, in this case, let’s be certain to exclude those who are actually willing to have their compensation tied to measurable performance. How many so-called development professionals would be out on the street if their salaries, indeed their employment, was directly tied to the phrase: what have you done for me lately? Anyone foolish enough to accept even partial risk, along with the employing agency, for success (and failure) is a clear and present danger to the rest of us and must be kept away. And then there are those new, tiny, start-up, community based organizations and so often those agencies serving the poorest and most unfortunate citizens who simply can’t afford one of those well-healed development professionals and can only get into the game on a contingent fee arrangement. After all, we certainly can’t let “them” into our club because, quite frankly, they are more than likely to siphon off support that we need and So this practice of claiming an ethical dilemma is really nothing more than the development establishment protecting itself and, while so doing, helping the rich get further aggrandized while excluding possible competition, both for jobs and funding. This is fine if we understand what it is and stop treating, with contempt, those who perform legitimate and serious services, especially on behalf of poor, downtrodden and needy people within our communities. I suggest we call a truce, re-write these foolish and ill-conceived Codes of Ethics and listen to the churning in our overly developed abdomens. The Center for Program Resources, Inc.,
Telephone: 602.222.3402
Facsimile: 602.266.3404,
Box 45541, Phoenix, AZ 85064-5541
email: thecenter@cox.net
(Proudly offering clients a wide range of fee options, including percentage fees,
for over 30 years!!!)

Source: http://cfpr.info/article.pdf

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