Professional Fundraising Consultants and Grant Writers

Nonprofits that hire outside professional fundraising counsel should be aware that there are state and federal labor laws governing wage payments that require the nonprofit to properly classify and compensate the consultant. Do you know whether your grantwriter is an employee or consultant?  Additionally, nonprofits hiring fundraisers should become familiar with state laws that may require both the nonprofit and/or the outside fundraiser to register with the state.

Is your grant writer an employee or a consultant?

Just because your fundraising consultant wants to be an independent contractor or because the last one hired by the nonprofit was a consultant, does not mean that the worker who is writing grant proposals and advising your board about donor-prospects is actually a consultant/independent contractor. The IRS and State and Federal Departments of Labor might classify the worker as an employee. Know the difference and how classification of workers can impact the nonprofit’s tax liability. A good place to start is guidance provided by the IRS.

Has your fundraising consultant suggested that s/he be paid a percentage of funds raised?

Learn why paying fundraisers a commission or percentage of funds raised is considered unethical by many. Read a Position Paper of the Association of Fundraising Professionals.

Has your grant writer registered with the state as a fundraising consultant?

It may not be necessary, but non-employee fundraising consultants in many states are required to register with the state. If your nonprofit operates in a state with such a requirement and the fundraising your nonprofit hired has NOT registered, you should insist that s/he register in accordance with state law requirements. In some states, although the obligation is on the consultant to register, the charity can be subject to fines/penalties. (Registration requirements only apply to outside workers, not employees so if the worker who handles fundraising for your nonprofit is an employee of the nonprofit, charitable registration requirements do not apply.)

Lawforchange.org provides links to the laws that regulate fundraising in each state.