Ethical Standard Deep Dive: Standard 24

Throughout the month of October, members of the AFP Ethics Committee will be addressing each of the standards in our Code of Ethics. Today, Yulanda Davis-Quarrie, M.S., CFRE examines Standard 24 and the practice of fundraisers paying finder’s fees or commissions for gifts.

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Standard 24: Members shall not pay finder’s fees, commissions or percentage compensation based on contributions.

Yulanda: Standard 24 is the bookend to Standard 21. It makes logical sense that if an AFP member cannot accept percentage-based/commission-based compensation, which places self-gain above donor trust and the organization’s mission, that member cannot perpetuate that type of unethical compensation by paying such fees to others.

The payment of percentage-based compensation sometimes is highlighted by the media (and not in a good way). One reason is the advent of telemarking companies who market their services with the pretense that they were helping the nonprofits raise lots of needed financial support for their various nonprofits. Unfortunately, a few companies took advantage of these nonprofits, and, as a result were charging, in some cases, up to 80 percent (or more) of the dollars raised, which left only a small percentage to support the charity’s mission. The obvious inequity of this approach caught the media and the public’s attention, and it underscores why the Association adopted this standard to ensure that charities get the full value of any donations being raised on their behalf.  

A consultant should be paid a fair fee but not on the basis of a percentage of the funds raised.  This approach ensures that the donation goes to support the charity and not the consultant. 

Guidelines

• Members recognize that there are three primary principles underlying this standard:
  • Philanthropic giving is a voluntary action for the public benefit.
  • The seeking or acceptance of philanthropic contributions should not provide personal gain to anyone.
  • Donors and potential donors must be protected from pressure or coercion.
• Commission or percentage compensation is any payment based on the dollar value of contributions.
• A finder’s fee is a fee paid to an individual for introducing an individual donor to a nonprofit organization.
• A finder’s fee should not be paid to an individual on the basis of the size of a donation secured.
• Members shall take care to discourage their organizations from paying finder’s fees, commissions or percentage compensation based on contributions.
• It is acceptable to negotiate a fee for service based on the work carried out by an individual, where that fee has no relation to the subsequent size of a gift, or the outcome of the solicitation efforts.
• Bona fide transaction fees are not subject to this standard. Transaction fee(s) include fees for credit card processing, stock transfers, electronic funds transfers, lock boxes, and processing Internet transactions.

Examples of Ethical Behavior

1. Refusing a contribution if it involves the payment of a finder’s fee or could be perceived as such. Explaining clearly the reasons for such refusal, and encouraging the parties involved to find a way to make the donation without the payment of a finder’s fee.
2. Helping a donor, estate planner, or counselor understand that a contribution or bequest is to be given to benefit the organization receiving the contribution, or a cause embodied therein, and not to benefit individuals.
3. Promoting the philanthropic or public benefit aspect of giving.
4. Establishing clearly in advance any fees payable for donor solicitation efforts and ensuring that such fees are not based on a percentage of contributions.

Example of Unethical Behavior

1. Paying a finder’s fee based on percentage contributions to an individual for identifying a donor or recipient organization.
2. Establishing a remuneration plan which pays a percentage of donations made.
3. Suggesting to someone that he or she might ask for a fee for making a match.
4. Paying a percentage finder’s fee for the purpose of securing a donation.
5. Paying a percentage finder’s fee for obtaining a corporate sponsorship.

Supported by: 
The Claudia A. Looney Fund for Ethics in Fundraising
&
The Patricia F. Lewis Ethics Endowment Fund