This is a topic we have been posting about since 2014 (https://www.ebhoward.com/contingency-fees/). Every now and again, we get a client who asks us if they can “just pay us out of the grant award” or if they can pay a small percent upfront and the remainder upon award.
As much as we want to help every client, we have to respectfully decline as that would be a success fee, and success fees go against the E.B. Howard Consulting‘s code of ethics, as well as that of the Grant Professional Association (GPA), and numerous other organizations.
Success fees are a type of payment to a grant writing professional in which the professional only gets paid for their services in the event the proposal is accepted. There are so many reasons why this method of payment does not work.
1. How services are paid
Imagine going to the doctor and telling your physician that you will only be paying for the visit in the event you feel better by next week. The physician could accidentally misdiagnose you. You could have comorbid conditions they were unaware of. You could be allergic to your medication and have to stop taking it. Nonetheless, the physician would have examined you, made the best attempt to diagnose your condition, and followed up with you to see if you were improving. All that work the physician did, regardless of the outcome, was just that – hard work performed using knowledge gained from both education and real-world practice.
Specialists rely on payments for their services to continue to provide them. Writing a grant is much the same. A grant writing professional (a reputable one, anyway) puts the same amount of high-level effort into every single grant they write. Although not every grant will be awarded, this process is a service, and that professional should be compensated at the time services are rendered.
2. Who makes the decision
Certainly not grant writing professionals, as that would be a major conflict of interest! Reviewers decide who gets an award. Reviewers are appointed by either a government agency or private funding institution based on their expertise and merit in identifying a marketable opportunity vs. an idea that is not quite ready yet.
Reviewers use specific criteria (criteria may differ between agencies and organizations) to determine a good fit. Some organizations receive an award, and the rest do not. Given that reviewers are solely responsible for award decisions, why would a grant writer forgo payment or get paid more depending on an uninvolved third party’s opinions?
3. Ethics
A major reason we and many other grant writing professionals decline to accept a success fee, it is unethical.
Is it okay to be paid a commission/percentage of the grant total?
https://grantprofessionals.org/page/ethicsfaqs
No, as a member of GPA, we are not to take a commission/percentage of the grant total but are to work for a salary or fee. The agency/organization is paying the grant professional to write the proposal for a project or need that the organization has identified. The funder is awarding dollars for the project/need, not the skills of the grant professional. (1, 19)
If the ethics do not bother you, the IRS audit will. Companies and grant writing professionals who choose to operate on a success fee basis are subject to consequences. If an audit discovers this practice took place, they can fine the company or force them to pay back the award amount in full.
Grant writing professionals can suffer damage to their reputation and possible disbarment from the Grant Professionals Association if a member. An additional (unitemized, unaccounted for) fee for something that should have already been paid for (fee-for-service) is a glaring red flag to an accountant or auditor.
Your takeaway
Unlike most of our competitors, we do not take incentive fees, contingency fees, or success fees. We uphold the ethics of the Grant Professional Association (GPA), follow Generally Accepted Accounting Principles (GAAP), and follow the federal government’s Uniform Guidance regulations §200.209.
We work with high-growth startups and organizations that support the startup and innovation ecosystem. We build highly specific non-dilutive funding menus, provide proposal preparation services, and measure outcomes of funding through evaluation. Schedule a consult call with us HERE.