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Monthly Archives: June 2012

This post discusses pre-award proposal development cost recovery in Federal grants. It is one of an ongoing series on Grant Writing as a Career. Earlier posts discussed other aspects of retaining and paying for grant writing consultant services.

 

In either of three ways, both as applicants and clients, educational institutions and non-profit organizations, may recover costs for retaining a consultant to develop a proposal for a Federal grant.

 

Educational Institution Proposal Cost Recovery:

Federal cost principles offer guidance for applicants that hope to pay for a consultant out of a future grant award. In OMB Circular A-21 – Cost Principles for Educational Institutions – the key provisions are J36 (pre-agreement costs) and J38 (proposal costs).

 

In simple terms, a ‘proposal cost’ is a cost of preparing a proposal on a potentially federally funded project, including the cost of developing data necessary to the proposal. An applicant may recover such a cost if the grant-making agency allows and approves recovery of such ‘pre-agreement costs’ in its request for proposals (RFP).

 

In a proposed budget, a line item would appear under the cost category of ‘consultants.’ For the benefit of the proposal’s technical reviewers, a meticulous applicant would explain this line item in its budget justification narrative.

 

Cost Recovery Using Indirect Cost Rates:

A second way for educational institutions to recover costs under OMB Circular A-21 is through an indirect cost rate. Using one, an applicant may recover the pre-application costs of hiring a consultant to develop a proposal to a Federal grant program that does not explicitly pre-approve charging such costs directly to a future grant award in a specific RFP. The applicant must take several steps in order to do so.

 

First, an applicant must apply to a Federal agency to establish an indirect cost rate. Second, it must spread its pre-application costs (e.g., those for developing a proposal) over its entire indirect cost structure. Third, it must apply its costs for preparing each proposal – as represented in its approved indirect cost rate – to each grant it obtains, but only do so when a grant program allows application of an indirect cost rate, since some programs do not. All such recovered costs must satisfy the test of being ‘reasonable and equitable.’ The applicant cannot allocate pre-application costs incurred during a previous accounting period into a current accounting period.

 

The use of an indirect cost rate allows the educational institution, as a client and an applicant, to recover its proposal development costs for both successful and unsuccessful grant applications. Federal agencies provide extensive guidance for calculating indirect cost rates.

 

Non-Profit Organization Proposal Cost Recovery:

A non-profit organization (NPO) must take a third approach in order to recover pre-award costs for proposal development. At present, OMB Circular A-122, Cost Principles for Non-Profit Organizations, does not enable it to adopt the same approach as an educational institution to using indirect costs. Instead, in order to become an allowable cost item, the NPO must propose pre-award proposal development costs as part of an indirect cost rate proposal. In addition, a cognizant Federal agency (i.e., one that negotiates and approves indirect cost rates for a non-profit organization on behalf of all Federal agencies) must approve its proposed indirect cost rate.

 

Proposal Development as Capacity Building:

A client may also apply for capacity-building grants from private foundations. Among the allowable purposes of such grants is commonly advancing an eligible applicant’s mission through ‘fund development’. This will be the focus of a later post.

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One key to winning a grant is to be aware of patterns among potential grant makers. This post highlights several recent and current patterns in grant making in the United States as a whole.

 

The Foundation Center conducts periodic surveys of samples of the nation’s foundations and publishes summaries of its findings online. Among other topics of potential interest to grant seekers, the surveys of various categories of grant-making foundations look at types of support, types of beneficiaries, and types of program focus areas.

 

Types of Support:

As a percentage of their total funding, foundations continue to favor requests for program support far more than other requests. Based on a sample of 1,490 larger foundations, surveyed in 2010, 50% of grants were for program support, another 20% were for general or operating support, and 18% were for capital support. Grant seekers should note that subgroups of foundations – such as family foundations or community foundations – do not necessarily share the same patterns of grant making as may prevail among all foundations.

 

Beneficiaries:

Based on the same sample, again as percentages of total funding, the top beneficiary groups for all foundations are: economically disadvantaged (29%), children and youth (20%), women and girls (8%), and ethnic and racial minorities (7%). Again, grant-making tendencies within the subcategories of foundations differs from the overall patterns.

 

Program Focus Areas:

Among the many possible program focus areas in grant making, health vies with education for pre-eminence. As percentages of total funding, based on all grants of $10,000 or more awarded by a sample of 982 larger independent foundations, surveyed in 2012, the top program focus areas are: health (25%), education (24%), human services (15%), and arts and culture (14%).

 

Consequently, when viewed on a nationwide basis, the most opportunities for securing a grant from a foundation in 2012 appear to lie with applicants that seek program support for delivering health or educational services for persons who are economically disadvantaged. As one might expect, the actual number of such opportunities varies significantly with an applicant’s specific geographic location and with the specific type of foundation it approaches for funding. Potential grant makers are far more numerous in the country’s most populous states, and family foundations are far more numerous than other types of foundations.

This post discusses professional codes of ethics in grant writing. It is one of an ongoing series on Grant Writing as a Career. Earlier posts discussed several kinds of grant writing consultants’ services and various fees they may charge for them.

 

Professional Codes of Ethics:

As professions, Law and Medicine, among many others,  have long had codes of ethics. Formal adoption of such a code is a mark of maturity in domains of human inquiry and practice. In recent decades, grant writing has joined the ranks of such domains. Many of its practitioners, organized into associations, now espouse and enforce a code of ethics as a set of norms to govern their professional conduct.

 

Both how and when a client pays a contractor for developing a proposal are enduring focuses of ethical concern in grant writing. One of the most persistent questions surrounds the use of deferred payments, or compensation based upon either contingencies or commissions.

 

Grant writing consultants’ websites may declare: “For ethical reasons, we do not work for a contingency fee, commission, or percentage of grant award.” They may also assure potential clients that: “We do not accept projects that are unlikely to be funded and do not require a finder’s fee or contingency fee.”

 

Such declarations and assurances are consistent with the ethical positions of several professional associations. On the practice of deferred payment, the Grant Professionals Association, the Association of Fundraising Professionals, and the American Grant Writers’ Association are in complete agreement. As a matter of ethics, all of them require their members in good standing to eschew deferred payment arrangements.

 

Reasons for Ethical Concerns:

One reason that deferred payment is unethical is said to be the nature of the client. Often the consultant’s client is a small rural school district or a small and/or new non-profit organization. It is argued that such clients cannot afford to pay exorbitant fees to obtain grants. High fees would siphon funds away from tackling the acute and chronic needs of the clients’ beneficiaries. However, the associations’ ethical rules are universal; they do not vary with the nature of the client – large or small, for-profit or non-profit. The possible effects of deferred payments on particular clients’ working assets do not appear decisive in adopting such rules.

 

Another reason that deferred payment is unethical is said to be out of concern about its actual source. Problems can arise if a client plans to pay a consultant out of a future grant award. Many grant makers and grant programs prohibit using their funds for this purpose, although exceptions do exist. Using a grant award this way may create a breach of trust with the grant maker. It risks post-award revocation or rescission of the grant and risks losing the grant maker as a continued source of future grants. It also risks moving beyond the consultant and client failing to observe a code of ethics and becoming a violation of law.

 

Of course, there are other reasons that deferred payments raise ethical issues. Some of these will be the focus of later posts in this series.

This post discusses commission-based compensation for grant writers. It is one of an ongoing series on Grant Writing as a Career. Earlier posts discussed hourly fees and flat fees, consultant retainer fees and prospect research fees, proposal review and editing fees, ordinary and general consulting business expenses, and contingency fees.

 

As previously noted, the odds of a given proposal being funded vary with the program, the funder, and the competition at the time of application. They vary with the applicant’s experience as a grant seeker, its track record in managing prior grant awards, and the merits of its problem-solving strategies. Seldom is a proposal’s positive outcome a certainty.

 

Commission-Based Compensation:

Contrasted with zero-sum contingency fees, another type of arrangement for deferred compensation pays the consultant a modest upfront fee, such as $2,500 or so per proposal. The client then agrees to pay a further commission upon notification or receipt of funding – either as a fixed sum or as a percentage of the amount of a grant award.

 

Consultants may state their deferred payment options on their websites. One consultant’s schedule – discoverable online – combined a fee with a commission in this way:

  • 60% of estimated fees due in advance (and)
  • 8% of awards over $75,000
  • 10% of awards between $25,000 and $74,999
  • 12% of awards between $10,000 and $24,999
  • 15% of awards between $500 and $9,999

 

In addition to the ‘estimated base fees,’ at the minimum points in each range, this option would amount to surcharges of:

  • $6,000 (at 8% of $75,000)
  • $2,500 (at 10% of $25,000)
  • $1,200 (at 12% of $10,000)
  • $75 (at 15% of $500)

 

With larger grants (such as those of $100,000 or more per year), percentage-based commissions more typically range from 1% to 5% of the total grant awarded.

 

Problems and Pitfalls of Commissions:

A budget is ‘padded’ when a line item is calculated at a higher amount than it should be or is introduced in its entirety when it is not necessary. Commission-based deferred payment arrangements may tempt proposal developers to pad their budget requests so that their pay-offs become that much larger. In the illustration above, from 8% to 15% of each dollar of padding would benefit the consultant, not the client.

 

Such padding goes beyond representing a cushion to account for annual cost inflation in certain items in a multiyear proposal (e.g., in salaries and fringe benefits). It also goes beyond realistic uncertainties in the future costs of certain requested products or services (e.g., those of computers or of airfares).

 

From the start, padding may be evasive or deceptive in its origins and its intent. At best it may be merely naïve. A client with severely limited financial resources may be more tempted than others to pad its grant budgets in order to pay a consultant’s commission. Whether naïve or deliberate, it is a bad practice since grant makers hold padded budgets in universal contempt.

 

This post discusses contingency fees. It is one of an ongoing series on Grant Writing as a Career. Earlier posts discussed hourly fees and flat fees, consultant retainer fees and prospect research fees, proposal review and editing fees, and ordinary and general consulting business expenses.

 

The odds of a given proposal being funded vary with the program, the funder, and the competition at the time of application. They vary with the applicant’s experience as a grant seeker, its track record in managing prior grant awards, and the merits of its problem-solving strategies. Seldom is a proposal’s positive outcome a certainty.

 

Contingency Fees:

Most grant writers value their work highly enough to require hourly or per diem or per-project compensation, rather than accept deferred payment made contingent upon grants being awarded. And most clients value consultants’ expertise and work products highly enough to pay for them upfront as agreed upon in a contract. However, there are exceptions.

 

Some clients expect consultants to develop a grant proposal for free and to get paid only if or when it is funded. They do so even though their personnel don’t work for free or on contingency themselves. Such clients shift to the consultant the risk of a grant not being awarded. Often, although not always, the same clients expect, sometimes naively, to use part of a grant, if awarded, to pay the consultant. This all-or-nothing arrangement makes any payment contingent upon the outcome of a grant proposal.

 

Zero-Sum Risks:

Some consultants are averse to the risk that they will earn nothing for creating a proposal; others accept the risk. Those who write proposals as a sidelight tend to be less risk-averse than those for whom writing proposals is a primary source of income.

 

Contingencies may leave a consultant penniless while the client walks away with a completed proposal. Such work-products often can be reworked and submitted to the same funder or to others. The arrangement implies that the value of a consultant’s time, effort, and work-product is zero. Such undertakings become speculative at best and desperate at worst.

 

In addition to undervaluing the consultant’s expertise, clients too often try to pay for a funded grant out of the grant itself. Such an expectation is problematic at best. In the federal grant context, cost principles in OMB Circulars A-21 and A-122 prohibit the recovery of costs (including grant writing costs) incurred before a grant award unless the sponsoring agency allows those costs. Whether such pre-award costs are allowable is stated in the proposal solicitation. In the private sector, foundations may exclude both pre-award and post-award proposal development as allowable costs. As a rule, they also tend to abhor the use of their grant awards to pay contingency fees or commissions to grant writers.

 

A later related post will discuss commissions, ethics, and pre-award cost recovery.

 

This is another one of an ongoing series of posts on Grant Writing as a Career. It discusses ordinary and general consulting business expenses. Earlier posts discussed hourly fees and flat fees (also called per-proposal fees or per-project fees), consultant retainer fees and prospect research fees, and proposal review and editing fees.

 

Grant Consulting as a Business:

Grant consulting is often a species of independent contracting and represents at least a minor form of for-profit business enterprise. As part of their service contracts, its practitioners thus try to recover from clients some of the mundane costs incidental to their work.

 

Consultants may adjust their hourly rates to reflect working with local versus distant clients. For onsite consulting, they may charge more-distant clients as much as $100 or more per hour. For an onsite visit with nearby clients, they may charge less per hour or even waive such fees entirely, particularly for an initial contact.

 

Travel Expense Recovery:

In the same way as other types of consultants (e.g., External Evaluators) who are written into a proposal’s budget, grant-writing consultants may charge a per-diem fee for onsite services; these commonly range from $500 to $2,000 per day. Similarly, they also may charge separately for most or all travel expenses incurred. Among such charges are: airfares, taxi fares, public transit fares, lodging, meals and tips, parking, car rental, mileage, and highway tolls. Other consultants don’t disaggregate this way. They simply build such costs of doing business into their overall rates.

 

Some consultants may require a client to prepay certain costs – such as lodging and/or airfare. They may also require a client to reimburse them later for mileage at the Internal Revenue Service rate in effect at the time of the consultation. In 2012, this rate would be 55.5 cents per mile. Again, other consultants simply build such costs into their overall rates.

 

Both clients and consultants may use the General Services Administration (GSA) to estimate reasonable costs for lodging, meals, and incidentals. In using them, they need to recall that GSA rates exclude local and state sales taxes. As examples, the GSA per-diem rates for Houston, in Harris County, Texas (for September, 2012) are: lodging $109/day, meals $66/day, and incidental expenses $5/day. For Chicago, in Cook County, Illinois, the per-diem rates are: lodging $190/day, meals $66/day, and incidental expenses $5/day. However, for Albuquerque, in Bernalillo County, New Mexico, the per-diem rates are: lodging $81/day, meals $51/day, and incidental expenses $5/day. These GSA per-diem rates vary both by location and time of year.

 

Rapid Turnarounds:

Finally, some consultants will try to recover a fee for expediting a grant proposal on a short turnaround time. Such charges for rush delivery, incorporated into fee schedules and contracts, may be $500 to $1,000 or more per proposal. Essentially, they amount to a surcharge for the consultant’s stress in meeting deadlines and a potential lack of sleep. As grant seekers, clients should try to give consultants as much lead-time as possible to avoid these premiums.

This is another one of an ongoing series of posts on Grant Writing as a Career. It discusses proposal review and editing fees. Earlier posts discussed hourly fees and flat fees (also called per-proposal fees or per-project fees), and consultant retainer fees and prospect research fees.

 

Proposal Reviews and Critiques:

As consultants, grant writers market their research and technical writing skills to potential clients. Although egregious exceptions may occur, their skills as writers and researchers are supposed to lend a competitive edge to proposals as instruments of solicitation and persuasion.

 

Sometimes clients may already have the rudiments of a proposal at hand. They may desire only a third-party critique of a proposal that they have already started or which has failed to win funding and for which no reviewers’ comments exist. Consultants may serve such review-and-revise functions with more detachment than those who created an existing proposal.

 

Many consultants are willing to proofread and edit a preliminary proposal rather than always write it from scratch. They are also willing to serve as objective, technical reviewers before a draft or a revision is made final. Consultants may furnish written comments on such a proposal and suggest how it might be improved. Alternatively, they may contract both to provide a critique and to revise or rewrite a proposal entirely.

 

Editing, Review, and Revision Fees:

Fees for proposal reviews vary with its nature and complexity, its state of readiness for submission before review, and the extent to which the consultants are to take an active role in revising the draft. In addition, they may vary with its length and with the type of funding source. Fees for reviewing or reworking longer proposals and those to be submitted to government agencies tend to be higher than others.

 

Fixed fees quoted on websites generally range from $250 to $1,500 per proposal reviewed. The pricier exceptions charge a minimum of $1,750 (10 hours at $175 per hour). Such hourly fees, if specified, are often similar to those consultants charge for preparing a brand new proposal and readying it for submission as a final draft.

 

In this arrangement, consultants are able to practice their technical writing skills and to see how applicants have handled a specific grant program’s proposal review criteria. Clients get an objective analysis of the merits of their proposals before they submit them.

This is another one of an ongoing series of posts on Grant Writing as a Career. It discusses consultant retainer fees and prospect research fees. An earlier post discussed hourly fees and flat fees (also called per-proposal fees or per-project fees).

 

Consultant Retainer Fees:

Some grant writers will work under a retainer agreement for a small subset of select clients. Retainers work well when there is ongoing work and a long-term relationship exists between the client and the consultant.

 

Typically the retainer commits to and specifies a minimum number of hours of service per month and a number of months the agreement is to be in effect. It is paid monthly and may encompass doing prospect research, preparing proposals, and ongoing consultation. Both parties benefit from the predictability of the arrangement. The retainer depends upon the specific contract, but may be as much as $1,000 to $3,000 per month.

 

Prospect Research Fees:

Many consultants will do prospect research for clients. They may adjust their fees according to the length and complexity of the search for potential funders, and according to the size of the client agency. The deliverable product of the search is ordinarily a listing of possible grant sources as well as an analysis of probabilities and next steps for obtaining funding from identified best prospects. The more the client is able to set parameters (e.g., search terms, funding type, beneficiaries, grant award range), the more efficient a prospect search can be.

 

Charges for prospect research services vary widely. They range from $1,500 to $4,000 per funding report, and vary with its nature, extent, and complexity. Even brief reports may cost a client $125 to $500 per identified viable grant lead, or may be delivered at a fixed fee of $600 to $2,500 per search. Evaluations of identified grant leads, conducted in meetings with existing clients, may be charged at $150 or more per hour.

 

In an hour’s time, consultants who know how to use online databases efficiently often may identify hundreds of leads for foundation and corporate grants. Searches for potential state or federal grants seldom generate so many leads. For consultants, the time crunch comes in sorting out the dead-end leads from the viable ones, and the distant-deadline leads from the more proximate ones. For clients, only the viable leads hold any real value, but even a single subsequent grant award can make the costs of the search worthwhile.

This is one in an ongoing series of posts on Grant Writing as a Career. Based on a review of consultants’ websites, it discusses hourly fees and flat fees (also called per-proposal fees or per-project fees). A later post will discuss: retainer fees; prospect research fees; proposal review and editing fees; and general consulting cost recovery.

 

Perhaps surprisingly, some professional grant writing consultants do not quote fees – least of all online – since each proposal and each client is different and they want to honor and preserve their uniqueness in some way. Other consultants may charge by the hour or by the proposal – and go into great detail in describing how they do so.

 

Competitive applications to corporations or foundations tend to be significantly less complex (and thus less costly for clients) than competitive applications to units of local, state, or federal government. In addition, the amount of effort required to develop a strong proposal (and thus ultimately costs to clients) tends to rise in proportion to the amount of funding requested. Both tendencies affect how consultants determine their fees for writing grant proposals.

 

Hourly Fees:

For consultants, charging hourly rates tends to reduce the risk of lost income by reflecting more closely exactly how long it takes to develop a given proposal. For potential clients, this arrangement may appear to be disadvantageous, since it seldom sets a limit on what getting a given proposal ultimately will cost.

 

Hourly rates for writing grant proposals vary greatly. They start as low as $15 per hour for inexperienced consultants to develop the most basic proposals for shallow-pocket clients to submit to private grant makers. Rates may surpass $100 per hour for highly experienced consultants to develop complex proposals for deep-pocket clients to submit to state or federal agencies. A higher hourly rate also often reflects a consultant’s record of success in winning grants. Hourly rates for skilled grant writers tend to average from $50 to $70 per hour, or the equivalent of from $1000 to $1400 per 20 hours.

 

Flat Fees:

An alternative to charging by the hour is to charge a flat fee (also called a per proposal fee or a per project fee). Usually a consultant will perform a thorough analysis of the details of a Request for Proposals (RFP) before estimating the hours needed and calculating a flat fee. While a consultant may charge a minimum flat fee of $2,500 for a proposal to a private grant maker, it may require a minimum of $4,000 or more for a proposal to a federal agency.

 

For consultants, charging flat fees puts a premium on being able to predict how much time developing a given proposal will take. It also puts a premium on consultants being able to develop the proposal efficiently so that the effective hourly rate of income on the work remains acceptable. Potential clients may regard a flat fee as more advantageous than an hourly fee, since it allows them to anticipate the maximum cost of getting a proposal developed.

 

The floor for a flat fee tends to be at least $1,000 for the most basic proposals for shallow-pocket clients to submit to private grant makers. Some consultants set the floor as high as $3,500 or $5,000 or even more. Flat fees may surpass $10,000, $12,000, even $15,000 for a complex proposal by an experienced consultant for a deep-pocket client to submit to a federal agency.

 

Many consultants will adjust their fees depending on the nature of a funder. While a quoted general per-proposal rate range may be $1,000 to $8,000, they may charge less for an application to a foundation or a corporation than one to a state or federal agency. Alternatively, a consultant’s quoted fee range for foundations may be $500 to $6,000 while its quoted fee range for government grants may be $1,200 to $15,000. Beyond these variations, a consultant may charge extra for preparing a proposal having a very short lead-time before it is due, not matter what its source.

 

Often consultants will require advance payment in full if the flat fee falls below $3,500 or some other predefined threshold. If the flat fee exceeds $3,500 or some other given threshold, they often will require from 50% to 70% of the total fee to be paid in advance. And they will require the balance to be paid either upon delivery of the completed proposal or within 15 to 30 days thereafter.

The supply of grants is shrinking, even while the national demand for them continues to grow. This post is one in a series concerning trends impacting the future of grant making.

 

Diminished Assets:

Without assets whose growth in value outpaces annual inflation rates and annual grant awards, the Nation’s grant-making foundations cannot continue to make grants indefinitely. Yet, after nearly five years, foundation assets have not yet returned to their pre-recession levels. The Chronicle of Philanthropy has reported that the ten wealthiest foundations alone saw their assets’ value decline by more than $25 billion, or about $1 in every $4 of their value before the economic crisis of 2008, a plunge from which they’ve yet to recover. In 2011 alone, foundation endowments shrank by about 3.5%, even after making slight gains in each of the preceding two years.

 

Anemic Asset Growth:

The Foundation Center reports that all foundations awarded a total of $45.7 billion in grants in 2010 and $46.9 billion in grants in 2011, a 2.6% gain before inflation. Its most recent forecast growth of 1%-3% in giving during 2012 will barely match the projected inflation rate.

 

Decreased Grant Making:

Independent foundations consistently account for more than 70% of grant making among all foundations. Grants by independents amounted to $32.5 billion in 2010, down by 0.7% from 2009 and the second year-to-year decline in such grant making in a decade. Among respondents to the Foundation Center’s latest Foundation Giving Forecast Survey, 31% of corporate foundations, 40% of community foundations, and 39% of independent foundations predicted decreased giving in 2012.

 

Absent Alternatives:

During times of contraction and retrenchment in federal and state grant making, some political pundits have posed soliciting more grants from the Nation’s foundations as a viable alternative for non-profit organizations, among other grant seekers. However, the Chronicle of Philanthropy points out that “…foundation support is no panacea… because grant makers don’t have nearly enough money to make up for the sums state and federal governments are withdrawing.” Its forecast for those seeking grants from foundations may also resonate: “For grant seekers, one thing is quite certain: Foundation giving is unlikely to rebound anytime soon….”

 

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