Is grantwriting a fundraising expense

Summary:

It depends how the resulting revenue will be treated.

Tom Pollak of the
Center on Nonprofits and Philanthropy and
The National Center for Charitable Statistics at
The Urban Institute (http://nccs.urban.org) posted this note to Cyber-Accountability on July 25, 2003:
Urban Institute's Center on Nonprofits and Philanthropy and the Center on
Philanthropy at Indiana University are working jointly on a project looking
at fundraising and administrative costs in the nonprofit sector. Mark
Hager, one of my CNP colleagues who is not a member of this list, forwarded
this response to your question:

"Is Grant Proposal Writing a Fundraising Expense?" is the title of
my article in the Spring 2003 issue of Nonprofit Quarterly (http://www.nonprofitquarterly.org), so interested
folks may want to look there.

In short, the published guidelines are pretty
clear on this question, although OMB A-122 isn't particularly helpful. The
reporting rules located in a couple of different places (e.g. Form 990
Instructions, AICPA Audit and Accounting Guide for Nonprofit Organizations)
are fairly consistent on how grantwriting expenses should be reported.

All
of them take the position that the proceeds from grantwriting can be either
a contribution or fees-for-service (program service revenues) depending on
the nature of the grant and the relationship between grantor and grantee.
If the grant is accounted for as a contribution, associated expenses are
fundraising. If the grant is accounted for as service revenue, associated
expenses are generally administrative.

In Dan Prives's example (see below), the grants are
likely of the "fees for service" variety (he even uses the word 'contract'
at one point). Consequently, these technical grants probably (hard to say
without knowing more) should be accounted for as program revenues, and
associated grantwriting fees should be accounted for as administrative, not
fundraising.

I think that the overall GAAP philosophy on accounting for
functional costs encourages allocation of some relevant pieces to programs,
but (despite the fact that many organizations do this...) there's no basis
for accounting for the bulk of these costs as program just because the
people doing the grantwriting are "program people".

This was written in response to this question from Dan Prives (posted earlier):
When is the cost of grant writing considered a fund raising cost?

I'm referring to technical grants in the health field or community
development. I have heard the opinion that preparing these
grants should
be considered a fund raising cost. In the situation I am
thinking about,
the people writing the grant proposals have a background in
the technical
specialty. When they are not writing grants they are doing the work in
their specialty. They are not fund raisers. Other than technical
government contracts, they couldn't raise a dime. Does that matter?

Does it matter whether the context is Form 990 program reporting or
indirect cost recovery under OMB A-122? (In other words, might it be a
program cost in the case of OMB A-122 and a Fund Raising cost
for Form 990?)

Are there any published guidelines, cases, published ethical standards,
etc.? References would be most appreciated.