At University of Wisconsin-River Falls (a small regional comprehensive
university, about 5,000 students) we have both a grants office (1.5
persons) and a development office (2.0 persons, approximately).  The
development office does alumni stuff, indeed most of their fundraising is
through alumni.  We have different reporting lines but have a cordial
relationship.  Generally speaking, proposals which look
programmatic--i.e.  give us x dollars to do these tasks--come through the
grants office, proposals for financial support for the university come
through the development office.  Occasionally they will mount a drive for
a project, e.g. a building.

In short, it's never been an issue on this campus.

Bill Campbell
Director, Grants & Research
UW-River Falls