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Is this statement grammatically correct? "The fee is administered and retained by the vendor. It is neither revenue to, nor administered by this agency."

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It's an interesting example. It appears to be grammatical, yet it doesn't sound right, at all. It's a right node-raising construction ( see Wikipedia), which is easier to explain in a positive version:

*It is both revenue to, and administered by, this agency.

I mark this with asterisk to mean that I find it unacceptable. It would come, using the right node-raising rule, from:

*It is both revenue to this agency and administered by this agency.

and that, in turn, from:

(*Both) It is revenue to this agency and it is administered by this agency.

by Conjunction Reduction, assuming that "revenue to this agency" and "administered by this agency" are of the same grammatical category. (I don't quite know what to do about the "both".)

Since this derivation turns out badly, maybe that is the problem --- that these two expressions are actually not of the same category, so that the reduction is not permitted.

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Or:

[EDIT: Fixed as per StoneyB's suggestion]

"The fee is administered and retained by the vendor. It neither constitutes a revenue to this agency nor is administered by it."

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This sort of construction is grammatical, in the sense that it is widely used and accepted (particularly in legal and bureaucratic writing).

It shouldn't be grammatical because the conjoined elements are not constituents: each contains pieces of two different constituents.

My own feeling is that it is an inefficient and graceless device, which saves some minor repetitiveness at the cost of greatly decreasing intelligibility, and consequently should be avoided by writers who respect their readers.

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Just extend the first sentence: ""The fee is administered and retained by the vendor, not by this agency." Or, if you must keep two sentences (which seem redundant in meaning), use, "The fee is administered and retained by the vendor. This agency does not administer the fee or receive it as revenue." The advantage of the second construction compared to the original one is that is active an in a normal subject-verb order.

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The usage of neither/nor isn't unconventional, and the sentence is more awkward than "wrong". It could be rephrased like so:

"The fee is administered and retained by the vendor, independent of this agency."

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