CAP Ethics & Professional Standards in Philanthropic Advising 2 — Questions and Answers
Question 1: The Donor Bill of Rights establishes that donors have the right to:
- Receive a tax deduction for all charitable contributions regardless of substantiation
- Be informed of the organization's mission and how funds are used, and have their gift used as intended (Correct answer)
- Direct organizational policy through their giving decisions
- Receive guaranteed investment returns on endowment gifts
Correct answer: Be informed of the organization's mission and how funds are used, and have their gift used as intended
The Donor Bill of Rights affirms donors' rights to information about the organization's mission, financial practices, and how their gifts are used—core transparency and stewardship obligations for all charitable organizations.
The Donor Bill of Rights (1993) includes rights to: be informed of mission and how funds are used; get annual reports; receive confirmation of deductibility; be assured names will not be traded; receive appropriate acknowledgment; be told whether gift-seekers are volunteers or paid; have opportunity to have names deleted from lists; feel free to ask questions and receive prompt responses; and be assured of professional conduct by those soliciting.
Question 2: A CAP advisor discovers that a nonprofit recommended to a client is engaged in significant financial mismanagement. The advisor's ethical obligation is to:
- Remain silent to preserve the advisory relationship with the nonprofit
- Immediately report the nonprofit to the IRS regardless of the client's wishes
- Promptly disclose the information to the client and help them assess whether to continue their charitable relationship with the organization (Correct answer)
- Anonymously notify the state attorney general's charity registration office
Correct answer: Promptly disclose the information to the client and help them assess whether to continue their charitable relationship with the organization
The advisor's primary obligation is to their client—disclosing relevant information that could affect the client's philanthropic decisions is a core duty of loyalty and candor.
Once the client has the information, they can decide how to respond—withdrawing support, requesting accountability, reporting to authorities, or maintaining the relationship with conditions. The advisor should not take unilateral action such as reporting to the IRS without client direction, except where legally required to report specific violations.
Question 3: Impact washing in the philanthropic context describes:
- Using charitable donations to clean up negative reputational impacts of corporate misconduct
- Making exaggerated or unsubstantiated claims about philanthropic impact to attract donors without evidence (Correct answer)
- Converting impact investments into outright grants after poor investment returns
- Redirecting restricted gifts to programs with measurable impact metrics
Correct answer: Making exaggerated or unsubstantiated claims about philanthropic impact to attract donors without evidence
Impact washing describes organizations that make inflated or unsupported claims about their impact to attract donors—analogous to greenwashing in sustainability—without rigorous evidence to back the claims.
As impact measurement has become a donor priority, some organizations have responded by adopting impressive-sounding metrics without the rigor to validate them. CAP advisors help clients evaluate impact claims critically: Are metrics independently verified? Do they measure outcomes or just outputs? Are comparison populations used? Impact washing harms donors and diverts resources from genuinely effective organizations.
Question 4: Under the American College's ethical guidelines, objectivity in philanthropic advising requires:
- Maintaining emotional distance from all client interactions
- Providing advice based on an impartial analysis of facts, free from personal bias and undisclosed self-interest (Correct answer)
- Refusing all gifts or entertainment from charitable organizations
- Using only quantitative metrics to evaluate charitable organizations
Correct answer: Providing advice based on an impartial analysis of facts, free from personal bias and undisclosed self-interest
Objectivity requires that advice be based on impartial analysis of the client's situation and relevant facts, free from the advisor's personal biases, undisclosed financial interests, or emotional preferences.
In practice, objectivity requires disclosure of potential conflicts, using structured analytical frameworks to evaluate organizations, presenting balanced assessments that include risks alongside benefits, and separating the advisor's personal philanthropic values from client recommendations. An advisor who personally supports a particular cause must be especially vigilant about ensuring recommendations reflect the client's values and priorities.
Question 5: The ethical duty of competence for a CAP designee differs from diligence primarily in that competence refers to:
- The timeliness of delivering advice and completing client tasks
- Possessing the knowledge, skill, and judgment necessary to perform professional services (Correct answer)
- The thoroughness of research conducted before giving advice
- Maintaining continuing education credits to keep the designation current
Correct answer: Possessing the knowledge, skill, and judgment necessary to perform professional services
Competence refers to having the necessary knowledge, skills, and judgment to deliver professional services; diligence refers to the careful, thorough application of those capabilities in a timely manner.
Both competence and diligence are required for ethical professional practice. Competence requires ongoing education and honest self-assessment of expertise boundaries. Diligence requires thorough research, prompt follow-through, comprehensive analysis, and consistent attention to client matters. An advisor can be competent but insufficiently diligent, or diligent but incompetent.
Question 6: Which scenario would most clearly violate the CAP ethical principle of integrity?
- Recommending a donor-advised fund when a private foundation might be slightly more appropriate for the client's goals
- Knowingly providing a client with inaccurate information about a charitable organization's financial health to secure the client's gift commitment (Correct answer)
- Charging fees for philanthropic planning services that are higher than industry averages
- Declining to take on a client whose philanthropic priorities conflict with the advisor's personal values
Correct answer: Knowingly providing a client with inaccurate information about a charitable organization's financial health to secure the client's gift commitment
Integrity requires honesty and truthfulness in all professional dealings; providing knowingly false information to influence a client's decision is a direct violation regardless of intent or outcome.
The American College's ethical principles include integrity (honesty, avoidance of deception), which prohibits misrepresentation, concealment of relevant facts, and deliberate distortion of information. Providing inaccurate information about an organization's finances to influence a client's decision violates both integrity and the client's right to informed decision-making.
CAP Ethics & Professional Standards in Philanthropic Advising 2
The Donor Bill of Rights establishes that donors have the right to: