CFRE Fundraising Ethics and Accountability 2 — Questions and Answers
Question 1: The concept of 'restricted vs. unrestricted gifts' is important in ethics because:
- Unrestricted gifts must be returned to donors annually
- Organizations must honor donor restrictions and use gifts only as intended (Correct answer)
- Restricted gifts are tax-deductible at a higher rate
- Unrestricted gifts cannot be used for operating expenses
Correct answer: Organizations must honor donor restrictions and use gifts only as intended
Honoring donor restrictions is a fundamental ethical obligation; using a restricted gift for a different purpose violates the donor's intent and the organization's fiduciary duty.
Question 2: What is the ethical obligation of a fundraiser when a prospective donor appears to be making a gift under undue influence?
- Accept the gift quickly before the donor changes their mind
- Proceed if the gift amount is below a certain threshold
- Pause the solicitation and take steps to ensure the donor is acting freely and competently (Correct answer)
- Report the gift as completed to meet campaign targets
Correct answer: Pause the solicitation and take steps to ensure the donor is acting freely and competently
Fundraisers must ensure donors are acting of their own free will and are competent; proceeding when undue influence is suspected violates the donor's rights and the fundraiser's ethical duty.
Question 3: Which document must US nonprofit organizations file annually to maintain public accountability?
- IRS Form 940
- IRS Form 990 (Correct answer)
- IRS Form 1099-MISC
- IRS Form W-2
Correct answer: IRS Form 990
IRS Form 990 is the annual information return required of most US tax-exempt organizations and is publicly available, providing transparency to donors and the public.
Question 4: The term 'quid pro quo contribution' refers to a payment where:
- The donor gives anonymously
- The donor receives something of value in return for their contribution (Correct answer)
- The organization matches the donation
- The gift is made via payroll deduction
Correct answer: The donor receives something of value in return for their contribution
A quid pro quo contribution is one where the donor receives goods or services in exchange for their gift; organizations must disclose the value of those benefits for tax purposes.
Question 5: Which ethical principle requires fundraisers to be honest about how funds will be used in a solicitation?
- Autonomy
- Stewardship
- Truthfulness and honesty (Correct answer)
- Confidentiality
Correct answer: Truthfulness and honesty
Truthfulness and honesty require that fundraisers accurately represent the organization's programs and how donated funds will be allocated.
Question 6: A charitable organization's board member is also the owner of a company being considered for a major vendor contract. This is an example of:
- A planned giving opportunity
- A conflict of interest requiring disclosure and recusal (Correct answer)
- Normal board governance practice
- A restricted gift arrangement
Correct answer: A conflict of interest requiring disclosure and recusal
When a board member has a personal financial interest in an organizational decision, it creates a conflict of interest that requires disclosure and typically recusal from the decision.
CFRE Fundraising Ethics and Accountability 2
The concept of 'restricted vs. unrestricted gifts' is important in ethics because: