CFRE CFRE 3 — Questions and Answers
Question 1: The 'pyramid of giving' model suggests that an organization should:
- Focus exclusively on major gift solicitation
- Build a broad base of small donors and cultivate them toward larger gifts over time (Correct answer)
- Solicit all donors at the same gift level
- Prioritize grant funding over individual donors
Correct answer: Build a broad base of small donors and cultivate them toward larger gifts over time
The donor pyramid illustrates that organizations need a large base of annual fund donors from which to identify, cultivate, and upgrade prospects to major and planned gifts.
Question 2: Which type of foundation is established by an individual or family and funded primarily from a single source?
- Community foundation
- Private foundation (Correct answer)
- Corporate foundation
- Operating foundation
Correct answer: Private foundation
A private foundation is typically established and controlled by an individual, family, or corporation and is funded primarily from a single source rather than public contributions.
Question 3: The IRS requires nonprofits to provide a written acknowledgment for any single cash donation of:
- $50 or more
- $100 or more
- $250 or more (Correct answer)
- $500 or more
Correct answer: $250 or more
Under IRS regulations, nonprofits must provide written acknowledgment (a receipt) for any single cash contribution of $250 or more so the donor can claim a charitable deduction.
Question 4: A 'challenge grant' in fundraising is designed to:
- Test a nonprofit's accounting controls
- Motivate additional giving by matching new gifts up to a set amount (Correct answer)
- Challenge a competing organization's funding claims
- Require grantees to submit matching IRS documentation
Correct answer: Motivate additional giving by matching new gifts up to a set amount
A challenge grant motivates donors to give by having a lead donor or foundation agree to match new contributions dollar-for-dollar (or at another ratio) up to a specified total.
Question 5: Donor retention rate is calculated by dividing:
- Total revenue by number of donors
- Number of donors who gave last year who also gave this year by total donors from last year (Correct answer)
- New donors this year by lapsed donors
- Total gifts this year by total gifts last year
Correct answer: Number of donors who gave last year who also gave this year by total donors from last year
Retention rate = (donors retained from prior year ÷ total donors in prior year) × 100, measuring how well an organization keeps its existing donors year over year.
Question 6: Which element is most critical in a major gift solicitation meeting?
- Presenting a printed brochure with gift levels
- Asking for a specific dollar amount tied to a specific project (Correct answer)
- Discussing the organization's administrative overhead
- Providing a tour of the facility before the ask
Correct answer: Asking for a specific dollar amount tied to a specific project
Effective major gift solicitations include a specific, personalized ask amount linked to a tangible project or impact, which gives the donor clarity on how their gift will be used.
Question 7: A nonprofit's 'development audit' is best described as:
- An IRS review of charitable deductions claimed by donors
- A systematic review of the fundraising program's strengths, weaknesses, and opportunities (Correct answer)
- An annual financial audit required by GAAP
- A background check on development staff
Correct answer: A systematic review of the fundraising program's strengths, weaknesses, and opportunities
A development audit is an internal or external assessment that evaluates all aspects of a fundraising program—from donor relations and systems to staffing and strategy—to identify improvement opportunities.
CFRE CFRE 3
The 'pyramid of giving' model suggests that an organization should: