CFRE CFRE 5 — Questions and Answers
Question 1: Which type of charitable trust pays income to the organization first, with the remainder going to heirs?
- Charitable remainder trust (CRT)
- Charitable lead trust (CLT) (Correct answer)
- Donor-advised fund (DAF)
- Pooled income fund
Correct answer: Charitable lead trust (CLT)
A charitable lead trust (CLT) distributes income to the nonprofit for a set term, after which the remaining assets pass to the donor's heirs, making it attractive for estate planning.
Question 2: An organization's 'donor bill of rights' primarily serves to:
- Grant donors legal authority over organizational decisions
- Assure donors they will be treated with respect and their gifts used as intended (Correct answer)
- Provide donors with voting rights at annual meetings
- Guarantee donors a financial return on their contributions
Correct answer: Assure donors they will be treated with respect and their gifts used as intended
The Donor Bill of Rights, developed by AFP and CASE, articulates the rights donors have to information, transparency, and respectful treatment from charitable organizations.
Question 3: In grant writing, a logic model is used to:
- Calculate the logical budget needed for the project
- Visually connect program inputs, activities, outputs, and outcomes (Correct answer)
- Identify logical grant funders for the project
- Document the logical sequence of grant approval steps
Correct answer: Visually connect program inputs, activities, outputs, and outcomes
A logic model is a planning and evaluation tool that maps the relationships between a program's resources, activities, outputs, and intended short- and long-term outcomes for funders.
Question 4: The 'recency, frequency, monetary' (RFM) analysis in fundraising is used to:
- Schedule recent, frequent staff meetings about monetary goals
- Score and segment donors based on how recently, how often, and how much they have given (Correct answer)
- Measure the organization's recent, frequent, and monetary grant success
- Evaluate recency of donor database updates for frequency of monetary errors
Correct answer: Score and segment donors based on how recently, how often, and how much they have given
RFM scoring ranks donors by how recently they gave (recency), how often they give (frequency), and the total amount they have given (monetary value) to prioritize outreach.
Question 5: Which solicitation channel typically produces the best donor retention rates?
- Social media advertising
- Direct mail
- Personal face-to-face solicitation (Correct answer)
- Telephone fundraising
Correct answer: Personal face-to-face solicitation
Personal, face-to-face solicitation consistently produces the highest retention rates because of the relational connection it creates, though it is also the most resource-intensive channel.
Question 6: A nonprofit board member's 'give or get' policy means the board member is expected to:
- Either give all their time or get a paid salary from the organization
- Either make a personal gift or help secure gifts from others totaling a set amount (Correct answer)
- Either give up their seat or get a committee assignment
- Either give their professional services or get reimbursed for expenses
Correct answer: Either make a personal gift or help secure gifts from others totaling a set amount
A 'give or get' policy requires each board member to either donate personally at a minimum level or leverage their networks to secure equivalent contributions from others.
Question 7: When a donor designates a gift to a specific program and that program is discontinued, the organization should:
- Return the gift immediately without contacting the donor
- Contact the donor to discuss redirecting the gift to a related purpose (Correct answer)
- Transfer the funds to the general operating budget without notifying the donor
- Hold the funds indefinitely until a similar program is re-launched
Correct answer: Contact the donor to discuss redirecting the gift to a related purpose
Ethical and legal stewardship requires the organization to contact the donor and seek their guidance on redirecting a restricted gift when the original designated purpose no longer exists.
CFRE CFRE 5
Which type of charitable trust pays income to the organization first, with the remainder going to heirs?