CFRE MCQ 2 — Questions and Answers
Question 1: According to AFP's Code of Ethical Principles, which practice is explicitly prohibited when compensating fundraising professionals?
- Paying a base salary plus performance bonus
- Paying a percentage commission based on funds raised (Correct answer)
- Reimbursing travel and lodging expenses
- Offering equity participation in the nonprofit
Correct answer: Paying a percentage commission based on funds raised
The AFP Code of Ethical Principles prohibits percentage-based compensation (commission) for funds raised, as it creates conflicts of interest and can distort donor relationships.
Question 2: A nonprofit organization wants to measure the long-term value of its donor relationships. Which metric best captures this?
- Average gift size
- Donor lifetime value (LTV) (Correct answer)
- Return on investment (ROI) per campaign
- Cost per dollar raised
Correct answer: Donor lifetime value (LTV)
Donor lifetime value (LTV) measures the total net revenue a donor generates over their entire relationship with the organization, capturing long-term relationship worth.
Question 3: In planned giving, what distinguishes a charitable remainder unitrust (CRUT) from a charitable remainder annuity trust (CRAT)?
- A CRUT pays a fixed dollar amount; a CRAT pays a fixed percentage
- A CRUT pays a fixed percentage of the trust's annually revalued assets; a CRAT pays a fixed dollar amount
- A CRUT requires a minimum 10% remainder to charity; a CRAT does not
- A CRUT allows additional contributions; a CRAT does not allow additional contributions (Correct answer)
Correct answer: A CRUT allows additional contributions; a CRAT does not allow additional contributions
A CRUT allows donors to make additional contributions to the trust after it is established, while a CRAT is funded only at inception and accepts no additional contributions.
Question 4: When conducting a feasibility study for a capital campaign, the consultant's primary role is to:
- Solicit lead gifts from top prospects
- Assess community readiness and gauge donor capacity and inclination (Correct answer)
- Develop the case for support document
- Train the volunteer leadership team
Correct answer: Assess community readiness and gauge donor capacity and inclination
A feasibility study consultant's primary role is to objectively assess whether the community has the willingness and financial capacity to support the proposed campaign goal.
Question 5: Which statement about major gift cultivation best reflects best practice?
- Solicitation should occur within 30 days of initial contact to maintain momentum
- Cultivation should be tailored to the donor's interests and may take months or years (Correct answer)
- All major donor prospects should receive identical cultivation tracks
- Cultivation ends once the first major gift is secured
Correct answer: Cultivation should be tailored to the donor's interests and may take months or years
Effective major gift cultivation is individualized, based on each prospect's interests and readiness, and the timeline varies significantly from donor to donor.
Question 6: A mid-sized nonprofit receives an anonymous $500,000 gift with no restrictions. What is the FIRST step the development office should take?
- Invest the funds immediately in the endowment
- Work with board and finance to document the gift and establish an appropriate fund (Correct answer)
- Announce the gift publicly to leverage matching opportunities
- Allocate the funds to the most underfunded program
Correct answer: Work with board and finance to document the gift and establish an appropriate fund
The first step is proper documentation and governance — working with leadership and finance to formally accept, record, and determine appropriate use of the gift per policy.
Question 7: The 'moves management' system in major gift fundraising refers to:
- Physically relocating donor meetings to preferred venues
- A structured approach to moving prospects through stages of identification, qualification, cultivation, solicitation, and stewardship (Correct answer)
- Transferring donor records between development staff members
- A CRM software feature for scheduling donor visits
Correct answer: A structured approach to moving prospects through stages of identification, qualification, cultivation, solicitation, and stewardship
Moves management is a systematic process that tracks and intentionally advances prospects through a pipeline of relationship-building stages toward a major gift.
CFRE MCQ 2
According to AFP's Code of Ethical Principles, which practice is explicitly prohibited when compensating fundraising professionals?