CFRE - exam practice with complete solutions

Philanthropy - ANSWER voluntary action for the common good... - Robert L. Payton, as quoted in Greenfield's Fundraising Fundamentals Number of nonprofits registered with IRS - ANSWER US: 1.4 mil; 63% registered as 501 ...

Philanthropy - ANSWER voluntary action for the common good... - Robert L. Payton, as quoted in Greenfield's Fundraising Fundamentals Number of nonprofits registered with IRS - ANSWER US: 1.4 mil; 63% registered as 501c3... 161K in Canada Donors give for the following reasons - ANSWER moral obligation to help... personal satisfaction of helping others... to remove guilt for not giving... to maintain/improve social status... peer pressure... compassion/empathy... personal identification... self-interest... religious influence... need to be needed... substitution for active participation... support for mission and purpose... personal relationship... appreciation for mission... evidence of one's success... to express anger, or love, or hope... to end fear... out of the cause's appeal... to be remembered... to gain recognition... to join group, sense of belonging ... to preserve the species... to gain immorality... for psychic self-satisfaction... desire to provide public goods... to fulfill condition for employment... in response to leadership from peers... to be agent for public good... satisfaction from seeing others satisfied... tax benefits giving nearly always implies - ANSWER some sort of connection to the org giving may provide - ANSWER some type of return in what the org will do for them or someone close to them effective fundraisers seek to discover... - ANSWER what is important to any potential donor, and tap that need to encourage and support giving. This requires being able to look at the org's mission and programs through the eyes of the donor rather that from the perspective of those who run the org. key activities in fundraising - ANSWER research, marketing, relationships, ethics & accountability Research supports fundraising by - ANSWER identifying stakeholders and potential donors, providing info about stakeholders, ensuring appropriate resource allocation, planning, evaluation, rating stakeholders for relationship building and service priorities Roles of marketing in fundraising - ANSWER communicate purpose and activities, promote mission and case for support, encourage participation in fundraising activities, encourage donations, communicate fundraising results, advocate the case Relationships - ANSWER the heart of fundraising Relationships support fundraising by - ANSWER adding prospects and developing them into active/regular donors, support other types of contributions, engage stakeholders in the organization, integrate with research and marketing, allow getting to know prospects and interests, support stewardship ethics and accountability ensure - ANSWER stakeholder trust and confidence, assets are managed and accounted for data collected and used properly, donor privacy and rights maintained, reporting/other requirements fulfilled, programs executed as promised, donors are retained Why research? - ANSWER ensures appropriate resource allocation, helps build staff and volunteer confidence, adds element of joy an discovery to prospecting How does Research ensure appropriate resource allocation? - ANSWER allows staff/volunteers to focus efforts on prospects who can provide the most good.... Helps in planning how to use volunteers in the organization (number and types of volunteers needed) How does Research help build staff and volunteer confidence? - ANSWER Backed by good information, the process of cultivation and solicitation has greater chances for success. How does good Research add an element of joy and discovery to prospecting? - ANSWER adds confidence, which eliminates anticipation of prospecting as a chore, makes it more like solving a good mystery - with whom can we successfully connect? How can we make our case compelling? How much will they give? Marketing - a formal definition - ANSWER the process of gathering, recording, and analyzing information pertaining to the marketing of goods and services Marketing - a simpler definition - ANSWER the process of finding out the wants and needs of current and potential markets Rosso's Concentric Circles - outer circle - ANSWER People with similar interests Rosso's Concentric Circles - at the core - who are these primary stakeholders? - ANSWER Major Donors, Board, Management Staff (these people have the responsibility to bring those in the outer circles closer) Rosso's Concentric Circles - second to outer circle - ANSWER Former Participants Rosso's Concentric Circles - closes to core - ANSWER Clients, Members, Employees, Volunteers, General Donors Critical Factors for a Philanthropy-Friendly Environment - ANSWER donor-focused research... targeted cases, constituents, methods... strategic communications... stewardship - the most important of all The critical balance - ANSWER Development professionals must find a way to balance the needs of the community with the interests/needs of donors and the needs of the organization Prospecting: the definition - ANSWER The systematic acquisition and recording of data that forms the basis for establishing, maintaining, and expanding the long-term gift relationship, with the ultimate goal of converting donors into major gift donors (looking for the fundraising gold!) 7 points of constituency development - ANSWER Identify fundable projects (part of org's strategic plan and objectives)... match prospects to projects (use Rosso's model)... Conduct research in ways that are: thorough and realistic, cumulative and ongoing (keep current), organized, ethical and confidential... Identify opportunities to involve prospects What's the difference in a Prospect (suspect) and a Qualified Prospect? - ANSWER Prospect/suspect is a possible source of support whose philanthropic interests appear to be a match with your organization, whose ability to give, interests, and linkages have not been qualified via research..... Whereas a Qualified Prospect is a prospect who continues to qualify as a logical source of support for the organization throughout a research, evaluation, and cultivation process the best research method depends on... - ANSWER the org's scope, resources and objectives... and on whether prospects are individuals, business/corp's, foundations, gov agencies, or other nonprofits Research methods to consider... - ANSWER mailed/electronic questionnaires... internet databases... in person interviews... telephone interviews Four sources of information for Research - ANSWER 1. Personal contacts (conversations, interviews, surveys)... 2. Publications/reports (journals, newspapers, directories, magazines, philanthropic directories, annual reports, corp/foundation community involvement reports... 3. Participation records (event attendees, program participants, those who inquire)... 4. Public information information to include in a useful prospect profile - ANSWER complete contact info, biographical data, business history, giving history with your org, cultivation/solicitation contact records, publicly available giving info from other orgs, sources of info checked for prospect and most recent review dates, general and specific interests Research pitfalls - ANSWER putting off research until you "have time", expecting interns or new volunteers to know what to gather, sending out cultivation/solicitation teams with incorrect information, trying to find out everything about everybody Prospect/donor profiles help you select the right... - ANSWER right person... to ask the right person... at the right time... in the right way... for the right amount Inquiries to use in researching foundations... - ANSWER is there support for similar agencies?... Does the foundation clearly state support for the type of project and/or contribution sought?... Is funding provided in the org's geographic area?... Is the request amount compatible with prior giving history? Inquiries to use in researching corporations... - ANSWER are board members affiliated with company?... Are services used by employees and dependents?... Are current donors/volunteers employed or have affiliations?... Does the organization purchase company products?... Does corporate interest match products/services?... are donation decisions made locally or at corporate level?... are needs and priorities of two entities aligned? Using electronic data enhancement... - ANSWER analysis of giving history and donor information... screening of prospect/donors to identify "wealth indicators"... data gathering from a variety of sources enhances the in-house database... resulting in a need to be more strategic. 3 primary types of giving campaigns - ANSWER Annual Giving, Capital/Major Campaigns, Planned Giving What is the "workhorse" fundraising tool of every org? - ANSWER Annual Giving - typically provides operating support for ongoing programs. Essential first stage that precedes all others. Which type of giving campaign is ideal for first-time donors to get them started, and for those you are seeking to upgrade? - ANSWER Annual Giving What is the "special needs" fundraising campaign... generally having a specific purpose and running a specific time period? - ANSWER Capital/Major Campaign Which type of campaign lays the groundwork for involving new volunteers and donors and sets the stage for increased giving? - ANSWER Capital/Major Campaign What is the bedrock on which fundraising campaigns are built, and which supports and informs everything you do? - ANSWER Research Marketing emerges from which 2 plans? - ANSWER the Strategic Plan and the Development Plan Activities generally a part of marketing - ANSWER Research... Segmenting markets... setting overall and program goals... planning organizational strategies... budgeting and resource allocation... communications... public relations... evaluation A key point when Marketing: It's not the money that's important, but rather... - ANSWER what the money does! Instead of taking the marketing approach of telling people how great we are, what is the more successful approach? - ANSWER come from the point of view of the target audience... answering for them the questions... "what's in it for me? Why should I get involved? What has the org done or will it do to affect me in my life?" successful execution of an effective marketing plan can help an organization to - ANSWER bring awareness of the org to target audience, create a positive environment in community, get constituent buy-in, encourage involvement, challenge and inspire people, set the stage for fundraising efforts, focus on donor motivations and program/client outcomes, create link b/w org and stakeholders Why do you need to know your audience when marketing? - ANSWER the most successful programs/products are those that are carefully targeted Goal of effective marketing? - ANSWER Bring about a transaction that is mutually beneficial. what should be in a good marketing plan? - ANSWER achievable goals, identified target markets, clearly articulated messages, specific strategies to achieve goals, assignment of resources, defined time frames, indicators of success, methods to monitor and evaluate progress What type of statement describes how the org is unique, generally stating niche in the community? This statement should describe in a few concise words what the org is all about so that when people read it, they will instantly "get" the org. Makes the mission of the org simple and compelling? - ANSWER Positioning Statement What comes first? Marketing or Communication Tools? - ANSWER Marketing research first! Must first know audience, what they want/need, how you will meet needs, how they like to receive info... etc. Effective communication requires - ANSWER two-way interaction so both sides know a connection has been made, and perhaps acted upon. To be effective, communication has to be - ANSWER personal! Better results if personalized as much as possible to target group What type of marketing is this? A business provides a portion of their sales to an org for the good will that accrues from helping a worthy cause. - ANSWER Cause-Related Marketing Venture What's at the top of the Hierarchy of Effective Communication? - ANSWER Visit What's at the bottom of the Hierarchy of Effective Communication? - ANSWER Print/Broadcast Media What is the order of communication types of the Hierarchy of Effective Communication (from bottom to top)? - ANSWER Print/Broadcast Media, Conferences/Events, Telephone, Visit When marketing planned giving, staff's role should be to provide information, but not... - ANSWER advice What is the key element of capital giving not present in other forms of fundraising? - ANSWER Urgency The role of media relations in a capital campaign - ANSWER tell the story from the point of view of how what you are doing will benefit the audience and their community... compelling interest to viewers/listeners/readers. Which website contains a database of 1.8 million IRS-Recognized Nonprofits? - ANSWER Guidestar (ensure your org's info on Guidestar is complete and accurate... very important tool and shouldn't be ignored.) The basis of fundraising is the... - ANSWER organization's case for support. What is the expression of the cause and all the reasons why prospective donors might want to contribute to its advancement? - ANSWER Case for Support The case is driven by... - ANSWER the mission and strategic plan of the org. what describes the org's goals and objectives and covers the programs and services it provides? - ANSWER Case for Support The case helps make it possible to match - ANSWER the org's needs to the donor's needs. What are the 3 key elements of a Case? - ANSWER Org's Purpose, Content, Focus The Purpose section of the case should include: - ANSWER Orgs' aims, purposes, and mission... presents a case for current programs, shows how new programs will benefit, and dramatically show the org's impact on its community in a variety of ways, now and in the future. The Content of the case should centralize information about a variety of subjects, including: - ANSWER org's needs, cause, mission, goals, objectives, strategies & task plans, governance, staff competence, budget, financial history, facilities Typically, the case will have a particular focus... it might be one, two, or all three of these: - ANSWER unrestricted operating support, restricted gifts for operations, restricted gifts for special needs - capital, endowment, or other What is a written version of the case for a specific constituency or campaign, derived from the org's overall case? - ANSWER Case Statement The Case Statement includes: - ANSWER the org's services, programs, objectives... how the fundraising goals support the org... the ways the org will remain productive, the difference a donor's support will make, what the org must do to improve/change its activities, aims and value to society Who said this?... The case statement is the one definitive piece of the whole campaign. It tells all that needs to be told, answers all the important questions, reviews the arguments for support, explains the proposed plan for raising the money, and shows how gifts may be made, and who the people are who vouch for the project, and who will give it leadership and direction. - ANSWER Harold J Seymour, 1935, Noted fundraising pioneer Why is it important to obtain feedback and ownership in developing the case statement? - ANSWER allows for key groups to provide input, general agreement to emerge, identify questions that may be raised ahead of time allowing them to be addressed before they are brought up by others, enhance guy-in. Why is it important to recruit volunteer leadership in developing the case statement? - ANSWER when prospective volunteers have questions, the case statement helps provide answers and gives them confidence in the plan and direction. why is it important to test the market with your case statement? - ANSWER determine how potential major donors feel about the org's direction and proposed development goals. Provides a vehicle to bring prospective major donors into the planning process and allows them to react to the proposed objectives, highlighting strengths and weaknesses as well as which components appeal to which constituents. The final case statement can be the basis of content for: - ANSWER website, proposals, campaign prospectus, newsletters, individual presentations, brochures, appeals, press releases, speeches ways to segment constituencies - ANSWER strongest supporters, regular donors, those with greatest interest/ability to give, those most interested in campaign elements Things to consider in case statement for major donor constituents: - ANSWER point out you are looking for a few major givers, ask for advice and participation, state needs more briefly, emphasize leadership, be candid about request, develop low-key "insider" appearance that is not too slick Things to consider in case statement for Community Audience constituents: - ANSWER emphasize economic contributions of your org to the community Things to consider in case statement for Corporate constituents: - ANSWER emphasize any services you provide to the corp or its employees Things to consider in case statement for Foundation constituents: - ANSWER avoid formal printing... be prepared to fit the foundations' proposal format... address annual goals, hidden agendas, and stated areas of interest. To ensure a successful case statement: - ANSWER know about or collect org info... talk to everyone... know the expectations/interests of the target constituency... relinquish pride of authorship... and write, rewrite, rewrite, then rewrite! The case statement should be reader-oriented, rather than - ANSWER organization-oriented Elements of the Development Process - ANSWER Developing the case for support... prospect research... cultivation and constituency development, solicitation strategies... acknowledgement and recognition... gift management the Development Plan interfaces with all aspects of the organization - ANSWER builds ownership in volunteers, staff, constituencies, board of directors... information gathering...requires a complete operating budget and fundraising goal... and outcome of planning process is a written operational plan that includes goals, objectives, strategies the Development plan covers the same period as the - ANSWER organization's strategic plan (and is reviewed at least annually.) Key elements of an Operational Plan - ANSWER Statement of purpose... strategic/financial goals... policies related to goal... budgeting... cultivation strategies... solicitation strategies... time frames... entities responsible for activities... indicators of success... monitoring processes/systems The Pyramid of Giving, from James Greenfield, "Evaluating and Managing the Fund Development Process", 1999 - ANSWER from bottom to top: First Time Annual Giving... Repeat Annual Giving... Special/Major Giving... Major Giving... Planned Giving (this pyramid moves from "like" to "love" to "trust") Choosing which types of giving to emphasize depends on org needs. If you have heavy operating costs and few capital requirements, then focus on - ANSWER annual and planned giving Choosing which types of giving to emphasize depends on org needs. If you have large capital needs (hospitals, colleges), then focus on - ANSWER capital fundraising Methods for acknowledging contributions - ANSWER calls, postcards, letters, gift clubs, public recognition 3 reasons to keep information on donors' gifts - ANSWER historical, planning, accounting What types of data should be collected and recorded? - ANSWER only information that would not be considered invasive, or that we wouldn't feel uncomfortable having the donor see (donors may review their own files at any time) What are the two types of major gifts a donor may make? - ANSWER Capital campaign (specified capital need, within a specific time period) and Endowment (builds permanent funds to support work, not spent for current operations or capital projects, typically built by planned gifts) What is a Comprehensive Campaign? - ANSWER may contain annual, major and planned, or only capital/endowment campaigns, depending on org's needs An emerging trend in campaigns... - ANSWER smaller/multiple campaigns... continuous campaign mode! 90% of funds raised during a campaign are given by what percentage of donors? - ANSWER 10% Once an org has a solid annual giving program in place, its next step is often: - ANSWER the launching of a major gifts/capital campaign Benefits of major gift campaigns: - ANSWER builds familiarity with org, encourages donors to "think big", pushes annual giving to new levels, builds volunteer leadership, increases the org's visibility, enables donor pledges over several years (allows them to consider larger gifts!) The more established these characteristics (institutional readiness), the greater the chance of success: - ANSWER reputation... credibility... urgency of case... availability/readiness of board/volunteers... solid prospect database, fully researched with established interest... operational readiness of office/systems... extent to which pre-campaign planning has occurred Constituent readiness is based on: - ANSWER org has stable, positive image... core of ready and accessible volunteers... adequate number of prospects able to make substantial gifts... ongoing awareness, information, and cultivation programs in place... completed external planning/feasibility study As part of the organization's strategic planning... - ANSWER the case has been made... the case statement written... and prospects identified With the organization's strategic planning complete, the next step is the - ANSWER internal audit (pre-campaign) Pre-campaign activities/internal audit include: - ANSWER Org planning (mission, direction, plans for next 5-10 years, long-range funding implications), board leadership (recruitment, structure, involvement in planning), administration and finance (personnel's understanding of dev process, org's budget and financial projections, revenue/expense past trends), Development Operations (staff size, experience, capabilities, goals, record keeping, gift processing/ack system, prospect research, cultivation/recognition programs, materials), donor base, volunteer structure, public and donor relations Another important Pre Campaign Activity - ANSWER Feasibility study to test campaign concept and gather data Another important Pre Campaign Activity - ANSWER Gift range table reflecting approximate levels of giving and number of gifts required Another important Pre Campaign Activity - ANSWER clear, agreed-upon policies and guidelines for how campaign will run A campaign is likely to reach its goal if the largest gift equals x% or more of the goal, and if it and next 9 gifts total x% of goal, AND next 90 gifts equal x% of goal? (the final X% can likely be raised from all other gifts.) - ANSWER 10%... 33%... 33% What is the Rule of Thirds? - ANSWER 10 gifts account for 1/3 of total, next 100 gifts account for another 1/3, final 1/3 comes from everyone else. While Rule of Thirds traditional approach can work, most modern campaigns are using major gift models in which... - ANSWER far fewer gifts are responsible for much larger percentages of total. (not uncommon for lead gift to be 30-50%, and top 10-15 gifts can account for 60% of total. A realistic campaign gift table usually results from what is learned during a... - ANSWER feasibility study. Components of major gifts campaign? - ANSWER fundraising strategies... role of steering committee and volunteers... communication plan... campaign budget... campaign duration... duration of pledge period (typically 36-60 months)... procedure for recording pledges... how gifts will be deposited... how gifts will be counted (annual fund, bequests, etc.)... guidelines for GIK... process for securities gifts... planned and other gift guidelines... recognition plan... campaign wrap-up and audit Phases of a major-gifts campaign? - ANSWER Planning... Cultivation... Solicitation... Pledge or fulfillment phase) -- all included in the campaign timetable Why should solicitation for a major gifts campaign start at the top and begin within the organization? - ANSWER these "gifts of confidence" provide credibility for the campaign and allow the major-gift solicitation to begin. What ideally occurs during the quite phase of a campaign? - ANSWER gifts from "family" and lead gifts are solicited, with goal of 100% board participation and 40-50% of the goal achieved. Two types of Planned Gifts? - ANSWER 1. Outright/Current (complete transfer or realized gift of cash/stock from estate) or 2. Deferred (testamentary giving or life income arrangements to be realized in the future) What is a provision made in a donor's will, through which an organization receives cash and/or other assets at the time of the donor's death? - ANSWER Bequest What is a legal contract between the donor and the org, through which the donor exchanges cash, stocks, or other assets for an agreed-upon income for life? - ANSWER Charitable Gift Annuity What is the dollar limit and minimum age requirement for IRA gifts? - ANSWER $100,000 and 70 1/2 years the IRA Rollover provision of the Pension Protection Act of 2006 allows a donor to: - ANSWER exclude any IRA funds withdrawn and transferred to a charity from his/her income when filing a tax return for that year (the donor must be 10 1/2 years old, and there is a $100K cap annually) What is the vehicle used by donors to transfer assets to a trust, which then goes to the charitable org after the death of the last beneficiary? The donor retains a fixed or variable income for life. - ANSWER Charitable Remainder Trust What is the agreement called that is established by donors transferring a deed of real property to an organization while reserving for themselves and/or someone else the right to live on or use the property for life? - ANSWER Life estate contract (charitable deductions from life estate contracts are limited to properties that are either personal residences or farms) What is the gift vehicle which transfers assets to a trust that provides income to a nonprofit org for a period of years? At the end of that period, the trust assets revert either to the donor (grantor) or to someone else the donor designates (non-grantor.) - ANSWER Charitable Lead Trust What is a common trust to which many donors make contributions and retain for themselves a pro rata share of the fund's earnings each year? As each beneficiary dies, the value of the fund attributable to that death is severed and paid to the organization. (similar to a mutual fund.) - ANSWER Pooled income fund What type of gift is established with a contract between an individual and an insurance company, providing a payment to the individual's estate or to named beneficiaries (spouse, children) at the individual's death? Charities are also frequently named as beneficiary. - ANSWER Life Insurance What is the benefit of making a charity both the beneficiary and owner of a life insurance policy? - ANSWER A donor can make an immediate gift that will provide immediate or future funds for a charity. Are charitable lead trusts usually established for small, medium, or large gifts? - ANSWER Typically very large gifts Advantages of Planned Giving to the Organization - ANSWER Establishes a long-term relationship with the donor... encourages donor to think about gifts of assets in addition to income... often provides future funds... enhances opportunities for charitable bequests, particularly in the case of gift annuities Advantages of Planned Giving to the Donor - ANSWER opportunity for income and estate tax deduction or to enjoy a fixed or variable income... supplement retirement income (e.g. deferred charitable gift annuities and charitable remainder trusts)... avoid or lessen capital gains tax (if highly appreciated asses are given)...increase income compared to other investments... competent management of assets transferred as gifts... ability to pass an asset to an heir after org's use Now that you are ready to start a planned giving program, what are the steps to take? - ANSWER 1. Commit to concept... 2. Appoint a study committee... 3. adopt a plan and guidelines... 4. board approves budget... 5. Training for staff and board members... 6. Identify prospects (begin with org's board and current major donors)... 7. add appropriate subcommittees... 8 prepare marketing plan... 9. start up a mail-cultivation program Trends that will affect planned giving... - ANSWER we are a graying society... lower birthrates in generations following baby boomers means it will be increasingly difficult to sustain growth in planned giving programs.... Most charities will need to have effective programs in place soon or will miss the opportunity... most people die without a valid will. Ideal donor for Gift Annuity - ANSWER older, single female on a fixed income, someone who wants a predictable income for life. The focus of philanthropy must be... - ANSWER relationship-building that is customized to the needs and desires of the donor. For philanthropy to flourish - ANSWER Donor focused research... Targeted cases, constituents, methods... Strategic communications... Stewardship... Focus on the value Strategic communications: think about how communications can... - ANSWER inform, challenge, and inspire people Instead of focusing communications on campaign methods or dollars, instead focus on... - ANSWER donor motivations and program/client outcomes. Stewardship involves giving donors confidence that their contributions are handled in ways that ensure intended use. For relationship purposes, stewardship is about... - ANSWER responding to and thanking donors in a timely way... recognizing donors and reporting appropriately... protecting donors' privacy and their rights What is the process of gradually developing the interest of an important prospective contributor through exposure to institutional activities, people, needs, and plans to the point where a major gift may be considered? - ANSWER Cultivation What is the basis of successful fundraising? - ANSWER ONGOING cultivation What is the tracking and recording of contributions to ensure they are used exactly as the donor intended? - ANSWER Stewardship What are the two major parts of fundraising, relating to building and sustaining relationships? - ANSWER Cultivation and Stewardship Describe the Exchange Principle - ANSWER Products and services are offered, meet someone's needs, and compensation (money or other kinds) is offered in return. How does the Exchange Principle apply to fundraising? - ANSWER This principle requires organizations to express their missions in ways that invite donors to participate in programs that extend their values and preserve their interests. At the same time, that participation is meeting one or more needs of the donor, such as desire for recognition, sense of belonging, making a difference, or other tangible/intangible need(s). As government tightens services to people in need... - ANSWER opportunities arise for nonprofits. Over the next 20 years, the transfer of wealth challenges nonprofit orgs to change their fundraising methods to ensure receipt of their share. More emphasis will be placed on... - ANSWER financial planning and planned gifts. Because each generation is different... - ANSWER nonprofits will need to conduct new research and then evaluate and update marketing/fundraising strategies to attract and secure new donors. The reasons people give are tied directly to - ANSWER the building of relationships. Purpose of Cultivation: - ANSWER add prospects to donor base... help move prospects to active supporters and regular donors... aid in improving relationships... provides understanding of how they can help org achieve its mission Cultivation is done to encourage donors to - ANSWER give again and at higher levels Engaging Potential Donors... what are some opportunities to engage target audiences? - ANSWER Participate in moderated discussions... become a member of the org... volunteer for a special project... participate in an online survey or auction... take an online or in-person course.. Purchase items offered for sale.