CAP GS859 2ND SAMPLE EXAM UPDATED QUESTIONS
AND CORRECT ANSWERS
Question:
1. Consider the idea of "the tyran-ny of one number." Why is it im-practicable to hold planned gift
givers to one number of dollars raised?
A) Planned gift people should
not be measured by results.
B) Results in gift planning can-
not be quantified.
C) The cash element in planned
gifts is relatively minor.
D) Planned gifts fall into three
main categories (current, de-ferred, and contingent and de-ferred). It is not logically possi-ble to add
these into a single meaningful number.
Answer:
The correct answer is D. To add apples, oranges, and pota-toes to get one number is easier than to add
current, de-ferred, and contingent deferred gifts into one number. Cash is easy to count. Deferred is
not as easy. How does one count today produce an irrevocable remainder interest in a unitrust whose
value is going up and down daily? As for revocable deferred, how can you reduce to a number the
value of a revocable 50% interest in the estate of a woman aged 52 who is in good health? Yet,
counting is inevitable. For it to be done right, per the "Guidelines for Reporting and Counting
Charitable Gifts, Second Edition," from the Nation Association of Charitable Gift Planners, as seen in
Assignment 5, we should report three numbers, each at its face amount. The reluctance of boards and
business offices to count in this way and their preference for current dollars is part of what is driving
the fusion of major and planned gifts, often to the detriment of planned gift officers.
Question:
2. What is the difference between gift counting and gift valuing?
A) Gift counting is the process
of determining the number of gifts received; gift valuing is the process of determining dis-counted
present value of those gifts.
B) Gift counting is the process
of determining the nominal val-ue of gifts; gift valuing is the process of determining the dis-counted
present value.
C) Gift counting is for internal
fundraising and marketing pur-poses; gift valuing is for the or-ganization's internal cash-flow
projections.
D) Gift counting is for the comp-
troller to determine the value of what the organization has re-ceived; gift valuing is for cred-iting the
donor with a specific value for donor recognition pur-poses.
, Answer:
The correct answer is C. Gifts are counted (per guidelines promoted by The National Committee for
Planned Giving) in a way that is simple to understand for fundraisers and donors and is motivational.
Gifts are counted (on this sys-tem) toward campaign totals and donor recognition levels on a simple,
three-part system: outright, irrevocable de-ferred, and revocable deferred. All gifts are counted at
nom-inal value without discounting for time value of money or likelihood of gifts actually coming to
fruition. Gift valuation, under the valuation standards promoted by the National Association of
Charitable Gift Planners, is done for internal purposes, to help the business office predict and value
the spendable cash flow from a planned gift. Valuation stan-dards take into account when the charity
is likely to realize spendable money, how much it will be able to spend, and the likelihood that the
money will actually materialize.
Question:
3. Which of the following endow-ments is set up to last for only a certain period of time?
A) a true endowment
B) a term endowment
C) a quasi-endowment
D) all endowments
Answer:
The correct answer is B. A term endowment lasts only for a term of years or set time.
Question:
4. Traditionally, the fundraising function in a large organiza-tion has been broken down into three
areas: annual, major, and planned. In addition, the orga-nization may have short-term campaigns. All
of the state-ments below are examples of what gift planners mean when they write about the fusion of
major and planned gifts, EX-CEPT
A) The departments may be
combined or fused.
B) Fundraisers may find them-
selves performing more than one role.
C) Fundraisers may ask for more
than one gift at a time (major gift commitment and planned gift commitment) in a double ask.
D) Increasingly, fundraisers are
being encouraged to fuse their work with that of financial plan-ners and others, who look at gifts as
financial and philan-thropic strategies within a more comprehensive plan.
Answer:
The correct answer is D. Sadly, fusion is code for cutting planned giving jobs and fusing the staff
with major gifts. It has meant spreading the planned giving team out over more cases and getting
them to double as major gift of-ficers. It has led to more calls made faster to make sure current dollars
come in. This has not been good news to planned gift people.
Question:
5. A capital campaign is used for what purpose?
A) building unrestricted endow-
ment
B) building a building or major
new program
C) raising money for current
budgets
, D) raising gifts from principal
(non-cash assets and appreciat-ed securities)
Answer:
The correct answer is B. Generally, a capital campaign is to build an edifice—a building or a
permanent program (like a center).
Question:
6. When a social investor is said to be sector agnostic, which state-ment(s) below is (are) implied?
I. The investor is focused on cost and results regardless of the sector.
II. The investor is willing to in-vest in cost-effective solutions in whatever sector they may be found.
Answer:
The correct answer is C. The phrase sector agnostic is cited here from the work of Lucy Bernholz,
who works in the high-tech, entrepreneurial world of Silicon Valley. Such thinkers take business and
markets as their primary reference point. They see business as results driven, and they see themselves
as producing innovative and disruptive solutions that get results whether the results are obtained
through business, nonprofits, or governmental advocacy. They believe in dollars in, results out. To
them, there is nothing special about the nonprofit sector other than legal forms.
Question:
7. A charity comes to believe that it is all about getting money in and putting results out. The charity
starts to move more to-ward being a vendor or ser-vice provider for corporations. For example, if the
charity is a school, it may do custom re-search for a company, train cor-porate staff, or otherwise
create benefits to the funder first, and students second. How might the IRS react?
I. The IRS might characterize the income as unrelated business taxable income.
II. The IRS might tax the charity on the earned income.
Answer:
The correct answer is C. Advanced theorists with a business perspective like Lucy Berhnolz's
perspective are sometimes sector agnostic and see charities as machines for creating social return on
investment and returns to the social in-vestor. In the process, sectors blur as if the differences were
just a matter of quaint terminology as opposed to the new and up to date language of social
entrepreneurialism. The IRS, however, is not sector agnostic and does not embrace blurred lines
between what is taxable and what is not, what is a gift and what is a business deal or investment. The
IRS says that a charity exists for a social purpose and has certain tax benefits because it selflessly
helps the public. So, when a charity gets into the earned income business, the IRS wants to see that
the income is clearly related to the charity's exempt purpose. Such acceptable, mission-related income
might include tuition at a school, admission fees for a museum, sales of bread made by trainees at a
bakery maintained to help ex-prisoners transition to society from jail, or sales of donated clothing in a
thrift shop maintained by a religious organization. In other cases, the charity is selling services for the
sake of making money unrelated to its purpose; when it in effect becomes a vendor or a business in
disguise, the IRS may recharacterize the income as unrelated business taxable income. Such income
is taxed to the charity. If it becomes a very large percentage of total receipts, the charity may lose its
exemption.
Question:
8. Which of the statements below is (are) true?
I. A moves manager at a char-ity decides who will approach which donor, how, and with whom.
II. The natural partner is the one who has overall responsibility for that donor relationship.
, Answer:
The correct answer is A. The terminology goes back to Dave Dunlop, a highly regarded fundraiser.
William Sturtevant writes about it at length in The Artful Journey: Cultivating and Soliciting the
Major Gift. The system sees fundraising as a multistep process for several players. The moves
manager is a fundraiser who develops a list of high potential donors and manages the process of
cultivating and soliciting them. The natural partner is a person who is well positioned to get an
appointment with the donor and influence the donor. It could be the president, executive director, a
board member, or a close friend of the prospect and a fellow donor. The pri-mary player is the natural
partner best positioned to make the ask or to support the fundraiser when the fundraiser makes the
ask.
Question:
9. Which of the statements below represents an ethical dilemma?
A) Bill is torn between accepting
a bribe and asking for a favor.
B) Mary is torn between making
a large commission and serving a client appropriately.
C) Meg is torn between using
undue influence to get a gift and treating the donor as she would wish to be treated.
D) Jack is torn between his com-
mitment to the ideals of his non-profit and his commitment to serving his superior, who takes a
dollars-and-cents approach to fundraising.
Answer:
The correct answer is D. Jack's case is a dilemma with an ethical tug on either end. One tug is toward
an ideal. The other tug is toward serving a superior honorably. The other examples show a tug
between a good choice and a bad choice. Such a situation is not an ethical dilemma, though it may be
a hard choice or temptation.
Question:
10. Which statement(s) below is (are) found in the "Model Stan-dards of Practice for the Chari-table
Gift Planner"?
I. Primacy of Donor Intent: The principal basis for making a charitable gift should be a de-sire on the
part of the donor to support the work of charitable institutions.
II. Explanation of Tax Implica-tions: Congress has provided tax incentives for charitable giv-ing. The
emphasis in this state-ment on philanthropic motiva-tion in no way minimizes the ne-cessity and
appropriateness of a full and accurate explanation by the gift planner of those in-centives and the
implications of those incentives.
Answer:
The correct answer is C. These are word-for-word the first two of the ten canons in the "Model
Standards of Practice for the Charitable Gift Planner." Donor intent "to benefit the work of a charity"
comes first; behind it comes a "full and accurate explanation" by the gift planner to the donor of the
tax incentives and their implications.
Question:
11. Under the heading "Full Disclo-sure," the "Model Standards of Practice for Gift Planners" states
the following:
It is essential to the gift plan-ning process that the role and relationships of all parties in-volved,
including how and by whom each is compensated, be fully disclosed to the donor. A Gift Planner
shall not act or pur-port to act as a representative of any charity without the express knowledge and
AND CORRECT ANSWERS
Question:
1. Consider the idea of "the tyran-ny of one number." Why is it im-practicable to hold planned gift
givers to one number of dollars raised?
A) Planned gift people should
not be measured by results.
B) Results in gift planning can-
not be quantified.
C) The cash element in planned
gifts is relatively minor.
D) Planned gifts fall into three
main categories (current, de-ferred, and contingent and de-ferred). It is not logically possi-ble to add
these into a single meaningful number.
Answer:
The correct answer is D. To add apples, oranges, and pota-toes to get one number is easier than to add
current, de-ferred, and contingent deferred gifts into one number. Cash is easy to count. Deferred is
not as easy. How does one count today produce an irrevocable remainder interest in a unitrust whose
value is going up and down daily? As for revocable deferred, how can you reduce to a number the
value of a revocable 50% interest in the estate of a woman aged 52 who is in good health? Yet,
counting is inevitable. For it to be done right, per the "Guidelines for Reporting and Counting
Charitable Gifts, Second Edition," from the Nation Association of Charitable Gift Planners, as seen in
Assignment 5, we should report three numbers, each at its face amount. The reluctance of boards and
business offices to count in this way and their preference for current dollars is part of what is driving
the fusion of major and planned gifts, often to the detriment of planned gift officers.
Question:
2. What is the difference between gift counting and gift valuing?
A) Gift counting is the process
of determining the number of gifts received; gift valuing is the process of determining dis-counted
present value of those gifts.
B) Gift counting is the process
of determining the nominal val-ue of gifts; gift valuing is the process of determining the dis-counted
present value.
C) Gift counting is for internal
fundraising and marketing pur-poses; gift valuing is for the or-ganization's internal cash-flow
projections.
D) Gift counting is for the comp-
troller to determine the value of what the organization has re-ceived; gift valuing is for cred-iting the
donor with a specific value for donor recognition pur-poses.
, Answer:
The correct answer is C. Gifts are counted (per guidelines promoted by The National Committee for
Planned Giving) in a way that is simple to understand for fundraisers and donors and is motivational.
Gifts are counted (on this sys-tem) toward campaign totals and donor recognition levels on a simple,
three-part system: outright, irrevocable de-ferred, and revocable deferred. All gifts are counted at
nom-inal value without discounting for time value of money or likelihood of gifts actually coming to
fruition. Gift valuation, under the valuation standards promoted by the National Association of
Charitable Gift Planners, is done for internal purposes, to help the business office predict and value
the spendable cash flow from a planned gift. Valuation stan-dards take into account when the charity
is likely to realize spendable money, how much it will be able to spend, and the likelihood that the
money will actually materialize.
Question:
3. Which of the following endow-ments is set up to last for only a certain period of time?
A) a true endowment
B) a term endowment
C) a quasi-endowment
D) all endowments
Answer:
The correct answer is B. A term endowment lasts only for a term of years or set time.
Question:
4. Traditionally, the fundraising function in a large organiza-tion has been broken down into three
areas: annual, major, and planned. In addition, the orga-nization may have short-term campaigns. All
of the state-ments below are examples of what gift planners mean when they write about the fusion of
major and planned gifts, EX-CEPT
A) The departments may be
combined or fused.
B) Fundraisers may find them-
selves performing more than one role.
C) Fundraisers may ask for more
than one gift at a time (major gift commitment and planned gift commitment) in a double ask.
D) Increasingly, fundraisers are
being encouraged to fuse their work with that of financial plan-ners and others, who look at gifts as
financial and philan-thropic strategies within a more comprehensive plan.
Answer:
The correct answer is D. Sadly, fusion is code for cutting planned giving jobs and fusing the staff
with major gifts. It has meant spreading the planned giving team out over more cases and getting
them to double as major gift of-ficers. It has led to more calls made faster to make sure current dollars
come in. This has not been good news to planned gift people.
Question:
5. A capital campaign is used for what purpose?
A) building unrestricted endow-
ment
B) building a building or major
new program
C) raising money for current
budgets
, D) raising gifts from principal
(non-cash assets and appreciat-ed securities)
Answer:
The correct answer is B. Generally, a capital campaign is to build an edifice—a building or a
permanent program (like a center).
Question:
6. When a social investor is said to be sector agnostic, which state-ment(s) below is (are) implied?
I. The investor is focused on cost and results regardless of the sector.
II. The investor is willing to in-vest in cost-effective solutions in whatever sector they may be found.
Answer:
The correct answer is C. The phrase sector agnostic is cited here from the work of Lucy Bernholz,
who works in the high-tech, entrepreneurial world of Silicon Valley. Such thinkers take business and
markets as their primary reference point. They see business as results driven, and they see themselves
as producing innovative and disruptive solutions that get results whether the results are obtained
through business, nonprofits, or governmental advocacy. They believe in dollars in, results out. To
them, there is nothing special about the nonprofit sector other than legal forms.
Question:
7. A charity comes to believe that it is all about getting money in and putting results out. The charity
starts to move more to-ward being a vendor or ser-vice provider for corporations. For example, if the
charity is a school, it may do custom re-search for a company, train cor-porate staff, or otherwise
create benefits to the funder first, and students second. How might the IRS react?
I. The IRS might characterize the income as unrelated business taxable income.
II. The IRS might tax the charity on the earned income.
Answer:
The correct answer is C. Advanced theorists with a business perspective like Lucy Berhnolz's
perspective are sometimes sector agnostic and see charities as machines for creating social return on
investment and returns to the social in-vestor. In the process, sectors blur as if the differences were
just a matter of quaint terminology as opposed to the new and up to date language of social
entrepreneurialism. The IRS, however, is not sector agnostic and does not embrace blurred lines
between what is taxable and what is not, what is a gift and what is a business deal or investment. The
IRS says that a charity exists for a social purpose and has certain tax benefits because it selflessly
helps the public. So, when a charity gets into the earned income business, the IRS wants to see that
the income is clearly related to the charity's exempt purpose. Such acceptable, mission-related income
might include tuition at a school, admission fees for a museum, sales of bread made by trainees at a
bakery maintained to help ex-prisoners transition to society from jail, or sales of donated clothing in a
thrift shop maintained by a religious organization. In other cases, the charity is selling services for the
sake of making money unrelated to its purpose; when it in effect becomes a vendor or a business in
disguise, the IRS may recharacterize the income as unrelated business taxable income. Such income
is taxed to the charity. If it becomes a very large percentage of total receipts, the charity may lose its
exemption.
Question:
8. Which of the statements below is (are) true?
I. A moves manager at a char-ity decides who will approach which donor, how, and with whom.
II. The natural partner is the one who has overall responsibility for that donor relationship.
, Answer:
The correct answer is A. The terminology goes back to Dave Dunlop, a highly regarded fundraiser.
William Sturtevant writes about it at length in The Artful Journey: Cultivating and Soliciting the
Major Gift. The system sees fundraising as a multistep process for several players. The moves
manager is a fundraiser who develops a list of high potential donors and manages the process of
cultivating and soliciting them. The natural partner is a person who is well positioned to get an
appointment with the donor and influence the donor. It could be the president, executive director, a
board member, or a close friend of the prospect and a fellow donor. The pri-mary player is the natural
partner best positioned to make the ask or to support the fundraiser when the fundraiser makes the
ask.
Question:
9. Which of the statements below represents an ethical dilemma?
A) Bill is torn between accepting
a bribe and asking for a favor.
B) Mary is torn between making
a large commission and serving a client appropriately.
C) Meg is torn between using
undue influence to get a gift and treating the donor as she would wish to be treated.
D) Jack is torn between his com-
mitment to the ideals of his non-profit and his commitment to serving his superior, who takes a
dollars-and-cents approach to fundraising.
Answer:
The correct answer is D. Jack's case is a dilemma with an ethical tug on either end. One tug is toward
an ideal. The other tug is toward serving a superior honorably. The other examples show a tug
between a good choice and a bad choice. Such a situation is not an ethical dilemma, though it may be
a hard choice or temptation.
Question:
10. Which statement(s) below is (are) found in the "Model Stan-dards of Practice for the Chari-table
Gift Planner"?
I. Primacy of Donor Intent: The principal basis for making a charitable gift should be a de-sire on the
part of the donor to support the work of charitable institutions.
II. Explanation of Tax Implica-tions: Congress has provided tax incentives for charitable giv-ing. The
emphasis in this state-ment on philanthropic motiva-tion in no way minimizes the ne-cessity and
appropriateness of a full and accurate explanation by the gift planner of those in-centives and the
implications of those incentives.
Answer:
The correct answer is C. These are word-for-word the first two of the ten canons in the "Model
Standards of Practice for the Charitable Gift Planner." Donor intent "to benefit the work of a charity"
comes first; behind it comes a "full and accurate explanation" by the gift planner to the donor of the
tax incentives and their implications.
Question:
11. Under the heading "Full Disclo-sure," the "Model Standards of Practice for Gift Planners" states
the following:
It is essential to the gift plan-ning process that the role and relationships of all parties in-volved,
including how and by whom each is compensated, be fully disclosed to the donor. A Gift Planner
shall not act or pur-port to act as a representative of any charity without the express knowledge and
