Certified Fund Raising Executive (CFRE) Practice Test

What does a letter of intent or pledge signify in terms of major gifts?

1. An enforceable contract

2. A non-binding agreement outlining donor intent

3. A formal refusal to give a gift

4. An external designation of funds

The correct answer is: A non-binding agreement outlining donor intent

A letter of intent or pledge signifies a non-binding agreement outlining donor intent. This means that while it represents the donor's commitment to providing support, it does not create a legally enforceable obligation. Instead, these letters are important tools for both donors and organizations as they communicate the intentions and expectations surrounding a gift. The significance of this type of document lies in its ability to articulate the donor's planned contribution, which helps the organization in its fundraising strategies and financial planning. It fosters transparency and trust in the relationship between the donor and the organization, allowing both parties to understand the potential support being offered without the legal ramifications that come with an enforceable contract. In this context, it supports the cultivation of relationships and encourages open communication regarding the gift, its intended use, and the donor's philanthropic goals. By providing a framework for understanding the donor's intentions, it can also enhance the likelihood of future gifts, reinforcing the importance of the letter of intent or pledge in the major gifts process.