Nonprofit Nonprofit Governance 2 — Questions and Answers
Question 1: What is the duty of care for nonprofit board members?
- Making informed decisions by exercising reasonable diligence (Correct answer)
- Donating personally to the organization each year
- Approving all staff hiring decisions
- Attending every fundraising event
Correct answer: Making informed decisions by exercising reasonable diligence
The duty of care requires board members to make decisions with the same care a reasonably prudent person would use in similar circumstances.
Question 2: What is a conflict of interest policy in a nonprofit?
- A written policy requiring members to disclose personal interests that could influence decisions (Correct answer)
- A policy preventing board members from serving on other boards
- A document banning paid staff from attending board meetings
- A restriction on accepting government grants
Correct answer: A written policy requiring members to disclose personal interests that could influence decisions
A conflict of interest policy ensures board and staff members disclose and recuse themselves from decisions where personal interests may interfere.
Question 3: Which term describes the practice of self-dealing where a board member personally benefits from a nonprofit transaction?
- Private inurement (Correct answer)
- Mission drift
- Fiscal sponsorship
- In-kind contribution
Correct answer: Private inurement
Private inurement occurs when a nonprofit's assets or earnings improperly benefit insiders like board members or executives.
Question 4: What is an Executive Session in a nonprofit board meeting?
- A closed meeting for board members only to discuss sensitive matters (Correct answer)
- The portion of the meeting where the Executive Director presents
- A special meeting to approve the budget
- An emergency meeting called by the board chair
Correct answer: A closed meeting for board members only to discuss sensitive matters
An executive session is a portion of the board meeting closed to staff and the public, typically used for personnel or legal discussions.
Question 5: What is the term for a board composed primarily of working volunteers who also perform operational tasks?
- Working Board (Correct answer)
- Governance Board
- Advisory Board
- Fiduciary Board
Correct answer: Working Board
A working board is common in small nonprofits where board members directly carry out programs, fundraising, and administrative work.
Question 6: What does 'duty of obedience' require of nonprofit board members?
- Ensuring the organization adheres to its mission and complies with applicable laws (Correct answer)
- Following all directives from the Executive Director
- Obeying donor restrictions on all gifts
- Reporting to the state charity bureau monthly
Correct answer: Ensuring the organization adheres to its mission and complies with applicable laws
The duty of obedience requires board members to ensure the organization remains true to its stated mission and complies with legal requirements.
Nonprofit Nonprofit Governance 2
What is the duty of care for nonprofit board members?