Financial Management & Oversight Flashcards
7 cards from real CED practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Management & Oversight flashcards as text
An executive director is evaluating whether to lease or purchase office equipment. Which financial concept is MOST relevant to this decision?
Answer: Net present value (NPV) analysis
NPV analysis compares the present value of lease payments against purchase costs, accounting for time value of money to identify the financially superior option.
A nonprofit board approves an endowment spending policy allowing annual distributions of 5% of the endowment's 12-quarter rolling average market value. What is the PRIMARY purpose of using a rolling average?
Answer: To smooth out market volatility and provide predictable annual income
A rolling average dampens the effect of short-term market swings, giving programs more predictable budgets regardless of year-to-year market fluctuations.
Which of the following BEST describes the difference between a capital budget and an operating budget?
Answer: The capital budget covers multi-year asset investments while the operating budget covers recurring annual income and expenses
Capital budgets plan for long-term asset acquisitions or improvements, while operating budgets manage day-to-day revenue and expense cycles.
A state contract requires a nonprofit to submit a cost allocation plan. What does this plan demonstrate?
Answer: How shared costs are distributed equitably across programs and funding sources
A cost allocation plan shows funders and auditors how indirect or shared costs (rent, utilities, administration) are fairly distributed among programs.
An executive director reviews a cash flow projection showing a negative cash position in months 3 and 4. What is the BEST proactive strategy?
Answer: Negotiate a line of credit before the shortfall occurs
Securing a line of credit while the organization is financially stable is far less expensive and more reliable than scrambling for funds during a crisis.
Under the Uniform Guidance (2 CFR Part 200), what is the threshold above which a nonprofit receiving federal funds must undergo a single audit?
Answer: $750,000 in federal expenditures per year
The Uniform Guidance requires a single audit for organizations that expend $750,000 or more in federal awards during a fiscal year.
Which financial metric is most useful when comparing the administrative efficiency of two nonprofits of different sizes?
Answer: Program expense ratio (program expenses ÷ total expenses)
The program expense ratio normalizes administrative costs as a percentage of total spending, enabling fair comparisons across organizations regardless of size.