Practice Test Geeks(CED) Certified Executive Director Practice Test
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Nonprofit Governance & Compliance 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 Nonprofit Governance & Compliance flashcards as text

  1. A nonprofit's bylaws require a quorum of two-thirds of board members to conduct business. At a meeting with 12 of 15 members present, is quorum met?

    Answer: Yes, because 12 exceeds two-thirds of 15

    Two-thirds of 15 is 10, and 12 members present exceeds that threshold, so quorum is satisfied.

  2. What distinguishes a nonprofit's 'interested party transaction' from a standard vendor contract?

    Answer: A board member, officer, or key employee has a financial interest in the other party

    An interested party transaction involves a person with authority over the nonprofit who also has a personal financial stake in the contracting entity.

  3. Under IRS intermediate sanctions rules (Section 4958), who is considered a 'disqualified person'?

    Answer: Someone in a position to exercise substantial influence over the organization's affairs

    Disqualified persons include those who can substantially influence the organization, such as executive directors, board members, and certain key employees.

  4. A nonprofit receives a restricted gift for a specific program that was later discontinued. What is the BEST course of action?

    Answer: Return the funds to the donor or seek donor approval to redirect them

    Restricted gifts must be used as the donor specified; if circumstances change, the organization must seek donor consent or apply cy pres doctrine to redirect funds.

  5. Which governance document establishes the internal rules for how a nonprofit is managed, including meeting procedures and officer roles?

    Answer: Bylaws

    Bylaws are the internal operating rules that govern board and officer procedures, meeting requirements, and organizational structure.

  6. The board of a nonprofit approves compensation for the executive director without reviewing comparable salary data. This failure most likely violates which fiduciary duty?

    Answer: Duty of care

    Duty of care requires board members to make informed decisions; approving compensation without market comparables fails the standard of a prudent person.

  7. What is the legal consequence of 'private inurement' in a 501(c)(3) organization?

    Answer: Revocation of federal tax-exempt status

    Private inurement — the improper diversion of nonprofit assets to insiders — can result in revocation of 501(c)(3) status by the IRS.