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. Which nonprofit board committee is typically responsible for overseeing the annual independent audit?

    Answer: Audit committee

    The audit committee provides independent oversight of the external audit process, reviews the auditor's findings, and ensures financial integrity.

  2. A 501(c)(3) spends 25% of its total expenditures on lobbying activities. What is the likely IRS consequence?

    Answer: The organization may lose tax-exempt status for excessive lobbying

    While 501(c)(3)s may engage in some lobbying, it must be an insubstantial part of activities; 25% likely exceeds the insubstantiality threshold and risks loss of exemption.

  3. What is a 'sunshine law' in the context of nonprofit governance?

    Answer: State law mandating open meetings for government-related nonprofits

    Sunshine laws require certain organizations, particularly those acting as public bodies, to conduct meetings openly and allow public access to records.

  4. Which of the following is an example of proper application of the 'business judgment rule' in nonprofit governance?

    Answer: A board reviews independent legal counsel's advice before entering a major real estate deal

    The business judgment rule protects board decisions made in good faith, with adequate information, and in the organization's best interest — such as relying on expert advice.

  5. Form 1023 is filed with the IRS for what purpose?

    Answer: To apply for recognition of tax-exempt status under Section 501(c)(3)

    Form 1023 is the IRS application for recognition of tax-exempt status under Section 501(c)(3) of the Internal Revenue Code.

  6. An executive director signs a $500,000 contract without board authorization as required by the bylaws. This action is BEST described as:

    Answer: Ultra vires, exceeding the director's authorized powers

    Acting beyond the scope of authorized powers is ultra vires; a contract signed without required board approval may be voidable and exposes the ED to personal liability.

  7. Which of the following BEST describes the 'duty of obedience' for nonprofit board members?

    Answer: Adhering to the organization's mission, bylaws, and applicable laws

    Duty of obedience requires board members to ensure the organization adheres to its stated mission, governing documents, and all applicable laws.