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
A nonprofit's executive director also serves as the board chair. From a governance standpoint, this arrangement is:
Answer: A governance concern because it undermines board independence and oversight
Having the CEO also serve as board chair creates a structural conflict because the board's primary role is to oversee and evaluate the executive director.
What is 'cy pres' doctrine as it applies to nonprofit law?
Answer: A legal doctrine allowing courts to modify charitable gift restrictions when the original purpose becomes impossible
Cy pres allows a court to redirect restricted charitable funds to a purpose as close as possible to the donor's original intent when the original purpose is no longer practicable.
Which of the following is NOT required to be publicly disclosed on a nonprofit's Form 990?
Answer: Names of donors and their contribution amounts
While Form 990 is a public document, Schedule B (donor list) is redacted from public copies, protecting donor privacy.
A nonprofit board adopts a resolution to dissolve the organization. Under most state laws, remaining assets after liabilities must be:
Answer: Transferred to one or more organizations with similar charitable purposes
Upon dissolution, nonprofit law and IRS regulations require that remaining assets be distributed to other tax-exempt organizations with similar purposes, not to private individuals.
What is the main risk of having too many 'insider' board members (staff, family members) on a nonprofit board?
Answer: Compromising the board's ability to provide independent oversight
When insiders dominate the board, the board cannot objectively evaluate management performance or catch conflicts of interest, weakening governance effectiveness.
Under the Sarbanes-Oxley Act, which two provisions directly apply to nonprofit organizations?
Answer: Whistleblower protections and document retention/destruction policies
Only two Sarbanes-Oxley provisions formally apply to nonprofits: whistleblower protections for employees and prohibitions on destroying documents related to a federal investigation.
A nonprofit receives a $1 million bequest restricted to building a new facility. The board decides to use the funds for operating expenses due to a budget shortfall. This action is:
Answer: A breach of fiduciary duty and likely a violation of state law
Using restricted funds for unauthorized purposes breaches the board's duty of obedience to donor intent and typically violates state charitable trust law.