CAP Nonprofit Management & Impact Evaluation 2

Question 1

Under UPMIFA, a nonprofit board's investment decisions for endowment funds must be guided by which standard?

Accepted Answer

The prudent investor standard applied to the institution's charitable purposes and risk tolerance

Answer

UPMIFA requires boards to apply a prudent investor standard considering the institution's purposes, investment horizon, risk tolerance, and need for current distributions versus long-term growth.

Question 2

A nonprofit's program efficiency ratio is calculated as:

Accepted Answer

Program service expenses divided by total expenses

Answer

The program efficiency ratio is program service expenses divided by total expenses, indicating what proportion of spending directly supports the mission.

Question 3

Which governance structure element is most critical for preventing conflicts of interest on a nonprofit board?

Accepted Answer

A written conflict-of-interest policy with disclosure and recusal procedures

Answer

A written conflict-of-interest policy, combined with annual disclosure statements and recusal procedures, is the governance standard for identifying and managing situations where board members have personal interests that could influence organizational decisions.

Question 4

A nonprofit seeking to demonstrate impact to major donors should focus primarily on:

Accepted Answer

Outcome data showing measurable changes in beneficiaries' conditions or behaviors

Answer

Impact is best demonstrated through outcome data—measurable changes in knowledge, behavior, status, or condition among those served—rather than output counts or financial ratios.

Question 5

The primary purpose of IRS Form 990 from a philanthropic advisory standpoint is to:

Accepted Answer

Provide public transparency into the organization's finances, governance, and mission-related activities

Answer

Form 990 is an annual information return that provides public transparency into a nonprofit's finances, executive compensation, governance practices, and program accomplishments—it is a key due diligence tool.

(CAP) Certified Philanthropic Advisor Practice Test

(CAP) Certified Philanthropic Advisor Practice Test

CAP Nonprofit Management & Impact Evaluation 2