CED Regulatory Compliance & Legal Framework 3 — Questions and Answers
Question 1: Under the Fair Labor Standards Act (FLSA), which category of workers is entitled to overtime pay at 1.5 times their regular rate?
- All salaried employees
- Non-exempt employees working over 40 hours per week (Correct answer)
- Part-time employees only
- Employees earning less than $100,000 annually
Correct answer: Non-exempt employees working over 40 hours per week
The FLSA requires overtime pay for non-exempt employees who work more than 40 hours in a workweek, regardless of whether they are paid hourly or salary.
Question 2: A 501(c)(3) organization risks losing its tax-exempt status if it:
- Generates any earned revenue from program activities
- Engages in substantial lobbying or political campaign activities (Correct answer)
- Employs paid staff in addition to volunteers
- Operates programs outside its original geographic area
Correct answer: Engages in substantial lobbying or political campaign activities
The IRS can revoke 501(c)(3) status if an organization engages in substantial lobbying or any political campaign intervention.
Question 3: An executive director is personally served with a subpoena for organizational records. The CORRECT immediate step is to:
- Immediately gather and deliver the requested documents
- Consult legal counsel before responding or producing any documents (Correct answer)
- Notify all staff of the legal inquiry
- Inform funders and major donors of the situation
Correct answer: Consult legal counsel before responding or producing any documents
Upon receiving a subpoena, an executive must consult legal counsel immediately to understand obligations, rights, and any grounds for objection before producing documents.
Question 4: The Uniform Prudent Management of Institutional Funds Act (UPMIFA) primarily governs:
- Executive compensation at nonprofit organizations
- Investment and spending of endowment funds by charitable organizations (Correct answer)
- Federal grant compliance requirements
- Corporate governance for nonprofit boards
Correct answer: Investment and spending of endowment funds by charitable organizations
UPMIFA provides guidance for nonprofits on prudent investment and spending of endowment and institutional funds.
Question 5: Title IX of the Education Amendments of 1972 prohibits discrimination based on sex in:
- All private organizations receiving any federal funding
- Educational programs or activities receiving federal financial assistance (Correct answer)
- Federal government employment only
- Organizations with more than 50 employees
Correct answer: Educational programs or activities receiving federal financial assistance
Title IX prohibits sex-based discrimination in any educational program or activity that receives federal financial assistance.
Question 6: Which document establishes the foundational legal structure and purpose of a nonprofit corporation?
- Bylaws
- Articles of Incorporation (Correct answer)
- Strategic plan
- Form 990
Correct answer: Articles of Incorporation
The Articles of Incorporation are the foundational legal document filed with the state that creates a nonprofit corporation and establishes its basic structure and purpose.
Question 7: Under ERISA, fiduciaries of employee benefit plans are required to act:
- Primarily in the interests of the sponsoring employer
- Solely in the interest of plan participants and beneficiaries (Correct answer)
- According to the majority vote of all employees
- In compliance with IRS recommendations only
Correct answer: Solely in the interest of plan participants and beneficiaries
ERISA imposes a fiduciary duty requiring plan managers to act solely in the interest of plan participants and beneficiaries, not the employer.
CED Regulatory Compliance & Legal Framework 3
Under the Fair Labor Standards Act (FLSA), which category of workers is entitled to overtime pay at 1.5 times their regular rate?