501(c)(3) Governance & Bylaws Flashcards
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Which of the following best distinguishes a 'public charity' from a 'private foundation' under 501(c)(3)?
Answer: Public charities receive broad public support from many sources, while private foundations typically rely on a single source of funding
Public charities demonstrate broad public support (from many donors and government sources), while private foundations typically rely on a single family, corporation, or endowment.
What is the legal effect of a board member's 'dissent' recorded in meeting minutes?
Answer: The dissenting member may be protected from personal liability related to that decision
A formally recorded dissent may help protect a board member from personal liability associated with a decision they opposed, demonstrating they did not support the action.
An organization's bylaws state that the board chair must be a US citizen. This provision is BEST described as:
Answer: A bylaw provision that the organization is free to adopt but is not required by federal law
Organizations generally have latitude to set qualifications for officers and board members in their bylaws, as long as the provisions do not violate applicable law.
Which of the following scenarios best illustrates 'mission drift' in a nonprofit?
Answer: A literacy nonprofit consistently redirects resources to unrelated technology ventures to attract new funding
Mission drift occurs when a nonprofit's activities move away from its stated charitable purpose, often driven by funding opportunities rather than mission alignment.
A 501(c)(3) organization wishes to advocate for a ballot measure to legalize a particular activity. This is an example of:
Answer: Direct political activity, which is absolutely prohibited for 501(c)(3) organizations
Attempting to influence voters on a ballot measure is considered direct political campaign activity, which is absolutely prohibited for 501(c)(3) organizations.
What is the main purpose of requiring board members to sign an annual attestation related to the conflict of interest policy?
Answer: To ensure board members have reviewed the policy and disclosed any conflicts for the current year
Annual attestations confirm that board members have read the conflict of interest policy and disclosed any relationships or interests that may create a conflict.
A 501(c)(3) organization's bylaws are silent on a particular governance matter. What is the most appropriate next step?
Answer: The organization should consult applicable state nonprofit corporation law, which typically provides default rules
When bylaws are silent, state nonprofit corporation law typically provides default rules that govern the situation until the organization amends its bylaws.