Nonprofit Organization Management Flashcards
7 cards from real CNC 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 Organization Management flashcards as text
Under IRS regulations, what is the maximum percentage of a 501(c)(3) public charity's activities that can be devoted to lobbying without jeopardizing its tax-exempt status under the substantial part test?
Answer: No specific percentage — 'insubstantial' is the standard
The IRS uses a facts-and-circumstances 'substantial part' test with no bright-line percentage, though organizations can elect the 501(h) expenditure test for clearer limits.
A nonprofit is planning to lay off 20% of its staff due to budget cuts. Which stakeholder group should the executive director consult FIRST?
Answer: The board of directors
Major staffing decisions require board approval or at minimum board notification, as the board holds fiduciary responsibility for the organization's operations.
What is the term for a nonprofit's policy that allows the board to access restricted reserves only under predefined financial hardship conditions?
Answer: Operating reserve policy
An operating reserve policy defines the target reserve level and the conditions under which reserves may be drawn down to cover operational shortfalls.
Which board committee is typically responsible for recommending the executive director's compensation package?
Answer: Compensation or HR committee
A compensation or HR committee reviews benchmarking data and recommends executive pay to ensure it is reasonable and defensible against IRS private benefit scrutiny.
A nonprofit merges two programs into one to reduce redundancy and cut costs. This is an example of which organizational management strategy?
Answer: Program consolidation
Program consolidation combines overlapping services to improve efficiency and reduce administrative overhead while maintaining mission delivery.
Which financial metric best indicates a nonprofit's ability to pay its short-term obligations?
Answer: Current ratio
The current ratio (current assets divided by current liabilities) measures an organization's liquidity and ability to meet near-term financial obligations.
When a board member consistently misses meetings and fails to engage in governance duties, what is the most appropriate first response from the board chair?
Answer: Have a private conversation with the member about their commitment and engagement
A direct, private conversation is the appropriate first step to understand the situation and allow the board member to recommit or gracefully resign.