CNC Financial Sustainability & Cash Flow Management 3

Question 1

Which of the following best characterizes a 'quasi-endowment' (board-designated endowment)?

Accepted Answer

It is set aside by board resolution and can be undesignated by a board vote

Answer

It is legally restricted by the donor and cannot be spent without court approval

Answer

It must be reported separately from all other net assets on Form 990

Answer

It requires a dedicated, separate bank account from general operating funds

Question 2

In nonprofit financial management, 'working capital' is best defined as:

Accepted Answer

Current assets minus current liabilities

Answer

The total balance across all investment and endowment accounts

Answer

The total unrestricted net asset balance

Answer

Average monthly payroll and operating expenses

Question 3

A nonprofit that receives a $500,000 government cost-reimbursement grant should recognize revenue:

Accepted Answer

As qualifying expenses are incurred

Answer

When the grant agreement is signed

Answer

When the grant funds are deposited in the bank

Answer

At the close of the fiscal year in which the grant was awarded

Question 4

Which financial sustainability strategy involves nonprofits generating revenue by selling goods or services related to their mission?

Accepted Answer

Social enterprise and earned income

Answer

Cause-related marketing partnerships

Answer

Fiscal sponsorship arrangements

Answer

Planned giving and bequest programs

Question 5

What is 'fiscal sponsorship' in the nonprofit sector?

Accepted Answer

An arrangement where an established 501(c)(3) extends its tax-exempt status to a sponsored project

Answer

A government subsidy program that offsets nonprofit operating costs

Answer

A CPA firm providing pro bono audit services to emerging nonprofits

Answer

A major donor committing to multi-year unrestricted operating support

Question 6

When beginning a financial assessment for a nonprofit client, a consultant should review which of the following FIRST?

Accepted Answer

The most recent independent audit or financial review

Answer

The organization's website design and donor messaging

Answer

Marketing materials and annual appeal campaigns

Answer

Staff performance evaluations and HR policies

Question 7

A nonprofit's 'overhead ratio' (management and fundraising expenses as a percentage of total expenses) is best understood as:

Accepted Answer

One metric that must be interpreted in the context of mission and organizational stage

Answer

The primary indicator of organizational effectiveness and impact

Answer

Legally capped at 15% for all 501(c)(3) organizations

Answer

A figure required to be disclosed annually on IRS Form W-2