CNC Nonprofit Organization Management 2

Question 1

Which document outlines the rules and procedures governing a nonprofit's internal operations, such as meeting frequency and officer roles?

Accepted Answer

Bylaws

Answer

Bylaws are the internal governance document that establishes operating procedures, officer responsibilities, and meeting requirements for a nonprofit.

Question 2

A nonprofit's executive director wants to launch a new program outside the organization's stated mission. What is the FIRST step the board should take?

Accepted Answer

Assess whether the program aligns with the mission or if a mission amendment is needed

Answer

The board must first determine whether the new program fits the existing mission before proceeding, as mission drift can jeopardize tax-exempt status.

Question 3

What is the primary purpose of an annual audit for a nonprofit organization?

Accepted Answer

To provide independent verification of financial statements and internal controls

Answer

An independent audit provides assurance to stakeholders that the nonprofit's financial statements are accurate and that proper internal controls exist.

Question 4

Which term describes a situation where a board member has a personal financial interest in a vendor contract being considered by the nonprofit?

Accepted Answer

Conflict of interest

Answer

A conflict of interest arises when a board member's personal interest could improperly influence their decision-making on behalf of the organization.

Question 5

A nonprofit organization receives a $500,000 grant that must be used solely for building construction. How should this be classified on the financial statements?

Accepted Answer

Temporarily restricted net assets

Answer

Funds restricted by a donor for a specific purpose are classified as temporarily restricted (now called 'net assets with donor restrictions' under ASC 958) until the restriction is met.

(CNC) Certified Nonprofit Consultant Practice Test

(CNC) Certified Nonprofit Consultant Practice Test

CNC Nonprofit Organization Management 2