Board Development & Governance Flashcards
7 cards from real CNE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Board Development & Governance flashcards as text
Which scenario represents a violation of the duty of obedience for a nonprofit board member?
Answer: Approving a grant that funds activities outside the organization's stated mission
The duty of obedience requires board members to ensure the organization adheres to its stated mission and legal requirements; approving off-mission activities violates this duty.
What is the main purpose of an audit committee in a nonprofit organization?
Answer: To oversee the financial reporting and external audit process
The audit committee provides oversight of financial reporting integrity, internal controls, and the relationship with external auditors.
Which practice best helps a board avoid 'groupthink' in decision-making?
Answer: Assigning a board member to play devil's advocate on major decisions
Designating someone to challenge assumptions and present counterarguments helps the board critically evaluate decisions rather than default to consensus.
A nonprofit board is considering a merger with another organization. Which action should occur FIRST?
Answer: Conducting due diligence on the other organization's financials and legal standing
Due diligence—reviewing the partner organization's finances, liabilities, culture, and legal status—must precede any merger commitment.
A board term limit policy is primarily intended to:
Answer: Bring in fresh perspectives and prevent entrenchment of power
Term limits create regular turnover that introduces new ideas, skills, and diverse perspectives while preventing any individual from dominating governance.
Which of the following best describes an 'interested party transaction' in nonprofit governance?
Answer: A financial transaction between the nonprofit and a board member or their family
An interested party transaction involves a financial exchange where a board member, officer, or their family has a personal financial interest.
Which document must a US nonprofit make publicly available upon request under IRS rules?
Answer: Form 990, 990-EZ, or 990-PF for the past three years
IRS regulations require nonprofits to make their Form 990 and application for tax exemption (Form 1023) available for public inspection.