Financial Management & Fundraising 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 Financial Management & Fundraising flashcards as text
A nonprofit's audit reveals a material weakness in internal controls. What is the board's most appropriate immediate response?
Answer: Request a management letter response and develop a corrective action plan
The board should require management to formally respond to the material weakness and implement a documented corrective action plan.
Which method of accounting is required for nonprofits that have $50 million or more in annual revenue and are subject to audit?
Answer: Accrual basis accounting
Accrual basis accounting is required for nonprofits undergoing audits and is the standard for organizations of significant size under GAAP.
What is a 'fiscal sponsor' in the nonprofit sector?
Answer: An established 501(c)(3) that allows a project or group to operate under its tax-exempt status
Fiscal sponsorship allows projects that lack their own 501(c)(3) status to receive tax-deductible donations through an established nonprofit.
What does the 'overhead ratio' measure in nonprofit financial analysis, and what is its primary limitation?
Answer: It measures administrative and fundraising costs as a share of total expenses; its limitation is that low overhead can indicate underinvestment in capacity
While overhead ratios are widely used, experts argue that low overhead can signal neglected infrastructure, staff development, and technology investment.
A nonprofit board member who also owns a company that the nonprofit contracts with must:
Answer: Disclose the relationship and recuse themselves from votes related to that contract
Conflict of interest policies require disclosure and recusal; complete prohibition on such relationships is not always required if properly managed.
Which of the following is an example of an 'in-kind contribution' that a nonprofit must properly value and document?
Answer: A law firm providing 40 hours of free legal services
In-kind contributions of services from specialized professionals should be recognized at fair market value if the nonprofit would have otherwise paid for them.
A nonprofit receives $10,000 from a fundraising gala. Attendees each paid $150 for a ticket, and the fair market value of the dinner was $60. What portion is tax-deductible per attendee?
Answer: $90 — the amount exceeding the fair market value of benefits received
Donors may only deduct the amount paid above the fair market value of goods or services received at a fundraising event.