Financial Sustainability & Diversification 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 Sustainability & Diversification flashcards as text
A nonprofit's board is reviewing a proposal to accept a $1M gift from a donor whose business practices conflict with the organization's values. Which policy should guide this decision?
Answer: Gift acceptance policy
A gift acceptance policy provides criteria for evaluating and accepting or declining gifts, including reputational considerations tied to donor source.
What is the primary purpose of a 'liquidity reserve' separate from an operating reserve?
Answer: To provide immediate cash for unexpected short-term obligations or emergencies
A liquidity reserve is specifically designed to cover sudden, short-term cash needs without disrupting program operations or drawing on longer-term reserves.
Under the Uniform Prudent Management of Institutional Funds Act (UPMIFA), what standard governs how nonprofits invest endowment funds?
Answer: Prudent investor standard considering risk, return, and mission alignment
UPMIFA requires nonprofits to apply a prudent investor standard, balancing risk and return in light of the organization's resources, needs, and mission.
A nonprofit is exploring a 'social enterprise' to generate unrestricted revenue. Which scenario would MOST likely be considered mission-related?
Answer: A job-training nonprofit opening a staffing agency employing its graduates
A staffing agency that employs graduates of a job-training program directly advances the nonprofit's mission while generating earned revenue.
Which financial ratio indicates the proportion of nonprofit revenue that goes to program activities versus administrative costs?
Answer: Program expense ratio
The program expense ratio (program expenses ÷ total expenses) shows what percentage of spending goes directly to mission delivery.
What is 'venture philanthropy,' and how does it differ from traditional grantmaking?
Answer: High-engagement funding that combines financial investment with capacity-building support
Venture philanthropy applies venture capital principles—long-term, high-engagement relationships that combine funding with strategic assistance to build organizational capacity.
A nonprofit receives a multi-year grant of $300,000 ($100,000/year for 3 years). Under ASC 958, how should Year 1 grant revenue be recognized if all conditions are met?
Answer: Recognize $100,000 in Year 1 as the time restriction is met for that year
Under ASC 958, multi-year grants with time restrictions are recognized as revenue in each period when the time restriction is satisfied—$100,000 per year.