CNE Financial Management & Fundraising 2

Question 1

A nonprofit receives a $50,000 grant restricted for program delivery. Where should this be classified on the statement of financial position?

Accepted Answer

With donor restrictions net assets

Answer

Grants with donor-imposed restrictions are classified as net assets with donor restrictions per ASC 958.

Question 2

Which fundraising cost ratio benchmark is commonly cited by watchdog organizations like Charity Navigator as a warning threshold?

Accepted Answer

Fundraising costs above 35% of total expenses

Answer

Most watchdog groups flag fundraising costs exceeding 35% of total expenses as potentially inefficient.

Question 3

A planned giving program receives a bequest commitment from a living donor. How should this be recorded?

Accepted Answer

Only upon receipt after the donor's death

Answer

Bequest intentions are not legally binding and should only be recognized as revenue when received.

Question 4

Under IRS regulations, what is the maximum percentage of a nonprofit's activities that can be lobbying before it risks losing 501(c)(3) status under the substantial part test?

Accepted Answer

No fixed percentage — 'substantial' is determined case by case

Answer

The IRS 'substantial part test' has no fixed percentage; it evaluates facts and circumstances rather than a bright-line rule.

Question 5

A nonprofit's current ratio is 0.8. What does this indicate?

Accepted Answer

Current liabilities exceed current assets, signaling liquidity risk

Answer

A current ratio below 1.0 means current liabilities exceed current assets, indicating potential difficulty meeting short-term obligations.

(CNE) Certified Nonprofit Executive Practice Test

(CNE) Certified Nonprofit Executive Practice Test

CNE Financial Management & Fundraising 2