CNE Financial Management & Fundraising 3

Question 1

A nonprofit is considering a capital campaign. What is the primary purpose of a feasibility study conducted before launch?

Accepted Answer

To assess whether the community will support the goal and identify potential lead donors

Answer

A feasibility study evaluates community readiness, donor capacity, and leadership support before committing to a capital campaign goal.

Question 2

Which financial statement shows a nonprofit's revenues, expenses, and changes in net assets over a period of time?

Accepted Answer

Statement of Activities

Answer

The Statement of Activities is the nonprofit equivalent of an income statement, showing revenues, expenses, and net asset changes.

Question 3

An organization receives a multi-year grant of $300,000 payable over three years with no conditions beyond reporting. How should year one revenue be recognized?

Accepted Answer

The full $300,000 — all years recognized upfront if unconditional

Answer

Under ASC 958, unconditional multi-year pledges are recognized in full at the time of the pledge, discounted to present value if material.

Question 4

What is the purpose of a nonprofit's investment policy statement (IPS)?

Accepted Answer

To establish guidelines for asset allocation, risk tolerance, and manager selection for the organization's investments

Answer

An IPS governs how invested assets are managed, setting parameters for risk, return objectives, and spending policies.

Question 5

A major donor wants to establish a fund within the nonprofit that will bear their family name and support a specific cause indefinitely. This is best described as a:

Accepted Answer

Named endowment fund

Answer

A named endowment fund is permanently invested with income used for a donor-designated purpose, honoring the donor's family.

(CNE) Certified Nonprofit Executive Practice Test

(CNE) Certified Nonprofit Executive Practice Test

CNE Financial Management & Fundraising 3