CNE Nonprofit Board Development 3 — Questions and Answers
Question 1: Under the duty of obedience, nonprofit board members are required to:
- Follow all instructions from major donors
- Ensure the organization adheres to its mission and legal obligations (Correct answer)
- Obey the executive director's strategic decisions
- Submit to annual personal background checks
Correct answer: Ensure the organization adheres to its mission and legal obligations
The duty of obedience requires board members to ensure the organization stays true to its stated mission and complies with applicable laws.
Question 2: A board votes on a contract with a company owned by a board member's spouse. The board member participated in the discussion and vote. This is an example of:
- Proper due diligence
- A conflict of interest violation (Correct answer)
- Standard business practice
- Delegated authority
Correct answer: A conflict of interest violation
Participating in a vote where a personal financial interest exists violates conflict of interest policies and potentially the duty of loyalty.
Question 3: What is the 'prudent person standard' in nonprofit governance?
- A requirement that all board members have professional certifications
- The expectation that board members act with the care an ordinarily prudent person would exercise in similar circumstances (Correct answer)
- A fundraising benchmark set by the IRS
- A restriction on board member compensation
Correct answer: The expectation that board members act with the care an ordinarily prudent person would exercise in similar circumstances
The prudent person standard sets the baseline of care—diligence, informed decision-making—that board members must demonstrate to fulfill their duty of care.
Question 4: Which statement best describes the role of an executive committee in nonprofit governance?
- It replaces the full board for all decisions
- It acts on behalf of the full board between meetings on urgent matters, within defined limits (Correct answer)
- It oversees the organization's financial audits
- It manages day-to-day operations alongside the CEO
Correct answer: It acts on behalf of the full board between meetings on urgent matters, within defined limits
Executive committees handle time-sensitive decisions between full board meetings, but their authority is typically bounded by bylaws and board policy.
Question 5: A board is considering a major strategic pivot for the organization. Who should lead this process?
- The board alone, without staff input
- The CEO alone, with board approval at the end
- A collaborative process between the board and executive leadership (Correct answer)
- An external consultant, with the board ratifying the outcome
Correct answer: A collaborative process between the board and executive leadership
Strategic planning is most effective when it is a partnership between board members (who set direction) and executive leadership (who understand operations).
Question 6: Which document primarily governs the internal rules and procedures of a nonprofit board?
- Form 990
- Articles of incorporation
- Bylaws (Correct answer)
- Strategic plan
Correct answer: Bylaws
Bylaws are the legally binding internal governance document that outlines board structure, meeting procedures, officer roles, and amendment processes.
Question 7: When should a nonprofit board review and update its bylaws?
- Only when required by the state attorney general
- Annually as a mandatory IRS requirement
- Periodically, typically every 3-5 years or when significant governance changes occur (Correct answer)
- Only when the organization changes its name
Correct answer: Periodically, typically every 3-5 years or when significant governance changes occur
Regular bylaw reviews ensure governance documents reflect current organizational structure, legal requirements, and best practices.
CNE Nonprofit Board Development 3
Under the duty of obedience, nonprofit board members are required to: