Nonprofit Nonprofit Financial Management

Question 1

What IRS form must most US public charities file annually?

Accepted Answer

Form 990

Answer

Form 990 is the annual information return that tax-exempt organizations file with the IRS to report on their finances, governance, and programs.

Question 2

What is the difference between restricted and unrestricted funds in a nonprofit?

Accepted Answer

Restricted funds must be used for donor-specified purposes; unrestricted funds can be used at the organization's discretion

Answer

Restricted funds carry donor-imposed conditions on their use, while unrestricted funds give the organization flexibility to apply them where needed most.

Question 3

What is an operating reserve in nonprofit financial management?

Accepted Answer

Unrestricted funds set aside to cover short-term operational needs or unexpected shortfalls

Answer

An operating reserve is a savings buffer that helps nonprofits sustain operations during revenue gaps, emergencies, or transitions.

Question 4

What financial statement summarizes a nonprofit's assets, liabilities, and net assets at a specific point in time?

Accepted Answer

Statement of Financial Position

Answer

The Statement of Financial Position (equivalent to a balance sheet) shows what the organization owns, owes, and its net asset balance at a specific date.

Question 5

What is the purpose of the Statement of Functional Expenses for nonprofits?

Accepted Answer

To show how expenses are allocated across program, management, and fundraising functions

Answer

The Statement of Functional Expenses breaks down costs by function, showing donors and watchdogs how much goes to programs versus overhead.

Nonprofit Practice Test

Nonprofit Practice Test

Nonprofit Nonprofit Financial Management