Question 1

Section 501(c)(3),exempt organizations are prohibited from supporting political candidates or campaigning to influence legislation.

Accepted Answer

Section 501(c)(3) organizations are classified as charitable, religious, educational, scientific, and literary organizations and are prohibited from intervening in political campaigns or supporting political candidates. They are also restricted from lobbying and attempting to influence legislation.

Question 2

The program expense ratio is calculated as Program service expenses / Total expenses.

Accepted Answer

This is the correct formula to calculate the program expense ratio.

Question 3

Entities that are tax-exempt under IRS Section 501(c)3 are permitted to endorse political candidates or attempt to influence legislation.

Accepted Answer

Entities that are tax-exempt under IRS Section 501(c)3 are prohibited from endorsing political candidates or attempting to influence legislation. This is known as the "Johnson Amendment," which prohibits 501(c)3 organizations from engaging in political campaign activity.

Question 4

Bonds which carry the full faith and credit of a government are called general obligation bonds.

Accepted Answer

General obligation bonds are backed by the full faith and credit of a government, meaning the government pledges to use all available resources to repay the bondholders.

Question 5

When computing Unrelated Business Income Tax,charities are permitted to deduct ordinary and necessary business related expenses and the first $1,000 of income is not taxed.

Accepted Answer

Charities are permitted to deduct ordinary and necessary business related expenses when computing Unrelated Business Income Tax, and the first $1,000 of income is not taxed.

Question 6

Fund-raising efficiency is a measure of performance that expresses how much an organization spends in raising a dollar of donations.

Accepted Answer

Fund-raising efficiency is measured as the ratio of fundraising expenses to donations received, which means it expresses how much an organization spends in raising a dollar of donations.

Question 7

Supporting expenses are not included in the numerator of the program expense ratio.

Accepted Answer

Supporting expenses such as fundraising and administrative costs are not included in the numerator of the program expense ratio, which only reflects the percentage of an organization's expenses that are directly related to program activities.

Question 8

The program expense ratio is calculated as (Program service expenses + supporting service expenses)/ Total expenses.

Accepted Answer

The program expense ratio is calculated as program service expenses divided by total expenses. Supporting service expenses are not included in numerator of the ratio calculation.

Question 9

Tax-exempt entities are not allowed to make contributions to political campaigns or they may lose their tax-exempt status.

Accepted Answer

This is because tax-exempt status is granted to organizations that are serving a charitable, religious, educational, scientific, or other specific purpose that benefits the public. The IRS does not allow these organizations to engage in partisan political activity as it goes against their purpose of providing a public benefit.

Question 10

Tax-exempt organizations are required to file Form 990 by the 15th day of the 5th month following the organization's taxable year.

Accepted Answer

This is correct as per the Internal Revenue Service (IRS) guidelines, which require tax-exempt organizations to file Form 990 by the 15th day of the 5th month after the end of their fiscal year. Failure to file this form can result in penalties and may cause the organization to lose its tax-exempt status.

Question 11

If one wished to compute the net debt of a government,this could be found in the governmental fund financial statements.

Accepted Answer

The net debt of a government is typically found in the government-wide financial statements, not the governmental fund financial statements.

Question 12

A tax-exempt organization must pay income taxes on income generated from trade or business activities unrelated to the entity's tax-exempt purposes.

Accepted Answer

This is known as unrelated business taxable income (UBTI) and is subject to income taxes.

Question 13

Service Efforts and Accomplishments Reporting is best completed by using a variety of measures,which are reported consistently.

Accepted Answer

Using a variety of measures for Service Efforts and Accomplishments Reporting helps to provide a comprehensive understanding of the organization's performance and progress. Reporting consistently is important to ensure accuracy and enable comparisons over time.

Question 14

The program expense ratio is calculated as follows:
 Total expenses / (Program service expenses + supporting service expenses).

Accepted Answer

The program expense ratio is calculated as program service expenses divided by total expenses.

Question 15

To apply for tax-exempt status,an organization must complete an IRS Form 1023.

Accepted Answer

To apply for tax-exempt status, an organization must complete an IRS Form 1023.

Question 16

The program expense ratio for a not-for-profit organization will improve if the organization shifts costs from fund-raising to administrative expenses.

Accepted Answer

The program expense ratio is calculated by dividing the total program expenses by the organization's total expenses. Therefore, if costs are shifted from fundraising to administrative expenses, it may improve the administrative expense ratio but it will not necessarily improve the program expense ratio. In fact, it may even negatively impact the program expense ratio if less money is being directed towards program activities.

Question 17

Bonds which carry the full faith and credit of a government are called revenue bonds.

Accepted Answer

Bonds which carry the full faith and credit of a government are called general obligation bonds, not revenue bonds.

Question 18

The GASB has issued standards for Service Efforts and Accomplishments Reporting.

Accepted Answer

The answer of The GASB has issued standards for Service...

Question 19

The three major user groups identified by the GASB are (1)citizen groups,(2)legislative and oversight officials,and (3)investors and creditors.

Accepted Answer

This statement accurately describes the three major user groups identified by the GASB.

Question 20

The program expense ratio for a not-for-profit organization will improve if the organization shifts costs from fund-raising to program expenses.

Accepted Answer

The program expense ratio is calculated by dividing program expenses by total expenses. Therefore, any increase in program expenses and decrease in fundraising expenses will improve the ratio. This is because program expenses are considered the primary mission of the organization, while fundraising expenses are considered ancillary to the mission.

Quiz 13: Auditing, Tax-Exempt Organizations, and Evaluating Performance