Non-profit board members play a vital role in stewarding your organization’s mission and have fiduciary duties that come along with it. And fulfilling their fiduciary duty involves more than reviewing financial statements. It requires a thoughtful balance of care, loyalty, and obedience with a clear understanding of how those duties extend to organizational and investment oversight.
This quiz will test your knowledge, highlight the nuances of fiduciary responsibility, and help you identify where an experienced investment manager can strengthen your organization’s governance and mission alignment.
Let’s Check-in on Your Fiduciary Knowledge
1. A board member’s fiduciary duty applies only to financial decisions.
Answer: B
Fiduciary duty extends beyond finances to every aspect of governance, including compliance, mission alignment, and other strategic decisions.
2. The “duty of care” primarily means:
Answer: A
Duty of care means acting with diligence, good faith, and informed judgment. Officers, directors, and fund managers must manage and invest portfolios ‘in good faith and with the care an ordinarily prudent person in a like position would exercise in similar circumstances.’
3. If a non-profit hires an investment manager, the board’s fiduciary duty over those assets is fully transferred.
Answer: B
The board retains ultimate responsibility, even when delegating to professionals. A sound investment manager will act in your organization’s best interest while also guiding your board of directors on meeting its own fiduciary responsibilities with planning, monitoring, and reporting support.
4. Reviewing the investment policy statement (IPS) annually is:
Answer: B
Reviewing the IPS annually demonstrates diligence and prudence. Regular review is critical for non-profits because they serve as a guide for the organization’s investment program – by clearly spelling out the goals the organization is trying to achieve and the risks they are willing to take in order to do so. An investment manager can help transform a policy into a strategic tool by reviewing and aligning the investment decisions with the long-term mission.
5. Which of the following best describes the “duty of loyalty”?
Answer: A
Duty of loyalty ensures personal interests never override the organization’s interests.
6. A board member who has a personal relationship with a vendor can participate in a vote if they disclose the conflict.
Answer: B
Disclosure is essential but not sufficient. The individual should recuse themselves from voting.
7. What is one way an investment manager supports the board’s fiduciary responsibility?
Answer: B
A strong investment manager educates, documents, and strengthens governance – going beyond just managing the investments.
8. The “duty of obedience” involves:
Answer: B
Duty of obedience ties the organization’s actions to its mission and legal framework. Board members know and obey applicable laws and regulations, donor intent and the organization’s mission.
9. To uphold fiduciary standards, the board should document investment discussions and decisions in meeting minutes.
Answer: A
Documentation protects the board and demonstrates compliance with fiduciary standards.
10. If markets are volatile, boards should react quickly and adjust the portfolio to avoid losses.
Answer: B
Reacting impulsively to markets violates the principle of prudence.
11. A prudent investment process focuses primarily on:
Answer: C
Process, not prediction, defines fiduciary-quality investment management.
12. The Uniform Prudent Management of Institutional Funds Act (UPMIFA) says there is a rebuttable presumption of imprudence if an institution spends more than how much of its endowment’s market value in any one year?
Answer: D
UPMIFA sets a rebuttable presumption of imprudence if an organization spends more than 7% of the average fair market value of its endowment over the prior three years in any given year. That doesn’t mean spending above 7% is automatically prohibited, but it does require the organization to justify that the spending rate still aligns with donor intent and the long-term preservation of the endowment.
13. The best way for a board to demonstrate fiduciary diligence in investing is to:
Answer: B
Consistent, documented oversight is key evidence of fiduciary diligence.
14. An investment manager’s fiduciary responsibility is separate from – but aligned with – the board’s fiduciary role.
Answer: A
Both parties share fiduciary responsibilities, but their scopes differ; alignment is critical.
15. A board demonstrates fiduciary strength when it:
Answer: B
Strong fiduciary boards emphasize process, transparency, and alignment, often supported by mission-driven investment partners.
We’re Here to be Your Fiduciary Partner
Your fiduciary duty is the backbone of your mission’s success. Our goal is to help you uphold it through transparent and documented processes, prudent investment management, and regular monitoring and reporting. Together, we can turn responsible governance into lasting impact. Schedule a call today to speak with a member of our Endowment & Foundation team about your fiduciary responsibility, questions on your duty of care, and ways we can help support governance and compliance.
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The information in this paper is not intended as legal or tax advice. Consult with an attorney or a tax or financial advisor regarding your specific legal, tax, estate planning, or financial situation.
