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Use of library space for private clubs

The board of trustees of a public school district library owns the library building. A private club occupies the entire second floor. The private club has traditionally not paid any rent or utilities, nor has it contributed to the upkeep of the building in any way.

The library, through a public vote of the school district, covers all of the costs of the building. Could the library be in danger of mismanagement of funds or losing its charter?
Insurance for Friends of the Library Groups

Is it required or advised that the Friends group (ours is a separate non-profit) have their own insurance? Monetary restrictions have resulted in our FOL group dropping their annual insurance as they understood it was not "required."