Fundraising

Before I answer, I have to put in this obnoxious disclaimer: THIS ANSWER IS ONLY FOR ASSOCIATION LIBRARIES.

I’m sorry. I know using ALL CAPS means I’m YELLING. But the distinction is important for these questions, so it warrants boosted volume.

Okay, with that obnoxious disclaimer out there, let’s get to the questions and answers.

QUESTION: Are there any legal restrictions or guidelines that would limit or prohibit our library staff from directly or indirectly assisting in fundraising efforts organized by the library board?

ANSWER: Yes, there are many, but most are surmountable with careful planning. To illustrate both the issues and the careful planning that can surmount them, here are two short stories. [Readers who don’t want to wade through two faux fairy tales to get to an answer can skip to “THE (BETTER) END.”]

Story #1: The Three Friends

Once upon a time, three friends worked at an association library: a library page, a library clerk, and a library director. The three friends didn’t let their differential power dynamic interfere with their friendship and were happy as they put away books, helped patrons, and directed day-to-day operations at the library (respectively).

One day, however, things changed. Out of the blue, the page was directed to make phone calls to all patrons who had borrowed books within the last year to ask for donations to the summer reading program. The clerk was told they would have to work that Friday night, paid, at the “Pizza for Pages” fundraising dinner. The library director was told to write and practice delivering a pitch to seek a large donation from a major regional philanthropic organization.

The three friends’ peaceful[1] work life came to a screeching end. The page worried that the calls to patrons were an invasion of privacy.[2] The clerk did not regard selling pizza as part of his job description. And the library director—while an excellent library director—had never been trained in seeking or managing charitable contributions.

It was all very stressful, and the three friends started looking for new jobs.

THE (CAUTIONARY) END

Story #2: The Three Other Friends

Once upon a time, there were three other friends at an association library: a library page, a library clerk, and a library director. Their differential power dynamic was occasionally an issue in their friendship, but they were united by their love of textiles and trivia.

The three friends were happy as they put away books, helped patrons, and directed day-to-day operations at the library (respectively). They also felt very accomplished in their careers, because in addition to their regular duties, each had specific language in their job description that made them an integral part of the library’s fundraising.

Part of the page’s formal duties were to “help maintain a donor database”—separate and apart from patron records—of people who had expressed interest in donating to the library. The page also sent out regular, scheduled donation solicitations that had been reviewed by the library’s accountant and fundraising counsel, making sure people understood how to make a tax-deductible donation to the library.

Part of the clerk’s formal duties were to “assist with fundraising, event planning, and presentations,” and the clerk’s regular hours were sometimes adjusted (or the clerk was paid overtime) to assist with fundraising events. As the clerk performed this duty, they often had to consult the library’s policies and procedures for working with the volunteers who helped with the events.

The library director felt particularly accomplished, because even though she didn’t have any experience with grants and grant management when she started, the library paid for her to attend training sessions until she was confident about applying for grants and managing them. As the director built these skills, the library board developed and passed policies on managing grants and soliciting/accepting donations, while the library’s treasurer took the time to understand the regulatory requirements of managing donations and grants.

It was occasionally stressful, but the three friends felt supported and confident in their jobs and didn’t spend a lot of time looking through job listings.

THE (BETTER) END

The take-away from these two tales is simple. At an association library, employees should not assist with fundraising unless:

• To comply with both governing ethics and laws pertaining to patron confidentiality, there is great care to not use library patron information to solicit donations. Instead, a completely separate database built using direct expressions of donor interest should be used; frequency of use or borrowing habits should not be referenced in solicitations;
• Fundraising duties are in the employee’s job description[3] (not just “additional duties as assigned”);
• The employees performing fundraising duties are still being supervised by their supervisor,[4] not a trustee, contractor, or volunteer;
• The library has a full array of policies governing gift/donation solicitation and acceptance;[5]
• If seeking grants (governmental or private) is part of the effort, the library has a full array of grant management policies;[6]
• If volunteers are also helping with fundraising, there is a volunteer policy that includes confirming volunteer service by letter, and the volunteers are covered by insurance;[7]
• The library is providing employees required to solicit gifts with appropriate on-the-job training;
• If the library is using a paid consultant or external fundraiser to help with fund-raising, that person or company’s service should be confirmed with a written contract.

Basically, like all things, fundraising by employees at an association library should be planned and overseen with care.

Thank you for giving me a reason to get all that out there!

NEXT QUESTION: Can the library board legally use the library’s official website and existing Facebook account to promote or facilitate board-led fundraising campaigns?

ANSWER: Yes, as long as the library has a full array of policies governing gift/donation solicitation and acceptance, and the policy includes solicitation via social media.[8]

QUESTION: If the above is permissible, is it also acceptable for the board to establish a separate Facebook account specifically for fundraising purposes on behalf of the library?

ANSWER: Yes, as long as the library has a full array of policies governing gift/donation solicitation and acceptance, and the policy includes solicitation via social media.

Unlike other public libraries, an association library is not subject to FOIL, so the considerations about record-keeping that sometimes arise when quasi-governmental entities use social media are not present here. However, a board should take great care to make sure solicitations on the library’s social media account do not distract from the primary purpose of the account, and if the solicitations are on a separate account, that the separate account is still owned by the library.

The member’s careful questions are the right approach this issue. Fundraising by a library—association or otherwise—should never be a spontaneous activity. An association library engaging in fundraising should have a well-developed array of policies, and if library employees have fundraising responsibilities, those responsibilities should be clearly stated. If the library is using volunteers and/or paid consultants to help fundraise, that service should also be governed by policy and with attention to compliance (including a written contract for all external services).

The policies needed to make informed, compliant decisions about your association library’s fundraising strategies and staff involvement are bolded in this answer, and where there are templates or other relevant information, this answer includes them in the footnotes.

Thank you for a serious and important array of questions.

There are a lot of questions packed into this submission!

Let's take them one at a time.

First question: "I have always been under the impression that it is illegal for public libraries to fundraise on their own, aside from 2 book sales per year." [1]

It is not illegal for a public library to fundraise.  It's just that, like starting sourdough[2], fundraising by a public library has many complications.

For more on that, see the analysis in the "Ask the Lawyer" answer posted here: https://wnylrc.org/raq/donations-solicitations-public-libraries.

Second question: If a school district public library no longer has a Friends Group, can it host fundraisers?

Yes, but to briefly summarize the "caveats" mentioned above: a public library should never rely on fund-raising to meet basic operational and strategic needs (that funding must come from the tax base and via established agreements for service). In addition, a public library's fund-raising must adhere to the extensive laws and regulations applying to the solicitation, accounting, use, and investment of such moneys.

Third question: For example, could the library itself host a bingo night and raise money?

Yes, but any event that involves "games of chance" should follow the state law regarding gaming.  For more on that, see the guidance at the "Ask the Lawyer" answer here: https://wnylrc.org/raq/donations-solicitations-public-libraries.

Fourth question: Can a school district public library send out a fundraising letter?

Technically, yes, but because of the caveats, I would say such a letter should go out after:

1. the fund-raising initiative was built into an established fund-raising plan passed by the board of trustees;
2. the fiscal controls for accounting for the money were reviewed and approved by the library's accountant and lawyer; and
3. the text of the letter was reviewed by the accountant and lawyer for compliance AND approved by the board of trustees for adherence to the strategic plan.[3]

Fifth question: Or is it important that all library staff and trustees refrain from fundraising efforts in order to separate public funds from fundraising?

I wish it were this simple, but it's a bit more complex.  If a public library deeply plans for and builds capacity for fund-raising for special initiatives, it is possible for paid staff to engage in what is called (in the fund-raising biz) "advancement".  However, once serious planning is happening on that scale, there are a variety of reasons for a non-association library to work with an affiliated not-for-profit (like a "Friends" or a foundation) to achieve the same objectives.

Sixth question: I am struggling because we have a lot of great ideas, but the future of our Friends Group is unclear.

To the director who submitted this question: you are not alone.  "Friends uncertainty" can happen, and when it does, it is a lousy situation for a director to be in.

Also: I am not surprised you have good ideas for fund-raising; library directors are some of the best sources for good ideas for "Friends" and other library supporters.  After all, directors are the people with the closest eye on the well-being and day-to-day needs of the library. 

But as your fourth question suggests, the energy of you and your staff is best spent focused on those day-to-day needs, which should only include fund-raising if the board has initiated a well-thought-out plan and strategic support for employees assisting with it (translation: there is a budget, wording in a job description, and at least three pages in the updated strategic plan for this, then the director can have responsibilities related to fund-raising... which should never be more than a very small fraction of their duties).

Third:  If at all possible, when a "Friends" group is rocky, this is a time for library trustees to step up and see if they can help revitalize the organization.[4] 

Seventh question: I am wondering what options are available to me as a library director, and my Board of Trustees, if the Friends Group were to dissolve.

There’s an array of options for a public library in this situation:

All of this brings me to the spirit of the question, which is: if fund-raising isn't going so well, what is a director to do?

Trustees who are reading, this is your chance to shine.  If you are so fortunate to have a director with good ideas, it is a good idea to listen to those ideas and see if they can fit into fund-raising by the Friends or by the library itself.  But unless a job description is re-written to include specific responsibility for fund-raising, and such activity is supported by the library's policies and strategic plan (after being carefully reviewed by the library's accountant and lawyer), a director or other staff member should NOT be fund-raising.

In other words: no aspect of fund-raising should ever, ever, EVER be a casual add-on to a library director's list of duties.  While a director's talents can be tapped for fund-raising, if things are going beyond brainstorming, such responsibility should only be imposed to the degree there is a clear and vetted plan[8] for doing so.

I thought this reply was written for directors, but really, it is written for boards, treasurers, and finance committees: if a director is to work on any aspect of fund-raising (which if they do, should only be the merest fraction of their duties), or if a public library is going to fund-raise, make sure the right infrastructure is in place!

Following our "do not reinvent the wheel" rule for "Ask the Lawyer," prior to diving into this, we checked the "Trustees Handbook" posted at https://www.nysl.nysed.gov/libdev/trustees/handbook/handbook.pdf.  On page 57, it provides an excellent summation of the concern at play in the issue of trustees and fund-raising:

"Public library boards generally take care to separate private fundraising efforts (such as direct personal solicitations, as opposed to seeking grants from foundations or government agencies) from normal library operations and board activities since there are restrictions on the appropriate use of public funds." [emphasis added]

The Handbook then points out that this concern is why many public libraries use "Friends" to personally solicit and raise funds.

To this concern about limits on the use of public funds, I would add that when it comes to raising money, it is very easy for the solicitation to run afoul of charitable regulations, required accounting, and limits on allowed fund-raising activities (such as games of chance).

But does this caution merit a complete bar on such solicitations?

To explore that, let's explore the risks.  And we're also going to talk about "raffles", so hang in there, association libraries...this one's for you, too.

Before a board solicits gifts, it should have a full suite of "fiscal controls" and accounting practices to govern how the solicitation is done.  A policy on soliciting/accepting donations, and policy on fund-raising events, a policy on procurement...if a board ensures that its actions in soliciting gifts are following a legally compliant policy, this mitigates the risk of no-compliance.

Let's take the member's specific situation as an example: Could trustee solicitations of gift cards for a raffle used as an inducement to participate in a survey on library use be done carefully enough to avoid a concern?

Here are the risks in such an endeavor: the library is planning to 1) have trustees ask for donations of gift cards; 2) use the cards as an inducement to fill out a survey; then 3)  "raffle" the donated cards; then 4) use the answers from the survey "to assess what the community wants to see in the library now and in the future."

Of the 4 things listed above, only #1--the solicitation of the cards--doesn't give me pause.  If the library has a good donation acceptance policy, and the cards are donated per that policy, and the library follows the conditions for the donation...then it is just another donation.

#2 poses a risk that is pretty easy to mitigate with a little caution.  In the world of not-for-profits in New York, a "raffle" is a "game of chance".  This means a "raffle" can be considered "charitable gaming" which can require registration and particular accounting (see General Municipal Law of New York (Section 186), and registration).

However, as defined by law, a "raffle" in New York requires the purchase of tickets for payment of money.[1] Since the draw described isn't technically a "raffle" (it's a drawing), to avoid any confusion, it might be good to avoid using that word.[2]

In addition, if you have time, it would be good to call your local County Clerk to make sure they don't regard the use of raffle tickets without payment of money to be a "raffle."[3]

Okay, the "raffle" concern is pretty easy to ameliorate. My concerns about #2 and #4 are a little more subtle and tricky.

As stated, the library is hoping the lisupare[4] will inspire people to fill out a survey to assess what the community wants to.

This means that the library hopes to use the results of the survey to make decisions about such things as programming, collection decisions, and the library facility.  From the sound of it, the input could even be used to develop plans for renovation or new construction funded by a bond or other municipal funding initiative in the future.

I imagine you see where I am going here.  By offering a reward with a defined financial value for participating in the survey, the board would risk the assertion of a direct link between financial compensation and a person filling out the survey a certain way.

I know.  This seems ridiculous.  But complaints have been made about far more innocuous things.

To avoid this, I suggest the library consider a different approach to incentivizing broad community participation in the survey. For instance, each person who completes one gets a leaf ornament or token to hang on a display, so the community can see how many people have taken time out of their day to give their feedback to the library.[5]  In this scenario, the trustees could request donations of the ornaments or display (which can then become part of the library's stock of display materials) can just follow the usual policy for accepting donations.

I am sorry to have to write this; I hate throwing cold water at good ideas.  Further, I am not saying the "raffle" (uh, that's "lisupare") is outright wrong.  But libraries function in large part because of the love and trust they foster in the public.  While the notion of a chance to be selected for a monetary gift for taking the time to complete a library survey is lovely, I think it can be interpreted wrongly--either in the moment, or down the road. 

Thank you for trusting me with this question.[6]

[1] Per GML 186 3-b, a "raffle", when conducted by a not-for-profit in NY, is a " game of chance in which a participant pays money in return for a ticket or other receipt and in which a prize is awarded on the basis of a winning number..." etc.

[2] You could go with a made-up word like "lisupare" ["Lie-soo-puh-ray; noun; definition: a randomly given library survey participation reward.]

[3] To address this, I called the NYS Gaming Commission.  Let's just say that unless you are reporting suspected gaming crimes, the Commission doesn't like to get in touch over the phone.  So, then I scoured their materials on "charitable gaming" at https:/www.gaming.ny.gov/charitablegaming/.  While it is clear the law requires "payment" which is defined as "legal tender, check, or credit card", I didn't find anything ruling out a situation like the one described (people "paying" for a raffle ticket by performing a task).  So, getting assurance from your county clerk, who keeps an eye on local charitable gambling, is a good idea.  Hopefully, they will laugh at the very idea that this could be seen as a "raffle."

[4] See footnote #2.

[5] I am a lawyer, not a professional display-maker, so I have no doubt a library employee with experience making displays can come up with a much, much, MUCH better version of this.

[6] Just so readers know, I spoke with the director who submitted this question, who was very cool about all my agita.

When one considers becoming a "Friend" of a library, several activities spring to mind:

Parties
Craft fairs
A charity auction
But being a "Friend" is not all book sales and giant thermometers.  Get out your Excel spreadsheets and prepare to take good notes; for a "Friends" group, raising "charitable" money[1] comes with detailed record-keeping and government oversight.

The "CHAR-500"[2] referenced in the question, an annual filing required of many not-for-profit organizations in New York State, is a major part of state oversight.[3]

A companion requirement—also referenced by the member—is that a not-for-profit register with the New York State Attorney General's Office.

But does every not-for-profit in New York State have to fulfill these requirements?

The answer, which does depend on some of the factors listed in the question, is:

"No.  BUT—." 

Let's review.

There are several factors that can exempt a not-for-profit operating in New York State from having to register and file the CHAR500. 

Of relevance to the member's question is Article 7-A of New York State's Executive Law, which provides:

§ 172-a. Certain persons[4] exempted.

...

2. The following persons shall not be required to register with the attorney general:

...

(d) Any charitable organization which solicits or receives gross contributions of less than twenty-five thousand dollars during a fiscal year of such organization, provided none of its fund raising is carried on by professional fund raisers or fund raising counsel. However, if the gross contributions received by such charitable organization during any fiscal year of such organization shall be in excess of twenty-five thousand dollars, it shall within thirty days after the date it shall have received gross contributions in excess of twenty-five thousand dollars register with the attorney general as required by section one hundred seventy-two of this article.

So, the member is right to point out the relevance of the Friends' annual income (although the trigger amount is $25,000.00, not $50,000.00).

That said, it is important to keep in mind that the reporting requirements of a not-for-profit are not just governed by the Executive Law.[5]  Further, even the Executive Law comes with exceptions: if the organization is using a professional fund-raiser, they will need to register (no matter how much money they take in).

Trying to figure out what to do?  For Friends, this is a good one to confirm with both your attorney and accountant, but in general, it is important to remember the difference between registering, which per Executive Law 172 and 7s-a is triggered when the $25,000 dollar annual income threshold is reached, and annual filing, which per Executive Law 172-b (2-s) is triggered either by registration, or when the first $25,000 dollar annual income is reached, after which a filing is due even in years with smaller income.

Despite this exemption for annual revenue of under $25k, many organizations will register and file the CHAR500 registration because: 1) they aspire to raise more than $25k; 2) they know that potential donors often use the Charities Bureau registration to conduct "due diligence" on potential donees;[6] 3) it is a way to model transparency (and inspire trust).

But to answer the question, in this instance, unless a pro is being used... no, registration is not required.

Thank you for an important question.

[1] Meaning money being raised by a charity, for a charitable purpose.

[2] Which is what I would call my BBQ-themed bar for not-for-profit sector workers, if I were to go into the niche restaurant business.

[3] Found here as of March 14, 2023: https://www.charitiesnys.com/pdfs/statute_booklet.pdf.

[4] As used in this section of the Not-for-profit Corporation law, a "person" is a not-for-profit organization.  I know, it's weird.

[5] The IRS allows certain charitable organizations with under 500K in assets and 200k in annual revenue to file an "EZ" form, rather that the full form 990.  For more on that, visit the IRS at https://www.irs.gov/instructions/i990ez.

[6] That said, not filing when it is not required can signal a commitment to economy and conservation of resources.

The lawyer answers…

Fund-raising in the current climate (or any climate) is tough.  There are state and federal accounting rules, bylaws, “best practices,” and internal policies to abide by, while at the same time there is pressure to make sure the campaign is well-executed, fun, and most of all: productive. 

The various online options for fundraising enhance productivity.  Online fundraising can bring a new array of donors into the mix, can reinvigorate current benefactors, and can make giving as easy as sending a text message.  It is also becoming a necessity…for some (mostly under age 35) donors, not offering these options can mean your fund-raising effort doesn’t exist! 

What does a library have to coordinate when getting into the world of online fund-raising?  There are a host of legal issues.  Our member asked about GoFundMe, the current site du jour, so we’ll use that one.

First of all, for those libraries that are registered 501(c)3’s and charitable not-for-profit corporations, no matter where the fund-raising takes place, the solicitation, donor acknowledgement, accounting, and reporting are governed by the same rules as your “analog” fund-raising.  So, first, when evaluating whether or not to use a GoFundMe, make sure your treasurer and accountant are part of the set-up, and you check your policies, so internal awareness and regulatory compliance can be assured.

GoFundMe (and others) wants you to use their utility for your “Campaign” (as they call it in their “Terms” as of 10/23/2017) so they have thought about these things.  That said, there is a catch.  Here is how they support efforts by charitable entities:

Charitable Giving: Campaigns are not charities to which you can make tax-deductible charitable contributions. However, in addition to the Services described above, GoFundMe permits Donors to contribute directly to certain charitable organizations ("Charities") through the Platform. Any donation you make to a Charity through the Platform will be subject to a Services fee as described at http://www.gofundme.com/pricing. You understand and acknowledge, however, that GoFundMe is not a charity. If you or your charity would like to register to be listed as a charitable organization on the Platform, please contact us at support@gofundme.com and we can help facilitate that process. As used in this Agreement, the term "Campaign" does not refer to a Charity, and you acknowledge that contributions to Campaigns are not deductible under your jurisdiction’s applicable tax laws and regulations.

See what they do there?  They put the tax issue on your organization, while making sure they still get their fee!  --And considering that these fees can be almost 8% of the money donated, it can add up.

So, second, do the math: does the potentially broader audience and ease of donating warrant the payment of the fee?

That said, this is the USA and GoFundMe provides a service for this fee.  For smaller libraries without big advancement, marketing, and IT departments, sites like GoFundMe can provide an easy-to-use “front end” for your campaign.  You can tell your story, use their various resources for promoting the campaign, and get a polished-looking product entirely supported by the vendor’s structure.  Of course, the content in that “front end” still has to be supplied by you, and it should be coordinated with the library’s website and social media presence.

So, third, ask: does the library have the technical and outreach ability to make the best use of the utility?  If no one on staff is confident about gracefully integrating the link on the library’s website, and using social media outreach to drive donors to the site, other avenues might be a better use of resources.  In other words: for some places, online is the way to go, while for or others, up close and personal could still be a winning strategy (with no fee!).  This is a question only your internal team can answer.

And finally, does the type of library or archives you are affect this issue?  Absolutely, but there is no categorical rule on this. The minutia of a library’s bylaws, IRS status, policies, and the goals of the fundraiser govern the use of online fundraising. 

Generally speaking, if an institution can fundraise for something in the “real” world, they can do it online.  Just make sure your solicitations, accounting, and reporting follow the usual rules…something that starts (and ends) with making sure your team is in the know, has designed the campaign before it is launched, and has the capacity to solicit, acknowledge, account for, and report to donations as required.

As offline, so online!  Good luck.