We are beginning our long-range planning process and are asking patrons to fill out a community survey to assess what the community wants to see in the library now and in the future. Thinking it was a good idea to raffle off gift cards to encourage participation, I gave my board trustees a letter requesting a donation of gift cards. Another director told me I'm not supposed to have the board ask for donations in any form. This is something our Friends group should do. Please advise. Thanks in advance!
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.
Tags: Board of Trustees, Donations, Fundraising, Public Libraries
A member asked if there are any legal issues to consider when using GoFundMe to fund-raise, especially for association libraries.
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.
Tags: Fundraising, Association Libraries, 501c3
