There are so many ways the relationship between a library and their Friends can get "complicated."
Can you provide a template for an agreement between a library and their Friends?
NOTE: As a primer to this answer, which mostly consists of the requested template, I suggest reviewing the materials in the ever-excellent "NYLA Handbook for Library Trustees," particularly the guidance and links on page 85.
"Ask the Lawyer" has addressed the issue of "Friends" relationships before. This question presents a chance to address some common areas of concern pro-actively.
Of course, since an agreement is only as good as the lines of communication between the parties who are in it, aside from reviewing this template in advance of discussing it with your Friends, get ready to spend some time on this. A good agreement is the product of a lot of discussion, back-and forth, and work for clarity—not the other way around. And if you can, invite your lawyer to the table.
That said, a simple template can be a handy way to frame the discussion. So with that, here it is:
TEMPLATE Cooperation Agreement
Friends of the ______________ Library
This agreement (the "Agreement") between the _________________ Library (the "Library") and the Friends of the _____________ Library, Inc. (the "Friends") is intended to further the mission of the Library and the mission of the Friends by clarifying the mission-driven collaboration, shared commitments, and terms for collaboration between the two institutions ("Collaboration").
In all matters involving the Collaboration, the Library and the Friends shall be guided by their missions.
The mission of the Library is:
The mission of the Friends is:
In furtherance of their missions, the Parties set forth the below "Shared Commitments."
Shared Commitments of the Library and the Friends
Shared Commitment to Ethics
In all matters involving the Collaboration, the Library and the Friends shall be guided by the ethics of their institutions, including the American Library Code of Ethics, the Library Board's Code of Ethics, the oaths of office of the Library Board Members, and the Friends Board's Code of Ethics, and each parties' Conflict of Interest policy.
Shared Commitment to Legal Compliance and Transparency
As not-for-profit institutions governed by a variety of federal and state laws and regulations, the Parties operate under an array of legal obligations, and hereby commit to model compliance and all appropriate transparency in their stewardship of Library and Friend's resources.
Shared Commitment to the Success of the Library
The Parties agree that the very purpose of the creation of the Friends is the continued viability and growth of the Library, and all their Collaboration shall be to that end.
In furtherance of their shared commitments, the Parties set forth the below "Collaboration Terms."
Use of Name
In consideration of the support enabled by this Agreement, the _________________ Library consents to the use of the Library's name in the name of the Friends.
Distinguishing the Entities
Although the Friends are allowed, by this Agreement, to incorporate the name of the Library into their name, each party agrees to exert extreme care to consistently distinguish one entity from the other, and to use their respective EIN's, proper corporate names, when relevant proper Charities Bureau number and corporate identification number, at all times to distinguish one from the other.
This obligation shall be especially critical during any marketing, contracting, fund-raising, event-planning, and when either party communicates with the public or any oversight authority.
To ensure mutual awareness of each other, the boards shall maintain a shared record of the current information for both parties, as it is available:
By no later than DATE, the Library and the Friends shall create and maintain a "Library-Friends Collaboration Committee," with at least three board members from each organization, for the coordination of any aspect of the Collaboration, and shall invite no less than three Library board members to serve on the committee in a voting capacity. The committee itself may also appoint three additional members, by majority vote, but the total membership shall not exceed nine.
The Library-Friends Collaboration Committee shall have no authority to bind either the Friends or the Library.
Committee members shall serve one-year, renewable terms, which run from January to December (the Friend’s fiscal year). The Committee shall be co-chaired by one appointee from each board, as named by the President of that board.
The stated purpose and authority of the committee shall be "To maintain a strong and routine collaboration between the Library and the Friends, to facilitate planning in furtherance of the mission of the Friends, and to ensure clarity in matters of fund-raising, fiscal goals, and specific donations."
The Library-Friends Collaboration Committee shall meet no less than quarterly, in furtherance of the commitments of this Agreement.
Annual Contribution Ratio
The Friends shall aspire to direct no less than INSERT% of their total annual income to the Library. Any departure from this percentage shall be subject to a vote by both parties, based on the planned need to temporarily direct resources in another way, for the benefit of the library (for example, the Friends contracting with registered fund-raising counsel for a capital campaign).
Annual Planning Sheet
As part of the operations of "Library-Friends Collaboration Committee" the committee shall create for each fiscal year an "Annual Planning Sheet." This sheet will list the special asks the library has (including but not limited to funding for acquisitions, equipment, programming, board discretionary funds, or a capital campaign), and will be used by the Committee and the Friends to determine fund-raising objectives for the year, and to pre-identify any departure from the annual contribution ratio.
The Friends will encourage donors to make "unrestricted" donations (donations without conditions).
If a restricted donation is accepted (for instance, a donation that requires a naming right, or a certain work of art be placed in the Library) the conditions of the donations must first be reviewed for consistency with the Library's controlling documents and strategic plan, and then accepted via a majority vote by the Library's board.
It is expected that at all times the Friends shall maintain appropriate records of donations and donor-restricted donations and shall issue, in a timely manner, letters of acknowledgement in furtherance of any tax credit the donor may qualify for.
The Friends may apply for grants from government and private entities for the benefit of the Library, but prior to applying for the grant, the conditions of the grant must first be reviewed for consistency with the Library's controlling documents and strategic plan, and then accepted via a majority vote by the Library's board. This is to ensure that the time and resources used to apply for the grant are not wasted.
If the Friends apply for grants from government and private entities for the benefit of the Friends (for instance, to purchase donor management software, or to buy equipment the Friends will use for events), the Library does not need to be consulted. However, the Friends and the Library will, through the Collaboration Committee, maintain awareness of grant applications, to ensure there are no redundant requests.
In MONTH of each year, the Treasurer of the Library, and the Treasurer of the Friends, shall meet to exchange financial reports, and to independently and/or jointly develop any observations or advice they as Treasurers may have for the Committee or their respective boards.
No Library Resources for Fund-Raising
It is understood between the Library and the Friends that no library employees shall staff a Friends' fund-raising event, and no Library resources whatsoever shall be used in furtherance of such event.
To avoid any concerns regarding authority and responsibility, no members of the Friends Board shall volunteer at the Library.
To avoid any concerns to the detriment of the Friends or the Library, in the event either party believes the other has violated its mission, formation documents, charitable purpose, applicable laws and regulations, or this Agreement, the concerned party shall notify the other in writing.
If the dispute is not resolved within ten days, the parties shall agree to retain a New York Bar Association-listed mediator to resolve the dispute. To select the mediator, the Library shall supply a list of 5 qualified candidates, and the Friends shall select the mediator from the list. As part of their service as a neutral party, the Mediator shall certify that they may serve without a conflict of interest.
If one full-day session of mediation does not resolve the dispute, the concerned party may seek such other relief as appropriate.
Bi-annual Agreement Review and Amendment
This agreement shall continue for so long as the Friends continue activities for the benefit of the ______________ Library.
Every two years, the officers of the Friends and the Library, shall meet to review this Agreement, or refine their practices that are governed by it, as needed.
This Agreement may be amended through a two-thirds vote by both boards within the same two-month period.
Effective Date and Term
The Agreement is effective upon the date of incorporation of the Friends, and shall continue for so long as both parties are in existence.
With this understanding, on ________, the Board of the ___________________ Library passed a resolution to enter this Agreement effective as of _________________, and the Board of the Friends of the _____________ Library, Inc. passed a resolution to enter this Agreement effective as of ____________, as signified by the signatures below.
[insert signatures, etc.]
Is it legal for a Friends of the Library group to hold their funds and not to use those funds to support the library's mission? OR refuse to pay for library program and services when ask by library staff?
Can they lose their 501c3 status, if it is proven that the funds are not being used to benefit the library?
Before we address what may be the clear signs of a dysfunctional relationship between a library and its "Friends," let's explore the basis for the Library-Friends arrangement.
A public library, hemmed in by many laws, regulations and pressures governing fiscal operations, often enters into a cooperative agreement with a "Friends" group--an independent, usually "501(c)(3)" corporation who can raise and spend money unburdened by such obligations.
Here's an example of how this works:
A town's library wants to create a special collection on "Local African-American Heritage"…a project that will be done in collaboration with a noted Black historian, the Black Studies department of a nearby college, and the archivist of a historically Black church in the town. The initial $10,000.00 donation to kick off the collection was left to the Friends by a donor in their will.
The Library and Friends create a joint committee to make the special collection happen. As envisioned by the joint committee, the project will involve renovation of a room in the library previously used for community meetings, as well as the acquisition of a wide range of books, museum-quality and ADA-compliant signage for the walls, and an oral history project housed on special interactive technology. The library's staff will receive special training on the resources and the room.
The new section's "Grand Opening" will feature a keynote speaker who some town residents find controversial. After the ribbon is cut (the Friends already own giant scissors) the Friends will host an off-site catered reception featuring a local rapper, which donors, trustees, project collaborators, staff and the media can attend for free.
Through careful planning by the joint committee, the details, budget, procurement procedures, and contracts for the room and opening events have been determined, and the bills are being paid entirely by the Friends. However, the contracts involved are not so simple.
The construction contracts were bid and had to follow all applicable procurement laws and regulations. The invoices for the new books are only in the name of the library. The off-site venue and catering contracts are only in the name of the Friends, but the contract expressly "holds harmless" the library. And although her speech will be in the new room, the contract for the speaker is only in the name of the Friends…a tactic used to avoid community accusations that taxpayer money was spent to generate controversy.
How does a library and its Friends reach this high-functioning ideal of collaboration? It takes a well-crafted (and periodically re-evaluated) Collaboration Agreement, sound policies, and routine, informed communication by both sides. This isn't to say there won't be a spat or two. But with a commitment to those things, a library-Friends relationship can be appropriately challenging, while reaching a productive ideal.
The questions posed by the member show what can happen when things are less than "productively ideal." They sound like symptoms of a problem I call "Friends Drift."
"Friends Drift" is where a previously strong relationship (or perhaps one that was never so strong), leads a library and its Friends to drift so far apart, they cease to collaborate effectively. As a result, the types of great programming and support the relationship was forged to create cease to materialize.
What does "Friends Drift" look like? It can have any number of causes and symptoms, but here are some solid hallmarks:
In the example provided by the member, the "Friends Drift" is so serious, the library is even wondering if the Friends are in compliance with State and Federal laws.
This is particularly worrisome because as not-for-profit, charitable organizations, the fiscal and operational integrity of both a library and its Friends should NEVER be something one has to speculate about. In New York, a public library must file an annual report with the Comptroller, while its Friends group must file both a "CHAR500" with the New York Attorney General and a form 990 with the IRS.
Those mandatory filings should provide everything needed for mutual assurance fiscal responsibility and transparency. If there is uncertainly even if those things are done, something has gone astray.
Which brings us to the member's specific questions, which I need to modify a bit, in order to provide accurate answers.
The first question is about whether a Friends group can withhold money from the library when the library asks for it.
The answer to that is: YES, that might be okay. In fact, it is often perfectly appropriate (and sometimes, highly advisable) for a Friends group not to pay for certain things for its affiliated library. For instance, while this is a critical factor to be decided only by the library and agreed to by the Friends, I would encourage any library to think twice (and twice again) before using a Friends group to routinely supplement an annual operating budget. In that same vein, a Friends group shouldn't pay (at least, not before deep and critical policy and fiscal analysis) a regular cost-of-living adjustment for staff salaries.
Why? Because this type of predictable, routine expense is something that should be built into the base operating budget, and supported by the sponsoring tax base(s). While community budget battles aren't always pretty, they are an essential connection to your area of service. Having Friends underwrite routine expenses to meet the library's basic Plan of Service is a potentially bad habit. In my opinion, it is something an experienced Friends group will meet with resistance.
So, what are Friends for? To put it in baking terms, they are for two things: whipping up delicious and beautiful frosting, and going from cupcake to cake.
The "frosting," is all the "extras" that are really flavorful essentials: speakers, new collections, special programming, or perhaps a really cool new set of carts or 3-D printer. They should be highly visible and make things better…just like lovely pink frosting on top of a chocolate cupcake (and just like the frosting, they could actually be a huge factor in the appeal of the cupcake, and have more calories - I mean, cost more money).
And the journey from "cupcake to cake"? That's a capital campaign. Need a new building? Hoping to expand? Want to build a green roof with solar? One-time physical upgrades are great candidates for "Friends" generosity and work, where the money can supplement a state grant or bond issue, or even take on the whole nut.
That's what Friends are for.
Which bring us to the next (slightly modified) question: what if "Friends" funds aren't being released at all? Can that risk their status at a not-for-profit?
Although there are some things Friends might not pay for, I can say with just as much assurance that any organization built solely around the well-being of a library, that does not use its resources for its not-for-profit purpose, is going to have some serious concerns. And yes, those concerns could impact its charitable and 501(c)(3) status.
To diagnose those concerns, an attorney for the library (or the Friends) would need to review the group's charter, bylaws, recent CHAR500's and 990's, and (if possible) board minutes and correspondence with the sponsored library. If there is a Cooperation Agreement, that should be reviewed. The method of requesting funds, and the basis for the refusal should be assessed. And of course, any exigent circumstances (were the Friends the victim of a theft? Did they not meet their fund-raising goals? Did they not yet conduct their audit?) would have to be considered.
Depending on what was found, legal action based on a violation of the Agreement could be threatened/brought by the sponsored Library, or a complaint to the New York Attorney General Charities Bureau or the IRS could be lodged. If things get to that point, it's likely the relationship is highly adversarial, and each party would have brought in a lawyer.
Now, I like lawyers. Being one, I see their value, and I never hesitate to recommend when I think a party needs to consult one. After all, it's how I make my living.
That said, if a library and their Friends are experiencing "Friends Drift" of the type discussed above, and its looking like things will get ugly, I recommend after initially working with their lawyers, the two groups consider using a mediator, not two adversarial lawyers, to help sort things out.
Now, when I say "mediator," I don't mean just any nice, neutral person who is willing to listen to both parties and help out. I mean a trained professional who knows the law and the obligations faced by both sides (likely a lawyer with not-for-profit experience), who can help them assess their mutual goals, and get their relationship on the right track.
In some cases, the mediation could be a respectful, productive "airing of the grievances" used to diagnose the problems and craft a new (or a first) Cooperation Agreement. In simpler cases, it could mean merely solidifying the functions of the groups' committees or developing some healthy new policies and procedures.
How does a mediation get set up?
A mediation is always conducted per a written "Mediation Agreement" that sets out the obligations of the mediator and the parties (a big one being confidentiality of the proceedings, another being the neutrality of the mediator and the willingness of the parties to proceed "in a spirit of mutual problem-solving"). The Mediation Agreement should also establish clear goals for the process (such as "…in furtherance of the mission of both parties, a session to discover and confirm shared procedures for the planned payment of certain library expenses") and defined results ("…the final product shall be a new/revised Cooperation Agreement to meet the needs of the parties for the next five years.").
A county's local bar association usually maintains a list of trained mediators. That said, for an exercise like this, not only mediation experience knowledge of libraries and not-for-profits is essential. The price tag for such a session could be anywhere from $1000-$50000 (with costs shared equally by the parties), but when compared with the costs for one party to hire a lawyer to go on the offensive, and the other to play defense - with nothing created but bad feelings and complaints in the end - as an investment, it may be worthwhile.
This is especially true since--unless something truly nefarious is suspected - "Friends Drift" is generally the result of good people caught up in the complicated web of not-for-profit operations, and not knowing quite what they can and should do. But good intentions don't automatically translate into knowing how to run a compliant not-for-profit. And when people try to wing it, trouble can start.
This is why the library-Friends relationship can be fraught with fiscal drama, and "Drift," even when all good people are involved.
The member's questions show how this drama - and Drift - can take up a lot of staff and volunteer energy, and cause a lot of stress. Working to maintain good relations, and perhaps using a mediator when relations are strained, can be the best way to harness that energy for the library and its Friends…and thus, for the entire community.
Thank you for a difficult question on an under-discussed topic.
 Meaning: donations to the group are tax-deductible, while operations are limited to its not-for-profit purpose.
 The library's pesky lawyer insisted on this, since the library is involved in the event.
 I know many taxpayers don't really care about the "Friends/Library distinction," but it never hurts to try to keep them distinct.
 It doesn’t have to be called a "Collaboration Agreement," but every library and friends combo should have a written contract that addresses how they operate together.
 The sad fact is, board committees can meet regularly and get nothing done (in other words, be "unproductive"). Signs of an unproductive board/committee meeting are: 1) big ideas are discussed but nothing is acted upon, 2) there are few if any anticipated resolutions for action items, and 3) a lack of clear objectives set at one meeting for action by the next meeting.
 I imagine there are tiny exceptions to this but in such a case, there would be other requirements for fiscal transparency.
 I am a lawyer, not a library budget specialist. This is a good topic to visit with your library system…they are there for you on all things tax levy and budget!
 Yes, I have that song stuck in my head now.
 By "nefarious" I mean suspected embezzlement, conflicts of interest, fiduciary neglect, or other issues that aren't just disconnects, but possible wrongdoing by a Friends board. If those are suspected, a Library should work with their lawyer on next steps.
 Libraries, you're not alone. This is a problem in religious organizations, social clubs, and other volunteer-driven organizations…although the people in library disputes might be better at trivia games and have larger vocabularies.