From Brian Donoghue

Financial Info from Brian D, MBLC


1)the town will need to establish a fund for the library money. According to Mass. General Law Chapter 44, Section 53A, any gifts or receipts received by a town department (i.e. the Library) must be accepted by the town officials (Board of Selectpersons, for example) and can be placed in a special fund for the use of that town department. The town treasurer, town accountant, or town manager could help you with this (hopefully).



2)The town must set-up the special fund with the clear understanding that all money donated to this fund can only be used for the benefit of the library and will be controlled by the Board of Library trustees. Any interest or dividends received by investing this money must also go exclusively to the library.



3)The actual financial management of the endowment fund (i.e. deciding on how to invest the money) may be in the hands of the town treasurer. The library trustees do not necessarily make investment decisions. It is probably better to have the investment of the funds managed either by the town treasurer or an investment professional (such as the Trust Dept. of a local Bank). Just to clarify this point; the library trustees make decisions on how the money is to be used in support of the library (for example, purchasing new furniture) but they don’t necessarily decide on how to invest the funds.



4)It is very important to establish, in writing, that the Endowment fund is not intended to pay for the routine operating costs of the library. It is important to identify a specific purpose for the Endowment funds. It does happen that once a library has accumulated a substantial endowment, the town will reduce their budgetary support for the library based on the attitude that “the library can pay for this out of their own money, etc.” Some libraries will specify that the Endowment fund can only be used for special purposes, it cannot be used for routine maintenance of the building, it cannot be used to pay the salaries of employees, etc.



5)When people donate to the endowment fund they should indicate that their money is not to be used for the routine operations of the library.



6)It is also important that there is an understanding between the trustees and the town treasurer and/or town manager on having an annual accounting of how much money is in the endowment fund. The trustees should be willing to share this information with the town’s officials and, of course, if the town treasurer is managing the funds, the trustees much know how much money there is.



7)The next step is deciding how fundraising will be handled.

Will the Friends of the Library do the fundraising for the endowment?

Will the library trustees create a new organization whose sole purpose is to raise money for the endowment (for example, will they create a Library Foundation for this purpose)?

Will the trustees and the library staff undertake the endowment fundraising duties themselves?

How will fundraising activities for the endowment be coordinated with other fundraising activities for the library (such as that done by the Friends)?





These are my initial thoughts on the subject. We have various books on library fundraising which contain a few pages, at least, on building a long-term fund (such as an endowment) for the library. I will be happy to answer any further questions which you may have on this subject.





Sincerely,



Brian







Brian Donoghue

Massachusetts Board of Library Commissioners

98 North Washington St.

Boston, MA. 02114

Tel: 617-725-1860