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Public Library District Toolkit: Strategies to Assure your Library’s Legal and Financial Stability

Public Library Investments 

Public library boards of trustees (municipal, school district and special district public libraries) are granted the authority to control property by New York State Education Law §226external link opens in a new window and §260external link opens in a new window. However, it is clear that all assets of the library, other than those received as a donation or bequest in the legal form of a “true trust”, must be invested only as prescribed in General Municipal Law §11.

Some direction can be found by reviewing Comptroller's Opinion 95-30. That opinion cites several laws, opinions and rulings that govern investment of bequests and surplus funds by public libraries. The following excerpt from the Comptroller's Opinion summarizes the situation:

"Accordingly, based on the provisions of General Municipal Law, §11, as amended by chapter 708 of the Laws of 1992, it is our opinion that moneys held in the custody of the chief fiscal officer or other officer of a public library, whether obtained from public or private sources, may be invested only as prescribed in General Municipal Law, §11, except that investments of gifts, grants or bequests in the form of a true trust are subject to the "prudent investor" provisions of Estates, Powers and Trusts Law, §§11-2.2external link opens in a new window and 11-2.3external link opens in a new window."

The Comptroller’s guidelines for investing public library funds are clearly outlined in the publication Investing and Protecting Public Fundsexternal link opens in a new window.

Though libraries often receive gifts, donations and on occasion, bequests most of these will not be given in the form of a “true trust’ as defined in N.Y.S. Estates, Powers and Trusts Law. If such is the case the library could continue to invest those funds in stocks and bonds provided they follow the "prudent investor" provisions of the N.Y.S. Estates, Powers and Trusts Law.

Association libraries considering a change of legal status are well advised to plan ahead for these regulations should they maintain a sizable reserve or endowment fund. Since the association must, by law, divest its assets to other nonprofit organizations, they may wish to dispense such funds to a community foundation, charitable foundation or other incorporated not-for-profit dedicated to the library, that would be able to invest these monies wisely for the benefit of the re-established library.

It is strongly advised that a library seek a legal and/or CPA opinion if there are any specific questions regarding proper investment practices.