Does this violate our 501(c)(3) status?
January 11, 2012 11:06 AM   Subscribe

I work at at a non-profit art museum on a state university campus. Though it's officially (legally, too, I guess) a museum, it feels more like a commercial art gallery. Does it violate our non-profit status when the founder buys a large number of art from each of the shows we do? I want to know so, when I begin to write grants, and if a potential funder asks, I can answer knowing where the question is going. Thanks.
posted by holdenjordahl to Law & Government (14 answers total) 2 users marked this as a favorite
You need guidance from your employer on this. It is their policy, not ours.
posted by Ironmouth at 11:12 AM on January 11, 2012

Is your concern that (1) someone is buying art, or (2) that the founder is buying art?
posted by NotMyselfRightNow at 11:27 AM on January 11, 2012

It's common in non-profits for high-ranking employees or board members to provide financial support through donations or participation in auctions, etc. That's really just leading by example, and there's nothing out of the ordinary about it. I'm not sure how something like this would even come up when you're working on grants.

Unless you're implying that the founder is using the organization to get art at a discount, or is reselling it in bulk for their own personal gain?

In any event, if you have questions about things like this you should be talking to your development director. They will have loads of materials on non-profit ethics.
posted by bcwinters at 11:29 AM on January 11, 2012 [1 favorite]

Do you have an acquisition policy? A collections policy? Those are good places to look.

But wait, I'm confused by your question.

1. Is this founder currently occupying a position - volunteer or staff - at the museum?

2. Is the founder buying art for the museum? OR for his/her own collection?
posted by Miko at 12:17 PM on January 11, 2012

It sounds like there's something more to it than just the purchase of artworks, in your opinion, because that really shouldn't be a factor. Definitely check with your development director about your concerns.
posted by xingcat at 12:23 PM on January 11, 2012

It seems to me that you may misunderstand the nature of non-profit institutions. Non-profit does not mean the institution cannot sell things. Non-profit means that profits are not accruing to an owner or stockholders; the institution itself is the owner, with a board of directors, and the staff are paid salaries. That's all it means.

Just like a university, which is non-profit, can make bazillions of dollars selling university-branded apparel without jeopardizing its nonprofit status, I don't see why a university cannot sell artwork without jeopardizing its nonprofit status. Who is purchasing the artwork seems immaterial to me.

Could you clarify your concern?
posted by jayder at 12:37 PM on January 11, 2012

I guess I'll assume that the founder is buying works for their own personal collection. I don't think that alone is going to violate your nonprofit status.

There are ethics to consider. Ethics are voluntary compliance standards, not standards on which the status of the institution depends. But generally, institutions that want to be seen as respectable and legitimate subscribe, often explicitly, to published codes of ethics. The most relevant point in the American Association of Museums' Code of Ethics says

collections-related activities promote the public good rather than individual financial gain

So this would mean that your museum is ethical if the exhibitions chosen and put on view are mainly for the public good, and not chosen and put on view in order to give the founder an avenue toward purchasing pieces s/he wants.

The American Association of ARt Museum Directors has a Code of Ethics specifically for directors, and a best-practices document called Professional Practices in Art Museums [PDF]. The latter asserts that
26 Private collecting of works of art by the director and other members of the
museum staff is appropriate and can enhance expertise to the benefit of the
museum, provided that no private collecting by the director or other members of
the museum’s staff conflicts in any way with the collecting interests of the
museum (see also appendix a and appendix b , p. 23, paragraph e.)
In essence, the goal here is to provent a curator or director or board member from going up against the museum at auction, or gathering up a collection to eventually be offered for sale to the museum. That stuff is shady, so typically an employment or volunteer agreement at an art museum should specifically include a non-compete cause to make sure this isn't happening.

Your museum should have a mission statement that gives some inkling into what kinds of exhibitions fall within the mission; a collections policy that covers acquisition and de-acquisition; and some kind of noncompete clause in the volunteer or board contracts in order to guard against improprieties.

But it sounds like this might not be all that improper. What's for certain is that this should never come up in grant writing - I can't imagine why it would. If the museum is passing on the opportunity to acquire some art, and a board member or volunteer or friend of the museum wants it, there is probably no problem with them buying it. In fact, it's not unheard of for someone to build a lifelong collection this way and then leave it to the museum.

The only ways this could possibly threaten nonprofit status is if you could show that there was private inurement - that is, that the museum was offering items from its collection for sale at a below market rate to this special person, or that the museum was serving this person's interests and not the public good. Here's a quick guide to what things violate nonprofit status.
posted by Miko at 12:43 PM on January 11, 2012

There's such a thing as unrelated business income for non-profits (for example, our church rents spaces in our parking lot to people in the neighborhood, and that income, unlike our parishioner donations, is taxed) but I would think selling art would be considered part of the exempt purpose of the organization.
posted by ThePinkSuperhero at 12:43 PM on January 11, 2012

Thanks for the responses, folks...

NotMyselfRightNow - The founder's buying art.

bcwinters - My concern is that he's using the organization to profit himself. He owned a private gallery before he created the foundation/museum.

Miko - Nope, no policies whatsoever. I've asked policy questions on this and realted topics and have not received an answer. I've asked to see the Memorandom of Understanding between the University and the Foundation. Same silence. The founder's title is simply President but he handles all curatorial functions.

jayder - To clairfy (I hope), he buys things that have been on exhibition and, once the show ends, he takes possession of them.
posted by holdenjordahl at 12:44 PM on January 11, 2012

We need to be clear on whether the museum is selling art it owns, too - because that's a different ball of wax. There are a lot more standards regarding a museum selling items from its collection. What I took this to mean was that art is shown in an exhibition, lent by an artist or other owner for the show, and then the founder is buying it. If the founder is buying art out of the museum's collection, yes, that is a serious ethical problem.I've been assuming the art is not yet part of the museum's collection, just being shown in an exhibition.
posted by Miko at 12:46 PM on January 11, 2012

Are you incorporated as a separate nonprofit entity from the University?
posted by Miko at 12:53 PM on January 11, 2012

Thanks, Miko, thanks everyone. this helps a lot.
posted by holdenjordahl at 12:59 PM on January 11, 2012

Sure, and just in case, I realized the one way it might come up in grant apps is if there are sections in your application which say "describe your collections policy" or "describe how this exhibition relates to your mission" -- sometimes grant applications request that you demonstrate that these things are in place, so if they're not, at the very least you have something you can bring around to the leadership and say "we need one of these policies because of this grant application." Grantors raising standards is one reason museums have had to up their game in response.
posted by Miko at 1:02 PM on January 11, 2012

You should probably seek museum accreditation, part of which will involve creating professional collections policies and other guidelines. The Association of Academic Museums and Galleries is probably the best place to start for you.
posted by dhartung at 1:20 PM on January 11, 2012 [2 favorites]

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