Nonprofits Take on the COVID-19 Crisis: Art Museum Standards Temporarily Relaxed to Help Museums Meet New Economic Challenges

Long-standing standards applicable to art museums, particularly with regard to the use of deaccessioning proceeds, have been temporarily relaxed in order to help art museums meet the financial challenges presented by the COVID-19 crisis. 

The Association of Art Museum Directors (AAMD) announced on April 15, 2020 that an art museum and its director will not be censured, sanctioned, suspended or expelled by AAMD for the museum’s good faith use of deaccessioning proceeds to pay for “direct care” of the museum’s collections.  This relaxation of the traditional rule — under which it would normally be an ethical violation for an art museum to use deaccessioning proceeds for any purpose other than the acquisition of works of art for the collection — is only temporary, applying only to actions taken through April 10, 2022.  Historically, when an art museum has used deaccessioning proceeds for a purpose other than acquisitions for the collection, AAMD has taken such actions as suspending or terminating the museum director’s AAMD membership and/or directing that other art museums not lend to or borrow from the offending museum.  AAMD’s actions recognize “the extensive negative effects of the current crisis on the operations and balance sheets of many art museums – and the uncertain timing for a museum’s operations, fundraising, and revenue streams to return to normal,” according to the AAMD press release.

To use proceeds for direct care—including, but not limited to, conservation costs—an art museum’s board must adopt a policy outlining what expenses it considers to be direct care, and that policy must be made publicly available (for example, on the museum’s website).  According to the American Alliance of Museums (AAM), “direct care” involves investing in the existing collections by enhancing their “life, usefulness or quality and thereby ensuring they will continue to benefit the public.”  (The “direct care” standard is also applicable to Regents-chartered museums in New York State, although New York art museums typically have not been willing to use deaccessioning proceeds for direct care due to the stringency of the traditional AAMD rule.)

AAMD was careful to state in its press release that this “temporary approach is not intended to incentivize the sale of art, only to provide additional flexibility on the use of the proceeds from art that may be sold.  AAMD’s longstanding principle that the proceeds from deaccessioned art may not be used for general operating expenses remains in place.” 

In addition, AAMD’s board adopted resolutions providing that AAMD will not censure or sanction an art museum that through April 10, 2022 uses the following revenue for general operations, including necessary expenses such as staff compensation and benefits:

• Income (not principal) from endowment funds or trusts held by a museum that are normally restricted to purposes other than general operations, such as art acquisition, conservation or research;
• Income (not principal) from donations or trusts held by outside entities in support of the museum, where such donations or trusts are also restricted to purposes other than general operations, such as art acquisition, conservation or research; and
• Income (not principal) from funds generated by deaccessioned works of art, regardless of when the works were deaccessioned.

AAMD acknowledges that this temporary relaxation of AAMD standards does not override applicable law.  Instead, the actions of AAMD are described as “an endorsement to donors or the relevant legal authorities, encouraging them to permit the temporary use of these funds for unrestricted needs.” 

The use of donor-restricted funds is regulated by state law (for example, the New York Prudent Management of Institutional Funds Act), and art museums should speak with legal counsel about their legal obligations before attempting to use donor-restricted funds for general operations.