busimom,
Your group decides how it will organize and operate. The important thing is that it is written down and approved by the group. It can be called by-laws, or a Charter, or something else, but it needs to be written down.
As far as whether you should give gifts to outgoing PTO officers, again that is up to the tradition you have set for your group. Frankly, it would depend on your finances at least partially and possibly also depend on how long the person served on the board.
We tend to give small gifts to outgoing officers. Things like a small potted plant or a gift cert to a book store. They are less than $25.
If you don't have written by-laws, you can look at our charter here:
www.macarthurschool.com/pto.htm.
Click on the link to the Charter on the right hand side of the page.
Where in MA are you? We are in Waltham.