Library Financial Management For Mortenson Associates September 9, 2008

1. Library Financial Management For Mortenson AssociatesSeptember 9, 2008 Bob Burger, Professor Emeritus, Ph.D., CPA University of Illinois Library Adapted from a presentation by Terry L. Weech Graduate School of Library and Information Sciences University of Illinois, Urbana-Champaign and Richard Schnuer, Finance Director City of Champaign, Illinois, USA

2. Outline • Overview • Financial and Managerial Accountability • Budgeting • Capital Projects • Revenue (taxes, fund raising, grants, etc.)

3. Overview Definition of Financial Management • The Planning, Directing, and Monitoring of income and expenses to achieve service goals • The Reporting and Evaluation of the Outcomes and Results

4. RELATIONSHIP TO OVERALL MANAGEMENT • POSDCORB • Planning • Organizing • Staffing • Directing • Coordinating • Reporting • Budgeting

5. Context of Financial Accountability and Managerial Accountability • Professional • Discipline • Reputation • Legal • Audits • Laws • Ethical • Personal • Cultural

6. Role of Financial and Managerial Accountability, Continued • What is the level of Accountability in your organizational setting? Who is responsible? • Does Accountability vary with type of library? • Does Accountability change over time in the same library? • Can you control what you are responsible for?

7. Role of Financial and Managerial Accountability, Continued • Who evaluates your financial and managerial performance? • Government Officials? • Superiors in your organization? • Colleagues and Staff? • Public? • Other? • What happens when/if you are held accountable?

8. Financial Documentation Terminology • Account Number: A number assigned to indicate a specific account in a series of accounts. • Allocation: Money available for spending by a specific department or organization • Audit Trail: The path of original documents by which financial transactions may be traced. Purchase Orders, Requisitions, Vouchers, Invoices, etc. are the documents that comprise the Audit Trail. • Balance: The difference between expenditures and allocations in an account • Cash Flow: The tracing of income and expenditures from the deposit of funds until expenditure • Encumber: To set aside or commit funds for a specific purpose, such as a book order, until they can be officially expended • Voucher: A document showing authority to make a purchase. • Purchase Order: An official commitment to purchase goods or services at a stated price. • Invoice: Description of goods or services and showing cost

9. BUDGETING Differences between Accounting and Budgeting: • Accounting is Accountability • The Audit Trail • The Income • The Expenditures • The Cash Flow

10. BUDGETING Differences between Accounting and Budgeting: • Budgeting is Planning • Mission: What you need to do • Goals: What you hope to do • Objectives: What you can measure you have done. • How well you have done it • What you will do next

11. The Budget Process • Cyclical Activity • Processes Vary • Two Critical Systems • Fiscal Management • Performance Measurement

12. The Budget Process • Drafting the Budget (service goals in monetary terms) • Who does this? • How is it reviewed? • Presenting the Budget • Who Presents? • Who receives the Presentation? • Budget Approval • Implementing the Budget • Evaluating Results

13. Types of Budgets • Line Item (or Object) Budget • Focus on Accountability • Usually by department or division • Function (Program) Budget • Focus on program inputs • Performance Budget • Focus on outcomes

14. Types of Budgeting Systems • Incremental (traditional) • PPBS(Planning Programming Budgeting System) • Includes components of both Program and Performance Budgets • ZBB (Zero Based Budgeting System) • Assumes justifying all programs each budget year • Decision Packages to be used if programs are eliminated • Responsibility Based Budgeting System • Budget determined by resources unit brings to the organization • Budget control at unit level, not central organization level

15. Newer Budget Models • Focus on Performance • Different methods used

16. Newer Budget Models Recent Trends • Benchmarking • Standardizing Performance Measures (ICCMA Project) • Service Efforts and Service Accomplishments - SESA’s • Activity Based Costing - ABC • Performance Budgeting

17. EXAMPLES OF RESPONSIBILITY BASED BUDGETING SYSTEMS • Responsibility Based Budgeting System UIUC: http://www.provost.uiuc.edu/communication/01/Comm01.pdf • Information Technology in University Management in Central and Eastern Europe Today by Peter Mederly and Pavol Mederly. http://leep.lis.uiuc.edu/seworkspace/weech/405/CMR9822.pdf

18. Capital Improvement Planning Definitions • Capital Project • Capital Improvement Plan (CIP) Advantages • Financial Planning for large costs • Lead time to implement projects • Project Coordination CIP Cycle

19. Numerous Sources Guiding Principals accountability equity efficiency revenue stability but: some objectives mutually exclusive Revenue Policies

20. Revenue Sources for Libraries • Taxes • Investment • Tuition and/or User Fees • Overdue Fines • Grants • Contracts • For Profit Activities • Fund Raising • Gifts • Sales

21. Revenue Sources outside United States • What revenue sources fund your library? • How much do you know about these sources? • What factors affect these sources?

22. SOURCES OF TAX REVENUE(FOR GOVERNMENT SUPPORTED ORGANIZATIONS) • National • State/Province • Local

23. TYPES OF TAXES(FOR GOVERNMENT SUPPORTED ORGANIZATIONS) • Income • Sales • Value Added (VAT) • Excise (Gasoline, Boats, Automobiles) • Real Property • Personal Property • Intangible Property (Royalties, Stocks, Bonds) • Other?

24. Other Income Sources • Investments • endowments and gifts • investment of operating funds • Tuition and/or User Fees • overdue fines • lost book charges • user charges for reserves or computer access • Cost Recovery (similar to fees, but based not on increasing income, but meeting costs)

25. Other Income Sources, Continued. • Fund Raising • Gifts • Capital Gifts • Operating Fund Gifts • Endowments • Deferred Gifts • Memorials • Book Plates • Furniture • Rooms • Staff (endowed professorship/librarians, study centers) • Other • Book Sales, Bake Sales, Gift Shop • Carnivals, Fund Raising Dinners, etc.

26. Grants and Contracts • Grant: To request funds for a project you propose. • Contract: Request funds to undertake a project proposed by the funding organization. • Sources • Government • Private

27. Grants and Contracts, Continued Procedures • RFP (Request for Proposal) • Letter of Transmittal • Problem Statement • Program Objectives • Program activities and Personnel • Timetable • Evaluation Plan • Budget • Ability to Sustain Program • Dissemination of Results

28. Revenue Forecasting • Approaches • Qualitative • Statistical (e.g., trends) • Causal • Considerations • Availability • Stability • Drivers

29. Financial Management QUESTIONS? COMMENTS? Thank you for your interest and attention! Bob Burger rburger@illinois.edu