Budgets and Financial Reporting for the New Library Director

1. Budgets and Financial Reporting for the New Library Director Adapted from a presentation originally prepared by: Kathy Schalk-Greene, as Director of the Mount Laurel Library Chris Carbone, Director South Brunswick Public Library February 27, 2019 8

2. But I’m Not a Numbers Person!

3. The Continuous Financial Cycle Special Project Planning

4. As a new director… • You may start your job at any point in this cycle • Find out what “past practice” has been • Review prior year budgets and audit reports for baseline numbers, trends and recommendations • Ask Trustee Treasurer and/or bookkeeper to explain how your library and town/county handle things • Review financial discussions/actions in past Board minutes • Review Strategic and Facility plans, if available • Introduce yourself to your town’s CFO • If it’s not broken - don’t rush to fix it right away

5. Who manages your money? Some municipalities pay the bills for their library. • Towns must fund their municipal library at 1/3 mil + • Your Board (not you) should ask the town for an accounting of what has been spent each month • Your Board should approve all bills each month If your municipal library pays its own bills: • The town must make a payment to the library (quarterly or all of the 1/3 mil) by March 31 – even if they haven’t passed their budget

6. The Budgeting Process

7. What is a Budget? • Simple Definition of budget • an amount of money available for spending that is based on a plan for how it will be spent • a plan used to decide the amount of money that can be spent and how it will be spent • an official statement from a government about how much it plans to spend during a particular period of time and how it will pay for the expenses “The best-laid plans of mice and men often go awry.” Adapted from “To A Mouse” by Robert Burns, 1785

8. The budgeting timeline • Different libraries have different fiscal years. • Different libraries use different timelines. There is no one right way. • Make things easier on yourself! Follow past practice for your library during your first year to experience a full cycle.

9. The Budgeting Process: • Establish Financial Goals for the Fiscal Year • Gather Information • Differentiate between Needs ands Wants • Determine special project costs • Develop a Plan • Remember: • Involve your staff where appropriate • Your process should include Trustee input

10. Establish Financial Goals for the Fiscal Year: • Will salary increases be given? • Do you want to increase materials spending? • Do you want/need to reduce certain expenses? • Should some funds be set aside for capital plans? • Remember: • Be realistic in your goal setting • Benchmarks/comparable data are available

11. Gather Information: ANTICIPATED INCOME • How much income do you expect to receive? • If you are a municipal library, the 1/3 mill fund amount to be generated by the Library Tax is announced in early October • Fines and fees • Interest from savings accounts/CDs • Gifts • Other? Be aware of recently enacted legislation that permits an increase in municipal free public library tax upon voter approval!

12. Gather Information:FIXED & KNOWN EXPENSES (Needs) • Salary, payroll taxes, pension costs, health benefits, professional development • Chargebacks from town (if any) • Service contracts (HVAC, cleaning, audit, alarm & fire monitoring, etc) • Utilities • Consortium / shared service expenses • Telecom / Internet connectivity • Other?

13. How do you estimate these numbers? • Look at your financial reports and audits from the previous year or two. • Has spending increased? • Decreased? • Stayed the same? • If you are in a multi-year contract (e.g. HVAC maintenance) you should know / find out what the yearly cost is.

14. How do you estimate these numbers? • Let your fingers do the walking - ask vendors for estimates. Ask for discounts! • Keep your ears open. • Are gas/energy costs expected to rise? • What percentage increase in PERS payments are municipalities anticipating? • What are the expected benefit costs?

15. Review Variable Costs (Wants): • Collection and materials • Programming • Library & office supplies • Postage • Other?

16. Determine Special Project Costs: • Special projects/needs, e.g.: • Implement time/print management software • Computer replacement plan • Start a special collection/service (makerspace, etc.) • You may not be able to afford to do everything now, but it’s good to have a wish list • Grants or unanticipated gifts may become available; you want to be ready to take advantage of them

17. Put the numbers together for a proposed budget • Group your budget lines into the same categories as you report them in the annual PCSA report. * Review old reports!! • Your anticipated income should balance with your anticipated expenses. • If your anticipated expenses are higher than your anticipated income, you need to reduce your expenses.

18. Do you have more income than anticipated expenses? • Consider yourself lucky! • Review your wish list • Create or add to a restricted capital maintenance or capital improvement fund

19. Do you have less income than anticipated expenses? • Review spending and expected trends • Can any costs be sponsored or delayed? • You may have to make some hard choices • Be creative – and use the challenge for a way to force changes that may be long overdue

20. Presenting the budget to the Board (and possibly the Town) • Give them a budget, but not your entire budget calculation worksheet (Too Much Information !) • Have your budget calculation worksheet available to refer to if you are questioned; be prepared to explain how you came up with your numbers • Ask for help from your treasurer and/or finance committee prior to the presentation – they can, and should, help you prepare!

21. Monthly Financial Reports

22. Useful monthly reports • Expenditures to date vs budgeted expenses (aka budget control report) • Profit & Loss statement • Bill list

23. Expenses To Date vs Budget (aka Budget Control Report – are you on target or over budget?)

24. Expenses To Date vs Budget (aka Budget Control Report – are you on target or over budget?)

25. Profit & LossWhat did you bring in this month/year? What did you expend?

26. Bill List What bills need to be paid this month?

27. Expense vs Budget Reports (for staff) Keep staff informed of how much they have spent versus their budget YTD (year to date)

28. But wait! There’s more! • What monthly financial reports is your library currently producing for your board meetings? • Remember the “past practice” guideline. If it’s working okay, you don’t have to change it right away (or at all).

29. The Capital Budget

30. Your capital budget • Allows you to plan for big projects: roof, carpeting, HVAC, integrated library system • Consider setting aside a portion of the operations budget towards future capital expenses. • Reserve capital funds with a board resolution • You may need to request capital funds from your town/county • Be aware of potential State funding!

31. Planning for multiple years

32. Capital budget: Schedule

33. Capital budget: Resolution

34. The Audit Process

35. Preparing for the Audit • All municipal libraries must be audited each year. There is no mandated time frame but it’s a good idea to get it done within the first 6 months. • Your bookkeeper/Treasurer may already have a process for handling the audit in place. If so, GREAT!

36. Your yearly audit • If you are paying for your audit, even if it is the same auditor as the town, you should request a proposal that includes the cost of the audit and what services will be included. • You can negotiate with auditors just as with other vendors. Auditors charge wildly different amounts for the same basic product. Ask around – what are other libraries paying?

37. Preparing for the Audit • Ask for help from yourTreasurer and/or bookkeeper in preparing for the audit. • There are certain things you know you’ll need each year, including: • Bank Statements • Bill Lists • Board Minutes • Checks Written • Deposit records

38. Deciphering your Audit Report • Ask the auditor to sit down with you and your treasurer to review the audit. Remember: you are their paying customer! • If the auditor has any recommendations for change: • Ask questions.How many other public libraries does your firm audit? Of those, how many have this procedure in place?

39. Wrapping it Up

40. When in doubt, ASK Do you still have questions? (Of course you do!) • Contact your auditor (anytime throughout the year) or accountant (if you have one) • Contact the State Library for guidance • Network through the New Jersey Library Association – connect with other library administrators and managers throughout the state. You are not alone.

41. Additional Resources: Return of Funds (Municipal libraries) • Return of Excess Funds Law (NJSA 40:54-15)was passed in 2010 • Be aware of excess operating reserve funds • For more info, contact the State Library

42. More additional resources • The state-mandated 1/3 mil municipal appropriation is posted each October • NJ Library Laws can be found here: http://www.njstatelib.org/services_for_libraries/resources/library_law/ Part 6, purchasing, includes info on Pay to Play; Part 7 includes the Local Fiscal Affairs Law (audit info & more);

43. Still more additional resources • Your town’s Chief Financial Officer can be a great resource – but not unless you ask for help. • NJ laws governing municipal fiscal administration: NJ Dept. of Community Affairs, Local Government Services http://www.nj.gov/dca/divisions/dlgs/ • Information on NJ Public Library Construction Bond Funding https://www.njstatelib.org/services_for_libraries/new-jersey-library-construction-bond-act/

44. Benchmarks / Comparable Data Compare Public Libraries – Public Libraries Survey Data https://data.imls.gov/ New Jersey Public Library Data and Analyses https://www.njstatelib.org/services_for_libraries/resources/statistics/ Public Library Research http://www.ala.org/tools/research/larks/publiclibraryresearch

45. Questions? Comments? Chris Carbone, South Brunswick Public Library ccarbone@sbpl.info