Library Financial Management

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Library Financial Management
For Mortenson Associates

September 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









Outline


Overview


Financial and Managerial Accountability


Budgeting


Capital Projects


Revenue (taxes, fund raising, grants, etc.)


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

RELATIONSHIP TO
OVERALL MANAGEMENT


POSDCORB


P
lanning


O
rganizing


S
taffing


D
irecting


Co
ordinating


R
eporting


B
udgeting

Context of Financial
Accountability and Managerial
Accountability


Professional


Discipline


Reputation







Legal


Audits


Laws


Ethical


Personal



Cultural

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?

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?


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


BUDGETING


Differences between Accounting

and Budgeting:


Accounting is
Accountability


The Audit Trail


The Income


The Expenditures


The Cash Flow

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

The Budget Process



Cyclical Activity


Processes Vary


Two Critical Systems


Fiscal Management


Performance
Measurement


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

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


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

Newer Budget Models



Focus on
Performance



Different methods
used

Newer Budget Models

Recent Trends


Benchmarking


Standardizing Performance Measures
(ICCMA Project)


Service Efforts and Service
Accomplishments
-

SESA’s


Activity Based Costing
-

ABC


Performance Budgeting


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

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

Revenue Policies


Numerous Sources


Guiding Principals


accountability


equity


efficiency


revenue stability


but: some objectives
mutually exclusive

Revenue Sources for Libraries


Taxes


Investment


Tuition and/or User Fees


Overdue Fines


Grants


Contracts


For Profit Activities


Fund Raising



Gifts


Sales

Revenue Sources outside United States



What revenue sources fund your
library?


How much do you know about these
sources?


What factors affect these sources?

SOURCES OF TAX REVENUE


(FOR GOVERNMENT SUPPORTED
ORGANIZATIONS)


National



State/Province



Local



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?

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)



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.



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

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

Revenue Forecasting


Approaches


Qualitative


Statistical (e.g.,
trends)


Causal


Considerations


Availability


Stability


Drivers

Financial Management


QUESTIONS?


COMMENTS?


Thank you for your interest and attention!


Bob Burger

rburger@illinois.edu