Library Financial Management Library Financial Management For Mortenson AssociatesFor Mortenson Associates

September 27, 2007September 27, 2007

Bob Burger, Professor EmeritusUniversity of Illinois Library

Adapted from a presentation by Terry L. WeechGraduate School of Library and Information SciencesUniversity of Illinois, Urbana-Champaign and Richard Schnuer, Finance DirectorCity of Champaign, Illinois, USA

OutlineOutline

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

OverviewOverview

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 RELATIONSHIP TO OVERALL MANAGEMENTOVERALL MANAGEMENT

POSDCORB– Planning– Organizing– Staffing– Directing– Coordinating– Reporting– Budgeting

Context of Financial Accountability and Managerial

AccountabilityProfessional

– Discipline – Reputation

Legal– Audits– Laws

Ethical– Personal– Cultural

Role of Financial and Managerial Role of Financial and Managerial Accountability, Accountability, ContinuedContinued

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 Role of Financial and Managerial Accountability, Accountability, ContinuedContinued

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 TerminologyFinancial 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

BUDGETINGBUDGETING

Differences between Accounting

and Budgeting:Accounting is Accountability

‒The Audit Trail‒The Income‒The Expenditures‒The Cash Flow

BUDGETINGBUDGETING

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 ActivityProcesses VaryTwo Critical Systems

Fiscal ManagementPerformance

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 ModelsNewer Budget Models

Focus on Performance

Different methods used

Newer Budget ModelsNewer 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 EXAMPLES OF RESPONSIBILITY BASED RESPONSIBILITY BASED BUDGETING SYSTEMSBUDGETING 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 PlanningCapital Improvement PlanningDefinitions

• Capital Project• Capital Improvement Plan (CIP)

Advantages• Financial Planning for large costs• Lead time to implement projects• Project Coordination

CIP Cycle

Revenue PoliciesRevenue Policies

Numerous SourcesGuiding 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 StatesRevenue 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 REVENUESOURCES OF TAX REVENUE (FOR GOVERNMENT SUPPORTED (FOR GOVERNMENT SUPPORTED

ORGANIZATIONS)ORGANIZATIONS)

• National

• State/Province

• Local

TYPES OF TAXESTYPES OF TAXES (FOR GOVERNMENT SUPPORTED ORGANIZATIONS)(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, Other Income Sources, Continued.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 ContractsGrants 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, Grants and Contracts, ContinuedContinued  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 ForecastingRevenue ForecastingApproaches

• Qualitative• Statistical (e.g.,

trends)• Causal

Considerations• Availability• Stability• Drivers

Financial ManagementFinancial Management

QUESTIONS?

COMMENTS?

Thank you for your interest and attention!

Bob Burgerrburger@uiuc.edu