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Practical Implications of the ALA Operating Agreement (ALA Policy 6.4: Divisions)
An Overview of the PLA/ALA Business Relationship
Legal Status
ALA is one legal entity of which PLA is a part ALA was incorporated in 1879 in state of Massachusetts ALA is a 501(c)3
charitable, educational nonprofit organization for the public benefit not a “professional association” limits in terms of lobbying and political activity (may not work on behalf of a
particular candidate)
Tax exempt from some taxes—on revenue from dues, conferences, sales of books, etc.
Pay taxes on advertising revenue
Division Authority
ALA divisions are specifically given the “authority to act for the ALA as a whole on any matter determined by Council to be the responsibility of the division.” (ALA Bylaws, Article VI)
Only members of ALA may belong to PLA
ALA Organizational Structure ALA Council is governing body of the Association Council may delegate responsibilities to the divisions and determines all
policies of the Association ALA Executive Board includes the officers (president, president-elect,
treasurer), immediate past president, and eight members elected by Council from among its members
Brief History of Operating Policies
1952—grants were made to ALA divisions from ALA endowment capital to enable them to have executive secretaries, and to develop and maintain more effective programs
1970s—ALA funded divisions from income derived from division dues and other revenue
1976—dues transition document ended inclusion of division membership within ALA Basic dues
Divisions assumed financial responsibility for the cost of their staff, publications and program, with the ALA General Fund assuming responsibility for a defined set of “indirect cost” items, including office space, administrative services, and other kinds of expenses
1982—“Operating Agreement Between ALA and Its Membership Divisions” The operating agreement is the contract that outlines the ‘business relationship’ between ALA and the Divisions
1989—Revised “Operating Agreement,” currently in force
Operating Agreement—Guiding Principles
ALA will provide general administrative, financial, membership and publishing services to the Divisions
Divisions assume financial responsibility for their staff and programs, including some indirect costs (overhead) for Division activities and services provided by ALA
Divisions are assessed overhead on certain revenues as means to share in the ongoing operational costs of ALA
Key Points of the Operating Agreement
The Operating Agreement defines the relationship between ALA and the Divisions, including financial responsibility. Specifically, the Operating Agreement:
Reflects current organizational values of ALA Provides a process for implementation and ongoing review Provides a list of ALA services which must be used by divisions Spells out ALA fiscal policies and procedures Describes approval process for Division national conferences Spells out practices related to ALA Annual Conference and
Midwinter Meeting
Practical Implications for Divisions
Divisions have the ability to: Establish their own dues structure Conduct strategic planning in their area of responsibility Seek external funding to pursue and enhance priorities and
projects Purchase furniture and equipment beyond the basics provided
by ALA Accumulate net revenues (net asset balance) Establish or add to existing endowments (long term investment) Hold a national conference, institute, seminar, preconference
Financial Responsibilities
Divisions receive these ALA services at no direct cost and PLA must use these exclusively:
Human Resources Membership Services Fiscal Services Information Technology and Telephone (ITTS) Legal Counsel Office space Utilities Library Services and Archives Rights and permissions Basic furniture/equipment
Financial Responsibilities
Divisions receive some ALA services at actual, or direct, cost (as defined in the Operational Practices):
Specialized data processing Maintenance for equipment purchased by divisions Printing and duplication Certain telephone services Postage; subscription and order billing services Central production unit services Marketing services
Specifics Related to ALA-provided Services:Staffing
Personnel PLA budget supports all PLA staff salaries and benefits PLA adheres to ALA personnel policies, including salary
structure and hiring process PLA Executive Director is responsible to the ALA Senior
Associate Executive Director as well as the PLA Board of Directors
PLA Executive Director and PLA staff serve on a variety of internal working groups related to ALA management and services
Specifics Related to ALA-provided Services: Conferences
ALA and PLA Conferences ALA provides space for meetings/programs and equipment at ALA
Midwinter Meetings and Annual Conferences. Equipment for pre-conferences/institutes is charged to the Division
ALA pays for PLA staff travel to Midwinter and Annual Conference PLA provides programming for ALA conferences PLA must receive approval from the ALA Executive Board to hold
National Conference at least two years prior to the event; Divisions are prohibited from conducting business meetings at National Conferences
PLA must notify state and regional ALA chapters in contiguous states about intent to hold a national conference and seek their cooperation four months prior to the proposal going before the ALA Board
Specifics Related to ALA-provided Services: ALA Offices
Services of ALA Offices ALA reviews press releases for PLA ALA provides services of staff in Executive Office,
Washington Office, and other ALA’s offices and library
ALA Publishing ALA manages rights and permissions PLA may purchase production/distribution services from
ALA PLA may offer its books to ALA or may self-publish PLA must offer books to ALA before going to outside
publisher
Specifics Related to ALA-provided Services: Financial
The PLA budget process is tied to ALA timelines and policies
The ALA Board approves the PLA budget after the PLA Board has approved it at Annual Conference
PLA pays ALA direct costs for IT services, equipment, printing, long distance phone calls, and supplies other than “basic”
ALA charges an indirect cost/overhead rate on non-dues revenue. For the 2010 National Conference, PLA paid $678,027 in overhead
Divisions may build a fund balance, i.e., accumulate and carry forward revenue. PLA fund balance at the start of FY 2012 is $970,000
Divisions do not receive interest on fund balances
Specifics Related to ALA-provided Services: Finances (cont’d)
Divisions may establish an endowment once the division has met its minimum recommended fund balance (sum of 33% of average operating expense, based on last 4 years).
Divisions retain the interest income from their endowment; it may be reinvested in endowment or transferred to operating
Endowment principal may not be removed without significant penalty
PLA Board voted to establish an endowment at the 2000 Annual Conference. PLA endowment at end of FY 2011 is $989,355
Specifics Related to ALA-provided Services: Finances (cont’d)
100% of the overhead rate is assessed on conference revenue and 50% of the overhead rate on publication revenue
Currently, web courses are considered “publications” and are charged at 50% of the overhead rate
Overhead exempt revenue includes: dues, donations, interest income, ALA royalties, separately ticketed events at conferences (e.g., meal functions), and advertising in those publications provided to division members as a perquisite of membership
Divisions pay ALA $1/ticket on ticketed eventsUnrelated business income tax (UBIT) is paid by PLA on advertising revenue
The ALA overhead rate for FY2012 is 25.5% on gross revenue.
Questions?
The financial and operational structure of ALA and its Divisions is complex and operational practices continue to evolve. If you have any questions about the information presented here or PLA operations or finances in general, please don’t hesitate to contact:
Barb Macikas, PLA Executive Director
Phone: 312.280.5028
Email: [email protected]
Thank you for your support of PLA and public libraries.