Finances
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Not Another Accounting Scandal.

Finances are very important to any small public library and require continued effort to maintain and, at times, a huge push to increase. It is hard to provide the services the library can and should for the benefit of all citizens without decent financial support. However, many small public libraries are seen as a bonus; something not necessary to the community but really nice to have. In today's society public libraries are necessary for every community: they are a place to go when you have questions; they allow the resources of a community to be pooled for the benefit of all; they provide support and resources to those lacking; they can be a place to improve your workforce, train in technology, and launch a business; and they are a place to go when you need to talk with other people. We have gone to society in a hurry and there is no other place to go and gather, to talk and share, to explore new ideas and to see what has come before.

There has been discussion lately about libraries using alternate funding sources. While I believe public libraries should use as many funding sources as they can — one time or continual, small or large — the community has to make a yearly, set commitment to the library whether it be from a millage, special tax, local government guarantee, or other source. Depending on funding from the state is hard during budget crunches and relying on local government line items for your money opens up the same problem.

It's also important how the money is kept track of and how it's audited. It is very important to have a yearly audit, listen to what the auditors have to say, then share the results with the public and let them know you're being accountable with their money. If the auditors find things aren't jiving, fix them. Accountability also means delivering measurable results and meeting community needs. See Chapter 7, Marketing, for more information on communicating the library's value to the community.

Determine the cost to circulate an item, from ordering it to getting it on the shelf. What is the overall cost of public computer access and the cost per use of your computers? How about your programs or interlibrary loan? Compare these with averages determined from other area libraries, libraries serving similarly sized populations in your state, and national statistics. This chapter looks at budgeting, revenues, expenditures, politicking, accounting, and reporting.

Budgeting

The mission and goals of the library drive the budget. Do not worry about matching your expenditures with revenues when you begin, but budget without limits to see what is possible. A well-founded case for new services, additional space, new technology, or special community programs works as a lever to increase library funding while simply asking for more money to continue the status quo is often met with a cold shoulder and increased scrutiny. Be sure you know what the library is doing, why it is doing it, how the library will get things done, and where it is going in the future before asking for money. Look at what can be done within the library and what should be left to other community groups, perhaps even a group yet to form. Public libraries are great places for groups to form based on common interests or a response to a common need.

Budgeting without limits will give you a great idea of where costs are and the trade offs between different service levels. Remember to allow for materials, operating costs, replacing technology, and maintaining the building in each budget. If the library is set up so there is no way to save money from year to year, still plan for technology and building replacement by communicating major expenses to funders several years in advance so everyone can plan ahead. Theft or shrinkage occurs in all businesses with libraries averaging yearly losses around 2% so budget for replacing lost items still in heavy demand. When budgeting, think several years at a time using a spreadsheet to forecast revenues and expenditures: both pessimistic and optimistic forecasts as well as those containing the best educated guesses. The future is always moving; be prepared. The Boy Scouts were on to something. :)

Stay Focused

Always focus on the mission of your library when budgeting. Ask yourself, "Is this in line with our mission and does it advance our goals and objectives?" If the answer is ever a "no," then work to slowly phase out that aspect of your services. Service cost per use equals the total cost to provide a service divided by the number of people using it and allows you to compare different services directly. Cover basic small public library functions before branching out to new or different services. Certain parts of the library's operations can be set up to pay for themselves, i.e. a small fee to check out videos can cover the materials budget for those videos allowing the library to have a broader and better selection than before. This is an example of an enterprise or revenue fund. One area of the budget will never pay for itself, no matter how creatively you fundraise and finance — your staff. Use a base of low cost labor to allow the director and other more experienced or educated employees to leverage their background and explore their creativity for the benefit of the library and the community. Remember to multiply employee wages and salaries by 1.0765 to add in the employer's mandated contributions to FICA, Federal Insurance Contributions Act funding Social Security and Medicare. On average, benefits such as retirement plans and health insurance add 15% to the wage and salary costs of public libraries. The staff is the greatest asset your library has! Hire well then train and develop them; work so the staff is in a position to get the most out of your collection and facilities.

Line Item vs. Program Budgets

Most small library budgets will be line item budgets, even if the library receives lump sum revenue from a parent agency. Revenue and expenses are broken down into categories and listed in a table. To determine the cost of individual programs and services from this budget; staff time, building overhead, direct costs, and indirect costs must all be added together for each program or service. If the budget is presented in this format it would be called a program budget. Keep the overall budget as simple as possible so everyone in the community can understand it, only including enough detail to satisfy the need for seeing accountability.

"The board is charged with securing adequate funds for library operations, but it is the director who serves as the professional expert and advisor to the board, translating community needs and library plans into costs for staffing, equipment, library materials, and facilities."1 The budget and monthly reports updating it provide control and feedback to the public through their representative board. "The budget is the link between the services, programs, and activities which the board and the library determine to offer to the community, and the financial resources with which to make those activities occur."2

Budgeting Calendar

Create a calendar for your budget listing dates each year when staff requests are due, draft of budget is circulated for staff comment and input, board discusses proposed budget, board adjusts and approves proposed budget, public hearings are held, budget is presented to funders, the final budget is adopted, and the board makes any necessary changes to reflect the actual funding level received. Begin six months or more before your new fiscal year to give everyone time. Keep yourself informed of the cost of materials, technology, utilities, staff, insurance, and more and share this information with the board and staff. Remember, even "free" books cost money to add to the collection and even "free" labor costs money to train and supervise. Tailor the budget to the fiscal realities of library funding, i.e. if money is extremely tight do not ask for a big increase for new programs and services, no matter how needed they are since a better time will come for asking.

Take the final budget and share it with everyone on staff immediately. Provide copies for the public including the library's mission, goals, and objectives and how the budget is working to meet them. Amend the budget as needed since circumstances will change.

Revenues

Do all you can — and involve the staff, the board, the Friends, and interested patrons — to raise the level of library funding to match the level of service needed. Do not worry if the revenues aren't matching up yet; give them time to grow and work to increase revenues while removing all extra costs. There will be many hard decisions even when you always keep your eye on the mission of the library and plan for the long term. While running from savings is okay to cover for unexpected drops in revenue or increases in expenses, it will ruin the library if practiced on a yearly basis. Do the best you can within your limits and work to remove those limits over time.

You can provide more services and programs if they are self supporting. All extras offered by your library should pay for themselves. Classes, costly crafts, concerts, printing, copying, faxing, videos, and more are great areas to change from cost centers to revenue centers which take in more money than is spent on them. Many organizations exist to increase art and cultural offerings so use them as a funding source for library programs.

Being a public library, the majority of your funding should be coming from the public. Various funding sources bring in revenues: property taxes, sales taxes, state government grants, fines, other grants, donations, endowments, fundraisers, and impact fees. Impact fees are charged to developers for the impact their new developments cause on government services, including increased library usage. Work with your local government to tap this potential income source to both of your benefits.

Working with Business

You are a marketing tool for local businesses and in return they can provide prize donations, printing services, reading logs, refreshments, and program sponsorships. For summer reading, ask your vendors to donate books for prizes; approach local businesses for gift certificates and prices such as restaurants, grocery and convenience stores, bookstores, craft stores, music and video stores, and general merchandise stores; and approach online businesses you and your community use. Senior citizen reading prizes can include coffee mugs, long distance cards, gas cards, grocery store gift certificates, pharmacy gift certificates, and more. The Friends of the Library, grants, charging a small admission, and donations can fund the entirety of your summer reading program. Share and publish a complete list of donors to your summer reading program each year.

Memorials and Honorariums

Memorial books, or books in honor of loved ones for their birthday or other special occasion, are a great way to raise funds and keep the latest materials coming. Create a simple envelope or form asking for the name of the person, whether it is a memorial or honorarium, who is making the donation, who a card should be sent to so the family or person honored knows about the donation, and where the donation should be used. If a book or other item is to be purchased offer to take suggestions for subject matter, but do not promise a particular book. There are a few books people would end up fighting over unless you resort to bidding for the right to make a particular title a memorial or honorarium.

Friends of the Library

A Friends of the Library group is a great fundraising organizations for your library; if you do not have an active group, work to create one. Book sales are a great way to both raise money and clear out the many donations and weeded items you cannot use in the library, assuming the board's Disposal of Equipment policy allows it. Books not selling in general include textbooks, computer books, magazines, National Geographics, self-help books, encyclopedias, and items that are dirty, damaged, or diseased, i.e. mildewed or moldy. You can either accept these and plan on recycling them or simply turn them away at the door. Many places which used to simply recycle corrugated cardboard will now take books and magazines — ask around. What you cannot sell or find new homes for, recycle.

Tax Write-Offs

Encourage everyone to donate, even if just a small amount, towards materials and programs. If every library user donated just $10 a year towards materials, the public library would cover a large portion of their material budget through donations! Emphasize the tax benefits of donating to the library; libraries, as public non-profit service organizations, qualify as tax-deductible on federal income taxes. Many states also encourage support of public libraries through their tax code, at times directly reducing the donor's taxes. Let people know that while they can't get out of paying taxes, they can tell the government where to send the money by donating to their library and writing it off on their tax returns!

Endowment

Beyond simple yearly donations, any library can create an endowment where the principal is secure and the interest provides for programming or some other popular library offering. Think big and set a million dollar goal — with 1,000 supporters donating $1,000 each you make it! Each $1,000 supporter should receive recognition and a pin or other visible sign they are a million dollar member of the library endowment. Encourage groups to work together or pool their donations to become million dollar members. Partner with local foundations or other groups providing donor advice, especially for putting the library in the donor's will and donating stocks and other property. Hold estate-planning seminars at the library, being sure to mention how people can leave a legacy through including the library in their will or trust. Encourage challenge grants from one donor to another putting peer pressure to a positive use!

Grants, Grants, Grants

Local foundations are usually the best source for grant funding. Talk to any state library agency or regional library system for leads on grants and local foundations since they know the ins and outs of grants and fundraising. See the Foundation Directory, available at various libraries all listed at http://www.fdncenter.org/collections/, and look for local foundations and their requirements and goals.

Tips for Successful Grant Writing

* Give the grantmakers what you would expect of someone asking you for money.
* Ask for and follow their guidelines.
* Apply only to sources matching what the library is looking to do.
* Know the interests and goals of the organization you are approaching and speak to them in your application.

Develop a relationship with various grantmakers by sending them information or notes a few times a year and talking with them whenever you get the opportunity, and not just about the library. If you have some time, volunteer to read and review proposals for state organizations and foundations since the best way to learn how to write grant proposals is to read them and see which are successful. New services, new technologies, example programs or services for others to duplicate, and arts and cultural programs are perfect opportunities to gather outside money and support. Remember, each project needs to be with the people you are serving so include the people who are supposed to be benefiting in planning and developing the project. Grants should be investments in the future potential of your patrons and your community.

Include indirect costs and explain every line when creating the grant budget. Staff time, supplies, utilities, building overhead, and more are appropriate in-kind contributions toward a grant. Count all staff and volunteer time involved with the operation as funds provided by the library, cash funds for staff and in-kind funds for volunteers. Your meeting room space or other space provided is also an in-kind contribution counting toward the library's side of any matching grant. Work with groups or individuals performing at the library to receive a discount off their normal fee and then apply the discount as an in-kind contribution from the artist. Once you have been funded, provide quarterly updates during the course of the project along with any required report at the end. Let politicians know when you get grants and invite them to the events or an unveiling of the new service made possible. Definitely thank the grantors; they make all of this possible.

Procedures for Cash and other Income

Keep cash on hand in the library to a minimum. $100 can cover all your needs for change and petty cash. At the end of each day, take anything over this amount and place it in a safe. Each week, or more often, deposit it with your bank or governmental body. Petty cash should always be the same amount. Over time this will be more in receipts for purchases and less in actual cash, but the total amount is constant.

Expenditures

Ensure you are operating as efficiently as possible: use competitive bidding for all large expenditures, work to get the best group discounts possible from library vendors getting all the libraries in the state to negotiate together if possible, and save the money from anything the library or the community can do without. Ideally you get important outcomes, making a big impact for the better in your patron's lives, through the minimum use of staff and other resources. There will never be "enough" funding, space, or staff so make the most of everything you have! I love efficiency — if a library can offer me twice the number of books or twice as many services for the same cost, I am thrilled! At some point and time, however, there is a limit. You get to the point where you can offer more, but at the cost of employee health and happiness or of not doing any of it well so don't stretch yourself too far. If you are already efficient and usage is still growing beyond your means, then take the case to the people doing your research carefully and finding good justification for increased funding whether it is for expansion, new equipment, more staff, or more materials.

Make each dollar you spend stretch as far as you can. Coordinate with other libraries for competitive bidding and the largest possible discounts. Invite new bids on all of your contracts when they expire. Talk with your utilities and all other service providers to get the best deals you can holding competitive bidding, especially with continued deregulation, every three to five years. Ask for discounts and deals as a consistent purchaser and payer and install energy efficient windows, technology, lights, and mechanical systems. When things are not in use, turn them off and lower the thermostat in the winter and raise it in the summer when the building is unoccupied. Always perform needed yearly maintenance and work to keep the library in good shape throughout its entire life — putting maintenance off will cost more in the long run. Many local businesses will give discounts others cannot match because they support the library and the community. Consider combining your needs with other local governments or libraries and putting out your bids in a group. Stick with a plan for replacing technology in the library and purchase a few new items every year. Stretch your computers as long as you can with memory upgrades and rotating older machines to run games for children, handle basic e-mail, and run the catalog. Even doing everything possible, a computer often gives up entirely after five or six years of constant library use. Anything you're doing that has regular costs to it, like keeping the photocopiers running or the printers filled with paper and toner, should charge enough to recoup those costs. Purchase audiocassette and CD albums direct from manufacturers and get tape and disc repair equipment from video store supply companies. Never buy more than one copy of a new book, relying on donations and buying used books — through eBay, Half.com, Amazon's Marketplace, ABEBooks.com, or your local bookstores — when you need an extra book for very popular items. Make connections with web sites, such as BookDepot.com, or physical stores which purchase overstock from publishers and sell off the titles at huge discounts. Work with the larger libraries or library systems in your region to take their weeded books since many large libraries buy four or more copies of the latest best seller, often in large print and audio formats as well, and unload them in a year or two. Look into the various companies leasing items to libraries, whether it is books, audios, or videos because as soon as it's not the hottest item anymore it's up for sale. Check with your local video stores too as in a few months they get rid of most copies of new best sellers and by donating one of each title to the library, they can write it off against their taxes and support the community.

Staff Add All the Value

"Libraries…must have great employees to be great libraries. This is why the typical library will spend between 60 and 75 percent of its budget on human resources. Spending sufficient time to hire staff with the best mix of personalities, talents, skills, and diversity is essential."3 Simply having a collection of materials can be done much more cheaply with no librarian present, but having librarians allows the patron to receive recommendations, find information, get answers, and interact with a friendly person! Staff also add value by making library services precise, accurate, and easy to use. The value added increases even farther if the staff delivers a finished product to your patrons, i.e. a completed family sheet to help fill in a genealogy is worth much more to someone than simply being pointed to the local history books.

Balancing the Budget

Balance the budget by keeping expenditures in line with revenues, working to increase your revenues as needed so the library can provide the services demanded and required by the community. Praise and party when you have to balance the budget by reducing revenues! The single biggest cost for a small public library is in staffing. This makes it the easiest to use for balancing the budget, but always the last resort. It is never a nice scene when a valued employee must be laid off due to lack of funds, but better than endangering the future of the library. Make the transition as easy as possible and always accompany it with a reduction in hours or services so as not to burn out the remaining staff. Doing more and more with fewer and fewer employees raises stress and lowers the level of service drastically — know your limits. Another area easy to reduce is the materials budget since no one is directly hurt and the library has complete control over these expenses. Quit purchasing all but essential, high demand titles and then stop cutting the materials budget — no one will use the library if there is nothing good and current to borrow.

Monitoring Expenditures

Watch the bills, especially payroll, alerting your manager or the board as soon as you notice any problems, i.e. unexpected large lump costs, gradually increasing costs, or costs running ahead of the budget. Payroll should be the most consistent from month to month, hardly wavering as you keep the library running and keep helping people. Monthly bills are slightly harder to manage. Definitely explain large bills to everyone mentioning if they are one time or yearly costs. If costs begin to run ahead of the budget, cut back while continuing contributions to any funds set up to handle unexpected costs or building replacement costs for the library - you'll be happy to have the funds when the roof needs to be replaced.

Checks and Balances on Checks and more

The director, president of the board, or treasurer of the board will approve all invoices before they are paid, double checking to make sure it was not already paid. When in doubt, do not pay the invoice and wait to see if the company sends another request for you to pay. Receipts or signed expense statements must be turned in for all expenditures. Check requests should list the date, vendor's name, mailing address, amount, line number to pay from, invoice number, and description of goods or services. Both the person writing the request and the manager approving it sign and date the completed form. At each board meeting all of the bills paid since the last meeting are compiled and presented for approval. The treasurer of the board and another board member sign the checks before they are legal. This process ensures checks and balances on the public's money and lets the board know where the money is going in general.

Politicking

The "goal, then, is to find effective ways to get and keep an adequate budget in a volatile, pressure-filled environment."4 Political strategies to achieve this are providing the highest quality service possible, effectively presenting budget requests, and mobilizing effective demonstrations of the library's power. Look for pressure points where you can work to get the majority of the votes. "Individual telephone calls from a few well-placed supporters may persuade some, while others may be more affected by the two hundred library supporters who pack the hearing room. No one strategy is always right."5 Give reporters good stories including short, quotable quotes and photo opportunities. A good visual for arguing your case is always to graph the library budget compared to the whole budget of the governmental entity of which you are a part or the entire tax load placed on property in your area. Increases to the library budget then seem very small and any cuts proposed show up as the pointless procedure they are — cutting public library budgets never saves government enough to do something else. With no savings because of no great cost, why would anyone bother to cut library funding?

Successful Politicking

1. Think Change
2. Mobilize the Team
3. Partner with Clout: political, community, local business, or big business
4. Talk Assets
5. Mind the Opposition. Convince the opposition they have been heard while always respecting them. It might simply be a lack of regular communication with local government.
6. Create and Innovate
7. Recap6

Assume elected officials are fit for their job and committed to making it work. As they have broad agendas and are responsible to many citizens, elected officials do not think of libraries regularly, but are happy to support them, especially if you can link your library to one of their larger agendas. Develop relations early before you need political influence or help, developing and maintaining both formal and informal communication between the library and your elected officials. "Be prepared to provide a clear, straightforward briefing. If you want help, be prepared to ask for the specific action you need,"7 avoiding what politicians would consider unpopular decisions during election years.

Let your funders know what they get for their money.

* meet community needs
o teamwork with other groups
o essential materials
o customer service
* stretch the money
o partnerships
o cost savings
o private income sources
* help elected officials do their jobs
o shared constituencies
o publicity opportunities
o provide up-to-date and accurate information8

"Qualitative or anecdotal reporting can also be very valuable. Use of the library can be described not only in terms of materials use but also in terms of more effective workers and businesses, more attractive homes and gardens, healthier residents, and citizens better-informed on matters of community interest and importance. Anecdotal information, couched in human interest terms, is sometimes an eye-opener to the board itself, and almost always gives officials and the public at large a better picture of what the library means to its community."9 Use people or dollar related numbers, i.e. how many people benefited or how little it cost to provide each circulation. Remind everyone that libraries help schools and children! Have a direction and a strategic plan so people know where you are going and why you need the funding, informing them about the economic effects and rising costs you experience. Your budget should at least rise as fast as inflation every year with years it does not being made up as soon as possible. Thank everyone when you get your funding — send thank yous to the funders as well as all who helped convince them!

Accounting

Most libraries follow the Government Accounting Standards Board (GASB) rules. GASB uses a modified accrual method where revenues are recorded as the library receives the actual payments and obligations are recorded when the library sends out payments. Revenues, money coming into the library, are not accounted for until they actually show up in cash form. Expenditures, money going out of the library, and all other obligations are accounted for when they actually occur, even if the purchase is a capital expense and the item will be used for years to come. What accountants mean by "when they occur" is the point at which the cash changes hands or the check is written. The modified accrual method provides a good picture of the library's cash flow, but not of the actual cost of services or running the library. In example, purchasing all new computers every four years would show up as a huge spike in the budget every fourth fiscal year when the expense was incurred while a better picture of the cost of providing computer access would be gained if this was spread out over four years or if a quarter of the library computers were replaced every year.

On the other hand, the full accrual method provides a good picture of the actual cost of services and of running the library. It "records expenses when they are incurred in providing services regardless of when these expenses are paid. Revenue is recognized in the accounting records when it is earned."10 Any credit owed to the library is counted as soon as it is promised or you know it'll be given to the library. An expense is only counted immediately if the item is used completely when it is purchased, such as utilities, wages, and processing supplies. Materials, equipment, and buildings would have a portion of their total cost recorded as an expense each fiscal year, the depreciation of these capital items.

Accounting reports are different from internal financial reports and must follow strict rules and be consistent between thousands of organizations. Reports for the board or the community can be created in many different ways. Use a computer accounting system to handle the double entry bookkeeping notation for the journal and general ledger needed, keeping separate records for each fund the library maintains. Many programs are able to output all your necessary reports from information you enter only once.

GASB 34

GASB 34 hasn't changed too many things. GASB 34 captures both the current financial picture and the total economic resources of the library. Throughout the course of the fiscal year it's matters as usual — modified accrual. Come the end of the fiscal year, when you prepare your final financial report, you also figure out the liabilities and assets or the whole financial picture of the library long-term — full accrual. Liabilities are debts the library has incurred and needs to pay off, such as banked employee sick and vacation days, bonds, capital leases, pension promises, outstanding claims and judgments, and post-employment benefits. Assets are inventory, buildings, facilities, equipment, and materials the library has. By definition, anything the library does not use in the course of a year is a capital asset including land, improvements to land, buildings, building improvements, office equipment, collection materials, historical treasures, and works of art. If you do not use up all of your supplies at the end of each fiscal year, do not worry as they will be used up within a year from purchase and are therefore not capital assets. You may decide to limit capital assets further through requiring an item or collection be over $5,000 before it is considered a capital asset. If the library is part of a much larger organization, such as a government or school system, the equipment and collections in the library may not need to be capitalized if they make up a small portion of overall capital assets. Always consult with an auditor for guidance on the matter before beginning the process since it's a lot of information to gather and if you don't need it you can save yourself the time and headaches.

Both capital purchases during the course of the fiscal year and debt principle payments need to be identified and marked so they can be easily eliminated from the modified accrual section when you create your full accrual report at year's end. Take your year end report and depreciate capital assets, summarize employee compensable absences with their current year change, add in deferred revenue, and eliminate interfund transactions and balances to create your full accrual report. Use the straight-line method of depreciation: assuming the asset is used up equally over its entire useful life, take the original cost and divide by the life in years to get its yearly depreciation or use a reasonable cost estimate when the original cost is unavailable.

With GASB 34 the accounting report focus changed from fund types to major funds. The general fund is a major fund along with any fund equaling at least 10% of the general fund. The budgetary comparison schedule will report the original or adopted budget, the final amended budget, and the actual revenue and expenditures; but is only created for major funds. In the additional information section you can include schedules for other funds if you like. Funds whose principal is restricted in perpetuity, such as endowments, are reported as permanent funds while all others are special revenue funds. Components for the GASB 34 model are Management's Discussion and Analysis which is an overview and instruction on how to use the report for managers and other high level people; the Government Fund Balance Sheet consisting of two statements - Statement of Net Assets which equals current assets minus current liabilities and Statement of Activities which includes governmental revenue, expenditures, and changes in fund balances; Fund Financial Statements for the general fund and any other major funds which also consist of two statements as above, but is regularly combined with the government wide report; Notes to Financial Statements; Required Supplementary Information consisting of one or more schedules — Budgetary Comparison Schedule for the General Fund and for any other Major Funds which includes the original budget adopted by the board, final amended budget, and actual amounts; and Combining Statements by Individual Fund which requires reconciliation between the government wide statements and the fund statements if they were reported separately. More on GASB 34 can be found at http://www.dresserassociates.com/GASB_34_summary.asp provided by Dresser & Associates.

Separation of Power

Good financial management always separates the different tasks involved among several people: one person may handle petty cash while another takes care of bank deposits and recording of receipts and a third person prepares financial statements and reports or writes checks. However you set it up, always require two signatures on your checks. This system of checks and balances will limit the possibility for fiscal misdeeds and catch them quickly if they occur.

The Audit

Potential accounting advisors include state or national library agencies and their publications, workshops, and seminars. Auditors are also great sources of advice when they audit your financial records at least every other year. Additional compliance audits may also be necessary if you receive more than $25,000 in federal funds. Auditor visits are a wonderful opportunity to prove your sound financial management of the public's money and to learn of any changes needed in your procedures and internal controls. The audit tests the reliability of your financial system and consists of a management letter, opinion on your financial statements, and a compilation the statements. The best opinion you can receive is "clear," stating your work seems free of financial misstatements. Auditors look for consistency and accuracy in recording financial transactions, match up payments and receipts, and check documentation to make sure it is correctly recorded and retained. They also examine your compliance with your own policies, procedures, and regulations. Have the auditing firm present their findings to the board and encourage questions.

After the audit is complete, examine the finished budget in terms of the library's long-range plans and needs: "Were the resources adequate to support services? Did service outputs grow or shrink so that adjustments should be made in future budget cycles? Can the library afford to continue all its programs and services? What new services are being requested? Is there a need to ask for added appropriations, plan a millage vote, or embark on a capital project?"11

Reporting

The director, board treasurer, and/or a governing body treasurer prepare monthly financial reports including current cash and investments, revenues, and expenditures. Create spreadsheets for all of the following sample reports using MS Excel or similar software. Open a completed file and save it with a new name using year, month, and type of report to automatically sort them together, i.e. 200501expenditures for the January 2005 bills. Remove all of the data, but none of the formulas, so you can put in the current values and continue to automatically calculate the totals. Double check the formulas when done to be sure they are capturing all of the new data. Print out the completed spreadsheets for presentation to the board.

Sample Treasurer's Report

Cash on hand (beginning of month)

Revenues during the month:

millage / government

gifts / donations

interest

fines

etc.

Total cash and revenues (add all of above up)

Expenditures during the month:

payroll

bills

other expenses

Cash on hand (end of month) — equals total cash and revenues minus expenditures, figure will be used at top of next month's report

Represented by:

CD's

checking account

savings accounts

petty cash

etc.

Total — must equal cash on hand (end of month) from above

Checking account reconciliation:

bank balance (end of month)

checks written but not yet cashed / outstanding checks

balance — same as shown under represented by for checking account

Repeat as needed for any other funds / accounts

Sample Monthly Financial Report

Code Description Budget Month To Date % Expended
REVENUES
201 Millage 230,000 0.00 227,493.00 98.9
219 Printing / Copying 10,500 878.50 8,607.00 82.0
etc.
EXPENDITURES
702 Librarian's Salary 30,000 2,500.00 24,230.64 80.7
703 Clerks 31,050 2,426.50 26,878.39 86.5
704 Assistants 16,800 1,372.00 15,272.00 90.9
705 Domestic 3,000 216.00 2,592.00 86.4
710 Social Sec. / FICA 6,675 498.36 5,708.44 85.5
714 Training 1,500 75.00 1,108.00 73.9
740 Operating Misc. 9,000 934.58 7,121.78 79.1
741 Books 15,000 802.04 14,541.00 96.9
742 Periodicals 1,000 36.97 775.65 77.5
743 Audios / Videos 3,500 213.55 3,751.67 107.1
744 Automation 2,200 24.95 2,197.78 99.9
etc.

Totals for receipts/revenues and expenditures/expenses should be arranged by fund or line item code as shown in the budget and ledgers.

Sample Monthly List of Bills

Name of Supplier Cost Budget Line Description
Advance Newspapers 49.50 740 Library Ad
Amazon.com 168.20 740 Inkjet Cartridges
Jim's Carpet & Uniform 38.06 901 Runners for High Traffic Paths
Baker & Taylor 1,841.20 741 Books and Audio Books
DEMCO 417.99 740 Processing Supplies, Name Tags
Gale Group 161.75 741 Large Print Books
Library Software 2,170.30 744 Support and Upgrades
Lawn and Landscape 175.00 901 Lawn Mowing
Imaging Systems 33.26 801 Copier Service Contract
Sam's Club 112.82 804 Trash Bags, Food for Programs
Sewer & Water Authority 196.18 906 Water and Sewer Charges
Bob Smith 250.00 901 Refinish Front Doors
TOTAL 5,650.98

Notes:

1. Malcolm K. Hill, Budgeting and Financial Record Keeping in the Small Library, Second Edition (Chicago: American Library Association, 1993): 1-2.
2. Ibid.
3. Christine Lind Hage, The Public Library Start-Up Guide (Chicago: American Library Association, 2004): 61.
4. Marilyn Gell Mason, Strategic Management for Today's Libraries (Chicago: American Library Association, 1999): 58.
5. Ibid.
6. Mary Anne Craft, The Funding Game: Rules for Public Library Advocacy (Lanham, Md.: Scarecrow; New York: Neal-Schuman, 1999).
7. Marilyn Gell Mason, Strategic Management for Today's Libraries (Chicago: American Library Association, 1999): 61.
8. Mary Anne Craft, The Funding Game: Rules for Public Library Advocacy (Lanham, Md.: Scarecrow; New York: Neal-Schuman, 1999): 119.
9. Darlene Weingand, Administration of the Small Public Library, Third Edition (Chicago: American Library Association, 1992): 100.
10. G. Stevenson Smith, Managerial Accounting for Libraries & Other Not-for-Profit Organizations (Chicago: American Library Association, 2002): 81.
11. Malcolm K. Hill, Budgeting and Financial Record Keeping in the Small Library, Second Edition (Chicago: American Library Association, 1993): 8.

References:

* Basic Guide to Non-Profit Financial Management available at http://www.mapnp.org/library/finance/np_fnce/np_fnce.htm.
* Hill, Malcolm K. Budgeting and Financial Record Keeping in the Small Library, Second Edition. Chicago: American Library Association, 1993.
* Library of Michigan. Financial Management Reference Guide. Lansing, Mich.: Library of Michigan, 2002. Available online at http://www.michigan.gov/hal/0,1607,7-160-18835_18894-69217--,00.html.
* Mutz, John and Katherine Murray. Fundraising for Dummies. Foster City, Calif.: IDG Books Worldwide, 2000.
* Smith, G. Stevenson. Managerial Accounting for Libraries & Other Not-for-Profit Organizations. Chicago: American Library Association, 2002.
* Stembridge, Koren. "Fundraisers R Us," American Libraries (March 2005): 38-39.

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Edward Elsner Library Consulting

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