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ACRL Board Manual 2020-2021

Board Manual for the ACRL Board of Directors.

6.0 Budget & FInance

Overview of the Budget of ACRL

ACRL generates revenue in three categories: membership dues/other, publications and education. Categories for expenses parallel those for revenue: member activities, publications, education—and a fourth to cover special programs. The ACRL fiscal year begins September 1 and ends August 31.

The ACRL budget is divided into programs (projects), each with a name and number. Each project includes line items for revenue and expenses. ACRL staff salaries and administrative costs are distributed throughout the projects. Salaries are estimated for each project based on historical data of actual staff time spent on projects (from the historical budget matrix which is updated annually with the staff time study), as well as on the Executive Director’s knowledge of factors likely to affect particular projects during the budget year. The operating expenses are estimates and percentages are distributed among projects. Operating expenses include a fixed percent for the ALA indirect cost charge (overhead), the rate of which is determined by ALA based on an indirect cost study. Overhead is charged on revenue generated for certain projects.

Staff and members of the Budget and Finance Committee develop budget assumptions, which are reviewed by the Board at the Fall Executive Committee meeting. Staff develops preliminary budgets for both ACRL and Choice based on these assumptions and these are distributed to the Board and the Budget and Finance Committee prior to Midwinter Meeting. The budgets are reviewed in depth by the Budget and Finance Committee at the Midwinter Meeting and the Board is informed about its directions. After these discussions, additional revisions may be made. After a budget meeting of the ALA Executive Director, AED for Member Programs and Services, CFO, and ACRL Executive Director, revisions may be made and another draft is submitted to the Budget & Finance Committee prior to the ALA Annual Conference.

Board members receive a summary of the final budget recommendation prior to the second meeting of the Board during the Annual Conference. The Budget & Finance Committee recommends approval of the budget to the Board. The ALA Executive Board approves the final budget for all of ALA at its fall meeting.

Budget and Financial Reporting

The fiscal year is divided into four quarters (Q1: Sept.-Nov; Q2: Dec.-Feb; Q3: March-May; Q4: June-Aug). Revenue and expense activities will occur throughout the year. However, a majority of expenses, those supporting members, and conference activities, and all revenue from ACRL conference registrations are realized in the third and fourth quarter after the activity is held. The majority of expenses from member activities will occur in the third and fourth quarters of the year when programs and projects are completed and requests for payment of reimbursement have been processed. Expenses for educational activities are paid as they occur. With the exception of the bank service charge, which is recognized monthly, endowment and long-term investment expenses generally occur in the fourth quarter.

During the fiscal year, the Executive Director provides quarterly financial reports to the Board and the Budget and Finance Committee comparing actual revenues/expenses to those budgeted. In these quarterly reports, all general administrative and staff salaries, as well as related costs, are recorded on a separate line. During the year, ACRL staff maintains records of their daily use of time. The resulting percentages are used to allocate salaries, benefits, and general expenses, such as telephone, postage, reprographics, etc. At the end of the year, these costs are distributed to each individual project. Source: Budget and Finance Committee, general comments, Midwinter, 1997

ACRL and Choice Budgets

ACRL and Choice finances

Historically, Choice’s net operating fund balance has been kept distinct from ACRL’s. During the start-up years, this made good sense. However, when Choice was consistently adding to the operating fund balance ($2,571,980 based on the start of FY19), the Budget & Finance Committee recommended to the Board that this policy be changed. The new policy below, adopted by the board in January 2007, came into effect in FY09 just in time for the Great Recession, which masked a change in how academic libraries approach collection development.

Choice Net Asset Balance

Choice has a separate net asset balance, rather than participating in a general ACRL or ALA Publishing net asset balance. As is true for all ALA current funds, the Choice net asset balance does not bear interest. Choice will maintain a mandated net asset balance equal to twenty five percent of the average annual operating expenses over the four most recently completed years, excluding ALA overhead. This objective does not preclude consideration of needs to develop and improve the Choice program through current budget funding. The ACRL operating budget contains an expense line for the mandated reserve for Choice, and it is appropriately budgeted as part of the annual budget preparation process. Source: ACRL Board, January 1989, January 1992, revised June 1997

a. Should Choice experience major financial problems in the future, the first attempt to resolve them will be from the Choice net asset balance. As a second level of support, ACRL will examine its overall program requirements and financial status to determine if assistance can be given to Choice. The final responsibility for resolution of such problems will rest with the ALA General Fund.

b. It is recognized that, as with the ACRL Budget, the ALA budget Analysis and Review Committee (BARC) and the ALA Executive Board still have purview over the Choice budget in a general sense, but the detail budgeting procedure and decisions follow the current process involving Choice staff, the ACRL Executive Director, the ACRL Budget and Finance Committee, and the ACRL Board.

c. Choice’s net asset balance may be used to support ACRL’s initiatives, programs, and services.  The specific amount to be contributed to ACRL by Choice shall be determined on an annual basis via the regular ALA/ACRL budgeting process. Some preliminary assumptions that will guide this process include:

  • That Choice shall at all times maintain an Operating Fund balance no less than 75 percent of total expenses for the previous fiscal year.
  •  That the financial needs of previously planned and approved major Choice capital expenditures, e.g., the purchase of Choice office space, shall take precedence over monies to be made available to ACRL.
  • That Choice shall at all times retain sufficient monies to fund necessary product development expenses.
  • That the amount to be contributed to ACRL by Choice in FY 2009 shall be initially set at $100,000 with the final amount to be determined during the course of the FY 2009 budget process. We anticipate the amount of this contribution will increase in successive years, reaching $200,000 by FY 2011.

Source: ACRL Board, January 2007

In June 2017, the Board approved funding for the CHOICE OER project through a “swap” that allows up to $700,000 to be transferred over FY18 and FY19 from the CHOICE long-term investment (LTI) into the ACRL LTI. In exchange, ACRL will transfer up to $700,000, to be split over FY18 and FY19, from ACRL’s net asset balance into CHOICE’s operating budget. ACRL and CHOICE staff will work with ALA Finance to complete this transfer, and will keep the Board updated on the status of the CHOICE LTI.

 BUDGET AND PLANNING PROCESS

The ALA divisions operate under three calendars:

  • Fiscal year: September 1 – August 31
  • Membership year: July 1 – June 30
  • Conference year (3 types-of-library divisions hold biennial conferences): ACRL’s Conference is held in the Spring of every odd year.

The timeline, process (including reviews and approvals), and the responsible parties (for workload, review and approvals) for the ACRL budget follow. The general process and ALA deadlines are the same for all divisions, but the specific timetable will vary with each division, according to established patterns and each division’s organization. The charts are therefore generalized.

ALA fiscal year: September 1 – August 31

In September, ALA fiscal services and division staff are working together to “close” the fiscal year that ended August 31. There are multiple closing reports issued during September and October. Everyone works to correct errors, clean up any problems, and finalize the reports. A considerable effort on the part of all is necessary to ensure our mutual goal of total accuracy for all accounts. ALA final overhead charges and taxes, as well as the ACRL time study adjustments to actual are posted as part of the third close. The final, official and audited budget report will not be available until January, at the Midwinter Meeting.

Meanwhile, the new fiscal year began on September 1.

In October, division staff will begin preparations for the preliminary budget for the fiscal year starting the following September. In preparation for development of the preliminary budget, division staff review past budget performances, study inflation factors, study new program areas and conduct impact studies, etc.

Staff develops a budget assumptions document that provides an overview of anticipated projects and general revenues and expense assumptions. The document is submitted to the Budget and Finance Committee for comment and it is provided to the Executive Committee with comments from the Budget and Finance Committee for its fall meeting. The Executive Committee reviews and adjusts the document as needed, and approves the revised document at the fall meeting. The approved budget assumptions document is the guide staff uses to develop the preliminary budget for the coming fiscal year. Between October and the Midwinter Meeting, division staffs develop draft budgets for their units, which are then submitted to their respective Budget and Finance committees and Boards for review and modification. These budgets usually differ somewhat from the budgets that are finally approved at Annual Conference.

Budget instructions and worksheets are issued to division staff by the ALA budget and planning staff in December. Included in the instructions are the assumptions that all units of ALA, both general fund units and divisions, are asked to include in preliminary budgets. These assumptions include inflationary estimates for supplies, postage, telephone, travel, and photocopying. Estimates are also provided for bad debt and returns as a percentage of gross sales, unrelated business income tax (which relates to a portion of advertising revenue for a division journal e.g., CHOICE), employee benefits as a percent of salaries, and estimated overhead rates. The official average percent increase in staff salaries are not usually known until late spring. ALA provides an overhead rate in December.

At Midwinter, division Budget and Finance committees and Boards provide various levels of input, advice, and review on the preliminary budget.

Immediately following Midwinter, division staff makes the necessary changes to preliminary budgets, and submit them to the ALA planning and budget staff. This preliminary budget includes a complete set of notes, outlining virtually every single expenditure (and calculation thereof) in that budget.

In January, each division Executive Director submits a budget impact statement following instructions provided by the Planning and Budget staff, which usually includes:

  • description of division activities/relationship to ALA’s strategic action plan
  • division’s business objectives and strategies
  • situation analysis: environmental impacts
  • market analysis
  • trend data and indicators
  • current financial status and multiyear trends
  • likely impact on ALA as a whole

This impact statement includes many of the elements of a business or financial plan, which is also submitted at that time.

ALA Planning and Budget staff assembles the preliminary budgets, together with spreadsheets comparing the preliminary budget with the actual budget for the prior year, and five-year projections. Based on actual performance for the last fiscal year and projected performance for the current fiscal year, a budgetary ceiling for the divisions is calculated. The budgetary ceiling is the sum of the fund balance at the end of the last fiscal year plus the anticipated revenues for the upcoming fiscal year.

During March, the divisions’ Executive Directors review the preliminary budget in a meeting with the ALA Executive Director, the Associate Executive Director of Finance, and the Associate Executive Director for Member Programs and Services. Following these meetings, ALA management forwards the division budgets to the ALA Executive Board for its review.

At the spring meeting of BARC, that committee reviews all the budgets, makes substantive analysis and returns them as information to the ALA Executive Board and ALA administration.

At the ALA Annual Conference, the divisions’ Budget and Finance committees review and analyze the budgets, suggest changes, and recommend the budgets to the boards for approval. The extent to which the approved budget differs from the preliminary budget will vary greatly, depending upon a number of factors, such as refinement of special project budgets, more recent membership dues projections, new projects since Midwinter, changes in overhead or tax rates, etc.

Following Annual Conference, division staff will work to finalize the budgets and enter monthly projections into the financial system for each expense and revenue line in its budget. These projections increase everyone’s ability to monitor budget performance throughout the year, as well as provide financial services with essential information for projecting cash flow for the whole of ALA.

On September 1, the fiscal year actually begins. Prior to the adoption of the ALA budget, divisions are able to operate fiscally, because the ALA Executive Board approved the budgetary ceiling at the Annual Conference, thereby providing the necessary authorization. At its fall meeting, the ALA Executive Board adopts the division budgets as part of the entire ALA budget for the fiscal year that started September 1.

The Board has responsibility for managing ACRL’s resources including its endowments and long-term investments although the investment strategy is managed by ALA. Endowment and investment policies are established and given oversight by the Board under the ALA policies and procedures.

ALA Budget and Planning Process Workflow