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ACRL Board Manual 2020-2021

Board Manual for the ACRL Board of Directors.

6.1 Long-term Investments (LTIs)

LONG-TERM INVESTMENT (LTI) POLICIES

ALA Establishment of Long-term Investment Fund policies related to divisions

 “Divisions may establish Long-term Investments or add to existing Division Long-term Investments from any source, including existing fund balances, once the Division has reached a minimum fund balance as determined by the Division and approved in accordance with the budget review process and approved financial plan. The establishment of Division Long-term Investments will follow the guidelines outlined in ALA policy. The use of interest from these Division Long-term Investments will be subject to Division Board approval and applicable ALA policy.”

Source: ALA Council, June 1989 (Policy 6.4.1.II.E)

The ALA Board upon recommendation from the Endowment Trustees and Finance and Audit established a new minimum for the endowments or long-term investments:

F&A concurs with the Endowment Trustees and recommends to the Executive Board increasing the minimum amount to start a new endowment to $50,000*. (This new minimum will also apply to all current endowments)**. Additionally, to allow those endowments currently under $50,000 five years to determine the path*** they want to take and ten years to reach the goal.

Source: ALA Executive Board, Midwinter 2012

At Annual Conference 2013, in order to meet ALA’s requirement that endowment funds have at least $50,000, the ACRL Board of Directors approved a one-time match of up to $8,000 to funds raised by RBMS to bring the Leab Endowment to $50,000.

At the 2014 Spring Executive Meeting, the Executive Committee approved subsuming the Oberly Award Endowment into the larger ACRL endowment and to provide from the ACRL endowment up to $500 biennially to support giving an award to the winners of the Oberly Award for Bibliography in Agriculture or Natural Sciences. ACRL is still waiting for ALA to take action on these changes. ALA has indicated they hope to have decisions made in the FY19 year.

*Prior to the 2012 action, the minimum was $25,000.

**This phrase added by ALA Finance Staff member Keith Brown for clarity of intent by the Trustees, but was not specifically stated in the motion

***Options discussed to reach new minimum included fundraising, spending down to zero, combining with other endowments etc.

ACRL Long-term Investment Fund

The purpose of the ACRL Long-term Investment is to provide a reliable source of income for an annual Initiative Fund that supports ACRL activities accomplishing the strategic directions and priorities of ACRL.

Source: ACRL Board, July 1996

Funds in excess of the required Reserve Fund are available for investment in a Long-term Investment fund. The Long-term Investment Fund is that portion of the ACRL net surplus that has been invested together with similar funds of the ALA for the purpose of providing permanent income to the division. The principal of the Long-term Investment Fund is not available for current operations and activities.

In 1997, the ACRL Board initiated a practice of transferring funds from the ACRL operating fund balance into an ACRL long-term investment program with a goal of reaching at least one million dollars in LTI. At the 2005 Annual Conference, the Board approved the following recommendations from the Long-Term Investment Fund Task Force:

  • Designate a specific sum for addition to the long-term investment fund, to be communicated to ALA and consider actual transfer of that sum or a portion of that amount within the reality of both the current fiscal and future budgets and the near and long term strategic initiatives of the association. The task force recommends $100,000 as the minimal amount. Actual transfer of this sum or a lesser amount would be linked to the current financial situation.
  • Since ALA policy requires a two-year advance notification of sums to be transferred to the LTI, it is recommended that the maximum amount possible always be shown in the budget; the amount to transfer can always be reduced by a Board action at the Annual Conference as ALA makes the transfers at the end of the fiscal year (i.e., August).
  • A growth plan linked to an historical milestone of the organization provides a framework for articulating a specific LTI target amount. Consideration of the 75th anniversary as that historical marker should be reviewed. A targeted amount of $2M is suggested
  • Continue spending interest earned from the general LTI fund on strategic initiatives as identified by the ACRL Board. Returning funds to the operating budget to support current initiatives gives credence to its importance to members and the association.
  • Once the desired principal level ($2M) is achieved, also spend 50% of the five year moving average of the appreciation of the LTI fund on strategic initiatives. Note: The 50% five-year moving average shall be calculated by averaging the interest, dividends and market gains (realized/unrealized) less bank fees, other investment related expenses and any interest and dividends that have been transferred to the operating budget. This calculation excludes any contributions or withdrawals made over the trailing five-year period. Withdrawals using the net 50% five-year moving average do not require repayment.

Long-term Investment Transfers Temporarily Halted

In FY09, due to the drop in ALA’s revenues and the need to maintain adequate cash revenue, ALA units were stopped from making transfers to the long-term investment until the financial situation improves. In FY07–FY08, ACRL did not make transfers to the LTI in recognition of the cash outlay made to purchase the Choice office building, which reduced the total funds upon which ALA would earn interest.

In FY11, ALA allowed a few transfers that had previously been requested to take place and ACRL transferred $75,000 to the LTI. In FY12, ACRL did not draw down its LTI and reinvested its appreciation in the principal since again no transfers to the LTI were allowed.

Transfers to the LTI take place in the fourth quarter of the fiscal year, as ALA is not in favor of monthly or quarterly/dollar cost averaging investing for the divisions. A history of ACRL and CHOICE transfers is shown in the figure below. The Budget and Finance Committee and Board review the plan for transfers to the LTI at the Annual Conference and confirm that the transfer should be made (no action means that the transfer goes forward).

ACRL and CHOICE Transfers from Net Assets Balances to Long Term Investment Funds

Transfers

1993

1994

1995

1996

1997

1998

1999

2000

2001

ACRL LTI

$10,000

$0

$20,000

$10,000

$0

$200,000

$200,000

$100,000

$100,000

CHOICE LTI

$0

$10,000

$20,000

$25,000

$0

$100,000

$100,000

$50,000

$50,000

 

Transfers

2002

2003

2004

2005

2006

2007

2008

2009

2010

ACRL LTI

$300,000

$100,000

$100,000

$100,000

$150,000

$0

$0

$0

$0

CHOICE LTI

$50,000

$30,000

$0

$49,999

$0

$0

$0

$0

$0

 

Transfers

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020*

ACRL LTI**

$75,000

$0

$0

$0

$150,000

$250,000

$250,000

$350,000

($125,000)

 ($135,000)

CHOICE LTI**

$0

$0

$0

$0

$0

$0

$0

($350,000)

$0

$0

 

* = planned transfer
** = CHOICE LTI to ACRL LTI transfer

Operating Guidelines

The ACRL Long-term Investment Fund will be invested with the Long-term Investment Fund of the ALA and will be subject to any policies governing the Long-term Investment Fund in general. An initial sum of $10,000 shall be invested, fulfilling the minimum level of funding for a separately designated Long-term Investment within the ALA Long-term Investment. Source: ALA Endowment Trustees, 1990

The ALA Executive Board, upon recommendation from the Finance & Audit Committee and Endowment Trustees increased the minimum amount to start a new endowment to $50,000* and applied this new minimum to all current endowments). Additionally, to allow those endowments currently under $50,000 five years to determine the path they want to take and ten years to reach the goal. Source: ALA Executive Board, ALA Midwinter Meeting 2012 

It shall be the intention of ACRL to retain the principal of the ACRL Long-term Investment Fund of the ALA Long-term Investment fund by using only a portion of the net earnings of the fund (defined as cash dividend and interest income) to support activities of the ACRL. The ACRL Board will annually determine the use of any paid out annual net earnings in support of specific ACRL program enhancements and special initiatives, in ways consistent with ACRL policies for use of Long-term Investment funds. In the absence of any specific Board action, unused paid out net earnings will revert to the Long-term Investment principal.

Withdrawals from the ACRL Long-term Investment will be made only under limited circumstances, as defined and approved by the ACRL Board. Withdrawals will be authorized only in order to carry out strategic priorities or in order to respond to emergency situations. Source: ACRL Board, July 1997. (Specific policies pending ALA BARC/Divisions Long-term Investment Policy Task Force Work)

Separate restricted Long-term Investments may be established, provided they meet the minimum level of funding for a separately designated Long-term Investment within the ALA Long-term Investment.

All funds in the ACRL Long-term Investment Fund, regardless of their source, are considered to be the funds of ACRL.

The ACRL Board will authorize additions to the Long-term Investment Fund as part of the budget approval process and in accordance with existing policies and the approved financial plan of the division.

Interest from the long-term investment fund should be used to support initiatives in the strategic plan. Source: ACRL Executive Committee, October 2005

CHOICE Long-term Investment Fund

The primary purpose of the CHOICE Long-term Investment Fund is to generate income to support the operation of and enhancement to the publication and its related projects. Funds in excess of the required CHOICE Reserve Fund are available for investment in a CHOICE Long-term Investment Fund. The CHOICE Long-term Investment is that portion of the CHOICE net surplus that has been invested together with similar funds of the ALA for the purpose of providing permanent income to the publication. In general, the principal of the CHOICE Long-term Investment Fund is not available for current operations and activities.

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 FY17 and FY18 from the CHOICE long-term investment (LTI) into the ACRL LTI. In exchange, ACRL will transfer up to $700,000, to be split over FY17 and FY18, 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. (Source: ACRL Board, June 2017)

Operating Guidelines

  1. The CHOICE Long-term Investment Fund will be invested with the ALA Long-term Investment Fund and will be subject to any policies governing the Long-term Investment Fund in general. An initial sum of $20,000 shall be invested, fulfilling the minimum level of funding for a separately designated Long-term Investment within the ALA Long-term Investment .
  2. It shall be the intention of ACRL to retain the principal of the CHOICE Long-term Investment Fund of the ALA Long-term Investment Fund by using only a portion of the new earnings of the fund (defined as cash dividend and interest income) to support activities of CHOICE to be determined from time to time by the ACRL Board under the advice of the CHOICE Editorial Board and the ACRL Budget and Finance Committee.
  3. Withdrawals from the CHOICE Long-term Investment will be made only under limited circumstances, as defined and approved by the ACRL Board. Withdrawals will be authorized only in order to carry out strategic priorities or in order to respond to emergency situations.

Source: ACRL Board, July 1997. (Specific policies pending ALA BARC/Divisions Endowment Policy Task Force Work)

  1. Separate restricted endowments may be established, provided they meet the minimum level of funding for a separately designated endowment within the ALA Endowment. Each separate restricted endowment will require its own separate policy statement.
  2. All funds in the CHOICE Long-term Investment Fund, regardless of their sources, are considered to be funds of CHOICE.
  3. The ACRL Board annually will make a determination of the disposition of any unused paid out net earnings consistent with ACRL policy for use of Long-term Investment funds. Paid out earnings will be used for CHOICE projects. In the absence of specific Board action, any unused paid out net earnings revert to the Long-term Investment principal.
  4. The ACRL Board will authorize additions to the CHOICE Long-term Investment fund as part of the budget approval process and in accordance with existing policies and the approved financial plan of the division.

Source: ACRL Board, January 1991

A portion of the CHOICE fund balance, not to exceed 20 percent, may be made available for special projects. The major criterion for deciding whether a project is appropriate for this type of funding is the value of the project in fulfilling the CHOICE publishing statement and furthering its goals:

  • to provide selections services for libraries and librarians;
  • to develop an electronic publishing program;
  • to increase the number of subscriptions to CHOICE.

Procedure:

  1. Proposed projects to be funded from the CHOICE fund balance must be included in the CHOICE budget.
  2. The Budget and Finance Committee reviews such projects when considering the CHOICE budget, and recommends them to the ACRL Board separately from the remainder of the ACRL budget.

Source: ACRL Board, June 1989

LONG-TERM INVESTMENTS – TRANSFERS & WITHDRAWALS

Revised Policy 8.5.1 REVISED - Long-Term Investment Funds: Association’s Use/Withdrawal and Repayment

Endowment – Long Term Investment - Fund Payout/Withdrawal Policy

Use in Budget Preparation

In the preparation of the ALA annual budget, the ALA Executive Director is authorized to include a payout rate of 3–5% of the five-year trailing calendar quarterly (20) rolling average of the net asset balance of the ALA Future Fund. Additionally, the Executive Directors of the Divisions and the liaisons for the Round Tables and others responsible for endowment funds are authorized to include in the preparation of their annual budgets, the anticipated payout value as provided by the Finance department. The payouts will be subject to any donor restrictions related to a particular fund and will be made from allowable temporarily restricted and unrestricted net assets. Additionally, the annual payout rate (3–5%) will be reviewed, determined and recommended by the ALA Endowment Trustees and the Finance and Audit committee of the ALA Executive Board, with final approval by the ALA Executive Board.

Use of Fund

Listed below are the primary instances whereby additional funds may be withdrawn from the Long-Term Investment Fund can be made.

 A.  Program Support

The General Fund, Divisions and Round Tables can request funds from their respective long- term investment funds to support one-time programs.

B. Emergencies

Emergencies will include financial disaster due to a major revenue shortfall, act of God, building catastrophe, major lawsuit, etc.

C. New Initiatives

New Initiatives will include projects or programs that are multi-year in nature and deemed important to the future of the Association, Divisions, Round Tables or units.

Amounts requested to be withdrawn in excess of the determined payout rate will require repayment with interest.

D. Scholarships & Awards

Allowable withdrawals from temporarily restricted and unrestricted Long-Term Investment funds

designated for named scholarships and awards will be made to the extent necessary to support the award or scholarship according to its stipulations and requirements. If the funds available from the annually determined payout rate of 3% - 5% of a named scholarship or award is not adequate, the amount in the temporary restricted and unrestricted investments designated for named scholarships may be used up to the limits of any permanent or donor restrictions.

E. Life Membership Funds

Allowable withdrawals from temporarily restricted and unrestricted Long-Term Investment funds designated for Life Membership, will be made from the Life Membership Fund to the extent necessary to support the annual membership fee for the participants.

F. Transfer of Existing Funds

It is allowable to make a transfer from an existing unrestricted funds for the establishment of a new and or in support of an existing scholarship fund, program or initiative fund within the Long-Term Investment Fund.

Withdrawal/Transfer/Repayment

Each withdrawal for any of the purposes referenced in A, B, C and the annually determined payout rate of 3–5% of the five-year trailing calendar quarterly (20) rolling average net asset balance must be approved by the Executive Board.

Withdrawals from the Long-Term Investment Fund above and beyond the annually determined payout rate of 3–5% of the five-year trailing calendar quarterly (20) rolling average net asset balance, for any of the following events:

  1. Program Support
  2. Emergencies
  3. New Initiatives will require repayment at the prevailing ALA borrowing rate with the term to be recommended by management and approved by the Executive Board.

The annual withdrawal of interest and or dividends from the Long-Term Investment Fund will not require repayment.

Source: ALA Council, 2011

 

ALA Endowment Fund Purpose Statement

Mission, Role, and Purpose of the Endowment Fund of the American Library Association

Mission
The primary mission of the American Library Association Endowment Fund is to support the development and enhancement of the Association programs and activities.

Historical Background
In the year 1890, pursuant to the provisions of Article 9 of the Constitution of the American Library Association, an Endowment Fund was created to include “receipts from life memberships and all gifts for Endowment purposes.” As one of the provisions of the American Library Association Constitution, the Endowment funds are committed to the custody of three trustees elected by the Executive Board. “The trustees shall have authority to hold, invest, reinvest, disperse and otherwise deal with Endowment funds in accordance with such directions as may be given them by the Executive Board of the Association.”

Meeting at Fabyan House in New Hampshire in the Spring of 1890, the Endowment Fund for the American Library Association was established. The guiding principle in the establishment of the fund was that only the income would be devoted to the purposes of the American Library Association. The first constitution of the American Library Association provided that “all receipts…for this purpose shall constitute an Endowment Fund which shall be invested and kept forever inviolate.”

From time to time since the first establishment of the Endowment, discussions were held relative to the receipt of funds for special purposes. Historically, these funds were committed to the management of the Endowment Fund Trustees with the stipulations of the initial donor or grantor being followed. The historical record is clear that the Executive Board of the American Library Association continually resisted the temptation of removing the capital funds of the Endowment. The record also shows the continued intention that funds taken from the Endowment for buildings and capital improvements would/should be returned to the Endowment Fund. This process of “borrowing” from the Endowment Fund for capital projects and operational expenses has been more common over the last 20 years of the Endowment Fund’s operation. During the first 80 years of the Endowment Fund operation it appears, through historical record, that only the interest earned on the Endowment funds were used for any Association purposes. It was clearly the intention of the American Library Association membership to use earnings for program enhancement.

Operating Guidelines
The following guidelines clarify the Constitution Article IX and ALA Policy A.6.5.1 ((Old Number 8.5.1). Unless specified, they apply only to the ALA Endowment Fund. Divisions follow the Division Operational Practice on Endowments.

The ALA Endowment Fund is by its very nature a complex fund with numerous purposes.

In order to provide continuity for the role and purpose of the ALA Endowment Fund, the following operating principles are adopted:

  1. The ALA Endowment Fund includes general funds, commonly called the Future Fund (Board-Designated), received by the Association through donation and bequest with specific stated purposes and restrictions. For purpose of investment efficiency, these funds may be invested together, with separate reporting of each fund as necessary and appropriate.
  2. It shall be the intention to retain the principle included in the ALA Endowment Fund, utilizing only a portion of the net earnings of the fund (defined as cash dividend and interest income) to support American Library Association activities to be determined from time to time by the Executive Board. The Executive Board has the power to spend principal from the Future Fund (Board-Designated) to meet emergency situations. When the Board spends principal, a reimbursement plan will be established with the Endowment Trustees for repayment of the principal, plus interest at a rate equal to the net earnings of the endowment as reported to ALA from the Endowment Fund manager. Repayment will begin the fiscal year following the withdrawal at a rate that will achieve total repayment of the principal and interest within five years. No expenditure of principal in a fiscal year will exceed 10% of the market value of the securities. Spending/Payout policy applies here – A6.5.1
  3. Upon acceptance of donations and bequests, the received funds will be maintained in the Board Designated ALA Endowment Fund unless restricted or designated for specific purposes.
  4. It shall be the policy of the Executive Board to establish a minimum level of funding of $10,000 for each designated or restricted part of the ALA Endowment Fund and for Division and Round Table endowments. New minimum amount policy applies here - $50,000.
  5. Every attempt will be made, through an Endowment Campaign Committee and/or Development Office, to bolster the financial resources of the existing designated/restricted endowment accounts to a minimum of $10,000. Should these smaller portions of the ALA Endowment Fund not reach the $10,000 within five years, consideration will be given to merging them, as appropriate, with the undesignated portion of the Endowment Fund. All new endowments, including Division and Round Tables, may be established with less than $10,000. However, the Executive Board must approve a plan to bring that endowment up to the minimum within five years. If the minimum is not achieved, the balance will be used for purposes specified during the period when donations were received. No interest may be spent from an endowment until it reaches $10,000. New minimum amount policy applies here - $50,000. A total of ten years to reach the minimum.
  6. As in the past, all funds received from the sale of life memberships shall be deposited in the Board-Designated portion of the ALA Endowment Fund. As with other general endowment funds, only the net earnings of the life membership deposits will be used to support Association activities. Spending/Payout policy applies here – A6.5.1

 Also, they are segregated in separate Life Member endowment funds.

  1. Monies received in the form of restricted donations and bequests below $10,000, where the restrictions require the spending of both principal and net earnings, will not be deposited in the Endowment but will be spent according to the donor/bequestor wishes.
  2. Donors will be requested to sign a standard form providing discretion to the Association and its Executive Board and Officers in the disbursement of donated funds. This may include the stipulation of the conditions under which these funds will be transferred to the Board Designated portion of the ALA Endowment Fund to be used for the general purposes of the American Library Association. Other exigencies might also be noted on this donor form.
  3. The Executive Board has established the portion of net earnings to be paid from the ALA Endowment Fund to the American Library Association’s general fund at 50% beginning in 1992, according to the implementation schedule previously established.  Spending/Payout policy applies here – A6.5.1
  4. Unless specified otherwise, the unused net earnings from the ALA Endowment Fund shall revert to the principal and not be available for drawdown.
  5. It shall be the practice of the Executive Board to inform the Endowment Trustees of specific and ongoing fundraising activities which might generate additional resources for the ALA Endowment Fund.
  6. It shall be the practice of the Trustees of the Endowment Fund to present a report on the status of the ALA Endowment Fund to the Council of the American Library Association at its annual conference and midwinter meetings. A written report will be submitted to the Executive Board at its regularly scheduled meetings.
  7. No Division or Round Table or other unit of the American Library Association shall maintain a separately invested endowment.
  8. It shall be the practice of the Trustees of the Endowment Fund to exercise appropriate caution and judgement in the investment and the administration of the ALA Endowment Fund. The wise investment and management of all endowment funds shall be intended to generate substantial ongoing funds for the support of Association activities and to enhance the growth of the Fund principal.
  9. It shall be the responsibility of the Trustees of the ALA Endowment Fund to develop an investment policy and strategy which the Trustees shall review periodically.
  10. All gifts and donations to the ALA Endowment Fund will be acknowledged in writing by the President of ALA, and may be acknowledged by other appropriate parties.