Budgets and Financial Reporting for the New Library Director

Mary Martin, Director, Long Hill Library

Betsy Kanouse, Director, Denville Public Library

February 2011

Plan for and prepare next year’s budget

Monitor spending through monthly financial reports

End of Year Evaluation / Annual Audit

The Unending Financial Cycle

As a new director…

You may start your job at any time in this cycle

First find out what “past practice” has been– Review last year’s audit report for numbers and

recommendations– Ask treasurer and/or bookkeeper to explain how your

library handles things

If it ain’t broke, don’t rush to fix it right away

Who manages your money?

Some municipalities pay the bills for their libraries.– Towns must fund their municipal library at 1/3 mil– Your Board (not you) should ask the town for an

accounting of what has been spent each month– Your Board should approve all bills each month

If your municipal library pays its own bills:– The town must make a payment to you (part or all

of the 1/3 mil) by March 31 -- even if they haven’t passed their budget

The Budgeting Process

"It's clearly a budget. It's got a

lot of numbers in it."— George W. Bush

The budgeting timeline

Different libraries use different timelines. There is no one right way. – Betsy’s Board usually passes their budget in

January; Mary’s doesn’t pass it until March.

Make things easier on yourself; follow past practice for your library at least for your first year on the job.

The Budgeting Process: Ask for input from staff

Special projects/needs, e.g.:– Implement time/print management software– Computer replacement plan– Start a special collection (video games, etc)

You may not be able to afford to do everything now, but it’s good to have a wish list

Grants or unanticipated gifts may become available; you want to be ready to take advantage of them

Some numbers you need – ANTICIPATED INCOME

How much income do you expect to receive?– If you are a municipal library, the municipal

appropriation is announced in October– Fines– Interest from savings accounts/CDs– Gifts– Other?

Some numbers you need – FIXED & KNOWN EXPENSES

Salary, payroll taxes, pension costs, health benefits Chargebacks from town (if any) Service contracts (HVAC, cleaning, audit,

alarm & fire monitoring, etc) Utilities Consortium / shared service expenses Telecom / Internet connectivity Other?

How the hell do you estimate these numbers?

Look at your financial reports and audits from the previous year or two.– Has spending increased? – Decreased? – Stayed the same?

If you are in a multi-year contract (e.g. HVAC maintenance) you should know / can ask what the yearly cost is.

How the hell do you estimate these numbers?

Make a call! Ask vendors for an estimate. Ask for discounts!

Keep your ears open. – Are pundits predicting an increase in gas costs? You

may need to increase your utilities budget line.

– What percentage increase in PERS payments are municipalities anticipating?

What’s left over? Start filling in other costs:

Collection and materials Programming Library & office supplies Postage Other?

Put the numbers together and voila! A budget!

Your anticipated income should balance with your anticipated expenses.

If your anticipated expenses are higher than your anticipated income, you need to trim your expenses.– Where from?

Do you have more income than anticipated expenses?

Consider yourself lucky!

Review your wish list

Create or add to a restricted capital maintenance or capital improvement fund

Other?

Presenting the budget to the Board (and possibly the Town)

Give them the budget, but not your entire budget calculation worksheet (T M I !)

Have your budget calculation worksheet available to refer to if you are questioned; be prepared to explain how you came up with your numbers

Ask for help from your treasurer and/or finance committee prior to the presentation – they can, and should, help you prepare!

Monthly Financial Reports

“Too… many… numbers… my head hurts…make it stop…”

Mary Martin

Four useful monthly reports

Expenditures to date vs budgeted expenses (aka budget control report)

Profit & Loss statement

Bill list

“Expense vs budget YTD” reports (for department heads/staff with purchasing responsibilities)

Expenses To Date vs Budget (aka Budget Control Report – are you on target or over budget?)

Profit & LossWhat did you bring in this month/year? What did you expend?

Bill list What bills need to be paid this month?

Expense vs budget reports (for staff)

Keep staff informed of how much they have spent versus their budget YTD (year to date)

But wait! There’s more!

What monthly financial reports is your library currently producing for your board meetings?

Remember the “past practice” guideline. If it’s working okay, you don’t have to change it right away (or at all).

The Audit Process

"We didn't actually overspend our budget. The allocation simply fell

short of our expenditure."Keith Davis

Your yearly audit

If you are paying for your audit, even if it is the same auditor as the town, you should request a proposal that includes the cost of the audit and what services will be included.

You can negotiate with auditors just as with other vendors. Auditors charge wildly different amounts for the same basic product. Ask around – what are other libraries paying?

Preparing for the Audit

All municipal libraries must be audited each year. There is no mandated time frame but it’s a good idea to get it done within the first 6 months.

Your bookkeeper/treasurer may already have a process for handling the audit in place. If so, GREAT!

Preparing for the Audit

Ask for help from your treasurer and/or bookkeeper in preparing for the audit.

There are certain things you know you’ll need each year. (See Mary’s audit preparation checklist).

Deciphering your Audit Report

Ask the auditor to sit down with you and your treasurer to review the audit. Remember: you are their paying customer!

If the auditor has any recommendations for change:– Ask questions. How many other public libraries

does your firm audit? Of those, how many have this procedure in place?

Wrapping it Up

“Bueller?... Bueller?... Bueller? ”

Ben Stein as the economics teacher in Ferris Bueller’s Day Off

When in doubt, ASK

Do you still have questions? (Of course you do!)

Contact your auditor (anytime throughout the year) or accountant (if you have one)

Contact the State Library for guidance

Send a shout-out to one of the library listservs. You are not alone.

Additional Resources: Giveback of Funds (Municipal libraries)

Return of Excess Funds Law (NJSA 40:54-15) was passed in 2010

Beware of excess operating reserve funds

For more info, contact the State Library

More additional resources

The state-mandated 1/3 mil municipal appropriation is posted each October: http://www.njstatelib.org/LDB/State_Aid/

NJ Library Laws can be found here: http://www.njstatelib.org/LDB/Library_Law/Part 6, purchasing, includes info on Pay to Play; Part 7 includes the Local Fiscal Affairs Law (audit info & more);Part 8 includes info on NJSA 40:54-15 (Return of Excess Funds)

Still more additional resources

Your town’s Chief Financial Officer can be a great resource – but not unless you ask for help.

NJ laws governing municipal fiscal administration: NJ Department of Community Affairs, www.state.nj.us/dca/lgs/

Questions? Comments?

Mary Martin, mary_martin00@yahoo.com

Betsy Kanouse, elizabeth.kanouse@denvillelibrary.org