Transcript FINANCIAL MANAGEMENT IN THE SMALL PUBLIC LIBRARY

FINANCIAL MANAGEMENT IN
THE SMALL PUBLIC LIBRARY
ABLE: Administering Better
Libraries -- Educate
Module #2
TWO THOUGHTS
“Oh, don’t bother me,” said the Duchess, “I
never could abide figures.”
-- Lewis Carroll, Alice’s Adventures in Wonderland
We are responsible public managers.
-- Sandra Nelson, Planning for Results
WHAT WE’RE GOING TO DO:
Part I – THE FINANCIAL CYCLE:
plan, budget, operate, report
financial procedures and controls
Part II – POLITICS, ISSUES, AND PROBLEMS
getting money, cutting budgets, reducing
expenses, bargaining units, various
problems of dysfunction
THE FINANCIAL CYCLE
1.
2.
3.
4.
Plan: whatcha gonna do?
Budget: the year’s plan, expressed in
$$
Operate: put the plan into action,
day by day
Report: monthly reports on how
you’re doing, and an audit to wrap up
LONG-RANGE PLAN
1.
2.
3.
Begin the budget process with a review of
the library’s long-range plan.
The staff and Board working together
should set specific goals for the year,
drawn from the plan.
The budget will need to consider on-going
operating costs as well as support for
changes identified in the goal-setting
process.
WHOSE JOB IS THIS?
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The manager and treasurer draft the
budget together.
The finance committee may review the
draft.
The draft reflects the Board’s decisions
in goal setting.
The Board reviews, amends, and
adopts the budget by resolution.
BUDGET
1.
2.
3.
4.
Review and analyze the prior year’s income
and costs.
Estimate next year’s income and costs.
Identify and put dollars on income or costs
which may result from new initiatives
drawn from the library’s plan.
Compute some percents and ratios to help
you compare this year’s draft with the past
and with other libraries like yours.
TIME TO ROLL UP THE
SHIRTSLEEVES!
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Budget structure: the chart of accounts
Income estimates
Expense estimates
What happens to the materials budget
Some calculations and comparisons
ESTIMATING INCOME
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Allocation from the Town
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Booksale
OTHER SOURCES OF
INCOME
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Friends
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Grants
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Endowments
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Foundations
ESTIMATING EXPENSES
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Fuel oil
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Medical insurance
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Salaries
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Library materials
BUDGETING FOR A NEW
ACTIVITY
Pick a project from your goals and make
a budget for it.
List the resources you will need and
identify the ones which are new costs.
Is there any offsetting income?
AFTER YOU FINISH YOUR
DRAFT
Do a few calculations and
compare them to prior
years:
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Percentage increase over last year
Salaries as a percentage of the budget
Materials as a percentage of the
budget
LOOKING FOR
COMPARISON DATA??

Ask your System if they prepare
comparative data – many do
Public Library Peer Comparison Tool
http://nces.ed.gov/surveys/libraries/
compare/index.asp?LibraryTypes=public
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ACCOUNTING 101
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Fund accounting
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Cash accounting versus accrual accounting
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Net assets (the fund balance)
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Cash flow and cash flow management
GASB and FASB
Governmental Accounting Standards Board –
municipal libraries
Financial Accounting Standards Board –
nonprofits, including association libraries
Only your accountant cares, but you need to
know they’re around!
FUND ACCOUNTING
For example:

Operating fund

Grant funds
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Building fund
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Endowment fund
FUND: DO GOODERS CLUB
GRANT
Gift received
Book bill paid
Book bill paid
Book bill paid
Balance remaining
$1,000
250
100
150
$ 500
CASH ACCOUNTING
ACCRUAL ACCOUNTING
The Do Gooders Club grant:
bill paid
$250
bill paid
$100
bill paid
$150
End of story – you have $500 left to
spend, right?
ACCRUAL ACCOUNTING
Do Gooders Club grant:
bill paid
$250
bill paid
$100
bill paid
$150
BOOKS ON ORDER: $350
NET ASSETS, a.k.a.
THE FUND BALANCE
TOTAL ASSETS – TOTAL LIABILITIES
=
NET ASSETS
Each fund will have its own fund balance
and added together, those balances
provide the net assets of the library
CASH FLOW
How do you know you will have enough
money to pay your bills in any given
month?
Cash flow and managing cash flow are
about time: when are you getting your
money and when will you spend it?
BUDGET VS. ACTUAL
MARCH
Take a look at March:
Copier: 100% vs. 25%
Insurance: 25% vs. 25%
Heat:
45% vs. 25%
Is this OK or is it bankruptcy?
Only your flow chart knows!!
LET’S REVIEW -So far we’ve talked about:
 Planning
 Budgeting
 Operating
Now we’ll do reports and financial
procedures.
FINANCIAL REPORTING
Think of it as a cycle:
 The Budget tells you what you’re going
to do – it forecasts.
 Monthly Reports tell you how you’re
doing – they are snapshots of the
present.
 The Audit looks back to tell you how
you did.
FINANCIAL REPORTS
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Prepared monthly
Show opening balance, transactions, and
ending balance for each fund
Show actual versus budget for the month
and the year-to-date.
Include a balance sheet for an overall
picture of the library’s finances.
Include notes to comment or explain items
as needed.
THE AUDIT
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An annual evaluation of the library’s
financial records and procedures.
Vital to our responsibility of public
accountability.
Brings professional expertise and
advice to the increasingly complex
world of financial management.
DO WE NEED ONE?
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The short answer is, YES!!
The longer answer is, for a very small
library, a professionally conducted
CPA’s audit is expensive.
Where’s the cut-off?
What are the alternatives?
YOU NEED A CERTIFIED
AUDIT IF:
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If you take in $25,000 or more annually
and therefore:
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You are required to file an IRS Form
990 tax return.
ALTERNATIVES TO THE
CERTIFIED AUDIT
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Ask an accountant for a review rather
than a certified audit.
Appoint an audit committee of Board
members
Find qualified community members
who will check the library’s books on a
volunteer basis.
OK, WHAT’S AN AUDIT
GOING TO TELL ME?
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Net assets versus last year and other
financial information.
Statement of opinion: is the library’s
financial work carried out in accordance with
generally accepted accounting principles?
Management letter: areas of financial
management which could be improved.
MISCELLANEOUS STUFF
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Need tax exempt status?
Looking for an Employers Identification
Number?
Or NYS sales tax exemption?
Not registered and chartered yet?
THE LIBRARY’S
FINANCIAL YEAR
Using Teaching Aid # 13, you will make a
calendar showing the library’s entire
financial year.
FUND-RAISING
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Government appropriations
Friends of the Library
Direct mail
Solicitation of big donors
State and Federal grants
Private grants
TWO THINGS TO
REMEMBER
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Libraries are government functions and
most of their operating funds should come
from governmental units.
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The most important thing to do about fundraising is to ASK. Too much time can be
spent planning and strategizing when what
is needed is some pavement pounding.
DOING THE BOOKKEEPING!
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Many libraries use software packages
like QuickBooks.
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The smallest libraries might just set
their books up in Excel.
FINANCIAL PROCEDURES
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Goal setting: manager recommends, Board
reviews and revises; adopts by resolution
Budget development: manager and
treasurer draft, reflecting Board’s direction.
Finance committee (all Boards should have
one) reviews, revises.
Board adopts budget by resolution
FINANCIAL PROCEDURES:
PAYING BILLS
1.
2.
3.
4.
5.
6.
Authorization to purchase goods
Receipt of goods
Approve payment
Write the check
Sign the check
File the records
VOUCHERS
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The voucher authorizes payment.
It shows:
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Who is being paid
How much
Charged to what account
Signature or initials of authorizing
individual
CHECKS
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The library manager approves most bills
and prepares checks for treasurer’s
signature.
Checks above a certain amount of money
may require two signatures.
Checks should be paid on a regular
schedule, generally twice a month.
A check may be written outside that
schedule if payment deadlines require.
PAYROLL
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Payroll is complex and if filings are not done
in a timely manner, the penalties are
expensive.
Use a payroll service such as Paychex or
ADP, or be sure your payroll software is
updated annually to reflect current tax law.
A payroll service will insure that payroll
taxes are paid on time.
DOCUMENTATION OF
PAYROLL EXPENSES
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Time sheets are the basis of payroll documentation
and all paychecks should be prepared from them.
The library needs to be able to establish the person,
date, and times worked.
This is necessary for accurate handling of workers
compensation claims, Human Rights Commission
investigations, and so forth.
Time sheets also keep track of sick and annual
leave balances.
They should be signed and dated by the employee
and by the person approving the payroll and kept
for five years.
BANK ACCOUNTS
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Keep a file of the current signature cards
and be sure they are changed every time
signers change.
Open additional accounts in separate banks
as needed to keep deposited amounts
within the FDIC insurance limit.
Banks will bid on banking services: ask
them for a free safe deposit box, or a sweep
account, or free checking for employees . . .
See what they will do for you.
BEST PRACTICES FOR
FINANCIAL PROCEDURES
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The library manager attends all Board
meetings
The manager is involved in budget
preparation and reporting
Enough people can sign on the bank
accounts so that the required number of
signatures always is available to sign payroll
and other deadline expenses.
BEST PRACTICES, con’t.
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The library’s financial records are kept
in the library, not on the treasurer’s
dining room table, nor in the
treasurer’s computer.
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This applies to all business records.
FINANCIAL CONTROLS FOR
THE SMALL LIBRARY
How can you protect your library from
theft or fraud?
 Separate financial duties as much as
you can.
 If the manager prepares the checks,
then the treasurer should do the bank
reconciliations.
MORE CONTROLS
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Use the voucher system vigorously. It
provides 4 points of approval for every
expenditure.
Use consecutively numbered checks,
purchase orders, and vouchers.
Keep unused checks locked up at all
times.
STILL MORE CONTROLS ….
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Use second signatures on large
checks.
Have written financial policies and
procedures and follow them.
Establish a by-laws clause about selfdealing and profiting from library
operations.
AND FINALLY . . . .
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Periodic review of financial controls by
the finance committee
Annual scrutiny of financial controls by
the auditor
ASSUME NOTHING
BEST PRACTICES FOR
FINANCIAL CONTROLS
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Each check is signed and supporting
documentation reviewed by someone other
than the check preparer.
The library’s financial records are kept in the
library.
Blank checks are kept locked up and no
checks are written out of number sequence.
Copies of the audit are mailed by the auditor
directly to the Board President and
executive committee.
HOW PEOPLE STEAL
MONEY
Because the bad news is that sometimes they
do.
 They steal cash receipts from fines or fundraisers.
 They write checks to library vendors like the
phone company, but for their own bills.
 They falsify financial reports and audits.
 They make side deals with vendors.
WHAT YOU CAN DO
Be sure that:
 the Board understands the financial reports
and the library’s financial situation.
 both Board and staff understand and are
following all policies and procedures.
 people doing financial work take scheduled
vacations during which their part of the work
is performed by someone else.
ASSUME NOTHING!
PART ONE IS OVER!!
You have learned many technical
aspects of financial management.
Now it is time for the rubber to meet
the road: Part Two consists of things
that can happen on your way to a
happy audit.
PART TWO -- POLITICS,
ISSUES, AND PROBLEMS
The technical part is easy.
The challenge lies in
the people and problems
we encounter along the way.
THE POLITICS OF GETTING
MONEY
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Unreasonable attacks from opponents
Politics within the legislative body
which affect the library adversely
Large controversial issues which are
not the library’s
Lack of media support or outright
hostility
ISSUE MANAGEMENT!
CUTTING THE BUDGET
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Have clear goals and work to keep
them alive.
If you don’t mean it, don’t threaten it.
Quit whining!
Provide leadership to the staff.
REDUCING EXPENSES
Be sure that your expenses are as low as
possible:
 Ask for bids
 Use state contracts
www.ogs.state.ny.us
 Take advantage of group buying
through the local Chamber of
Commerce, NYLA, etc.
BARGAINING UNITS,
SALARIES AND BENEFITS
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Responsibility of the Board to pay
appropriate salaries to staff
Tailor a benefits package to meet the
needs of a sole employee
Union negotiations
TRAIN WRECKS
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The Board shuts the manager out.
The treasurer is not available to the
Board or manager
The Board won’t do politics
The town thinks it controls its library
fund and what the library can spend
the money on
Trustee micromanagement
ABLE
FINANCIAL MANAGEMENT
IN THE SMALL PUBLIC LIBRARY
THE END!