1 American Library Association BARC Member Orientation American Library Association BARC Member Orientation (Financial Fundamentals) Fall BARC Meeting

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American Library AssociationAmerican Library Association

BARC Member OrientationBARC Member Orientation

(Financial Fundamentals)

Fall BARC Meeting

Wednesday - October 3, 2007

Marilyn Hinshaw – BARC Chair

Rod Hersberger – Treasurer

Gregory Calloway – AED Finance

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I. BARC Role and ResponsibilityI. BARC Role and Responsibility Committee Charge Review proposed ALA budget Review financial performance Make and report budget recommendations Role as a liaison Relationship with Finance & Audit, Executive

Board and Council Reporting to Executive Board & Council Decision-Making Process ALA Membership & Organizational Chart Calendar

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Budget Analysis and Review Committee(BARC Charge)

The Budget Analysis and Review Committee (BARC) is charged to review the proposed budget, as forwarded by the ALA Executive Board, in the context of the ALA strategic plan, annual priorities and budget assumptions. To review the financial performance of the Association and the budget impact of potential actions of the ALA Council. To make budget recommendations to the ALA Executive Board and to report to Council regarding budget analysis and the process.

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ALA Decision-Making ProcessALA Decision-Making Process

COUNCIL

100 – Councilors at Large

11 - Divisional Councilors

53 - Chapter Councilors

12 - Executive Board Members

10 – Round Table Councilors

ENDOWMENT TRUSTEES

3 - Elected by The Executive Board Treasurer - Liaison

FINANCE & AUDIT COMMITTEE

Treasurer - Chair

3 - Executive Board MembersAppointed by the President

BARC Chair- Ex-Officio

PLANNING & BUDGET ASSEMBLY

10 - Councilors Elected by Council 5 Chapters; 5 At-Large

14 - Divisional Representatives

36 - Committee Chairs - ALA Committees

Chairs Appointed by President

30 - Round table Representatives

EXECUTIVE BOARD

4 - Elected by Membership

8 - Elected by Council

1 - Staff - Executive Director

DIVISION BOARD OF DIRECTORS

Elected by Division Members

BUDGET ANALYSIS & REVIEW COMMITTEE

(BARC)

6 - Members At-Large


1 - Treasurer Appointed by the President

EXECUTIVE COMMITTEE

President

President - Elect

Immediate Past President

Treasurer

Executive Director

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ALA MEMBERSHIP ORGANIZATION

C H A P T E R S A F F IL IA T E DO R G A N IZ A T IO NS

A L A S T A FF

E X E C U T IV E D IR E C T O R B o a rd S ub com m itte es

E X E C U T IV EB O A R D

C O U N C ILC O M M IT T E E S

R O U N D T A B L E S R E P R E S E N T A T IV E S TOO T H E R O R G A N IZ A T IO N S

A L A A D V IS O R Y A NDS T A N D IN G C O M M IT T E E S

JO IN T C O M M IT T E E S W IT HO T H E R O R G A N IZ A T IO N S

D IV IS IO NS

C O U N C IL

M E M B E R S H IP

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A LA Organizational C hartFY 2007 - 2008

Divis ions Conference Services

ALA O ffices Roudtables

ITTS Aw ards Programs

O ffice of Accreditation O LOS

O ffice of Inte llectual Freedom HRD R

M a ry G h ik asS e n io r A E D M e m be r P rog ra m s & S erv ic es

V a c a ntD ire c to r

D e ve lo pe m en t O ff ice

C yn th ia V ivianD ire c to r

H u m an R e so u rc es

J o An n e K em pfIn te rim D ire c to r

G o vern a nc e O ffice

F in an ce

B u dg e t

A c c ou n ts R e ce iva b le A c c ou n ts P aya b le

P a yro ll C o lle c tio ns

A c co u n ting

O p era tion s & S ta ff S u pp o rt

G re g Ca llo w ayA E D F in an ce & A c c o un ting

O ff ic e o f T ec h n o lo g y P o licy

G o vern m e n t R e la t io ns

E m ily S he k e to ffA E D W a sh in g to n O ffice

C u s tom e r S e rv ice

In te rn a tion a l R e la t io ns

P IO

L ib ra ry

O R S

P u b lic P ro g ra m s

C h a p te r R e la tio ns

C ath leen Bo u rd onA E D C om m u n ic a tio ns

A L A E d it io ns

B o o k list

A L A Te c h S o u rce

P ro du c ts & P ro m otio ns

P ro du c tion S erv ices

A m e rica n L ib ra ries

D o n C h ath amA E D P ub lish ing

K eith M ic h a el F ie lsE x e cu tiv e D ire c to rG o vern a nc e O ffice

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ANNUAL BUDGETARY PLANNING CALENDAR

October - Fall Board Mtg. The Executive Board reviews the strategic plan as presented by the Executive Director/Senior Management and further defines the strategic focus resulting in the broad programmatic objectives. The Executive Board and BARC review and approve the Division’s final Budgetary Ceiling for the current year.

Midwinter Meeting The Executive Board - Treasurer - presents the broad programmatic objectives to Council for approval. BARC monitors the current budget. President-Elect proposes presidential program budget.

January ALA staff prepares the Annual budget based on the broad programmatic objectives.

April - May The Executive Board receives from staff - Senior Management - the preliminary budget, which is reviewed and then forwarded to BARC for a detailed analysis.

May - June Staff – unit managers and senior management - updates the budget.

Annual Conference Executive Board approves the budget. Council approves the budgetary ceiling. Division Boards approve their budgets.

September - October ALA management reviews the strategic focus of the Association.

August - September Staff begins preparing next year’s budget and three - year financial plan.

March - April Budget hearings for ALA and the Divisions are held.

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II. BARC Agenda DevelopmentII. BARC Agenda Development

Meeting Agenda Samples

- Fall

- Midwinter

- Spring

- Annual Council Referrals to BARC Processing BARC Action Items

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Council Referrals to BARC

Samples of past Council referrals:

- > Dues Impact Study

- > Income Based Dues Study (Graduated Dues Study)

- > Resolution on the Gathering of Diversity Statistics

- > Resolution to Establish ALA Policy for Retaining Legal Counsel

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III. ALA BudgetIII. ALA Budget

Calendar Process Fund interrelationship Budget guidelines Handling new projects and requests Spring meeting - 2008

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FINANCIAL PLANNING CALENDAR – FY 09

The Executive Board reviews the strategic plan as presented by the Executive Director/Senior Management and further defines the strategic focus resulting in the broad programmatic objectives. The Executive Board and BARC review and approve the Division’s final Budgetary Ceiling for the current year – Chicago.

January - 2008 ALA staff prepares the Annual budget based on the broad programmatic objectives.

October 18th Division Leadership Meeting: Meet new Division Presidents - Chicago

Monthly Endowment Trustees Conference Calls – Every Third Wednesday @ 2:00 EST

Fall Board Meeting

October 19th – 21st

October 3rd – 5th BARC meeting: Finalize FY08 budget - Chicago

Midwinter Meeting (January 11th – 16th)

The Executive Board - Treasurer - presents the broad programmatic objectives to Council for approval. Participation ie reports in ALA Finance Workshop and PBA. BARC monitors the current budget. President-Elect proposes presidential program budget – Philadelphia.

December – 1st Week

Year end financial review with staff. Meet with auditor to discuss the progress of the audit. Prepare Council mailing on year end results. Begin preparations for Midwinter reports to Council, PBA, ALA Finances 101 and Treasurer’s Forum (if necessary). Prepare for ALA annual report.

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FINANCIAL PLANNING CALENDAR – FY 09

April - May The Executive Board receives the preliminary budget from staff (Senior Management), which is reviewed and then forwarded to BARC with recommendations – Chicago.

May - June Staff - unit managers and senior management - updates the budget.

Annual Conference (June 26th – July 2nd)

Executive Board approves the budget. Council approves the budgetary ceiling. Division Boards approve their budgets – Anaheim.

August/October Staff begins preparing next year’s (FY10) budget and three - year financial plan.

March - April Budget hearings for ALA and the Divisions are held at ALA headquarters.

April 14th –15th BARC Meeting: reviews preliminary budget, performs a detailed analysis and forwards to Finance & Audit with recommendations - Chicago

June Treasurer, along with staff, prepares for reports to Council (FY09 budget) and PBA – if necessary

August/October Final FY09 budget finalized, primarily the divisions.

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TIMELINE OF BUDGET PROCESS

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Inter-Fund Relationship(Sample FY08 Budget)

Plant Grants & General Fund Divisions Roundtables Fund Awards LTI*

REVENUES 29,195,951$ 16,310,242$ 340,479$ -$ 4,371,734$ 1,357,905$

Revenue TransfersInterest/Dividends 191,363$ -$ -$ -$ -$ (191,363)$ Life Member Dues 51,000$ 20,385$ -$ -$ -$ (71,385)$ Cont. Member Dues (4,665)$ 4,665$ -$ -$ -$ -$

Total Revenues 29,433,649$ 16,335,292$ 340,479$ -$ 4,371,734$ 1,095,157$

EXPENSES 29,862,968$ 13,287,332$ 312,759$ 1,703,849$ 3,942,776$ 658,925$

Small Div Suppt 135,923$ (135,923)$ -$ -$ -$ -$ Plant Fund Transfer 1,703,849$ -$ -$ (1,703,849)$ -$ -$ Overhead (1,822,755)$ 1,822,755$ -$ -$ -$ -$ Overhead (17,378)$ -$ 17,378$ -$ -$ -$ Overhead (428,958)$ -$ -$ -$ 428,958$ -$

Total Expenses 29,433,649$ 14,974,164$ 330,137$ -$ 4,371,734$ 658,925$

Net Revenue -$ 1,361,128$ 10,342$ -$ -$ 436,232$

Expense Transfers

*Long-Term Investment Fund

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IV. Strategic Financial PlanIV. Strategic Financial Plan

Stakeholders Environmental assessment Association needs and

priorities Financial impact

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2010 Initiatives – FY06Project Approved YTD

Project Project # Coordinator Unit Budget Actual Variance Commentary

Web CE Library 11-593-xxxx-9401 Ghikas 200 25,000$ 25,000$ -$

Publishing Release Newswire 11-593-xxxx-9402 Sheketoff 150 4,000$ 4,000$ -$

An account with PR Newswire was created to pay for four to five news releases that would reach a large audience very quickly.

Telecom Reform Washington 11-593-xxxx-9403 Sheketoff 150 30,000$ 28,541$ 1,459$

Telecom Workshop held Aug 28-30, 2006 in Denver, CO to prepare ALA for the upcoming telecommunications policy debate. Key library leadership and telecom policy experts met to discuss the principal issues being raised in the policy debate, to identify othe

Librarians W/O Libraries 11-593-xxxx-9404 Taylor 412 10,000$ 10,000$ -$

Spent $12,500 for a feasibility study to explore the possibilities of developing a volunteer program for libraries in need. The additional $2,500 was contributed by the divisions.

ALTA Advocates eNEW 11-593-xxxx-9405 Ward 411 $ 10,000 $ - $ 10,000

Development of the ALA/ALTA Advocacy Registry E-newsletter will occur in FY07. The newsletter will be integrated into development of the new I Love Libraries website project.

AL Magazine Research 11-593-xxxx-9406 Kniffel 303 50,000$ -$ 50,000$

Spent $23,356 for a feasibility study and focus group to examine the possibility of ALA publishing a magazine for the public to be distributed in libraries. These funds were spent in ALA Editions operating.

Member Satisfaction Survey 11-593-xxxx-9407 Rodriguez 250 $ 15,000 $ 9,800 $ 5,200

Survey is in progress. For 2007: Completion scheduled for Mid November. Results will be analyzed and distributed.

CCF Marketing 11-593-xxxx-9408 Robertson/Castle 115 9,000$ 1,518$ 7,482$

Ad Campaign 11-593-xxxx-9409 Gould 113 13,000$ -$ 13,000$

Will amplify the messages about the value of libraries and librarians during NLW 2007.

Division Web Development 11-593-xxxx-9410 Hall 116 10,000$ -$ 10,000$

Total FY06 176,000$ 78,859$ 97,141$

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2010 Initiatives – FY06/07

Project YTD Project Project # Coordinator Unit Budget Actual Variance

FY06Telecom Reform Workshop - NAB 11-593-xxxx-9403 Sheketoff 150 -$ 802$ (802)$

Member Satisfaction Survey - NAB 11-593-xxxx-9407 Rodriguez 250 -$ 19,600$ (19,600)$

CCF Marketing - NAB 11-593-xxxx-9408 Robertson 115 -$ 5,087$ (5,087)$

Ad Campaign - NAB 11-593-xxxx-9409 Gould 113 -$ 13,000$ (13,000)$

Total -$ 38,489$ (38,489)$

FY07AdvocacyResources/Training 11-593-xxxx-9411 Gould 113 50,000$ 42,464$ 7,536$

State Revenue Advocacy 11-593-xxxx-9412 Dowling 251 15,000$ 15,000$ -$

School Library Advocacy 11-593-xxxx-9413 Dowling 251 15,000$ 5,191$ 9,809$

Rural & Tribal Libraires 11-593-xxxx-9414 Orange 107 15,000$ -$ 15,000$

NAB - Library Corporation 11-593-xxxx-9415 Swader 106 5,000$ -$ 5,000$

Total 100,000$ 62,655$ 37,345$

FY07

National Privacy Discussion - NAB 11-593-xxxx-9416 Krug 108 25,000$ 1,542$ 23,458$

Delivery of Library Message - NAB 11-593-xxxx-9417 Sheketoff 150 20,800$ 20,949$ (149)$

Media Group/Media Participation - NAB 11-593-xxxx-9418 Gould 113 25,000$ 20,000$ 5,000$

Library Magazine for Public - NAB 11-593-xxxx-9419 Kniffel 303 25,000$ -$ 25,000$

Website Development - NAB 11-593-xxxx-9420 Gould/Merola 113 25,000$ 18,900$ 6,100$

E-Government - NAB 11-593-xxxx-9421 Sheketoff 150 28,000$ 28,044$ (44)$

ALA Web Design - NAB 11-593-xxxx-9422 Vanyek 505 46,200$ 42,647$ 3,553$ -$ -$ -$

Total 195,000$ 132,082$ 62,918$

Grand Total 295,000$ 233,226$ 61,774$

Update 2006 - 2007

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V. Financial ConceptsV. Financial Concepts

Glossary of working terms Glossary of additional terms Fund accounting Fund structure Decision-making process

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Glossary of Working TermsGlossary of Working Terms501 C3 (ALA) – a tax law provision granting exemption from the federal income tax to non-profit organizations. exemptions apply to corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals.

501 C6 (APA) – a tax law provision granting exemption from the federal income tax to non-profit organization that promotes a line of trade or business. This exemption is reserved for business leagues, chambers of commerce, real estate boards or boards of trade etc. The APA is exclusively devoted to a number of functions which cannot be undertaken to a "substantial" extent by the American Library Association, which is organized as a nonprofit educational association under section 501(c)3 of the U.S. Internal Revenue Code. These functions are (1) the certification of individuals in specializations beyond the initial professional degree and (2) the direct support of comparable worth and pay equity initiatives and other activities (e.g. legislative lobbying) designed to improve salaries of librarians and other library workers. As a 501(c)6 professional association, the ALA-APA is able to serve as a vigorous advocate for America's librarians and other library workers and will be able to offer certifications which will help promote individual status and the quality of library service.

Accrual Accounting - An accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions occur. The general idea is that economic events are recognized by matching revenues to expenses (the matching principle) at the time in which the transaction occurs rather than when payment is made (or received).

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Glossary of Working TermsGlossary of Working Terms

Assets – An item of economic value owned by an individual or organization, that can be converted to cash.

Budgetary Ceiling – Except for projects supported by grants to the Association, annual estimates of income shall be based upon the unexpended balance remaining from the previous year plus anticipated revenues for the next budget year. In no case may expenditures be budgeted in excess of the estimates of income arrived at in this manner except for projects supported by grants to the Association. The annual estimates of income and budget objectives for each year are to be submitted to Council for approval.

Capital Appreciation – an increase in the market value of an asset (marketable securities) over its original cost.

Capital Budget - A detailed plan to secure or finance long-term outlays, for fixed assets such as facilities, furniture, equipment, software and hardware.

Credit* – Entry on the right side of a DOUBLE-ENTRY BOOKKEEPING system that represents the reduction of an ASSET or expense or the addition to a LIABILITY or REVENUE. (See DEBIT.)

Debit* - Entry on the left side of a DOUBLE-ENTRY BOOKKEEPING system that represents the addition of an ASSET or expense or the reduction to a LIABILITY or REVENUE. (See CREDIT.)

*See slide #23

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Glossary of Working TermsGlossary of Working TermsDeferred Revenue – Income received but not earned until all events have occurred. Deferred income is reflected as a LIABILITY.

Depreciation – Expense allowance made for wear and tear on an ASSET over its estimated useful life.

Expenses - In accounting, an expense represents an event in which an asset is used up or a liability is incurred.

Grants & Awards – Funds from government and non-government agencies made available to support specific programs, services and initiatives.

Liabilities – a financial obligation, debt, claim, or potential loss – what an organization owes.

Long-Term Investment – The active management of a pool of securities, which includes equities, fixed income (bonds) and REIT’S, for the purpose of growing the corpus, assets, and investment resources so as to support current and future Association needs, including scholarships, awards and unique programs that build a strong future for the American Library Association and America’s libraries.

Market Value – The value that an asset (marketable securities) can receive, as determined by open bidding between buyers and sellers in a regulated market place ie NYSE

Net Asset Balance – The accumulated revenues minus expenses for ongoing operations.

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Glossary of Working TermsGlossary of Working TermsOperating Budget – Is an annual budget of an activity which includes revenues, expenses, programs etc.

Operating Cash – The revenue generated from on-going operations from the primary revenue generating units to conduct daily operations.

Overhead Recovered – Reimbursable costs to the General fund (Administration Central) for providing administration and infrastructure support from certain revenues generated within the Association.

Plant Fund – Consists of capital assets and general operations for buildings, capital equipment, construction in progress and improvements in and infrastructure or land. This includes:

- ALA Headquarters

- Washington Office

- Capital Budget

Realized (gain/loss) – an investment transaction, that recognizes the gain or loss in value of a security when it is sold.

Unrealized (gain/loss) – The prevailing value of an unsold investment, as determined by the market and compared to its original cost, that results in a gain or loss in the value.

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Glossary of Working TermsGlossary of Working Terms

Revenues - The amount of money that an organization receives from its activities in a given period, mostly from sales of products and/or services to customers. *Note: conflicts abound as to when revenue should be recognized. The Financial Accounting Standards Board’s (FASB) Statement of Financial Accounting Concept 5 states that revenues should be recognized when they are “realized or realizable” and “earned”. Revenues are “realized or realizable” when products are exchanged for assets (such as cash) or claims to assets (such as promises to pay). Revenues are “earned” when the entity has performed all duties necessary to the purchaser.

Statement of Operations – Same as the income statement, which illustrates the profitability ie revenue less expenses, over a given period of time – monthly, quarterly, annually etc.

Statement of Positions – Same as the balance sheet, which gives a snapshot holdings ie assets, liabilities and member equity, on a specific date.

Subscription Equivalent – dollar amount transferred from the general administration to Publishing in order offset the net expense of publishing and distributing American Libraries.

Variance – The difference between the actual revenue/expense and the budgeted revenue/expense.

Yield - The annual rate of return - interest/dividends/appreciation - on an investment, expressed as a percentage.

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Fundamental Accounting Formula

= + + -

DR CR DR CR DR CR DR CR DR CR

+ - + - - + - + + -

STOCKHOLDERS (MEMBER) EQUITY= +

Net Assets Revenues ExpensesAssets Liabilities

ASSETS LIABILITIES

DR = DebitCR = Credit

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ALA FUND STRUCTUREALA FUND STRUCTURE

R ound T able F und

Divis ion F und

G enera l F und

OP E R A T IN G F U N D

T ec hno logy F urn/E quip &

B uilding

C apita l

F urniture & E quipment

H uron P laza & WO

Operating

H eadquarters

B uilding

P L A N T F U N D

P ermenently R es tric ted

T emporarily R es tric ted

U nres tric ted

L ON G -T E R M IN V E S T M E N T F U N D

N on-G overnment

G overnment

G R A N T S & A WA R DS

TOTAL ALA BU DGE T

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ALA Decision-Making ProcessALA Decision-Making Process

COUNCIL

100 – Councilors at Large

11 - Divisional Councilors

53 - Chapter Councilors


10 – Round Table Councilors

ENDOWMENT TRUSTEES

3 - Elected by The Executive Board Treasurer - Liaison

FINANCE & AUDIT COMMITTEE

Treasurer - Chair

3 - Executive Board MembersAppointed by the President

BARC Chair- Ex-Officio

PLANNING & BUDGET ASSEMBLY

10 - Councilors Elected by Council 5 Chapters; 5 At-Large

14 - Divisional Representatives

36 - Committee Chairs - ALA Committees

Chairs Appointed by President

30 - Round table Representatives

EXECUTIVE BOARD

4 - Elected by Membership

8 - Elected by Council

1 - Staff - Executive Director

DIVISION BOARD OF DIRECTORS

Elected by Division Members

BUDGET ANALYSIS & REVIEW COMMITTEE

(BARC)

6 - Members At-Large


1 - Treasurer Appointed by the President

EXECUTIVE COMMITTEE

President

President - Elect

Immediate Past President

Treasurer

Executive Director

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VI. Financial ReportsVI. Financial Reports

Monthly Performance Reports Statement of Financial Position –

Balance Sheet Statement of Operations and Changes in

Net Assets – Income Statement

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Statement of Financial Position2006 2005

Asse ts

Current assets:Cash and cash equivalents 4,973,323$ 5,472,980$ Short-term investments 11,704,039 11,443,248 Accounts receivable, less allowances for doubtful accounts

and returns (2006 – $347,552; 2005 – $330,305) 4,072,792 5,047,212 Inventories, less reserves (2006 – $454,751; 2005 – $384,827) 1,275,529 1,310,999 Grants receivable 759,125 444,514 Prepaid expenses and other receivables 775,865 562,162

Total current assets 23,560,673 24,281,115 Property and equipment, less accumulated depreciation 9,248,864 8,782,665 Long-term investments 26,440,483 24,258,429 Total assets 59,250,020$ 57,322,209$

Liabilitie s and ne t asse ts

Current liabilities:Accounts payable 3,955,845$ 4,652,146$ Accrued liabilities 952,579 806,883 Accrued income taxes 43,631 37,270 Deferred revenue:

Publication subscriptions 2,535,294 2,462,657 Membership dues 3,659,463 3,577,941 Conference fees 2,831,237 4,440,384

Current Portion of long-term debt 145,000 – Grants and awards 524,385 722,945

Total current liabilities 14,647,434 16,700,226 Long-term debt 3,030,000 3,175,000 Accrued postretirement benefits 10,760,153 9,229,840 Total liabilities 28,437,587 29,105,066

Net assets:Unrestricted:

Nondesignated 24,263,806 22,566,373 Board-designated reserve 684,553 528,490

24,948,359 23,094,863 Temporarily restricted 5,349,374 4,607,580 Permanently restricted 514,700 514,700

Total net assets 30,812,433 28,217,143 Total liabilities and net assets 59,250,020$ 57,322,209$

August 31

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Statement of Operations & Changes in Net Assets

TotalRevenues , gains , and other support

Operating revenues and gains:Membership dues $ 8,040,314 Sale of books and materials 4,879,337 Subscriptions 4,707,248 Advertising 6,228,742 Meetings and conferences 12,174,614 Products and promotions 1,855,601 Grants 4,258,373 Contributions 1,207,841 Dividends and interest income:

Short-term investments 630,822 Long-term investments 676,504

Other 2,428,696 Total operating revenues and gains 47,088,092 Net assets released from restrictions:

Satisfaction of program restrictions – Total operating revenues, gains, and other support 47,088,092

Expenses

Payroll 18,114,050 Outside services 6,011,499 Travel 2,636,221 Meetings and conferences 5,376,585 Publications 5,316,086 Operating 6,144,190 Postretirement benefits 1,776,000 Total expenses 45,374,631 Operating revenues, gains, and other support (less than)

in excess of operating expenses 1,713,461 Nonoperating:

Partnership investment income –

Net realized and change in unrealized gains (losses):Short-term investments (134,980)Long-term investments 1,016,809

Change in net assets 2,595,290 Net assets at beginning of year 28,217,143 Net assets at end of year $ 30,812,433

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VII. Operating AgreementVII. Operating Agreement

History/Background – why is it needed? Relationship between the General Fund

and the Divisions (Policy 6.4.1) – see attached

Composite rate formula Services provided at no charge Services provided as a direct charge Non-overhead assessed revenues Overhead assessed revenues

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Operating Agreement Relationship

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OPERATING AGREEMENT HIGHLIGHTS

• Created over a two year period in the late 1980’s. Adopted in 1989 with a five year phase in period.

• Defines the relationship between divisions and core (administrative) structure of ALA.

• Reviewed annually at the Division/BARC Leadership meeting.

• Preamble:- Statement of purpose and values outlines the unique structure of ALA ie “one association with indivisible assets and a single set of uniform procedures.”

- Home of 11 Divisions and other units, “The nature of the relationship among the ALA units is a dynamic one, demanding collaboration and a willingness to work together.”

• Defines the financial responsibility between ALA and the Divisions.

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• The agreement provides a cooperative framework in which questions of organizational relationship can be addressed and resolved.

• Guiding Principles

- Shared values of unity, diversity, authority (delegated to individual Divisions) autonomy and collaboration/cooperation.

- Divisions assume financial responsibility for staff and programs, including some indirect costs for Division activities and services provided by ALA.

continued

- ALA will provide general administrative, financial, membership, publishing services to the Divisions.

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OPERATING AGREEMENT SERVICES FUNDED BY THE GENERAL FUND AT NO

CHARGE TO DIVISIONS

• Publishing - Rights and Permissions, copyright services and other specialized services.

• Finance/Accounting - Preparation of monthly budget reports, management of annual budgeting cycle, planning/budgeting support, credit & collections and annual audit.• OIF, Washington Office/OITP/OGR, OLOS, HRDR, OR, Executive Office, Diversity Office, Governance and IRO

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OPERATING AGREEMENTDETERMINED OVERHEAD CHARGES

Overhead will not be assessed on revenues from:

• Division Dues

• Division Donations• Interest Income Earned by Divisions• ALA Royalties to Divisions• Travel Expense Reimbursement from Outside

Organizations• Separately-Ticketed Events at Conference (Tours and

Meal Functions)• Advertising in Publications Provided to Division Members

as part of Membership

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OVERHEAD CALCULATIONS

• Overhead is charged on non-dues revenue generating activities ie. registration fees, exhibit space, meal functions (except separately ticketed events, net sales of materials, subscriptions, advertising other than those provided as part of membership) small miscellaneous fees and royalties.

• Some assessments are at 100% of the ALA composite rate Registration fees, exhibit space and meal functions.

• Remainder are assessed at 50%--Net sales of Materials, Subscriptions Advertising Except in Publications provided as part of division Membership, Other Miscellaneous Fees.

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• Management Practicescontinued

- Interpretations of the Operating Agreement that guide the application of the Agreement. Provides for flexibility when new initiatives are proposed or services developed.

- Planners recognized that to support the diversity of needs and services within ALA and to membership and recognizing that Small Divisions do not have a sufficient membership base, the operating agreement provides for a supplement to support Small Divisions.

• Small Division Support

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INDIRECT COST RATE FORMULA

Indirect Costs

Conferences + Graphics + Publishing + American Libraries

==Revenues


Rate

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VIII. Indirect Costs and StudyVIII. Indirect Costs and Study

Fact sheet Formula Allocation methods Process Division results Indirect cost rate history Divisions – Ten things to know

and love

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INDIRECT COST RATE FORMULA

Indirect Costs


==Revenues


Rate

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Allocation MethodsAllocation Methods

Sherri Vanyek

ITTS

# of phone lines, # of PC’s, # of phones, # of financial transactions

Cynthia Vivian

Human Resources Table of Positions ie # of Full Time Equivalent Employees

Cathleen Bourdon

Communications Membership Statistics

Al Campanio

Staff Support Assigned Square Footage inBuilding/Maintenance

Mark Gould

PIO Allocation of PIO Usage

Karen Muller

Library Allocation of Library Usage

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Four Step ProcessFour Step Process(Flow Chart on Next Slide)

Allocate total ALA expenses across all units & activities

Update allocation methodologies & apply to indirect cost centers

Determine direct/indirect cost incurred by indirect cost centers (16) after methodology applied – See excel Human Resources example and excel “fully direct/indirect” sheets

Allocate indirect costs to indirect cost formula as required by Operating Agreement – Excel Formula detail sheet and Page 50

44

Flow ChartFlow ChartHuman Resources

Total direct expenses captured across all unitsHR = $587,863

Direct/Indirect costs for support units allocated to all units

Indirect cost allocated to support units based on methodologies

I/D + D = $587,863 + $111,507 =$699,370

Composite indirect cost rate determined22.6%

See excel worksheet“expense allocation”

See excel worksheet“fully allocated direct

indirect costs”

See excel worksheet“sample indirect costcenter” HR allocated

based on FTE’s

See excel worksheet“formula detail”

45

SCHEDULE #4

699,370.24$

# OF FTE'S % ALLOCATION

HQ Building 0 0.0% -$

Executive Bd./Council 0 0.0% -$

Executive Office 6 2.2% 15,561.73$

LARC/Library 6 2.2% 15,561.73$

Staff/Off. Supp. Svr. 5 1.9% 12,968.11$

ITTS 12 4.5% 31,123.47$

Human Resources 0 0.0% -$

Distribution Center 3 1.1% 7,780.87$

Reprographics 2 0.7% 5,187.24$

Building Maintenance 3 1.1% 7,780.87$

Membership Services 14 5.2% 36,310.71$

Fiscal Services 19 7.0% 49,278.82$

General Administration 0 0.0% -$

Member Prog/Serv AED 3 1.1% 7,780.87$

PIO 6 2.2% 15,561.73$

Production Services 7 2.6% 18,155.36$

Marketing 0 0.0% -$

Offices & Committees 41 15.0% 105,041.70$

Conference Services 9 3.3% 23,342.60$

Products & Promotions 2 0.7% 5,187.24$

Publishing AED 2 0.7% 5,187.24$

ALA Editions 23 8.5% 59,653.31$

Booklists 31 11.5% 80,402.29$

American Libraries 7 2.6% 18,155.36$

ALA TechSource 2 0.7% 5,187.24$

PLA 9 3.2% 22,045.79$

ACRL 13 5.0% 34,624.86$

CHOICE 11 4.1% 28,529.84$

AASL 9 3.2% 22,564.51$

ASCLA 1 0.4% 2,593.62$

ALCTS 3 1.1% 7,780.87$

LAMA 3 1.1% 7,780.87$

RUSA 3 1.1% 7,780.87$

ALTA 2 0.9% 5,965.33$

LITA 4 1.5% 10,374.49$

ALSC 6 2.2% 15,561.73$

YALSA 3 1.2% 8,558.95$

Round Tables 0 0.0% -$

Restricted Funds 0 0.0% -$

Related Interest Grps. 0 0.0% -$

0 0.0% -$

Totals 270 100.0% 699,370.24$

HUMAN RESOURCES

Allocation based on full time equivalents per the FY 2005 Table of Positions. The CHOICE and the Washington Offices are weighted @ 1/2. Total costs of $699,370.24 are based on direct costs of $587,863 and indirect costs of $111,507.24.

46

General Fund Support to Divisions 2006

Overhead Small Division General Fund

Unit Indirect Costs Paid Support Support

PLA 963,371.59$ 690,862$ 272,510$ ACRL 874,480.13$ 121,683$ 752,797$ CHOICE 469,474.98$ 311,875$ 157,600$ AASL 592,219.57$ 348,604$ 243,616$ ASCLA 101,919.45$ 1,792$ 56,154$ 156,281$ ALCTS 243,248.05$ 33,972$ 209,276$ LAMA 211,013.61$ 15,796$ 195,218$ RUSA 206,821.44$ 16,038$ 190,783$ ALTA 84,600.52$ 164$ 85,961$ 170,398$ LITA 223,141.39$ 37,641$ 185,500$ ALSC 398,897.09$ 82,364$ 316,533$ YALSA 249,766.75$ 14,658$ -$ 235,109$

Total 4,618,954.56$ 1,675,449$ 142,115$ 3,085,621$

47

DIVISIONS INDIRECT COSTS 2006

% % %Cost Type 2006 Total 2005 Total $ Change Change

Operating Supplies 29,581$ 0.2% 49,814$ 0.3% (20,233)$ -40.6%Telephone 70,920$ 0.4% 45,882$ 0.3% 25,038$ 54.6%Equip/Main 12,258$ 0.1% 47,369$ 0.3% (35,111)$ -74.1%Human Resources 698,566$ 4.2% 699,370$ 4.7% (804)$ -0.1%Building Operations 1,528,546$ 9.3% 1,087,300$ 7.2% 441,246$ 40.6%Reprographics 15,115$ 0.1% 14,825$ 0.1% 290$ 2.0%Distribution Center 210,203$ 1.3% 249,102$ 1.7% (38,900)$ -15.6%ITTS 1,973,067$ 12.0% 1,874,071$ 12.5% 98,996$ 5.3%Library/ORS 686,988$ 4.2% 625,069$ 4.2% 61,919$ 9.9%Fiscal Services 1,519,744$ 9.2% 1,466,608$ 9.8% 53,136$ 3.6%Audit Fees 108,328$ 0.7% 113,918$ 0.8% (5,590)$ -4.9%Publishing AED 45,317$ 0.3% 87,057$ 0.6% (41,740)$ -47.9%Production Services (56,032)$ -0.3% (25,598)$ -0.2% (30,434)$ 118.9%PIO 817,158$ 5.0% 798,443$ 5.3% 18,715$ 2.3%Membership Services 1,948,753$ 11.8% 1,703,884$ 11.3% 244,869$ 14.4%General Administration 6,840,216$ 41.6% 6,188,737$ 41.2% 651,479$ 10.5%

Total 16,448,729$ 100.0% 15,025,851$ 100.0% 1,422,878$ 9.5%

48

DIVISIONS INDIRECT COSTS 2006

% % $ % Indirect Indirect 2006 Total 2005 Total Change Change Revenue Costs Rate

UnitPLA 963,371.59$ 20.9% 634,315.14$ 14.8% 329,056.45$ 51.9% 4,095,274$ 963,371.59$ 23.5%ACRL 874,480.13$ 18.9% 912,060.90$ 21.3% (37,580.77)$ -4.1% 2,011,553$ 874,480.13$ 43.5%CHOICE 469,474.98$ 10.2% 461,962.23$ 10.8% 7,512.75$ 1.6% 2,823,271$ 469,474.98$ 16.6%AASL 592,219.57$ 12.8% 570,579.58$ 13.3% 21,639.99$ 3.8% 2,216,846$ 592,219.57$ 26.7%ASCLA 101,919.45$ 2.2% 83,578.96$ 1.9% 18,340.49$ 21.9% 65,222$ 101,919.45$ 156.3%ALCTS 243,248.05$ 5.3% 231,223.69$ 5.4% 12,024.36$ 5.2% 493,514$ 243,248.05$ 49.3%LAMA 211,013.61$ 4.6% 238,827.55$ 5.6% (27,813.94)$ -11.6% 340,613$ 211,013.61$ 62.0%RUSA 206,821.44$ 4.5% 216,345.91$ 5.0% (9,524.47)$ -4.4% 431,447$ 206,821.44$ 47.9%ALTA 84,600.52$ 1.8% 107,788.58$ 2.5% (23,188.06)$ -21.5% 68,850$ 84,600.52$ 122.9%LITA 223,141.39$ 4.8% 240,513.30$ 5.6% (17,371.91)$ -7.2% 510,402$ 223,141.39$ 43.7%ALSC 398,897.09$ 8.6% 375,503.47$ 8.8% 23,393.62$ 6.2% 991,881$ 398,897.09$ 40.2%YALSA 249,766.75$ 5.4% 214,157.45$ 5.0% 35,609.30$ 16.6% 372,572$ 249,766.75$ 67.0%

Total 4,618,954.56$ 100.0% 4,286,856.76$ 100.0% 332,097.80$ 7.7% 14,421,445$ 4,618,954.56$ 32.0%

49

INDIRECT COST SUMMARY 2002 - 2006

FY06

FY05

FY04

FY03

FY02

$16,449,000

15,026,000

15,420,000

14,094,000

15,865,000

$4,619,000

4,287,000

4,680,000

4,447,000

4,784,000

28.1%

28.5%

30.3%

31.8%

30.2%

$1,676,000

950,000

1,359,000

801,000

1,169,000

$142,000

136,000

240,000

230,000

230,000

$3,086,000

3,473,000

3,566,000

3,876,000

3,845,000

Total Indirect Costs

Division Indirect Costs

% of Total

Total Indirect

Costs Paid

Small Division Support

Net General Fund

Support

0

5,000,000

10,000,000

15,000,000

20,000,000

Total Ind. Cst. Div. Ind. Cst. Div. Ind.Cst. Pd. Gen. Fund Sup. Small Div. Support

FY06 FY05 FY04 FY03 FY02

50

American

Conferences Graphics Publishing Libraries

Indirect Cost $1,557,459 $400,910 $2,230,663 $355,501 $4,544,533Revenue $8,106,316 $1,855,601 $9,016,038 $1,131,745 $20,109,700

Unit Rate 19.2% 21.6% 24.7% 31.4% 22.6%

Revenue per $ Indirect Cost $5.20 $4.63 $4.04 $3.18 $4.43

American

Conferences Graphics Publishing Libraries

Indirect Cost $1,556,381 $370,381 $2,002,708 $371,771 $4,301,241Revenue $8,018,918 $1,949,416 $8,923,740 $1,136,039 $20,028,113

Unit Rate 19.4% 19.0% 22.4% 32.7% 21.5%

Revenue per $ Indirect Cost $5.15 $5.26 $4.46 $3.06 $4.66

2005 2006Indirect Cost $4,286,857 $4,618,955

Revenue $11,639,576 $14,421,445

Revenue per $ Indirect Cost $2.72 $3.12

2005 2006Indirect Cost $14,408,610 $15,712,832

Revenue $38,556,819 $41,485,114

Revenue per $ Indirect Cost $2.68 $2.64

Previous Rate = 23.1% Current Rate = 23.9%2005

*Indirect Cos ts for Conferences+Graphics+Publishing+Am er.Lib./Revenues for Conferences+Graphics+Publishing+Am er.Lib.

**Division Indirect Costs/Division Revenues***Total ALA Indirect costs (less Restricted Fund and affiliates)/Total ALA Operating Revenues. Total operating revenueis defined as General Fund ($26,713,644), Divisions ($14,421,445), Round Tables ($350,025) and Plant Fund ($0).

Exhibit I

37.4%

TOTAL ALA COMPOSITE RATE***

=

+ +

+ +

37.9%

Publishing Deprtment

=

+

+ 22.6%

=

=

=

32.0%= 36.8%

Fiscal Year 2006

Fiscal Year 2005

=

=

=

=

=

DIVISION COMPOSITE RATE**

COMPOSITE RATE*

NEH RATE

Overall

Composite

Rate

Overall

Composite

Rate

=

21.5%

51

INDIRECT COST RATE HISTORY

Study

Rate

Budget Year Applied

20062005200420032002200120001999199819971996

22.6%21.5%21.8%18.8%20.3%19.6%18.9%18.5%18.0%16.5%16.7%

20082007200620052004200320022001200019991998

52

IX. Long-Term Investment Fund(AKA Endowment)

Purpose Policy 8.5.1 - Budget utilization * Interest * 5 year moving average Scholarships and awards Division transfers Establishing an endowment - Principal amount needed

53

Purpose of the Long-Term Investment (Endowment) Fund

The purpose of the American Library Association’s Long-Term Investment (Endowment) Fund is to protect and grow the corpus, assets, and investment resources so as to support current and future Association needs, including scholarships, awards and unique programs that build a strong future for the American Library Association and America’s libraries.

54

Five-Year Moving Average

For each endowment calculate (add) the annual appreciation ie interest, dividends, realized and unrealized gain/loss, for the previous five years – including the current year.

For each endowment calculate (add) the annual expenses – bank fees, life member dues, awards etc. - for the previous five years – including the current year.

For each year subtract the annual expenses from the annual appreciation

Divide by five Multiply by 50%

Note that any interest withdrawn over the previous five years must be deducted in step 3.

55

Sample 5 Year Moving Average

Ending Yearly 5 Year 50% Interest IncomeDate Balance Appreciation* Moving Average Allocation - Bank Fees/Dues

8/31/2006 $11,000,000 $437,000 $451,400 $225,700 $147,000

Interest/dividends $260,000Realized G/L $500,000

UnrealizedG/L ($210,000)Bank Fees ($95,000)Life Dues ($18,000)

8/31/2005 $10,000,000 $1,335,000 $364,000 $182,000 $185,000


UnrealizedG/L $600,000Bank Fees ($80,000)Life Dues ($19,000)

8/31/2004 $8,000,000 $660,000 $97,000 $48,500 $152,000



8/31/2003 $6,000,000 $226,000 ($35,000) ($17,500) $48,000

Interest/dividends $111,000Realized G/L ($222,000)


8/31/2002 $4,000,000 ($401,000) ($80,200) ($40,100) $89,000

Interest/dividends $156,000Realized G/L ($240,000)

UnrealizedG/L ($250,000)Bank Fees ($45,000)Life Dues ($22,000)

56

ALA OPERATING PROCEDURES FORTRANSFERS & WITHDRAWALS BETWEEN DIVISION FUND BALANCES & THE LONG TERM INVESTMENT FUND

I. TRANSFER PROCESS - From Division Fund Balances (Net Asset Balance) to the Long Term Investment Fund (Endowment Fund).

A. It is desirable that Divisions establish 4 – 6 months of reserves - (Net Asset Balances divided by average

monthly expenses), before any transfers are requested. B. Transfers from the Division(s) Fund Balance to the Long Term Investment fund must be a part of the Division(s)

approved annual budget. C. Transfers of $50,000 or more must be reviewed by BARC as part of the 3 year financial plan and requested 2

years prior to the execution. II. WITHDRAWAL PROCESS – From the Long Term Investment Fund A. Any withdrawal from the Division(s) Long Term Investment Fund, other than emergencies, must be part of the

Division(s) annual budgeting process. It is desirable that interest is withdrawn first and principal is withdrawn as a last resort.

1. Emergencies The ALA Executive Board shall authorize withdrawals from the Division(s) Long Term Investment Funds when the purposes

and programs of the Division would otherwise be seriously impaired. Any withdrawal will carry with it a specific repayment plan. The plan will include a schedule of repayments with the interest rate set at the time of withdrawal. The interest rate will be based off of ALA’s borrowing rate. Requests for withdrawal must be submitted to BARC for review and board approval.

2. Scholarships/Awards The ALA Executive Board shall authorize withdrawals from temporarily restricted and unrestricted Division Long Term

Investment funds designated for named scholarships and awards to the extent necessary to support the award or scholarship according to its stipulations and requirements. If the amount in the temporarily restricted and unrestricted funds are not adequate, the (principal) of the fund may be used, up to the limits of any permanent or donor restrictions. Requests for withdrawal must be part of the Division(s) annual budget process.

57

X. ALA Finance WorkshopX. ALA Finance WorkshopMidwinter Meeting PhiladelphiaMidwinter Meeting Philadelphia

(Assignments)(Assignments)

Legal Framework Mario Gonzales & Joan Giesecke

Budget Framework Linda Williams & Marilyn Hinshaw

Operating Agreement Audra Caplan & Charles Kratz, Jr.

Round Tables Norman Eriksen

Evaluations Tyrone Cannon

58

XI. ALA-APAXI. ALA-APA

BudgetBusiness PlanOperating AgreementFinancial Statements

59

XII. HousekeepingXII. Housekeeping

Expense ReportsPer Diem – page 62Hotel ArrangementsAirline ReservationsDietary Needs

60

ALA Expense ReportAmerican Library Association Name: Unit: DateExpense ReportAttach receipts or other documentation to this form Meeting Dates: to Location:and forw ard approved form to Financial Services

Purpose:

I TransportationCash Amex Master Total Charge Line Number

A. Taxis, buses, subways, etc. (other than to/from airports in Section B; need receipt for $25+)Date Grand Total

Daily Total $0.00 $0.00 $0.00

B. T/F Airports From: To: $0.00(Taxi, Bus, Mileage) From: To: $0.00(Need receipt for $25+) From: To: $0.00

From: To: $0.00

C. Air, Train, Bus $0.00

D. Rental Car or Mileage (Rental/Mileage): $0.00 11 102(Gas, Tolls, Parking): $0.00 11 102

II Lodging (Room charges, taxes only. List all other charges on room bill elsewhere.) $0.00

III OtherA. Tips Amount: $0.00 $0.00

(except meals, e.g., bellman, doorman, skycaps) Type:B. Other Amount: $0.00 $0.00

(e.g., phone calls -- list specific items and charges) Type:

IV MealsDate: Bkfst Lunch Dinner Other Total

$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00

Totals $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

V Business Meetings: (Indicate date, purpose of meeting, participants, list specific items & charges. Include group meal functions, taxi, etc.)Date:(enter date/s in this area) $0.00

$0.00$0.00$0.00$0.00$0.00

VI Other Non-Travel, Misc Expenses Not Listed Above: $0.00$0.00$0.00

VII Account Summary Grand Totals: $0.00 $0.00 $0.00 $0.00

$0.00 Cash & Amex Total from Right: (check sum): $0.00$0.00 Less Advance Dated : $0.00$0.00 Less Personal Expenses Charged to ALA: $0.00 Submitted by: Date$0.00 Balance Due You: $0.00 (must be signed by employee)

Balance Due ALA: $0.00 Approved by: DateTotal $0.00

Third party reimbursements:For Accounting:Audited by: Date:

61

Travel Arrangements

BARC members are authorized to book airline reservations to/from Chicago for the spring and fall meetings through ALA’s travel agent:

Experient 1– 800-323-6222

if you so choose. Simply identify yourself as a member of the committee and use charge line:

11-101-5210-0012

62

Hotel Accommodations

Hotel reservations for BARC members to attend the spring and fall meetings will be made by ALA staff.

63

Expense Reimbursement The following expenses, which may be incurred by members attending official BARC fall and spring meetings, are reimbursed by ALA: - Round trip air travel, (if not using the official ALA travel agent) at the lowest possible economy class fare without requiring plane changes or layovers); round trip train fare. The cost of changing an existing airline reservation is not reimbursable.

- Ground transportation between home and airport (taxi, van or personal car, tolls, mileage, airport parking)

- Ground transportation between airport and meeting site or hotel (taxi, van or public transportation)

- Three meals daily for meals not provided at BARC meetings. Meals are reimbursed at actual cost up to the maximum per diem amounts allowable for each meal, on a per diem basis at the ALA per diem rate of $50 ($10 breakfast; $15 lunch; $25 dinner)

- Mini-bar charges are considered part of the per diem and are not separately reimbursable-

64

Expense Reimbursement (Con’t) Taxi fares for rides to/from hotel/meeting site to restaurants

Reasonable tips (maid, bellman, skycap, etc.)

BARC members are asked to submit reports of their meeting expenses in a reasonable amount of time. Original receipts for hotel, air, taxi rides, meals, etc. must be submitted. A copy of the travel itinerary must be attached when using an electronic ticket. BARC members should deduct all personal expenses (in-room movies, laundry, health club, personal phone calls, etc.) from their expense report - these expenses are not reimbursed by ALA. Expense reports should be mailed directly to Finance staff at Headquarters. Finance staff reviews the reports, assigns charge lines and obtains proper authorizing signatures. A reimbursement check will then be issued, usually within days of authorization. Please note – expenses incurred during ALA Midwinter Meetings and Annual Conferences are not reimbursable to BARC members.

65

Refreshment Preferences and Dietary Needs

In order to make the meeting more pleasant for you, please fill out the attached preferences survey – see next slide - and send it back to Finance staff.

66

Refreshment Preferences and Dietary Needs (con’t)

Name:

Allergic to:

Will not eat or drink:

Coffee: Regular Decaf Tea

Soft drinks: Brand Regular Diet

Anything else ?

Documents

1 American Library Association BARC Member Orientation American Library Association BARC Member Orientation (Financial Fundamentals) Fall BARC Meeting