Budgets and Financial Reporting for the New Library Director

1. February 2011 Budgets and Financial Reporting for the New Library Director Mary Martin, Director, Long Hill Library Betsy Kanouse, Director, Denville Public Library

2. The Unending Financial Cycle

3. 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

4. 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

5. The Budgeting Process "It's clearly a budget. It's got a lot of numbers in it." — George W. Bush

6. 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.

7. 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

8. 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?

9. 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?

10. 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.

11. 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?

12. What’s left over? Start filling in other costs: • Collection and materials • Programming • Library & office supplies • Postage • Other?

13. 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?

14. 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?

15. 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!

16. Monthly Financial Reports “Too… many… numbers… my head hurts…make it stop…” Mary Martin

17. 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)

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

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

20. Bill list What bills need to be paid this month?

21. Expense vs budget reports (for staff) Keep staff informed of how much they have spent versus their budget YTD (year to date)

22. 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).

23. The Audit Process "We didn't actually overspend our budget. The allocation simply fell short of our expenditure." Keith Davis

24. 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?

25. 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!

26. 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).

27. 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?

28. Wrapping it Up “Bueller?... Bueller?... Bueller? ” Ben Stein as the economics teacher in Ferris Bueller’s Day Off

29. 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.

30. 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

31. 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)

32. 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/

33. Questions? Comments? Mary Martin, mary_martin00@yahoo.com Betsy Kanouse, elizabeth.kanouse@denvillelibrary.org