2007-2008 EBD #3.0
(2008 Annual Conference)
2007-08 BARC #4.2
Report to ALA Council
2008 Annual Conference
Sunday, June 29
Once again it is my pleasure to report on the work of the Budget Analysis and Review Committee (BARC). Our spring meeting convened April 14-15, 2008 at ALA Headquarters in Chicago. The agenda priorities included the February results report and the Preliminary FY 2009 Budget. Below you will find the report of this and other agenda items we took up in that meeting, in order of their presentation.
- FY Preliminary 2009 Budget
- FY Preliminary 2009 Budget – Divisions and Round Tables Breakout
- Small Division Subsidies
- FY 2009 Budget Instruction Document Revision
- FY 2008 Budget Overview, Year to Date
Other items discussed were
- Scholarship Bash Update
- Conference Scheduling Motion, Council referral
FY 2009 Preliminary Budget
The FY 2009 Budget reflects a climate of fast change for several of ALA’s major revenue streams, more specifically Publishing and Conference functions. ALA is making transitions not only to online communication among members, but to providing publications and events on line. As these changes in major offerings are being developed within the Association, revenue streams are always a consideration. Conferences and Publishing are major sources of income for ALA’s General Fund as well as for its Divisions. As BARC reviewed the Proposed Budget for the General Fund, Divisions and Round Tables, we constantly saw the energy and engagement our units have for the changing face of services delivered to members. We honor our mission with employees who represent both growing expertise in new initiatives while we retain a great deal of institutional memory through long term members of the ALA staff.
ALA Budget in Total
Senior finance staff presented BARC with the total Preliminary FY 2009 Budget of $53,421,204 in Revenue and expenses budgeted at $54,525,383. Expenses that exceed revenue by $1.1 million revolve around the two-year revenue/expenditure cycle of ALA’s activities. In order to prepare for two Division conferences in FY 2010, some costs must be paid in advance. In the year when only one Division conference occurs, as is the case in FY 2009, ALA budgets less revenue for the General Fund and less revenue overall.
In the meantime, the General Fund must continue to retain staff with compensation growth and by maintaining desirable benefits. Neither of these areas of the budget are highly generous, but as an organization we attempt to remain comparable across the Association industry and to retain the reputation of a “good employer.” ALA staff deserve our best efforts to reward and keep them with us, to our universal benefit.
Other on-going and regularly occurring expenditures will be maintaining the replacement schedule for computers of about 1/3 per year, some programming costs, and facilities maintenance expenses. The desired replacement of two major enhancements for the Association’s support functions, both needing updating, are the IMIS system (members management content for associations) and the Financial Management system. They will not be funded in this fiscal year’s budget.
Since what was presented this spring is a Preliminary Budget, it will be revised in the fall when the final financial results of the Anaheim Conference, the PLA Minneapolis Conference, and other revenue earning efforts of ALA units are recorded and finalized. It is then that BARC, Council and the Executive Board can assure themselves that the Revenue and Expenditures proposals will more closely align than you see in this version.
Division and Unit Budgets
In BARC’s two day meeting, at least a full day is devoted to hearing the planned activities of ALA’s Divisions and Round Tables with the revenue and expenditure projections this planned work represents. To get this accomplished, each member of BARC is assigned to several units to work closely with the Division and Round Table staff and officers. The liaison work by a member of BARC makes for a closer connection to each unit and brings a deeper knowledge base to the table when each unit makes its Budget presentation to BARC.
Highlights of Divisions and Round Tables presentations to BARC:
- ACRL/CHOICE staff reported progress of construction on the LEED certified building where they will relocate in the late fall. The floor to be occupied in Liberty Square cost $2.5 million, purchased after three years exploring the available properties in Middletown, CT, their current location.
- YALSA’s projects include “Books With Bite”, starting an endowment and doing a first online webinar.
- AASL is contemplating a partnership with the PTA and slated the “Seattle Moms” for a conference program in Anaheim.
- PLA completed a successful conference in Minneapolis in March 2008, with financial results just beginning to come in during BARC’s April meeting.
- ALA’s Round Tables are improving their financial support, with all of them financially solvent. The Exhibits Round Table proposed changing Corporate membership by separating membership dues from corporate giving. This could prove beneficial for both corporate tax purposes and for ERT revenue.
Small Division Support
Other highlights of our Division/Roundtable discussions included the work of small divisions to re-invent themselves. Both ALTA and ASCLA have been the recipients of subsidies from ALA’s budget, and the FY 2009 budget will continue to provide this support.
- ASCLA plans producing more revenue with pre-conferences for the Anaheim and 2009 Annual Conference and they are in the process of a membership campaign.
- ALTA is working in partnership with FOLUSA – Friends of Libraries USA, using a shared administrator by contract agreement with plans to propose a closer relationship if the members are satisfied and wish to go forward. It has evolved to the point of proposing a new name, ALTAFF.
Budget preparation guidelines are prepared by the Finance Office, and in response to the continued concerns expressed in the Management Letter prepared by the auditing firm, staff had proposed a 5% variance allowance in the FY 2009 guidelines rather than the previous 10% margin. ALA’s auditors registered continuing concerns in their annual Management Letter that revenue projections and actual revenue show a variance of more than 10%, repeated over years of operations. In the spring meeting, BARC re-examined the ’09 budget planning document which it had asked Finance to defer for further consideration. At the end of discussion, BARC created a task force from among its members to work with Mary Ghikas on the drafting of a document that clarifies the purpose and objectives of Budget Instructions Guidelines for the organization’s use.
BARC’s task force will seek a “best practices” scenario and put a draft on paper. The work of this task force will come back to BARC at the fall meeting. At that point, further action, if any, will be considered and recommended. The volunteer members of this BARC Task Force are Joan Giesecke, Audra Caplan, Rod Hersberger with staff members Mary Ghikas and Greg Calloway.
FY 2008 Year to Date
By early April, the financial information available for study and discussion included financial transactions completed to the end of February. Given the FY 2008 budget year, dated September 1, 2007 to August 31, 2008, BARC examined the report of the Association’s financial status at the end of six months.
Total ALA Revenue at mid-point was $24,019,828, or $173,521 off the budget. Internally that divides into excess of budget in the Grants and Awards budget of $248,472 and in the Long Term investment/dividends fund of $30,291. Division revenues are 5% less than budget at $344,129 and the General Fund revenue shortfall was $105,616.
Literally, the total miss of the mid-point revenue target is less than 1%. For an organization as large as ALA, that is a remarkable accomplishment.
On the Expenditure side, ALA had expended $24,118,823, which represents $1,804,279 or 7% less than budgeted at this mid year point. The General Fund and Divisions have retained most of this savings, spending $1,044,408 from the General Fund and $971,227 less than budgeted by Divisions.
The Long Term Investment Fund has dropped to $29,532,776 in comparison to August 2007 when it stood at $30.2 million. Return on the investments is parallel to market downturns.
Specific items at the six-month milestone identify current issues with ALA finances:
- Anaheim is a new venue for an Annual Conference. Expenditure to produce a conference always precedes the event as the year evolves, making positive revenue hard to predict until within a few weeks of the event. Should expenditures exceed conference revenue, then all ALA units would adopt a contingency planning mode, cutting costs or seeking alternate sources of revenue to replace conference shortfall.
- Publishing is deeply committed to changing traditional delivery of products. You will be seeing more products within ALA Online Resources. Following a year of dropping advertising sales and as Publishing moves more deeply into online territory, their efforts will include a push on advertising sales.
- Membership is one of the basic and traditional sources of revenue for the Association. There is a continuing need to unravel and examine the dynamics of ALA member choices, specifically how the Association can retain members for the long term.
- At the six-month milestone, economic news had become worrisome. Interest rates continue to tank and that means earnings on the endowment flattened. This source of revenue will not be full of the cheery news it has been in the recent past.
The positive news in regard to these issues include:
- The Midwinter Conference in Philadelphia was financially successful resulting in $400,000 net revenue, producing smiles all around the BARC table. The bundling package for Midwinter/Annual Conference registration appears to be a success so far.
- With increased efforts, Publishing’s advertising sales are rebounding. The real story for this unit is relearning its business from the bottom up. The model adopted is faster response to customer learning and communication styles, including flexible transfer of staff within the department. For example, this would include defining and staffing an online team while continuing to support traditional print products where a print format makes most sense. “The Big Book of Grant Money” at the ALA Store is a new monograph you can look for at Annual Conference. With this flexible approach and constant monitoring to adjust expenditures downward, Publishing will most likely miss its budget projection, but still finish with projected net revenue of $70,000.
- In February, membership was up 2,025 more than a year ago. While a national or division conference will normally raise membership in that unit for the year of the conference, ACRL’s national conference produced growth in continuing members.
- ALA is managing $7.6 million in grants budgeted for the year. The Development Office is assertively prospecting some 70 corporations to glean interested partners for specific activities, for individual or partnering units, or for the Association as a whole. Cultivating a partnership culture within the Association has emerged as a stronger base for seeking grants.
Some other details to note:
At the six-month mark, there were no early warning signs of problems or unusual financial stress within the units of ALA or across the Association. Although Publishing is projecting revenues less than expenses, adjustments will more than offset the $300,000 revenue shortfall. The phrase “cautiously optimistic” was our summation of the outlook for the remainder of the operating year.
Scholarship Bash Update
Given its 10 years of existence, since 1998 New Orleans, the Bash has been an event that conference planners say the members love to attend. In the future BARC will periodically review the outcome of the Scholarship Bash.
Since 2002, ALA has supported the Bash annually with a $40,000 supplement. This takes the place of the former “All Conference Reception.” The Bash also receives the support of a number of major ALA vendors, which helps offset expenses. The ticket price for members is controlled to match the perception of their willingness to pay. Both Spectrum and other scholarships receive funding from the proceeds of the event after expenses. It should be noted that the overall success of the Bash is such that there is now a reserve of approximately $154,000 to cover any Bash shortfalls. The committee concurred that the event is a popular evening entertainment and focuses member attention on the importance of funding scholarships.
Council’s Conference Schedule Motion – Midwinter, 2008
BARC asked Deidre Ross and Mary Ghikas to consider the potential difficulties to ALA’s revenues and contracts if the Council motion to shorten Midwinter and Annual Conference schedules were enacted. Deidre described no major barriers with hotel or convention center locations because the room blocks and meeting rooms are already at skeleton levels on Wednesday. Implementing a shortened schedule would require that the second meeting of Council moves to Monday, leaving no break in the Council schedule with completion of business on Tuesday. Preliminary investigations of the financial impact point to reduction of expenses, but in practical terms governed by already standing contracts, the January 2010 Midwinter meeting is the first possible starting date.
For those of us who actively monitor the Association’s financial information one source of ease is the evidence that finance staff are some of the best in the business. They also keep a fine tuned ear to economic news in general, which they translate into information we can use within the Association’s financial and programmatic plans. BARC members thank Greg Calloway, Associate Executive Director of Finance; Keith Brown, Senior Financial Analyst; Sandra Lee, Director of Planning & Budgeting; Russ Swedowski, Controller; and Elaine Klimek in particular for the quality of work they produce to facilitate our work as a committee.
BARC members also appreciate the signals we continuously receive of the healthy respect ALA’s entire staff has for practices that conserve ALA resources. In the BARC meetings, the planned activities we hear reported are supported by increasingly better data to predict the potential the activity has for meeting member needs as well as how funding to support it would be generated. We thank all the ALA staff for their open welcome to our probing questions and their work to enliven and enrich the Association.
Charles Kratz, Jr.
J. Linda Williams
Rod Hersberger, ALA Treasurer
Marilyn L. Hinshaw, BARC Chair, 2007-2008