BARC Report Fall 2005 Meeting
2005-2006 EBD #3.2
Budget Analysis and Review Committee
Report to the Executive Board
2005 Fall Meeting
October 29, 2005
It is my pleasure to report on the Budget Analysis and Review Committee (BARC) meeting of October 25-26, 2005 in Chicago.
The following topics were discussed:
- BARC Orientation of new members and liaison relationship
- ALA Ahead to 2010 Financial Plan
- Dues Proposal
- Annual Conference Financial Impact of Hurricane Katrina
- Composition of BARC
- Unaudited FY 2005 results
- Final FY 2006 Total ALA Budget
- Past President's Budget
BARC welcomed two new members, Fran Buckley, Executive Board Liaison, and Rod Hersberger. Discussion focused on the role of BARC, utilizing the communication venues to enhance understanding and further relationships with the divisions and roundtables through the liaison program and the Financial Planning Seminar, Planning and Budget Assembly, and Treasurer's Forum. The BARC Liaison assignment list is attached to this report.
ALA Ahead to 2010 and the American Library Association 2006-2010 Financial Plan – EBD #12.7 and BARC #22.2
The Financial Plan for ALA Ahead to 2010 is sound and necessary in order for ALA to maintain operations and fund the new initiatives critical to the future success of the organization. The Strategies highlight ALA's current and potential strengths; the integration of the collaborative process between the ALA offices and the divisions, the reallocation of resources, the development of new products and services, the diversification of funding streams and a plan for a dues increase. BARC commends the leadership of the Executive Director and his Financial Team, especially Greg Calloway, for this exceptional plan.
Dues Proposal – EBD #4.7 and BARC #23
A joint task force of BARC and Membership Committee chairs met by conference call on October 21, 2005 and made the following recommendation to BARC:
The task force recommends to BARC the approval of a graduated dues increase for ALA personal members to be phased in over a three-year period, 2007-2009.
The dues increase for all personal members, is projected to result in $927,868 over the course of the three-year period, taking into consideration some drop off in membership the first year and no growth in years two and three. The largest increase would result in a $30.00 increase for those with three or more years of personal membership; the remaining categories incur an increase ranging from $8.00-$23.00.
Action Item:
BARC endorses the recommendation of the Membership Committee to bring to the membership for a vote the revision of the personal members dues structure in the table in 2005-06 BARC document #23 (EBD #4.7); and further, BARC recommends to the Executive Board that it convey this recommendation to the Council for its vote at the 2006 Midwinter Meeting to place this issue on the spring 2006 ballot.
BARC also discussed the “Other Member” membership category addressing the salaries of those members less than $20,000 per year. The salary cap was last reviewed in 1999 and does not reflect the impact of inflation on library staff salaries. With demographic membership information and renewal trends supplied by Gerald Hodges, the $20,000 salary cap is recommended to increase to $25,000 based on the consumer price index. BARC determined that the impact of this raised cap would not likely have a negative fiscal impact.
Action Item:
BARC recommends to the Executive Board to increase the “Other Member” salary cap from $20,000 to $25,000; and further, BARC recommends to the Executive Board that it convey this recommendation to the Council for its vote at the 2006 Midwinter Meeting to place this issue on the spring 2006 ballot.
A progressive marketing strategy is necessary to garner the support needed for the success of a dues increase. BARC encourages the Board to seek appropriate counsel in packaging these two ballot measures together to ensure an optimal outcome. BARC and the Membership Committee offer their full support to assist in the marketing strategy of this effort. BARC thanks the Membership Committee, and in particular, Chair Marcia Boosinger, the Membership Dues Task Force, Gerald Hodges and his staff, and Finance for the fine collaborative and deliberative work and sensitivity to member needs and that of the Association.
Annual Conference Financial Performance Scenarios – EBD #4.5 and BARC #22.1
The financial performance scenarios developed by Finance staff provide various scenarios related to a reduction in attendance. The scenarios include a reduction of 5%, 10% and 20%, which could result in a net revenue loss ranging from $232,000 - $929,000, depending upon the drop in attendance. A cancellation would result in a net loss of $2,529,000. Preliminary discussion among members shows overwhelming support for a New Orleans conference. Management reports several measures from New Orleans officials to ensure the health and safety of the area. ALA will obtain event cancellation insurance. ALA's commitment to New Orleans has already resulted in positive national publicity, which will increase over time.
Composition of BARC – BARC #2.2
Per the direction of the Executive Board, BARC discussed the addition of two new members representing the divisions. Mary Ghikas informed BARC that there is already a selection mechanism model in place as the Division Presidents elect Conference Committee division representatives at their Sunday Breakfast at Midwinter. The Committee on Organization has yet to discuss this topic. The BARC Chair will work with the COO Chair to develop a presentation to frame the role and responsibilities of BARC members to assist Division Presidents with their selection process. BARC participation is one of the best ways to learn comprehensively about the organization from a global perspective. BARC welcomes the divisional representation and looks forward to working with our colleagues. The BARC Chair will provide a comprehensive orientation to all new and returning members and will work with Finance staff to ensure an adjustment to the BARC budget beginning with the 2006 Annual Conference to address the additional financial need.
Unaudited FY 2005 August 3 rd Close – EBD #14.3, 14.3A, 14.3B, 14.3C and BARC #5.3, 5.3.1, 5.3.2, 5.3.3
Fiscal Year 2005 was a banner year for ALA for many reasons. Net revenue in Publishing was more than $2.3 million, a new record. With several vacant staff positions, resulting in a shorter list of new products, Publishing sold more from the backlist. ACRL's national conference attracted a record number of attendees. The 2005 Annual Conference registration was greater than 26,000. The sale of Newbery and Caldecott Medal seals continues to climb to record numbers. Grants increased from $2.7 million in FY 2004 to $3.5 million in FY 2005. The association's net assets are at a record $26.9 million with $4.777 million of that figure in the new Washington Office property.
According to the August 2005, 3 rd Close, total ALA revenue of $42,709,689 is 1% more than the budget of $42,375,159. The General Fund revenue of $26,597,620 is $1,141,224 less than budget due to lower Publishing sales, dues income and lower revenues for Midwinter and Annual Conferences. Division revenues are 7% or $801,365 more than budget and Grants and Awards are $583,697 or 20% more than budget. Round Table revenues of $318,644 are $32,192 less than budget due to dues income, registration fees and donations.
Total ALA expenses of $41,049,839 is 6% less than the budget of $43,743,680, resulting in a net revenue of $1,659,850 for the year. The General Fund expenses of $15,604,626 are $2,064,518 less than budget. Division expenses are $1,145,203 or 9% less than budget. Grants and Awards expenses are $583,697 or 20% more than budget. Round table expenses of $242,692 are less than budget by $100,925 due to conference related expenses and printing costs.
Cash and short-investments are $16,790,247 compared to $18,585,056 last year. The Long-Term Investment is $24,258,429 as compared to the $20,096,714 million balance in August 2004. Long-Term Investment income has far exceeded expectations with $636,433 earned and an increase of $122,884 over budget.
Total assets are $57,732,084, which is $7,228,616 or 14% more than August 2004. Total liabilities are $30,828,687, which is $3,913,878, or 15% more than the close of FY 2004. Total net assets are $3,314,738, or 14% more than last August, totaling $26,903,397.
Total General Fund revenues of $26,597,620 are $1,141,224 or 4% less than budget as was projected in February. Revenues are $653,269, 3% more than FY 2004. In terms of the General Fund, Publishing, Annual Conference and Membership Dues income are below revenue targets for the year. Publishing revenues are less than the budget by $383,586 due to American Libraries , Book Links, Products and Promotions and ALA Techsource. Annual Conference revenues are $97,551 less than budget. Dues income is less than budget by 5% of $274,415, totaling $5,199,585.
Based upon the 3 rd close, total General Fund expenses of $25,604,626 are $2,064,518 or 7.5% less than budget. Member Programs and Services expenses are $591,884 less than budget due primarily to Annual Conference ($152,829) and Midwinter Conference ($194,684). Communication expenses are $138,034 less than budget and Publishing expenses are $968,411 less than budget. Business expenses have increased by $24,536, but Executive Board and Council committee expenses have dropped by $57,543 under budget.
ALA saved more than $1.0 million in salaries, much of this attributed to the vacant Publishing positions. With fewer staff, Publishing, one of the Association's largest revenue streams, cannot generate new products. Management has wisely decided to fill positions in revenue generating areas. BARC wishes to commend all staff for working so diligently to keep expenses down while maintaining the vital programs and services. BARC wishes to especially commend the Board and Council for holding down costs.
As a result of the cost-saving and significant performance of key businesses within the Association, the General Fund produced a one-time net revenue balance.
As the net revenue balance represent funds that can only be expended for one-time efforts, BARC was presented a number of sound proposals from Management. There are three critical areas where a one-time infusion of funds would seem to be the most prudent action to take:
- Complete CIPA and CDA repayment of loans.
- Award individual and organizational incentive compensation.
- Implement ALA Ahead to 2010 and provide research and development for new revenue generating projects.
1.) Repayment of CIPA and CDA Loans– EBD #14.3A and BARC #5.3.1
ALA borrowed funds from the Endowment (Policy 8.5.1) in order to pursue the CIPA and CDA litigation. Since ALA now has the additional funds, it is good business to retire the CIPA and CDA loans and repay the Endowment.
Action Item:
BARC recommends to the Executive Board approval to apply the $181,000 in interest/dividend transfer to the General Fund (per Policy 8.5.1 – Long-Term Investment Funds: Association's Use/Withdrawal and Repayment) towards repayment of CIPA and CDA loans and recommends to the Executive Board a transfer from the General Fund FY 2005 net revenue balance an amount of $183,600 to fully repay the outstanding loan balances and retire the loans.
2.) FY 2005 Individual and Organizational Incentive Compensation – EBD #14.3 B and BARC #5.3.2
The Individual and Organizational Incentive Compensation Plan has been in place since September 2003 without implementation due to lack of resources. Management has established a benchmark satisfaction survey and will implement proposals to enhance customer satisfaction. Progress will be monitored every two years. The application of net revenue balance towards this effort would appropriately recognize staff for their significant accomplishments in the current and past two years, enhance staff morale and encourage retention of staff, one of our greatest capital assets.
Management reports that three of four organizational goals have been realized, focusing on individual continuing education and staff development, improving customer service levels and achieving enhanced net revenue targets. The fourth goal – meeting the target for membership growth – was not attained, but continues to be an opportunity. The proposal provides that all staff who received a satisfactory evaluation will receive a one-time compensation distribution of approximately $800 each.
Action Item:
BARC recommends that the Executive Board approves the FY 2005 organizational incentive plan request as detailed in EBD #14.3 B and BARC #5.3.2.
3.) Earmark Remaining Net Revenue – EBD #14.3C and BARC #5.3.3
Given the unknown and potential loss of revenue in FY 2006 related to the Annual Conference and a concerted support to finance ALA Ahead to 2010 strategies, the remaining one-time net revenue balance might be prudently applied to these three activities.
Action Items:
BARC recommends $139,925 or 25% of the remaining net revenue balance, after repayment of loans, be allocated to the Executive Board designated reserve.
BARC recommends to the Executive Board that up to $219,774 from the FY 2005 General Fund net revenue be used to initiate the “Ahead to 2010” strategic plan.
BARC recommends to the Executive Board that $200,000 from the FY 2005 General Fund net revenue remaining balance be held in reserve against possible loss in revenue resulting from the 2006 Annual Conference.
Final FY 2006 Budgetary Ceilings and Transfers – EBD #3.1 and BARC #22
There are few adjustments to the FY 2006 Budget that Council approved in June 2005. The General Fund revenue budget of $27,548,309 remains unchanged from the Annual Conference presentation. Total division revenues are budgeted to increase by $106,530 to $13,614,348. Several divisions made revenue changes. Division expenses are budgeted to reach $13,688,470. Expense adjustments were also made by divisions.
Long Term Investment transfers total $745,198 for divisions and round tables. All round table budgets appear to have positive net assets ending FY 2005 with positive net assets totaling $442,190 projected for year-end FY 2006.
The Plant Fund budget now includes Headquarters and the Washington Office building expenses. The General Fund will transfer a total of $1,553,691 to offset the Plan Fund operating expenses.
There are some changes to the Grants and Awards fund due to the award of new grants and funding related to the Campaign for America's Libraries. The Board should notice that some sizable grants offer no overhead for administrative or operational costs.
The Capital budget requires continual monitoring as investment in the Association's software and IT management systems, equipment and building related investments are key to the ongoing financial stability of the organization.
BARC did review document Capital Equipment – BARC #18 and noted that Greg Calloway will seek information regarding a property tax exemption process for the District of Columbia regarding the Washington Office condominium. Initial findings indicated that ALA would need to assure a certain amount of revenue into the District.
BARC would like to commend Al Companio for his proactive and strategic performance in making energy efficient changes to the Chicago headquarters buildings and thereby reducing expenses overall associated with the Plant Fund.
Action Items:
BARC recommends to the Executive Board approval of the Final FY 2006 General Fund Budgetary Ceiling of $27,548,309, including a $1,553,691 net asset transfer to offset the Plant Fund net operating expenses.
BARC recommends to the Executive Board approval of the Final FY 2006 Divisions Budgetary Ceiling of $20,556,647. BARC recommends to the Executive Board elimination of 1 division FTE.
BARC recommends to the Executive Board approval of the Final FY 2006 Round Tables Budgetary Ceiling of $839,780.
BARC recommends to the Executive Board a $1,553,691 transfer from the General Fund to offset the Plant Fund net operating expenses.
BARC recommends to the Executive Board approval of the Final FY 2006 Grants and Awards (Restricted Fund) Budgetary Ceiling of $2,796,052.
BARC recommends to the Executive Board approval of the Final FY 2006 Long Term Investment Fund (Endowment Fund) Budgetary Ceiling of $602,182 including $79,428 capital gain to be allocated for funding the ALA Spectrum Initiative and a transfer of $219,190 interest and dividends from Endowment Fund to the General Fund in accordance with Policy 8.5.1.
BARC recommends to the Executive Board approval of the transfers from Division operating fund balances to Long Term Investments of $691,999; PLA $250,000, ACRL $300,000, CHOICE $50,000, AASL $25,000, LAMA $2,000, RUSA $49,999, and ALSC $15,000.
BARC recommends to the Executive Board approval of the transfers from Round Table operating fund balances to Long Term Investments of $53,199; EMIERT $49,999, and LHRT $3,200.
BARC recommends to the Executive Board approval of the Final FY 2006 total ALA Capital Budget of $1,725,018.
BARC recommends to the Executive Board approval of the Final FY 2006 General Fund Small Division allocation of $142,115.
BARC recommends to the Executive Board approval of a 2% compensation adjustment to base salary and a 1% individual incentive with a fiscal year impact of $397,000 in FY 2006.
BARC recommends to the Executive Board approval of the Final FY 2006 Total ALA Budgetary Ceiling of as follows:
| General Fund |
$ 27,548,309
|
| Division Fund |
20,556,647
|
| Round Tables |
839,780
|
| Grants & Awards |
2,796,052
|
| Long Term Investment |
602,182
|
| TOTAL |
$ 52,342,970
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Should the Board decide to repay the full loan balance for CIPA and CDA, BARC proposed a recommendation to the Finance and Audit Committee regarding the $88,749 that would remain in the net asset balance.
Action Item:
BARC recommends to the Finance & Audit Committee that it recommend to the Executive Board that, if the Executive Board choose to repay in full the CDA and CIPA loans, $88,749 in FY 2006 net revenue is allocated by the Executive Board either to staff compensation or to begin implementation of the Ahead to 2010 plan.
Past President's Budget Proposal – EBD #4.8 and BARC #14
BARC discussion concurred with the recommendation by the Treasurer.
Action Item:
BARC concurs with the recommendation in BARC #14 that no Past President's Budget be established.
BARC also noted that in discussion of Contingency Reserve – BARC #17 – the software used for the Hurricane Katrina projects will be moved from the contingency to the Capital Fund.
BARC would also like to acknowledge the diligent work of Dorothy Ragsdale as reflected in the Human Resource Reports – BARC #16 and #16.1, and is pleased with the effort to fill critical vacant positions.
Financial Education and Communication Strategies
Each conference offers many opportunities for ALA's financial leadership to educate and inform member leaders in several venues. This process increases the communication and can make the finances of the Association more transparent and create more awareness and better understanding of what is a complex and somewhat daunting structure. There are signs of collaboration and cooperative planning throughout the organization. Enhanced communication at all levels is critical to the ongoing success and positive contributions of the many facets that make the American Library Association a strong, viable organization with a vision for the future.
2006 Financial Planning Seminar : The Agenda for the 2006 Financial Planning Seminar is as follows:
Friday, January 20, 2006 - 1:30 – 4:30 PM
1:30-1:40 - Welcome, Introductions and Outcomes – Patty Wong
1:40-2:10 - Financial Primer – Marilyn Hinshaw
2:10-2:40 - Financial Principles and Realities – Raymond Santiago
2:40-2:55 - Break
2:55-3:35 - Financial Environment Overview (including Indirect Costs) – Teri Switzer
3:35-4:20 – Two Breakouts:
• Divisions (including Operating Agreement review) – Jim Rettig, Rod Hersberger and Teri Switzer
• Round Tables – Patty Wong and Marilyn Hinshaw
4:20-4:30 – Wrap-up
The BARC chair will draft a letter for all Division and Round Table staff liaisons to communicate with member leaders requesting a formal designate of the most appropriate financial representatives to attend the Financial Planning Seminar. The letter will also describe the form and function of the Financial Planning Seminar to encourage increased participation and ongoing communication. The BARC liaison program will be introduced within the letter and emphasized at the Seminar. Seminar participant contact information will be collected to promote further communication and directly answer any issues that may arise. Follow-up will also be posted through the Online Communities software and the Treasurer's web page.
2006 Midwinter Meeting Planning and Budget Assembly
The assembly will be held Sunday, January 22, 2006 – 1:00 p.m. – 2:30 p.m. The agenda will be determined by the Executive Board.
BARC suggests focusing on ALA Ahead to 2010 – the Strategies and the Financing of ALA's future. As part of the discussion the proposed membership dues increase is a natural addition to the topic.
Division Leaders/BARC Joint Meeting
The joint meeting will be held Sunday, January 22, 2006 – 2:30-3:30 p.m. The BARC chair will formally contact divisional leaders requesting agenda items and concerns, including any pertaining to the Operating Agreement, per Policy Manual Section III C., with guidance from staff. The letter should go out by the middle of November with a return expected the first week of January 2005 for BARC and appropriate staff to prepare. This meeting offers another venue for increased and open communication.
Treasurer's Forum
Saturday, January 21, 2006 - 4:30 – 6:30 PM has been reserved for the forum.
The Treasurer and the Executive Board may designate a particular topic and will leave this time available if the Board desires. It is a more intimate, informal setting and ideal for discussing issues of concern that may require more time to develop.
BARC would like to acknowledge the exemplary work of Greg Calloway, Keith Brown, Sandy Lee, Elaine Klimek and the finance and accounting staff as well as Keith Michael Fiels, Mary Ghikas, and Gerald Hodges. On behalf of BARC, it continues to be a pleasure to work towards the financial health of the American Library Association.
Respectfully submitted:
Francis Buckley
Rodney Hersberger
Marilyn Hinshaw
James Rettig
Raymond Santiago (absent)
Teri Switzer, Treasurer
Patricia (Patty) Wong, Chair
2005-06 BARC #2.1
Revised: 10/25/05
BARC Liaisons, FY 2005-2006
Divisions
AASL/YALSA Patty Wong
ALCTS/LAMA Rod Hersberger
RUSA/ASCLA Jim Rettig
ALTA/ALSC Marilyn Hinshaw
ACRL Teri Switzer
LITA Rod Hersberger
PLA Raymond Santiago
Round Tables
CLENERT/LIRT/SORT Jim Rettig
LSSIRT Patty Wong
ERT/NMRT Marilyn Hinshaw
IFRT/IRRT/MAGERT Fran Buckley
LHRT/LRRT Raymond Santiago
FAFLRT/GODORT/VRT Fran Buckley
EMIERT/GLBTRT/SRRT Patty Wong
Departments
Communications & Marketing Marilyn Hinshaw
Executive Office (includes Executive Board and Council) Patty Wong
Finance/Operations/Plant Fund/Business Expense Fran Buckley
Publishing Services Jim Rettig
Member Programs & Services (includes ITTS, Annual Conference & Midwinter Meeting) Rod Hersberger
Washington Office/OITP/OGR Raymond Santiago
BLIA05-06.DOC
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