ALA Finance & Audit Committee Report to the Executive Board
2005-2006 EBD# 4.3
ALA Finance & Audit Committee
Report to the Executive Board
Fall Meeting
October 27, 2005
FY 2005 Close Update – EBD#14.3, #14.3A, #14.3B, #14.3C
It was a record-breaking year for ALA. We have 66,000+ members, the Chicago 2005 conference was very successful, ACRL held a record-breaking national conference in April, publishing net revenues came in at $2.3 million, we received more than $3.5 million in grants, and the Newbery-Caldecott seals sales has surpassed projections – just to name a few successes. This, plus more, was all done with many ALA staff doing double duty because there were up to 24 positions vacant at various times throughout the year. In total, the salary savings amounted to a little over $1.0 million. During the past couple years, ALA kept positions vacant longer, with the intent to produce savings such as this. Luckily, though, recruitment efforts are underway and several of these positions are being filled. Even though this will mean fewer salary savings, the addition of these positions will mean that research and development activities, which have been put on hold for up to two years, will now get underway.
As of the 3 rd close, the General Fund resulted in excess revenues over expenses, which F&A recommends to the Board be allocated as follows:
Action Items:
F&A concurs with BARC and 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 an amount of $183,600 to fully repay the outstanding loan balances and retire the loans. – EBD #14.3A
F&A concurs with BARC's recommendation that the ALA Executive Board approve the FY 2005 organizational incentive plan as detailed in EBD #14.3B.
F&A concurs with BARC and recommends that $139,925 or 25% of the remaining net revenue balance after repayment of loans and payment of the OIP request be allocated to the Executive Board Designated Reserve. – EBD #14.3C
F&A recommends that $200,000 of the remaining General Fund net balance be allocated for initial implementation of the Ahead to 2010 strategic plan. – EBD #14.3C
F&A recommends that $200,000 of the remaining General Fund operating Reserve be held in reserve against any potential losses incurred by the 2006 Annual Conference. – EBD #14.3C
F&A receive BARC's recommendation on the funds available because of the early retirement of the CDA and CIPA loans and that F&A recommends that the Executive Board reserve these funds for staff compensation.
FY 2006 Final Budgetary Ceilings
Greg Calloway presented the final budgetary ceilings and transfers for FY 2006. Moved and seconded that F&A concurs with BARC and recommends to the Executive Board the approval of the budgetary ceilings, transfers and other budget action items as presented in EBD #3.1.
Action Items:
F&A concurs with BARC and 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.
F&A concurs with BARC and 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.
F&A concurs with BARC and recommends to the Executive Board approval of the Final FY 2006 Round Tables Budgetary Ceiling of $839,780.
F&A concurs with BARC and recommends to the Executive Board approval of the Final FY 2006 Grants and Awards (Restricted Fund) Budgetary Ceiling of $2,796,052.
F&A concurs with BARC and 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.
F&A concurs with BARC and 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.
F&A concurs with BARC and 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.
F&A concurs with BARC and recommends to the Executive Board approval of the Final FY 2006 total ALA Capital Budget of $1,725,018.
F&A concurs with BARC and recommends to the Executive Board approval of the Final FY 2006 General Fund Small Division allocation of $142,115.
F&A concurs with BARC and 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.
The FY 2006 grand total ALA Budgetary Ceiling is $52,342,970.
Audit Update
Ken Herlin and Maria Shepard of Ernst and Young joined Russ Swedowski, ALA Controller, and F&A to discuss this year's audit of the ALA finances. The audit will begin November 7, 2005. The 2005 audit will express an opinion on the consolidated financial statements of the ALA, issue reports for an audit in accordance with Government Auditing Standards and OMB Circular A-133, which is related to our federal grants/awards, and will issue a management letter that provides their recommendations regarding opportunities for improvement in internal controls, if any.
The entirety of ALA will be audited, including the APA, which will receive a limited review. The areas of emphasis include: accounts receivable, inventory, accrued expenses, sources and recognition of revenue, partnership investment income, disbursement from the Long-Term Investment Fund, accounting for income taxes, and the Washington property. The treasurer will meet with the auditors in December and the auditors will present their final findings to the Finance and Audit Committee at the 2005 Midwinter Meeting.
ALA Bond Investment Update
Raj Bhatia of Merrill Lynch and Jim Barclay and M.G. Subhas of Neuberger Berman updated F&A on the performance of the Neuberger Berman bond fund. The investment balance is $11,429,831 as of the end of the fiscal year. During the past 14 years, $5,399,000 in interest has been earned. F&A have asked Mr. Bhatia to prepare scenarios that reflect an investment portfolio that could drive a greater return, yet one that is well within the Association's investment policy for our cash account. F&A will revisit the cash fund between now and the Midwinter Meeting.
BARC Report
Patty Wong, BARC Chair, summarized BARC's fall meeting and brought to F&A the following:
• Dues Proposal, EBD # 12.7
Action Items:
F&A concurs with BARC and 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 EBD #4.7; and further, F&A and BARC recommend 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.
F&A concurs with BARC and recommends to the Executive Board that we increase the other member salary cap from $20,000 to $25,000; and further F&A and BARC recommend 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.
• Annual Conference Scenarios (Katrina fall-out), EBD# 4.5
- 5% decrease in registration and booth space would result in a $232,000 loss
- 10% decrease in registration and booth space would result in a $464,000 loss
- 20% decrease in registration and booth space would result in a $929,000 loss
- Compares to canceling the conference, which would result in a loss of $2,529,000
• Past President's Budget Proposal, EBD #4.8
Action Items:
F&A concurs with the BARC recommendation that no budget for the immediate past president be established.
• CIPA/CDA Loan Payment, EBD #14.3A
• Organizational Incentive Plan, EBD #14.3B
• 2010 Financial Plan, EBD #12.7
Action Items:
F&A commends ALA staff for developing the model in such a clear and succinct terms.
F&A Revised Charge, EBD #4.6
To recognize the importance of the Sarbanes Oxley Act and to show a commitment to the spirit of the Act, F&A members discussed the proposed expanded charge. The additions stress the importance of the committee's involvement in the Association's audit process. F&A will continue to work with the Ernst and Young auditors on the structure of the Finance and Audit Committee and will bring an action item to the Executive Board at the Midwinter Meeting.
Whistleblower Policy, EBD#4.4
F&A discussed the principal issues regarding a whistleblower policy in a non-profit association with the Ernst & Young auditors. At this point, F&A will draft a policy to present to the Executive Board at the Midwinter Meeting, leaving the procedures to be determined by ALA Management and staff.
F&A would like to thank the ALA Financial Services staff, including Greg Calloway, Keith Brown, Elaine Klimek, Sandy Lee, and Russ Swedowski for all their work during the past fiscal year and for guiding F&A through the maze of issues related to the Sarbanes Oxley Act.
Respectfully submitted:
Michael Golrick
Patricia Smith
Janet Swan Hill
Patty Wong, BARC Chair
Teri Switzer, Treasurer
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