AC06 Finance & Audit Report to Executive Board
2006-2007 EBD# 4.0
2006 ALA Annual Conference
Finance & Audit Committee Report to ALA Executive Board
2006 Annual Conference
June 28, 2006
FY 2006 Budget Update, EBD# 14.0
Gregory Calloway presented the FY 2006 budget update. As of April 2006, total ALA revenue is $1.1 million more than budget and expenses are $1.3 million less than budget. However, year-end General Fund revenues are not as promising, projected to be $575,000 under budget. By the end of the year, it is expecting to be $350,000 short of budget in dues ($239,000 in organizational dues and $111,000 in personal dues). Publishing may be $160,000 less than budget but Booklist and classified ads are doing well. The mail list rental may be $65,000 less than budget.
However, salary savings are projected to come in at $1.1 million. This means that professional services will be over budget by as much as $500,000. Total expenses are projected to come in at $675,000 under budget, leaving a net revenue figure of $100,000.
Divisions revenues are currently over budget by 9% and expenses are currently 5% less than budget. It was noted that LAMA has made a strategic decision to move their LA&M journal from a print format to an electronic format. This should result in a decrease in expenses. ALSC continues to realize significant success selling the Newbery and Caldecott seals. All totaled, the divisions are currently realizing a 300% increase over budget in net revenues.
There continues to be some concern with respect to this annual conference. Walk in registrations have surprised by being significantly higher than expected. Among this number are the areas Katrina library employees who have been offered free registration. Annual Conference net revenue is unknown at this time.
Endowment Trustees Report, EBD# 13.3 and Subsequent Action
Rick Schwieterman, Senior Trustee, presented the endowment report. As of March 31, the long term investment fund has a book value of $14.8 million and a market value of $26.5 million. During the first quarter of the 2006 calendar year, the fund increased a little over $1 million for the period the portfolio returned 4.3% compared to its benchmark of 3.6%. All of the portfolio managers with the exception of Gulf and Ariel, the SRI mutual fund. He noted that the Trustees replaced Gulf at their April meeting with Merrill Lynch Investment Managers. He continued by noting that the market continues to be very volatile. So volatile that the first quarter gains have been lost thus far in the second quarter with the portfolio value at $25.3 million. These returns are a result, in part, from actively managing the long term investment fund, and the asset allocation strategy.
Rick Schwieterman discussed the Board's action in the spring to change the name of the Trustees. From the Trustees perspective, there is considerable gain in terms of awareness by continued use of the term Endowment Trustees. This encouraged F&A to further discuss the issue and the following action resulted:
Move that the Executive Board be asked by the F&A Committee and BARC to rescind its previous motion in the spring of 2006 to change the name of the Endowment Trustees to the Long Term Investment Trustees.
In closing, he encouraged the Trustees and the Association to follow the best practices of an asset allocation strategy and to preserve the integrity of Policy 8.5.1. Finally, he expressed his privilege to have given back to the library community by serving 9 years as a trustee.
Controller's Report, EBD #4.2
Russell Swedowski, the ALA Controller, reported that inventory levels are typical for this time of year. The largest inventory item is $51,000 of READ posters.
Trade account receivables are down compared to April. Conference exhibit billings have been offset by an increase in bookstore collection activity.
Total cash and short-term investments as of the end of April amounted to approximately $18 million. This is approximately $1.5 million more than a year ago due to the increase in accounts payable. Interest income, however, is lower than budget but higher than last year at this time. The Neuberger Berman bond fund investment account remains relatively flat, compared to last year. However, this fund historically has out performed certificates of deposit, with nearly $6 million in interest having been realized since December 1991.
Federal and state tax returns were filed the end of April. Overpayments on both were applied to 2006 taxes. The Huron Plaza partnership is still affecting the taxes owed, with a $25,000 loss reflected on the return. The partnership has not yet been dissolved and as a result there continues to be some expenses incurred.
FY2007 Budget Approval, EBD# 4.1
Gregory Calloway and Patty Wong discussed the FY 2007 budget based on BARC's review in May and at this conference. In order to achieve everything that is being set out, collaboration among and between all of the ALA units (including collaborating with outside associations and organizations) is imperative. With the passing of the dues increase, some additional progress on the 2010 goals will be realized.
BARC Report, EBD#3.0 and Actions
Patty Wong, chair of BARC, brought to F&A BARC's recommendation to approve the FY 2007 budgetary ceilings.
F&A concurs with BARC and recommends to the Executive Board approval of the Preliminary FY 2007 General Fund Budgetary Ceiling of $29,635,840.
F&A concurs with BARC and recommends to the Executive Board approval of the Preliminary FY 2007 Divisions Budgetary Ceiling of $20,400,473.
F&A concurs with BARC and recommends to the Executive Board approval of the Preliminary FY 2007 Round Tables Budgetary Ceiling of $851,187.
F&A concurs with BARC and recommends to the Executive Board approval of the Preliminary FY 2007 Grants and Awards (Restricted Fund) Budgetary Ceiling of $3,031,367.
F&A concurs with BARC and recommends to the Executive Board approval of the Preliminary FY 2007 Long Term Investment Fund (Endowment Fund) Budgetary Ceiling of $735,119 including $94,217 capital gain to be allocated for funding the ALA Spectrum Initiative and a transfer of $281,446 interest and dividends from the Endowment Fund to the General Fund in accordance with Policy 8.5.1.
F&A concurs with BARC and recommends to the Executive Board a $1,610,879 transfer from the General Fund to offset the Plant Fund net operating expenses.
F&A concurs with BARC and recommends to the Executive Board approval of the Preliminary FY 2007 General Fund Small Division allocation of $130,066.
F&A concurs with BARC and recommends to the Executive Board approval of the Preliminary FY 2007 total ALA Capital Budget of $1,704,600.
F&A concurs with BARC and recommends to the Executive Board approval of a 3.0% compensation adjustment to base salary and a .50% individual incentive with a total fiscal year impact of $458,000 in FY 2007.
F&A concurs with BARC and recommends to the Executive Board approval of the Preliminary FY 2007 Total ALA Budgetary Ceiling as follows:
| General Fund |
$ 29,635,840
|
| Division Fund |
20,400,473
|
| Round Tables |
851,187
|
| Grants & Awards |
3,031,367
|
| Long Term Investment |
735,119
|
| TOTAL |
$ 54,653,986
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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 $250,000; ACRL $100,000, CHOICE $50,000, AASL $50,000, and RUSA $50,000.
BARC recommends to the Executive Board approval of a transfer of $25,000 for LIRT from Round Table operating fund balances to Long Term Investments.
CHOICE Office Space, EBD#12.1
ACRL and CHOICE presented information on another building to purchase and requests approval to conduct a feasibility study. The original building, the Acheson House, was taken off the market this past spring.
BARC and the F&A Committee recommend the undertaking of a detailed feasibility study by ACRL/CHOICE of the property located at 77-83 Crescent Street in Middletown, Connecticut to determine its suitability as office space for CHOICE, and, in the event this property proves unsuitable, feasibility studies on additional properties that ACRL/CHOICE might subsequently identify as potentially suitable for purchase prior to the December 2007 expiration of CHOICE's current lease in the Riverview Center property.
Indirect Cost Executive Summary, EBD#4.27
Keith Brown distributed the two page handout on indirect costs. This handout was the topic of discussion at the BARC and Division Leaders meeting on Sunday. Several suggestions which will add clarification were received. The handout will be revised and distributed electronically to the Division Leaders and posted to the Treasurer's webpage.
Dues Increase Implications, EBD#4.28
The dues increase is projected to result in a little over $1.2 million in revenues, over a four year phase-in period. The figure takes into account the likelihood of realizing a decrease in membership. At least half of the additional income will go towards supporting programs and services that help ALA achieve its 2010 goals. It is also planned that $250,000 will be available each year as an “initiative fund” in which ALA units can compete. The intent will be to support one time initiatives.
F&A would like to extend its thanks to the ALA Finance Department, Greg Calloway, Keith Brown, Sandy Lee, Elaine Klimek, and Russ Swedowski for all their help during the preparations of the FY 2006 and FY 2007 budgets. F&A also thanks outgoing member, Michael Golrick, for his contributions to the issues F&A has faced the past several years.
Respectfully submitted,
Michael Golrick
Janet Swan Hill
Patricia Smith
Patricia (Patty) Wong, BARC Chair
Teri R. Switzer, Chair
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