ALCTS Fiscal Year 2002: Year End Budget Report

Judith Niles, Chair, Budget and Finance Committee

Fiscal year 2002 was indeed an unusual year for ALCTS. It was the first fiscal year in a very long time that ALCTS did not have shared office staff and operations with LAMA. There were quite a number of definite highs and some very definite lows. It was also a year in which two large expenses did not occur as expected and one large expense did occur that was unbudgeted. There were some unexpected savings; however, the bottom line is that despite all this, ALCTS did not produce enough revenue to offset even the minimum expenses it takes to operate this association. For fiscal year 2002, ALCTS would have had to produce about $110,000 in net revenue to break even.

The total revenue and total expense figures both ended up below what was budgeted. Revenue was budgeted at $518,689 and came in at $425,200. However this revenue number is misleading since there was a one-time revenue gain due to a reconciliation of outstanding LRTS subscription revenues in the amount of $23,000. Take that out and revenues fell about $115,000 short of budget. On the expenses side, expenses were budgeted at $549,639 and came in at $495,148, a savings of about $55,000. We saved money in several account lines, which by design were not spent or under-spent.

ALCTS ended the year with about a $65,000 deficit for FY2002. On the surface this looks rather bleak. However, the FY02 budget contained a $30,000 deficit to begin with and by Board action at Midwinter 2001, this was extended by $30,000. Without trying to make a large deficit seem palatable, the deficit we have is not too far out of line with what we anticipated.

SO WHAT HAPPENED?

Revenue:
Falling short by $115,000 in revenue from budget was a contributing factor. There were a number of bright spots. We had one pre-conference that did well (Map Cataloging). Fundamentals of Acquisitions, our first web based course, did not meet the budget but did well when it was offered. Book sales exceeded budget by about double. Despite being down by almost 5% from budget (the budget projected a 3% membership growth - looked good in January 2001), membership dues revenue was only off by 1.8% from last year.

However, on the negative side, LRTS subscription revenue without the adjustment was off by $9,000. Royalty payments were off by $8,500. Advertising was off by $6,000 but more on a par with FY01. And the biggest loss came with registration fees, off $102,000. Even with the outstanding critical success of the Metadata Institutes, there was no appreciable revenue from continuing education. Metadata registrations accounted for $50,000 of the $85,000 in that revenue line. The pre-conferences we did have accounted for another $27,000. Contributing to the loss were the cancellation of the Library Binding Institute because of low registration, having only one and a half pre-conferences, and no other viable continuing education opportunities outside FOA.

Expenses:
Although it is easy to analyze the revenue side of the budget, it is not as easy to analyze the expense side in some instances. It would have taken about $110,000 in net revenue to break even in fiscal 2002. There is a base of expenses for which no revenue line is attached. Dues revenue is posted to "Administrative project;" however, this category includes most of the operational expenses for ALCTS: salaries, benefits, overtime, temporary help, Executive Director travel, phone, postage, and the like. Even with the dues revenue, this line always runs a significant deficit. In fiscal 02, that deficit was $50,000.

There were increased expenses in some projects related to the change in how ALCTS approaches doing business. This change results in greater expenditure for the Executive Committee meetings, Board meetings, Awards ceremonies and President's Program, member promotion, and annual conference support (including division committee support). In addition, we changed how we report some expenditure to projects. The biggest expenses ALCTS has relates to staff -- salaries, benefits, and related staff costs totaled $217,956, which actually came in under budget ($233,659) as an aggregate. Savings broke out as follows: salaries ($3,000), benefits ($3,000), temporary help ($5,000), overtime ($2,700), and professional development ($2,200). The savings can be traced to several of the staff charging time to LAMA during the first quarter of FY01. As we went through the year, the monthly salary costs slowly rose as staff began to charge all their time to ALCTS. As a comparison, fiscal year 2001 salaries and related expenses totaled $155,854.

There were a number of expense lines in which we saved some money. Savings worth noting included temporary help ($5,000), bank service fees ($5,000), overtime ($2,700), postage ($2,600), mail services ($4,300), reprographics ($5,600), miscellaneous ($9,000) and some production costs associated with LRTS ($14,000). The LRTS savings are somewhat misleading since the July issue wasn't mailed until the end of August and not all production costs associated with that issue were posted to FY02.

Now on the not-so-good side of the expenses, those higher than expected. I mentioned before the cost of doing ALCTS business has increased expenses. The following expense lines and projects illustrate that point.

Administrative: This line had a number of expenses that were not budgeted. These included travel to the Program for Cooperative Cataloging and IFLA for the Executive Director and travel to Midwinter 2002 for staff member Kirsten Ahlen. Kirsten's travel was paid for by ALCTS since at the time ALA was under a travel cut back and we were allocated travel for only three staff paid for by ALA. The other large expenditure in this line represents Midwinter 2002, including late audio-visual requests.

Services to Members: The expenditures in this project number relate to a change in posting grants to IFLA participants ($4,000) and an increase in the expenses ($5,000 against $1,600 budgeted) for the ALCTS awards. This year ALCTS gave thirteen awards instead of its usual eight. Four of these awards were Presidential Citations, which were initiated at Annual 2002. The increase was also due in part to the way the award certificates were made: larger size, hand lettered, and framed.

Executive Committee: This project was only slightly over budget ($2,600). This expense will continue as the Executive Committee has re-structured its work at the fall and spring meetings. These meetings are now discussion sessions on particular topics. Because of this change, the EC invites others to participate, which in turn increases the expenses for those meetings. The trade offs are numerous and well worth the small increase in expense.

Division Committees: "Division Committee project" is a mixed bag of expenses from Midwinter and Annual conferences: a little catering, some AV, some travel, and photocopying of handouts. These expenses are easily controlled with vigilance. This resulted in an over-budget of about $4,000.

Membership Promotion: This project cumulated many expenses for FY02 that were scattered through the budget in other places. The result of this effort was to gather those expenses for membership into the actual account for membership. The actual amount spent ($6,424) was under the budgeted amount ($7,115) but a $3,207 expense related to the purchase of membership promotion materials, such as new banners, new stationery, bag tags, magnets, and a few other items. All of these were used in the membership booth that ALCTS purchased at Annual Conference (also included in this project - about $1,000)

Annual Conference: Annual Conference is becoming an increasing expense for ALCTS. The President's Program speaker costs continue to be an unbudgeted item ($4,850 in FY02). Travel related to that speaker is also posted here. The project came in $7,200 over the budgeted amount, which quite frankly is not that surprising. We had two extraordinary expenditures this year, the visioning session with Lou Wetherbee ($1,000 plus expenses) and the expenses for Tom Delsey (about $850). In addition, last minute AV orders, some catering for the President's Program and other meetings, photographer expenses, signs, and photocopying all eventually add up. With the need to support Annual in a manner we probably haven't supported it before, this will be perhaps not an increasing expense project, but one that at least will not reduce itself to any great extent.

The last group of expense disasters represents those projects in which we didn't control costs well enough, didn't budget enough for costs, had to cancel, or a combination of factors that resulted in losses instead of revenue. As a note and not specifically aimed at the four items below, we budgeted total expenses for travel, lodging, meals, speaker expenses, facilities rental, and equipment rental for all events (Annual, Midwinter, workshops, institutes, pre-conferences, Executive Committee, etc.) for FY02 at $104,170. The actual expenditure for all of these combined came to $129,655. We also budgeted revenue at $187,765 and we actually had only $85,249.

Metadata Institutes: Although the two Metadata Institutes were critical successes, they were not financial successes, losing about $10,000 for both. The loss was a factor of not charging enough to cover costs, which were more than expected, especially facility rental and AV. This resulted in a swing of $18,300 in the budget from revenue projected at $8,300 to a net loss of $10,100.

Library Binding Institute: The LBI was in all cases a complete failure and probably should not have been offered at all. Timing was bad, audience was overestimated, and the cost of producing it might have resulted in a registration fee that was too high. In the end LBI cost ALCTS around $6,000. This was negotiated down from $11,000 because ALCTS placed two workshops at the same hotel in August and was able to use some of the penalty to pay for those workshops.

Disaster Management Pre-conference: This pre-conference was the great mystery of the year. Scheduled after September 11, this pre-conference should have been a huge success. However, despite very low enrollment and a decision to go ahead, the result was a net loss of $3,500 for ALCTS. The pre-conference received outstanding evaluations, and several suggestions were made to make it an institute in the future. This loss, coupled with having only one other pre-conference (a financial success), left ALCTS with virtually no net revenue for Annual Conference pre-conferences.

ALCTS Newsletter: The Newsletter has turned out to be our latest version of a black hole. The move to electronic format did not substantially decrease the cost of producing it and provided no avenue to sell advertising (at least at present). The result was that the newsletter ran $5,000 over budget. These are all production costs, since it is electronic and there are no press charges, postage, etc. associated with it any longer. The newsletter in FY02 cost ALCTS $12,500 to produce.

SO WHAT DOES IT ALL MEAN?

In the long term, I think FY02 can be viewed as an anomaly. Factors that bring me to that conclusion include: the foray back into the continuing education world and having a realistic idea of what it would actually cost to produce CE again in this now more expensive world; the fact that FY02 was a start-up year for ALCTS and there were one-time extraordinary expenses, just to re-stock and re-equip the staff with what they needed to work; that ALCTS did not produce enough revenue and that by the time revenue is posted, mostly at the end of the year, it was too late to remedy the situation; that to build an association that responds to the issues of the day and its own membership, certain expenses having no direct revenue source are to be expected (Executive Committee, Awards, etc.); and a larger, more engaged staff requires some but not significant funding to hire and retain those employees who can make a difference to the association. It also must be remembered that the FY02 was planned when ALCTS and LAMA shared resources and the budget was not significantly altered after the split with the exception of the staff expense lines (salaries and benefits).

Most of the deficiencies in the FY02 have been addressed in the FY03 budget. Having FY02 under our belt, so to speak, the FY04 budget becomes somewhat easier to construct. The key to the FY04 budget however will be the continual monitoring of the FY03 budget and making those corrections in the FY04 budget as we go through this current fiscal year.

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