BUDGETING AND FINANCE

BASICS

BUDGET
 Denotes Plan and Allocation
 Budgets are most effective and most realistic if their preparation occurs within the context of
organizational planning.
Planning a Library’s Budget
 It is a plan for the use of money available during the fiscal year and reflects allocations, expected
revenues and projected Expenditures.
 The Planning Process should make clear which budget covers which type of expenses.
 Both the overall mission of the library and the goals and objectives of library should be
considered.
How are you going to avail your budget?
 Make a proposed budget for the fiscal year and have it approved to the funding authorities.
Allocations
 Are the amounts that are distributed to various fund lines in the budget (Budget Document)
 Are the measure of the financial commitment to support activities necessary to reach the goals
outlined in a planned
Budget Document
 Other sources of revenue, fund balances, and encumbrances brought forward from the previous
year or amounts allocated but unexpended within the previous year.
Encumbrances
 Represents the projected cost of orders that have been placed but for which the items have not
yet been received.
 Is also recorded as soon as the obligation of payment is incurred, that is when the order is
placed.
 When the item is received, the encumbrance is cleared and the actual cost is recorded as an
expenditure.

BUDGET
 The total amount of funds allocated to meet a library’s expenditures over a fixed period of time.
 A well-crafted budget becomes an internal control that can measure operating effectiveness and
performance.
 Most libraries manage their budgets on a fiscal year, which may or may not parallel the calendar
year.
 Example:
o July to July - Academic, School Libraries
o Oct. – Sept. - Other Counties

TYPES OF BUDGET
 Materials Budget
o Should be consistent with both the library’s long-range and short-range plans
o Is also called the acquisitions budget, collections budget, or resources budget is one of
the portion of a library’s total budget.
o May cover the purchase of equipment to house collections, costs to support the
technological infrastructure that provides access to electronic resources.
o Binding and other preservation and conservation treatments
o Vendor service charges
o Catalog records
o Shelf-ready processing
o Shipping and handling fees
o Institution memberships
o Shared digital repositories and storage facilities.
o Other fund document deliveries
o Example:
  School Library – Librarians usually prepare an acquisitions budget within the
context of the school’s or the school’s district budget e.g. amounts allocated by
subject (reading levels, discretionary and nondiscretionary purchases)
 Bigger Library (Academic Libraries) – The individual with administrative
responsibility for collection development and management usually prepares the
materials budget. Individual librarians with specific collections responsibilities
are usually asked to present annual request. The administrator with
responsibility for the entire materials budget rolls these individual requests into
a total amount requested for the library.
 Operating Budget
o Based on actual ongoing operations
 Personnel Budget
o Number of personnel including salaries and wages, and other benefits.

 Capital Budget
o Is devoted to proposed additions, replacements, and improvements to fixed assets
(property and equipment)
o These budgets are long term plans and are usually handled separately from annual
budgeting activities.
 Example of Library’s Budget:
o The Library’s Personnel – under operating budget
o Other Libraries:
 20-30% of the budget goes to collection expenses
 50-60% of the budget goes to personnel
 10-20% of the budget goes to operating expenses

BUDGETING TECHNIQUES

1. ZERO-BASED BUDGET APPROACH

a. Requires a fresh start each year
b. The library is asked to begin with blank page and determine how much to spend in each
category of the budget.
c. Each funding request is proposed and defended without reference to past practice.
d. Few government and nonprofit organizations take this approach because of the amount
of work involved.

2. A PROGRAM OR PERFORMANCE BUDGETING APPROACH

a. Looks at allocations for specific activities or programs and provides a very clear
connection with planning documents and the objectives set each year.

3. FORMULA-BASED BUDGETS APPROACH

a. Used a set of weighted variables to calculate allocations to each fund line

4. HISTORICAL OR INCREMENTAL BUDGETTING APPROACH

a. Which determines the needed incremental changes in various categories
b. This is sometimes called as line-item budgeting – because existing categories are
increased or decreased by a percentage.
c. Combining incremental budgeting with program budgeting is a common practice.
i. The library begins with the previous year’s budget and identifies programmatic
priorities that should be funded at a higher level and ideally areas of lower
priorities where the allocation can be reduced.

FUNDING SOURCES
 Most Libraries, the largest part of the budget is funded through an appropriation from the
parent organization.
 Prior to the end of the fiscal year, most libraries prepare a funding request and just prior to or
soon after the beginning of the fiscal year. Receive budget allocation.
  In many organizations the budget for library materials is treated as a protected category and
may receive extra scrutiny and interest in how it is allocated and spent.
 Collections librarians are becoming more involved in fund raising, (Supplemental Funds) the
process of seeking additional money from sources other than the parent organization and
includes seeking gifts, grants etc.

MATERIAL BUDGET REQUEST

 Before the fiscal year end, the library is ask to submit a budget request. This is usually part of
the overall planning process of the parent organization. The library can use this process for two
purposes:
o To request funds and to inform

ALLOCATION OF FUNDS
 ALLOCATIONS – Mirrors the organizational structure of the library, the community served, and
the Collection Development Policy.
 Most collections budgets are line-item budgets, with subdivisions or subaccounts within the
larger budget.
 Line-item Budget – allows easy comparisons from year to year and promotes accountability.
 Example:
o Large libraries may allocate by one or more of the following:
 Subject or discipline, Location (Main or Branch Library), type of user, format or
genre, type of publishers.
o Very Large libraries may further subdivide allocations
 Example: funds allocated to purchase materials for children in a large public
library might be subdivided to fund lines for nonfiction, fiction, picture books,
and videos.
 School library media center budgets might be allocated according to curriculum
areas, subjects, users, curriculum mapping etc.

LINE-ITEM BUDGET
 Is a form of budget presentation that clusters proposed expenses by department or cost center
 The presentation typically shows the actual expenditure or budget from the prior period for
comparison purposes, so that one can quickly see if there are significant changes budgeted from
the prior period.
 Advantages:
o It increases ability to track expenditures and collections librarian performance at a
granular level.
o It simplifies the process of aligning the library’s goal

ANNUAL BUDGET
 An annual budget outlines both the income and expenditures that are expected to be received
and paid over the coming year.
o Discretionary Allocation – Discretionary purchases are individual orders for items
o Non-Discretionary Allocation – Is an on-going financial commitment typically
subscriptions to journal and databases.
ALLOCATION FORMULA
 Are usually built on supply and demand factors
o Supply factors – take into account the amount of materials published in the subject
area, the cost of those materials, and total library collections support.
o Demand factors – include number of students, teachers, faculty, courses offered,
circulation, registered borrowers, interlibrary activity, and library organization.
CONTINGENCY FUND
 To meet unexpected needs, purchase expensive items, and balance unexpected user demand
 Normally 5-10 percent of the total material budget

EXPENDING THE BUDGET

 Once the collections budget is allocated, it must be spent
 Most libraries set targets for expenditures and encumbrances during and at the end of the fiscal
year.