Budgeting Q&A with Ron and Kelly - July 17, 2023

Recording

June 17, 2023 Budgeting Q&A with Ron and Kelly

What is a budget?

A Budget is a…

• Orderly financial plan.
• An estimate for the operation of the library.
• A well-thought-out plan analyzing revenue and expenses from prior and current years.
• A budget should be done for each library fund (Operating Fund, Capital Fund).
• A budget is a document that must be monitored monthly (comparing budget to actuals).
• A document that can be amended as needed throughout the year.

Who is part of the budget process?

• The budget development process is a team effort.
• Directors should work with staff, the Treasurer, and the Board to create the budget.
• The Director should consult with staff regarding supplies, programming expenses, contracts, etc., needed for the upcoming budget year.
• The Treasurer can assist with prior and current purchases, which will help estimate expenses for the upcoming budget.
• Be sure to review the past couple of years and the current year's financial statements (also known as profit and loss statement / revenue and expense statement). This helps determine the cost of expenses and how much of an increase to factor in.
• Think about the plan for the library’s programming and services that will be offered over this budget year.
• Are there any repairs and maintenance items that must be addressed?
• Consider staffing needs – more or fewer staff, more hours, or fewer hours.
• A lot of thought needs to go into the budget process to ensure all expenses and revenue are included for the upcoming fiscal year.

What is the goal for having a budget?

• A budget ensures the library will have enough revenue to cover the expenses estimated for that budget year.
• Overestimating revenues and/or underestimating expenditures could result in shortfalls threatening the delivery of essential services.
• Underestimating revenues and/or overestimating expenditures could result in collecting more real property taxes than are necessary.
• Your goal is to have a balanced budget, which means your revenue equals your expenses. If you estimate you will receive $100,000 in revenue and estimated $100,000 in expenses you budgeted to break even, that’s a balanced budget.
• As you prepare the budget, if the expenses exceed the revenue you estimated to receive, you will have to reduce your expenses to align with your revenue. You need to make sure you have the funds to cover your expenses.

Note: The library’s current and approved annual budget must be posted to your library’s website as part of Minimum Standards.

Budgeting Revenue

• The library should include clockwork funding (the guaranteed revenue you know the library will receive).
• Clockwork funding comes annually from School Districts, Towns, and/or Villages.
• It is important to use realistic estimates based on the most current and accurate information available (if you received $100,000 for funding from the school district and you are requesting an increase of 2.5%, then you would budget $102,500 for this budget year)
• LLSA (Local Library Services Aid) is funding from NYS and can be considered clockwork funding.
• NYS Construction Aid – if DASNY approves the library's project in writing, you can count this revenue; however, this revenue will cover a portion of your expenses for the submitted construction project. Don’t forget to budget the expense side for construction costs.
• Do Not Rely on One-Shot Funding such as memorials, donations, gifts, or fundraising to support your recurring operating expenses. This is temporary funding unless you have documentation or a contract that the library will receive these funds.
• Grants typically have rules/guidelines of what grant money can be spent on. If the library budgets for grant dollars, you will need to budget the expense of what the grant is intended for to offset the revenue. In the end, grant funding is a wash. These funds are not surplus to your bottom line. If you do not receive the grant money, then you don’t make the purchase. Example: Tummonds Fund Grant – If you budget $1,000 in revenue, you need to budget $1,000 in expenses to offset. I recommend separate line items for revenue and expense to track grant money. It’s easier to track how much was received and how much was spent.

Budgeting Expenses

Reviewing the past couple of years and your current financial statements is helpful. This has actual information on how much was spent on expenditures. The Director should meet with staff to discuss the plans/needs for this budget year.

• Salaries – Will there be wage increases? Are there vacancies that will need to be filled? Considering new positions that you will be hiring? Are there current positions that may need to increase/decrease their hours?
• Benefits – Employer portion Social Security/Medicare (FICA), Worker’s Comp Insurance, Disability Insurance, Health Insurance, NYS Retirement employer contribution % increase/decrease, Unemployment Insurance, EAP Services.
• Check your policies – Are there staff retiring? Do you have to cover their health insurance or part of it?
• If someone leaves, the library must pay them for unused vacation and/or sick time unless noted in library policy. These all need to be factored into your budget.
• Staff Development – Continuing education for staff, conferences, and workshops. The library should budget 1% of its overall budget towards continuing education for staff each year.
• Mileage reimbursement – When staff uses their personal vehicle to travel to conferences/training, the library should reimburse for mileage. The System uses the IRS reimbursement rate. For 2023 that amount is .655/mile.
• Programming needs – Services and supplies for programs (i.e., Summer Reading).
• Furniture – Office chairs, desks, etc.
• Office supplies – Paper, pens, notebooks, post-it notes, toner, etc.
• Library materials – Printed materials (include purchases from Title Source 360, Ingram, Amazon, etc.), Electronic Materials (eBooks/audiobooks, Hoopla), Other materials (DVDs), book covers, bar codes, spine labels, etc.
• Custodial Supplies – Cleaning supplies, garbage bags
• Postage
• Utilities – Gas, electric, water, sewer – these costs have been increasing, so you need to factor in an increase
• Telecommunications – Telephone and internet/fiber services
• Insurance – General Liability Insurance, Director’s and Officer’s Insurance (a.k.a. Errors and Omissions Insurance), Cyber Liability Insurance, etc.
• Building Services Contracts – Plowing, mowing, garbage/recycling, carpet cleaning, pest control, custodial services, general repairs, and maintenance to the building (plumbing, electrical, HVAC repairs).
• Professional/Consultant Fees – Lawyer fees, presenter fees, auditing services, etc.
• Membership Dues/Subscriptions – NYLA Membership (Reminder: NYLA updated their membership structure, libraries need to sign up on their own if they want to renew their membership).
• Lease for equipment – Copier, postage machine, etc.
• Payroll services
• OWWL Cost Shares – Annual reimbursement to the System for a percentage for technology support/services and Evergreen database.
• OWWL2go Funding – Annual commitment to fund the System’s Overdrive account for all patrons to access.
• Swank – Movie licensing. The System invoices the libraries annually for those that are interested.
• Library Cards – Will you need to order library cards this budget year? The System places orders twice a year and will invoice the libraries
• Publicity/Publications/Advertising
• Loans – Include principal and interest.
• Capital improvements – New roof, new A/C unit, new windows, repave driveways, NYS Construction project. The library should have a capital improvement plan and a capital reserve account.
• IT infrastructure – Computers, networking, and other required upgrades. The System's IT department will work with Directors to help plan/budget for the library’s technology needs.
• Unexpected repairs or supplies – Build in a little cushion for those unexpected expenses.

Approved Budget

• Once your budget is built and you are comfortable with estimates, the governing board must approve the final budget.
• Once approved, it is the responsibility of the governing board and the director to ensure that services are delivered within the limits provided in the budget.
• Monthly spending should be closely monitored and compared to the budget at the end of every month to identify variances that might cause the library to end the year with a significant surplus or loss.
• Budgets can be amended as needed. The board will need to approve the amendments.
• Timely detection of projected budget shortfalls/overages allows actions to be taken early to address the shortfalls/overages
  • Waiting until the end of the year after the situation has deteriorated significantly can result in taking more drastic action with fewer options available.

Surplus, Loss, and Reserves

• End-of-Year Surplus – These funds can stay in the operating fund or be transferred to reserve accounts.
• Reserve Accounts – Money set aside through formal resolution for a specific purpose. Resvers must be noted in a board-approved policy. Example funds include Capital Reserve and Cash Flow Reserve.
• Loss – Hopefully, there is not a loss. Too many years of financial deficits can result in widening budgetary gaps.