Lecture 3b: ACQ Lecture 3b: ACQ Funds, Budgets, Funds, Budgets, and Accountingand Accounting

Lecture 3b: ACQ Lecture 3b: ACQ Funds, Budgets, Funds, Budgets, and Accountingand Accounting

Development andDevelopment andManagement of Management of

CollectionsCollections

ACQ Funds, Budgets, and Accounting

Objective: To understand the sources of ACQ funds and how the funds are allocated, expended, and accounted for

Coverage:1. Sources of ACQ Funds2. ACQ Budgets3. Accounting

1. Sources of ACQ Funds• Appropriations

– Funds from parent organization– On-going expenditure – annual

• Gifts– Endowments from foundations or wealthy organizations

• Grants– Additional funds from parent organization or other sources– “Development” budget

• Others– Revenues, such as fees & charges, fines, etc.

Basic terminology & elements

• Budget• Funds• Vote

– Recurrent Vote– Development Vote

• Encumbrances or Commitment• Unencumbered• Expenditure• Pre-payments

Basic terminology & elements

• Month to Date (1/9/04 to 31/9/04)• Year to Date (1/1/03 to 31/12/03)• Projection• Price is the list price of an individual item• Cash balance = Allocation – Expenditure• Free balance (Estimated balance) = Actual balance –

Encumbrance

2. ACQ Budgets• Who prepares/authorizes?

– ACQ / Collection Development Librarians– Library Director– CEO / Finance Director

• Factors to consider when planning for the budget:– Monographic resources vs continuing resources– Base budget = total amount paid in previous year less

cancellations and cessations– Estimated inflation rate = estimate dollar amount required

to meet inflation– Foreign currency fluctuations = difficult to predict– Source of funds – on-going or short-term– Non-print resources vs equipment to view/read such

resources

2a. ACQ Budgets• Organization of a budget

– Types of resources purchased– Subject disciplines– Library programmes– Languages

• Allocation methods– Budget structure– Monographic resources vs continuing resources– Collection development policy/goals– User demographics

2a. ACQ Budgets• Establishing a budget

– Create funds based on the budget structure– Allocate budget to each fund– Assign appropriate funds to each title purchased– Record all transactions accurately

• Adjustments/revisions– Monitor encumbrances and expenditure regularly to

ensure proper control• do not overspend or underspend the allocation• “equitable” expenditure across all funds

– Adjust spending, where possible– Revise allocation, when needed

3. Accounting• Functions/Purposes• Procedures• Monitoring/reporting methods• Auditing requirements

What is Accounting?• About people & businesses• About recording of data

– Keep all details of business transactions such as cash received; cash paid out; goods bought & sold; equipment bought for office use; etc.

• About classifying & summarising– Data has to be sorted out in order to be useful to the

business. It has to summarise how much profit or loss has been made during a particular period

• About communicating information– Interpret what has been learned from the summarised

data. Is the business performing well financially?

Fund accounting• Allocation

– How much money is there to spend?• Encumbrance

– How much will a purchase probably cost?• Payment

– How much is actually spent?• Balance

– How much money is left?

Importance of fund accounting

• Be accountable for the expenditure of all received funds

• To monitor expenditure throughout the year & avoid over/under spending

• Provide timely & specific information of the fiscal situation of the organisation

• As a basis for budgetary planning• To prepare for financial audit• To pay creditors promptly, accurately & maintain good

PR

Invoices• Documents issued by vendors that contain all financial

details of a purchase/transaction• Easier to handle smaller number of invoices from agents

than numerous invoices from publishers• Discounts, handling charges, shipping fees will appear• Major international agents are offering on-line invoices• Invoices could be on tape for direct input into the local

system• Have to be thoroughly checked before they can be

approved for payments• Late charges apply if payment after due date

Checking invoices

• Date stamp invoice upon receipt of shipment• Check items listed against items received• Check items listed against original order records/PO• Resolve discrepancies with vendors• Note PO # & fund to be charged• Note vendor #• Approve – initial & date

Invoice payments

• Send original copy of approved invoice to finance section

• Keep duplicate invoice in files for future reference by auditors

• File by vendor & invoice date

Vouchers• It is an internal accounting document issued by library to

authorise finance section to disburse cash to pay the invoice

• It is forwarded together with the approved invoice• Information found on vouchers are

– Name & address to which the cheque is to be issued– Invoice number, date, & exact amt in local currency– Details of the purchased items– Authorised signature

Credit Memos/Notes

• A document issued by vendors & used to offset/contra an amt or portion of an outstanding invoice from the same vendor

• A document used in place of a cash or cheque refund over an acceptable time period

• Amount of money received should go back to the fund from which the original payment was made

Statements• A document from vendor containing information such as paid

invoice, outstanding invoice, credit memos• It is issued regularly, monthly or quarterly• It is also known as Vendor’s Statements• Discrepancies between statements & library internal

accounts/records are common– Payments processed but vendor yet to receive by the time the

statement is generated• ACQ staff have to verify accurateness of each statement

received

Typical problems in fund accounting

• Different vendor name on invoice & cheque• Inconsistencies in amounts on invoice, cheque &

voucher• Incorrect fund account/class used• No invoice, no payment records but voucher available

Some solutions

• Check all files• Check system• Check with finance department• Check with vendors

FY-end Processing• Annual budget

– Creation of new budgets– Encumbering of outstanding orders– Serial/Standing orders

• Project/development budget– Span across FY– Carry forward balance