1

American Library AssociationAmerican Library Association

ALA Finances 101 Financial Handout Operating Agreement,

Indirect Costs and Budget Guidelines

2

Operating AgreementOperating Agreement

History/Background – why is it needed? Relationship between the General Fund

and the Divisions (Policy 6.4.1) – see attached

Composite rate formula Services provided at no charge Services provided as a direct charge Non-overhead assessed revenues Overhead assessed revenues

3

Operating Agreement  Relationship

4

OPERATING AGREEMENT HIGHLIGHTS

• Created over a two year period in the late 1980’s. Adopted in 1989 with a five year phase in period.

• Defines the relationship between divisions and core (administrative) structure of ALA.

• Reviewed annually at the Division/BARC Leadership meeting.

• Preamble:- Statement of purpose and values outlines the unique structure of ALA ie “one association with indivisible assets and a single set of uniform procedures.”

- Home of 11 Divisions and other units, “The nature of the relationship among the ALA units is a dynamic one, demanding collaboration and a willingness to work together.”

• Defines the financial responsibility between ALA and the Divisions.

5

OPERATING AGREEMENT HIGHLIGHTS

• The agreement provides a cooperative framework in which questions of organizational relationship can be addressed and resolved.

• Guiding Principles

- Shared values of unity, diversity, authority (delegated to individual Divisions) autonomy and collaboration/cooperation.

- Divisions assume financial responsibility for staff and programs, including some indirect costs for Division activities and services provided by ALA.

continued

- ALA will provide general administrative, financial, membership, publishing services to the Divisions.

6

OPERATING AGREEMENT SERVICES FUNDED BY THE GENERAL FUND AT NO

DIRECT CHARGE TO DIVISIONS

• Publishing - Rights and Permissions, copyright services and other specialized services.

• Finance/Accounting - Preparation of monthly budget reports, management of annual budgeting cycle, planning/budgeting support, credit & collections and annual audit.• OIF, Washington Office/OITP/OGR, OLOS, HRDR, OR, Executive Office, Diversity Office, Governance and IRO

7

OPERATING AGREEMENTDETERMINED OVERHEAD CHARGES

Overhead will not be assessed on revenues from:

• Division Dues

• Division Donations• Interest Income Earned by Divisions• ALA Royalties to Divisions• Travel Expense Reimbursement from Outside

Organizations• Separately-Ticketed Events at Conference (Tours and

Meal Functions)• Advertising in Publications Provided to Division Members

as part of Membership

8

OVERHEAD CALCULATIONS

• Overhead is charged on non-dues revenue generating activities ie. registration fees, exhibit space, meal functions (except separately ticketed events, net sales of materials, subscriptions, advertising other than those provided as part of membership) small miscellaneous fees and royalties.

• Some assessments are at 100% of the ALA composite rate Registration fees, exhibit space and meal functions.

• Remainder are assessed at 50%--Net sales of Materials, Subscriptions Advertising Except in Publications provided as part of division Membership, Other Miscellaneous Fees.

10

OPERATING AGREEMENT HIGHLIGHTS

• Management Practicescontinued

- Interpretations of the Operating Agreement that guide the application of the Agreement. Provides for flexibility when new initiatives are proposed or services developed.

- Planners recognized that to support the diversity of needs and services within ALA and to membership and recognizing that Small Divisions do not have a sufficient membership base, the operating agreement provides for a supplement to support Small Divisions.

• Small Division Support

11

INDIRECT COST RATE FORMULA

Indirect Costs

Conferences + Graphics + Publishing + American Libraries

==Revenues

Conferences + Graphics + Publishing + American Libraries

Rate

12

VIII. Indirect Costs and StudyVIII. Indirect Costs and Study

Fact sheet Formula Allocation methods Process Division results Indirect cost rate history Divisions – Ten things to know

and love

13

INDIRECT COST RATE FORMULA

Indirect Costs

Conferences + Graphics + Publishing + American Libraries

==Revenues

Conferences + Graphics + Publishing + American Libraries

Rate

14

Allocation MethodsAllocation Methods

Sherri Vanyek  

ITTS 

# of phone lines, # of PC’s, # of phones, # of financial transactions

Cynthia Vivian 

Human Resources Table of Positions ie # of Full Time Equivalent Employees

Cathleen Bourdon 

Communications Membership Statistics

Al Campanio 

Staff Support Assigned Square Footage inBuilding/Maintenance

Mark Gould 

PIO Allocation of PIO Usage

Karen Muller 

Library Allocation of Library Usage

 

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Four Step ProcessFour Step Process(Flow Chart on Next Slide)

Allocate total ALA expenses across all units & activities

Update allocation methodologies & apply to indirect cost centers

Determine direct/indirect cost incurred by indirect cost centers (16) after methodology applied – See excel Human Resources example and excel “fully direct/indirect” sheets

Allocate indirect costs to indirect cost formula as required by Operating Agreement – Excel Formula detail sheet and Page 22

16

Flow ChartFlow ChartHuman Resources

Total direct expenses captured across all unitsHR = $587,863

Direct/Indirect costs for support units allocated to all units

Indirect cost allocated to support units based on methodologies

I/D + D = $587,863 + $111,507 =$699,370

Composite indirect cost rate determined22.6%

See excel worksheet“expense allocation”

See excel worksheet“fully allocated direct

indirect costs”

See excel worksheet“sample indirect costcenter” HR allocated

based on FTE’s

See excel worksheet“formula detail”

17

SCHEDULE #4

699,370.24$

# OF FTE'S % ALLOCATION

HQ Building 0 0.0% -$

Executive Bd./Council 0 0.0% -$

Executive Office 6 2.2% 15,561.73$

LARC/Library 6 2.2% 15,561.73$

Staff/Off. Supp. Svr. 5 1.9% 12,968.11$

ITTS 12 4.5% 31,123.47$

Human Resources 0 0.0% -$

Distribution Center 3 1.1% 7,780.87$

Reprographics 2 0.7% 5,187.24$

Building Maintenance 3 1.1% 7,780.87$

Membership Services 14 5.2% 36,310.71$

Fiscal Services 19 7.0% 49,278.82$

General Administration 0 0.0% -$

Member Prog/Serv AED 3 1.1% 7,780.87$

PIO 6 2.2% 15,561.73$

Production Services 7 2.6% 18,155.36$

Marketing 0 0.0% -$

Offices & Committees 41 15.0% 105,041.70$

Conference Services 9 3.3% 23,342.60$

Products & Promotions 2 0.7% 5,187.24$

Publishing AED 2 0.7% 5,187.24$

ALA Editions 23 8.5% 59,653.31$

Booklists 31 11.5% 80,402.29$

American Libraries 7 2.6% 18,155.36$

ALA TechSource 2 0.7% 5,187.24$

PLA 9 3.2% 22,045.79$

ACRL 13 5.0% 34,624.86$

CHOICE 11 4.1% 28,529.84$

AASL 9 3.2% 22,564.51$

ASCLA 1 0.4% 2,593.62$

ALCTS 3 1.1% 7,780.87$

LAMA 3 1.1% 7,780.87$

RUSA 3 1.1% 7,780.87$

ALTA 2 0.9% 5,965.33$

LITA 4 1.5% 10,374.49$

ALSC 6 2.2% 15,561.73$

YALSA 3 1.2% 8,558.95$

Round Tables 0 0.0% -$

Restricted Funds 0 0.0% -$

Related Interest Grps. 0 0.0% -$

0 0.0% -$

Totals 270 100.0% 699,370.24$

HUMAN RESOURCES

Allocation based on full time equivalents per the FY 2005 Table of Positions. The CHOICE and the Washington Offices are weighted @ 1/2. Total costs of $699,370.24 are based on direct costs of $587,863 and indirect costs of $111,507.24.

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General Fund Support to Divisions 2006

Overhead Small Division General Fund

Unit Indirect Costs Paid Support Support

PLA 963,371.59$ 690,862$ 272,510$ ACRL 874,480.13$ 121,683$ 752,797$ CHOICE 469,474.98$ 311,875$ 157,600$ AASL 592,219.57$ 348,604$ 243,616$ ASCLA 101,919.45$ 1,792$ 56,154$ 156,281$ ALCTS 243,248.05$ 33,972$ 209,276$ LAMA 211,013.61$ 15,796$ 195,218$ RUSA 206,821.44$ 16,038$ 190,783$ ALTA 84,600.52$ 164$ 85,961$ 170,398$ LITA 223,141.39$ 37,641$ 185,500$ ALSC 398,897.09$ 82,364$ 316,533$ YALSA 249,766.75$ 14,658$ -$ 235,109$

Total 4,618,954.56$ 1,675,449$ 142,115$ 3,085,621$

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DIVISIONS INDIRECT COSTS 2006

% % %Cost Type 2006 Total 2005 Total $ Change Change

Operating Supplies 29,581$ 0.2% 49,814$ 0.3% (20,233)$ -40.6%Telephone 70,920$ 0.4% 45,882$ 0.3% 25,038$ 54.6%Equip/Main 12,258$ 0.1% 47,369$ 0.3% (35,111)$ -74.1%Human Resources 698,566$ 4.2% 699,370$ 4.7% (804)$ -0.1%Building Operations 1,528,546$ 9.3% 1,087,300$ 7.2% 441,246$ 40.6%Reprographics 15,115$ 0.1% 14,825$ 0.1% 290$ 2.0%Distribution Center 210,203$ 1.3% 249,102$ 1.7% (38,900)$ -15.6%ITTS 1,973,067$ 12.0% 1,874,071$ 12.5% 98,996$ 5.3%Library/ORS 686,988$ 4.2% 625,069$ 4.2% 61,919$ 9.9%Fiscal Services 1,519,744$ 9.2% 1,466,608$ 9.8% 53,136$ 3.6%Audit Fees 108,328$ 0.7% 113,918$ 0.8% (5,590)$ -4.9%Publishing AED 45,317$ 0.3% 87,057$ 0.6% (41,740)$ -47.9%Production Services (56,032)$ -0.3% (25,598)$ -0.2% (30,434)$ 118.9%PIO 817,158$ 5.0% 798,443$ 5.3% 18,715$ 2.3%Membership Services 1,948,753$ 11.8% 1,703,884$ 11.3% 244,869$ 14.4%General Administration 6,840,216$ 41.6% 6,188,737$ 41.2% 651,479$ 10.5%

Total 16,448,729$ 100.0% 15,025,851$ 100.0% 1,422,878$ 9.5%

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DIVISIONS INDIRECT COSTS 2006

% % $ % Indirect Indirect 2006 Total 2005 Total Change Change Revenue Costs Rate

UnitPLA 963,371.59$ 20.9% 634,315.14$ 14.8% 329,056.45$ 51.9% 4,095,274$ 963,371.59$ 23.5%ACRL 874,480.13$ 18.9% 912,060.90$ 21.3% (37,580.77)$ -4.1% 2,011,553$ 874,480.13$ 43.5%CHOICE 469,474.98$ 10.2% 461,962.23$ 10.8% 7,512.75$ 1.6% 2,823,271$ 469,474.98$ 16.6%AASL 592,219.57$ 12.8% 570,579.58$ 13.3% 21,639.99$ 3.8% 2,216,846$ 592,219.57$ 26.7%ASCLA 101,919.45$ 2.2% 83,578.96$ 1.9% 18,340.49$ 21.9% 65,222$ 101,919.45$ 156.3%ALCTS 243,248.05$ 5.3% 231,223.69$ 5.4% 12,024.36$ 5.2% 493,514$ 243,248.05$ 49.3%LAMA 211,013.61$ 4.6% 238,827.55$ 5.6% (27,813.94)$ -11.6% 340,613$ 211,013.61$ 62.0%RUSA 206,821.44$ 4.5% 216,345.91$ 5.0% (9,524.47)$ -4.4% 431,447$ 206,821.44$ 47.9%ALTA 84,600.52$ 1.8% 107,788.58$ 2.5% (23,188.06)$ -21.5% 68,850$ 84,600.52$ 122.9%LITA 223,141.39$ 4.8% 240,513.30$ 5.6% (17,371.91)$ -7.2% 510,402$ 223,141.39$ 43.7%ALSC 398,897.09$ 8.6% 375,503.47$ 8.8% 23,393.62$ 6.2% 991,881$ 398,897.09$ 40.2%YALSA 249,766.75$ 5.4% 214,157.45$ 5.0% 35,609.30$ 16.6% 372,572$ 249,766.75$ 67.0%

Total 4,618,954.56$ 100.0% 4,286,856.76$ 100.0% 332,097.80$ 7.7% 14,421,445$ 4,618,954.56$ 32.0%

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INDIRECT COST SUMMARY 2002 - 2006

FY06

FY05

FY04

FY03

FY02

$16,449,000

15,026,000

15,420,000

14,094,000

15,865,000

$4,619,000

4,287,000

4,680,000

4,447,000

4,784,000

28.1%

28.5%

30.3%

31.8%

30.2%

$1,676,000

950,000

1,359,000

801,000

1,169,000

$142,000

136,000

240,000

230,000

230,000

$3,086,000

3,473,000

3,566,000

3,876,000

3,845,000

Total Indirect Costs

Division Indirect Costs

% of Total

Total Indirect

Costs Paid

Small Division Support

Net General Fund

Support

0

5,000,000

10,000,000

15,000,000

20,000,000

Total Ind. Cst. Div. Ind. Cst. Div. Ind.Cst. Pd. Gen. Fund Sup. Small Div. Support

FY06 FY05 FY04 FY03 FY02

22

American

Conferences Graphics Publishing Libraries

Indirect Cost $1,557,459 $400,910 $2,230,663 $355,501 $4,544,533Revenue $8,106,316 $1,855,601 $9,016,038 $1,131,745 $20,109,700

Unit Rate 19.2% 21.6% 24.7% 31.4% 22.6%

Revenue per $ Indirect Cost $5.20 $4.63 $4.04 $3.18 $4.43

American

Conferences Graphics Publishing Libraries

Indirect Cost $1,556,381 $370,381 $2,002,708 $371,771 $4,301,241Revenue $8,018,918 $1,949,416 $8,923,740 $1,136,039 $20,028,113

Unit Rate 19.4% 19.0% 22.4% 32.7% 21.5%

Revenue per $ Indirect Cost $5.15 $5.26 $4.46 $3.06 $4.66

2005 2006Indirect Cost $4,286,857 $4,618,955

Revenue $11,639,576 $14,421,445

Revenue per $ Indirect Cost $2.72 $3.12

2005 2006Indirect Cost $14,408,610 $15,712,832

Revenue $38,556,819 $41,485,114

Revenue per $ Indirect Cost $2.68 $2.64

Previous Rate = 23.1% Current Rate = 23.9%2005

*Indirect Cos ts for Conferences+Graphics+Publishing+Am er.Lib./Revenues for Conferences+Graphics+Publishing+Am er.Lib.

**Division Indirect Costs/Division Revenues***Total ALA Indirect costs (less Restricted Fund and affiliates)/Total ALA Operating Revenues. Total operating revenueis defined as General Fund ($26,713,644), Divisions ($14,421,445), Round Tables ($350,025) and Plant Fund ($0).

Exhibit I

37.4%

TOTAL ALA COMPOSITE RATE***

=

+ +

+ +

37.9%

Publishing Deprtment

=

+

+ 22.6%

=

=

=

32.0%= 36.8%

Fiscal Year 2006

Fiscal Year 2005

=

=

=

=

=

DIVISION COMPOSITE RATE**

COMPOSITE RATE*

NEH RATE

Overall

Composite

Rate

Overall

Composite

Rate

=

21.5%

23

INDIRECT COST RATE HISTORY

Study

Rate

Budget Year Applied

20062005200420032002200120001999199819971996

22.6%21.5%21.8%18.8%20.3%19.6%18.9%18.5%18.0%16.5%16.7%

20082007200620052004200320022001200019991998