1. 1 American Library Association Member Financial Orientation American Library Association Member Financial Orientation (Financial Fundamentals) Thursday – October 6, 2011 Clara Bohrer – BARC Chair James Neal – Treasurer Gregory Calloway – AED Finance

2. Orientation Manual - Agenda - Role and Responsibilities Agenda Development ALA Budget Strategic Financial Plan Financial Concepts Financial Reports Operating Agreement - Policy 6.4.1 Indirect Cost Study Long-Term Investment Fund ALA Finance Workshop ALA-APA Housekeeping 2

3. I. BARC Role and Responsibility Committee Charge Review proposed ALA budget Review financial performance Make and report budget recommendations Reporting to Executive Board & Council Role as a liaison Relationship with Finance & Audit, Executive Board, Council and Staff Decision-Making Process ALA Membership Chart Organizational Chart – see attached Budget Planning Calendar 3

4. Budget Analysis and Review Committee (BARC Charge) The Budget Analysis and Review Committee (BARC) is charged to review the proposed budget, as forwarded by the ALA Executive Board, in the context of the ALA strategic plan, annual priorities and budget assumptions. To review the financial performance of the Association and the budget impact of potential actions of the ALA Council. To make budget recommendations to the ALA Executive Board and to report to Council regarding budget analysis and the process. 4

5. 5 ALA Decision-Making Process COUNCIL 100 – Councilors at Large 11 - Divisional Councilors 53 - Chapter Councilors 12 - Executive Board Members 18 – Round Table Councilors ENDOWMENT TRUSTEES 3 - Elected by The Executive Board Treasurer –Ex-Officio FINANCE & AUDIT COMMITTEE Treasurer - Chair 3 - Executive Board Members Appointed by the President BARC Chair PLANNING & BUDGET ASSEMBLY 10 - Councilors Elected by Council 5 Chapters; 5 At-Large 13 - Divisional Representatives 37 - Committee Chairs - ALA Committees Chairs Appointed by President 28 - Round table Representatives EXECUTIVE BOARD 4 - Elected by Membership 8 - Elected by Council 1 - Staff - Executive Director DIVISION BOARDS OF DIRECTORS Elected by Division Members BUDGET ANALYSIS & REVIEW COMMITTEE (BARC) 6 - Members At-Large 2 - Executive Board Members* 1 - Treasurer *Appointed by the President EXECUTIVE COMMITTEE President President - Elect Immediate Past President Treasurer Executive Director

6. ALA MEMBERSHIP ORGANIZATION 6

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8. 8 ANNUAL BUDGETARY PLANNING CALENDAR October - Fall Board Mtg.The Executive Board reviews the strategic plan as presented by the Executive Director/Senior Management and further defines the strategic focus resulting in the broad programmatic objectives. The Executive Board and BARC review and approve the Division’s final Budgetary Ceiling for the current year. Midwinter MeetingThe Executive Board - Treasurer - presents the broad programmatic objectives to Council for approval. BARC monitors the current budget. President-Elect proposes presidential program budget. JanuaryALA staff prepares the Annual budget based on the broad programmatic objectives. April - MayThe Executive Board receives from staff - Senior Management - the preliminary budget, which is reviewed and then forwarded to BARC for a detailed analysis. May - JuneStaff – unit managers and senior management - updates the budget. Annual ConferenceExecutive Board approves the budget. Council approves the budgetary ceiling. Division Boards approve their budgets. September - OctoberALA management reviews the strategic focus of the Association. August - SeptemberStaff begins preparing next year’s budget and three - year financial plan. March - April Budget meetings for ALA and the Divisions are held.

9. II. BARC Agenda Development Meeting Agenda Samples - Fall - Midwinter - Spring - Annual Council Referrals to BARC Processing BARC Action Items 9

10. Council Referrals to BARC 10 Past Council Referrals:  Dues Impact Study  Income Based Dues Study (Graduated Dues Study)  Resolution on the Gathering of Diversity Statistics  Report for Improving the Effectiveness of ALA Council  Report of the Chapter Relations Task Force  Young Professionals Task Force

11. III. ALA Budget Financial Planning Calendar Process Fund Interrelationship Budget Guidelines Handling New Items and Requests Spring Meeting - 2012 11

12. 12 FINANCIAL PLANNING CALENDAR – FY12 The Executive Board reviews the strategic plan as presented by the Executive Director/Senior Management and further defines the strategic focus resulting in the broad programmatic objectives. The Executive Board and BARC review and approve the Division’s final Budgetary Ceiling for the current year – Chicago. January - 2012ALA staff prepares the Annual budget based on the broad programmatic objectives. October 20thF&A/Division Leadership Meeting: Meet new Division Presidents - Chicago MonthlyEndowment Trustees Conference Calls – Every Third Wednesday @ 2:00 EST Fall Board Meeting October 21st – 23rd October 6th – 7thBARC meeting: Finalize FY12 budget - Chicago Midwinter Meeting (January 20 th – 24 h ) The Executive Board - Treasurer - presents the broad programmatic objectives to Council for approval. Participation i.e. reports in ALA Finances 101 and PBA. BARC monitors the current budget. President-Elect proposes presidential program budget – Dallas. December – 1 st or 2 nd Week Year end financial review with staff. Meet with auditor to discuss the progress of the audit. Prepare Council mailing on year end results. Begin preparations for Midwinter reports to Council, PBA, ALA Finances Best Practices and Treasurer’s Forum (if necessary). Prepare for ALA annual report.

13. 13 FINANCIAL PLANNING CALENDAR – FY12 April - MayThe Executive Board receives the preliminary budget from staff (Senior Management), which is reviewed and then forwarded to BARC with recommendations – Chicago. May - JuneStaff updates the budget. Annual Conference (June 21 st – June 27 th ) Executive Board approves the budget. Council approves the budgetary ceiling. Division Boards approve their budgets – Anaheim, CA. September/NovemberStaff begins preparing next year’s (FY14) budget and three - year financial plan. February - April Budget hearings for ALA and the Divisions are held at ALA headquarters with staff. April/MayBARC Meeting: BARC reviews and analyzes the preliminary budget and forwards with recommendations to the Finance & Audit committee - Chicago June Treasurer, along with staff, prepares for reports to Council (FY13 budget) and PBA – if necessary August/October Final FY13 budget finalized, primarily the divisions.

14. Midwinter Meeting Financial Responsibilities ALA-APA BARC/F&A Meeting via Conference Call Prior to MW F&A/BARC Meeting Friday January 20th 12:00 – 1:30 ALA Finances Best Practices Friday January 20th @ 2:30 – 3:30 PM Finance & Audit Saturday January 21st @ 9:00 – 11:00 AM BARC Meeting Saturday January 21st @ 12:00 – 1:30 PM Endowment Trustees Report Sunday January 22nd @ 9:00 AM PBA Sunday January 22nd @ 1:00 – 2:30 PM BARC/Division Leaders Sunday January 22nd@ 2:30 – 3:30 PM Finance & Audit Monday January 23rd @ 7:30 – 9:30 AM Treasurer’s Forum Monday January 23rd @ 5:00 PM ??????? Treasurer’s Report to Council Tuesday January 24th @ 8:00 – 12:30 PM Executive Board Meeting Tuesday January 24th @ 1:30 – 4:30 PM 14

15. Annual Conference Financial Responsibilities ALA-APA BARC/F&A Meeting via Conference Call Prior to AC BARC Meeting Friday June 22nd @ 12:00 – 3:30 PM Finance & Audit Saturday June 23rd @ 11:00 – 1:30 AM BARC Report to Council Saturday June 23rd @ 3:30 – 5:00 PM Endowment Trustees Report Saturday June 23rd @ 3:30 – 5:00PM PBA Sunday June 24th @ 1:00 – 2:30 PM BARC/Division Leaders Sunday June 24th @ 2:30 – 3:30 PM Treasurer Reports to Council Tuesday June 26th @ 9:00 AM F&A/BARC Reports to Executive Board Tuesday June 26th @ 1:30 – 4:30 PM 15

16. TIMELINE OF BUDGET PROCESS 16

17. 17 Inter-Fund Relationship (Sample)

18. IV. Strategic Financial Plan Association Needs and Priorities Financial Impact 18

19. V. Financial Concepts Glossary of Terms Fund Accounting 19

20. Glossary of Working Terms 20 501 C3 (ALA) – a tax law provision granting exemption from the federal income tax to non-profit organizations. exemptions apply to corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals.exemptionreligiouscharitablescientificliteraryeducational 501 C6 (APA) – a tax law provision granting exemption from the federal income tax to non-profit organization that promotes a line of trade or business. This exemption is reserved for business leagues, chambers of commerce, real estate boards or boards of trade etc. The APA is exclusively devoted to a number of functions which cannot be undertaken to a "substantial" extent by the American Library Association, which is organized as a nonprofit educational association under section 501(c)3 of the U.S. Internal Revenue Code. These functions are (1) the certification of individuals in specializations beyond the initial professional degree and (2) the direct support of comparable worth and pay equity initiatives and other activities (e.g. legislative lobbying) designed to improve salaries of librarians and other library workers. As a 501(c)6 professional association, the ALA-APA is able to serve as a vigorous advocate for America's librarians and other library workers and will be able to offer certifications which will help promote individual status and the quality of library service.exemption Accrual Accounting - An accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions occur. The general idea is that economic events are recognized by matching revenues to expenses (the matching principle) at the time in which the transaction occurs rather than when payment is made (or received).events

21. Glossary of Working Terms 21 Assets – An item of economic value owned by an individual or organization, that can be converted to cash. Budgetary Ceiling – Except for projects supported by grants to the Association, annual estimates of income shall be based upon the unexpended balance remaining from the previous year plus anticipated revenues for the next budget year. In no case may expenditures be budgeted in excess of the estimates of income arrived at in this manner except for projects supported by grants to the Association. The annual estimates of income and budget objectives for each year are to be submitted to Council for approval. Capital Appreciation – an increase in the market value of an asset (marketable securities) over its original cost. Capital Budget - A detailed plan to secure or finance long-term outlays, for fixed assets such as facilities, furniture, equipment, software and hardware.long-termoutlaysfixed assets Credit* – Entry on the right side of a DOUBLE-ENTRY BOOKKEEPING system that represents the reduction of an ASSET or expense or the addition to a LIABILITY or REVENUE. (See DEBIT.) Debit* - Entry on the left side of a DOUBLE-ENTRY BOOKKEEPING system that represents the addition of an ASSET or expense or the reduction to a LIABILITY or REVENUE. (See CREDIT.) *See accounting formula

22. Glossary of Working Terms 22 Deferred Revenue – Income received but not earned until all events have occurred. Deferred income is reflected as a LIABILITY. Depreciation – Expense allowance made for wear and tear on an ASSET over its estimated useful life. Expenses - In accounting, an expense represents an event in which an asset is used up or a liability is incurred.accountingasset liability Grants & Awards – Funds from government and non-government agencies made available to support specific programs, services and initiatives. Liabilities – a financial obligation, debt, claim, or potential loss – what an organization owes. Long-Term Investment – The active management of a pool of securities, which includes equities, fixed income (bonds) and REIT’S, for the purpose of growing the corpus, assets, and investment resources so as to support current and future Association needs, including scholarships, awards and unique programs that build a strong future for the American Library Association and America’s libraries. Market Value – The value that an asset (marketable securities) can receive, as determined by open bidding between buyers and sellers in a regulated market place ie NYSE Net Asset Balance – The accumulated revenues minus expenses for ongoing operations.

23. Glossary of Working Terms 23 Operating Budget – Is an annual budget of an activity which includes revenues, expenses, programs etc.budget Operating Cash – The revenue generated from on-going operations from the primary revenue generating units to conduct daily operations. Overhead Recovered – Reimbursable costs to the General fund (Administration Central) for providing administration and infrastructure support from certain revenues generated within the Association. Plant Fund – Consists of capital assets and general operations for buildings, capital equipment, construction in progress and improvements in and infrastructure or land. This includes: - ALA Headquarters - Washington Office - Capital Budget Realized (gain/loss) – an investment transaction, that recognizes the gain or loss in value of a security when it is sold.transaction Unrealized (gain/loss) – The prevailing value of an unsold investment, as determined by the market and compared to its original cost, that results in a gain or loss in the value.

24. Glossary of Working Terms 24 Revenues - The amount of money that an organization receives from its activities in a given period, mostly from sales of products and/or services to customers. *Note: conflicts abound as to when revenue should be recognized. The Financial Accounting Standards Board’s (FASB) Statement of Financial Accounting Concept 5 states that revenues should be recognized when they are “realized or realizable” and “earned”. Revenues are “realized or realizable” when products are exchanged for assets (such as cash) or claims to assets (such as promises to pay). Revenues are “earned” when the entity has performed all duties necessary to the purchaser.Financial Accounting Standards Board’s (FASB)assets Statement of Operations – Same as the income statement, which illustrates the profitability ie revenue less expenses, over a given period of time – monthly, quarterly, annually etc. Statement of Positions – Same as the balance sheet, which gives a snapshot holdings ie assets, liabilities and member equity, on a specific date. Subscription Equivalent – dollar amount transferred from the general administration to Publishing in order offset the net expense of publishing and distributing American Libraries. Variance – The difference between the actual revenue/expense and the budgeted revenue/expense. Yield - The annual rate of return - interest/dividends/appreciation - on an investment, expressed as a percentage.rate of returninvestment

25. Fundamental Accounting Formula 25 DR = Debit CR = Credit

26. 26 ALA FUND STRUCTURE OPERATING FUNDPLANT FUND GRANTS & AWARDS LONG TERM INVESTMENTS General Fund Divisions Round Tables Headquarters Building Washington & Choice Offices Operating Furniture & Equipment Exchange Trans (NG) Restricted (NG) Unrestricted Temporarily Restricted Permanently Restricted Huron Plaza Property TOTAL ALA Budget Capital Budget Exchange Trans (G) TechnologyFurn/Equip & Building Technology Reserve Fund

27. VI. Financial Reports Monthly Performance Reports APA Statement of Financial Position (Balance Sheet) Statement of Operations and Changes in Net Assets (Income Statement) 27

28. Statement of Financial Position 28

29. Statement of Operations & Changes in Net Assets 29

30. VII. Operating Agreement VII. Operating Agreement (Policy 6.4.1) Relationship between the General Fund and the Divisions Services provided at no charge Services provided as a direct charge Non-overhead assessed revenues Practices 30

31. Operating Agreement Relationship 31

32. Operating Agreement Highlights 32 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 Leadership/BARC 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.

33. Operating Agreement Highlights 33 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.

34. Operating Agreement Services Funded by the General Fund at No Direct Charge to Divisions 34 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

35. 35 Operating Agreement Determined 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

36. Overhead Calculations 36 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.

37. 37 Operating Agreement Services Charge at Actual Cost STAFF SUPPORT SERVICES : Specialized Data Processing*, Equipment Maintenance for Equipment Purchased by Divisions over which the Division Exercises Sole Use and Control, Printing and Duplication*, Certain Telephone Services*, Postage for Special Mailings* PUBLISHING: Subscription and Order Billing Services, Central Production Unit Services, Marketing Services * As Defined in the Operational Practices

38. Operating Agreement Highlights 38 Management Practices continued - 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

39. VIII. Indirect Costs and Study Indirect Cost Fact Sheet – see attached Indirect Cost Rate Formula Indirect Cost Allocation Methods 2010 Indirect Costs Division Indirect Costs Indirect Cost Study Formula Results Indirect Cost History Recent Application Changes 39

40. 40 Indirect Cost Rate Formula (Per Operating Agreement) Indirect Costs Conferences + Graphics + Publishing + American Libraries = = Revenues Conferences + Graphics + Publishing + American Libraries Rate Indirect Costs Revenues = Revenue Producing Units = Rate or

41. Allocation Methods 41 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 in Building/Maintenance Mark Gould PIO Allocation of PIO Usage Karen Muller Library Allocation of Library Usage

42. Four Step Process Four 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 – See excel formula detail sheet 42

43. Flow Chart 43 Human Resources Total direct expenses captured across all units HR = $726,788 Direct/Indirect costs for support units allocated to all units Indirect cost allocated to support units based on methodologies D + I/D = $605,859 + $120,929 = $726,788 Composite indirect cost rate determined 25.5% See excel worksheet “expense allocation” See excel worksheet “fully allocated direct indirect costs” See excel worksheet “sample indirect cost center” HR allocated based on FTE’s See excel worksheet “formula detail”

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45. Indirect Costs 2010 45 %% Cost Type2010Total2009Total$ ChangeChange Operating Supplies $ 20,6900.1% $ 24,2200.1% $ (3,530)-14.6% Telephone $ 35,7040.2% $ 31,0230.2% $ 4,68115.1% Equip/Main $ 36,2200.2% $ 41,9160.2% $ (5,696)-13.6% Human Resources $ 726,7884.1% $ 679,2013.5% $ 47,5887.0% Building Operations $ 1,757,5349.8% $ 1,726,4018.8% $ 31,1331.8% Reprographics $ 23,3010.1% $ 42,5020.2% $ (19,201)-45.2% Distribution Center $ 231,2451.3% $ 240,5931.2% $ (9,348)-3.9% ITTS $ 2,365,03113.2% $ 2,456,00812.5% $ (90,977)-3.7% HQ Library/ORS $ 739,8534.1% $ 736,5233.8% $ 3,3290.5% Fiscal Services $ 1,775,2399.9% $ 1,788,5349.1% $ (13,295)-0.7% Audit Fees $ 91,3470.5% $ 116,5590.6% $ (25,212)-21.6% Publishing AED $ 82,8230.5% $ 51,2610.3% $ 31,56361.6% Production Services $ (54,416)-0.3% $ 112,1090.6% $ (166,525)-148.5% PIO $ 749,6384.2% $ 729,6883.7% $ 19,9512.7% Membership Services $ 1,751,3999.8% $ 1,825,1879.3% $ (73,788)-4.0% General Administration $ 7,527,50442.1% $ 9,021,51346.0% $ (1,494,009)-16.6% Total $ 17,859,902100.0% $ 19,623,238100.0% $ (1,763,336)-9.0%

46. Division Indirect Costs 2010 46 2010% Total2009% Total$ Change% Change Cost type Operating Supplies $ 5,709.900.11% $ 6,011.920.11% $ (302.02)-5.0% Telephone $ 7,429.090.15% $ 6,356.390.11% $ 1,072.7016.9% Equip/Main $ 7,536.460.15% $ 8,588.290.15% $ (1,051.83)-12.2% Human Resources $ 203,884.544.01% $ 181,112.263.24% $ 22,772.2812.6% Building Operations $ 217,368.974.27% $ 206,151.763.69% $ 11,217.205.4% Reprographics $ 5,627.830.11% $ 12,878.640.23% $ (7,250.80)-56.3% Distribution Center $ 46,796.440.92% $ 54,556.570.98% $ (7,760.13)-14.2% ITTS $ 553,971.2010.88% $ 461,431.878.26% $ 92,539.3320.1% HQ Library $ 129,998.212.55% $ 128,817.922.30% $ 1,180.290.9% Fiscal Services $ 686,779.5913.49% $ 675,885.0412.09% $ 10,894.551.6% Bank & Audit Fees $ 28,292.960.56% $ 30,054.080.54% $ (1,761.12)-5.9% Publishing AED $ -0.00% $ -0.00% $ -#DIV/0! Production Services $ (53,476.54)-1.05% $ 109,167.281.95% $ (162,643.82)-149.0% PIO $ 163,287.553.21% $ 197,015.693.53% $ (33,728.14)-17.1% Membership Services $ 591,131.0711.62% $ 627,106.9311.22% $ (35,975.86)-5.7% General Administration $2,494,989.5549.02% $ 2,883,508.2451.60% $ (388,518.69)-13.5% Total $5,089,326.82100.00% $ 5,588,642.90100.00% $ (499,316.08)-8.9%

47. Divisions Indirect Costs 2010 47 %% Indirect 2010Total2009Total$ ChangeChangeRate Unit PLA $ 881,909.4317.3% $ 737,658.4313.2% $ 144,251.0019.6% 21.2% ACRL $ 933,059.5018.3% $1,209,350.4921.6% $ (276,290.99)-22.8% 42.4% CHOICE $ 580,495.1511.4% $ 648,180.4711.6% $ (67,685.32)-10.4% 19.1% AASL $ 676,715.6813.3% $ 674,527.7012.1% $ 2,187.980.3% 25.3% ASCLA $ 109,749.532.2% $ 102,386.441.8% $ 7,363.097.2% 130.6% ALCTS $ 236,330.624.6% $ 292,614.275.2% $ (56,283.65)-19.2% 43.4% LLAMA $ 152,021.743.0% $ 223,619.224.0% $ (71,597.48)-32.0% 54.3% RUSA $ 213,695.324.2% $ 271,495.484.9% $ (57,800.16)-21.3% 50.1% ALTAFF $ 231,501.704.5% $ 151,844.952.7% $ 79,656.7552.5% 60.7% LITA $ 204,125.304.0% $ 260,981.234.7% $ (56,855.93)-21.8% 50.4% ALSC $ 509,034.7510.0% $ 620,012.6711.1% $ (110,977.92)-17.9% 47.7% YALSA $ 360,688.087.1% $ 395,971.547.1% $ (35,283.46)-8.9% 72.0% Total $5,089,326.82100.0% $5,588,642.89100.0% $ (499,316.07)-8.9% 32.3%

48. General Fund Investment in Divisions 2010 48 OverheadSmall DivisionGeneral Fund Unit Indirect CostsPaidSupport PLA $ 881,909.43 $ 724,712 $ 157,197 ACRL $ 933,059.50 $ 166,971 $ 766,089 CHOICE $ 580,495.15 $ 364,994 $ 215,501 AASL $ 676,715.68 $ 434,866 $ 241,850 ASCLA $ 109,749.53 $ 9,454 $ 24,711 $ 125,007 ALCTS $ 236,330.62 $ 44,889 $ 191,442 LAMA $ 152,021.74 $ 13,459 $ 135,563 RUSA $ 213,695.32 $ 19,349 $ 194,346 ALTA $ 231,501.70 $ 18,536 $ 57,757 $ 270,723 LITA $ 204,125.30 $ 34,057 $ 170,068 ALSC $ 509,034.75 $ 97,031 $ 412,004 YALSA $ 360,688.08 $ 17,362 $ - $ 343,326 2010 $ 5,089,326.82 $ 1,948,680 $ 82,468 $ 3,223,115 2009 $ 5,588,642.89 $ 1,435,956 $ 135,720 $ 4,288,407 Difference $ (499,316.07) $ 512,724# $ (53,252)# $ (1,065,292)

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50. 50 Indirect Cost Summary 2006 - 2010 FY10 FY09 FY08 FY07 FY06 $17,859,902 19,623,000 18,725,000 18,123,000 16,449,000 $5,089,927 5,589,000 5,190,000 5,258,000 4,619,000 28.5% 27.7% 29.0% 28.1% $1,948,680 1,436,000 1,777,000 1,220,000 1,676,000 $ 82,468 136,000 141,000 133,000 142,000 $3,223,115 4,288,000 3,554,000 4,170,000 3,086,000 Total Indirect Costs Division Indirect Costs % of Total Total Indirect Costs Paid Small Division Support Net General Fund Support

51. 51 Indirect Cost Rate History StudyRateBudget Year Applied 2011 2010* 2009 2008 2007 2006 2005 2004 2003 2002 2001 TBD 25.5% 26.1% 24.0% 23.9% 22.6% 21.5% 21.8% 18.8% 20.3% 19.6% 2014 2012 & 2013 2011 2010 2009 2008 2007 2006 2005 2004 2003 *See next slide

52. Changes Resulting From FY10 Indirect Cost Study Approved by the Executive Board at the FY11 Spring meeting based on recommendation by staff and Finance & Audit Committee. The 2010 rate (25.5%) will be applied to the FY12 budget The 2010 rate (25.5%) will also be applied to the FY13 budget Beginning with 2011 study, all future rates, will be applied on a lagging three-year basis as follows: – the 2011 rate will apply to the FY14 budget – the 2012 rate will apply to the FY15 budget – the 2013 rate will apply to the FY16 budget 52

53. IX. Long-Term Investment Fund (AKA Endowment) Policy 8.5.1 – see attached - Spending/Payout Scholarships and Awards Division Transfers Establishing an Endowment - Principal amount needed 53

54. Purpose of the Long-Term Investment (Endowment) Fund 54 The purpose of the American Library Association’s Long-Term Investment (Endowment) Fund is to protect and grow the corpus, assets, and investment resources so as to support current and future Association needs, including scholarships, awards and unique programs that build a strong future for the American Library Association and America’s libraries.

55. Spending/Payout Policy The spending/payout rate will be a range of 3% - 5% of the trailing five-year quarterly rolling average of each funds net asset balance. The annual spending/payout rate will be reviewed and recommended by the Endowment Trustees and the Finance & Audit Committee with final approval by the ALA Executive Board. 55

56. 56 ALA OPERATING PROCEDURES FOR TRANSFERS & WITHDRAWALS BETWEEN DIVISION FUND BALANCES & THE LONG TERM INVESTMENT FUND I. TRANSFER PROCESS - From Division Fund Balances (Net Asset Balance) to the Long Term Investment Fund (Endowment Fund). A.It is desirable that Divisions establish 4 – 6 months of reserves - (Net Asset Balances divided by average monthly expenses), before any transfers are requested. B. Transfers from the Division(s) Fund Balance to the Long Term Investment fund must be a part of the Division(s) approved annual budget. C. Transfers of $50,000 or more must be reviewed by BARC as part of the 3 year financial plan and requested 2 years prior to the execution. II.WITHDRAWAL PROCESS – From the Long Term Investment Fund A.Any withdrawal from the Division(s) Long Term Investment Fund, other than emergencies, must be part of the Division(s) annual budgeting process. It is desirable that interest is withdrawn first and principal is withdrawn as a last resort. 1.Emergencies The ALA Executive Board shall authorize withdrawals from the Division(s) Long Term Investment Funds when the purposes and programs of the Division would otherwise be seriously impaired. Any withdrawal will carry with it a specific repayment plan. The plan will include a schedule of repayments with the interest rate set at the time of withdrawal. The interest rate will be based off of ALA’s borrowing rate. Requests for withdrawal must be submitted to BARC for review and board approval. 2.Scholarships/Awards The ALA Executive Board shall authorize withdrawals from temporarily restricted and unrestricted Division Long Term Investment funds designated for named scholarships and awards to the extent necessary to support the award or scholarship according to its stipulations and requirements. If the amount in the temporarily restricted and unrestricted funds are not adequate, the (principal) of the fund may be used, up to the limits of any permanent or donor restrictions. Requests for withdrawal must be part of the Division(s) annual budget process.

57. X. ALA Finance Best Practices Midwinter Meeting 57  Budget Context; Mission and Legal Structure  Financial Framework  Role and Responsibilities  Annual Budget Cycle and Process  Annual Budget Guidelines  Budget Development  Implementation and Review

58. XI. ALA-APA Budget Business Plan Operating Agreement Financial Statements 58