23 Sources of Finance and Budgeting Techniques

Dr Shivarama Rao K

  1. Introduction

Finance is like lifeblood of the library, the importance of funding in providing quality library service cannot be overemphasized. Without a strong financial support, one cannot imagine state-of-the art library building, well developed collection, well trained staff, modern information storage and retrieval systems and value added services. The library is invariably a part of a wider organization – an arm of government, university, school, and research institute or business concern as the case may be. Its budget therefore is negotiated with its parent organization. The parent body is therefore the proprietor that takes full responsibility for its funding (Ubogu & Okiy, 2011). In general, libraries are not revenue earning institutions. Most of them are service components of academic and other institutional bodies. Hence, they have a special obligation to manage their finances with great care and judiciousness.

  1. Definition and Principles of Financial Management

“Finance may be defined as the art and science of managing money. It includes financial service and financial instruments. Finance also is referred as the provision of money at the time when it is needed. Finance function is the procurement of funds and their effective utilization in business concerns” (Paramasivan & Subramanian, n. d). According to Oxford dictionary, the word ‘finance’ connotes ‘management of money’ (as cited in Pramasivan & Subramanian, n.d.).

 

As per Weston and Brigham, Financial management “is an area of financial decision-making, harmonizing individual motives and enterprise goals” (as cited in Pramasivan & Subramanian, n.d.). Financial management helps in, financial planning, acquisition of funds, proper utilization of funds, financial decisions, to check profitability, increase value of the firm and promoting savings. In nutshell, major components of financial management are:

  • financial planning
  • forecasting of receipts and disbursements
  • realisation of funds and revenues
  • allocation of funds
  • utilisation of funds
  • financial accounting
  • financial control
  • financial auditing

The task of finding money; investing funds, managing property and getting the sanction for the budget and all other related matters of finance are the responsibility of the central executive authority of the parent organisation to which the library belongs.

 

Financial management follow certain guidelines to achieve its objectives. Some of the guidelines include – effective control, simplicity, regularity and foresight, economy and flexibility.

  • Effective control is necessary for the economical use and channelization of resources so that there is little wastage and the limited financial resources can be put to maximum use.
  • Procedures for financial management should be simple and easy to operate. Simplicity results’ in efficiency and economy.
  • Financial management programmes should have a typical timetable so as to acquaint everybody with what he/she is expected to do at a particular point of time.
  • Economy should be effected in any activity and every activity, more so in financial matters. Hence, judicious spending of finance is must. All precautions should be taken to avoid unnecessary expenditure and wasteful use of scarce finances.
  • Financial management should keep in mind the virtues of elasticity so as to learn scope for adjustment according to circumstances. Only then can it be successful in times of emergency and crisis. But this flexibility should be within the framework of financial rules and procedures. This type of adjustment usually is done at the fag end of the financial year when unutilised funds are available in other items.

While these principles are useful in operating and managing finances in libraries, there are statutory financial rules and procedures laid down by the executive authorities. Libraries have no option but to follow financial rules and should prepare for financial audits.

 

Nonetheless, library and information centres are service-oriented and not-for-profit organisations. Financial management in such organisations is more complex and important than in profit-oriented organisations. Some of the characteristics of service oriented not for profit organizations are:

  • Labour intensive organizations
  • Will not have any inventory of services
  • Intangible – quality of service cannot be inspected and measured in advance i.e., before rendering the service.
  • Negligible profit measures
  • No direct relationship between the costs and benefits

Hence, libraries performance is largely rely on non-monetary measures like:

  • Result measures
  • Process measures
  • Social indicators
  • Inputs as proxy output measures
  1. Sources of finance

Finance plays a very significant role in the organisation and management of any institution, more so in the case of libraries which have to acquire and build up a collection on a continuous basis throughout the year and even longer. With the increasing costs of books and journal subscriptions, it would be impossible to plan a collection development programme, consistent with the needs of users, without an ensured supply of funds Financial requirement is either long term (fixed capital requirement) or short term (working capital requirement). Fixed capital is the capital, which is used to purchase the fixed assets of the library such as land and building, furniture and fittings and IT infrastructure, etc. Short-term financial requirements are popularly known as working capital, such as procurement of raw materials, payment of wages, day-to-day expenditures, etc. is part of working capital. Hence, we can classify library expenditure according to different heads, viz. Salary & wages, Binding, Stationary, Postage, Contingency, Books and periodicals, Furniture, Building, Equipment, Publications, and Telephone/Internet.

 

In planning for the financial needs of the library and recording financial activities, it is important to keep operating and capital activities separated for reporting purposes. In both operating and capital budgets, you will need to show revenue (or income) and expenditures. In other words, the financial support given to libraries are of two types: i) recurring and ii) non-recurring. The recurring grants are generally given for the purchase of books and periodicals, maintenance of regular services, and for anticipated contingent expenditure. The non-recurring grants are given for specific purposes such as construction of library building, purchase of furniture and equipment and sometimes for special collections. The third type of grant, known as an ad hoc grant is given on special recommendations for special purchases.

 

Government financing is usually is the main source of finance for special and research libraries. The greatest percentage of operating funds increasingly come from public funds raised through taxes. In India majority of special and research libraries are attached to government departments and research institutes in the field of agriculture, medicine, judiciary, museums, national archives and more recently economic, social, and industrial development. Special libraries which come under various ministries such as agriculture, health, commerce, and industry, usually provide a free service to a restricted government clientele and are seldom open to the public. The newer research institutes serving industry, while financed mainly by governments, often do charge subscription and service fee for their specialized services (Kent, 1987). Special libraries get their funds from appropriations made by their respective parent organisations. Whenever the parent body takes up a new project or programme, which needs library and information support, adequate finances may be provided to the library to meet the special support facilities. The library is expected to ask for funds for any additional or special services which are usually examined before funds are provided for such services. In addition, ad hoc grants from governmental agencies are obtained for specific purposes.

 

Of late, special libraries have been seriously considering the ways and means of generating part of their own resources. It has become increasingly necessary for libraries to seek alternative sources of revenue to support activities that were once thought to be the responsibility of tax dollars. Causes of this trend include the rapid growth of information, increased costs for services and materials, and demands for additional services. Many librarians today feel pressed to spend more time and energy making contacts and writing grant proposals in order to raise needed funds (Burlingame, 1995).

The sources of funds for libraries can be broadly grouped as follows:

  • Regular grants from parent body (public fund raised through taxes)
  • Ad hoc grants from other departments/institutions (public fund)
  • Grants from endowments and charitable institutions
  • Fees, subscriptions, sale of service and miscellaneous revenues earned by the library (ad hoc, non-recurring and meant for specific purposes with restrictions on allocation and use)
  • Fines and miscellaneous sources: Some libraries impose fines on the late return of books as well as for loss or misuse of books. Income from this source is very meagre. As a matter of fact, it cannot be considered as a source of income, because the aim of the fine is not to raise revenue but to compel the user to return the borrowed book in time and not to damage or lose it during his/her possession. Moreover, libraries may not have the authority to re-appropriate amount collected as fine or overdue charges for any purpose
  • Miscellaneous sources may consist of money received by the sale of library publications and waste paper, reprographic services, translation and other documentation services rendered, etc. These services are rendered by libraries usually on a non-profit basis. Normally, such (limited) funds are added to the general fund of the parent organisation for allocation through normal budgeting.
  1. Financial estimation

Libraries finance estimation depends upon the age, jurisdiction, quantity and quality of reading material, number of readers, and other factors` relating to that particular library. Some important bases for financial estimation for libraries are:

  • User population and its composition
  • Material to be acquired (media, nature and type of information source)
  • Services to be provided vis-à-vis objectives
  • Hardware and software requirement
  • Unsatisfied service pressures, if any, are the most frequently used factors in determining the financial needs -of a library
  • Established national And international standards for quality in services often expressed as minima of materials, personnel and operational funds for a given size of library
  • Increase in prices of reading materials and inflation. Three methods generally used for estimating library finances are discussed below;

4.1. Per capita method

 

In this method, a minimum amount per head is fixed which is considered essential for providing standard library services. The educational and cultural standards of a community, the expectations of its future’ needs,’ the per capita income of the society, the average cost of published reading material, and the salary levels of the library staff are the common factors that go to determine the per capita library finance.

 

4.2. Proportional method

 

This method presupposes that the authorities provide adequate finances to the library out of their regular budget, and that a particular minimum limit is fixed. A generally used measure of adequate support is the percentage of the institutional budget that is allocated for library purposes. Various standards have been recommended for deciding this limit for academic and public libraries in India. However, there are criticisms that this method is likely to lead to a high disparity in case of special libraries as the budgets of high technology and capital-intensive organisations are much larger than the budgets of pure research, social science and humanities institutions.

 

4.3. Methods of details

 

According to this method all items of expenditure of a library are accounted for while preparing the financial estimates. These are of two types, viz., i) recurring or current expenditure and ii) non-recurring or capital expenditure.

  1. Library Expenditure

The library expenditure is generally undertaken to satisfy the intellectual requirements of the readers and provide those documents which the readers in their individual capacity cannot and do not want to purchase. Besides, no individual can purchase all the literature which comes out of the printing presses of different countries, on different subjects, in various languages, and in diverse forms. The only agency which can acquire, process and make available all this literature to readers is the library. There are three major characteristics in the nature of library expenditure:

  1. Library is a growing organism – The library trinity of documents, readers and staff always grows. It implies that the requirements of the library will always go on increasing day by day. All this means more expenditure.
  2. Library is a spending institution – Libraries, unlike many government departments, are not revenue-fetching agencies. They are spending institutions, and they participate in nation-building activities. The money spent by the library is a long-term investment in human capital.
  3. Library expenditure is recurring – Libraries are not only spending and growing institutions, they are also permanent bodies. In an era of educational advancement, library services will have to maintain a continuous rhythm to cope with the academic requirements of the clientele. This means that library expenditure is recurring in nature.

Some of the library expenditure principles include:

  1. Principle of maximum aggregate benefit: Library manager should plan library expenditure in such a manner that the majority of readers derive maximum benefit of library use.
  2. Principle of advance planning: Library expenditure should be planned in advance and a proper estimate should be made for different items so that adequate and balanced revenue may be allotted to different heads.
  3. Principle of equitable allocation: Library funds should be equitably allocated for spending on different types of reading material covering various subject areas. For example, books on science and technology are costlier than language books. Costly reference books become out of date faster in some subject areas is others. However, in special libraries their principle may be applicable as most document has to be spent in reference and periodical literature. Normally, 70% of the publication grant is allowed for periodicals. All such factors are to be taken into consideration while spending money for library use.
  4. Principle of economy (Law of parsimony): It means that you should not spend more than the necessary amount on any item, and the expenditure should not exceed your sanctioned grant. Duplication should be avoided, because the extra amount thus saved could be better spent on purchasing new alternative titles covering additional subject areas.

Budgeting purpose and techniques

 

Librarians have always been faced with the need to demonstrate the value of the services and information products for which they budget. The budget is a powerful management and public relations tool and essential for explaining goals, objectives and its role in an organization. (Seer, 2000). As libraries are facing budget crunch problem, special library managers are hard pressed to perform amazing feats of budgetary cuts and are sometimes penalised if any deficiencies in the service show up as a result. The ability to plan, to re-evaluate and to take firm control of the finances becomes equally as important as the quality of information (Cropley, 2006). Hence, librarian should have good knowledge of finance, accounts, cost cutting skills and economics of information to deal budgetary constraints.

 

A budget (derived from old French word bougette, purse) is a quantified financial plan for a forthcoming accounting period with a plan of action matched by resources required to implement the plan. Budgets are an element of an organization’s financial management; financial management addresses the overall fiscal integrity of an organization and is an ongoing process. Although some aspects of financial management are cyclical (budget development, cost monitoring, forecasting, etc.), financial management occurs on a daily basis. The mission of the corporate library is to maximize the value of information services while minimizing associated costs, the common goal of all functions of an organization. As a common organizational element, special library budgets emerge from the goals and objectives of the special library and directly support the mission statement, goals and objectives of the parent organization (Dossett, 2004).

 

Budget classification has various versions, such as based on how money is spent, who prepares and allocates, chronometer classification or by any such purpose and category. Budgets can also be classified according to the comprehensiveness of their coverage-that is, whether they are general budgets for the entire library, special budgets for departments, or financial plans for special purposes. They can further be differentiated by degree of internal breakdown. Typically, budgets are prepared for one fiscal year but may be part of a long-term budget planning cycle. The fiscal year for which budgets are prepared varies widely. Most publicly supported agencies operate on an annual budget cycle, with little or no opportunity to carry over funds from one year to another. There is increased pressure in a number of agencies to plan and budget on a long-term cycle. Many programs are long-term and funding them on an annual basis produces uncertainty on the part of those carrying out the programs, as there may be no assurance that funding will continue for the life of a program. Sometimes budgets are based on, such as Sales budget, Production budget, Capital budget, Cash flow budget, Marketing budget, Project budget, Revenue budget, Expenditure budget etc. Typically, budgets serve three major purposes; planning, coordinating and controlling (Prentice, 1996).

 

Budgets can also be defined by the sources of revenue. In most not-for-profit services such as libraries, funding comes from tax revenues or contributions from citizens. These vary according to the level of government and whether the funds are general purpose or for a special purpose. Contributions vary from membership fees to bequests or other gifts. As budgeting process involves planning, allocating and reporting and there are dozens of budgeting techniques, generally special and research libraries employ one of the following six types of budgets: lump sum, formula, line item, program, performance/function, or zero-based budgeting (Prentice, 1996).

 

6.1. Lump Sum Budget

 

Lump sum budgeting involves the allocation by the library’s parent organization’s top level management of a “lump sum” of budget resources to the library. The library is given a sum of money and told to function on that amount of money for a period of time. Since the lump sum method lacks specific ties to organizational goals and objectives, many library directors prefer other types of budgets. Also there are criticism like such a method can indicate primitive funding principles or a lack of interest in the library and its purpose. If the library director is alert, this can become an opportunity for the library to develop its own planning format and allocate the lump sum to program objectives. However, lump-sum budgets can be perceived as representing a high-level of flexibility and control within the library itself. Post allocation, the library management proceeds with further distribution of amount among various library programs and services.

 

6.2. Formula Budget

 

When a special library is funded through the formula budget, the budget allocation is typically tied to a numeric value such as full-time-equivalencies (FTEs), i.e., number of FTEs registered students multiplied by a fixed currency amount yields the budget for the library. This method has weakness; primarily, the budget total is calculated at a late point in time and intrudes on advance planning – especially for purchases and staffing increases – within the library. Another weakness results from the formula budget’s lack of identification with the parent organization’s goals and objectives. Also weakness emanates from the unpredictable nature of the budget since the formula is based on variables outside the influence or control of the special library.

 

6.3. Line –Item Budget

 

Line-item budget is commonly used budgeting method for financial planning, listing specific revenue sources (such as fines, print & copy, etc.) and expenditure categories (such as personnel, supplies, equipment, print materials, serials, etc.). As the name suggests line item, each category of activity is treated as separate unit from the list; it lists those items necessary to conduct an activity, such as personnel, equipment, supplies, and books, usually in a standard format that does not vary from year to year or from system to system. Line-item budgets facilitate low levels of detail for both planning and cost control purposes. Often, the accounting function of the parent organization develops accounts and sub-accounts on a company-wide basis. In that case, the library uses the company accounting scheme.

 

Some of the advantages of line-item type budget are, easy to prepare and project, each unit is detailed for both planning and cost control purposes and helps in comparing performance from one fiscal period to another fiscal period. Continuity is thus provided and the new budget can be constructed from the previous year’s document by listing the same line items and by varying amounts to be spent depending upon recent experience. Simple planning is necessary in developing this type of budget, as cost figures can simply be increased to meet inflationary factors. This type of budget is closely related to incremental budgeting under which whatever is in the budget is to an extent frozen and tile new budget is developed based on increments to the base figures. These types of budget-line-item and its incremental variation-are easy to prepare as they are based on previous action, and are easy to control in that variations in each line item for the agency can be plotted and reviewed over a number of years. It is possible to determine the extent to which salaries or the supplies necessary to run a library have increased (Prentice, 1996). For example, below table illustrates how a line-item budget is depicted:

 

Line-item type budget has its limitations like (Warner, 2004);

  • difficulty in relating the line budget to the goals of the parent organization,
  • the line-item budget’s propensity for “perpetuating” a line, i.e., ‘once a line, always a line’, the tendency of the Miscellaneous line to grow unwieldy as technologies and their costs escalate, and
  • the reality that comparing this year to last year is more complex and represents variables unaccounted for within the line-item budget.
  • It lack planning as major requirement
  • Line items are only units of program but not the measurable outputs
  • There is no requirement for planning
  • It is more focused on programs than output and end user satisfaction

6.4. Program and Performance Budget

 

Program budgeting and performance budgeting seem to be interchangeable terms, depending on which authority one cites. A program budget, sometimes called cost centre or product budget. This is further broken down into particular program or project areas of service such as reference, circulation, collection, and programs. The program budget identifies goals and programs to carry them out, the performance budget includes a measurement factor to respond to the question, “How are we doing-are we meeting our objectives and to what extent? For performance tasks rather than programs are highlighted. Performance areas include, library technical services – catalogue and material processing, planning – budgeting, automation, recruitment, talent engagement, circulation desk etc. “Program budgeting was first recommended by the Hoover Commission in the late 1940s and was adopted by the federal government in 1949. Performance budgeting came along a decade or more later. Program budget focuses on different projects earmarked in their goals and objectives, in a special library setup these are the services by the library to its clients. Its attractiveness is further enhanced by its usefulness when establishing priority for library programs relative to the parent organization and identifying of the most appropriate means of achieving the objectives. Program budget is somewhat similar to line-item type budget that each program in the program budget appears separately and is broken out in categories similar to the line-item budget (Robinson & Robinson, 1994). Sample program budget model illustrated below:

 

According to Young, “Program budgeting emphasizes the services that have been developed and assesses the dollar allocations in serving the needs of the clientele and performance budgeting as “activity budgeting” that is efficiency-oriented and places emphasis on the work to be done and its unit cost. Performance budgeting is management oriented: its principal thrust is to help administrators to assess the work efficiency of operating units by (1) casting the budget in functional terms, and (2) providing work cost measurements to facilitate the efficient performance of prescribed activities. Harry and others have described this methodology as consisting of eight steps (Prentice, 1996):

  1. Define the problem
  2. Identify relevant objectives
  3. Select evaluation criteria
  4. Specify client groups
  5. Identify alternatives
  6. Estimate costs of each alternative
  7. Determine effectiveness of each alternative
  8. Present findings

As the process demands first step planning is to define objectives and establish the objectives, identify the resources, collect data to support the program. Personnel costs, material cost, supplies and overhead cost are part of any program.

 

For example (Prentice, 1996), let us assume that the reference department has agreed that it will provide an on-line search service to small business. Staff would collect all cost figures for the program. The first and most expensive cost is that of personnel. This will include the salary of the individual during the time they are negotiating questions, conducting the actual search, sharpening their searching skills, or engaging in any other activity directly related to the searching activity. If supervision or training is required, the cost of the amount of time spent will also be calculated. If clerical support is needed this too will be added to the cost according to time spent. As direct salary costs are only about two-thirds of the actual cost of staff, benefits must be added in at the appropriate rate for each level of employee. The total of these factors will be the actual personnel costs. Cost of work station purchase or lease and the cost of thesauri or other search supports are included, as is the cost of paper for printouts and the cost of any additional supplies required to conduct the task. The cost per square foot of space used to house the activity is included as well. Overhead costs, which include the cost of heating, cleaning and insuring the space used, plus the administrative costs of managing the overall library service, may be included for each program or may be called an administrative program, with all such costs identified together rather than being broken down for each program. If the decision by the library administration is to absorb the cost of searches, then the cost of connect time and data base use would also have to be included in the program. A figure for the cost of an average search would be calculated and the number of searches in a particular period would be estimated. The program resulting from the data collection for on-line searching might look as follows:

 

DEPARTMENT                                           Reference

PROGRAM                                                 Online search service

DESCRIPTION                                           To provide exhaustive bibliographic search service

ANTICIPATED                                             Facilitating quality searches at reasonable cost

ACCOMPLISHMENTS

WORKLOAD INDICATORS                          Use statistics to be maintained

POSITIONS                                               Professional, Semi-professional

EQUIPMENT                                       Workstations, Printers, Bibliography control software

SUPPLIES                                              Forms, papers and consumable items

CONTRACTUAL                                         Rental or lease of equipment, Costs of database                                                                                                                   packages, Internet charges

 

One of the major advantages of program budget is it facilitates comparative analyses among the library’s multiple sub-programs. Others maintain that a program budget produces a document that is easily understood and demonstrates a willingness to make best use of limited resources by minimizing conflict and overlap among projects. One can easily find out accountability both in terms of fiscal responsibility and in the extent to which program objectives are achieved. A disadvantage associated with the program budget emerges when the adoption of the program budget method forces special library managers to think along program lines in contrast to the comfort-zone associated with previous budgeting methods. Sometimes library staff in defence, as program budgets demand analysis, reporting and justifying how they spend their time in respective projects. Even performance budget’s strength as providing an instrument for monitoring staff members and for developing unit costs. The primary disadvantage associated with performance budgets is the emphasis on quantity, not quality, of the activity being monitored.

 

6.5. Planning Programming Budgeting System (PPBS)

 

Planning Programming Budgeting System is advance-revised version of program budget. This is more towards evaluation of performance of a program. Its emphasis is on the determination of the purpose of a library or other institution, a clarification of its objectives, and the development of programs to carry out the objectives. In PPBS there is a greater emphasis on measures of program effectiveness and the opportunity for decision-making based on the extent to which programs are meeting objectives. This is holistically planned budgeting mechanism where other than economic factors social and political factors are part of budget. The emphasis of PPBS is on planning to meet objectives, and it is in the planning steps that the greatest amount of change and new learning will take place. Conclusions can be reached as to what priorities actually exist and changes then made if that is desirable. Choices are next made as to which of a number of alternative methods is best for implementing the agreed priorities. To carry this out there is need for a decision-analysis unit– a person or group competent to review data and provide cost figures for programs and alternatives. For instance (Prentice, 1996),Principal types of output indicators are number of items circulated, people registered as borrowers, individuals attending a program, and similar data. These can be collected for varying time spans depending on the availability of data and the planning needs. Some activities are not quantifiable and there is no point in trying to force quantification. This is particularly true in the case of the many service-related functions of an information center. The number of reference questions answered is no measure of quality or of user satisfaction. It should be remembered that volume indicators serve as a guide to how much the library is doing rather than how well it is doing. They do provide a guide to the size of clientele and help to allocate resources in response to use. Sudden changes in volume indicators also help to alert planners to areas requiring attention.

 

Selecting output indicators for evaluation should be made clear in the beginning and ensure those factors meet certain criteria. For example, Circulation data are inappropriate as a measure for reference service and on-line user measures are appropriate only to one facet of reference service.

 

6.6. Zero-Based Budget (ZBB)

 

The focus of Zero-based budgeting is on that what will happen in the future that corresponds to the goals and objectives of the parent organization. Previously discussed budgeting processes are comparing present performance and/or programs to the past or to the current activity. This budget is starts on “fresh paper” and this “from scratch” approach is viewed as an appropriate instrument to rank library programs by cost/importance to organizational goals and to identify and eliminate programs that provide minimal value-added (Zach, 2002).

 

“Zero-base budgeting (ZBB) is a planning and budgeting process that involves decision making at all levels of management, starting with a zero base for budgeting and justifying the entire budget request in detail. It requires that all programs and operations at all levels be identified in decision packages, evaluated, and ranked in priority order.” (Kindey & Taylor, 1994). In the process of budgeting every function has to justify budget fund requirement, generally the head of each functional unit is responsible for this. Broad steps involved for a zero-based budgeting blueprint are:

  1. Elucidation of organizational goals and objectives
  2. Examining status of the existing structure, functions and activities
  3. Identifying decision units, normally subdivisions of the organization
  4. Preparing decision packages (a decision package is a statement of objectives, current operations, alternative actions, and possible funding levels of a unit)
  5. Review of decision packages and ranking them according to priorities
  6. Preparing overall budget

This system of budget has been viewed as better management, greater efficiency, and justifiable use of financial resources. Other advantages associated with zero-based budgeting include its focus on identifying programs that will further the company’s goals for the future. Reliance on “the way we’ve always done things” violates the basic premise of zero-based budgeting. Most zero-based budgeting advocates maintain that the method promotes innovation, effectiveness and efficiency. The downside of zero-based budgeting relates to its complexity, time-consuming nature and its success is in how best top-level management or governing body supports. Starting at “zero” implies that all aspects of the library’s operation will undergo examination and justification. Most special libraries indicate that zero-based budgeting also intrudes on day-to-day operational activities such as journal subscription renewals and standing orders (Dossett, 2004).

 

Zero-base budgeting is result oriented and progressive, what is to be accomplished, at what level, and the way in which it is to be accomplished are the major questions. Justifying outdated or non-relevant functions get easy exist in zero budgeting. Due to these requirements sometimes libraries face challenges in justifying financial requirements. Periodic reports and performance reviews are core to zero-budgeting, as organizational policies mandate aligning goals and objectives of various divisions to top management goals and priorities. Zero-base budgeting is more than a budget system. It is a management improvement strategy that eventually leads the organization to management by objectives, to long-range planning for programs and resource allocation and to tying inputs to outcomes (Prentice, 1996).

 

There are a number of similarities between program and performance budgeting and zero-base budgeting, please sees below table:

ZBB

 PPBS
Greater flexibility to achieve objectives Traditional way of achieving objectives
Short term budgetary system within the planning context Long-range budgetary management system
Decisions are required concerning each program on an annual basis Overall program is reviewed, but not each year and not with an overt decision to fund or not to fund
  1. Budget Process

Preparing annual budget helps in understanding our goals, it gives us the real picture of developmental areas, encourages effective ways of dealing with money issues, fills the need for required information for top management and to avoid surprises and maintain fiscal control. Typically, budgets are prepared for one fiscal year but may be part of a long-term budget planning cycle. The fiscal year for which budgets are prepared varies widely. Most organizations run on tax payers money operate on an annual budget cycle, with little or no opportunity to carry over funds from one year to another. Hence, library head should maintain well-planned financial management calendar and communicate this to top level management. Warner’s admonition to “Own Your Numbers” implies a library manager’s thorough knowledge and understanding of the critical nature of the budget process. Each manager must know the questions to ask and answer. Such questions would include:

  •  What is the total budget of the library?
  •  What is the total budget of the organization?
  •  What percent of the organization’s total budget goes to the library?

Although the answers to the second and third questions may be difficult to ferret out, the astute library manager creates a role within the management cadre that facilitates obtaining answers (as cited in Dossett, 2004). On a regular basis, maintain and monitor cost versus actual records. Typically, the parent organization’s accounting department prepares periodic cost reports. Additional activities that accompany the budget process include maintaining and reviewing a consideration file at all times and reviewing and acting on other funding opportunities, such as grants and fund raising. Anticipate rather than react to budgetary concerns.

 

Adhering standards meant for special libraries is must to substantiate your library’s activities and programs in quantitative terms. Professional organizations such as the American Association for Law Libraries, the Medical Library Association and Special Library Associations in India have also argued standards for libraries supporting those professions.

 

“Included among Warner’s (as cited in Dossett, 2004) collection of rules of thumb are:

  • In private law firms, the libraries materials budget (i.e., no salaries) is said to be approximately 1 percent of the firm’s total revenues.
  •  In special libraries, library expenditures are rumoured to be between 0.5 and 5 percent of revenues.
  •  In special libraries, salaries account for 50 percent to 80 percent of the budget, literature and service costs 10 percent to 40 percent, and the remaining 10 percent all else.
  •  The cost of purchasing equals the cost of processing (i.e., the technical services budget equals the book budget)
  •  In general, serials prices rise exponentially faster than do book prices: 15 to 16.5 percent per year for serials, 7 percent per year for books.Although less than scientific, these rules-of-thumb represent experience of other special librarians. As anecdotal support, one would cautiously employ such rationale when involved in formal budget/financial management activities with senior management. At the same time, knowing “what others are doing” can be judiciously applied to formal budget discussions if substantiated by “hard data”.

Often, budget presentations to upper management are brief for the presenter, but long and tedious for the review panel. Therefore, Warner suggests that regardless of the presentation format, the library manager presenting the budget must be brief, to the point, informed and well addressed.

 

Organizational communication standards have budget presentation formats to submit the budget proposals to review panel. Hence, guidelines are provided, follow them carefully. Always choose right presentation media to present your budget, apply right format, study, and apply sound design principles to your presentation. Avoid overloading the presentation with distracting sounds, animation, small text, and colourfulness. Include only those elements that enhance your message and motivate your audience to act as your library needs them to act. Below is a sample template for how we can create actual budget document;

 

  1. Summary

The budget systems described so far has differing levels of planning implications and each has economic and political implications as well. The one implemented by the individual library will depend largely upon decisions taken by the parent institution or government ministries. Which format to follow is rarely a decision made by the librarian. Knowledge of budgeting, its benefits and difficulties of the major budgeting systems is essential for librarians, however. No one method is best for all kinds’ special libraries. However, as a conclusion, special libraries may proceed for program budgeting or zero-base budgeting as a way of reviewing aspects of the library program. As the requirement of performance budgeting that measures of performance or output be identified-serves as a obstruct to widespread acceptance of this approach, in large part because of the difficulty of devising generally acceptable performance measures for a service which is performed in a not-for-profit setting. As public demand for accountability increases, performance measures are being tested and incorporated into the planning budgeting cycle. Nonetheless, zero-base budgeting, after a flurry of experimentation in the mid 1970s, is now used as a source of planning techniques but is regarded as too unwieldy to be used as a full budgeting system. As special libraries deal with various internal operations and information services, the internal planning can be complex and detailed hence internal budget decision-making process carefully structured, but the output that emerges for external consideration must be simple and easy to understand in its larger implications and should not appear too different from what the funding agency top management expects. (Prentice, 1996).

 

As we are witnessing shrinking budgets and periodic inflations, libraries as an element of overhead often face first round budget cuts. Collaborative collection development, just-in-time acquisitions, patron driven acquisitions and forming consortiums are the emerging trends to overcome shrinking budget problems. The special library that integrates itself into the organizational life system and consistently demonstrates its value to the parent organization through effective, efficient programs and value addition will be better positioned to withstand budget cuts. Specific strategies that equip the special library in dealing with the threat or reality of budget cuts include programs that satisfy the needs of its upper management and its end users. Hence, first know your organization; know your end-users expectations and changing needs. Implement marketing strategies that establish the special library as a vital component of the parent organization’s success and ensure organization cannot lead without this component.

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