Happenings at the Fianance Committee Meeting

The Finance Committee conducted its fall meeting at the SLA headquarters October 1-2. The agenda included the following topics: management letter review, 1998 financial report and budget review, staff recognition, 1998 operating deficit, FY 1999 budget, unit budget requests, cost per member statistics, five year forecast, fund development, investments, re-appointment of auditors, computer system upgrade, capital expenditures, asset safeguarding, unit financial reports, committee charge, and long-range financial planning.

The bulk of the first day was focused on the review and approval of the FY 1999 Draft Budget. Staff concentrate time and effort to produce shadow budgets in developing the FY 1999 Budget. In the most basic terms, shadow budgeting entails the development of multiple budgets for each program area:

Current Reality Budget: How we typically budget--using up-to-date financial information and program plans (both short-term and long-term) to develop a well-thought, realistic budget based on specific goals and objectives.

Best Case Scenario Budget: Incorporates the principle of stretch. This is where we dream if there were additional funds (i.e., new products and services, technology, etc.). There must be a direct benefit in allocating additional funds (i.e., increased income or greater long-term benefit to the members). We also examine the impact that the dreaming will have on the organization as a whole. For instance, having $10,000 of additional promotional dollars might yield $50,000 of new product orders. What is the impact on other program budgets and staff resources (i.e., accounting, mail, fulfillment, technology requirements, etc.)?

Worst Case Budget Scenario: The contingency plan for the tough times when income is down and/or there is an unforeseen major expenditure in a program area or activity.

The FY 1999 Budget includes a total income of $6.8 million. This represents an eleven percent increase, or $668,285, over the FY 1998 Budget. This is due primarily to the increased projected income in the areas of Membership Development, Fund Development, Advertising, and Annual Conference Exhibits. The FY 1999 Budget also includes the income mandates from the Finance Committee's long-range financial plan: increased income from membership dues, educational registration fees, shipping and handling fees, exhibit booth fees, advertising rates, career services fees, and research income.

The ratio of dues to non-dues income for FY 1999 is 26.9 to 73.1, as reflected in the budget (versus 25.8 to 74.2 in 1998). The change is due to the 1999 dues rate increase.

In January 1998, the board of directors accepted the following generic financial assumptions that have been incorporated in the FY 1999 Budget:

The Urban Consumer Price Index is projected to rise approximately three percent. The AIMS Association Financial Index is projected to increase near four percent. This will relate to an across-the-board increase in operational expenses.

Non-profit postal rates will increase six to ten percent and the use of such for association programs and services will continue to be scrutinized and limited.

Staffing costs will increase by seven to eight percent to fund the salary administration plan as approved by the board of directors, and will include the expansion of outsourcing.

Legal and other professional services will continue to rise at a rate of five to six percent.

Travel and lodging costs will continue to increase approximately five percent.

Further technological advances and implementation of the virtual association will enable the association to provide more products and services in the digital format, offering potential sources of additional revenue. Since the initial period of changing any delivery method causes uncertainty, staff will be faced with offering both digital and print formats in undetermined quantities as the initial demand may be somewhat vague.

The growth in the membership dues base is projected at three to four percent, with a projected increase in income of more than $250,000 (based on the assumption that a new dues rate structure will be in place effective January 1, 1999). Programmatic costs will increase to serve a growing membership base.

SLA's international interests and exposure will continue to increase. This will create greater demand for the development, implementation, and delivery of global products and services to a growing international membership.

While there are no new major programs included, the FY 1999 Budget does reflect the following programmatic and/or activity changes and highlights:

The continued funding of strategic priorities in accordance with the 1999 dues increase and the priorities established by the board of directors in June 1998. These are primarily in the following areas: technology, professional development, public affairs, leadership services, governance, and research.

An increase in program costs for the continued use of outsourcing and other consultant fees. According to the Association Information Management Service (AIMS), associations using external professional services usually have a higher level of productivity. Utilizing external professional services is a good way to stretch the capabilities of staff and to meet the special and/or episodic needs of the association without a long-term staffing commitment.

An increase in net membership income of more than fifteen percent as approved by the board of directors at its June 1998 meeting. The income figures include the dues rate increase approved by the membership in 1998. A strong emphasis will be placed on member retention and international recruitment for 1999.

A greater allocation of personnel costs to: 1) those activities generating unrelated business income (advertising, product development, contributions, and sponsorships) as additional staffing efforts are being made in the areas of marketing and fund development; 2) membership development, as greater emphasis is being placed on the retention of members and the recruitment of international members; and 3) exhibits, as the annual conference exhibit hall continues to grow and new market segment vendors are sought.

A re-alignment of staffing allocations within the Professional Development program as the program continues to change and develop in response to the needs of the profession and technological changes.

The inclusion of one additional staff position as approved by the board of directors in June 1998. The position is slated as a senior level director dedicated to leadership services.

The Finance Committee spent the second meeting day working on the long-range financial plan of the association. This work will be continued at the winter and spring meetings of the Finance Committee.

by Richard Wallace, SLA Treasurer. For more information, contact Wallace (rewallce@aestaley.com).