Unit 4.1 : Financial resources of Public Libraries. Mobilisation and Estimation of Public Library Finance.
MLIS-102 (D): Public Libraries
1. Introduction
Money is a critical input for any enterprise, and effective fund management becomes indispensable for an organisation to attain its objectives. Libraries and information centres are no exception; they constantly require substantial financial resources. Any comprehensive exploration of essential public services, such as library facilities, remains complete with delving into their economic dimensions. Emphasising the importance of financial management skills among library and information professionals is crucial due to the continuous need for adequate funding in these sectors.
Despite the pressing economic and financial pressures faced by libraries in recent years, the management of their finances remains an overlooked aspect within library management. How libraries handle their finances resembles the practices of not-for-profit service organisations, particularly those within welfare economies rather than profit-driven enterprises.
Libraries, predominantly non-revenue earning entities, essentially function as service components within academic and institutional bodies. This fact accentuates their responsibility to meticulously and judiciously manage their finances. Public library services often remain free, supported by public funds - whether through government grants or library cess. Recognising the paramount importance of a consistent and adequate flow of finance to libraries cannot be overstated, considering finance also serves as an instrument for control and evaluation.
2. Financial management
Financial management extends beyond simply handling cash or providing funds. It encompasses studying principles and practices governing financial operations within institutions, industries, or states. The 'finance function' involves procuring necessary funds for enterprises and ensuring their effective utilisation. This field addresses the acquisition, distribution, and optimal use of funds, balancing revenue and expenditure, and maintaining comprehensive transaction records for enhanced control and evaluation.
Critical components of financial management include:
• Financial planning
• Forecasting receipts and disbursements
• Fund realisation and revenue generation
• Fund allocation
• Fund utilisation
• Financial Accounting
• Financial control
• Financial auditing
The responsibility for finding funds, investing resources, managing assets, obtaining budget approvals, and other financial-related matters falls under the jurisdiction of the central executive authority within the public library system or the parent organisation to which a specific type of library belongs. Nevertheless, libraries are responsible for estimating their financial needs, formulating budgets for their functions, activities, and programs, managing allocated funds, adhering to specified spending periods, maintaining meticulous accounts, and compiling comprehensive reports.
2.1 Principles of Financial Management
Understanding fundamental financial management principles proves necessary and beneficial to manage finances effectively. These principles encompass:
• Effective Control: Efficient financial management relies on proper control mechanisms. Simplified control methods promote economical resource usage, minimising wastage and maximising limited financial resources.
• Simplicity: Financial management procedures should remain simple and user-friendly, fostering efficiency and economic viability.
• Regularity and Farsightedness: Establishing a structured timetable for financial management programs ensures clarity and expected contributions from involved parties. Timely submission of budgets and provision for future needs are essential for effective financial planning.
• Economy: Prudent financial management demands economy in all activities, emphasising the avoidance of unnecessary expenses and the judicious use of scarce funds.
• Flexibility: Financial management allows adaptation to varying circumstances, particularly during crises. However, this adaptability must align with established financial rules and procedures to maintain integrity and accountability.
While these principles aid in managing library finances, adherence to statutory financial regulations set by executive authorities becomes imperative for libraries.
Furthermore, understanding related fields such as cost accounting economics (especially welfare economics) and employing various financial management tools and techniques like funds flow analysis, ratio analysis, break-even analysis, and financial forecasting prove crucial in library and information centre management. These concepts find practical applications within these domains. Economic management needs to be a more vital aspect of library services. More efforts should be made to establish a model for economic management within financial frameworks. Libraries, often part of larger parent organisations, integrate their financial management and accounting systems. The primary responsibility typically lies with the head librarian or the accounts division of the parent organisation.
2.2 Financial Management in Service-oriented and Not-for-Profit (NFP) Organisations
Financial management within service-oriented and not-for-profit (NFP) organisations, like libraries and information centres, presents greater complexity and challenges than profit-oriented entities. Managing finances in these settings entails systematic planning, securing funds, prudently allocating resources, and maintaining meticulous accounting practices.
Several distinctive characteristics of service-oriented and NFP organisations contribute to the difficulties faced in their financial management. These include:
• Labor-intensive nature, contrasting with profit-making organisations that rely on machinery and technology.
• Absence of inventory, as these entities provide services rather than tangible goods.
• Dominance of professionals within their operations.
• Challenges in assessing service quality before delivery.
• Lack of a straightforward profit measure, customary in profit-driven organisations based on revenue from goods and services sold.
Measuring output becomes challenging for service-oriented and NFP organisations due to multiple objectives, the absence of a clear cost-benefit relationship, and difficulties in comparing performance across different organisational units. There is no universally accepted criterion for gauging success in such entities. Consequently, they often resort to non-monetary measures to assess output.
These measures can be subjective or objective, discrete or scalar, quantitative or qualitative and may include:
• Results measures
• Process measures
• Social indicators
• Using inputs as proxy output measures
Libraries and information centres, in particular, need to dedicate more attention to devising practical output measurements. Additionally, there needs to be more clarity between costs and benefits within service-oriented organisations. Unlike profit-driven companies influenced by market forces, service-oriented and NFP organisations experience less impact from market dynamics due to the absence of shareholders, leading to differences in ownership and power structures. This often results in these entities taking on political dimensions.
The traditional cost accounting and control techniques, primarily developed for profit-oriented companies, are less directly applicable to service-oriented and NFP organisations. Management controls within these institutions must be improved, especially in smaller entities operating from a single location, which has become customary over time.
3. Sources of Funding/ Finance in Libraries
Libraries face mounting economic and financial pressures due to various factors:
• Increased costs of information materials
• Diverse and expanding demands
• Adoption of new technology
• Requirement for additional space and infrastructure
• Escalating wages and salaries
• Interlibrary loan and resource sharing
• Introduction of new programs/projects to validate the library's existence
3.1 Financial Challenges in Library Management: Libraries depend extensively on continuous funding to organise their activities, programs, and services. Securing funds annually and over extended periods, such as three or five years, is crucial, ensuring continuous financial stability. Finance is pivotal in library management, especially in acquiring and building collections yearly. The increasing costs of books and journal subscriptions make it only possible to plan collections with a consistent fund supply. Often, funding bodies need to pay more attention to the need for processing materials acquired, impacting competent usage.
3.2 Types of Financial Support:
• Recurring Grants: These grants cater to regular services, book and periodical purchases, and expected contingent expenses.
• Non-recurring Grants: Allocated for specific purposes like constructing library buildings, procuring furniture/equipment, or special collections.
• Ad Hoc Grants: Provided for specific purchases based on recommendations.
3.3 Diverse Funding Sources for Libraries:
• Government and Public Funding: Mainly through grants from national/state governments and public funds raised via taxes.
• Local Support: Library cess and assistance from municipal or provincial authorities.
• Other Grants: From public institutions, private agencies, endowments, charitable entities, and foreign/international support.
• Fines and Miscellaneous Sources: Income from late book returns, fines, sales of old library materials (books, newspapers), and fees for services like photocopying, printing, internet usage, etc.
• Fee-based Services: Charging for specific services (overdue charges, membership fees), often meant for supplementary purposes.
• Gifts and Donations: Mobilizing funds through exhibitions, sales, and community support. Donations in cash, buildings, or investments can provide regular income through rent or interest.
3.4 Ethical Considerations in Financial Practices:
• Caution in imposing fines to avoid negative user experiences.
• Careful planning and promotion of fee-based services for new offerings without duplicating existing services.
• Handling gifts and donations cautiously to ensure unconditional and exclusive control over funds collected for the library.
Libraries often grapple with balancing traditional free services while exploring fee-based options for specific services, maintaining the core mission of providing accessible information to all. Careful planning, ethical considerations, and strategic fundraising are essential to ensure financial sustainability and maintain the library's integrity as a public service institution.
4. Funding of Public Libraries: Challenges and Sources
Libraries, especially public ones, are characterised by their expenditure-driven nature, needing more significant revenue-generating capabilities while consistently requiring increased funds for their ever-growing services. The UNESCO Public Library Manifesto 1994 stipulated that local or national governments should wholly fund public libraries.
Historically, public libraries relied on funding from government sources and support from scholars, trusts, NGOs, and aristocratic patronage. However, in the 20th century, particularly after India's independence, the development of public libraries became a state subject. Consequently, financial resources primarily come from state government grants and the levying of a library cess per state library legislation.
4.1 Diversifying Financial Resources:
With changing landscapes and the multifaceted functions expected of public libraries, there's a pressing need to innovate and explore diverse funding avenues. A strategic approach involves tapping into cultural associations, private foundations, commercial firms, philanthropists, and other organisations, aligning the library's mission with donor interests or community requirements.
The primary sources of library funds include:
• Regular Grants from Parent Bodies: Derived from public funds raised through taxes.
• Ad Hoc Grants: Received from other departments or institutions, also sourced from public funds.
• Grants from Endowments and Charitable Institutions: Support from organisations inclined toward aiding libraries.
• Fees, Subscriptions, and Miscellaneous Revenue: Generated through services but are ad hoc, non-recurring, and often earmarked for specific purposes.
• Fines and Miscellaneous Sources: While fines and other sources provide limited income, they primarily serve compliance purposes. Miscellaneous sources may include revenue from the sale of library publications, reprographic services, translations, etc., usually allocated to the parent organisation's general fund for budget allocation.
• Recurring and Non-Recurring Grants: Recurring grants support regular acquisitions, service maintenance, and anticipated contingent expenses. Non-recurring grants cater to purposes like construction, furniture acquisition, and special collections. Ad hoc grants are occasionally provided for unique purchases based on recommendations.
• Government and Institutional Support: The RRRLF (Raja Rammohun Roy Library Foundation) and other government departments are substantial funding sources for Indian public libraries. Additionally, foreign entities, specialised agencies, bilateral aids, and international organisations may offer monetary or in-kind support.
• Fee-based Services and Policy Recommendations: Public libraries should explore revenue generation through fee-based services, especially for non-traditional offerings like demographic reports, computer printouts, reference services, training programs, and more. However, balancing these fee-based services with the core mission of providing free access to essential information is crucial.
• Insufficient Government Contribution: In India, there's a disparity between the substantial financial support provided by local, state, and federal governments in the USA and the inadequate contributions from central and state governments to public library funds. The lack of a national policy on library services in India further exacerbates the financial shortfall.
• Legislative Framework and Revenue Sources: In India, 19 states have public library legislation, categorised as either "pure form" or "mixed form." While some states employ library cess or receive grants-in-aid, others rely on voluntary organisations. However, library cess alone often fails to meet the growing needs of public libraries due to varying taxable capacities among regions.
• Subscription and Endowments: Subscription fees are controversial as they contradict the principle of free library services. The reliance on endowments or charitable trusts, common in countries like the USA, is infrequent in India due to the non-recurring nature of funds.
The financial demands of public libraries continue to grow, necessitating consistent government support. While endowments, subscriptions, and fines contribute minimally, they are not substantial revenue sources. A holistic approach involving government grants, innovative funding strategies, and a national policy on library services is imperative for sustaining public libraries effectively.
5. Mobilization and Estimation of Public Library Finance
It involves acquiring, managing, and estimating financial resources essential for public libraries' effective functioning and development. This process encompasses various steps and considerations to ensure adequate funding for library operations, services, programs, and infrastructure.
• Understanding Financial Needs: The process begins with an in-depth assessment of the financial requirements of the public library. This involves analysing the library's goals, mission, services, user demographics, and future growth prospects. Understanding the specific financial needs is crucial for accurately estimating the required funds.
• Financial Estimation: Estimation involves projecting the financial needs of the public library over a specific period, typically ranging from a fiscal year to multiple years. Estimation is based on various factors, including but not limited to:
o Operational costs: Staff salaries, utilities, maintenance, and day-to-day expenses.
o Collection development: Acquiring books, e-books, periodicals, databases, and other resources.
o Technological infrastructure: Hardware, software, and upgrades to support digital services.
o Program and service development: Planning and executing community programs, educational workshops, and outreach initiatives.
o Capital expenditures: Infrastructure development, renovations, or expansions.
• Sources of Library Finance: Identifying and mobilising diverse funding sources is crucial. Common sources include:
o Government Grants: Local, state or national governments allocate funds to support public libraries.
o Private Donations and Grants: Contributions from philanthropic individuals, foundations, or corporate entities interested in supporting library initiatives.
o User Fees and Services: Revenue generated from services like photocopying, printing, late fees, or special programs offered for a fee.
o Endowments and Trusts: Funds from long-term investments or trusts established to support library operations.
o Partnerships and Collaborations: Collaborative projects with other organisations or institutions that provide financial support.
o Fundraising Activities: Events, campaigns, or initiatives to raise funds from the community or specific donor groups.
• Budget Planning and Allocation: Libraries create a comprehensive budget plan once the financial estimation is complete and potential funding sources are identified. This involves allocating funds to different areas based on priority needs and strategic goals. Budget planning ensures that available resources are optimally distributed to effectively meet the library's objectives.
• Advocacy and Communication: Libraries often engage in advocacy efforts to highlight the importance of adequate funding for their operations. This involves communicating the value and impact of library services to stakeholders, policymakers, and the community to garner support and funding.
• Monitoring and Evaluation: After funds are allocated, it's essential to monitor expenditure and evaluate the effectiveness of financial utilisation. Regular assessments ensure funds are used efficiently and effectively, making adjustments when necessary to align with changing needs or circumstances.
• Long-Term Sustainability: Efforts to secure long-term sustainability involve strategic planning, diversified funding sources, building community relationships, and adapting to evolving trends in technology and user preferences.
The mobilisation and estimation of public library finance require a strategic, comprehensive, and dynamic approach that considers various factors, including financial needs assessment, funding sources, budget planning, advocacy, monitoring, and sustainability strategies.
5.1 Estimation of Library Finances
The success of any institution, including libraries, hinges upon a continuous and adequate flow of finances. Estimation becomes the cornerstone of proper financing, much like how governments, institutions, individuals, and families evaluate their financial needs and resources. For libraries, the estimation of required finances is contingent upon various factors like the library's age, jurisdiction, volume, and quality of reading materials, and the number of readers, among others.
5.2 Bases for Financial Estimation in Libraries:
• User Population and Composition: Understanding the demographics of library users involves analysing the characteristics, preferences, and behaviour patterns of individuals who utilise library services. This analysis includes age groups, socioeconomic backgrounds, educational levels, and interests. By comprehending the user base, libraries can tailor their collections, programs, and services to cater to specific needs and preferences, thus effectively estimating the financial requirements for diverse materials, resources, and programs serving these demographics.
• Material Acquisition: Determining the types of media, content, and information sources required for procurement is fundamental for estimating financial needs. This involves evaluating the demand for various formats such as books, e-books, journals, audio-visual materials, online databases, and more. Libraries must assess the cost of acquiring these materials, considering both physical and digital formats, and allocate funds accordingly to maintain an up-to-date and diverse collection.
• Services and Objectives: Aligning financial needs with the library's service objectives ensures that allocated funds support the core mission and goals of the institution. This involves understanding the scope of services offered by the library, be it reference assistance, educational programs, outreach initiatives, or technological benefits. Estimating financial requirements involves aligning these services with the library's objectives and identifying the resources, staff, and infrastructure needed to deliver these services effectively.
• Hardware and Software Needs: Modern libraries heavily rely on technology to provide access to information. Estimating financial needs includes considering hardware (computers, servers, etc.) and software (library management systems, databases, digital platforms) requirements. This involves initial acquisition costs and ongoing maintenance, upgrades, and technological advancements to ensure the library's technical infrastructure remains efficient and up-to-date.
• Unmet Service Pressures: Identifying and addressing the most pressing factors influencing financial needs involves understanding the gaps or deficiencies in current services. Libraries must assess where services are falling short, be it in terms of resources, staffing, technology, or infrastructure, and estimate the financial investments necessary to bridge these gaps and meet the growing demands of users.
• National and International Service Standards: Compliance with established quality service benchmarks at the national and international levels helps estimate financial needs. Libraries aim to meet or exceed service standards set by governing bodies, industry associations, or international library consortia. Aligning with these standards requires adequate financial support to maintain quality service levels.
• Economic Factors: Considering economic factors such as inflation, rising costs of reading materials, and changes in market dynamics is crucial. Libraries must adapt their financial estimations to account for these economic shifts to ensure continuous access to materials and services without compromising quality.
5.3 Methods of Financial Estimation:
• Per Capita Method: This method fixes a minimum amount per person deemed essential for standard library services. Factors influencing this estimation include educational and cultural standards, future needs, per capita income, book costs, and staff salaries. Recommendations from various commissions and experts suggest different per capita amounts for different types of libraries.
• Proportional Method: This approach involves setting a specific percentage of an institution's budget as a minimum for the library. Recommendations vary - for instance, the University Education Commission proposed 6.5% to 10% of a university's budget for libraries. However, most universities in India typically allocate around 3% of their budget to libraries. Similar suggestions are made for colleges and public libraries.
• Method of Details: This method entails accounting for all expenditure categories, dividing them into recurring (current) and non-recurring (capital) expenses. It involves meticulous tracking of expenses and comprehensive estimation for various library needs, such as staff, books, and materials. Expert committees and commissions have suggested specific formulas and criteria for calculating staff requirements and the cost of books and materials.
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