Unit-12:Budgeting and Types

12.0 : Objectives

After reading this Unit, you will be able to:

• know the sources of finance for libraries;

• learn the various types of budgets and financial plans;

• formulate the budget proposal keeping in view both budgeting aspects and
functions of a library;
• calculate the financial requirements using methods of financial estimation; and
• confirm the actual expenditure to the budget in a library.

12.1 : Introduction

Libraries and information Centres are essentially non-profit making service organisations,
attached to one institution or another. Previously, their financial plans were part of the
general budget, and as such the library staffs were exempted from preparing their budgets.
However, with the recognition of the fact that a budget was both a financial plan as well
as a control mechanism, it has become essential for librarians to prepare library budgets.
To begin with, the budgets generally reflected

objects of expenditure such as, salaries, documents, etc. It was more an "On what
budget". The purpose of the expenditure was a secondary consideration, and sometimes, it
did not find a place in the budgetary statement. But, with the growing concern of costs,
there developed a tendency to either reduce expenditure or to justify what was being
spent. In this situation, the library was hard hit and was subjected to frequent budget cuts,
as it was considered essentially a non-profit making, unit. This put a considerable
pressure on librarians to justify the expenditure incurred on the libraries. It was surprising
that they came out with plans which justified effectively the expenditures, which made
Townsend remark, "A tight budget brings out the best creative instincts in man. Give him
unlimited funds and he won't come up with the best way to result. Man is a complicating
animal; he only simplifies under pressure. Put him under some financial pressure - then
he will come up with a plan which, to his own private amazement, is not only less
expensive, but also faster and better than his original proposal which you sent back".

Thus, it is necessary that librarians become familiar with the principles and practice of
financial management. These would include problems of acquisition,
distribution/allocation, and utilisation of financial resources. Some of the functions that a
librarian has to perform would be determining financial requirements, budgeting the
various activities and programmes, managing the funds allotted appropriately and
accounting for the same.

12.2 : Sources of Finance for Libraries

Libraries require finance on a continual basis for organising their activities, programmes
and services. Depending on the type of library, the sources of finance are different. The
following table gives, in general, the sources of funds for different libraries;
Table 12.1 : Sources of Funds for Academic, Special and Public Libraries
At this juncture, it may be mentioned that there is no consensus among the people
concerned whether subscriptions and/or charges should be levied at all. Ranganathan, the
librarian par excellence, for one was opposed to this idea as he favoured a free
service, especially for public libraries, all his life. On the other hand, with increasing
concern for costs and emphasis on self-sufficiency in recent times, this position needs to
be re-examined. However, while such cost-recovery programmes may be workable in
developed countries, it would not be so in developing countries like India. This is because
of the fact that the users, in developing countries, cannot afford to pay fees for services
rendered by libraries.

12.5 : Budget Justification

While a review of past expenditure, use of library statistics, and standards may be useful
in estimating the different items of expenditure in a budget, they may not, by themselves,
help much in justifying the budget. Therefore, the librarians or information scientists must
put in some special effort in this regard. This effort may be in the form of data/information
collection, or choosing a particular method of budget construction which will also aid in
justifying it or adopting certain tactics.

12.5.1 : Data/Information Collection

Quantification facilitates justification to a certain extent. Hence, it is suggested that all
activities amenable to quantification may be quantified. An increase in document
circulation or of reference questions answered or of retrospective bibliographies, state-of-
art reports compiled, etc., may be documented for future use at the time of budgeting. The
data collected should be graphically presented for maximum impact. One precaution that
needs to be taken is that whatever is presented graphically or otherwise has to be precise
and concise, apart from being simple. A well-presented graph saves a lot of words.

Secondly, it will be a good practice to maintain a file containing testimonials of

appreciation from users who have benefited by the library and information services.
Comments from the clientele regarding inadequacy or lacunae in collection, services, etc.,
or suggestions for improvement needs to be recorded as these would stand in good stead
when additional funds for collection development or for instituting new services are
requested. In addition, information regarding various types of On-demand services
undertaken by the library or information centre (in response to specific queries from
users) with the feedback received from the users should be collected and maintained for
future use.

If programmed budgeting, especially PPBS, has been the method adopted for budget
construction, performance figures regarding the various operational and service activities
would be available. These may come in handy at the time of justification.

12.5.2 : Method Adopted in Budgeting

In developing a financial plan for a library/information centre, the librarian should be
aware that all he asks for, will not be sanctioned inspite of the fact that the budget might
have been constructed on the basis of sound reasoning. Therefore, a technique that can be
followed with successful results is to develop a multi-tier budget. In this method, a
minimum core level of service without which the institution cannot survive should be
developed with corresponding costs. Then, several tiers indicating new programs and
services with corresponding benefits should be developed with the necessary cost figures.
After this exercise is gone through, the librarian should present its multi-tier budget
indicating his preference of a particular tier. A word of caution here-do not be over-
ambitious to recommend the top-most tier. It will be turned down much to the
disappointment of the librarian. Hence, the librarian should indicate one of the tiers other
than the top tier to give the impression to the management that he is rejecting some higher
priced alternatives.

Another technique that can be fruitfully utilised is to calculate the amount required to run
the present level of service and then compare it with the proposed budget which would
include new programmes and services. This comparison would show that the increase in
funds asked for, is more for continuing the present level of service than the starting of
new services. Inflation may account for a substantial increase in funds accompanied by
price increases of books and periodical

subscriptions. If, however, the management persists in not providing additional funds,
one can tell them that no increase in budgetary funds would result in decrease in library
and information services. This is because the fixed costs like salaries cannot be reduced
(as a matter of fact, the fixed costs increase due to increments and other allowances to be
given to the existing staff) and consequently the variable costs like book costs, periodical
subscriptions, etc. would have to be reduced. Hence, it is hoped that such a comparison
would convince the management in releasing the necessary funds.

12.5.3 : Other Tactics

The other tactics that can be adopted by the librarian and would help him indirectly in his
quest for funds are:

a) Inclusion of management and senior personnel in library committees;

b) To charge other institutions who make use of the services;

c) Maintain good relations with the finance section as this would facilitate obtaining
financial information easily. In addition, financial personnel can be useful in the
formulation of the library budget;

d) Assess the financial climate of your organisation before you make demands;

e) It will be a wise policy to adhere to the budget as far as possible. This would be
a plus point as far as the management is concerned; and

f) Speak to the financial management the language they understand. Therefore, in

budgeting demonstrate to them that you have financial sense.

12.6 : Conclusion

From the foregoing account, it is clear that no administrative problem is more basic than
the preparation of an appropriate budget for the operation of library or information centre.
But, for budgeting to be
successful it should indicate all the details relating to the expenditure incurred in a
library. For this, it becomes necessary for librarians to develop a certain degree of
competence in order to justify their financial demands. The problem does not stop there
as they have to exercise a lot of constraint and discipline to conform to the actual
expenditures incurred to the budgeting statement prepared earlier. Of course, it goes
without saying that the final correlation between the budget and the actual financial
statement at the end of the year would depend upon "the validity of the data used in the
construction of the original budget, the knowledge, experience and luck of the librarian in
the manipulation of the data and forecasting the future, and finally, the discipline
exercised by or on, the library manager in making the actual expenditure conform to the
budget"

12.7 : Summary

In this Unit, you were introduced to the concepts pertaining to financial planning.
Terminology concerned with budgeting has been explained in detail. In addition,
different methods of financial estimation - Per capita method, Cost of addition
method, Method of details, Method of proportions, Programmed Budgeting (PPBS,
ZBB) and Budget justification procedures have been highlighted.