Blie-226-B3 - FINANCIAL MANAGEMENT - IGNOU

BLIE-226
Management of Library and

Information Centre
Indira Gandhi
National Open University
School of Social Sciences
Block
3
FINANCIAL MANAGEMENT
UNIT 10
Sources of Finance and Resource Mobilisation 5
UNIT 11
Budgeting Techniques 27
UNIT 12
Budget Preparation 42
Programme Design Committee
Prof. Uma Kanjilal (Chairperson) Prof. S.B. Ghosh, Retired Professor
Faculty of LIS, SOSS, IGNOU Faculty of LIS, SOSS, IGNOU
Prof. B.K.Sen, Retired Scientist Prof. T. Viswanathan
NISCAIR, New Delhi Retired Director, NISCAIR, New Delhi
Prof. K.S. Raghavan, DRTC Dr. Zuchamo Yanthan
Indian Statistical Institute, Bangalore Faculty of LIS, SOSS, IGNOU
Prof. Krishan Kumar, Retired Professor Conveners:
Dept. of LIS, University of Delhi, Delhi
Dr. Jaideep Sharma
Prof. M.M. Kashyap, Retired Professor Faculty of LIS, SOSS, IGNOU
Dept. of LIS, University of Delhi, Delhi
Prof. Neena Talwar Kanungo
Prof. R.Satyanarayana Faculty of LIS, SOSS, IGNOU
Retired Professor, Faculty of LIS, SOSS
IGNOU
Dr. R. Sevukan
(Former Faculty Member) Faculty of LIS
SOSS, IGNOU
Programme Coordinators Course Coordinator

Prof. Jaideep Sharma and Prof. Neena Talwar Kanungo Dr. Archana Shukla
Course Preparation Team

Unit No(s) Unit Writer(s) Course Editor
10-12 Dr. M.S. Sridhar Dr. M.S. Sridhar
Internal Faculty
Dr. Archana Shukla
Prof. Neena Talwar Kanungo
Prof. Jaideep Sharma
Print Production Secretarial Assistance Cover Design

Mr. Manjit Singh Ms. Sunita Soni Ms. Ruchi Sethi
Section Officer (Pub.) SOSS, IGNOU Web Designer
SOSS, IGNOU, New Delhi E Gyankosh, IGNOU
March, 2013 (Second Revised Edition)

 Indira Gandhi National Open University, 2013
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BLOCK 3 FINANCIAL MANAGEMENT
Introduction
This Block deals with financial management of libraries in general and budgeting
in particular. You have already studied in Unit 1 of this course, that ‘budgeting’
is one of the managerial functions. Financial management or fiscal management
is the study of the principles and practices involved in financial operations of an
institution, industry or state. This Unit deals with the problems and procedures
of acquiring, distributing and effectively utilising funds, balancing of revenues
and expenditure and accounting of the entire transactions for better control and
evaluation. This Block consists of three units (10, 11 and 12). The Unit 10 provides
background and general picture of financial management as a whole, Units 11
and 12, respectively deal with general budgeting techniques and the process of
budget preparation in libraries.
Unit 10 dealing with financial or fiscal management in libraries and information
centres explains problems associated with financial management of service and
not-for-profit (NFP) organisations and discusses how libraries as service
institutions seldom earn revenue, but still required to be regularly funded almost
entirely by their respective parent organisations or government. Grants from
endowments, fees, subscriptions, sale of service, etc. are meager supplementary
sources for libraries. Various heads of library expenditure to be operated within the
framework of set rules, procedures and guiding principles are also explained. The
Unit points out the need for costing and cost benefit analysis, economic theory of
library and other financial management techniques and tools in librarianship.
Unit 11 discusses features and attributes of library budget. Budget is a financial
statement which provides details of the proposed revenues and their utilisation
for expenditure for a specific period, usually a year. Budget is both a plan
document and a control mechanism. As a road map to guide actions, a tracking
device to measure progress, budget aids orderly and progressive planning,
coordination and implementation. It is also an instrument of financial control
and a device for evaluating results. Though budget helps limiting expenditure to
income and spend money wisely, it can also cause some problems like over-
emphasis on easily observable factors, tempt one to become routine and quantify
services that are not quantifiable and hence required to be used intelligently. It is
an instrument of control, communication, coordination, evaluation and motivation
and helps evaluating performance on the basis of the utilisation of fund.
A library, being a service institution, offering its services without any price, does
not support itself financially. Funds have to be provided to a library by its parent
organisation or by the government. From the appropriations of funds made, library
organises and regulates its expenditures for its functions and services according
to certain norms and procedures. The budgeting technique used for the purpose
is usually line item budgeting. The other techniques of importance are Programme
Budgeting, Performance Budgeting, Planning Programming Budgeting Systems
and Zero Based Budgeting.
Budgets are usually prepared in conformity with standard norms, particularly
with reference to the distribution of funds towards different competing items of
expenditure. Three methods are generally considered for estimation of budget,
namely, per capita method, proportional method, and method of details. Per capita
method suggests a minimum sum of money per user such as students, faculty
Financial Management and research scholars in the case of university and college libraries. Proportional
method prescribes a percentage on the total budget of the parent organisation
whereas method of details takes items of expenditure of library as the working
data for allocation of funds.
Unit 12 explains how to prepare budget by presenting typical contents of a budget
document, principles of budget making, ways of providing justification for
expenditure, need for getting approval for the budget and handling budget excesses
and budget formalities. Issues relating to allocation of funds, encumbering of
funds and fund accounting to ensure proper use of funds and control of budget
are also discussed in this Unit.
It is necessary that the library professionals have clear understanding of budgetary
terms. Preparing budget begins with considering what the library hopes to
accomplish, particularly keeping long-range plan in mind, new factors like
developments in ICT, overall current economic condition of the parent
organisation and in the country, service needs of users, etc. Estimates are prepared
on the basis of past experience, present demands and future expectations of
requirements. In other words, budget has to take into account (i) the actual
expenditure of previous financial year, (ii) spillovers, if any, (iii) amount already
spent up to the date of preparation of the budget during current financial year,
(iv) foreign exchange (FE) requirements (if any), (v) advance commitments to
be made for the next financial year, (vi) capital items, (vii) impact of inflation on
cost of books, periodicals, binding, and other supplies, (viii) increase in enrolment/
members, etc. Budget items have to be shown in four types, viz, actual expenditure
for the last year, estimated expenditure for the current year, revised financial
estimates for the current year, and estimated expenditure for the next year. Thus,
the budget provides a linkage between three successive years. Every item of
expenditure with reference to its past allocation and enhanced current requirements
has to be noted and justified.
Complexity of budget and budgetary control system may vary depending on the
nature of parent organisation. Budgetary control is the process of comparing
what was planned with what has been accomplished during the period. Budget
and budgetary control system have many merits like use of Rupee as a common
denominator, dealing directly with efficiency of the organisation, stimulating
good management practices, detecting deviations from planned expenditure,
suggesting corrective actions, facilitating centralised control and availing collective
wisdom of people involved.
The cardinal principle of fund accounting is that every financial transaction is
charged to some account and a record consists of what the transaction involved.
Fund accounting system allows for verification of all the transactions and provide
accurate report so that there is neither under-spending nor over-spending. Above
all keeping accurate records of money spent and knowing the balance remaining
as well as carrying out expenditure audit are essential. It is a good practice to
periodically reconcile the library accounts with that of finance/accounts
department of the parent organisation.
Library is a spending institution and a growing organism. Naturally library
expenditure is recurring and permanent in nature. As such seeking maximum
aggregate benefit, advance planning, equitable allocation and economy are the
principles of library expenditure. Financial audit, particularly post-audit, enables
meticulous but sample scrutiny of financial transactions to have proper control
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over irregular, inappropriate and wasteful expenditures.
Sources of Finance and
UNIT 10 SOURCES OF FINANCE AND Resource Mobilisation
RESOURCE MOBILISATION
Structure
10.0 Objectives
10.1 Introduction
10.2 Financial Management
10.2.1 Principles of Financial Management
10.2.2 Financial Management in Service-oriented and Not-for-profit Organisations
10.3 Sources of Funding / Finance
10.3.1 Academic Libraries
10.3.2 Public Libraries
10.3.3 Special Libraries
10.4 Implications of ICT Developments: E-Procurement and E-Documents
10.5 Library Expenditure Planning
10.5.1 Importance of Library Expenditure
10.5.2 Nature of Library Expenditure
10.5.3 Principles of Library Expenditure
10.5.4 Classification of Library Expenditure
10.6 Summary
10.7 Answers to Self Check Exercises
10.8 Keywords
10.9 References and Further Reading
10.0 OBJECTIVES
After reading this Unit, you will be able to:
• explain the need and purpose of financial management and its application
in libraries and information centres;
• identify the characteristic features of service-oriented and not-for-profit
organisations, and the circumstances under which financial management
system has to operate in libraries;
• describe the sources of finance for different types of libraries and ways of
mobilising finance for libraries; and
• discuss the major categories of expenditure, principles and classification of
library expenditure.
10.1 INTRODUCTION
Since money is most important input resource for any enterprise, proper
management of funds is necessary to achieve the goals of the organisation.
Libraries and information centers are no exceptions. They also need substantial
financial resources almost on a continuous basis. No study of an important public
activity like library services can be complete and fruitful unless it also covers
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Financial Management financial aspects. A basic knowledge of library finance, library expenditure,
budgeting and accounting is, therefore, very important for any librarian or a
student of library science. Hence, there is no need to over emphasise the need
for financial management skills among library and information professionals.
On the other hand, it is considered that the economic management of libraries
and information centers is the most neglected area in library management. There
is a general lack of ‘financial literacy’ among librarians. This is despite the fact
that in recent years, tremendous economic and financial pressures are mounting
on libraries. The way finance is managed in libraries is more akin to that of other
not-for-profit service organisations, that too those in welfare economy than profit
making enterprises.
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. Public library service
is generally free because it is supported by public funds, either through special
grants from the government and/ or through a library cess. The importance of the
provision of a continuous flow of adequate finance to libraries cannot be
exaggerated. A few principles are required to be understood, as finance is also an
instrument of control and evaluation.
10.2 FINANCIAL MANAGEMENT

Financial management is not just managing cash or providing funds. It is the
study of the principles and practices involved in financial operations of an
institutions, industry or state. ‘Finance function’ is the task of providing funds
needed for the enterprise i.e., procurement of funds and their effective utilisation.
It deals with the problems and procedures of acquiring, distributing and effectively
utilising funds, balancing of revenues and expenditure and accounting of the
entire transactions for better control and evaluation. In other words, important
phases or 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 public library system or
the parent organisation to which a particular type of library belongs. However,
the library has a major share of responsibility in estimating its own financial
requirements, preparing a budget for its functions, activities and programmes,
managing the funds appropriated and spending within the specified period,
maintaining accounts, and finally preparing a report.
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Self Check Exercise Sources of Finance and
Resource Mobilisation
Note: i) Write your answer in the space given below.
ii) Check your answer with the answers given at the end of this Unit.
1) What do you understand by financial management and what are its
components?
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10.2.1 Principles of Financial Management

For effective financial management, knowledge/ understanding of some basic
guiding principles of financial management is necessary and useful. The principles
of financial management are:
i) Effective control
ii) Simplicity
iii) Regularity and farsightedness
iv) Economy
v) Flexibility
i) Effective Control: Financial management can work efficiently only when
controlled properly. The method of financial control should be simple and
easy. Control is also necessary for the economical use and channelisation of
resources so that there is little wastage and the limited financial resources
could be put to maximum use.
ii) Simplicity: Procedures for financial management should be simple and easy
to operate. Simplicity results in efficiency and economy.
iii) Regularity and Farsightedness: Financial management programmes should
have a typical timetable so as to acquaint everybody with what s/he is
expected to do at a particular point of time. For example, in the preparation
of the budget for a library, inputs should come from the heads of sections
who would in turn expect cooperation from their staff. The preparation of
budget would be time-bound and submitted to the authorities on time so
that the budgetary sanctions could be obtained in time to operate it. Similarly,
since payment towards subscriptions to current journals should be sent to
the publishers during a particular time of the year, the required fund should
be readily available by that time. Sticking to a timetable facilitates advance
thinking and preparation. Not only present needs but also future requirements
should also be kept in view when making provisions for finance.
iv) Economy: Economy should be affected in any activity, more so in financial
matters. All precautions should be taken to avoid unnecessary expenditure
and wasteful use of scarce finances.
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Financial Management v) Flexibility: Financial management should keep in mind the virtues of
flexibility/ elasticity so as to adjust itself according to circumstances. Only
then it can be successful in times of emergency and crisis. But this does not
mean that one should take undue advantage of its flexible nature. There are
provisions and practices in utilising or diverting funds appropriated for a
certain item of expenditure to the purchase of other items like books or
equipment. 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 centralised funds are available in other items (or
heads).
While above principles are useful in operating and managing finances in libraries,
there are statutory financial rules and procedures laid down by the executive
authorities and therefore libraries have no option but to follow such financial
rules as well.
There are other related fields and issues of financial management, library and
information professionals need to be kept in mind. They are cost accounting and
economics (particularly welfare economics), various tools and techniques of
financial management, economics and cost accounting like funds flow analysis,
ratio analysis, break even analysis, operating and financial leverages, financial
forecasting, capital budgeting, economic theory, theory of production, costing,
etc. as they have adequate scope for application in library and information centre
management.
In practice, as said before, economic management of library services is the weakest

area of library management. Little is done to prepare a model and bring about
economic management of library services within a system of financial
management. Libraries are generally not independent entities and hence financial
management and accounting systems of libraries are usually part of larger (parent)
organisation. Financial responsibilities usually rest with head of library (librarian)
and/ or accounts division of the organisation.
Self Check Exercise

ii) Check you answer with the answers given at the end of this Unit.
2) State the principles that govern financial management.
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10.2.2 Financial Management in Service-oriented and Not-for- Sources of Finance and
Profit Organisations
Libraries and Information centres are paternalistic, service-oriented and not-for-
profit (NFP) organisations. Financial management in such organisations is more
complex and challenging than in profit-oriented organisations. Money
management in service-oriented and NFP organisation involves systematic
planning, getting funds, judicious spending of funds and meticulous accounting.
There are certain difficulties in financial management of service-oriented and

NFP organisations. Some important characteristics of such institutions together
with difficulties are discussed below. The problem becomes more acute if budgets
of such institutions are not planned as part of planning of parent body and if they
worry more about accounting than planning.
Among the important characteristics of service-oriented and NFP organisations,

the labour intensive as against machine and technology intensive nature of profit-
making organisations, lack of inventory (as they will have no inventory of
services), dominance of professionals, difficulty in inspecting and measuring
the quality of service in advance of delivery (i.e., before rendering the service),
etc. are important. Lack of profit measure is quite typical to service-oriented and
NFP organisations. Profit-oriented organisations measure their output by amount
of revenue earned based on prices charged for goods and services sold. For
individual profit centres, revenue is measured by transfer prices. Service-oriented
and NFP organisations either should device similar monetary measures of output
wherever possible or rely on non-monetary measures. By and large, the output
measurement is a practical problem and also a challenge in service and NFP
institutions. There is no single generally accepted criterion for measuring success
of such organisations. Multiple objectives, lack of relation between costs and
benefits and difficulties in measuring performance and comparing performance
of different units of the same organisation are some peculiarities of service-
oriented and NFP organisations. Due to dissimilar functions, the organisational
units cannot be compared in service-oriented and NFP organisations. In the
absence of monetary output measures, certain non-monetary measures could be
employed by service and NFP organisations. These non-monetary output measures
can be classified as subjective or objective, discrete or scalar, quantitative or
qualitative. Some important non-monetary output measures are:
i) Results measures
ii) Process measures
iii) Social indicators
iv) Inputs as proxy output measures
Libraries and information centres have not given adequate attention in devising
output measurements. In addition, there appears to be no direct relation between
costs and benefits in service organisations. Market forces play a less significant
role in service-oriented and NFP organisations. Due to lack of shareholders,
there appears to be differences in ownership and power. Consequently there is a
tendancy for service-oriented and NFP organisations to be political organisations.
Historically, the cost accounting and other control techniques were developed
for manufacturing (i.e., profit-oriented) companies and hence they are less
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Financial Management applicable to service-oriented and NFP organisations. Inadequate management
controls have become a tradition in such institutions, which are usually relatively
small and operate on a single location.
Self Check Exercise

ii) Check you answer with the answers given at the end of this Unit.
3) Enumerate characteristics of service-oriented and not-for-profit organisations.
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10.3 SOURCES OF FUNDING/ FINANCE

The economic and financial pressures are mounting on libraries due to
(i) increased cost of information materials; (ii) ever-growing and diverse demands;
(iii) adoption of new technology; (iv) need for new space and infrastructure to
cope up with new environment; (v) increases in wages and salaries; (vi) interlibrary
loan and resources sharing; (vii) new programmes and projects to justify the
existence of library.
Library finance includes both the funds appropriated to a library and its expenditure.
Libraries depend heavily on continuous supply of funds for organising its
activities, programmes and services. In dealing with this, ensuring a continuous
supply of funds not merely on a yearly basis but over a period of time, i.e., three
or five years are very important. Finance plays a very significant role in the
organisation and management of any institution, more so in case of libraries
which have to acquire and build their 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. While
appropriations are made for the acquisition of books and journals, funding bodies,
quite often, overlook or underestimate the necessity of funds for processing the
acquired materials and make them available for use by competent persons. Further,
regular flow of funds ensures the rhythm and tempo of the user services. These
services have to run on a continuing basis. Unless adequate funds are provided
for all these activities, libraries will either operate sub-optimally or remain
ineffective.
The financial support given to libraries is 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 like
construction of library building, purchase of furniture and equipment and
sometimes for special collections. The third type of adhoc grant is given on
special occasions on recommendations for specific purchase.
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Different types of libraries receive funds from different sources, though some Sources of Finance and
sources such as government grants are common. The greatest percentage of
operating funds increasingly comes from public fund raised through taxes. A
judicious estimation of funds required has to be done well in advance as funds
are required on a continuing basis.
Various sources of funds for libraries can be broadly grouped as follows:
i) The main source of finance for any library is regular grants from parent
body or National/ State Government (some percentage of budget and/ or
public fund raised through taxes)
ii) Local library cess and support from municipal and other provincial
authorities.
iii) Adhoc grants from other departments/institutions (public fund), private
national agencies, endowments and charitable institutions and certain foreign
or international support.
iv) Fines and miscellaneous sources: Some libraries impose fines on late return
of books as well as for loss or misuse of library cards and books. Income
from this source is very meager. As a matter of fact, it cannot be considered
as a source of income, because the aim of 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 her/his possession. Moreover, in some situations libraries may
not have authority to re-appropriate amount collected as fine or overdue
charges for other purposes. In addition, the effectiveness of imposing fine is
questionable as it may create ill feelings among users and discourage use of
library. Hence, the policy of levying fine itself is debatable and possible
revenue is offset by potential bad effect on public relation. Miscellaneous
sources may consist of money received by the sale of old library materials
like waste paper, used / withdrawn books, equipment, furniture, etc.
v) Self-generated fund (Fee-based services): Libraries usually render their

services on a nonprofit basis. Charging for library services is fairly a recent
phenomenon. Fees, subscriptions, sale of service and miscellaneous revenues
earned by the library are ad hoc, non-recurring and often meant for specific
purposes with restrictions on reallocation and use. Normally, such (limited)
funds are added to the general fund of the parent organisation for allocation
through normal budgeting procedure.
It is generally objectionable to charge for library services when the mission

is to provide free library services to all. Otherwise, public libraries in
particular loose their sanctity. It is debatable that libraries can charge for
their services, as charge on traditional services may deter use of library. If
public libraries charge for all services and membership, like a private library,
one may even demand that it has to generate the entire budget required to
run the library. Hence it is necessary to continue to provide all traditional
library services free of cost. Any fund generation from fee-based services is
only restricted to only new services and the fund so generated should be
considered as a supplementary fund. Hence, enrolment or membership fee,
caution deposit, book lending fee, usage fee are to be considered with extra
care depending on the type of library and the mission of the library. However,
nominal overdue charges (library fine), recovery charges for not returned
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Financial Management books and charges for duplicate cards, etc., are well accepted in most
circumstances. Sale of withdrawn books, used equipment and furniture, old
newspapers, etc., are obviously realised for library fund. Similarly, charges
for photocopy service and computer printouts, Internet charges, etc., are
grey areas where library can price appropriately to raise its revenue.
The real impact of fee-based services should be in the areas of new services.
Increased use of a particular service and changed need among users provide
clue for new services. Introducing new services involves set-up cost, but
services far outweigh the risk as such new services not only generate revenue
but also provide many intangible benefits like enhanced public relations
and boosting library image. Hence the primary motive of fee-based new
services should not be generating profit or fund but gaining these intangible
benefits. Some of the fee-based services could be access to research
experience and services, online searching of international databases,
document delivery, local and external inter-library loan delivery, internet
and other resources charges.
Fee-based new services are not only required to be carefully and strategically
planned, avoiding duplicating local services or competing with other local
information systems but also promoted with appropriate marketing methods.
Pricing of these services is a tricky issue as professional research time, local
interlibrary loan and document copying, verification of citation information,
translation and other documentation services, copyright charges, taxes and
tariffs, staff time, etc., are involved. In addition to extensive marketing and
pricing structure, care should be taken not to violate lease agreements,
licenses and copyright restrictions, service tax, etc.
vi) Gifts and donations (Mobilising library finance): In these days of pressing
need for money to run library services, all possible sources of funding need
to be explored and if necessary, lobbying for fund taking library clientele
into confidence is not wrong. Apart from grants from Government, donations
and gifts, various fund generating sources have to be tapped and fund raising
activities and campaigns have to be launched. One such example is organising
book exhibitions and other sales by “Friends of the library group” in the
premises. Gifts and donations are excellent source of supplementing funds
for special projects. Citizens are often willing to make significant donations
to cover part or all the costs of a new or remodeled library building. However
some care should be taken in handling gifts and donations. Firstly, library
must have exclusive control over all funds collected, donated or appropriated
as library fund. There should not be unusual riders on such funds, i.e., gifts
and donations should be transferred unconditionally to treasurer of parent
organisation or local authority or a public depository like bank or to financial
secretary of the committee or Board. Secondly no gift, donations or grant
from charitable institutions be used to justify reducing or replacing the
community’s commitment to public funding. Otherwise, library runs the
risk of disenfranchising and benefactors-donors may cease according grants
to library if they see that their efforts are resulting in reduced public funding
for the library instead of improving the resources.
Gifts and donations need not be in cash. Any donation of building or other
investments are much better as they provide fund more regularly in the
12 form of rent on space/ accommodation and interest on investments.
10.3.1 Academic Libraries Sources of Finance and
a) University Libraries: University libraries receive their regular funds from
the respective universities and special grants from both the University Grants
Commission (UGC) and the State Governments. The UGC grants are mainly
plan grants, whereas the State Government grants are mainly non-plan grants.
However, government grants are not given to the libraries directly, but
government gives grants to the university and then the university allots to
the library the necessary share out of the same. The University Grants
Commission grants are mainly of three types, viz., recurring, non-recurring,
and ad hoc grants.
Few university libraries charge fees from their student members for the use
of the library. A charge or fee for library use is not made without protest
from users. These days there is a growing feeling that the university should
provide library services free of charge, just as it provides lecture rooms,
laboratories, and other facilities. Pros and cons of fee-based library services
are already discussed on previous pages.
b) College Libraries: A question often asked as “how much does it cost each
year to run a good library?” The amount will vary from college to college,
depending on the nature of the curriculum, the quantity and quality of services
expected, and the quality of the present collection. The total student strength
in a college is another criterion to be taken into consideration while allotting
funds for college library. The problems of financing a library of an established
college are different from those of a new college. The needs of the former
are confined to acquiring materials to remedy weaknesses and to keep the
collection up-to-date, whereas the latter must build up a complete basic
collection.
There are three main sources of funds for college libraries. The principal
source is the allocation from the current operating funds of the college.
Whether the college is public (government) or privately controlled matters
less in this connection than the amount of additional money the library may
need during any one budgetary year. Sometimes a part of the ‘Amalgamated
Fund Collection’ is given to the college library for purchase of reading
materials. Occasionally some portion of the contingency grant of the college
is made available to the library by the Principal. A second source of income
for college libraries is grants, individual gifts, and endowments. But this is
not so very popular in India. A large number of college libraries throughout
the country receive grants from the University Grants Commission. Other
sources of income for college libraries are subscription/membership fee
charged from the students, and annual recurring and non-recurring grants
from the State Governments or the governing bodies of the institution.
c) School Libraries: Promoting good library service in schools depends very

much on finance. In the case of primary schools, lower fee rates for library
services can be fixed as there will be less expensive books needed for students
of lower classes. It is necessary that the entire library fee collected from
students should be spent exclusively on books and equipment.
At present there are no fixed norms for the provision of finances to school
libraries in India. The library fund of school should preferably comprise of 13
Financial Management fee collected from pupils, equal contribution from the management, matching
contribution from government or local body, other gift or special grant that
may at any time be received specifically for the library and donations from
public.
The State Government or any education authority administering the school

should meet the initial expenditure on setting up of the school library
including cost of new library buildings and initial expenditure on fittings
and books covering the basic stock needed as a nucleus for library activities.
Self Check Exercise

4) What are the sources of finance for university libraries?
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10.3.2 Public Libraries

Libraries in general and public libraries in particular are expenditure-inclined
(or intensive) and ever growing organisations with no (or least) revenue earning
capacity but with recurring nature of service and hence recurring demand for
ever increasing funds. Hence a permanent assured source of income with enhanced
flow of money is required. UNESCO Public Library Manifesto (1994) prescribed
that the local or national government should wholly fund public libraries.
Historically public libraries had the fortune of generating funds from government
sources and patronage of aristocracy. The learned scholars, trusts and NGOs
have always been the main source of funds for public libraries. However, during
20th century, particularly after independence, development of public library is
regarded a State subject in India. Hence financial resource through levying of
cess as per library legislation of State or/ and grant from State Government has
become main source to public libraries. In addition, many public libraries are
continued to run by voluntary organisations with or without some subscription
fee. With the changed circumstances and environment particularly service
orientation and diverse functions expected from public libraries, there is a greater
need to adopt innovative and new approaches to explore and generate financial
resources from different and new sources. The new circumstances are such that
aids/assistance may not uniformly come forth as expected during financial crises
and requirement may vary from year to year. Hence it may not be safe to
exclusively rely on traditional sources of revenue.
Public libraries need to tap all possible sources like cultural associations, private
foundations, commercial firms, philanthropists, trade unions, publishers’
associations either directly from such institutions or working in co-operation with
fund raising associations and organisations like ‘Friends of the Library Group’,
14
NGOs, important personalities of the locality and others. A strategic plan with Sources of Finance and
well articulated mission of the library to match the donor’s needs or the community
requirements has to be developed for the purpose.
In addition, RRRLF and other Government departments and agencies are well
known sources of funds for public libraries in India. Sometimes sources from
abroad and its specialised agencies, regional organisations, bilateral aids as well
as national and international organisations like UN may also provide fund in
cash or kind.
Public libraries should not fall behind in generating fund from fee-based services
particularly charging for non-traditional new services like demography, product,
trend and travel reports, computer prints, reference service, extension classes,
training programmes, internet based information services on health, travel,
education (scholarship), organising exhibitions, etc.
Having relegated the responsibility of running public libraries to local community,

the Government should not escape the responsibility of providing adequate
financial assistance. Interestingly, the norm in USA is that Local Government,
State Government and Federal Government respectively contribute 60%, 25%
and 15% of budget to public libraries. Unfortunately in India, there is no national
policy on library and information services and no Union library legislation, and
contributions of both Central and State Governments to public library funds
have been too low. Transferring ‘library’ from State List to local bodies by
constitutional amendments (73rd and 74th, 1992) has not lead to any improvement
in the financial support to public libraries. The National Commission on LIS
proposed in 8th Five Year Plan is not yet a reality. However, public libraries can
seek some financial support from five year plans, RRRLF, grants from Department
of Culture (which runs certain libraries) and grants from National Archive of
India (for preservation of rare books).
In fact as early as 1958, K.P. Sinha Committee recommended creation of Block

Library Fund and Municipal Library Fund through cess, and both Central and
State governments should contribute equal amount with provision to gradually
increase state contribution to three times the cess amount. On the other hand,
more recently in 1985, Prof D.P. Chattopadhyaya Committee on National Policy
of Library and Information Services recommended for 6-10% of education budget
for libraries and central government to provide fund under plan expenditure. In
addition, it is also recommended that public libraries particularly in rural areas
should draw resources from other official agencies like National Adult Education
Programme, Agricultural Extension Programme, Distance Education Programme,
etc. working at that level. It is also suggested that industrial organisations should
also provide finance for libraries. It is unfortunate that compared to the target of
6-10% of education budget, States spent far less than 1% of education budget on
libraries. Similarly, compared to suggested standard of more than Re. 1 per capita
(1988-89), most states spend much less than that even after 20 years (despite
substantial reduction of buying power of Rupee over 20 years). As mentioned
earlier contributions of both central and state governments to library fund have
been too low.
The main sources of public library revenue are subscriptions, library cess, grants
from government and endowments. Considering library subscription as a source
15
Financial Management of fund is widely disputed. An equally forceful opposite view is that subscription
defeats the whole concept of free public library service advocated by Ranganathan.
The report of the Advisory Committee for Libraries, Government of India (1957)
also supported the inadvisability of considering subscription as a source of
revenue. The Advisory Committee describes such subscription libraries as
‘stagnating pools’. Yet, after half a century, a bold and new review of the situation
is required in the light of privatisation, private-public partnership and ‘pay and
use’ philosophies of the time.
So far, Nineteen states in the country have public library legislation and run public
libraries under the statutory system which is not uniform. Tamil Nadu, Andhra
Pradesh, Karnataka, Kerala and Goa have provision for raising library cess as a
surcharge on certain taxes. These states have what is termed ‘pure form’ of
statutory system where Local Library Authority (LLA) created by the Act receives
cess, grants from government, special grants for special purposes, gifts,
contributions and income from endowments, fees, fines, etc. and has the
responsibility to run libraries and provide library services. For example, Tamil
Nadu and Andhra Pradesh Library Acts have provided for a cess in the form of
surcharge on land and property tax at the rate of six per cent. The Karnataka Act
has provided for a library cess in the form of surcharge at the rate of three per
cent (later increased to six per cent) not only on land and house tax but also on
octroi duty, vehicle tax and professional tax. In addition to the library cess,
Karnataka public libraries receive a grant from the government equivalent to
three percent (later six per cent) of the total land revenue collection. Other states
have what is termed as ‘mixed form’ of statutory system, where no library cess is
proposed, but the respective governments have made provision for grants-in-aid
for public libraries. In addition to substantial grant-in-aid, these libraries called
by different names like ‘Subscription Libraries’, ‘Recognised Libraries’, ‘Grant-
in-aid Libraries’ and ‘Affiliated Libraries’ are allowed to charge subscription
and run by voluntary organisations with gifts and donations. Rest of the States in
the country have no legislation (not bound by law/ statuary system to provide
public library services), but make direct government efforts as well as provide
grant-in-aid to voluntary organisations running public libraries. Experience shows
that library cess alone cannot be sufficient to meet the continuously growing
needs of public libraries. Besides, the taxable capacities of various local areas of
LLA differ significantly, thereby making standard and uniform public library
service throughout the country a difficult task.
Just like education, public health and other welfare economy measures, ideally
public library service, which is declared free to citizens, should be totally
supported by regular budget grants from the government. Unfortunately, in many
countries including India, this is not the position. As a result finances for public
libraries have become inadequate. Only library legislation at the national level
can change things for the better. It would be proper for the government to provide
for initial expenditure, while recurring demands of the libraries should be met
from the proceeds of library cess, etc. Moreover, the local authorities should be
encouraged to collect more funds by giving them matching government grants.
Endowments, charitable trusts and private benefactions could be another source

of public library revenue. In countries like USA this is a common feature, whereas
in India it is rare. The financial demands of libraries are recurring in nature,
whereas funds from endowments are not so. Hence, endowments and
16
benefactions, though welcome, should not be taken as a permanent or continuing Sources of Finance and
and adequate source of income. Endowments can best be used for erecting library
buildings, acquiring furniture and fittings, etc.
Other sources of public library revenue are fees and fines, gifts in cash or kind.
The income from these sources is generally very meager, and cannot be considered
as a significant source of revenue.
10.3.3 Special Libraries

Special libraries get their funds from appropriations made by their respective
parent organisations. Whenever the parent body takes up a new project or a
programme, which needs library and information support, adequate finances
should be provided to the library to set up additional/ special support facilities.
Special 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, special libraries obtain ad hoc grants from governmental agencies for
specific purposes. Of late, special libraries have been seriously considering the
ways and means of generating part of their own resources.
Self Check Exercise

5) State how public libraries get their funds.
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10.4 IMPLICATIONS OF ICT DEVELOPMENTS:

E-PROCUREMENT AND E-DOCUMENTS
Stupendous growth of ICT (Information and Communication Technology) during
last two decades has touched every walk of life including libraries. With the
advent of the Internet, e-commerce has been a great success. This development
has made two broad implications on the financial management of libraries and
information centers. Firstly, the way procurement and money are handled —
received, paid or transferred – has substantially changed to become simple and
almost instantaneous. Libraries could send their orders for documents by e-mail
as well as they are allowed to search, identify the documents and order
electronically by downloading order form from the websites of many international
agencies. There is no need to enter bibliographic information or personal/
institutional details in such a process. Till then, it use to take months for procuring
publications of societies and obscure publishers, standards, patents and technical
reports and extremely urgent articles by making advance payment through bank
drafts and sending the same by airmail. Along with e-mail ordering, wire transfer
17
Financial Management of money has reduced the delay to some extent. But the real instant ordering and
paying on the net for effective e-procurement necessitates use of credit cards or
e-cash mode and it is still rare in Indian libraries. The parent organisations
(including government) and their accounts departments are still suspicious about
possible miss use of credit cards for electronic payments (or e-transfer of money)
on the Internet and libraries are not provided with credit cards. As a result
tremendous saving in time, efforts and cost incurred by e-procurement is not
being availed by large number of libraries.
The second implication of ICT development is concerned with digitisation and

procurement of e-documents. More and more libraries are becoming digital at
least hybrid in terms of their collection. In fact, acquiring/ creating or subscribing
to digital collection has dramatically changed the collection building process of
libraries and information centers. The outright purchase of an e-document (with
full rights to use and share like a printed book) is only a minor part of acquisition
of e-documents. Large part of digital collection is not owned but accessed for a
limited period under totally new terms of subscription or lease agreement. Such
agreements of accessing digital libraries impose restrictions on repeated use for
a longer (indefinite) period and for sharing with others. In this scenario, resource
sharing and consortia arrangements add further complexities as member libraries
need to collectively pay for such subscription to digital collections/ libraries.
Normally publishers allow subscriber to access e-collection either through a
password or make it IP address enabled access. Sharing an e-document not owned
is difficult and sharing a password is illegal. Having realised that there is no
control over possible sharing of password by libraries, over 95% of publishers
offer only IP address enabled access to their e-content (like e- journals), which
drastically restricts sharing with other libraries. In addition, lease agreements of
such online subscriptions are one-sided and put-forth many stifling conditions
on libraries. Pros and cons of such lease agreements are beyond the scope of this
Unit. One important point from the angle of financial management of libraries is
that when the subscription ends, library will have no access to back issues of the
journals for which libraries have earlier paid. Further it is very difficult to account
for collective/ collaborative payments in consortia mode. Lower usage, saving
on staff time and geographical location of member libraries are favourable aspects
in resource sharing and consortia. However, such joint collection development
and priority access of inter-library loan provide savings if consortium deliveries
can be achieved at a lower cost than alternative sources of inter-library-loan and
document delivery. Further, assessment of potential utility or actual use of such
e-collection is quite difficult as statistical data pertaining to access/ click/ use
provided by publishers are often hyped and misleading. Even costing of e-journals
is often misrepresented by bundling together a large number of e-journals of the
same publisher without option to eliminate unwanted/ irrelevant ones. In some
particular circumstances, the entire payment for consortia subscription is made
by another (usually government) agency leading to total lack of assessment of
need and cost benefit analysis.
Consortia payment: Budget and funding are thorny issues in consortia mode.
As explained above, member libraries are required to transfer part of library
budget for consortium and yet they will have no control over the transferred
amount. Consortium libraries themselves need to have a legal entity with
permission and authority to deal with such pooled money. Though resource
sharing and library consortium are considered as possible solution to the financial
18
crunch faced by libraries, co-operative nature of resource sharing and consortium Sources of Finance and
may lead to bureaucratic problems of finance and implementation. A
memorandum of understanding between the host institution and the consortium
regarding operational, administrative, legal, financial and programmatic
requirements is necessary. The host institution is required to act as fiscal agent
for the consortium with the responsibility for accepting, accounting and
administering its funds, grants and contracts, maintain consortia budget and all
related accounts.
Lastly, some typical general problems and issues of fiscal management in libraries
are briefly listed below.
1) A large part (2/3 or more) of a library budget is consumed by reading materials.
2) The average raise in prices of reading materials is always above the average
inflation rate.
3) Prices of serials and journals increase much more rapidly than that of
monographs.
4) Some of grey or semi-published literature like theses, technical reports and
standards are abnormally costly even though photo copies are normally
supplied to libraries.
5) The value of Rupee is steeply falling against hard currencies like US Dollar,
Sterling Pound and Japanese Yen.
6) Marginally increased budgets are unable to match the devaluation and
increase in prices.
7) Even during the periods of tight budgets, it is the reading materials budget
of a library is more vulnerable than salary and other maintenance budget.
8) Allocation of reading materials budget among different subjects or different
types of documents is becoming increasingly difficult.
9) The unconfirmed prices and unexpected increase in prices of reading
materials further complicate the fiscal management (for example,
supplementary invoices for additional volumes of journals).
10) Inconsistent conversion rates are applied by manipulating the date of billing.
11) Increased postage also adds its might to the problem.
12) The process of encumbering the available meager budget and moving
‘monies’ back and forth in a manual system can lead to errors and too broad
approximations of expenditures, commitments and available balance funds.
The process of encumbering funds is further complicated by fiscal policy of
parent organisation normally bound by the artificial year called financial
year. For these reasons and also sudden windfalls during end of financial
years constructing budget and creating a monitory plan is made difficult.
10.5 LIBRARY EXPENDITURE PLANNING

You now have an idea of how a library gets finances for running its library services.
Expenditure is the second important aspect of financial management. Library
19
Financial Management expenditure occupies the same place in the study of financial management as
consumption does in the daily life of an individual. As consumption is the end of
all economic activities, so also, library expenditure is the end of all financial
activities of a library.
10.5.1 Importance of Library Expenditure

Just as you spend money on your books and studies, so do the libraries spend
money on the books and periodicals, readers’ services, references and bibliographical
services, documentation and information services, etc. The objective behind all
these is the supply of the right document to right reader at the right time. 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. All this means spending money and more money.
10.5.2 Nature of Library Expenditure

There are three major characteristics in the nature of library expenditure:
a) Library is a spending institution: Libraries, unlike many government
departments, are not revenue-fetching agencies. On the other hand, libraries
are spending institutions, and they participate in the nation-building activities.
The money spent by the library is a long term investment in human capital.
b) Library is a growing organism: The library trinity-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.
c) Library expenditure is recurring: Libraries are not only spending and growing
institutions, but they are also permanent bodies. In an era of educational
advancement, library services will have to maintain a continuous rhythm to
cope up with the academic requirements of the clientele. This means that
the library expenditure is recurring in nature.
10.5.3 Principles of Library Expenditure

a) Principle of maximum aggregate benefit: The library exists for the service
of different types of readers. Therefore, as a librarian, you should be neutral,
and should see that no particular individual is specially benefited by your
expenditure policy. You should plan your library expenditure in such a
manner that majority of readers derive maximum benefit of library use.
b) Principle of advance planning: The 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. Orders
should be placed in advance so that the needed materials are acquired in
time. The Librarian should avoid last minute purchases.
c) Principle of equitable allocation: The library funds should be equitably

allocated for spending on different types of reading material covering various
20
subject areas. For example, books on science and technology are costlier Sources of Finance and
than that of other language books. Costly reference books become out of
date faster in some subject areas when compared to others. All such factors
are to be taken into consideration while spending money for library use.
d) Principle of economy: It means that you should not spend more than the
necessary amount on any item, and should not exceed your sanctioned grant.
Unnecessary duplication should be avoided, because the extra amount thus
saved could be better spent on purchasing new alternative titles covering
additional subject areas.
10.5.4 Classification of Library Expenditure

Generally speaking, money spent on building, costly equipment and furniture is
shown against capital expenditure, and other items which occur almost throughout
the year like books and periodicals, stationery and postage, binding and
contingency, salaries and wages, etc. are shown against current expenditure.
However, you can classify library expenditure according to different heads, viz.(a)
salaries and wages, (b) binding,(c) stationery, (d) postage, (e) contingency, (f)
books and periodicals, (g) furniture, (h) building, (i) equipment, and (j)
publications.
Self Check Exercise

6) State the major items of expenditure of libraries.
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10.6 SUMMARY
This Unit deals with the financial management of libraries. Financial management
in service and NFP organisations has several problems attributable to the
characteristics of such institutions. Libraries, being service institutions, seldom
earn revenue and hence, have to be funded almost entirely by their respective
parent organisations or by governments in case of public libraries. Adequate and
continuous supply of funds is necessary to sustain library and information services.
There are number of different sources like regular grants from parent
organisations, ad hoc grants from other organisations, grants from endowments,
fees, subscriptions, sale of service, etc. through which finance for libraries flow.
Libraries spend their funds on books and journals, salaries and allowances of
their staff, development of library, documentation and information services,
building, equipment, furniture, etc. The expenditure is normally channeled
21
Financial Management according to set rules and procedures, conforming to some guiding principles to
get maximum benefits.
Libraries have, by and large, restricted their financial management to preparing

budget and managing their operational fund that too budget for reading materials.
Most of the exercises of costing and cost benefit analysis are academic in nature
and have not been tried out and hence, not led to any significant changes in the
decision making process of libraries. Economic theory of library is still less
known phenomenon for practitioners. Vast array of financial management
techniques and tools are largely unexplored in the library context.
10.7 ANSWERS TO SELF CHECK EXERCISES

1) Financial management is the study of principles and practices involved in
financial operations of a library. Its scope includes acquisition, distribution
and utilisation of funds, balancing revenue and expenditure, general control
and evaluation of financial matters. Important components of financial
management are:
i) Financial planning
ii) Forecasting of receipts and disbursements
iii) Realisation of funds and revenues
iv) Allocation of funds
v) Utilisation of funds
vi) Financial accounting
vii) Financial control
viii) Financial auditing
2) The principles that govern financial management are:
i) Effective control
ii) Simplicity
iii) Regularity and farsightedness
iv) Economy, and
v) Flexibility
3) Service-oriented and not-for-profit organisations have certain characteristics
distinct from those of profit- oriented organisations. They are as follows:
i) Services cannot be stored and hence, there is no ‘inventory’ in service-
oriented organisations. Services unsold are services lost.
ii) They are labour intensive organisations.
iii) There is a dominance of professionals in such organisations.
iv) Service-oriented organisations face the difficulty of measuring the
quantity and quality of services rendered. Success of these organisations
depends both on how much service is rendered and how well rendered.
v) Quality of service cannot be inspected and measured before rendering.
22
vi) There is no single criterion (like profit) to measure success of service- Sources of Finance and
oriented organisation. Multiple objectives, lack of relation between costs
and benefits and difficulties in measuring performance and comparing
performance of different units of the same organisation are some
peculiarities of service- oriented organisations.
vii) Market forces play less significant role in service-oriented organisations.
viii) Service-oriented organisations tend to become political organisations
due to lack of shareholders and differences in ownership and power.
ix) Inadequate management controls has become tradition in such
organisations as cost accounting and other control techniques are
believed to be for profit-oriented organisations.
x) They are relatively small and operate usually on a single location basis.
4) The sources of finance for university libraries are:
i) Grants from the respective university budget
ii) Special grants from the University Grants Commission
iii) Library fees
iv) Fines or overdue charges
v) Sale of publications, etc.
5) Public libraries get their funds from:
i) Library cess collected in States where Public Library Acts are in force.
ii) State Governments provide matching grants equal to the amount
collected by way of library cess.
iii) In some States, the entire funds come from Government grants.
iv) Member-subscription is also sometimes a source but is very negligible.
10.8 KEYWORDS
Cost Accounting : It is a process of accounting for cost by relating
expenditure to cost centre and cost activities. In
management accounting, cost accounting
establishes budget and actual cost of operations,
processes, departments or product and the analysis
of variances, profitability or social use of funds.
CBA -Cost Benefit : The ratio of the benefits of a given project to its
Analysis cost, taking into account the benefits and costs
that cannot be directly measured in Rupee. CBA
has been considered as a valuable tool for
increasing people’s awareness of the costs and
benefits of information and documentation as a
production factor and to provide better basis for
budgeting and strategic planning.
23
Financial Management CEA-Cost Effectiveness: A way of finding the least expensive means of
Analysis reaching an objective or a way of obtaining the
greatest possible value from a given expenditure.
While CBA seeks to develop standards and criteria
for determining how well the existing services of
a library meet the requirements of its users, CEA
aims at discovering new, improved procedures
and devices for providing better services to the
users.
Economics : It is the branch of social science that deals with
the production and distribution and consumption
of goods and services and their management.
The study of how the forces of supply and demand
allocate scarce resources. Subdivided into
microeconomics, which examines the behaviour of
firms, consumers and the role of government; and
macroeconomics, which looks at inflation,
unemployment, industrial production, and the role
of government. It is descriptive and concerned
with what is and what ought to be. It deals with
relationship of inputs to the outputs and eventually
to supply, demand, markets, sales, prices, value,
utility, etc.
Financial Estimation : Estimating the amount of money required for
running services of an institution.
Financial Forecasting : It is forecast of the expected financial position and
the results of operations and cash flows based on
expected conditions. It involves a systematic
projection of expected actions of management in
terms of financial statements, budgets, etc. using
past records, funds flow behaviours, financial
ratios and expected economic conditions in the
industry and the firm.
Financial Management : Financial management encompasses the two core
processes of resource management and finance
operations. It is an element of management dealing
with acquisition, distribution and utilisation of
funds.
Library Expenditure : Money spent by a library on different heads such
as purchase of reading materials, salaries and
allowances, stationary, postage, furniture,
equipment, etc.
Library Finance : Sources of financial flows and expenditures.
Library Income : Funds which accrue to a library from different
sources such as grants, membership fee,
endowments, fines, service charges, sale of
publications, etc.
24
Macroeconomics : Industry and national level economic system with Sources of Finance and
the objective of maximisation of profit.
Microeconomics : It is concerned with behaviour of individuals,
firms and markets.
Non-plan Grants : Regular budgeted grants given every year.
Non-recurring : Expenditure that do not repeat every year (e.g.
Expenditure building, equipment, machinery, etc.).
Plan Grants : Funds made available on projects that go under
annual plans, five-year plans, etc.
Ratio Analysis : Single most important technique of financial
analysis in which quantities are converted into
ratios for meaningful comparisons, with past ratios
and ratios of other firms in the same or
different industries. Ratio analysis determines
trends and exposes strengths or weaknesses of a
firm and hence, used for evaluating the
performance, setting standard and estimation.
Recurring Expenditure : Expenditure that repeats every year e.g. books,
journals, staff salaries, etc.
Welfare Economics : It is a branch of economics that uses microeconomic
techniques to simultaneously determine allocative
efficiency within an economy. It deals with cost-
benefit analysis of the allocation of resources,
economic activity, and distribution of the
resulting output on a society’s welfare. It provides
theories and techniques to analyse operations of
NFP institutions.
10.9 REFERENCES AND FURTHER READING

Anthony, Robert N., and John Dearden. Management Control Systems: Text and
Cases. Illinois: Richard D. Irwin Inc., 1976. Print.
Broyles, Jack, et.al. eds. Financial Management Handbook. 2 ed. England: Gower,
1983. Print.
Bryson, Jo. Effective Library and Information Centre Management. England:

Gower, 1990. Print.
Cloutier, Claudettee. “Setting Up a Fee-based Information Service in an Academic

Library”. Journal of Academic Libraries 22.14 (2004). Print.
Evan, G . Edward. Management Techniques for Libraries. New York: Academic

Press, 1976. Print.
Holland, Yvonne. “Purchasing with Plastic! Using a Credit Card for Procurement
in Libraries”. CSIR Information Services, Australia.
25
Financial Management IGNOU.MLIS-E6. Public Library System and Services. Block-2: Public Library
System: Resource Development, Unit 5: Development Plans and Resource
Mobilisation, Unit 6: Financial Resources. New Delhi: IGNOU, 2003. Print
Kent, Allen, and Lancour, Harold, eds. Encyclopaedia of Library and Information
Science. Vol. 3. New York: Marcel Dekker, 1970. 430-440. Print.
Mittal, R. L. Library Administration: Theory and Practice. 5 ed. Delhi:

Metropolitan Book Co., 1984. Print.
Moore, Russell F., ed. AMA Management Handbook. New York: AMA, 1970.
Print.
Newton, Jack B. “Budgeting for Supervisors”. Mali, Paul, ed. Management

Handbook: Operating Guidelines, Techniques and Practices. New York: John
Wiley and Sons, 1981. 1313-28. Print.
Sridhar, M.S. “Are Demand Forecasting Techniques Applicable to Libraries?”

Library Herald 23.2 and 3 (1984): 84-89. Print.
--- . “Is Cost Benefit Analysis Applicable to Journal-Use in a Special Library.”

The Serials Librarian 15 (1/2) 1988: 137-153. Print.
--- . “Are Books ‘Inferior Goods’ of Leisure Industry”. Library Science with a
Slant to Documentation and Information Studies 34. 4 (1997): 159-162. Print.
--- . “Resource Sharing among ISRO libraries: a Case Study of Consortia

Approach”. SRELS Journal of Information Management. 39.1 (2002): 41-58.
Print.
--- . “Ratio Analysis Technique: a Tool for Assessing the Health of a Library”.
Proceeding of the Twelfth IASLIC National Seminar on Financial Management
of Library and Information Centres, 28-31 December 1986. Calcutta: IASLIC,
1986, p 137-146. Print.
Tejomurty, A. Studies in Academic Librarianship. Jaipur: Printwell, 1987. Print.
Tripathi, P. C., and P.N.Reddy. Principles of Management. 2ed. New Delhi:

Tata McGraw Hill, 1991. Print.
University Grants Commission, Library Committee. University and College

Libraries. New Delhi: UGC, 1965. Print.
26
Sources of Finance and
UNIT 11 BUDGETING TECHNIQUES Resource Mobilisation
Structure
11.0 Objectives
11.1 Introduction
11.2 Library Budget and Financial Planning
11.3 Budgetary Methods and Techniques
11.3.1 Line Item or Incremental or Historical or Object-of-Expenditure Type Budgeting
11.3.2 Formula Budgeting
11.3.3 Programme Budgeting
11.3.4 Performance Budgeting
11.3.5 Planning Programming Budgeting System (PPBS)
11.3.6 Zero-Based Budgeting (ZBB)
11.4 Budgetary Norms and Standards
11.5 Methods and Techniques of Financial Estimation
11.5.1 Per Capita Method
11.5.2 Proportional Method
11.5.3 Method of Details
11.6 Summary
11.8 Keywords
11.0 OBJECTIVES
After reading this Unit, you will be able to:
• discuss library budget and its features;
• describe budgeting and financial planning processes;
• explain types of budgetary methods;
• highlight budgetary standards, norms and principles;
• apply norms and standards to work out financial estimates for different types
libraries viz., academic, public and special libraries; and
• differentiate budgetary methods, prepare an outline of a library budget and
maintain accounts using appropriate records conforming to audit requirements.
11.1 INTRODUCTION
In the preceding Unit of this Block, you have learnt about the financial
management of libraries in general and sources of funds as well as circumstances
under which budgetary system has to operate in service-oriented and not-for-
profit organisations. In this Unit, you will learn what is budget, why it is required
in libraries and information centres, how it is prepared and operated together
with advantages and disadvantages of different budgetary methods and techniques.
Library being an expenditure-oriented institution, the central aspect of financial
management is the budget. Budget is a statement of income and expenditure. It 27
Financial Management provides guidance in spending the appropriated funds through a period of time.
It is also an instrument of control, communication, coordination, evaluation and
motivation. In this Unit, we shall study the basic features of a library budget.
Budgeting is one of those managerial functions you would have studied as part
of POSDCORB in Unit 1 (Principles and Functions of Management). In addition
to being a key managerial function, budget is both a plan document and a control
mechanism. It is a plan document as it provides projected futuristic plan for
library in terms of money and it is a control mechanism as the budgetary control
ensures checking the performance against plan and helps to correct deviations, if
any, from the performance targets.
Budget being a road map for the delivery of library services in the subsequent
years, provides a fiscal foundation for library operations. It provides opportunity
to request necessary funding for established services as well as supplemental
support for increased use and for new services. It is a way to track required
revenues and reportable expenditures. It involves details and cost factor of each
activity together with future growth and promises of library services. In view of
cost factors involved, there is also a need for standards for operational procedures.
11.2 LIBRARY BUDGET AND FINANCIAL

PLANNING
Budgeting is a planning process in which expenditure and revenue of the
organisation over a specific time period are accounted for. ‘Budget’ is a plan
document and a financial statement which provides details of the proposed
revenues and their utilisation for expenditure for a specific period, usually an
year. It is a means of check and control on what monies should have been received
and how monies are to be spent. Budgeting need not be just confined to money.
It can be expressed both in financial and non-financial terms. But it is a practice
(and it is the strength of the budget) that it is expressed with a common
denominator called Rupee. Hence, the budgeting is the process of quantifying
all the plans of an operation to determine whether they will achieve the desired
results and to adjust accordingly where they will not achieve the desired results.
Budget is a quantitative expression of a plan of action, a tool in the hands of
library or information centre manager, a road map to guide management actions
towards the destination, and a tracking device to measure progress, highlights
variations from the plan and show the need for corrective actions to put the
operation back on track (Newton, 1981). In other words, budget aids orderly and
progressive planning, coordination and implementation, serves as an instrument
of financial control and a device for evaluating result.
It is already stated that budget is a systematically prepared statement of estimated
revenue and expenditure of an institution for a period of time, usually a year.
The objective of this process is to produce financial plan. Budget serves dual
purpose of limiting expenditure to income and assuring wisely planned spending.
Financial planning and budgeting have certain obvious advantages. They make
goals clearer, assist in fixing responsibility, reveal weaknesses in the structure of
the organisation, force quantification of targets and achievements, lead to most
productive use of resources, pinpoint timely actions and indicate need for
corrections from deviations, if any. However so budgeting in general can also
cause some problems.
28
i) It may lay too much emphasis on easily observable factors (e.g., circulation Budgeting Techniques
figures of libraries).
ii) Budget may tempt one to become routine without improving operations.
iii) Library services are not quantifiable in terms of Rupee.
iv) Budget requires continuous adoption to meet changed circumstances.
v) It does not work automatically.
vi) Hence, budget and budgetary control are required to be used intelligently.
It is already noted that budget is a guide to incur expenditure for different activities
and operations of an intuition throughout the year. The general principle of this
futuristic guide is that the estimated expenditure should not exceed the revenue.
In other words, income and expenditure should balance each other. Budget should
not be confused with annual financial reports. The latter is an official document
to know as to what was achieved and what was not achieved during a given year.
It is in fact, a factual record of the state of affairs of finance of an institution
during a particular year. The budget, on the other hand, is only an estimate for
the forthcoming year. In short, a budget is a preparation for the future, whereas
financial report is an analysis and evaluation of the past.
As said before, a budget is also a very important instrument of control,

communication, coordination, evaluation and motivation. It controls as it
channelises the expenditure according to a set financial rules and procedures.
Budget estimates communicate to the staff and others concerned, the total financial
outlay of the institution and allocation of funds for each major item of expenditure
and regulates spending. It enables coordinating through sharing of common
expenditure of different units not only to economise on expenditure but also to
maximise fund utilisation. It helps evaluating performance on the basis of the
utilisation of funds within the prescribed period. Above all, budget motivates
staff to perform well, for funds have been provided for the activities for which
they were sought, envisaging future developments. All the above attributes and
merits of budget would equally apply to library budget.
11.3 BUDGETARY METHODS AND TECHNIQUES

Every library, no matter how small, has to operate with a budget. In most of the
libraries, the librarian and her/his senior staff prepares the budget, according to
budgetary norms issued by the authorities. The budget is scrutinised, whetted, if
necessary, and approved by the Library Executive Committee before it is sent to
the higher authorities for its final approval and sanction. The general practice is
to follow the methods and procedures of parent organisation. Being special service
of comparatively limited scope some small special libraries may be exempted
from preparation of detailed budget. There are a few methods of budgeting for
preparing library budgets which include traditional ones practiced by many
libraries and the more innovative ones that have, in recent years, found their
way, into libraries. These budgetary methods are discussed in the subsequent
sub-sections.
29
Financial Management 11.3.1 Line Item or Incremental or Historical or Object-of-
Expenditure Type Budgeting
Probably the most common type of budget is the one that divides items of
expenditure, line-by-line, into broad categories such as books and journals, salaries
and allowances, equipment, supplies, capital expenditure, contingencies, etc.
with further sub-divisions for each of these broad categories. This is the usual
traditional method , which by taking into account past expenditure on each item,
prepares the current budget, hence it is also called historical budgeting. The
budget is prepared with a small increase of say 5 or 10 per cent for each major
item of expenditure of the previous year’s allocation, assuming that all current
programmes are as good and necessary and hence termed as incremental
budgeting. The other name for line item budgeting is Object-of-Expenditure Type
Budgeting.
The advantage of this method of budgeting is that it is relatively easy to prepare,

present and understand. To some extent it ensures that the funds provided are
spent for the purpose stated. This extensively practiced method has certain
weaknesses. This method does not go into the performance evaluation of activities
and services and also does not suggest any future projections. That is, it does not
necessarily involve any review as to what amount ought to be spent in terms of
activities and services. Secondly, it moves in the same manner as in the past
year, without any forward push. Thirdly this tends to ossify and rigidify budget.
In other words, budget funds earmarked for a particular item cannot be spent for
any other purpose i.e., financial rule would not permit shifting of expenditure
from one head to another. For instance, funds allotted to equipment, if unspent,
cannot be shifted to acquisition of a few important titles of current journals,
even if it is fully justified. It emphasises tools rather than what these tools have
to achieve. It also has tendency to tempt to disguise needs and ask for more
monies than needed. Above all, it lacks a forward look and does not provide
accountability for performance.
11.3.2 Formula Budgeting

Based on financial norms and standards (to be discussed in the next section) this
method tries to relate some inputs like users served, academic programmes
supported and ratio of book stock to total funds of parent body. The formulae are
used for financial estimation as well as budget justification. This appears to be a
broad and quick method and hence saves lot of time. But it does not account for
finer variations in respect of each library and its customers and services.
11.3.3 Programme Budgeting

This method propounded originally in Hoover Commission Report (1949) has
three steps. They are: (i) statement of agency (i.e., library) objectives (ii) full
consideration of alternative ways and (iii) logical selection of the best based on
effectiveness and efficiency. Extended from line-item method, this method tries
to answer the questions ‘what purpose the money is being spent?’ and ‘how
resources have to be deployed for each programme?’ and more suitable for a
contracting economy. Accordingly, financial plan is presented as programmes
and subprogrammes built upon work units or workloads. Work units are assumed
to be measurable and the work unit costs are building blocks of the programme
30 budget.
The focus in this method of budgeting is on the library’s activities and the funds Budgeting Techniques
are to be earmarked for programmes or services that the library plans to provide.
For instance, if a library decides to provide a Current Awareness Service, the
cost of that service (like staffing, materials, publication, overheads, etc.) is
calculated and the expenditure estimated. The budget is thus prepared on the
basis of the cost of programmes and whether a programme has to continue, get
modified or deleted.
A library may also group its major programmes or functions, which may
correspond to the organisational structure of the library like administrative
services, technical services, readers services, etc. Each of these services may be
organised through departments such as acquisition, classification and cataloguing,
reference and bibliographical services, documentation and information services,
together with summary descriptions of these functions or programmes and
comparative figures of current and proposed expenditure. In this type of budget,
provision is made for various activities of each department. This method gives
an opportunity to the heads of various departments to gauge their requirements
and watch their expenditures.
11.3.4 Performance Budgeting

This budgeting method is similar to programme budgeting but the emphasis
shifts from programmes to performance. The expenditure is based on the
performance of activities and the stress is laid upon operational efficiency. This
method requires careful accumulation of quantitative data on all the activities
over a period of time. Management techniques such as cost-benefit analysis are
used to measure the performance and establish norms. For example, data on the
number of books acquired, classified and catalogued, actual man-hours for doing
the entire processing work, etc. are collected to determine manpower and materials
to perform the tasks.
It emphasises performance and operational efficiency of the programmes. Like

programme budgeting starting with statement of agency objectives, full
consideration to alternate ways of achieving the objectives and a logical selection
of the best is made based on effectiveness, efficiency and cost-benefit analysis.
Unit cost for specific operations multiplied by volume of operations anticipated
would give the budget.
The advantage of the method is the emphasis on service mission of library.

However, it is difficult to quantify service quality and activities. In other words,
this method measures only quantity not quality, which is rather difficult to measure
in terms of money. In fact, budget allocation for a service institution like a library
has little direct relationship to the degree of satisfaction users receive from library
services. Measuring benefits of libraries in Rupees, complex interrelationship of
costs of different operations and nonlinear variation of cost for every unit output
(marginal/incremental cost) are some of the hurdles in working out budget by
this method. It may look too humble and begging for a review of each operation
every year by authorities.
31
Financial Management 11.3.5 Planning Programming Budgeting System (PPBS)
This method of budgeting was first proposed by USDOD (United States
Department of Defence) (1961). Two key elements of PPBS are budgeting and
systems analysis. As an extension of programme budgeting, PPBS involves
systems analysis, OR (Operation Research) and other cost-effectiveness processes
to provide a more systematic and comprehensive comparison of costs and benefits
of alterative approaches to a policy goal or programme objective. This establishes
a rational basis to enable decision maker to choose between alternative programmes.
This method combines the best of both programme budgeting and performance
budgeting. The focus in this method is on planning. It begins with the
establishment of goals and objectives and ends with formulation of programmes
or services. The controlling aspect of measurement, which is central to performance
budgeting, is also an important part of PPBS. This method combines the functions
of planning activities, programmes and services, translating them into tangible
projects and finally presents the requirements in budgetary terms.
Great disparities do exist in practice and lack of standards for measuring

programme effectiveness/performance are the difficulties of implementing PPBS.
It also suffers from other implementation problems and some critical gaps like
(i) focusing on what will be done rather than how to do it, (ii) failing to provide
an operating tool, (iii) lack of mechanism to evaluate the impact of various funding
levels, (iv) focuses on new programmes or major increases on ongoing
programmes rather than forcing continued evaluation of existing programmes,
and (v) cost calculation is based on the decisions made in the planning and
programming steps.
11.3.6 Zero-Based Budgeting (ZBB)

The method, developed by Peter Phyrr during early 1970s, requires thorough
knowledge of the organisation, lot of time, effort and training. Having much in
common with PPBS and opposite to historical budgeting, it emphasises current
activities and the necessity to justify each part of the programme every year. It
assumes a budget of ‘zero’ for each programme until one convinces the
appropriating authority that the programme is worthwhile and deserving support
at a specified level. It does not allow for incremental growth in budget. ZBB is
an operating, planning and budgeting process which requires each manger to
justify her/his entire budget request in detail from scratch (hence zero-base) and
shifts the burden of proof to each manager to justify why s/he should spend at
all. This approach requires that all activities be identified and developed as
“decision packages” and systematic evaluation and ranking of these “decision
packages” preferably using a computer. It does not take into account of what
happened in the past but places emphasis on the current activities. Every
programme and activity is spelled out in detail and the financial requirements
are worked out without any reference to the past. In other words, request for
financial support has to be established afresh every year. No activity, in fact,
could continue simply because that activity was undertaken in the previous year.
In other words, the entire budget is justified from scratch.
Steps involved in preparation of ZBB are:
– Activities/ programmes are grouped to lowest level entity,
32
– Objectives and activities of each programme examined and alternative Budgeting Techniques
methods evaluated,
– Programmes are then grouped into a series of ‘decision packages’ with their
statement of purpose,
– Ranking of the ‘decision packages’,
– Cut-off point corresponds to the total budget allocation.
ZBB improves plans and budgets of libraries and helps to develop good
management teams. It also helps to accrue follow on benefits over the years. Yet
the serious problem of enormous time and efforts required together with other
administrative problems as well as problems of developing and ranking ‘decision
packages’ prevents its adoption in libraries.
Some Observations: Some of these budgetary methods are of recent origin and
present a more readily understandable view of budgetary requirements of activities
and services. A more objective justification for them makes them better
instruments for purposeful spending. In practice it is necessary to understand the
‘politics’ of the budget process within the parent organisation and look for
opportunity for personally participating in the final negotiations/ deliberations
as well as using personal informal contacts effectively.
In India, almost all libraries follow the conventional historical method of budgeting.
It is only in recent years that some attention is given to other newer methods.
One aspect that needs careful examination is that most library functions and
services are of a continuing nature and cannot be discontinued on any account
without reference to its past. While it is necessary to evaluate performance and
bring improvements to ensure quality of service, discontinuity of existing services
would prove undesirable, particularly if conditions do not warrant. It is, however,
possible to make a more objective assessment of these methods of budgeting,
only if Indian libraries start making their budgets by these newer methods and
gain sufficient experience in their operations.
Self Check Exercise

Note: i) Write your answers in the space given below.
ii) Check your answers with the answers given at the end of this Unit.
1) List the different methods of preparing library budgets.
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2) Explain briefly the features of Zero-based Budgeting.
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Financial Management
11.4 BUDGETARY NORMS AND STANDARDS
For the purpose of financial planning and budgeting, standards and norms have
been set/proposed by professional experts, committees and bodies. They are quite
useful in estimating budget, seeking and justifying funds as well as allocating
budget among various items of expenditure.
Having got some idea on the methods of budgeting, let us now discuss the
standards and norms that form the basis of estimating library funds required and
also the distribution of funds to major items of expenditure within the total library
budget. We will discuss the basis for estimating financial requirements of libraries
in the next section with three important methods of estimating funds, namely, i)
per capita method, ii) proportional method and iii) method of details. These
methods make use of established standards and norms. However, the other aspect
of budgetary norms and standards that needs attention in this section is the actual
distribution of budgetary funds to different competing items of expenditure. The
major items of expenditure in libraries are books and journals, salaries and
allowances, both of which are to be combined to generate services. Ranganathan
has suggested that the proportion of expenditure of a university library on these
two major items be as follows:
Staff : 50%
Books and other reading materials : 40%
Miscellaneous : 10%
The University Grants Commission Library Committee (1957) has suggested
that a university library with 5,000 students and 500 teachers and research fellows
should have a budgetary provision of Rs.3,50,000 out of which Rs.1,75,000
would be spent on books, journals and other kind of reading materials, and a
similar amount on staff, implying thereby that the expenditure on books and
staff may be equal. But general trend on expenditures in libraries tend to be
higher for staff salaries than for books. Taking into account the recommendations
of University Grants Commission, university and education commissions and
library experts, the general norms appear to be as follows:
Salaries and allowances : 50%
Books : 20%
Periodicals : 13%
Binding : 7%
Others (supplies, maintenance, etc.) : 10%
In the case of public libraries, the distribution is more or less the same for the
two major items of expenditures.
Salaries and allowances : 50%
Books : 20%
Periodicals and Newspapers : 5%
Binding : 5%
Others : 20%
34
Some Observations: Current thinking on library and information services, library Budgeting Techniques
budgeting and related aspects, is on the following lines.
i) Library and information services are to be totally oriented to user needs,
irrespective of the types of libraries. User needs must be systematically
assessed and obtained, on the basis of which libraries should organise their
services.
ii) Library budgets, consequently, are to be in tune with need-based services.
iii) Unit costs of every operation in a library have to be worked out and budgetary
estimates have to be built on this data. Cost of library operations and services,
particularly in India, is not attempted. Libraries mostly operate on
appropriated funds by the parent organisations without any scientific basis
for allotment. Cost accounting is essential for fixing budgetary estimates.
iv) With tremendous increase in the cost of books, journal subscriptions, staff
salaries, library and information services, etc. the question very often arises,
whether library services should be continued to be given without any charge.
Some of these services like literature search, document supply, compilation
of bibliographies, SDI, CAS, etc. can be priced. Of course, in the context of
Indian conditions these services may be subsidised partially.
On the whole, a more scientific basis for library expenditure has to be evolved in
view of the importance of library services. Library budgeting has to be more
innovative and in tune with the new demands.
Self Check Exercise

3) State attributes of library budget.
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11.5 METHODS AND TECHNIQUES OF FINANCIAL

ESTIMATION
By now you have realised the fact that the success of any institution depends
upon the adequate and regular flow of finances. This is true with libraries also.
The foundation of proper financing depends upon the correct and effective
estimation. Just like government, institutions, individuals, and families attempt
at making financial estimations of their needs and resources, libraries also have
to prepare financial estimates. How to estimate, on what basis, and how much
finance a library requires depend upon the age, jurisdiction, quantity and quality
35
Financial Management of reading material, number of readers, and other factors relating to that particular
library.
Some important bases for financial estimation for budget of libraries are:
i) User population and its composition,
ii) Material to be acquired (media, nature and type of information sources),
iii) Services to be provided vis-à-vis objectives,
iv) Unsatisfied service pressures, if any (the most frequently used factor in
determining the financial needs of a library),
v) 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,
vi) Increase in prices of reading materials and inflation.
Three methods generally used for estimating library finances are percapita method,
proportional method and method of details. These methods are discussed in the
following sub-sections.
11.5.1 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. The per capita estimate can be based either on the number of literate
persons or adults. However, the safest method is to calculate library finance per
head of population.
The University Grants Commission Library Committee (1957) recommended

that a university should provide Rs. 15 per student and Rs. 200 per teacher for
acquiring reading material for its library. The Kothari Education Commission
in1964-66, however, recommended that “as a norm, a university should spend
each year about Rs. 25 for each student and Rs. 300 per teacher”. Ranganathan
suggested that per capita expenditure on university and college libraries should
be Rs.20 per student and Ps. 300 per teacher. In schools, per student appropriation
at the rate of Rs. 10 should be made available for the libraries. For public libraries,
Ranganathan suggested, 50 Paise per capita expenditure, way back in 1950. All
these per capita norms are old and obsolete. Now, the per capita figures must be
much higher than that prescribed decades ago and this is the inherent limitation
of the method as it does not provide for inflation and devaluation. It may be
better to relate per capita to cost of living index or any suitable index so that the
per capita norm automatically gets revised.
11.5.2 Proportional Method

This method presupposes that the authorities provide adequate finances to the
libraries 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
36
budget which is allocated for library purposes. Various standards have been Budgeting Techniques
recommended for deciding this limit in India. The University Education
Commission had recommended that 6.5 per cent of a University’s budget would
be a reasonable expenditure for its library. The Commission suggested that “this
expenditure could vary from 6.5 to 10 per cent, depending on the stage of
development of each university library”. In practice, majority of the universities
in India hardly spend three per cent of their total budget on their libraries. It is
generally agreed by most authorities that a college should allocate to the library
four to five per cent of its total expenditure. Ranganathan suggested that 6 to 10
per cent of the total budget should be earmarked for public library purposes.
This proportional method of budgeting 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 pure research, social science and humanities
institutions.
11.5.3 Method 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.
For estimating public library finances, Ranganathan suggested the circulation of

reading material be used for recurring/current expenditure and nonrecurring/
capital expenditure. The Government of India Advisory Committee for Libraries
(1957) followed almost similar method for estimating the financial requirements
for establishing a countrywide public library system.
The UGC Library Committee (1957) in its report suggested a staff formula for
finding out the quantum of library staff members of various categories required
for college and university libraries. It has also laid down their respective pay
scales. The total amount required for meeting the cost of the staff can be calculated
by this formula. For cost of books and other reading materials, the Committee
has suggested a per capita expenditure formula.
Lastly, a suitable combination of above methods may be ideal in some situations.
Self Check Exercise

Note: i) Write your answer in the space below.
4) List the methods of estimating funds for libraries.
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11.6 SUMMARY
In this Unit, we have discussed library budget, its features and attributes. A library,
being a service institution, offering its services without any price, does not support
itself financially. Funds have to be provided to a library by its parent organisation
or by the government. From the appropriations of funds made, library organises
and regulates its expenditures for its functions and services according to certain
norms and procedures.
Methods of budgeting like line item budgeting, Programme budgeting,

Performance budgeting, Planning Programming Budgeting Systems and Zero-
Based Budgeting are briefly introduced in this Unit. In Indian libraries, the
conventional line item budgeting is quite common. Budgets are usually prepared
in conformity with standard norms, particularly with reference to the distribution
of funds towards different competing items of expenditure. The proportion of
funds for staff salaries is generally more than that of books and journals in any
library.
Three methods are generally considered for estimation of budget, namely, per
capita method, proportional method, and method of details. Per capita method
suggests a minimum sum of money per user such as students, faculty and research
scholars in the case of university and college libraries. Hence, population is an
important factor while working out funds for public libraries. Proportional method
prescribes a percentage on the total budget of the parent organisations for libraries,
whereas method of details takes items of expenditure for libraries as the working
data for allocation of funds.

1) The methods of budgeting are: (i) Line item budgeting (ii) Formula budgeting
(iii) Programme budgeting (iv) Performance budgeting (v) Planning
programming budgeting system (vi) Zero- based budgeting.
2) Zero-based Budgeting (ZBB) is a new concept in budgeting which bases its
expenditure estimates on specific programmes and their performance without
any reference to their past expenditure. It requires fresh estimates to be
made for every activity. Commencing from point zero, each activity has to
be justified. Infact, the entire budget has to be justified from scratch.
3) A library budget is a record of funds appropriated to it and the estimated
expenditure for a financial year. This record serves as a guide to the library’s
functions, activities, programmes and services throughout the year. The
appropriations of funds and the estimated expenditure should balance each
other. It is an instrument of control, communication, coordination, evaluation
and motivation.
4) The methods of estimating library funds are:
i) Per capita method whereby a minimum sum of money is determined
for every student, faculty member or research scholar in the university
and college libraries.
38
ii) Proportional method prescribes a fixed percentage on the total budget Budgeting Techniques
of the parent organisation’s research budget, or education budget of
states.
iii) Methods of details take into account the actual amount of expenditure
spent on each item.
11.8 KEYWORDS
Budget : A financial and/or quantitative statement
prepared and approved prior to a defined
period of time of the policy to be pursued
during that period for the purpose of attaining
a given objective.
Budget Centre : A section or area of an organisation under the
responsibility of a manager for which budgets
are prepared; these budgets are compared with
actual performance as part of the budgetary
control process. A budget centre may be a
function, department, section, individual, cost.
Cost-Analysis (Analysis of : Knowledge of the reaction of individual costs
Cost Behaviour) (i.e., fixed, variable and semi-variable costs)
and expenses to changes in the volume of
activity. Cost- analysis helps (i) planning the
amount of costs to be incurred in future
periods (ii) estimating profits from future
activities; and (iii) determining whether costs
have been adequately controlled by those
responsible for their incurrence.
Cost Centre : A location, person or item of equipment, or a
group of these in or connected with an
undertaking in relation to which costs may be
ascertained and used for the purposes of cost
control or product costing. Cost Centre is a
non-revenue-producing element of an
organisation, where costs are separately
figured and allocated, and for which someone
has formal responsibility. The personnel
function is a cost centre in that it does not
directly produce revenue.
Financial Estimation : Estimating the amount of money required for
running services of an institution.
Financial Forecasting : It is forecast of the expected financial position
and the results of operations and cash flows
based on expected conditions. It involves a
systematic projection of expected actions of
management in terms of financial statements,
budgets, etc. using past records, funds flow
behaviours, financial ratios and expected
39
Financial Management economic conditions in the industry and the
firm.
Flexible Budget : A budget that recognises the difference in
behaviour pattern of fixed and variable costs
and which is designed to change in relation
to the level of activity actually attained.
Operating Statement : A summary of the operating costs (and, where
appropriate, of the revenues and profit
margins) of the whole or part of the activities
of an enterprise for a given period. A
detailed periodic report of the financial
results of a firm’s operations, as compared
with budgeted and previous period’s figures.
Profit Centre : A kind of responsibility centre in which the
manger is held responsible for both revenues
and costs, and hence for the resultant level of
profit.
Prospective Pricing : Setting price prior to the performance of the
service is called prospective pricing.
Responsibility Centre : A personalised group of cost centres under the
control of a ‘responsible’ individual.
Restricted Funds : Restricted funds do not allow flexibility in use
of funds. Like grants for specific purposes,
restricted funds cannot be used for purposes
other than that specified. Grants or donations
that require that the funds be used in a specific
way or for a specific purpose. They can be
considered a contract between the
donating party and the receiving party.
Restricted funds are often associated with
non-profit organisations, since a donation
might be made to the organisation for a
specific use only. If the funds are used for
something other than what was stipulated, the
organisation could be required to pay the
funds back. For example, a restricted
funds gift to a university could indicate that
the funds only be used for scholarships in a
specific department.
Unit Cost : Expenditure incurred in producing one unit of
a good or service, computed usually as average
cost. Cost of a single unit of operation, e.g. cost
of cataloguing a single book.
Unrestricted Funds : Unrestricted funds allow flexibility in use of
funds and reallocation of funds from one head
to another.
40
Budgeting Techniques
Cases. Illinois: Richard D. Irwin Inc., 1976. Print.
1983. Print.

Gower, 1990. Print.
Cheek, Logan M. Zero-base Budgeting Comes of Age: What it is and What it

Takes to Make it Work. New York: AMACOM, 1977. Print.
Evans, G . Edward. Management Techniques for Libraries. New York: Academic

Press, 1976. Print.
Mittal, R. L. Library Administration: Theory and Practice. 5th ed. Delhi:

Metropolitan Book Co., 1984. Print.
Mookerjee, S.K., and B. Sengupta. Library Organisation and Library

Administration. Calcutta: World Press, 1977. Print.
Print.
Newton, Jack B. “Budgeting for supervisors”. Mali, Paul, ed. Management

Wiley and Sons, 1981.1313-28. Print.
Price, Parton P. “Budgeting and Financial Control” .Kent, Allen and Harold
Lancour, eds. Encyclopaedia of Library and Information Science. Vol. 3. New
York: Marcel Dekker, 1970, 430-41. Print.
Pyhrr, Peter A. Zero-base Budgeting: a Practical Management Tool for Evaluating

Expenses. New York: John Wiley and Sons, 1973. Print.
Sridhar, M. S. “Ratio analysis technique: a tool for assessing the health of a

library”. Financial Management of Library and Information Centres: Papers
Presented in XII IASLIC National Seminar at Banaras Hindu University, Varanasi,
28-31 December 1986. Calcutta: IASLIC, 1986, 137-46. Print.
Tripathi, P.C., and P.N. Reddy. Principles of Management. 2ed. New Delhi: Tata
McGraw Hill, 1991. Print.

41
UNIT 12 BUDGET PREPARATION
Structure
12.0 Objectives
12.1 Introduction
12.2 Preparation of Library Budget
12.2.1 Contents of a Budget Document
12.2.2 Principles of Budget Making
12.2.3 Justifying the Budget Request
12.2.4 Approval of the Budget
12.2.5 Notification of the Budget of the Library
12.2.6 Budget Excess
12.3 Use of Funds, Financial Control and Accounting
12 .3.1 Allocation of Funds
12.3.2 Encumbering Funds
12.3.3 Financial Control
12.3.4 Fund Accounting
12.3.5 Financial Records
12.3.6 Financial Audit
12.4 Summary
12.6 Keywords
12.0 OBJECTIVES
You already know that library budget serves as an instrument of control,
communication, coordination, evaluation and motivation. Studying this Unit will
enable you to prepare an outline of a library budget and maintain accounts using
appropriate records conforming to audit requirements.
After reading this Unit, you will be able:

• explain the process of budget preparation;
• highlight contents of budget document;
• justify budget;
• describe budgetary control process; and
• discuss the use of funds, financial control ,accounting and auditing.
42
Budget Preparation
12.1 INTRODUCTION
In the preceding Unit of this Block, you have learnt about the budgeting techniques
and principles in general and certain standards and norms for preparation of
budget. This Unit deals with the important phase of financial management,
namely, budgeting, financial control and accounting. Library being expenditure
oriented institution, the central aspect of financial management is the budget,
which is a statement of income and expenditure, providing guidance in spending
the appropriated funds through a period of time. In this Unit, we shall study the
basic features of a library budget.
Preparation of library budget is a major responsibility of the librarian and her/his

staff. The budget in fact, is a reflection of the current and future activities,
programmes and plans of the library. It has to be prepared with the cooperation
of all senior members of the staff and within the framework of rules, procedures
and guiding principles. It is necessary to justify expenditure on every item,
particularly when more funds are to be earmarked for any running activity or
proposed new programme. Accounting, as a means of recording library
expenditure, as per established rules and procedures and maintenance of necessary
financial records in conformity with audit requirements are very important.
As described earlier, budget is a road map for the delivery of library services in
the subsequent years and provides a fiscal foundation for library operations. It
involves details of each activity and considering cost factor involved in each
activity together with future growth and promises of library services.
12.2 PREPARATION OF LIBRARY BUDGET

Library budget preparation is not just the responsibility of librarian but it is the
responsibility of everybody involved in running the library. Inputs need to freely
flow from bottom most line and front end soldiers to unit/section heads and
from section heads to librarian. Budget preparation has to follow certain budget
calendar, guidelines, characteristics and costing inputs. Budget should have clarity,
accuracy, consistency and comprehensiveness. In other words, there should not
be any ambiguity in projection and no vagueness in cost and other estimates
used. Budget is a good comparative assessment device and hence, it should reflect
consistency with what happened in the past. Above all budget should provide a
total/complete picture of all fiscal activities of the library.
Even though budget activity in libraries is oversimplified as an annual affair, in

the strict sense budget work should take place throughout the year. Activities in
the budget calendar deals during beginning and mid of the year (often, financial
year is from 1st April to 31st March of the succeeding year). While reviewing
annual report and previous years data takes place at the very beginning of the
year to ascertain trends, patterns and changes, the mid-year peak activity includes
review of expenditure and revenues to determine whether the current budget is
on track. Usually a new Budget Estimates (BE) for the next year and a Revised
Estimate (RE) for the current year (i.e., RE of previously estimated BE) are
prepared once in a year around mid of the year so that the same is reviewed,
adjusted and finally approved by the authorities well before completion of the
financial year.
43
Financial Management Budget activity of the library presupposes the type of budgetary technique adopted
by the parent organisation. Even though there are several budget types like
Program Budgeting, PPBS and Zero-Based Budgeting, it is the traditional Line
Item Budgeting is widely used in reality. Similarly, the financial year (FY)
followed by the parent organisation has to be invariably followed by the library.
In addition, several guidelines of the organisation in consultation with finance
and accounts department have to be followed. Generally the Accounts Department
of the parent organisation parallely maintains broad accounts relating to library
as part of total accounts of the organisation. Accounting of sanctioned budget
along with gifts, donations, earnings, special funds, etc., if any, are maintained
by library with greater details than that maintained in accounts department to
monitor how funds are used. It is a good practice to periodically reconcile the
library accounts with that of finance/accounts department of the parent
organisation.
It is necessary that the library professionals have clear understanding of budgetary

terms like revenue item, expenditure item, foreign exchange, operating cost,
capital cost, etc. Operating activities recur regularly and can be anticipated from
year to year whereas capital activities occur irregularly and require special fund
raising efforts. Normally, new or remodeled library building, major upgrades of
technology, purchase of expensive equipment or furnishings fall under capital
activities. It is very important that operating and capital activities are kept
separately in the budget. All revenues should be broken down by the source of
funding and expenditures are usually grouped in categories with similar products
or services tied together.
Another important set of guidelines to be followed while preparing budget of

library is whether expansion or growth is desired. If so rate and areas of growth
have to be kept in mind. It is necessary to have inputs and guidelines from the
authorities, library committee or board, finance committee, etc. Some of the
broad guidelines/ indicators usually set by authorities are steady state, controlled
growth, selected growth, overall reduction and selective reductions. ‘Steady state’
is a case of cost to continue and it assumes no changes in the budget or allows
only an increase for inflation. On the other hand, ‘controlled growth’ guideline
establishes a determined percentage for the total increase in expenditures.
‘Selected growth’ tries to establish targeted or permitted increases with no
personnel but wage and other expenditure increases for existing personnel are
taken care. An ‘overall reductions’ guideline sets a percentage for total decrease
in expenditures of the library. Another possibility is to have ‘selective reductions’
guideline specifying targets for specific decreases in expenditure. It is also possible
that management provide a unique combination of guidelines and the same need
to be kept in view while preparing budget for the library.
The process of preparing budget begins with considering what the library hope
to accomplish in the next year. It is necessary to have current long-range plan in
mind with necessary adjustments/revision made to update it. An important aspect
in budget preparation, in recent years, is to note the current and new factors like
developments in ICT, resource sharing, networking, consortia, etc. affecting the
library. The overall current economic condition of the parent organisation and in
the country has also to be kept in view while preparing the budget for library.
44
Budget estimates depend much on what users require. Hence, it is necessary to Budget Preparation
document library service needs of users and the library activities necessary to
meet those needs. Head of library should widely invite suggestions from library
staff on possible new services, additional material and personnel required for
‘new services’.
The total financial resources required has to be determined taking into consideration
estimated approximate increase for regular budget items, expected revenues,
increase in cost, increase in usage, the need for new services, change in number
and composition of user community, etc. However, any anticipated resource
constraints have to be spelled out how inadequate resources are likely to affect
goals of the library.
After drafting the library budget (both BE and RE) each item is reviewed with
Finance Committee, Library Committee/Board/Director before submitting for
approval. The required funds are secured once the budget document is approved
with or without modifications. Occasionally, budget document may need changes
during the budget year due to unexpected developments.
The preparation of the budget is the responsibility of the chief librarian who also
has the responsibility for allocating and administering funds within the overall
activities and services of the library. This responsibility can be delegated to the
next level, i.e., department or section heads, but the overall coordination and
accountability still rests with the chief librarian. Adequate discussion should
take place between the chief librarian and her/his section heads. When the
information needed for making the estimates for the library budget has been
assembled the next step is the preparation of the budget itself. Preparation of a
budget takes substantial time and efforts. Generally during the middle of the
current financial year, Budget Estimates (BE) for the next financial year and
Revised Estimates (RE) for the current financial year are called for by the office
concerned. Estimates are prepared on the basis of past experience, present
demands and future expectations of requirements. The estimates should take
into account the actual expenditure of previous financial year, spillovers, if any,
amount spent up to the date of preparation of the budget during current financial
year, foreign exchange requirements (if any), advance commitments to be made
for the next financial year, capital items, etc. No set of rules can be given for
preparing this statement, but the librarian should bear in mind the impact of
inflation on cost of books, periodicals, binding, and other supplies. The increase
in enrolment, the probable need for annual salary increases at least comparable
to those of the past five years and the possible impact of new technological
developments on library economy and efficiency are some of the factors to be
kept in mind. Head of the library has to discuss the budget proposal with the
section or department heads before the final consolidation. Budget requirements
are filled up in a proforma approved by the institution. The proforma commonly
used for a historical budget in academic libraries is of two types: i) Schedule of
expenditure on pay and allowances of staff ii) Schedule of expenditure on all
other items. The above-mentioned two schedules of expenditure usually are made
under the following heads.
Schedule of expenditure on staff salaries:
It is usually prepared under the following heads:
45
Financial Management 1) Serial number
2) Designation of staff member
3) Pay scale
4) Basic pay on 1st April
5) Total for twelve months
6) Date of increment
7) Rate of increment
8) Total amount of increment (rate x months)
9) Dearness pay rate and amount
10) Dearness allowance rate and amount
11) House rent rate and amount
12) Contribution to GPF/CPF rate and amount
13) Any other honorarium rate and amount
14) Interim relief rate and amount
15) Total of amount of columns 5, 8 to 14
Schedule of expenditure on all items:

This contains, inter alia, the following heads:
• Establishment
• Salaries
• Allowances
• Contribution to provident fund, gratuity
• Other recurring expenditure
• Binding
• Stationery
• Postage
• Contingency
• Books, periodicals and back sets
• Other non-recurring expenditure
• Construction or expansion of library building
• Maintenance of library building
• Purchase or repair of furniture
• Equipment
• Employing additional staff for specific time and purpose, such as processing
of books needed for special purposes
• Special collections
As mentioned earlier, all the above items are to be shown in four types, viz.
actual expenditure for the last year, estimated expenditure for the current year,
revised financial estimates for the current year, and estimated expenditure for
46 the next year. Thus, the budget provides a linkage between three years.
12.2.1 Contents of a Budget Document Budget Preparation
The budget document is an official document, seen or circulated to several

administrative and financial officials of the parent organisation. Hence, it should
be self-contained with regard to the activities and services of the library, self-
explanatory, well organised and neatly presented. Every item of expenditure with
reference to its past allocation and enhanced current requirements must be clearly
stated with justification for the extra funds.
The format of contents of a budget document is given below:
• Title page indicating the budget estimates for the year...
• Contents
• Executive summary
• A synopsis of the budget
• Budget at a glance
Part I Goals and objectives of the library in brief together with activities
and accomplishments of the previous year
• Anticipated activities and proposed targets for the budgeted year
• Future perspectives
Part II Budgetary estimates: a total view
• Estimates by items on separate page
• Salaries and allowances
• Books and journals
• Library, documentation and information services
• Equipment
• Stationery, postage, etc.
• Building maintenance
• Contingencies
• Miscellaneous
12.2.2 Principles of Budget Making

The budgets of different libraries vary considerably. Nevertheless, there are some
elements which are essential and common for different library budgets. They
may be reduced to a few guiding principles and applied in the preparation of any
library budget. Some of these guidelines are discussed below.
The librarian should be invited by the authorities to submit the library budget.
The librarian in turn must consult her/his departmental heads about book funds,
and the library staff members about personnel and other administrative costs.
The final choice of what goes into the budget and how much to ask for should
rest with the librarian.
The librarian should request sufficient funds in each head of the budget to support
a sound programme of library development. It is very important to calculate the
47
Financial Management expenditure by anticipating income, inflation rate, foreign exchange rates, salary
increases, insurance rate, public utility charges, etc. as well as time-delay.
The budget should be prepared and submitted in time. This facilitates recruitment
of additional staff, ordering of materials, etc. in a proper way.
The academic library budget should represent library planning in terms of

educational goals and not be simply a “crisis” operation in which urgent current
needs are hastily converted into Rupee estimates to meet a budget deadline.
Planning to meet educational goals implies that the library will take into account
proposed new curricular changes, the impact of new courses on library books
and personnel, the effect of price increases in binding and like.
The budget should be reasonably flexible in its execution. Classification of the

budget categories should enable the library to check its financial records easily
against the periodic balance statements.
Some important sources of finance for a library or information centre, as discussed

in Unit 10, include (i) regular grants from parent organisation and/or governments,
(ii) adhoc grants or subsidies (iii) fines, fees and services charges. Important
heads of expenditure of information centre or library (as explained earlier) are
(i) collection building and updating (books, jounals, reports, etc.) (ii) binding
and other maintenance costs, (iii) furniture and equipment, (iv) building, (v)
salaries and wages (vi) stationery, postage, etc.
Depending on the size of library or information centre and nature of its parent
organisation the complexity of budget and budgetary control system may vary
from a simple fairly fixed (constant) voted grant of budget from parent
organisation for books, journals and other reading materials to a most complex
situation where grants are received from parent institution and other agencies in
addition to certain revenues earned. These sources of finance may have several
restrictions in their deployment. Allocation has to be done to all heads as explained
above and by type of material (i.e., books, journals, reports, etc.), subjects, or by
departments, etc. An “effective budgeting can display endless variety” in terms
of material (Newton, 1981). The budgeting method used by a library or
information centre is normally decided by the parent institution.
Self Check Exercise

1) State the contents of a budget document.
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48
12.2.3 Justifying the Budget Request Budget Preparation
The chief executives of the parent organisation often take the final decision about
library budget. The officials who are responsible for providing library funds will
quite naturally want to know why the funds are required. They will consider
critically the merits of the library request in relation to those of other departments
or agencies and the total financial resources at their disposal. It is probable that
funds will not be sufficient to meet all the requirements in full and that budget
allocations may be affected accordingly. The library budget request should state
separately and clearly the purposes for which funds are requested and explain
why additional funds may be required in certain categories. The supportive
documentation and justification for the budget has to be developed through out
the year. Justification for the library’s budget will already have been made if the
arguments for services have been well presented in detailed and timely reports
throughout the year. In other words, budget preparation should not become once-
a-year crisis. As stated earlier, it is also necessary to understand the ‘politics’ of
the budget process and build up effective rapport with the key members of the
team or committee.
Sometimes the librarian may think it expedient to present an inflated budget,

considering the fact that the authorities usually sanction less than what is asked
for. This is not a good practice. Padding the budget is not only ethically
questionable, but also unwise and inadvisable because it is difficult to justify
amounts in excess of proven needs. The librarian is also a part of the college,
university or such other parent bodies and, as such, must realise that there are
many demands and constraints on the limited resources in majority of institutions.
The librarian should neither minimize the requirements of the library, nor be
unduly discouraged if the library committee or finance committee is unable to
give all that he asks for because of other pressing and urgent requirements of the
parent institution. The best that can be done is to present an honest picture of the
cost of running a library, in terms of material needed and of services expected
for the clientele. After making an honest budget, the budget request must be
accompanied by a free, clear, and forceful argument proving the need for the
amount asked. Remember that there is no better way of sowing suspicion in the
minds of usually hard-headed finance authorities than presenting an unrealistically
inflated budget.
While preparing the budget you should remind yourself that, regardless of other
values it may have, the budget document must be easily understood and so
convincing in its arguments that the appropriating authority will be persuaded to
accept it and provide the necessary funds. To produce such a document, you
should use all the techniques and supporting data that are available with you.
12.2.4 Approval of the Budget

The librarian presents the budget to the library committee or any other authority
for discussion and approval. The library budget, with the approval and
recommendations of the committee, is sent to the university office or any
appropriate office to be incorporated in the total university or organisation budget.
The Executive Council/ Syndicate of the university passes the entire university
budget. The visiting committee of the University Grants Commission assesses
plan requirements of the university library. The visiting committee visits the
49
Financial Management library and discusses the library requirements with the librarian. The approved
recommendations are consolidated and submitted for sanction to the University
Grants Commission.
In a college, usually the principal of the college approves the library budget,
after taking into account the requirements and opinions of the heads of different
teaching departments, and the requirements in different subject areas. In public
and special libraries, similar procedures are there to get the budget approved and
sanctioned by appropriate authorities.
12.2.5 Notification of the Budget to the Library

When the budget is passed, the same is communicated to the library. This includes
both plan and non-plan budget. The university authorities in consultation with
the State Government approve plan budget wherever necessary (especially when
matching grant is involved). After the budget notification, the university librarian
informs the different academic departments regarding the budget allocations.
These allocations, in fact, are funds in the names of different departments placed
at the disposal of the university librarian. Money is spent by the librarian on
items recommended by the heads of the departments. The library committee
does the subject-wise allocations for books and periodicals. This is purely an
internal arrangement of the library after the passing of the budget. If there are
differences of opinion on allocations to different subjects, they are usually
adjusted, erased and balanced by the library committee.
12.2.6 Budget Excess

Bill or library commitments which exceed the sanctioned budget, if any, for the
library are usually adjusted in two ways, i.e., (i) by adjustment of the excess
amount in next year’s budget and/ or (ii) by additional allocation subject to
approval by the authorities. However, it has been observed in practice, that the
second alternative is not only theoretical but also a doubtful and remote possibility.
Budget excess adversely affects on the attitudes and awareness of the management
towards the library.
Self Check Exercise

2) If there is excess in library spending beyond the budgeted allotment, state
the methods of adjusting the excess.
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50
Budget Preparation
12.3 USE OF FUNDS, FINANCIAL CONTROL AND
ACCOUNTING
Most of the practitioners are much concerned and are more serious about the
phase of actual use of funds, accounting, auditing and financial control. This
phase in itself involves allocation of funds as envisaged in the budget,
encumbering funds under each head, fund accounting and financial audit. Let us
briefly discuss some of these aspects in this section.
12.3.1 Allocation of Funds

Allocation of funds might have been based on past practices and performance,
differential publication rate and inflation rate, level of demand, actual use and
the total programme of the library or information centre. Actual allocation could
be by departments/units, by subjects, by type of material, by users, by language
or by format. Such an allocation of funds provides better control and more
effective way to monitor funds and has best chance to achieve fair balance in
development of programmes and services. However, a rigid allocation, particularly
for collection development, may lead to difficulty in transferring fund from one
account to another and consequently under spending may occur in some cases
when the other heads starve for funds. In addition to such ineffectiveness,
approval, blanket and standing order plans as well as development of reference,
general and special collections may not fit into any heads. Further, matching the
needs and monies available becomes complicated, time consuming and it may
be difficult to develop models even after massive efforts. However, it may be
noted that such formal allocation of funds may not be necessary in a small libraries.
12.3.2 Encumbering Funds

The most difficult task in budgetary control process in libraries and information
centres is encumbering funds. Encumbering funds is a complex process that
allows one to set aside monies to pay for ordered items. The process of
encumbering funds is difficult and complicated for various reasons. Firstly, it is
common that there will be other under spending and/ or overspending in some
heads. Secondly, there are some uncertainties about supplies (delayed supplies
and non-supplies). Libraries make several orders for documents under many
heads in a given financial year and supplies are received continuously at no
fixed intervals. Generally there is no automatic cancellation of non-supplied or
unbilled orders and hence no disencumbering done automatically. It is very
common that prices, discounts and handling charges of documents as well as
exchange rates for foreign currencies keep changing frequently causing variation
in the value of funds encumbered. Lastly, moving ‘monies’ back and forth by
encumbering and disencumbering in a manual system can lead to errors.
12.3.3 Financial Control

It is already stated earlier that budget is a tracking device to measure progress,
highlight variations from the plan and show the need for corrective actions to
put the operation back on track. Nobody has the luxury of working without
financial restrictions. Nobody gets money without justifying its requirements.
Above all, one should be prepared to face both sudden windfalls as well as severe
cuts in budgets. Budgetary control system is an example of a system (particularly,
51
Financial Management the monetary and evaluation techniques of systems analysis) as well as a widely
recognised control function of the management.
Budgetary control is one of the oldest and transitional control techniques used
by managers. Budgetary control is the process of comparing what was planned
with what has been accomplished during the budget period. It is not a past-
oriented or post-action control but a future-oriented control system. It is not a
post-mortem type assessment but a continuous examination of the progress made
and comparing it with the cost standards and time lapsed so that the manager is
able to make adjustments in operation on a day-to-day, week-to-week, or month-
to-month basis for rest of the period of the budget.
As budget is only a futuristic plan, how far the actual operations of the library or
information centre have, conformed to the budgeted programme will be known
only after completion of the budget period (i.e., financial year). Knowing post-
facto how much deviation or under spending or ineffective utilisation of resources
has taken place is like discussing the ways of avoiding accident after the accident
has occurred. Hence, continuously monitoring the operations to examine how
the operations are carried out, whether there are any deviations, the causes for
deviations and ways to rectify deviations within a week or a month will be of
immense help. Though budget is prepared once in a year, the budgetary control
process is a day-to-day, week-to-week, fortnight-to-fortnight, month-to-month
and quarterly-to-quarterly activity for a check of all revenues and expenditures
budgeted and stated before hand.
The three basic steps in the control process are: establishing standards, comparing
results with standards and taking corrective action. Preparation of budget is
nothing but establishing cost standard. This process begins with top management
setting goals and objectives and the lower level managers developing budgets
for their units and the same successively reviewed and integrated at each higher
level. Unlike profit-oriented organisations where budget for marketing expenses
can influence the amount of revenue, the service-oriented and not-for-profit
organisations should have different kind of simple matching of revenues and
expenses.
Statements relating to commitments and actual expenditure should be regularly

checked and continuously reviewed to control the budget. In the actual practice
of budgetary control system, operating statements have to be prepared for each
of the budget centres (or heads or items) involved. These statements should form
part of the management information system (MIS) used to control the performance
of library or information centre against the budget plan. A good budgetary control
system should follow the theory of ‘management by exception’ and focus its
attention on matters that are adverse or that show an unusual variance in addition
to providing full details of budget statements.
In practice, it may be suffice to have monthly reporting in the beginning of

financial year and changing the periodicity to fortnightly during later part of the
year. However, the unit heads my have data on daily or weekly basis throughout
the year to facilitate operational control and the same need not be sent to head of
the library or information centre. Appendix 1 exhibits a simple proforma operating
statement for budgetary control.
52
Self Check Exercise Budget Preparation

3) Why do we need a budgetary control system?
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12.3.4 Fund Accounting

Accounting means a systematic maintenance of the income and expenditure flow
on records. A properly conducted accounting system is a basic prerequisite of
efficient financial administration. Its main purpose is to ensure that the library
funds are spent correctly, properly and within limits. It also helps in planning the
future budgets and for making special studies. In other words, the purpose of
fund or financial accounting for not-for-profit organisation is to assure proper
use of monies provided and to make it possible to track expenditure.
The major part of the fund in a library is operating fund. For fund accounting
purpose operating fund can be divided into restricted fund and unrestricted fund.
Unrestricted fund allows flexibility in use for purposes other than that specified
where as restricted fund cannot be used for other purposes.
The cardinal principle of fund accounting is that every financial transaction is

charged to some account and a record consists of what the transaction involved.
Fund accounting system allows for verification of all the transactions and provide
accurate report. Proper fund accounting by allowing one to know how much
money is spent, how much is left and how is encumbered or committed aids
budgetary control process and enables continuous checking and reviewing of
the situation and examination of the need for reallocation or reappropriation of
funds. It makes clear to the spender how much amount s/he has spent and how
much is left, so that there is neither under-spending nor over-spending. It helps
the administration to remain alert against misappropriations and maladjustments.
Before setting up a book keeping system, the librarian should result the finance
section to determine the procedure of accounting so as to serve best their mutual
purposes.
12.3.5 Financial Records

All institutions that want to survive must meet certain standards of business
organisations and the library is no exception to the general rule. Its financial
records, like its budget should be set up in accordance with the main accounting
procedures of the parent office. It is no longer considered a good practice to
maintain a separate library account, handled directly by the librarian. In most
institutions, all library payments are made through a central office. The finance
section of the organisation maintains the library account while the library
53
Financial Management maintains the records of detailed accounts including outstanding orders, bills
forwarded, etc.
As stated earlier, the main purpose of library accounting is to keep expenditures

within the budget. In addition, accounting helps in the preparation of the annual
report and budget, provide the factual monetary basis for making decisions, assist
the departments in making a wise and systematic use of fund and provide
information for library reports, studies and surveys.
Most of the libraries keep their financial records according to a single-entry

system. Though certain amount of diversity is found in the maintenance of
financial records in different libraries, one main point to be kept in mind is that
these records should be the simplest possible, consistent with efficiency and
should permit rapid and convenient checking against office ledgers. Some of the
records libraries normally maintain are explained below.
a) Cash Book: The cash book is a record in which details of daily cash
transactions regarding income and expenditure of an institution are entered.
But in many libraries, the librarian does not maintain a cashbook, because
the financial transactions generally take place through the accounts/
administrative office, and not directly through the librarian. However, the
libraries which take some amount towards contingency expenditure do
maintain a record in the form of cashbook. The specimen of cashbook of a
library is as under.
Receipts Expenditure
Date Parti- No. & Head of Amount Date Parti- No. & Head of Amount
account Rs. Ps.
culars Date of account Rs. Ps. culars Date of
voucher to be voucher to be
credited credited
Total Total
b) Ledger: A ledger is a book in which the budget provision or income is

given at the top and expenditure on all items and subjects is entered one
after the other. The specimen of a ledger is as under:
Name of the library : Year:
Budget provision : Rs. Head:
S.No. Name Bill Amount Amount Progres- No. of Subject Signa-

of No. & passed sive Books ture of
vendor Date for total librarian
payment
1 2 3 4 5 6 7 8 9
54
c) Allocation Register or Allotment Registers: In allocation register Budget Preparation
expenditure head-wise and subject-wise accounts are maintained. Separate
financial records are maintained in the library for books, periodicals, binding,
stationery, contingency, postage, etc. under approved budget heads. It helps
us in knowing, at any point of time, how much money under what head and
on which subject is spent or committed/ encumbered and how much balance
remains to be spent. Technically speaking, though ledger and allocation
register are two different records, their purposes are the same. The specimen
of an allocation register is as under:
Name of library: Year:
Head of demand: Provision of amount allotted: Rs.
S.No Name Bill Amount Amount Progres- Bal- No. of Sub- Sign Sign of
of No. & passed sive ance books ject of in librarian
vendor date total charge
1 2 3 4 5 6 7 8 9 10 11
d) General invoice register or bill register
The specimen of bill register is as under.
S.No Bill Name of Amount Sign of Sign of Remarks

No. & firm librarian bill
Date receiver
1 2 3 4 5 6 7
In this register the serial number given in column one are termed as the
voucher number of this bill. The office copy of each bill is arranged in serial
number in separate file after the same has been processed and paid for. This
arrangement helps the library staff in finding out any information regarding
any item at any time as the voucher number of the bill links it to all registers
in library sections and relevant records.
e) Monthly Expenditure Statement: This statement helps the operator of each

head of expenditure to know the latest position of the grant at the end of
every month. A specimen of the monthly expenditure statement is as under:
Allocation: Rs.
55
Month Expenditure Cumulative Balance Sign Remarks
expenditure
April
May etc.
f) Salary Bill Register: The salary bill register of the library staff is a detailed
document of the salaries during a particularly year. It contains information
relating to salary and deductions of library staff. In this register all the entries
are made by the accounts section except the leave record of the library staff,
which is filled in by the librarian.
g) Record of Petty Cash: In general, petty cash accounts are handled in two
ways: (i) Turning fine and replacement monies into petty cash directly, (ii)
Fine and replacement monies are collected directly by the accounts office
and this amount is made available to the library in the form of petty cash. In
some cases, separate amount is drawn and used as petty cash and fine being
a revenue cannot be used by the library.
h) Equipment Record or History Card: Another useful record for the library
is a card file of major equipment. This should be made in duplicate, one
copy to be kept in the main administrative office and the other in the library’s
files. It should indicate the name of the item, the date of purchase, the cost,
and such information as serial numbers (e.g. PCs). This record facilitates
equipment purchasing and replacement, makes possible a more considered
judgment in placing replacement orders or in deciding repair versus
replacement, and also provides an accurate inventory for insurance and other
purposes. Many problems of legacy accounting system are solved in
automated accounting system.
Self Check Exercise

Note: i) Write your answers in the space given below.
ii) Check your answers with the answers given at the end of this Unit.
4) State the reasons for keeping financial records.
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
5) Give the headings of an invoice register.
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
56
12.3.6 Financial Audit Budget Preparation
Lastly, financial audit part of the process enables meticulous but sample scrutiny
of financial transactions to have proper control over irregular, inappropriate and
wasteful expenditures. Auditing is a scrutiny of the financial transactions of
government and semi government bodies. It is deemed necessary from the
authority’s point of view for their satisfaction.
Libraries and information centres normally have post-audit by external/central/

statutory auditors, who usually look into loss of reading materials, irregularities
in procurement processes and outstanding advance payments and supplies. Even
though two types of audit systems are prevalent in their country, government
departments and libraries generally follow post-audit. Post-audit means that the
drawing and disbursing officer prepares the bills, signs them and sends them to
the treasury/ bank/ principal for payment. The drawing and disbursing officer is
responsible for the correctness of the bills. The officer or the librarian must satisfy
herself/himself fully before signing the bill. In post-audit system, only random
audit is resorted to, after the financial year comes to a close. Every item is not
checked, but some months are selected at random. Payment items occurring during
these selected months are thoroughly and minutely verified. Mistakes, if any, are
pointed out. The person concerned is advised and warned to be cautious in future.
Pre-audit system is generally followed in autonomous bodies in which the audit

is under local fund account. In case of pre-audit, no item can be passed for payment
unless it has been first audited. Pre-audit system reduces the responsibility of the
drawing/disbursing officer in the sense that all the necessary verifications such
as checking of items, accessioning of items, charging of approved rates,
correctness of calculations, debiting to proper head of account, etc. have already
been done by the audit section in advance. Here instead of the drawing officer,
the auditors satisfy themselves before the bills are passed for payment. Auditing
is carried out both by internal audit team as well as external/statutory audit team.
The problem of correcting and noting for future do not arise in pre-audit
procedures. This simplifies matters somewhat and reduces the auditing
responsibility of the librarian.
Self Check Exercise

6) State why auditing is necessary in libraries?
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
57
12.4 SUMMARY
This Unit has explained how to prepare budget with typical contents of a budget
document and few helpful guidelines for preparing budgets. The contents of the
budget document, principles of budget making, justification for expenditure,
getting approval for the budget and handling budget excesses and other usual
budget formalities are also explained in this Unit.
Issues relating to allocation of funds, encumbering of funds and fund accounting

as a preparation to proper use of funds and control of budget are discussed.
While budget is a financial statement which provides details of the proposed
revenues and their utilisation for expenditure for a specific period, the budgetary
control is the process of comparing what was ‘planned with what has been
accomplished during the period. Libraries and information centres have certain
peculiarities as service-oriented and not-for-profit organisations and hence
implementation of budgeting and budgetary control system in such institutions
is more difficult than in profit-oriented organisations. Budget and budgetary
control system have many merits like use of Rupee as a common denominator,
dealing directly with efficiency of the organisation, stimulating good management
practices, detecting deviations, suggesting corrective actions, facilitating
centralized control and availing collective wisdom of people involved.
The final aspect of financial management is that of keeping accurate records of

money spent, and remaining balance. There are standard procedures and rules
for maintaining different types of records of expenditure, which are described
with examples. Library expenditure is subject to audit to ensure that the
expenditure has been according to norms, rules and procedures.

1) The contents of a budget document, besides the title page and contents,
includes the following: budget at a glance; goals and objectives of the library
in brief; activities and accomplishments of the previous year; activities and
proposed targets of the budgeted year; detailed statement of expenditure
estimated for the budgeted year along with the past year, on all the activities
or items of expenditure.
2) Excess expenditure beyond the estimated expenditure is adjusted in the

following ways:
i) The excess amount is shifted to the next year’s budget, subject to the
approval of the financial and administrative authorities
ii) Making a special request for funds for the extra expenditure, subject to
the approval of the financial and administrative authorities.
3) Budget is a futuristic plan. Actual performance may or may not conform to
the budget due to various reasons. Instead of knowing whether actual
performance varied from the budgeted target after the budget period, it is
better to periodically monitor and know the deviations from the set budget
so that wherever possible necessary adjustments can be effected during the
subsequent periods to make actual performance to become close to budgeted
targets. It is exactly for this purpose a budgetary control system is needed.
58
4) Financial records are necessary as they serve the following purposes: Budget Preparation
i) Help in the preparation of the annual report and the budget of the
following year,
ii) Provide factual monetary basis for making decisions on books,
periodicals and other expenditures;
iii) Assist the departments, in case of universities, in making a wise and
systematic use of their book fund allotment;
iv) Provide information for annual reports, studies and surveys.
5) Generally invoice register has the following headings; Serial Number; Bill
Number and date; Name of Firm; Amount; Signature of the Librarian;
Signature of bill receiver; Remarks.
6) Audit is necessary in libraries to check whether the allotted budgetary funds

are spent according to financial procedures, rules and norms. It seeks to
control irregular, inappropriate and wasteful expenditure. Every
administrative and financial authority consults audit reports in order to satisfy
themselves that the allocated funds have been spent properly and lawfully
invariably.
12.6 KEYWORDS
Accounting : A systematic maintenance of income and
expenditure flow on records. It is a
systematic process of identifying,
recording, measuring, classifying,
verifying, summarising, interpreting and
communicating financial information.
Accounting provides information on the
(i) resources available to a firm, (ii)
he means employed to finance those
resources, and (iii) the results achieved
through their use
Audit in relation to Accounting : Systematic examination and verification

of a firm’s books of account, transaction
records, other relevant documents, and
physical inspection of inventory by
qualified accountants (called auditors).
Auditing : Official examination of accounts and

scrutiny of financial transactions of a
government or non-government body/
institution.
Budget : A financial and/or quantitative statement

prepared and approved prior to a defined
period of time of the policy to be pursued
during that period for the purpose of
attaining a given objective.
59
Financial Management Budget Centre : A section of the organisation or the
undertaking defined for the purpose of
budgetary control.
Cost Centre : A location, person or item of equipment,

or a group of these connected with an
undertaking in relation to which costs
may be ascertained and used for the
purposes of cost control or product
costing.
Cost-Analysis (Analysis of : Knowledge of the reaction of individual

Cost Behaviour) costs (i.e., fixed, variable and semi-
variable costs) and expenses to changes
in the volume of activity. Cost analysis
helps (i) planning the amount of costs to
be incurred in future periods (ii)
estimating profits from future activities;
and (iii) determining whether costs have
been adequately controlled by those
responsible for their incurrence.
Financial Estimation : Estimating the amount of money required

for running services of an institution.
Financial Forecasting : It is a forecast of the expected financial

position and the results of operations and
cash flows based on expected conditions.
It involves a systematic projection of
expected actions of management in terms
of financial statements, budgets, etc.
using past records, funds flow
behaviours, financial ratios and expected
economic conditions in the industry and
the firm.
Financial Records : Documents which keep track of library

expenditure i.e., cash book, ledger, salary
bill register, allocation register, etc.
Flexible Budget : A budget that recognises the difference

in behaviour pattern of fixed and variable
costs and which is designed to change in
relation to the level of activity actually
attained.
Library Expenditure : Money spent by a library on different

heads such as purchase of reading
materials, salaries and allowances,
stationary, postage, furniture, equipment,
etc.
Non-plan Grants : Regular budgeted grants given every year.

60
Non-recurring Expenditure : Expenditure that do not repeat every year Budget Preparation
(e.g. building, equipment, machinery,
etc.).
Operating Statement : A summary of the operating costs (and,
where appropriate, of the revenues and
profit margins) of the whole or part of
the activities of an enterprise for a given
period.
Plan Grants : Funds made available on projects that go
under annual plans, five-year plans, etc.
Profit Centre : A form of responsibility centre in which
a manger is held responsible for both
revenues and costs, and hence for the
resultant level of profit.
Prospective Pricing : Setting price prior to the performance of
the service is called prospective pricing.
Recurring Expenditure : Expenditure that repeats every year e.g.
books, journals, staff salaries, etc.
Responsibility Centre : A personalised group of cost centres
under the control of a ‘responsible’
individual.
Restricted Funds : Restricted funds do not allow flexibility
in use of funds. Like grants for specific
purposes, restricted funds cannot be used
for purposes other than that specified.
Grants or donations that require that
the funds be used in a specific way or for
a specific purpose. They can be considered
a contract between the donating party
and the receiving party. Restricted funds
are often associated with non-profit
organisations, since a donation might be
made to the organisation for a specific
use only. If the funds are used for
something other than what was
stipulated, the organization could
be required to pay the funds back. For
example, a restricted funds gift to a
university could indicate that the funds
only be used for scholarships in a
specific department.
Single Entry : Entries showing only expenditure.
Single Entry Bookkeeping : An accounting method in which
transactions are recorded as a single
entry, rather than as both a debit and
a credit as in double-entry bookkeeping.
61
Financial Management Unit Cost : Expenditure incurred in producing
one unit of a good or service, computed
usually as average cost. Cost of a single
unit of operation, e.g. cost of cataloguing
a single book.
Unrestricted Funds : Unrestricted funds allow flexibility in use

of funds and reallocation of funds from
one head to another.

Cases. Illinois: Richard D. Irwin Inc., 1976.Print.
1983. Print.

Gower, 1990. Print.
Cheek, Logan M. Zero-base Budgeting Comes of Age: What it is and What it

Takes to Make it Work. New York: AMACOM, 1977. Print.
Evans, G . Edward. Management Techniques for Libraries. New York: Academic

Press, 1976. Print
Mittal, R. L. Library Administration: Theory and Practices. 5th ed. Delhi:

Metropolitan Book Co., 1984. Print
Mookerjee, S.K., and B. Sengupta. Library Organisation and Library

Administration. Calcutta: World Press, 1977. Print.
Print.
Newton, Jack B. “Budgeting for supervisors”. Mali, Paul, ed. Management

Wiley and Sons, 1981.1313-28.Print.
Price, Parton P. “Budgeting and Financial Control” .Kent, Allen and Lancour,
Harold, eds. Encyclopaedia of Library and Information Science. Vol. 3. New
York: Marcel Dekker, 1970. 430-41. Print.
Pyhrr, Peter A. Zero-base Budgeting: a Practical Management Tool for Evaluating

Expenses. New York: John Wiley and Sons, 1973. Print.
Sridhar, M. S. “Are Demands Forecasting Techniques Applicable to Libraries”.

Library Herald 23.2 and 3(1984): 84-89. Print.
--- . “Is Cost Benefit Analysis Applicable to Journal-Use in a Special Library?”

The Serials Librarian 15.1/2. (1988): 137-153. Print.
62
--- . “Ratio Analysis Technique: a Tool for Assessing the Health of a Library”. Budget Preparation
Proceeding of the twelfth IASLIC National Seninar on Financial Management
of Library and Information Centres IASLIC National Seminar, 28-31 December
1986. Calcutta: IASLIC, 1986. 137-46. Print.
Tripathi, P.C., and P.N.Reddy. Principles of Management. 2ed. New Delhi: Tata
McGraw Hill, 1991. Print.

63

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BLIE-226

Management of Library and

Programme Coordinators Course Coordinator

Course Preparation Team

Print Production Secretarial Assistance Cover Design

March, 2013 (Second Revised Edition)

10.2 FINANCIAL MANAGEMENT

10.2.1 Principles of Financial Management

In practice, as said before, economic management of library services is the weakest

Self Check Exercise

There are certain difficulties in financial management of service-oriented and

Among the important characteristics of service-oriented and NFP organisations,

Self Check Exercise

10.3 SOURCES OF FUNDING/ FINANCE

v) Self-generated fund (Fee-based services): Libraries usually render their

It is generally objectionable to charge for library services when the mission

c) School Libraries: Promoting good library service in schools depends very

The State Government or any education authority administering the school

Self Check Exercise

10.3.2 Public Libraries

Having relegated the responsibility of running public libraries to local community,

In fact as early as 1958, K.P. Sinha Committee recommended creation of Block

Endowments, charitable trusts and private benefactions could be another source

10.3.3 Special Libraries

Self Check Exercise

10.4 IMPLICATIONS OF ICT DEVELOPMENTS:

The second implication of ICT development is concerned with digitisation and

10.5 LIBRARY EXPENDITURE PLANNING

10.5.1 Importance of Library Expenditure

10.5.2 Nature of Library Expenditure

b) Library is a growing organism: The library trinity-documents, readers and

10.5.3 Principles of Library Expenditure

b) Principle of advance planning: The library expenditure should be planned

c) Principle of equitable allocation: The library funds should be equitably

10.5.4 Classification of Library Expenditure

Self Check Exercise

Libraries have, by and large, restricted their financial management to preparing

10.7 ANSWERS TO SELF CHECK EXERCISES

10.9 REFERENCES AND FURTHER READING

Bryson, Jo. Effective Library and Information Centre Management. England:

Cloutier, Claudettee. “Setting Up a Fee-based Information Service in an Academic

Evan, G . Edward. Management Techniques for Libraries. New York: Academic

Mittal, R. L. Library Administration: Theory and Practice. 5 ed. Delhi:

Newton, Jack B. “Budgeting for Supervisors”. Mali, Paul, ed. Management

Sridhar, M.S. “Are Demand Forecasting Techniques Applicable to Libraries?”

--- . “Is Cost Benefit Analysis Applicable to Journal-Use in a Special Library.”

--- . “Resource Sharing among ISRO libraries: a Case Study of Consortia

Tejomurty, A. Studies in Academic Librarianship. Jaipur: Printwell, 1987. Print.

Tripathi, P. C., and P.N.Reddy. Principles of Management. 2ed. New Delhi:

University Grants Commission, Library Committee. University and College

11.2 LIBRARY BUDGET AND FINANCIAL

As said before, a budget is also a very important instrument of control,

11.3 BUDGETARY METHODS AND TECHNIQUES

The advantage of this method of budgeting is that it is relatively easy to prepare,

11.3.2 Formula Budgeting

11.3.3 Programme Budgeting

11.3.4 Performance Budgeting

It emphasises performance and operational efficiency of the programmes. Like

The advantage of the method is the emphasis on service mission of library.

Great disparities do exist in practice and lack of standards for measuring