1. Finance Matters Best practices in managing library funds

2. Treasurer’s arrest shakes community “…when people here found that mild-mannered [Ira] town treasurer Donald Hewitt was cooking the books, it was big news. When they learned the extent of it– more than $400,000 allegedly embezzled over about 30 years– it was even bigger.” “Common threads… involvement of a trusted individual, specific expertise and individual transactions small enough to stay below the radar.” Brattleboro Reformer, 4/11/2011 page 3

3. In this presentation… Where library funds come from Trustee and librarian responsibilities Best practices

4. Where library funds come from All figures from the VT Public Library Statistics 2010 Annual Report

5. Sources for Library Funding Vermont National

6. Use public library statistics to discover the library profile

7. Trustee and librarian responsibilities

8. Incorporated Libraries 22 VSA 111, 103 Trustees may own and sell real and personal property make and keep bank accounts accept contributions spend money Law of Libraries, 2010, page 4

9. Incorporated funding Most incorporated libraries in Vermont receive a portion of their funding from local appropriations Public funds may come with strings such as town audit of certain accounts; open meeting law; or requirement that trustees be elected by voters It is good practice to keep the lines of communication open between the library and the selectboard Law of Libraries, 2010, page 4

10. Municipal libraries 22 VSA 144 Unless governed by charter or special law, trustees have authority to Write orders to the treasurer on the library accounts Accept gifts on behalf of the municipal library Decide how money will be spent, by budget adopted at town meeting Town auditors may audit the municipal library accounts Law of Libraries, 2010, page 5

11. Municipal library funding Selectboard sets the municipal library budget to be presented at town meeting for approval Trustees may bring a petition signed by five percent of the voters asking for additional funding, to be placed on the town meeting ballot It is good practice to keep the lines of communication open between the library and the selectboard Law of Libraries, 2010, page 5

12. Basic trustee responsibilities Financial management and oversight Board and director put together the annual budget At least one trustee reviews library bills and signs that bill is accurate for town hall or treasurer payment Financial committee reviews monthly disbursements and checks whether budget is on track Payroll is handled by the town for municipal libraries, by board or fiscal agent for incorporated libraries

13. Basic staff responsibilities Daily management and tasks of library income and expenditure Director and Board build the annual budget Prepares weekly list of bills to be paid; director verifies and signs Prepares monthly disbursements and notes variance from annual budget Staff verifies payroll A Manual for Vermont Library Trustees, 2010, 12

14. Check book or petty cash fund Staff have access to some funds for local payments Staff should have board oversight for checkbook Should be regular protocol for the collection of library fees such as overdues or copier costs Municipal library: fees and gifts may go back to town Incorporated: fees and gifts managed by board treasurer A Manual for Vermont Library Trustees, 2010, 7-8

15. Best Practices

16. Set the control environment Bank statements are reviewed by the board No town or library records are kept in staff or trustee’s homes Treasurer attends all board meetings Policies and procedures have been developed, written down, and govern all transactions Management must use time sheets, get approval for travel expenses, have credit card scrutinized Receipts are required for expense reimbursement Blue Avocado, Five Internal Controls for the Very Small Nonprofit, January 6, 2010. http://www.blueavocado.org

17. Lay out who is responsible Write the procedures down Who checks the invoice for addition errors? Who approves the invoice so it is paid? Blue Avocado, Five Internal Controls for the Very Small Nonprofit, January 6, 2010. http://www.blueavocado.org

18. Design physical controls Lock money up Staff computers should be secured and have passwords Checks should be in a locked location Blue Avocado, Five Internal Controls for the Very Small Nonprofit, January 6, 2010. http://www.blueavocado.org

19. Design cash procedures If cash is collected, two people count it If cash is disbursed for postage or other small amounts, require receipts Blue Avocado, Five Internal Controls for the Very Small Nonprofit, January 6, 2010. http://www.blueavocado.org

20. Reconcile the bank statement The statement should be given unopened to someone on the board who does not handle the money Reconciling the bank statement is probably the chief safeguard against embezzlement Blue Avocado, Five Internal Controls for the Very Small Nonprofit, January 6, 2010. http://www.blueavocado.org

21. Bookkeeper signs checks? Bookkeepers should not sign checks If this is impractical, set limit on the size of the check, for example no more than $100 Safeguard: person who is not the bookkeeper should reconcile the checkbook Blue Avocado, Five Internal Controls for the Very Small Nonprofit, January 6, 2010. http://www.blueavocado.org

22. Atmosphere and environment Periodically another board member might survey the fiscal operations, checking whether an expense is legitimate, payroll taxes were paid properly Setting a standard of high accountability actually is the best safeguard The best safeguards may still not catch every thief; they will help honest people and prevent ongoing theft Blue Avocado, Five Internal Controls for the Very Small Nonprofit, January 6, 2010. http://www.blueavocado.org

23. Vermont Department of Libraries This publication is supported by the Institute of Museum and Library Services, a federal agency, through the Library Services and Technology Act.