Original Question (2/21/12):
Bruce Pomerantz (MN)
A small library leases its 9 computers for $2,800. Because this is a yealy expense, I’m inclined to categorize this as an operating expenditure, not as capital, which is how the librarian entered it.
Next year, the library will bid the lease. If a new vendor receives the contract, there will be costs for set up. I still think the additional cost should be categorized as operating.
Thoughts?
Katina Jones (MO)
I vote for putting it in Operating Expenditures – because it’s a yearly expense. The annual costs related to having their own computers would be listed as Operating, right?
Edie Huffman (IN)
Sounds right to me.
Peter Haxton (KS)
I agree, it should be operating.
Stacey Malek (TX)
I agree.
Kathy Sheppard (SC)
I also agree in theory. Our problem is, each of our counties has its own unique definition of what is included in non-building “capital” expenditures. Some include library collection inventory as capital. Others include oddball items like the computer lease. We settled long ago on telling the local libraries to use their county’s definition of capital – at least that way they get consistent numbers from one year to the next, even if some of their purchases are not strictly comparable to other libraries. We can generally pull out the actual building funds anyway. Also it is more likely the library can get the correct figures from the county if they use county nomenclature.
We have had this discussion on the list before, and someone mentioned there is a good federal definition of “capital” somewhere but I confess, I did not track that down as do not need another big change in definitions right now -- still getting a lot of flack about the “internet uses/users” change this year. But I would like to see that definition if anyone has it to hand.
Frank Nelson (ID)
http://clinton3.nara.gov/pcscb/staf_define.html
Not a particularly up-to-date document, but it does remind us of the perennial problem of nailing down the definition of capital. As long as such weasel words as "locally accepted accounting practices" are applied to non-building capital expenditures, there will be no consensus.
Kathy Sheppard (SC)
Exactly. Maybe what we should do is think through that definition and specify that libraries include ONLY expenditures for facilities. But then would that include renovations, landscaping, new roof, building design, bookmobile or other library vehicle, etc.?
I do think it’s worth discussing since it seems to come up pretty frequently in this group.
Thanks for the definition, Frank.
Bruce Pomeranz (MN)
Frank Nelson’s and Kathy Sheppard’s recent communications demonstrate the need for a definition committee that interprets the definition. This current method of gathering ideas from everyone can be chaotic. At least in this specific case, everyone is in agreement.
Daria Bossman (SD)
Yes, a Definitions committee is definitely needed! I second that thought! Daria Bossman (SD)
Katina Jones (MO)
(Kathy) I may be too literal for my own good, but I’m not sure what is unclear about our current definitions (link to WebPLUS User Guide):
OPERATING REVENUE (p 45, PDF p 49)
Report revenue used for operating expenditures as defined below. Include federal, state, local, or other grants. DO NOT include revenue for major capital expenditures, contributions to endowments, revenue passed through to another agency (e.g., fines), or funds unspent in the previous fiscal year (e.g., carryover). (Funds transferred from one public library to another public library should be reported by only one of the public libraries. The State Data Coordinator shall determine which library will report these funds.)
OPERATING EXPENDITURES(p 46, PDF p 50)
Operating expenditures are the current and recurrent costs necessary to support the provision of library services. Significant costs, especially benefits and salaries, that are paid by other taxing agencies (government agencies with the authority to levy taxes) "on behalf of" the library may be included if the information is available to the reporting agency. Only such funds that are supported by expenditure documents (such as invoices, contracts, payroll records, etc.) at the point of disbursement should be included. Do not report the value of free items as expenditures. Do not report estimated costs as expenditures. Do not report capital expenditures under this category.
CAPITAL REVENUE(pp 47-48, PDF pp 51-52)
Report all revenue to be used for major capital expenditures, by source of revenue. Include funds received for (a) site acquisition; (b) new buildings; (c) additions to or renovation of library buildings; (d) furnishings, equipment, and initial collections (print, non-print, and electronic) for new buildings, building additions, or building renovations; (e) computer hardware and software used to support library operations, to link to networks, or to run information products; (f) new vehicles; and (g) other one-time major projects. Exclude revenue to be used for replacement and repair of existing furnishings and equipment, regular purchase of library materials, and investments for capital appreciation. Exclude income passed through to another agency (e.g., fines), or funds unspent in the previous fiscal year (e.g., carryover). Funds transferred from one public library to another public library should be reported by only one of the public libraries. Report federal, state, local, and other revenue to be used for major capital expenditures… (emphasis added)
Total Capital Expenditures(p 48, PDF p 52)
Report major capital expenditures (the acquisition of or additions to fixed assets). Examples include expenditures for (a) site acquisitions; (b) new buildings; (c) additions to or renovation of library buildings; (d) furnishings, equipment, and initial book stock for new buildings, building additions, or building renovations; (e) library automation systems; (f) new vehicles; and (g) other one-time major projects. Include federal, state, local, or other revenue used for major capital expenditures. Only funds that are supported by expenditure documents (e.g., invoices, contracts, payroll records, etc.) at the point of disbursement should be included. Estimated costs are not included. Exclude expenditures for replacement and repair of existing furnishings and equipment, regular purchase of library materials, and investments for capital appreciation. Exclude contributions to endowments, or revenue passed through to another agency (e.g., fines). Funds transferred from one public library to another public library should be reported by only one of the public libraries.
Edie Huffman (IN)
And 3rd
Kathy Sheppard (SC)
Katina,
I probably jumped in there too hastily and without referring to the current definition, which you are right to bring forward, so thanks for that. My difficulties arise where there are gray areas, and I do get questions like, Is a USED vehicle a capital purchase? (We decided it was new to them, so yes, but the county did not consider that a capital expenditure because it did not fall into their “capital” budget.)
The harder thing for library directors, especially new directors in less sophisticated counties where bookkeeping is still an inexact practice and fines are collected under the circ desk in Tupperware containers, is not so much understanding the definition as getting the dollars right, tracking down the “expenditure documents” and coded line items for funds spent on behalf of the library but for which there is no easily discovered paper trail. Here’s an instance that required the time of several people to make the decision: Is our big landscaping project (included in a countywide, county funded effort) a capital expenditure? The library thought it was important to record this as it was an important capital improvement, but they couldn’t nail down the dollar amount for just the library’s part of the project. I think we decided not to include, following the guidance regarding invoices/contracts, but the library saw the need to begin keeping a separate record of projects and expenditures like this. But now the figure reported in the survey was no longer useful for that library. And how many others?
Well, it’s not all THAT bad in most of South Carolina’s libraries. But because so much is incorporated in the definition I do have to suspect that a lot of the capital numbers are fudged. Broad definitions like these makes it hard, in my view, for libraries to make meaningful comparisons.
Maybe it would be better to report JUST expenditures for buildings – isn’t that what we are most interested in, in this element? If I want to know how much money was spent on building new libraries in our state, I must call around and check the figures reported in the survey, and weed out, as possible, the vehicles, computers, e-book collection for the branch that got a new roof, etc.
I know this discussion was diligently carried on over the years and the definitions were arrived at for good reasons, and maybe they are still good reasons. Still, we want the numbers to be useful, so it might be good to revisit these particular elements and examine how the figures are being used today. I think committee is a good way to do that.
Frank Nelson (ID)
Ah, Friday mornings.
Yes, having our definitions on top is the way to go. Remember that these definitions are the product of two decades worth of ongoing committee and subcommittee work, as well as the annual balloting process which has served us well despite the chaos and clunkiness.
We and all our predecessors have always wanted precision and cleanliness in our definitions and collection methods. The fact that many of these questions of interpretation persist underscores the slipperiness of some of our most cherished elements.
There really are some holes that are still not plugged with this capital/operating thing. It is often a shell game for municipal and county governments at year's end when they struggle to balance the budget. Now you see it, now you don't.
Every now and then, it has been suggested that we ask for building expenses only, but even that calls for some deliberation as we would have to examine lease agreements here as well as for computers. Just because there is a yearly payment doesn't make it an operating expenditure.
And the beat goes on.
Edie Huffman (IN)
Frank:
What a treasure we have in you! Thanks so much for your memory, caring and sharing. Have a great weekend!