Date: September 6, 2006

To: RCPL Board of Trustees

From: Greta Chapman

Re: August Budget Narrative

Date: September 6, 2006

To: Greta Chapman

From: Heidi Archie

Re: August Budget Narrative

As the year progresses, the narrative becomes longer. To make a more time efficient read, a table of contents has been provided. This will allow for easier navigation to answer questions.

I. City budget line items of interest

a. 4246 – Other Rentals

b. 4253 – Repair Equipment

c. 4341 – General Materials

II. No new County budget line items of interest

III. Library Board Fund budget items of interest

a. 4252 – Repair Structures

b. 4320 – Building and Structures

IV. Previously discussed City Budget line items – no new information

V. Previously discussed County Budget line items – no new information

VI. Previously discussed Library Board Fund budget line items – no new information

The Library estimates spending approximately 8.3% of its budget on a monthly basis. To begin August, we should have spent approximately 66.4 % or (8.3 * 8). To date we have spent 63.25% of the City budget, 61.98% of the County budget and 34.06% the Library Board Funds budget.

The City was able to load the County and Library Board budgets. However, since the budget reports provided by the City will only show budget to actual expenses, and do not include revenue; the Library Board budget will continue in the same format as previous months.

I. City budget line items of interest

a. Line item 4246 – Other Rentals – This line item covers the parking lot contract and is paid on a quarterly basis. This cost is also shared with the County. The final quarter of the year will be paid with County and City funds: $1125 County and $495 City.

b. Line item 4253 – Repair Equipment – Earlier this year, the main air handler drive and motor went out and needed replaced. The equipment was quite old but was not budgeted for replacement in this budget year. However, we were forced to replace it due to inoperability. Additionally, the two air handlers run together and will not regulate air temperatures properly if they are on two different systems. Due to this, both air handlers needed to be replaced. This unexpected expense totaled about $8,500. This cost has pushed this budget line over for the year. We will continue to have smaller expenses paid out of this line item due to contractual obligations for service on equipment throughout the building.

c. Line item 4341 – General Materials – As previously explained, the Library had been paying all invoices for materials out of 4341 – General Materials until expended and then moved on to 4342, etc. However, in conversations with City Finance, from an auditing standpoint, we are unable to do that at this time. If we want to use all four line items, we must split each invoice out and have each material billed to it’s appropriate budget line. Since we already do that in our acquisitions system, it would be duplication and inefficient to do again in the accounting system.

· City Finance’s recommendation was to pay all materials out of 4341 – General Materials for the year. This line item will be overspent by the amount equal to the other three line items by the end of the year.

· For 2007, these four line items have been collapsed into one line item 4341 – General Materials. Therefore, this will not be an on-going issue in future budget cycles.

II. No new County budget line items of interest

III. Library Board Fund budget line items of interest

The Board Funds budget document now includes a second tab that outlines space use expenditures. In reviewing this tab the top portion shows all expenditures to date. The bottom portion shows what remaining expenses are currently planned and their estimated prices.

a. Line item 4252 – Repair Structures – The following explanation can best be understood by viewing the second tab of the Board Funds budget document and scrolling to the bottom of the document to the “Upcoming budgeted expenditures for Space Use” section. The original space use budget recommendation included transposed numbers for trenching the floor, electrical and concrete patching for the new technology training center and commons area. Originally stated as $1700, but should have been $7100. Currently the Library is in the process of receiving quotes that are within the $7100 range. This expense should be on target with the actual amount budgeted for this expense.

b. Line item 4320 – Building and Structures – The flooring for the coffee shop has been paid. Background: The budget was originally proposed with the majority of funding for the coffee shop in this line item. At the time of budget submission, we were unable to determine what portion of the expenses would come from each individual line item. Therefore, we used this as a placeholder for the funding. However, this is a Capital Outlay line item, which means expenditures must be over $5,000 in order to be paid out of it. So far, the costs have been less than $5,000 and have come out of 4252 – Repair Structures.

IV. Previously discussed City budget line items – no new information

a. Line item 4111 – Overtime Wages – This line item has been overspent due to overtime required during vacancies throughout the building. The amount of overtime has decreased significantly and will continue to decrease as the vacant positions have been filled. Additionally due to vacancies throughout the Library, we should see savings of approximately $35K in line item 4110 – Salary and Wages for the year. This savings will off set the over-expenditure in overtime wages.

b. Line item 4211 - General & Auto Liability – This was budgeted at $6,832 while actual expenses are $12,437. This amount is based on premium information received for the current year for the entire City of Rapid City. The Library is charged a percentage of that rate. We typically project a 5% increase in operational costs such as this, but are unable to predict when such a large jump will occur.

c. Line item 4244 – Lease/Purchases – Due to a misunderstanding between the Library staff and City Finance, the amount budgeted for this year was approximately $6K short. Background information: Ten years ago, the City began an energy conservation plan with Johnson Controls, which will be completed this August. Since the plan expires mid-year, the Library staff was under the impression that the cost would only be for part of the year and therefore budgeted half of the yearly amount. However, the City took out a loan for this program 10 years ago and set the yearly payment amount to cover 10 years. This means that even though the coverage is only good through August, we are required to make a full last installment on the loan. Additionally, there are a few leases that will be renewed throughout the year, so this line item will continue to rise slightly each month. When reviewing the entire budget at the bottom line level, the savings seen in line item 4110 – Salary and Wages should still off-set these additional costs.

d. Line item 4251 – Rolling Stock – This is a line item that had previously not been used by the Library. According to City Finance, we are to use this line item when purchasing parts for the two library vehicles, such as oil filters, etc. Historically, we had used line item 4262 – Gas, Oil, Fuel for these small purchases.

e. Line item 4252 – Repair Structures – As previously explained, this line item includes the $39,900 encumbrance for our carpet replacement. Additionally, earlier in the year there was a misunderstanding of how to read the budget reports between the Business Office and City Finance, and it appeared that there were some extra funds within this line item. We have since determined that is not the case. But with that in mind, we went ahead and took care of the scheduled maintenance of various items throughout the building during the first quarter. Most of the work was preventative and scheduled. We don’t anticipate any additional large expenses from this line item this year.

f. Line item 4253A – Repair Structures – In July, we had to pay two sizable invoices to Action Mechanical:

· $2442 for work accomplished in 2004 that had been invoiced incorrectly. Apparently through inconsistent collection efforts from the vendor and incomplete information provided to City Finance; they were unable to determine which department should be billed. After investigation, it was determined that is was an invoice due to the Library for work done at the end of 2004 to flush and clean the heating and cooling system.

· $4361 for replace two of six chillers of the air conditioning system. The chillers were under warranty but the labor to replace them was not. Due to the use of the building and hot temperatures in the area; we were not able to sufficiently cool the building without all six chillers operating at full strength without straining the remaining compressors. Therefore, the chillers had to replaced while they were still under warranty.

g. Line item 4262 - Gas, Oil, Fuel – In 2005, there was an oversight in payment of the gas bills from June – December. This mistake was caught and corrected in February and therefore we have essentially overspent this line item.

h. Line item 4263 - Clothing, Food – We did not include a separate amount in our projections for this line item originally but had planned for $500 in spending of uniforms and safety boots as required for our union members. These funds were included in the line item 4294 – Other Miscellaneous Expenses, but upon review from City Finance were deemed to be taken out of line item 4263.

i. Line item 4264 – Janitorial & Chemical Supplies – Last year, we had implemented some changes in hopes of a cost savings in supplies for the building. For example, automatic paper towel dispensers and acquiring more multi-purpose cleaners to avoid stocking a variety of cleaning supplies. However, these items have proved to not be a cost savings for the building due to increased usage and increased hours of operation. Therefore, this line item had been reduced and will most likely be overspent this year. We are still looking for further efficiencies and ways to lower costs in this line item in order to remain within our budgetary guidelines. We also have funding available in County funds for this line item.

j. Line item 4282 – Natural Gas - Due to the recent jump in natural gas prices, we have seen a spike in our costs. To date, we have expended 115.08% of this budget line item. Our need for natural gas to heat the building has decreased with the summer months. However, we could see a rise again in October or November. In speaking with the City Finance office, this will likely be a problem all City Departments will face this year and this will be an item up for discussion as a supplemental appropriation in October pending availability of funds. This concern is being reviewed for our 2007 City budget planning process as well.

k. Line item 4320 – Building and Structures (Capital Outlay) – The $20K requested as a supplemental appropriation from 2005 funding has now been loaded into the 2006 budget. This amount was requested to be used to for the acoustics remediation project. Additional information will be forthcoming.

l. Line item 4341 - General Materials – The Library has begun to use line item 4342 for material purchases as line 4341 has been expended. Background information: In 2005, Library staff developed a more efficient way to track the materials that are purchased through the database used throughout the library. This keeps very accurate amounts of what is spent in each department: Reference, Youth Services, etc. for materials. However, since we order items for all departments from the same vendors, many items are invoiced together. This means that if the Library has ordered 50 books, each book is a line item on an invoice. Rather than tracking that line by line through our accounting system, it was more efficient to process the entire invoice as a total amount charged to one line item: 4341. Once we have expended that amount in full, we will begin using line item 4342, and so on. If we require detail about how much has been spent per department for materials, that information is available in the database system and would only be a duplication of effort to also be in our accounting system.

V. Previously discussed County budget items – no new information

a. Line item 4261A – Office Supplies/Library Cards – While this line item appears to be overspent, it in fact is not. For budget planning purposes, the Library separates out this line item into four categories:

4261A- Office Supplies/Library Cards
4261B - Printing

4261C - Book/AV Processing

4261D - Postage.

· However, the City has only the capability to input a four-digit code into their system, so they are unable to accommodate our 5 digit code. Therefore, the reports we receive from the City will not differentiate between these fields until we go live on the new system in the fall of 2006. At this time, these four line items total $15,950 and we have expended $6004.25; which is about 37.64%.

b. Line item 4281 – Telephone – These expenses are paid from City and County funds. Periodically through the year, we pay all or partial phone bills out of the County Budget. We have only spent 26% of our City Budget and 42% of our County budget. We do not anticipate overspending in either budget in this line item.

c. Line item 4341 – General Materials – Similarly materials are distributed between both budgets throughout the year. We have spent about 68% of the County budget but only about 35% of the City budget. We have slowed our spending in this line time in County funding but will not overspend these line items in either budget.

d. Line item 4296 - Office Equipment/Furniture – This line item is currently budgeted at $5,000 this year and we have expended $7,856.33. This amount was moved from our 2005 budget to 2006 due to a miscalculation in our close-out of 2005. We will not be incurring any additional expenses in this line item during 2006 due to this discrepancy.

VI. Previously reviewed Library Board Funds budget items – no new information

This budget is quite under spent for the year. This is primarily due to the fact that part of these funds will be used to implement the Space Use plan once completed. Additionally, part of these funds will be used to supplement temporary wages as needed throughout the year.

a. Line item 4225D – Other services (Consultant) – This figure represents the invoices paid to date for the Space Use Consultant.

b. Line item 4530 – Reimbursements (Friends of the Library and Returned Books) – Similar to the City and County budgets, this line item houses two pieces of information, the reimbursement of book sales and the refunds for materials. Since the City only has one code for us to use, both of these items are included in the total paid to date. The Friends are simply a pass through cost and returns for lost materials don’t seem to follow a pattern at this time.

EQUAL OPPORTUNITY EMPLOYER