Library Earned Income Activities

Summary Finding

By Earned Income Committee

May 2005

OUR CHARGE

The Library Executive Council (LEC) charged the Earned Income Committee (EIC) to independently review current and proposed income-generating activities in the Libraries and to report its findings. The objective was to provide an independent fiscal analysis. The committee’s initial charge was not to make recommendations but, after reviewing findings with LEC in March 2005, LEC asked the group to make recommendations.

Because of the size, scope and/or complexity of the activity (and also because the units earning the income have no independent authority to spend the income), the EIC did not include ILL, Library Fines, Photocopy and Room Rentals in its current review.

WHAT WE DID

The activities reviewed for this report include the Gifts-in-Kind, EPSL and Judaic book sales, earnings from EBSCO Lending, Personal Binding, Online Gift Shop and the various earned income activities in Nonprint, PAL and Archives & Manuscripts. During the summer and fall of 2004, the EIC conducted site visits, interviewed and gathered data from the staff primarily involved in the oversight of these activities. Where possible, the EIC used the data gathered from staff to prepare a revenue/cost analysis for each activity.

WHAT WE FOUND

• Many of the activities are infrequent and lack substantive volume.
• A variety of activities is offered, some of which do not recover costs.

• Revenue is being deposited into a variety of accounts, including Foundation and state gift accounts, which in most cases, is a violation of University accounting polices and procedures.
• Most of the units kept or tried to keep all the revenue they received for their own use, even though a sizable portion of their costs was paid out of the Libraries operating budget.
• The Libraries’ operating budget is not being reimbursed for most of the labor, materials and overhead costs associated with these activities.
• Under the present structure, most of the costs (i.e. postage, shipping, etc.) are not being identified, tracked or linked to the activities they support.

• Libraries resources are being diverted from core services in order to pursue earned income activities.
• Many of the entrepreneurs lack the skill, knowledge, perspective and/or motivation to accurately account for costs and revenues.
• There is a conflict of interest inherent in situations whereby entrepreneurs fiscally monitor themselves.

• Many of the activities generate goodwill with outside individuals, groups, organizations and with UM students and faculty.
• Some activities may be considered by some as essential to the Libraries’ mission while others may support secondary objectives or unrelated activities.

WHAT WE RECOMMEND

The Libraries are in the business of providing research services and access to its collections.  Toward that end, the EIC recommends that Archives and Manuscripts and the Performing Arts Library test, for a period, gratis provision of the following mediated services now done for fees: photocopying, photographic reproduction, audiotape reproduction, lending of clarinet scores, and research services.
If this recommendation cannot be implemented entirely, as much as possible should be done without charge and should be transferred to electronic delivery of the desired copies or reproductions.  If electronic delivery is not possible, U.S. Postal Service should be used to deliver tangible items.  The EIC recommends that the L&A allocations for these departments be increased to offset the loss of revenue ($6,500 for A&M, $2,600 for PAL, according to their most recent estimates of annual earnings).  If any income continues to be collected for A&M and PAL beyond July 1, 2005, the EIC recommends that the income be deposited in the Libraries' operating budget.

With the exception of Photocopying Services, the Libraries are not in the retail sales business (i.e. selling small number of items to individual consumers). Therefore the EIC recommends that the following activities be discontinued:

• Friends of the Libraries’ online gift shop,
• personal binding,
• sales of videos (i.e. Writer’s Block), books, CDs etc.,
• sale of individual publications (i.e. EPSL’s and Gifts-in-Kind’s online book sales).

The current inventory and future production of books, videos, CDs, etc. should be distributed as promotional items to area libraries or other relevant organizations. The Libraries’ communications coordinator and development officers should be consulted for ideas or appropriate avenues for distribution. EPSL could have $1,000 added to its annual acquisitions budget to compensate for the income it would have had if the online book sale income continued until endowment level was reached.

The Libraries should continue to support bulk sales to commercial vendors of donated material that is not added to the collection. The proceeds from such sales should be deposited into the Library’s Collection Development/Acquisitions account and used to purchase additional items for the collection. Included in the bulk sales category would be the current sale of Judaic gift material and Gifts-in-Kind’s used-books bulk sales. Items not selected or sold via bulk should be donated to charitable, educational organizations or otherwise disposed.

Earned income collected between now and the end of the current fiscal year (FY’05) and presently in other accounts can be retained but should not be added to after 30 June 2005.

The EIC has not proposed any system of cost-plus, cost recovery, partial subsidy or full subsidy because the activities produce such small amounts of income that the creation and management of such a system wouldn’t justify the cost/value. The Earned Income Committee can be reactivated to consider any proposal for a new earned-income project. The EIC would consider the proposal and make recommendations to LEC.

Although the campus promotes entrepreneurship, it does so for major efforts bringing in many thousands or even millions of dollars. It is clear that the Libraries do not have and should not have income-earning enterprises in this league.

Dave Cooper

Ray Foster

Jane Williams

Denise Wright