Final Graded Exam
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Notify me immediately and with as much notice as possible if there is any reason why this exam will not be handed in by the deadline.
General Instructions:
· Read all instructions for each section/question separately.
· Show all your work. If the question requires math, do not only supply the final figure.
· If the question requires a written response, answer in complete sentences.
· Each section will notify you how much it is worth. That should help inform the expected length of your response.
Grading:
There are 100 points available on this exam. This exam counts for 40% of your grade. On the course website, therefore, a 36/40 would mean that you got 90 out of 100 points on the exam (both fractions are a 90% grade). A perfect score will appear as 40/40 on the course website. I will provide comments on your submissions.
Section 1 (10 points – 2 points for each item below)
What is wrong with each of the following quotes? Each is a direct quotation from published texts about li
ary financial management. In my opinion, each quote has misleading, confusing, or just plain inco
ect language in one or more places. Explain what is wrong, suspect, or misleading about each.
A. “Most [li
ary] organizations employ either a cash or accrual accounting system. Unfortunately for most government-funded information services, the system is the cash basis. A cash system does not allow one to ca
y forward unexpended funds…” (Management Basics for Information Professionals, by G. Edward Evans and Patricia Layzell Ward, 2nd edition p XXXXXXXXXX)
B. “There are similarities between fund accounting and profit-motivated accounting systems in terms of activities, terminology, and qualitative objectives. However, profit enterprises use a single-entry focus while fund accounting usually involves many fragmented financial reports. Such reports focus on separate individual funds and the flow of liquid assets, rather than income.” (Management Basics for Information Professionals, by G. Edward Evans and Patricia Layzell Ward, 2nd edition p. 441)
C. “The li
ary’s capital assets, or fixed assets, are those items it owns (i.e. its property). Examples of a li
ary’s assets are the buildings, furnishings, book collection, and bookmobile. Long-term assets may be depreciated or appreciated as their value decreases or grows. For example, the value of a book collection may appreciate with age as the average cost per volume increases. The value of a bookmobile or of li
ary furnishings will depreciate with age as the asset gets older and becomes worth less on the market.”(Arlita W. Hallam and Teresa R. Dalston. Managing Budgets and Finances: A How-to-Do-It Manual for Li
arians and Information Professionals, p. 24)
D. “You will also see the term asset on a li
ary’s financial balance sheet. In this case, an asset refers to revenues, or income, not to long-term fixed assets, such as those listed above.” (Arlita W. Hallam and Teresa R. Dalston. Managing Budgets and Finances: A How-to-Do-It Manual for Li
arians and Information Professionals, p. 24)
E. “Income is the actual money coming into the li
ary, through fines, tax receipts, donations, nonresident cards, photocopier charges, or any other source. It is counted as income after it is received.” (Arlita W. Hallam and Teresa R. Dalston. Managing Budgets and Finances: A How-to-Do-It Manual for Li
arians and Information Professionals, p. 24)
Section 2 Multiple choice. (10 points – 1 point per question)
Instructions: Mark all answers that are co
ect. Some questions will have more than 1 co
ect answer.
A. In calculating the property tax base for a taxing district we:
a. subtract any exemptions from the appraised value.
. add any exemptions to the assessed value
c. take a percentage of the exemptions available and subtract them from the appraised value
d. subtract any exemptions from the assessed value.
B. Outsourcing li
ary operations:
a. always has benefits that exceed any drawbacks;
. can be prohibited by a union labor contract;
c. sometimes has hidden costs;
d. is only advisable with routine tasks;
C. In a capital lease:
a. the risks of ownership are transfe
ed to lessee;
. the lease is recorded as a liability in the financial statements;
c. there is never any buy-back option;
d. the leased property is returned to the lessor after the expiration of the lease.
D. Differential cost analysis:
a. requires the use of differential calculus
. is the comparison of costs between two or more alternatives
c. can be approached in a variety of ways, depending on the alternatives involved
d. may involve the use of activity-based costing
E. The parole evidence rule means that:
a. what is written down by the individual negotiators as potential points of agreement during a contract negotiation is always part of the final written contract.
. the final written contract is what governs the agreement, regardless of any prior ve
al or written commitments that may have been made during negotiations.
c. the final written contract is on “parole” until both parties agree that it is working as planned.
d. anything agreed to ve
ally in contract negotiations is implicitly included in the final written contract even if not explicitly stated.
F. A grant received by a public li
ary for digitizing collections should be accounted for:
a. in the general fund;
. in a capital projects fund devoted to the grant;
c. in a fiduciary fund devoted to the grant;
d. in a special fund devoted to the grant.
G. A defined contribution retirement plan:
a. allows you to know how much you will have once you retire;
. is always pegged to the Consumer Price Index;
c. specifies that a specific contribution must be made each month to the retirement fund or investment vehicle of the employee’s choice, but does not guarantee any specific payment amount once the person retires;
d. is becoming more the plan of choice by both private and public employers.
H. Contemporary collection management must:
a. have personnel with knowledge of licensing and negotiating;
. only be managed by someone knowing a foreign language;
c. always be overseen by a lawyer;
d. consider legal advice when contracts are involved.
I. When receiving a major gift from a donor the li
ary should:
a. formalize the gift with a “Deed of Gift.”
. rely solely on a ve
al understanding for the purpose of the gift.
c. publicly advertise the amount of the gift and the donor.
d. if an in-kind gift, provide the donor with an estimated value of the gift.
J. The Uniform Commercial Code:
a. is a set of laws governing everything from the sale of goods to banking to contracts.
. directly or indirectly governs most elements of contract law.
c. assists states and other governments by guiding them on how to effectively write their own laws.
d. is an example of a “common law” provision.
Section 3 (10 points)
Imagine you are an administrator who supervises several department managers in a university li
ary. Craft a policy for the li
ary’s manual about staying within the allocated budget for student wages. More information and advice follow.
In monitoring li
ary student wage budgets at your university, you notice some managers either consistently overspend or underspend. These two groups have tended to balance each other out. Still, you would prefer that everyone get closer to the target. Write up a new policy and procedure document that will help these managers understand your expectations. To assist you, here is a list of questions your policy should answer:
· What does “staying within the budget” mean exactly? (It is virtually impossible to hit a budget to the dollar, so what kind of leeway are you affording?)
· Who is responsible for monitoring the budget? How?
· What is the reporting process if a budget manager is concerned about future spending issues? Or reporting “all good” for that matter?
· What are the consequences for missing the budget target?
Section 4 (10 points)
Activity-based costing is being used in public li
aries for several legitimate reasons, not the least of which is that municipalities are using it for financial decision-making. Discuss:
A. the value/purpose of using activity-based costing (3 points)
B. the steps involved in activity-based costing. Include an explanation of what the step entails. (3 points)
C. how you would use the information obtained in an activity-based costing analysis and the caveats you would give to anyone using this type of analysis. (4 points)
Section 5 (10 points)
This is a differential cost exercise. You will be asked to determine the cost of each option and discuss other factors in considering which alternative to choose.
Your academic li
ary has a large backlog of 2,626 uncatalogued titles written in the Azeri language that must be cataloged. This Azeri collection is respectable, and there are 2 or 3 scholars who are still active in the area and use the volumes regularly. About 40 additional titles are bought each year, so the backlog is growing. You no longer have someone who can read and catalog Azeri. You have come up with two possible ways to get the backlog cataloged.
The first is to directly hire a cataloger on contract who knows Azeri to catalog the volumes. You are not sure how efficient such a person is because you will have to advertise regionally for such a person, but you estimate that such a person could catalog the backlog in 14 months or so. Some of the material is already cataloged on OCLC, but some of the books will require original cataloging. The temporary cataloger would have an annual salary of $54,000 plus benefits equal to 23% of their salary. A contract for a temporary cataloger can be for as many months as you wish.
The second way is to contract with a cataloging outsourcing company that has an excellent reputation in the field and claims that they can catalog Azeri materials. The cataloging outsourcing company would charge $30 for cataloging each title, which includes all costs for providing a shelf-ready book.
Answer the following questions.
A. Determine the costs to catalog just the backlog of 2,626 titles for each alternative. Ignore any present value calculations that you might have considered for this question (i.e. don’t wo
y about inflation or salary increases). Allied costs can also be ignored here. Provide these costs in a table that enables easy comparison between the two. (5 points)
B. How will you ensure that the cataloging meets your li
ary's standards, for whichever alternative is chosen? (2 points)
C. Choose which alternative you think is best, taking into consideration not only the cost but other factors that you should use to make the decision