Your Money's Worth: Learn the Lingo of Finance

By Anne M. Turner -- Library Journal, 7/15/2004

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I wanted to call this column "Accountants Are from Mars, Librarians Are from Venus," but a librarian hearing about it said, "They're from farther away than that. Try Pluto." She meant the finance people, of course. That concept pretty aptly sums up my relationship with the gurus of the finance department. They are nice folks, but it is clear they come from a different planet.

Most librarians achieve the exalted ranks of management by knowing a good deal about how to deliver library services, manage library workers, and get along with library boards. Many often don't know the arcane details of managing money. We can make budgets and complete the fiscal year without overspending, but as to the details of accounting and auditing practice, we're often completely in the dark.

Language that counts

Unfortunately, our situation is not helped by the professionals in the government, university, or library finance departments. These people speak a language all their own and follow conventions that make no sense to the typical outsider. For example, they use minuses when they mean there is a positive balance. And they use terms such as general ledger and trial balance that are meaningless to all but the initiated. In fact, even when they use familiar words, they often mean something else entirely.

You and I know the term journals applies to professional or scholarly publications, or diaries of events, e.g., The Journals of the Lewis & Clark Expedition. But to a finance person, journaling is a verb without which no finance report can be produced. Ask somebody at finance, "When are we going to have the final expenditure report for March?" You'll get the reply, "I'm still journaling that; maybe next week." What is meant is that all the paid invoices are still being entered into the database (the journal), and that must be done before it can be added up and you can be told what you spent. Other variations of this term are journaled, and (I regret to say) journalization, the recording of debits and credits in the journal book or file.

Then there is the ledger, which I think we can easily agree is a list showing debits (what you've paid out) and credits (what you've received). These must balance, although I don't see why—what, after all, is a deficit? But that isn't my question. What I want to know is why they need both a journal and a ledger.

Fund balance is one of my favorite finance terms. It's very hard to agree on what it actually is—the balance, I mean, not the term. Typically, the finance department sends out a stern memo in May saying that the absolute end-of-fiscal-year cutoff date for all purchases will be June l5. The library staff screams, of course: Doesn't finance understand the vagaries of publishing? Will every book not delivered by mid-June have to be reordered? And so forth. But discipline holds: purchasing stops as directed and only previously ordered items—encumbrances—are accepted and paid for.

Sounds logical, right? And it is, except for the issue of when you cancel those encumbrances, which you need to do in order to have a reasonable account of the fund balance (how much money is left) at the close of the fiscal year.

Certain of uncertainty

But arcana strike again. As it turns out, every balance of money left is a trial balance. "What do you mean, trial balance?" I asked the accountant. "We just spent infinite time going over everything and finally agreed that we've got X as a fund balance. Why call it a trial, for goodness sakes?" The answer is, because it is an accounting convention. Finance people won't declare a figure final until it has been checked and double-checked and survived a review by licensed pros who follow what are called "generally accepted accounting practices."

These are the auditors, of course—the ones who come to town, occupy office space co-opted from some other use, and make demands to see more and more ledgers, journals, and whatnot. They wear suits and ties. They have no sense of humor. All real finance department work is put on hold until they are gone, as in, "Yeah, yeah, we'll get to that as soon as the auditors are through." The outcome of this exercise is a report in which you learn that the auditors "express opinions" but never take responsibility. It is their opinion that the basic financial statements they've seen are "free of material misstatement." In other words, no one has absconded with the fine money.

Oh, well. We have a lot of terms in libraries that I'm sure the finance people don't understand—weeding, ILL, MARC record. How about migration path (e.g., the route we take to implement a new technology). Or, my special favorite, value engineering—the process of taking all the best things out of the new building plans to get the cost down—a term I'm sure the finance folks wish they had invented themselves. Or maybe they did.

Author Information

Anne M. Turner (turnera@santacruzpl.org) is Director, Santa Cruz City-County Library System, CA. A revised edition of her book It Comes with the Territory is on McFarland's summer list