Financial Administration

Financial Reporting of Library Holdings (F47)

Revised: July 3, 2002


  1. Background

    This policy paper establishes guidelines to ensure that library holdings can be accurately reported in accordance with generally accepted accounting policies.


  2. Constraints

    FAP - Personal Property Accountability (F33)


  3. Definitions

    Library holdings - For purposes of this paper, a catalogued collection of materials supervised by a professional librarian. This includes not just books and periodicals but microforms, multimedia formats, digital media, etc. Items retained in small departmental libraries are not included.

    Acquisition cost - Includes the amount paid to the vendor, does not include internal processing costs.

    Book value - With respect to individual items, the cost of acquisition or, for donated items, the fair market value at the time of the donation. With respect to library holdings as a whole, the sum of the book value of all the individual items in the collection. (Book value is an accounting term that normally refers to depreciated cost but for purposes of this policy refers to original cost since library holdings are not depreciated. Note that this term applies to all library holdings as defined above and not to "books" alone.)


  4. Policy and Procedure

    To comply with generally accepted accounting principles, the UW System will report in its Annual Financial Report the aggregate acquisition cost of library holdings as of each June 30th. To that end, each institution will supply System Administration with a report in the prescribed format showing the beginning book value, current year additions, current year disposals and ending book value of its library holdings. Procedures shall be established as described below to ensure the accuracy of this annual report. Certain rare books and/or special collections of unusual value may be excluded from this report as described below.

    1. Reported additions should agree with, or be reconciled to, the costs recorded in the accounting records for the acquisition of library materials (class code 49xx). Costs of binding should be included.

    2. Library books removed from use should be removed from the inventory of library materials at average cost. For this purpose, a new average cost should be determined at the beginning of each fiscal year as follows: divide the book value as of June 30 by the number of volumes in the collection as of June 30. Library holdings other than books should be removed at original acquisition cost or at an amount that approximates original cost as nearly as is practical to determine. Each institution shall develop written procedure to ensure that items removed from use are identified and removed from inventory/cost records.

    3. A physical inventory of library materials shall be performed on a sample basis every two years in order to verify that the materials listed on the inventory records can be located and are available for use. The physical inventory should be conducted by the institution's internal auditors or by other personnel who are trained in statistical sampling and who have no direct responsibility for managing the library. The sample size should be based upon an attribute sample randomly chosen to ensue that the true error rate does not exceed 8% at the 90% confidence level. This means that if the expected error rate is 5%, the sample size should be chosen using a reliability factor of +/- 3%. To meet the statistical test, the error rate in the sample may not exceed 5%. An error means that the item cannot be located or that its on-loan status cannot be confirmed. Libraries that have a more exhaustive physical inventory process for regularly verifying the reliability of collections records are exempt from the foregoing requirement.

    4. Works of art, rare books and special collections of unusual value may be excluded from the annual report to System Administration if all of the following criteria are met:

      1. they are held for exhibition, education, or research in furtherance of public service rather than for financial gain;

      2. they are protected, kept unencumbered (i.e., may not be pledged as collateral), cared for, and preserved; and,

      3. they are subject to a policy that requires the proceeds from sales of collection items to be used to acquire other items for collections.

      The estimated current market value of these excluded items must be reported to the Institution Risk Manager by May 15, who, in turn, will report the values to the System Administration Risk Manager by June 15.