Library of Congress: Status of Retail Activities

Highlights

This report evaluates the use of profits from the Library of Congress' retail activities to support other Library activities. GAO found that the Library has not yet developed an overall plan, specific business plans, pricing policies, or the accounting procedures to generate profits to support other activities. Although it has policies and procedures to control the use of its logo, the Library has not yet defined the scope and mission of the retailing functions, control of products, or licensing agreements. The Library's three major retail activities--the Photoduplication Service, the Gift Shop, and the Audio Video Laboratory--have not consistently generated profits or covered all costs for the last five years. In each case, the activity's total expenses exceeded its total revenues. GAO found that the Library is not able to conduct a study on generating profits from the its retail activities to support other Library activities or evaluate options.

Recommendations

Matter for Congressional Consideration

Matter	Status	Comments
In order to develop the information and tools needed for evolving from its current retail operations to one that will generate profits to support other Library activities, the Librarian of Congress should develop an overall plan for generating profits from retail activities to support other Library activities.	Closed – Implemented	In its April 2002 letter (GAO-02-554R), GAO noted that the Library of Congress lacked an overall plan for achieving the goal of generating profits from its retail activities to support other Library activities. For example, the Library had not determined the range of products that potentially could be sold, profit and loss considerations for certain retail activities, and whether to emphasize the most profitable products or expand product lines and markets. To address these weaknesses, GAO recommended that the Library develop an overall plan for generating profits from its retail activities to support other Library activities. In response to this recommendation, in June 2003, the Library completed and delivered to Congress a plan for generating profits from its retail activities to support other Library activities. The plan establishes specific goals for developing the profit potential of the Library's retail activities and a timeframe for accomplishing those goals. By preparing this overall plan, the Library has completed the first major step for identifying opportunities and alternatives for how it will achieve the goal of generating profits to support other Library activities.
In order to develop the information and tools needed for evolving from its current retail operations to one that will generate profits to support other Library activities, the Librarian of Congress should develop business plans for the operations of its current and future retail activities.	Closed – Implemented	The Library reported completing an 18-month business planning process that included its current and anticipated future retail and fee-for-service activities. The business planning process considered strategic, operational, and financial aspects of current and identified future retail activities, as well as the organizational flexibilities needed to incorporate additional products and services according to institutional needs and customer demands as they arise. In carrying out the planning process, the Library reported that it assessed current operations and what and how products and services should be offered; identified improvements that can be made in current operations; studied industry standards and products, services, and distribution mechanisms used by peer organizations; developed design plans to identify structural, procedural, and operational requirements needed to support long-term, sustainable business activities; and defined management control and budgetary requirements needed to support implementation of business plans. The Library also reported that the business planning process reviewed related operational and planning issues, including human resources, IT, fiscal, facilities, and regulatory, and developed implementation plans that identified the start-up and ongoing actions that need to be taken to deploy the new business model in the short, interim, and long term. The planning process culminated in the preparation of formal business plans that cover the Library's principal retail and fee-for service activities--Retailing and Merchandising activities and its various Duplication services.
In order to develop the information and tools needed for evolving from its current retail operations to one that will generate profits to support other Library activities, the Librarian of Congress should develop accounting procedures to measure cost and profitability for its retail activities.	Closed – Implemented	The Library reported that, as part of its recently completed business planning process, it has developed and implemented accounting and reporting policies and procedures to measure costs and revenues and that use of these procedures will enable retail and fee-for-service activities conducted by the Business Enterprise units. The policies and procedures require the accounting and reporting of all applicable costs and revenues for current Business Enterprise retail and fee-for-service activities. Business Enterprise fund managers are required, when recording and reporting financial data, to follow specific financial guidelines developed for the Library's Revolving Fund operations. The financial guidelines are based on Library accounting and financial management directives and regulations implemented by the Library. The applicable directives address budget execution and funds control, the applicable basis of accounting, cost accounting, cash management, and management and accounting controls. According to the Library, Business Enterprise units are required to use these guidelines and procedures to establish accounting capabilities that integrate accounting into its business infrastructure and unit managers. Also, requirements have been established calling for the preparation of accounting and budgeting reports for retail and fee-for-service activities at the business unit level.
In order to develop the information and tools needed for evolving from its current retail operations to one that will generate profits to support other Library activities, the Librarian of Congress should establish pricing policies.	Closed – Implemented	The Library has established formal pricing policies for its three current retail activities (retail and merchandising, duplication services, and digital image sales) in its new business model. Based on documentation provided by the Library, the pricing policies were developed with long-term sustainability in mind and appear to have built-in flexibilities to adjust with changing costs and market conditions. Based on our conversations with Library Services management as well as responses to additional inquiries and supporting documentation provided, the Library has substantially completed our recommendation.
In order to develop the information and tools needed for evolving from its current retail operations to one that will generate profits to support other Library activities, the Librarian of Congress should develop overall policies defining the scope and mission of the retail activities.	Closed – Implemented	The Library has clearly defined the scope and mission of the newly-formed Business Enterprises division in its business model. The Library provided us with summary documentation supporting the definition of Business Enterprises mission, which is to facilitate access to the Library?s collections by providing strategically targeted products and services. Documentation provided also includes support for how Business Enterprise's mission aligns with the Library?s mission. The Library also provided us with documentation supporting the defined scope of Business Enterprises activities and justification of how those activities support the mission. Based on our conversations with Library Services management as well as responses to additional inquiries and supporting documentation provided, the Library has substantially completed our recommendation.
In order to develop the information and tools needed for evolving from its current retail operations to one that will generate profits to support other Library activities, the Librarian of Congress should conduct marketing studies or analyses to identify markets and products that will help it achieve the goal of generating profits from its retail sales to support other Library activities.	Closed – Implemented	The Library reported that it has conducted at least 10 marketing studies and product development analyses. The studies include benchmarking and/or interviewing 15 external organizations with similar missions, including the New York Public Library, the British Library, the National Archives, and Smithsonian Business Ventures, and documenting 3,800 existing retail products. The Library provided us with documentation showing important outcomes of the market and product analyses, including capturing market trends, customer segments, and distribution channels for retail operations. The Library also provided us with documentation identifying best practices that were gathered in the areas of operations, mission, product development, merchandising and online stores. Based on our conversations with Library Services management, as well as responses to additional inquiries and supporting documentation provided, the Library has substantially completed our recommendation.

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Topics

Government Operations

Financial analysisInternal controlsProfitsRetail facilitiesAccounting proceduresRevolving fundsE-commerceFinancial managementBusiness planPrivate sector