ELBERT COUNTY LIBRARY ELBERTON, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor ELBERT COUNTY LIBRARY - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENTOFNETASSETS 1 B STATEMENT OF ACTIVITIES 2 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUND 3 D RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE STATEMENT OF NET ASSETS 4 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUND 5 F RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES 6 G NOTES TO THE BASIC FINANCIAL STATEMENTS 7 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND 15 ELBERT COUNTY LIBRARY - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION SCHEDULES OF REVENUE 2 STATE 16 3 FEDERAL 17 4 LOCAL 18 5 SCHEDULE OF SALARIES AND TRAVEL 19 SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION III FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 September 17, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the Board of Regents of the University System of Georgia and Director and Members of the Elbert County Library Board INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities and the major fund (Exhibits A through G) of the Elbert County Library as of and for the year ended June 30, 2007, which collectively comprise the Library's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Elbert County Library's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe Library's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position ofthe governmental activities and the major fund ofthe Elbert County Library, as of June 30, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2007ARL-41 Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through v and page 15 are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Elbert County Library's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit ofthe basic financial statements, and in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, ~~~.4d~ Russell W. Hinton, CPA, CGFM State Auditor RWH:as 2007ARL-41 ELBERT COUNTY LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Management's discussion and analysis of the financial performance of the Elbert County Library is intended to provide the reader with an overview of the Library's financial activities for the year ended June 30, 2007. OVERVIEW OF ELBERT COUNTY LIBRARY The Elbert County Library is a one-county system that includes a primary location in Elberton, a smaller service unit in Bowman, and a Bookmobile. Library services are provided under the authority of a seven member Library Board made up of 4 members appointed by the City of Elberton and 3 members appointed by Elbert County. Government funding is received from both of these entities. FINANCIAL HIGHLIGHTS FOR 2007 General revenues from the city and county were $102,163.00, accounting for 32% of total revenues. State funding from Georgia Public Library Service for general operating expenses was $173,179.25, or 54% of revenue and is included in the $192,387.87 of program-specific revenues. These revenues also include charges for services and operating grants and contributions. Miscellaneous revenues and investment earnings complete the revenue stream, making total revenues $320,264.51. Expenses related to governmental activities were $320,884.49. Fiscal year 2007 was the first full year without the local Power Up grant, from which we received funding from late 2004 through mid-fiscal year 2006. The final matching renovation funds were disbursed in fiscal year 2006 as well. These changes dropped total revenues by $59,790.49 for fiscal year 2007. In compliance with governmental accounting standards, accounts receivable have been calculated differently for fiscal year 2007. The Accounts Receivable, Net - Other line in Table 1 - Net Assets now includes an estimate for fines and fees (overdues) and accompanying allowance for doubtful accounts. This information was reflected in the fiscal year 2006 financial statements. Because any PINES fines may be paid to any PINES library, inclusion of this data as assets is an estimate. An $18,000.00 grant from the Gates Foundation was used to purchase computing equipment for the Elberton Library and the Bowman Service Outlet. An LSTA Literacy Grant administered through the Georgia Public Library Service (GPLS) added $7,857.84 which was directed to the purchase of children's materials. An additional LSTA Grant, also administered through GPLS, provided necessary funding of $4,000.00 so that the Library could join the Georgia Library Accounting Alliance in purchasing a new accounting system from Blackbaud, Inc. ELBERT COUNTY LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Library's basic financial statements which comprise the following three parts: Library-wide financial statements, fund financial statements, and notes to the financial statements. Library-wide Financial Statements The Library-wide financial statements are designed to provide readers with a broad overview of the Library's finances, in a manner similar to a private-sector business by combining all funds into one reporting entity. By combining all funds, the reader can, at a glance, answer the question, "How did we do financially during 2007"? The statement ofnet assets presents information on all of the Library's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Library is improving or deteriorating. The statement of activities presents information showing how the Library's net assets changed during the most recent fiscal year based on the activities specific to the Library. The activities (or functions) of the Library include Public Services, Technical Services, Support Services, Maintenance and Operations, and Information Technology. All revenues and expenditures are reported as soon as the underlying event occurs, regardless of when the cash will be affected. Thus, revenues and expenditures are reported in this statement for some items that will result in cash flows in future fiscal periods. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Library uses fund accounting to ensure compliance with finance related legal requirements. All of the funds of the Library are considered governmental funds. Governmental funds are used to account for essentially the same functions reported in the Library-wide financial statements. However, unlike the Library-wide financial statements, fund financial statements focus on how money flows into and out of those funds and the balances left at year-end for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the Library's general government operations and the basic services it provides. 11 ELBERT COUNTY LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 FINANCIAL ANALYSIS LIBRARY-WIDE The summary of the Library's Net Assets provides a comparison of the Library's net assets for fiscal year 2007 compared to fiscal year 2006. Table 1 Net Assets Governmental Activities Fiscal Fiscal Year 2007 Year 2006 Assets Cash and Cash Equivalents Investments Accounts Receivable, Net Other Allowance for Doubtful Accounts Capital Assets, Net of Depreciation $ 89,897.20 $ 91,146.00 17,295.04 17,295.00 1,330.20 -811.42 118,243.00 130.00 118,055.00 Total Assets $ 225,954.02 $ 226,626.00 Liabilities Salaries Payable $ 52.00 Net Assets Invested in Capital Assets Unrestricted $ 118,243.00 $ 118,055.00 107.711.02 108,519.00 Total Net Assets $ 225,954.02 $ 226,574.00 Total Liabilities and Net Assets $ 225,954.02 $ 226,626.00 Net assets serve as an indicator of an entity's financial position. (See financial highlights for fiscal year 2007.) Table 2 shows the changes in net assets for fiscal year 2007 compared to the changes in net assets for fiscal year 2006. Revenues and expenditures are broken down by governmental funds. 111 ELBERT COUNTY LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services Operating Grants and Contributions State Federal Capital Grants and Contributions Governmental Activities Fiscal Fiscal Year 2007 Year 2006 $ 7,350.78 173,179.25 11,857.84 $ 7,510.00 159,169.00 3,745.00 56,645.00 Total Program Revenues $ 192,387.87 $ 227,069.00 General Revenues: Allotments from Participating Governments $ 102,163.00 Investment Earnings 343.06 Miscellaneous 25,370.58 $ 142,424.00 560.00 10,002.00 Total General Revenues $ 127,876.64 $ 152,986.00 Total Revenues $ 320,264.51 $ 380,055.00 Expenditures Public Services Technical Services Support Services Maintenance and Operations Information Technology $ 56,183.67 30,706.20 190,696.62 25,013.48 18,284.52 $ 85,185.00 29,921.00 173,594.00 86,722.00 2,843.00 Total Expenditures $ 320,884.49 $ 378,265.00 Change in Net Assets $ -619.98 $ 1,790.00 Net Assets, Beginning of Year 226,574.00 224,784.00 Net Assets, End of Year $ 225,954.02 $ 226,574.00 ELBERT COUNTY LIBRARY'S FUNDS The Library's funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues of $320,264.51 and expenditures of $321,072.49. This deficit resulted in reducing the fund balance by $807 .98. GENERAL FUND BUDGETING HIGHLIGHTS The Elbert County Library budget is prepared according to Georgia law using a fiscal year that begins on July 1. The Library Board approves the annual budget in June for the following year. The original budgeted expenditures were $282,620.35 and were amended to $295,206.16 during IV ELBERT COUNTY LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 the year. Unbudgeted Federal LSTA and Gates grants accounted for the increases in budgeted revenues and corresponding expenses. All grant expenditures were fully reimbursed by grant funds. CAPITAL ASSETS At the end of fiscal year 2007, the Library had $118,243.00 invested in capital assets, all in governmental activities. The Library land and building are owned by Elbert County, and the City of Bowman provides the location for the Service Unit located there. Table 3 Capital Assets Governmental Activities Fiscal Fiscal Year2007 Year2006 Equipment Collections Accumulated Depreciation $ 24,040.00 365,610.00 -271,407.00 $ 24,040.00 344,448.00 -250,433.00 Total $ 118,243.00 $ 118,055.00 The depreciated value of the collections remained virtually static. The materials are an aging collection, with over 70% fully depreciated (i.e., more than IO years old). New materials purchases have been held to minimal levels due to rising operating costs. The result is that new materials purchases are barely compensating for discards and fully depreciated materials. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the Elbert County Library's finances and to show the Library's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Peggy Johnson, Director of the Elbert County Library, Elberton, Georgia. You may e-mail questions to pjohnson@elbertcountypl.org. V ELBERT COUNTY LIBRARY ELBERT COUNTY LIBRARY STATEMENT OF NET ASSETS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Other Allowance for Doubtful Accounts Capital Assets Equipment Library Collections Less: Accumulated Depreciation Total Assets NET ASSETS Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 89,897.20 17,295.04 1,330.20 -811.42 24,040.00 365,610.00 -271,407.00 $ ===2~2;,;;.5,~95;;.;4=.0=2 $ 118,243.00 107,711.02 $ ====22=5-,9=5=4.=02= The notes to the basic financial statements are an integral part of this statement. - 1- ELBERT COUNTY LIBRARY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2007 EXHIBIT"B" EXPENSES PROGRAM REVENUES OPERATING CHARGES FOR GRANTS AND SERVICES CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS GOVERNMENTAL ACTIVITIES Current Services Public Services Technical Services Support Services Maintenance and Operations Information Technology $ 56,183.67 $ 30,706.20 190,696.62 25,013.48 18,284.52 7,350.78 $ 22,302.70 $ 145,732.44 17,001.95 -26,530.19 -30,706.20 -44,964.18 -8,011.53 -18,284.52 Total Governmental Activities $ 320,884.49 $ General Revenues Allotments from Participating Governments Investment Earnings Miscellaneous 7350.78 $~===1=85=,0=37.09 $ $ -128,496.62 102,163.00 343.06 25,370.58 Total General Revenues $ _ _--'1C::2.:.-7,.:.87'""'6"".64:;...,.... Change in Net Assets $ -619.98 Net Assets - Beginning of Year 226,574.00 Net Assets - End of Year $ ====22=5=,9,.,54=.0=2= The notes to the basic financial statements are an integral part of this statement. -2- ELBERT COUNTY LIBRARY BALANCE SHEET GOVERNMENTAL FUND JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Other Allowance for Doubtful Accounts Total Assets FUND BALANCE Unreserved Designated for Bookmobile Replacement Undesignated Reported in: General Fund Total Fund Balance EXHIBIT "C" GENERAL FUND $ 89,897.20 17,295.04 1,330.20 -811.42 $ 107,711.02 $ 17,295.04 90,415.98 $ 107,711.02 The notes to the basic financial statements are an integral part of this statement. -3 - ELBERT COUNTY LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2007 EXHIBIT"D" Total Fund Balance - Governmental Fund (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Equipment Library Collections Accumulated Depreciation Total Capital Assets Net Assets of Governmental Activities (Exhibit "A") $ 107,711.02 $ 24,040.00 365,610.00 -271,407.00 118,243.00 $ 225,954.02 The notes to the basic financial statements are an integral part of this statement. -4 - ELBERT COUNTY LIBRARY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUND YEAR ENDED JUNE 30, 2007 EXHIBIT"E" REVENUES Local Funds State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Public Services Technical Services Support Services Maintenance and Operations Information Technology Facilities Acquisition and Construction Total Expenditures Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending GENERAL FUND $ 102,163.00 173,179.25 11,857.84 7,350.78 343.06 25,370.58 $ 320,264.51 $ 55,737.06 30,706.20 190,696.62 25,013.48 18,284.52 634.61 $ 321,072.49 $ -807.98 108,519.00 $ 107,711.02 The notes to the basic financial statements are an integral part of this statement. -5 - ELBERT COUNTY LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES JUNE 30, 2007 EXHIBIT"F" Total Net Change in Fund Balance - Governmental Fund (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Depreciation Expense over Capital Outlay $ $ 25,745.00 -25,557.00 -807.98 188.00 Change in Net Assets of Governmental Activities (Exhibit "B") $ ===6..1.,...9,....9,...8 The notes to the basic financial statements are an integral part of this statement. -6- ELBERT COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 1: DESCRIPTION OF LIBRARY AND REPORTING ENTITY REPORTING ENTITY The Elbert County Library (Library) operates pursuant to Official Code of Georgia Annotated Sections 20-5-40 through 20-5-59 to provide public library services with costs shared by participating local governmental agencies and grants from the State of Georgia. The Library Board consists ofseven members; three members appointed by Elbert County Board of Commissioners and four members appointed by Elberton City Council. The Library Board is without authority to determine the amount ofits funding, except by submission ofbudget requests to local governmental units from which the Library receives support and to the State of Georgia for State and Federal flow through funding. Membership in the Library and participation in library services is at the discretion of each participating governmental agency. The Library Board has the power to designate management, the power to retain unreserved fund balances of local and other funds for continued operations and is the lowest level of oversight responsibility for the Library's operations. While the Elberton City Council appoints a majority of the Elbert County Library's Board, the Elberton City Council is neither able to impose its will upon the Library nor is there a financial benefit/burden relationship between the two boards as defined by Governmental Accounting Standards Board. The Elbert County Library is therefore considered to be a related organization of the City of Elberton, Georgia. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The Library's basic financial statements are collectively comprised of the Library-wide financial statements, fund financial statements and notes to the basic financial statements ofthe Elbert County Library. Library-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall Library. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through intergovernmental revenues and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Library's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the Library related to the administration and support of the Library's programs, such as office and maintenance personnel and accounting) are not allocated to programs. -7- ELBERT COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the Library's funds. Eliminations have been made to minimize the double counting of internal activities. The emphasis of fund financial statements is on major governmental funds. The Library reports the following major governmental fund: General Fund is the Library's primary operating fund. It accounts for all financial resources of the Library. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The Library-wide governmental financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the Library gives (or receives) value without directly receiving (or giving) equal value in exchange, include grants and donations. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The Library uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The Library considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Interest is considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred. Capital asset acquisitions are reported as expenditures in governmental funds. The Library funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the Library's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. -8- ELBERT COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the Library to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the Library in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the Library to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. The Library does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks. -9- ELBERT COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RECEIVABLES Receivables consist ofamounts due from grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed, and fines and fees from patrons and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do include any amounts which would necessitate the need for an allowance for uncollectible receivables. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the Library-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the Library. Capitalization thresholds and estimated useful lives of capital assets reported in the Library-wide statements are as follows: Capitalization Policy Estimated Useful Life Equipment Library Collections $ 5,000.00 10 to 20 years All 10 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. NET ASSETS The Library's net assets in the Library-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the Library's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. - 10- ELBERT COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unrestricted net assets - Unrestricted net assets represent resources derived from grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the general operations of the Library, and may be used at the discretion of the Library to meet current expenses for those purposes. Note 3: DEPOSITS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. - 11 - ELBERT COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 3: DEPOSITS CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $116,946.04. The bank balances were entirely covered by Federal depository insurance. Note 4: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Governmental Activities Capital Assets Being Depreciated Equipment Library Collections Less Accumulated Depreciation for: Equipment Library Collections Governmental Activity Capital Assets - Net Balances July 1, 2006 Increases Decreases Balances June 30, 2007 $ 24,040.00 344,448.00 $ 25,745.00 $ $ 24,040.00 4,583.00 365,610.00 10,718.00 239,715.00 1,202.00 24,355.00 $ 118,055.Q0 $ 188.0Q $ 4,583.00 11,920.00 259,487.00 Q,QQ $ 118,243.00 Current year depreciation expense by function is as follows: Public Services $ 25,557.00 Note 5: RISK MANAGEMENT The Library is exposed to various risks ofloss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The Library has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and job related illness or injuries to employees. The Library has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Library's insurance coverage in any of the past three years. The Library has elected to self-insure for all losses related to acts of God. The Library has not experienced any losses related to this risk in the past three years. The Library is self-insured with regard to unemployment compensation claims. The Library accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. The Library has not experienced any unemployment compensation claims during the last two years. - 12 - ELBERT COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 5: RISK MANAGEMENT The Library has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Director Assistant Director Treasurer $ 100,000.00 $ 100,000.00 $ 100,000.00 Note 6: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The Library believes that such disallowances, if any, will be immaterial to its overall financial position. Note 7: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all librarians and clerical personnel employed by regional and county libraries are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe Library who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The Library makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2007 2006 2005 100% 100% 100% $ 14,157.22 $ 14,913.00 $ 14,489.00 - 13 - (This page left intentionally blank) ELBERT COUNTY LIBRARY GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2007 SCHEDULE "1" REVENUES Local Funds State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Public Services Technical Services Support Services Maintenance and Operations Information Technology Facilities Acquisition and Construction Total Expenditures Net Change in Fund Balance Fund Balance - Beginning NONAPPROPRIATED BUDGETS ORIGINAL FINAL ACTUAL AMOUNTS $ 102,163.00 $ 102,163.00 $ 102,163.00 169,252.89 173,179.25 173,179.25 11,857.84 2,000.00 2,000.00 7,350.78 343.06 10 130.00 10 130.00 25,370.58 $ 283,545.89 $ 287,472.25 $ 320,264.51 $ 41,439.40 $ 49,518.87 $ 55,737.06 30,725.76 30,725.76 30,706.20 183,249.52 187,755.86 190,696.62 26,705.67 26,705.67 25,013.48 500.00 500.00 18,284.52 634.61 $ 282,620.35 $ 295,206.16 $ 321,072.49 $ 925.54 $ -7,733.91 $ -807.98 108,519.00 Fund Balance - Ending $ 925.54 $ -7 733.91 $===1=07..,7=1=1=.0=2 Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 15 - ELBERT COUNTY LIBRARY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007 AGENCY/FUNDING GRANTS Board of Regents of the University System of Georgia Office of Public Library Services Salaries Benefits Library Materials SCHEDULE "2" GOVERNMENTAL FUND TYPE GENERAL FUND $ 145,732.44 15,005.81 12441.00 $ =====17=3=1=7=9=.2=5 See notes to the basic financial statements. - 16 - ELBERT COUNTY LIBRARY SCHEDULE OF FEDERAL REVENUE YEAR ENDED JUNE 30, 2007 AGENCY/FUNDING GRANTS Museum and Library Services, Institute of Through Board of Regents of the University System of Georgia Library Services and Technology Act Family Literacy Vacation Reading Program SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 7,857.84 4 000.00 $ 11 857.84 See notes to the basic financial statements. - 17 - ELBERT COUNTY LIBRARY SCHEDULE OF LOCAL REVENUE YEAR ENDED JUNE 30, 2007 LOCAL SOURCES City Government Elberton County Government Board of Commissioners Elbert SCHEDULE "4" GOVERNMENTAL FUND TYPE GENERAL FUND $ 50,000.00 52,163.00 $ ===1=02==16=3=.o=o See notes to the basic financial statements. - 18 - NAME Bailey, Camilla Cade, Sanisha Grace, Anne L. Johnson, Peggy J. Lewis, H. G. Matthews, Nancy B. Mccollum, Renee Munumer, Alana Ruff, Jessica L. Thornton, Valencia Totals per Report ELBERT COUNTY LIBRARY SCHEDULE OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2007 SCHEDULE "5" TITLE CATEGORY Technical Service Library Aide Assistant Director Director Library Aide Bookmobile Driver Library Aide Library Aide Library Aide Public Service/Shelver SALARIES TRAVEL $ 21,038.16 552.00 51,797.76 $ 70,347.86 534.00 9,372.00 2,550.00 366.00 3,483.00 3,753.00 1,065.97 2,319.98 $ 163,793.78 $==3=,3=8=5=.9=5 See notes to the basic financial statements. - 19 - SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS ELBERT COUNTY LIBRARY AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6522-06-01 Previously Reported Corrective Action Implemented SECTION III FINDINGS AND QUESTIONED COSTS ELBERT COUNTY LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported.