Jefferson County Library, Louisville, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2007

JEFFERSON COUNTY LIBRARY
LOUISVILLE, 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

JEFFERSON COUNTY LIBRARY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

3

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

4

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

5

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES 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 BALANCES - BUDGET AND ACTUAL

GENERAL FUND

17

SUPPLEMENTARY INFORMATION

SCHEDULES OF REVENUE

2

STATE

18

3

FEDERAL

19

4

LOCAL

20

5 SCHEDULE OF SALARIES AND TRAVEL

21

JEFFERSON COUNTY LIBRARY - TABLE OF CONTENTS -
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 IV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

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 ofthe General Assembly Members ofthe Board of Regents of the University System of Georgia
and Director and Members ofthe Jefferson 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 of the governmental activities and each major fund (Exhibits A through G) of the Jefferson 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 ofcontents. These financial statements are the responsibility ofthe Jefferson 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 ofexpressing an opinion on the effectiveness of the 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 of the governmental activities and each major fund of the Jefferson County Library, as ofJune 30, 2007, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America.
2007ARL-41

The Jefferson County Library has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.

The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 17 is not a required part of the basic financial statements but is 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 ofmeasurement and presentation ofthe 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 Jefferson 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 of the 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,

.

~~w.~

Russell W. Hinton, CPA, CGFM State Auditor

RWH:as 2007ARL-41

JEFFERSON COUNTY LIBRARY

JEFFERSON COUNTY LIBRARY STATEMENT OF NET ASSETS
JUNE 30, 2007
ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net
Local Government Other Capital Assets Equipment Library Collections Less: Accumulated Depreciation
Total Assets
LIABILITIES Accounts Payable Deposits and Deferred Revenues Long-Term Liabilities
Due in More Than One Year Total Liabilities NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Permanent Fund Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

160,864

207,279

20,337 1,979

121,550 649,967 -562,094

$ = = = = 5.9.9.=,8=8=2

$

1,933

451

10 901

$

13,285

$

209,423

2,500 374 674

$

586,597

$====5=99=,8=8=2

The notes to the basic financial statements are an integral part of this statement.
-1-

JEFFERSON 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
Total Governmental Activities

$

174,755 $

962

166,310

47486

$

389 513 $

13,349 $ 13 349 $

23,089 $
159,600 27 037

-138,317 -962
-6,710 -20 449

209 726 $ _ _ _ _-...;.16.;;..;6"-,4'-"3~8

General Revenues Allotments From Participating Governments Investment Earnings Miscellaneous Revenue

$

183,732

8,020

31 628

Total General Revenues

$ _ _ __!::;22:,3:..,3<,e8:,,..0

Change in Net Assets

$

56,942

Net Assets - Beginning of Year

529 655

Net Assets - End of Year

$ ====58~6;,;5;;,;;9,;,,7

The notes to the basic financial statements are an integral part of this statement. -2-

JEFFERSON COUNTY LIBRARY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2007

EXHIBIT "C"

ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net
Local Government Other
Total Assets
LIABILITIES AND FUND BALANCES LIABILITIES
Accounts Payable Deposits and Deferred Revenue
Total Liabilities FUND BALANCES
Reserved for: Permanent Fund
Unreserved Undesignated Reported in: General Fund Permanent Fund Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

PERMANENT FUND

TOTAL

$

160,859 $

204,367

20,337 1 979

5 $ 2,912

160,864 207,279
20,337 1 979

$

387,542 $

2917 $===3=9=0~4=59=

$

1,933

1 436

$

3 369

$

1,933

1 436

$

3 369

$

$

384,173

$

384 173 $

$

387,542 $

2,500 $
417 2 917 $

2,500
384,173 417
387 090

2 917 $ ===39=0'"=4=5=9

The notes to the basic financial statements are an integral part of this statement. -3-

JEFFERSON COUNTY LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2007

EXHIBIT "D"

Total Fund Balances - Governmental Funds (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
Fines and Fees Revenues that do not provide current financial resources are reported as deferred revenues in the governmental funds.
Long-Term Liabilities are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Compensated Absences
Net Assets of Governmental Activities (Exhibit "A")

$

387,090

$ 121,550 649,967 -562,094

209,423 985

-10 901 $ ===58=6=5=9=7

The notes to the basic financial statements are an integral part of this statement. -4 -

JEFFERSON COUNTY LIBRARY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS 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
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

PERMANENT FUND

TOTAL

$

183,732

198,857

10,869

13,349

7,897 $

30643

$

445 347 $

$ 123 123 $

183,732 198,857
10,869 13,349 8,020 30643
445 470

$

186,354 $

962

169,545

47 486

$

404 347 $

$

41,000 $

343,173

$

384 173 $

0 $
0 $ 123 $ 2 794

186,354 962
169,545 47486
404 347
41,123
345 967

2 917 $ ===3=8=7=0=9=0

The notes to the basic financial statements are an integral part of this statement. -5-

JEFFERSON COUNTY LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2007

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (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 Capital Outlay over Depreciation Expense

$ 36,596 -26,180

Fines and Fees Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the governmental funds.

Compensated absences decreases reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds.

41,123
10,416 985
4418

Change in Net Assets of Governmental Activities (Exhibit "B")

$ ==5=6=,9=42=

The notes to the basic financial statements are an integral part of this statement. -6-

JEFFERSON COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 1: DESCRIPTION OF LIBRARY AND REPORTING ENTITY
REPORTING ENTITY
The Jefferson 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 ofnine members; six members appointed by the Jefferson County Board of Commissioners, one member appointed by the City ofLouisville, one member appointed by the City of Wadley and one member appointed by the City of Wrens. The Library Board is without authority to determine the amount of its funding, except by submission of budget requests to local governmental units from which the Library receives support and to the State ofGeorgia 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 Jefferson County Board of Commissioners appoints a majority of the Jefferson County Library's Board, the Jefferson County Board of Commissioners 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 Jefferson County Library is therefore considered to be a related organization of Jefferson County, 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 of the Jefferson County Library.
Library-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities of the 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 ofthe Library's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
-7-

JEFFERSON 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 funds:
General Fund is the Library's primary operating fund. It accounts for all financial resources of the Library, except those resources required to be accounted for in another fund.
Permanent Fund - The Mary Lou Cain Book Fund is the fund used to account for an endowment of which the corpus is to be invested and preserved intact with the resultant income to be used for the purchase of children's books for the Jefferson County Library.
BASIS OF ACCOUNTING
The basis of accounting 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, except for compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds.
-8-

JEFFERSON COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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 ofdeposit) 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 and equity investments 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 of return 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 ofGeorgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and

-9-

JEFFERSON COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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.

RECEIVABLES

Receivables consist ofamounts due from grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed, 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. The Library does not capitalize book collections or works ofart. 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 5 to 25 years

$

5,000

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:

- 10 -

JEFFERSON COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
Restricted net assets - These represent resources for which the Library is legally or contractually obligated to spend resources for permanent funds in accordance with restrictions imposed by external third parties.
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 ofthe Library, and may be used at the discretion of the Library to meet current expenses for those purposes.
Note 3: DEPOSITS AND INVESTMENTS
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,

- 11 -

JEFFERSON COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 3: DEPOSITS AND INVESTMENTS

(6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe 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 Banlcs, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $377,157. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk:

Category 1 - Uncollateralized Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's
trust department or agent but not in the Library's name.

The Library's deposits are classified by custodial credit risk category at June 30, 2007, as follows:

Custodial Credit Risk Category

Bank Balance

1

$

0

2

0

3

82,553

Total

$===82-,5=5=3

CATEGORIZATION OF INVESTMENTS At June 30, 2007, the fair value ofthe Library's total investments was $1,517 and this entire amount consisted of common stock which was registered in the Library's name.

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The Library does not have a formal policy for managing concentration of credit risk. More than 5% of the Library's investments are in Verizon Communications, Inc., common stock. This investment is 98% of the Library's total investments.

- 12 -

JEFFERSON COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

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

$ 127,139 619,600 $

$ 36,596

98,081 449 651
$ 129,007 $

5,656 20 524
10 416 $

5,589 $ 6,229

121,550 649,967

5,589 6 229
0 $

98,148 463,946
209,423

Current year depreciation expense by function is as follows:

Public Services

$===26-,1==8==0

Note 5: RESTRICTED ASSETS

Endowments in which donors have stipulated as a condition ofthe gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose ofproducing present and future income, which may be expended, are restricted assets in the Statement ofNet Assets because their use is limited by applicable contractual agreements. Restricted assets at June 30, 2007, were as follows:

Permanent Fund

Restricted Investments Mary Lou Cain Book Fund
Note 6: RISK MANAGEMENT

$====2'="""=50=""0

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 of loss associated with 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.

- 13 -

JEFFERSON COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 6: RISK MANAGEMENT

The Jefferson County Board of Commissioners and the Cities of Louisville, Wadley, and Wrens provide insurance coverage for torts, assets and acts of God.

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.

The Library has purchased a surety bond to provide additional insurance coverage as follows:

Position Covered

Amount

All Employees

$

50,000

Note 7: LONG-TERM DEBT

COMPENSATED ABSENCES Compensated absences represent obligations ofthe Library relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this Long-Term Debt. The Library uses the vesting method to compute compensated absences.

The changes in Long-Term Debt during the fiscal year ended June 30, 2007, were as follows:

Governmental Fund
Compensated Absences (I)

Balance July 1, 2006

$

15,319

Additions Annual Leave Earned

17,841

Deductions Annual Leave Utilized

22,259

Balance June 30, 2007

$====10-,9==0==1

(1) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements.

- 14 -

JEFFERSON COUNTY LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 8: 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%

$

20,326

$

18,997

$

19,471

- 15 -

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JEFFERSON COUNTY LIBRARY GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES 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

$

177,732 $

177,732 $

183,732

199,710

199,710

198,857

10,869

10,869

10,869

13,349

7,897

18 991

18 991

30643

$

407 302 $

407 302 $

445 347

$

45,472 $

45,472 $

186,354

1,800

1,800

962

316,559

316,559

169,545

44,290

44,290

47,486

500

500

1 000

1 000

$

409 621 $

409 621 $

404 347

$

-2,319 $

-2,319 $

41,000

241 407

241 407

343 173

Fund Balance - Ending

$

239 088 $

239,088 $ ====38=4=1=7=3

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.

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JEFFERSON 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 Library Materials Maintenance and Operations

SCHEDULE "2"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

159,600

8,534

30 723

$ ======19=8=8=5=7

See notes to the basic financial statements.

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JEFFERSON COUNTY LIBRARY SCHEDULE OF FEDERAL REVENUE
YEAR ENDED JUNE 30, 2007
AGENCY/FUNDING GRANT Museum and Library Services, Institute of Through Board of Regents of the University System of Georgia Library Services and Technology Act Family Literacy Program

SCHEDULE "3"
GOVERNMENTAL FUND TYPE GENERAL FUND
$ ===:::,.;,1,;;;,i0,;;;;86=9

See notes to the basic financial statements.

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JEFFERSON COUNTY LIBRARY SCHEDULE OF LOCAL REVENUE
YEAR ENDED JUNE 30, 2007
LOCAL SOURCES Board of Education Jefferson County City Governments Louisville Wadley Wrens County Government Board of Commissioners Jefferson

SCHEDULE "4"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

12,000

20,200 9,520
15,312

126,700

$ ====18=3=,7=3=2

See notes to the basic financial statements.

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NAME
Anderson, Meagan Blackmon, Kaye Boatright, Bonnie A. Boeckel, Lisa Braddy, Mark Cherry, Jennifer M. Cuyler, Dawanna Edwards, Patricia Evans, Eva Hudson, Kathy G. Lewis, Cervantes Maner, Richard McGahee, Wanda P. Miller, Jennie C. Rogers, Charlotte Stepp, Jared Stepp, Jordan Templeton, Cherlyn Watts, Tiffany
Totals per Report

JEFFERSON COUNTY LIBRARY SCHEDULE OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2007

SCHEDULE "5"

TITLE CATEGORY
Library Assistant Library Assistant Assistant Director Library Assistant Outreach Clerk Library Assistant Library Assistant Director Head of Circulation Branch Manager Library Assistant Library Clerk Branch Manager Administrative Assistant Director Library Assistant Library Assistant Library Assistant Library Assistant

SALARIES

TRAVEL

$

77

363

65,062 $

1,031

2,693

15,080

229

1,294

45

1,048

57,445

913

18,399

28

14,331

38

512

7,030

18,824

32

22,859

78

4,322

2,153

1,298

3,246

1 965

$

238,001 $ =====2=3=9=4

See notes to the basic financial statements.

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SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

JEFFERSON 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-6812-06-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6812-06-01

Corrective action took place immediately upon knowledge ofthe inadequacy in May 2007. The actions taken were as stated in the Management Responses to the audit for fiscal year 2006.

Director reviews all requests for purchases and authorizes by initialing and dating. All receipts checked in by administrative assistant using packing slip and purchase
order discrepancies noted on packing slip - packing slip initialed and dated. Director is alerted to any discrepancy. Director opens all mail and reviews all invoices, initials, and dates. Administrative assistant runs "open payables" report from accounting system. Director reviews "open payables" report, initials, and dates for payment. Administrative assistant prepares checks for payment. Director verifies that check and invoice match - sign checks. Administrative assistant makes copies of checks and attaches to invoice/packing
slip and files.

Additional procedures implemented in fiscal year 2008 include purchase order number log requiring two initials maintained, check numbers are verified to be in sequence when director signs.

In the absence of the director the assistant director performs the duties of the director.

SECTION III FINDINGS AND QUESTIONED COSTS

JEFFERSON COUNTY LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

COMMUNICATION OF INTERNAL CONTROL DEFICIENCIES

The auditor is required to communicate to management and those charged with governance control deficiencies identified during the course of the financial statement audit that, in the auditor's judgment, constitute significant deficiencies or material weakness.

A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Jefferson County Library's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Jefferson County Library's financial statements that is more than inconsequential will not be prevented or detected by the Jefferson County Library's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Jefferson County Library's internal control.

Any identified deficiencies in internal controls that we did not consider to be significant deficiencies and/or material weaknesses have been communicated to management and those charged with governance within a separate management letter dated September 17, 2008. Internal control deficiencies identified during the course of this engagement that were considered to be significant deficiencies and/or material weaknesses are presented below:

EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Significant Deficiency Finding Control Number: FS-6812-07-01

Condition:

This is a repeat finding (FS-6812-06-01) from the year ended June 30, 2006. A review of expenditures revealed that the Library failed to implement internal controls to ensure that expenditures were properly documented and approved by authorized personnel prior to purchase.

Criteria:

The Library's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are properly approved and processed according to established procedures and reported in accordance with State law.

Questioned Cost: NIA

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JEFFERSON COUNTY LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Significant Deficiency Finding Control Number: FS-6812-07-01

Information:

A review of thirty expenditure vouchers revealed the following:

Seventeen vouchers did not include a requisition. Twenty vouchers did not include a purchase order that was approved
by authorized personnel prior to purchase. Seven vouchers had no documentation indicating evidence of receipt.

Cause:

These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning with regard to expenditures.

Effect:

Errors and/or irregularities may not be detected in a timely manner.

Recommendation: The Library should establish policies and procedures to ensure that expenditures are properly approved and documented.

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-6812-07-02

Condition:

The Library did not have adequate controls in place over the financial statement reporting process.

Criteria:

Management is responsible for having adequate controls over the financial reporting process, which not only includes proper recording oftransactions to the general ledger, but extends to accurate preparation and presentation ofthe financial statements, including note disclosures.

Questioned Cost: NIA

Information:

The Governmental Accounting Standards Board (GASB) Statement 34 reporting model requires the presentation ofboth fund level and entity-wide level statements in the Library's financial statements. The auditors had to prepare the appropriate fund level and entity-wide level financial statements from the Library's general ledger.

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JEFFERSON COUNTY LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-6812-07-02

Cause:

The Library did not implement an adequate system of internal control over the financial statement reporting process.

Effect:

The Library did not have adequate controls in place to ensure that the financial statements were properly prepared in accordance with generally accepted accounting principles.

Recommendation:

The Library should develop and implement internal controls over the financial statement reporting process to ensure that activity is properly recorded in the general ledger; to verify that financial statements (including note disclosures) properly reflect activity reported in the general ledger; and to include a monitoring process to evaluate the accuracy of the financials presented for audit.

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SECTION IV MANAGEMENT'S RESPONSES

JEFFERSON COUNTY LIBRARY SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Jefferson County Library's responses to the findings described below were not audited and accordingly, we express no opinion on it.
Finding Control Number: FS-6812-07-01
We concur with this finding. As a result of the audit for fiscal year 2006, corrective action was taken beginning in May 2007. Additional procedures were also put in place in fiscal year 2008. The administration has implemented the following changes to correct this finding.
Director reviews all requested purchases and authorizes each purchase by initialing and dating
A purchase order is used for all purchases A purchase order log is maintained and each purchase order number verified to be in
sequence and initialed by two administrative staff members All receipts are checked in by an administrative staffmember using both the packing slip and
purchase order to verify accuracy. Discrepancies are noted on the packing slip which is initialed and dated Director is alerted of any discrepancy Director opens all mail and reviews all invoices upon receipt, initials and dates Administrative assistant runs an "Open Payables" report on unpaid invoices Director reviews all unpaid invoices and authorizes payment by initialing and dating Administrative assistant prepares all checks for payment Director verifies that the invoice, packing slip, and check match Director verifies check number sequence, signs checks Administrative assistant makes copies of signed checks and attaches the check copy to the invoice/packing slip then mails checks Written policies and procedures have been put into place to reflect the above procedures
In the absence of the Director, the Assistant Director performs the duties of the Director.
Finding Control Number: FS-6812-07-02
We concur with this finding. Since the auditing occurs about a year after the close ofthe fiscal year, any deficiencies noted and corrected cannot be reflected until a year later.
At the beginning of fiscal year 2008 the Director and administrative assistant used the "Chart of Accounts for Georgia Public Libraries" to verify that every revenue and expenditure would be posted correctly according to the chart. Several changes were made. Unfortunately, these changes did not happen in fiscal year 2007. Because of the size of the administrative staff, there is no other staff member who can or has the knowledge to check to ensure that all postings are correct.
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JEFFERSON COUNTY LIBRARY SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-6812-07-02 The Director and administrative assistant attended several training sessions during fiscal year 2008 to familiarize themselves with the process of producing finance reports. Neither of them is an accountant and found that they did not have the expertise to produce the financial statements. The accounting system, FundWare, could not produce financial statements and being a small library system, there were no funds to hire an independent auditor to prepare them. A new accounting system, Blackbaud, was installed in the end of fiscal year 2007 so that for fiscal year 2008 and beyond, producing financial statements will be possible by library personnel. The Board of Trustees is aware of these audit issues and the need for additional funding to ensure that the financial statements are properly prepared, as well as, ensure that an independent audit is done for fiscal year 2008 and beyond. Alternatives are being investigated at this time. A resolution will occur before July 2009. Contact Person: Patricia Edwards, Director Phone: (478) 625-3751 Fax: (478) 625-7683 E-mail: pedwards@mail.jefferson.public.lib.ga.us
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