Athens Regional Library, Athens, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2005

ATHENS REGIONAL LIBRARY
ATHENS, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2005
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

ATHENS REGIONAL 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 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

7

G

NOTES TO THE BASIC FINANCIAL STATEMENTS

8

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCE - BUDGET AND ACTUAL

GENERAL FUND

19

SUPPLEMENTARY INFORMATION

SCHEDULES OF REVENUE

2

STATE

20

3

FEDERAL

21

4

LOCAL

22

5 SCHEDULE OF SALARIES AND TRAVEL

23

ATHENS REGIONAL 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 Ill 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
July 17, 2006

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 Athens Regional 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 Athens Regional Library as of and for the year ended June 30, 2005, which collectively comprise the Library's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Athens Regional 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 the major fund of the Athens Regional Library, as of June 30, 2005, 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.

2005ARL-41X

The Athens Regional 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.
As discussed in Note 2, to the basic financial statements, during fiscal year 2005, the Library reported capital assets costs and depreciation expenses in accordance with generally accepted accounting principles. Library collections additions are reported at cost. These changes are in accordance with generally accepted accounting principles.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 19 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 Athens Regional 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 State Auditor
RWH:as 2005ARL-41X

ATHENS REGIONAL LIBRARY

ATHENS REGIONAL LIBRARY STATEMENT OF NET ASSETS
JUNE 30, 2005
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Local Federal Government Other Inventories Capital Assets Equipment Library Collections Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Endowment Fund Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

535,105

760,388

82,554 65,627
1,843 14,233

254,571 9,465,702 -6,417,802

$ ===4=,7=6=2=,2=2=1

$

4,626

6,237

119,371 8 858

$

139,092

$

3,302,471

568,280 752,378

$

4,623,129

$ ===4='=76=2=,2=21=

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

ATHENS REGIONAL LIBRARY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2005

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
Total Governmental Activities

$ 2,269,758 $ 243,327 511,604 156,680 285,058
$ 3 466 427 $

165,512 $ 165 512 $

876,109 $ 84,568

-1,228,137 -243,327 -511,604 -72,112 -285 058

960 677 $ _ ____;-2::c,3::_4:..::0,::,2c=..38=--

General Revenues Allotments from Participating Governments Investment Earnings Miscellaneous

$

2,088,070

20,106

76182

Total General Revenues Change in Net Assets

$ ---=-2"-'1"'"84-'=-35:..,8:....

$

-155,880

Net Assets - Beginning of Year (Restated)

4 779 009

Net Assets - End of Year

$ ===4;;;6~2;;;,3.;,12;.,;9;..

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

ATHENS REGIONAL LIBRARY BALANCE SHEET
GOVERNMENTAL FUND JUNE 30, 2005
ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net
Local Federal Government Other Inventories
Total Assets
LIABILITIES AND FUND BALANCES LIABILITIES
Accounts Payable Salaries Payable
Total Liabilities FUND BALANCES
Reserved For Inventories for Resale For Endowment
Unreserved Undesignated Reported in: General Fund Total Fund Balances
Total Liabilities and Fund Balances

EXHIBIT"C"

GENERAL FUND

$

535,105

760,388

82,554 65,627
1,843 14,233

$ ==1=,4=5=9=7,...,50....

$

4,626

6,237

$

10,863

$

14,233

568,280

866,374 $ 1,448,887

$ ==1=,4=5=9=7,...,5.0...

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

ATHENS REGIONAL LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2005

EXHIBIT"D"

Total Fund Balances - 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
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

$ 1,448,887

$

254,571

9,465,702

-6,417,802

3,302,471

-128,229

Net Assets of Governmental Activities (Exhibit "A")

$ ==4=,6=2=3=1,=29=

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

ATHENS REGIONAL LIBRARY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
GOVERNMENTAL FUND YEAR ENDED JUNE 30, 2005

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
Total Expenditures
Net Change in Fund Balance
Fund Balance - Beginning
Fund Balance - Ending

GENERAL FUND
$ 2,088,070 895,050 65,627 165,512 20,106 76182
$ 3,310,547

$ 2,006,296 243,327 511,604 156,680 285,058

$ 3,202,965

$

107,582

1,341,305

$ ==1=,4=4=8=,8=87=

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

(This page left intentionally blank)

ATHENS REGIONAL LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES JUNE 30, 2005

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

Some items 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. These activities consist of:

Decrease in Compensated Absences

$
233,031 -511154

107,582
-278,123 14 661

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

$ ==-1=5=5,=88=0=

The notes to the basic financial statements are an integral part of this statement. -7-

ATHENS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2005

EXHIBIT "G"

Note 1: DESCRIPTION OF LIBRARY AND REPORTING ENTITY
REPORTING ENTITY
The Athens Regional 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 is comprised of 16 members which are also trustees ofthe member library which appointed them. The Library Board membership consists of4 members appointed from the AthensClarke County Library Board, 3 members appointed from the Franklin County Library Board, 3 members appointed from the Madison County Library Board, 3 members appointed from the Oconee County Library Board and 3 members appointed from the Oglethorpe County Library Board. 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 ofeach participating governmental agency. The Library Board has the power to designate management, the power to retain unreserved fund balances oflocal and other funds for continued operations and is the lowest level of oversight responsibility for the Library's operations. The Athens Regional Library is therefore determined to be a joint venture.
Blended Component Unit The Athens-Clarke County Endowment Fund, Inc. was organized exclusively for the charitable and educational purpose of establishing and maintaining an endowment fund for the Athens-Clarke County Library.
The Endowment will raise funds from public donations and fundraising activities to establish an investment corpus. Income from the corpus will be used to either purchase materials for the Library's collection or make grants to the Library for the exclusive purpose ofpurchasing materials. The financial statements ofthe endowment fund have been blended with the Library's general fund.
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 Athens Regional 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.

-8-

ATHENS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2005

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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, except those resources required to be accounted for in another fund.
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
-9-

ATHENS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2005

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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.
RESTATEMENT OF PRIOR YEAR NET ASSETS - BEGINNING OF YEAR
For fiscal year 2005, the Library restated Library Collections and the related accumulated depreciation and equipment accumulated depreciation due to errors and omissions. The Library increased Library Collections, net ofaccumulated depreciation, $365,913, and decreased equipment accumulated depreciation $59,200. The net result ofthe corrections was an increase in net assets of $425,113. These changes are in accordance with generally accepted accounting principles.
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. Georgia Laws OCGA 45-8-14 authorize 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,

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ATHENS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2005

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(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.
RECEIVABLES
Receivables consist ofamounts due from grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed 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 not include any amounts which would necessitate the need for an allowance for uncollectible receivables.
INVENTORIES
Inventories of goods for resale are valued at cost and are recorded as expenditures at the time of purchase. The inventories reported on the balance sheet are equally offset by a reservation of fund balance which indicates that this amount does not constitute "available spendable resources" even though they are a component of net current assets.
CAPITAL ASSETS
Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. 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 of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method.

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ATHENS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2005

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

10 years

All

10 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.

FUND BALANCES RESERVED
Reserves represent those portions of fund balance equity that are legally segregated for a specific future use.

The Athens-Clarke County Library Endowment Fund, Inc. was organized exclusively for the charitable and educational purpose of establishing and maintaining an endowment fund for the Athens-Clarke County Library. Income from the corpus will be used to either purchase materials for the Library's collection or make grants to the Library for the exclusive purpose of purchasing materials.

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,

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ATHENS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2005

EXHIBIT "G"

Note 3: DEPOSITS AND INVESTMENTS

(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.

CATEGORIZATION OF DEPOSITS At June 30, 2005, the bank balances were $1,323,129. The amounts of the total bank balances are classified into four categories of custodial credit risk:

Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the Library or by the Library's agent in the Library's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the Library's name.
Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the Library's name.
Category 4 - Uncollateralized.

The Library's deposits are classified by custodial credit risk category at June 30, 2005, as follows:

Custodial Credit Risk Category

Bank Balance

1

$ 661,672

2

14,772

3

646,685

4

0

Total

$ 1,323,129

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ATHENS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2005

EXHIBIT "G"

Note 3: DEPOSITS AND INVESTMENTS

CATEGORIZATION OF INVESTMENTS Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure ofthe counterparty to a transaction, the Library will not be able to recover the value ofthe investment or collateral securities that are in the possession of an outside party. The Library does not have a formal policy for managing custodial credit risk.

Investments are classified as to risk by the categories described below:

Category 1 - Insured or registered, or securities held by the Library or the Library's agent in the Library's name.
Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the Library's name.
Category 3 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent, but not in the Library's name.

At June 30, 2005, the fair value of the Library's total investments was $183,650 and this entire amount consists of Equity Mutual Funds (open-end Mutual funds) which are not required to be classified by categories of custodial credit risk.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Library does not have a formal policy for managing credit quality risk.

The Equity Mutual Fund does not have a credit quality rating.

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, 2004 {Restated)

Increases

Decreases

Balances June 30. 2005

$ 249,207 $ 9,380,097

5,364 227,667 $

$ 254,571

142,062

9,465,702

157,284 5,891.426
$ 3,580,594 $

15,015 496 139
-218,123 $

142,062

172,299 6,245,503

$ 3,302,471

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ATHENS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2005

EXHIBIT "G"

Note 4: CAPITAL ASSETS

Current year depreciation expense by function is as follows:

Public Services Note 5: RESTRICTED ASSETS

$==5===11~15==4

Athens-Clarke County Endowment Fund, Inc. funds and contributions from donors restricted for the purchase of materials for the Athens-Clarke County Library are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable contractual agreements. Restricted Assets at June 30, 2005, were as follows:

General Fund

Restricted Cash and Cash Equivalents Restricted Investments

$

40,425

$ 527,855

Note 6: 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 these risks 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.

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

Position Covered

Amount

All Employees

$ 500,000

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ATHENS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2005

EXHIBIT "G"

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. The Library uses the vesting method to compute compensated absences.

The changes in Long-Term Debt during the fiscal year ended June 30, 2005, were as follows:

Governmental Funds
Compensated Absences

Balance July 1, 2004

$ 142,890

Additions Annual Leave Earned

119,371

Deductions Annual Leave Utilized

134.032

Balance June 30, 2005

$=====12""=8==.2==2===9

Portion of Long-Term Debt Due within One Year

$_ _1_19~.3_7_1

Note 8: RELATED PARTY TRANSACTIONS

Mrs. Pam Blake, Administrative Assistant for the Athens Regional Library, is married to Mr. Dennis Blake, the Library's insurance agent. For the year under review, the Library's insurance policies were handled by Mr. Blake and his employer, The Boswell Group.

Mr. Todd Emily, President ofthe Athens-Clarke County Endowment Fund during the fiscal year, is an investment advisor for Edward Jones. Edward Jones handles the Investment Portfolio for the Endowment Fund of the Library.

Note 9: 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

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ATHENS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2005

EXHIBIT "G"

Note 9: RETIREMENT PLANS

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 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2005 2004 2003

100% 100% 100%

$ 161,095 $ 156,802 $ 155,476

- 17 -

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ATHENS REGIONAL LIBRARY GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2005

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
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES}
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balance
Fund Balance - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

2,091,708 $

2,091,708 $

2,088,070

895,049

895,049

895,050

65,627

174,075

174,075

165,512

10,000

10,000

20,106

76182

$

3,170,832 $

3,170,832 $

3,310,547

$

2,005,500 $

2,005,500 $

2,006,296

243,327

243,327

243,327

498,637

498,637

511,604

156,679

156,679

156,680

285,578

285,578

285,058

$

3,189,721 $

3,189,721 $

3,202,965

$

-18 889 $

-18 889 $

107 582

$

99,540 $

99,540

-102,229

-102,229

$

-2689 $

-2 689

$

-21,578 $

-21,578 $

107,582

819 499

819 499

1,341,305

Fund Balance - Ending

$

797 921 $

797 921 $===1=4=4=8=88=7=

Notes to the Schedule of Revenues, Expenditures and Changes _in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the blended component unit.
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.

- 19 -

ATHENS REGIONAL LIBRARY SCHEDULE OF STATE REVENUE
YEAR ENDED JUNE 30, 2005
AGENCY/FUNDING
GRANTS Board of Regents of the University System of Georgia Office of Public Library Services Salaries Travel Library Materials Maintenance and Operations Talking Book Centers

SCHEDULE "2"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

596,498

3,000

71,667

84,568

139 317

$ ====8=9=5,=0=50=

See notes to the basic financial statements.

- 20 -

ATHENS REGIONAL LIBRARY SCHEDULE OF FEDERAL REVENUE
YEAR ENDED JUNE 30, 2005
AGENCY /FUNDING GRANT Museum and Library Services, Institute of Through Board of Regents of the University System of Georgia Library Services and Technology Act State Library Program

SCHEDULE "3"
GOVERNMENTAL FUND TYPE GENERAL FUND
$ ========6,..5=62=7=

See notes to the basic financial statements.

- 21 -

ATHENS REGIONAL LIBRARY SCHEDULE OF LOCAL REVENUE
YEAR ENDED JUNE 30, 2005
LOCAL SOURCES Boards of Education Franklin County Oconee County Oglethorpe County City Governments Arnoldsville Bogart Carnesville Crawford Franklin Springs Lavonia Lexington Royston Watkinsville Winterville County Governments Boards of Commissioners Athens-Clarke County Franklin County Madison County Oconee County Oglethorpe County

SCHEDULE "4"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

24,000

10,000

15,000

100 6,000 2,700
500 1,500 8,000
500 14,208
8,000 10,000

1,497,787 24,000
153,503 265,772
46 500

$ ====2=,0=8=8=,0=70=

See notes to the basic financial statements.

- 22 -

ATHENS REGIONAL LIBRARY SCHEDULE OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2005

SCHEDULE "5"

NAME
ALEXANDER, GAYLE B. ALKE, ROSALYN PERKINS AMES, KATHRYN S. ANDERSON II, RAYMOND V. ANDERSON, MICHELLE M. ARCHIBALD, WRENFORD N. ARNOLD, SARAH HAY ASHWORTH, GREGORY S. ATWOOD, JUDY J. AUWARTER, CLARE BABB, LAURA PARROTT BACHARACH, SUZANNE B. BAK, TODD EDWARD BARTON, FELICITY J. BASINGER, PHILIP E. BEST, GLENDA S. BETTINI, ALICE E. BILLINGS, JESSICA L. BILLINGS, REBECCA BLAKE, PHYLLIS M. BLASINGAME, ALVINA S. BOBILIN, ERIK VICTOR BOWDEN, HOLLY L. BOYER, CARLIE M. BRAGG, DORIS MARIE BRAGG, JAMIE M. BROOKS, PHYLLIS M. BURROUGHS, JANET A. BURTON, ASHLEY R. BUSH, EVAN MICHAEL CANTRELL, DORIS 0. CARLAN, MARSHA D. CARTER, LAURA W. CARTER, SARA S. CASTLE, KIMBERLY ANNE CHANDLER, STACEY LEIGH CHANDLER, WESLEY C. CHISTOPHER, DENTEL P. CHITWOOD, ROSEMARY D. CLAPP, JANET E. CLAYTOR, ALISA YVONNE DANIEL, DOROTHY D. DEAL, MARCUS GREGORY DEGRASSE, SUZANNE M. DEMPSEY, THEODORA M. DEROSHIA, ELIZABETH ASHLEY DIETZ, CHRISTINE H. DINGLER, NANCY F. DOUGLAS, KAREN W. DRIVER, MARY ANNE DROZ, GARY C. DUARTE, MARIA GUADALUPE ELSNER, DANIEL S. ELSNER, JACQUELINE C. FAUST, TWANNA B. FERRELLE, STACEY OVERSTREET FIRESTONE, GAIL C.

TITLE CATEGORY
LIBRARY ASSISTANT LIBRARY ASSISTANT DIRECTOR SECURITY GUARD LIBRARY ASSISTANT PARA PROFESSIONAL LIBRARY ASSISTANT LIBRARY ASSISTANT CERTIFIED LIBRARIAN CERTIFIED LIBRARIAN LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT SECURITY GUARD LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT ADMINISTRATIVE SECRETARY LIBRARY ASSISTANT LIBRARY ASSISTANT CERTIFIED LIBRARIAN LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT BRANCH MANAGER LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT CERTIFIED LIBRARIAN LIBRARY ASSISTANT LIBRARY ASSISTANT BRANCH MANAGER COURIER LIBRARY ASSISTANT BRANCH MANAGER LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT COMPUTER SPECIALIST BRANCH MANAGER LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT COMPUTER SPECIALIST LIBRARIAN NON CERT COURIER LIBRARY ASSISTANT LIBRARY ASSISTANT CERTIFIED LIBRARIAN LIBRARY ASSISTANT PUBLIC RELATIONS MANAGER CERTIFIED LIBRARIAN
-23-

SALARIES

$

7,187 $

21,370

86,704

6,566

586

34,113

172

885

68,931

68,931

22,248

882

6,607

2,030

6,305

6,130

23,175

5,173

1,887

30,005

872

5,003

45,237

88

8,348

6,301

8,801

26,669

564

13,083

2,751

960

60,467

25,081

988

29,346

4,564

258

15,140

1,641

14,601

22,105

38,970

28,630

5,769

21,500

1,209

164

7,533

49,759

1,056

3,064

159

60,467

26,143

35,182

54,849

TRAVEL 10
3,738
1,055 1,217
41 9
48
60 22 243 127
34
99
911

ATHENS REGIONAL LIBRARY SCHEDULE OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2005

SCHEDULE "5"

NAME
FLEMING, ALFREDA W. FLOYD, ROBIN D. FREEMAN, LIZBETH P. GARNER, TANYA GENTRY, MELISSA D. GERSON, TAMRA FRIED GIBSON, JOAN M. GIESZLER, CRISTINE P. GILMOUR, NATHAN GOLDBERG,DEBORAH GOODROE, MICHAEL G. GOODWIN, SCOTT ALLEN GORDON, JANICE MARIE GORDON, MABLE LAVERNE GOTTSCHALK, WILLIAM ROBERT GRAHAM, THERESA L.
GREENE, LATOYA R.
GUNN, JENNIFER LINDSAY HALLOW, PATRICIA L. HANNEMAN, WINIFRED T. HARDY, SARAH L. HARTEL, MARY JEAN HATZIOS, ADAK.
HAWKES, MONICA R.
HAYEK, MATTHEW W. HAYNES, GLORIA K. HENZEL, JOANNA G. HENZEL, JUDY HULSEY HIGTON, JANET H. HODGIN, SARAH C. HOOVER, LUVERNE E. HUMPHRIES, CAROL JANE HUNTER, SARAH N. JAMESON, CYNTHIA C. JEWELL, PRENTICE L. JOHNSON, DORIS K. JONES, EMMA L. KASTELLEC, MIKE ANDREW KELLY, RASHEDA PATRICE KHUWATSAMRIT, NATAYA KNAUFT, EVELYN ANDERSON LECROY, EMMA L. LEFFERT, KIMBERLY B. LESTER, DEBORAH FAY LESTER, MARY LOU LINNEMANN, MARY PALMER LOFTIS, DEANNA C. LORD, THOMAS RAY MARKOV, CLAUDIA L. MARKOV, STEPHANIE LOUISE MARSHALL, KATHY ANN MILLER, AMY LEIGH MIZE, JOHN HAROLD MONK, JONATHAN D. MOORE, VICKI C. MORENO, CELIA L. MUHAMMAD, ZAYN A.

TITLE CATEGORY
LIBRARY ASSISTANT SECURITY GUARD LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT CERTIFIED LIBRARIAN LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT CUSTODIAN LIBRARY ASSISTANT CUSTODIAN LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT BRANCH MANAGER LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY STORE MANAGER LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT CUSTODIAN LIBRARY ASSISTANT
- 24 -

SALARIES

$

27,814 $

10,256

5,808

720

4,605

17,137

6,028

2,295

4,901

7,117

924

4,044

905

28,074

1,006

21,585

17,717

2,216

515

2,654

28,770

55,876

496

23,519

17,440

23,691

296

3,008

355

1,034

2,171

6,368

7,401

25,302

26,979

2,188

15,874

7,418

16

409

6,970

15,140

31,750

877

14,442

9,685

381

2,160

23,979

360

59

28,297

23,221

30,907

6,443

224

4,677

TRAVEL 4 8
4
157 78
152 68

ATHENS REGIONAL LIBRARY SCHEDULE OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2005

SCHEDULE "5"

NAME
NEWTON, EMILY A.
NICKELS, ROBERT R. OBERST, ANIKA PADGETT, DANIEL C.
PATEL, DIVA A.
PEEPLES, LAUREN KAYLA PETERS, VALARIE E. PIERCE-TOMLIN, CHRISTINA MARIE PLAKSIN, SUEANNE M. POPE, GAIL R. POULSEN, IDA BRINCH REDDY, TIMOTHY J. REEBER, PATRICIA R. ROWLAND, CHARLES STANFORD SCHROEDER, MARILYN ANITA SCOTT, TIMOTHY D. SEIGLER, PHILLIP E. SHEPARD, KATHRYN J. SILK, MONIRA A. SIMONDS, MAMIE FIKE SIMS, ANNETTE E. SLABODA, DONNA DOLORES
SMITH, ANNA L.
SMITH, CLARA LOUISE SUMPTER, CHUTNEY KELLANE TATE, WILLIAM JEFFERSON TAYLOR, MATHEW V. THOMAS, TERI CHARLENE THOMPSON, KATHLEEN HILL THRASHER, DEBORAH SIMS
TUMEN, JORGE A. TUMEN, VIRGINIA I.
UHALL, MICHAEL BENJAMIN VICENTE, MIGUEL J. WALKER,BEVERLYJANE WARD, JUNE T. WATKINS, MILDRED C. WEBBER, GEORGE F. WEDDLE, KRISTEN L. WILLIAMS, CYNTHIA G. WILLIAMS, DIANE T. WILLIAMS, JENNIFER S. WILSON, RYAN JAMES WRIGHT, JANET WRIGHT, LASKISHA Y.
Accruals June 30, 2004 June 30, 2005

TITLE CATEGORY
Hourly LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT CERTIFIED LIBRARIAN LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT SECURITY GUARD LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT BUSINESS MANAGER LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT BRANCH MANAGER LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT BRANCH MANAGER ADMINISTRATIVE SECRETARY LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT ACCOUNTING CLERK LIBRARIAN NON CERT LIBRARY ASSISTANT LIBRARY ASSISTANT LIBRARY ASSISTANT BRANCH MANAGER

SALARIES

TRAVEL

$

4,317

19,271

5,178

2,282

2,559

231

1,458

575

32,134

3,368

634

3,395

471

7,408

12,823

8,694

23,592 $

269

2,290

276

45,333

5,106

543

1,562

1,986

5,570

41,443

1,641

3,500

5,684

42,991

1,725

1,614

3,481

15,302

175

549

269

4,362

5,539

21,578

138

1,826

158

31,207

186

482

1,974

12,388

$ 2,030,399 $

8,936

-491 6,237

Totals per Report See notes to the basic financial statements.

- 25-

$ 2,036,145 $====8=9=3=6

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

ATHENS REGIONAL LIBRARY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6292-04-01 FS-6292-04-02 FS-6292-04-03 FS-6292-04-04

Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION Inadequate Internal Control Procedures Finding Control Number: FS-6292-04-01

We concur with this finding. Library Administration will determine whether current employee duties can be reassigned to achieve a higher degree of internal control with existing staff. In addition, the Director may consider hiring one additional part-time administrative staff member to assure that there is separation of those who perform monthly bank reconciliation and record keeping/voucher payment functions if funds permit.

GENERAL LEDGER Failure to Report Athens-Clarke County Library Endowment Fund Finding Control Number: FS-6292-04-02

While we believe the Endowment is a separate entity, we are unwilling to accept a qualification on the audit. In future audits, the Endowment will be reflected in our Management Discussion and Analysis document.

INVENTORIES GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-6292-04-03

Inventories We disagree with this finding. The Library did have procedures in place to ensure that the inventory balances as presented for audit were accurate. The Library Store for Resale balances had not been adjusted from prior year for the simple reason that 1) The actual

- 1-

ATHENS REGIONAL LIBRARY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
INVENTORIES GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-6292-04-03
date of the physical inventory done was August 2003 for the Journal Entry made on the books and observed by an auditor (we understand the procedure to be that the inventory MUST be observed by an auditor in order to avoid a finding) on June 30, 2003. 2) The auditing/counting of$13,000 or inventory in the library store (an area less than 150 square feet) is not material to our overall budget. The Library uses the store as a small enterprise fund run by volunteers. It is a waste of taxpayer dollars to count pencils in this manner.
General Ledger We disagree with this finding. The Library did have adequate procedures in place to ensure all journal entries made to the accounting records were posted to the appropriate accounts. The accounts in question were generated as a series of zeroes by Fundware Accounting System in the year-end process. The accounting system uses a series ofnonzero numerical funds to post accounts to. These are not non-zero accounts and should not be included with the other funds. The trial balance was in balance at the conclusion of fieldwork.
CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-6292-04-04
We strongly disagree with this finding. The Library prepared for GASB 34 during the month ofNovember 2004 in compliance. We did the sample and created the spreadsheet for the value of the materials collection with direction from Georgia Public Library Services. We feel that we have come up with a value ofthe materials collection based on the accepted guidelines as provided by the State of Georgia. The Capital Asset records were reconciled to the accounting records and the additions for the year are the actual dollars used in the spreadsheet provided by GPLS. We would like to see the figure corrected on the financial statements to reflect the last spreadsheet materials collection balance used during the course of fieldwork. We urge this in compliance with GASB 34.
-2-

ATHENS REGIONAL LIBRARY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6292-04-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

ALLOWABLE COSTS/COST PRINCIPLES PERIOD OF AVAILABILITY OF FEDERAL FUNDS Unallowable Expenditures Finding Control Number: FA-6292-04-01

We strongly disagree with this finding. The transfer of $1,176 from the State Materials Grant fund was to support the Family Literacy Latino Grant with materials purchased in Mexico which took longer to arrive in the United States. The materials in question are used in the Pinewoods Library currently. We feel that this is in compliance with LSTA grant guidelines.

The expenditure in the amount of$2,000 for a one year subscription DID begin during the grant period. This is documented by the original subscription invoice paid earlier during the grant period. This expenditure simply extends the life ofthe subscription beyond the grant period in an effort by the Library to "stretch" Federal dollars as we received the discount for a longer subscription period offered by the vendor. The same is true of the annual license agreement and the second subscription invoice in the amount of $4,375. The subscription to this valuable business resource software started during the grant period yet extended beyond the period is in compliance because the subscription was started during the grant period in good faith with the Library and the vendor. The $8 finance charge was an accounting error, and is not material.

-3-

SECTION III FINDINGS AND QUESTIONED COSTS

ATHENS REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2005
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6292-05-01
Our examination ofthe Athens Regional Library's control activities revealed that the Library did not maintain adequate separation of duties for the following accounting procedures:
Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment function. No administrative review was performed to determine that the bank reconciliations were correct.
Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions.
Expenditures/Liabilities/Disbursements Invoice processing function was not separated from the check writing and general ledger reconciliations. Documentation could not be provided for three oftwenty expenditures that were tested.
Employee Compensation The duty of setting up new employees on the accounting system; recording payroll information into the payroll system; and recording payroll changes was not adequately separated from the duty ofwriting checks. In addition, there was no independent review ofthe direct deposit listing to ensure that payroll disbursements were in accordance with approved contracts and salaries.
Separation of duties involving key accounting functions is the basis for achieving an adequate system of internal control. These deficiencies were a result of management's decision to limit the number ofadministrative staff made responsible for accounting functions and failure to implement controls to properly account for all transactions. Management should periodically review this decision to determine if employee duties can be reassigned to achieve a higher degree of internal control with existing staff. Internal controls should be implemented by the Library to ensure that all disbursements are adequately documented and recorded in the financial records.
- 1-

ATHENS REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2005
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS INVENTORIES REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition Finding Control Number: FS-6292-05-02
Accounting procedures of the Athens Regional Library were insufficient to provide adequate internal controls over the above control categories. The following deficiencies were noted:
Cash and Cash Equivalents
Bank reconciliations were not prepared on a timely basis. The June 2005 reconciliations were not prepared until June 2006.
Bank reconciliations were not reconciled to the total cash listed on the general ledger as presented for audit. The operating checking account had an unidentified variance of $4,771 and the operating money market account had a variance of $2,283 related to unrecorded interest earnings.
Stale dated checks totaling $20,471 were noted as part ofreviewing the outstanding checks. Funds invested in certificates of deposit were carried at purchase cost in the general ledger
rather than actual investment balances on hand at the banks and confirmed by the auditor. Activity related to interest earnings and reinvestment of said earnings has not been reflected in the general ledger.
Inventories
The Library did not have procedures in place to ensure that the inventory balances as presented for audit were accurate. The Library Store Inventory for Resale balances on the general ledger had not been adjusted from the 2003 fiscal year audit.
Revenues/Receivables/Receipts
The open accounts receivable listing, provided by the Library for audit purposes, contained numerous errors and omissions. Audit adjustments were necessary to ensure that accounts receivable were materially presented.
A review of the open accounts receivable listing identified the following:
-2 -

ATHENS REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2005
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS INVENTORIES REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition Finding Control Number: FS-6292-05-02
Two receivable items totaling $21,200 were determined to be invalid. No supporting documentation was available on these two items.
One receivable in the amount of$12,671 was determined to have been received during the current year; however, the funds received were improperly posted to current year revenue rather than closing the account receivable.
Two negative receivables totaling $7,750 were determined to be the result of improperly posting receipt of current year revenue to the account receivable account.
A review of subsequent period transactions identified six receipts, totaling $150,024 that should have been recorded as revenue and accounts receivable for the fiscal year under audit.
Expenditures/Liabilities/Disbursements
A review of the open accounts payable listing, provided by the Library for audit purposes, revealed that all $4,626 of accounts payable and $6,237 of salaries payable were invalid. These invalid payables were the result of improper procedures related to posting of cleared checks during the bank reconciliation process.
General Ledger
The Library did not properly close out their general ledger at year end. As of the end of audit fieldwork, the June 30, 2005, books had not been closed out.
As reported in prior years, the Library did not have adequate procedures in place to ensure all journal entries made to the accounting records were posted to the appropriate accounts.
For the two prior fiscal years, the trial balance presented for audit was out ofbalance. In the current fiscal year, the general ledger balanced but is still carrying balances in the nonexistent function of "00". During the current period, management attempted to resolve this problem by contacting Fundware Software Services, who is the current owner of the software program; however, the problem still exists at the conclusion of fieldwork.
The deficiencies noted above occurred because of management's failure to implement adequate controls to ensure that bank accounts are reconciled to the general ledger in a timely manner, resale
-3-

ATHENS REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2005
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS INVENTORIES REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition Finding Control Number: FS-6292-05-02
inventories are properly accounted for and reconciled to the general ledger, revenues and expenditures are properly documented and processed,journal entries are properly coded and posted to appropriate accounts and that general ledger balances were correct and year-end procedures are being properly followed. Furthermore, management continued to fail to follow-up on problems identified with the accounting system and resolve them in a timely manner. The Library should establish and implement appropriate procedures to strengthen internal controls to ensure that bank reconciliations are performed timely, inventories for resale are counted annually and tied to the general ledger, receipts and expenditures are properly identified and processed, journal entries are adequately documented and general ledger year-end close-out/reconciliation procedures are performed.
EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Salary and Travel Listing Not Reconciled to Accounting Records Reportable Condition Finding Control Number: FS-6292-05-03
The accounting procedures of Athens Regional Library were insufficient to provide accurate and complete salary and travel expenditure detail listings. The detail listing of salary and travel payments by individual, submitted to the Department ofAudits, was not reconciled to the Library's general ledger. The total variances noted between the listing of salaries and travel and the general ledger were $1,508 (salaries) and $485 (travel). Additionally, the prior year payable of $491 and current year payable of $6,237 were determined to be invalid due to lack of supporting documentation.
This deficiency occurred because Library management failed to reconcile the salary and travel expense reported on the general ledger to the listing of salary and travel payments by individual submitted to the Department of Audits. The Library should establish and implement appropriate procedures to ensure that salary and travel information submitted to the Department of Audits is accurate, complete and reconciled to the general ledger.
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ATHENS REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2005
FINANCIAL STATEMEJ".-TT FINDINGS AND QUESTIONED COSTS
GENERAL LEDGER Failure to Report Athens-Clarke County Library Endowment Fund Reportable Condition - Material Weakness Finding Control Number: FS-6292-05-04
The Athens Regional Library did not report assets, liabilities and fund balances, nor the revenues, expenses/expenditures and changes in net assets/fund balances of the Library Endowment Fund which is maintained at the Library. The Endowment Fund was determined to be a Blended Component Unit and included in the General Fund.
During our examination of the Endowment Fund the following deficiencies were noted:
The checkbook did not contain an ending balance. No annual tax return was filed for the calendar year 2003, 2004 or 2005. A review ofcurrent year expenditures identified expenditures for fund raising events for a
non-Endowment Fund related group. These expenditures were later reimbursed; however, according to the Articles of Incorporation and By-Laws, these expenditures were not allowable to be funded from Endowment Fund proceeds. No expenditures for library materials were noted in the year under review. The Athens-Clarke County Library Endowment Board does not have a treasurer as required by the Articles of Incorporation. There are no internal controls over the Endowment Fund assets.
These deficiencies occurred because ofmanagement's failure to adhere to the By-Laws established by the Endowment Fund. The Library should establish adequate accounting controls for the Endowment Fund.
CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Reportable Condition Finding Control Number: FS-6292-05-05
A review of the Library's Capital Assets records noted a material deficiency as discussed below:
The Library did not update Capital Asset records for activity occurring during fiscal year 2005 until July 2006.
The Capital Asset list, provided by the Library for audit purposes, contained numerous errors and omissions. Audit adjustments were necessary to ensure that the capital assets were materially presented.
The Library did not have a comprehensive Board approved Capital Asset Policy available for audit.
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ATHENS REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2005 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Reportable Condition Finding Control Number: FS-6292-05-05 The Library should establish adequate controls related to the Capital Assets. An administrative review should be performed to ensure the accuracy ofinventory records and amounts recorded in the general ledger at the close of each fiscal year.
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SECTION IV MANAGEMENT'S RESPONSES

ATHENS REGIONAL LIBRARY SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2005
Finding Control Number: FS-6292-05-01
CASH AND CASH EQUIVALENTS We concur with this finding. We have corrected this finding (during fiscal year 2007) by hiring one additional part-time Accounting Clerk in order to separate the function of duties as required by Georgia Department of Audits. Administrative review of the bank reconciliations will also be maintained during fiscal year 2007.
REVENUES/RECEIVABLES/RECEIPTS We concur with this finding. The separation of duties will be maintained by the additional accounting staff.
EXPENDITURES/LIABILITIES/DISBURSEMENTS We concur with this finding. Once again, the additional staffwill be used to separate the invoicing from the general ledger function.
EMPLOYEE COMPENSATION We concur with this finding. We corrected this during fiscal year 2006 by having the Administrative Assistant enter new employees into the system (separate from the Business Manager). Also, the direct deposit listing is signed by a Board Member that signs the payroll checks.
Finding Control Number: FS-6292-05-02
CASH AND CASH EQUIVALENTS We concur with this finding. We have hired additional staff to do the bank reconciliations in a timely manner during fiscal year 2007. Interest postings will be done timely. The "stale" outstanding checks will be reviewed and removed from the general ledger during fiscal year 2007. Investment interest will be posted timely during fiscal year 2007 with additional needed staff.
INVENTORIES We concur with this finding. We have corrected this by having a Library Store inventory done in June of 2006. This will continue on a yearly basis to correct this finding.
REVENUES/RECEIVABLES/RECEIPTS We concur with this finding. Accounts receivable will be reviewed properly during fiscal year 2007. The incorrect receivables of $21,200 were set up by posting in an accounting software error. Steps to contact Fundware and correct this problem will be done during fiscal year 2007. The $150,024 expenditures were the IMLS year one expenditures which were received during fiscal year 2006 thereby zeroing out the receivable.
EXPENDITURES/LIABILITIES/DISBURSEMENTS We concur with this finding. The accounts payable set up incorrectly during fiscal year 2005 was system generated by the accounting software. We have contacted the software company to correct this problem during fiscal year 2007.
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ATHENS REGIONAL LIBRARY SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2005
Finding Control Number: FS-6292-05-02
GENERAL LEDGER We concur with part of this finding. The trial balance was out of balance during fiscal year 2004 due to the accounting software error. The trial balance was in balance during the course of fieldwork. The general ledger was closed during the course of fieldwork. We disagree with that particular part of this finding. The accounting software errors will be corrected during fiscal year 2007 by forcing Kintera Fundware to fix this problem in the accounting system.
Finding Control Number: FS-6292-05-03
We concur with this finding. There was an account set up with the object code being one digit different (55850) than the travel object code of 55800. This caused the CS-1 to be out of balance. Proper accounting procedures were used to set up this account and maintain functional budget procedures. We will use the proper accounts during fiscal year 2007 and thereafter in order to comply.
Finding Control Number: FS-6292-05-04
We concur with this finding. We were not aware of GASB 39 and its intent to present financial statements of Endowment Organizations on the general ledger. We feel that it was not management's failure to adhere to the By-Laws established by the Endowment Fund Board of Directors which is entirely volunteer. Management does not have the authority to call a Board meeting; this is the Board's responsibility. The checkbook did not have the balance written on the last stub; however, a formal system of bank statements and accounts balances were maintained throughout the year and presented to the auditor. We agree that no annual tax return was filed due to the fact that the receipts for those years did not total over $25,000 the IRS regulation. We will file the returns during fiscal year 2007. The Endowment did have a Treasurer and still maintains this Board Position. There were internal controls in place over the Endowment assets. These consisted and currently consist of the spending account maintained as 25% of the investment pool cannot be over spent by the Director. At no time did the Endowment have expenditures in excess of this amount, thereby following the internal controls as specified by the Board. Management has taken steps to present the Endowment in accordance with generally accepted accounting principles.
Finding Control Number: FS-6292-05-05
We concur with this finding. The Library did update the Capital Assets records for the year under question. Proof of this is noted with the addition of the $5,900 copy machine added to the Capital Assets spreadsheet. We do have a Capital Assets policy which was presented to the auditors. We did have the Board vote on the threshold of$5,000 for depreciating the assets. We will present the past minutes that show this.
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ATHENS REGIONAL LIBRARY SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2005 Finding Control Number: FS-6292-05-05 We did have to make adjustments to the Capital Assets spreadsheet provided by Georgia Public Library Services because we felt that the fiscal year 2004 materials collection was overstated due to inaccurate PINES reporting. This was corrected during fiscal year 2005. Contact Person: Mamie Fike Simonds, Business Manager Phone: (706) 613-3650 Fax Number: (706) 613-3660 E-mail Address: msimonds@athenslibrary.org
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