CHEROKEE REGIONAL LIBRARY LAFAYEITE, 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 CHEROKEE 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 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 1 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 CHEROKEE 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 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 October 10, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the Board of Regents of the University System of Georgia and Director and Members of the Cherokee 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 of the governmental activities and each major fund (Exhibits A through G) of the Cherokee Regional Library as of and for the year ended June 30, 2007, which collectively comprise the Library's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Cherokee 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe Library's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Cherokee Regional Library, as of June 30, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2007ARL-41 The Cherokee 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. 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 Cherokee Regional Library's basic financial statements. The accompanying supplementary information which consist ofSchedules 2 through 5, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit ofthe basic financial statements, and in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, RWH:gp 2007ARL-41 ell W. Hinton, CPA, CGFM State Auditor CHEROKEE REGIONAL LIBRARY CHEROKEE REGIONAL LIBRARY STATEMENT OF NET ASSETS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Local Federal Government Other Capital Assets Land Equipment Library Collections Less: Accumulated Depreciation Total Assets LIABILITIES Long-Term Liabilities Due in More Than One Year NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 203,772 198,378 34,989 2,000 64,942 12,500 68,247 2,563,507 -2,192,380 $ ====9=5=5_,9,..55... $ 48195 $ 451,874 105 455 781 $ 907 760 $====9=5=5=,9,..55... The notes to the basic financial statements are an integral part of this statement. -1- CHEROKEE REGIONAL LIBRARY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2007 EXHIBIT"B" EXPENSES GOVERNMENTAL ACTIVITIES Current Services Public Services $ Technical Services Support Services Maintenance and Operations Information Technology Total Governmental Activities General Revenues Allotments from Participating Governments Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year PROGRAM REVENUES OPERATING CHARGES FOR GRANTS AND SERVICES CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS 95,346 $ 95 346 $ 419,548 $ 96,635 41,575 -2,938 -430,387 28,371 -32 716 516183 $ _ _ _ _-.;c.39;;..;6"",0""9~5 $ 447,238 10,702 165,380 $ _ _ ___,:;62::.:3:.L:,3::2=.0 $ 227,225 680,535 Net Assets - End of Year $=====90_7_7_6_0 The notes to the basic financial statements are an integral part of this statement. -2- CHEROKEE REGIONAL LIBRARY BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2007 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Local Federal Government Other Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Deposits and Deferred Revenue FUND BALANCES Reserved for: Capital Projects Unreserved Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND CAPITAL PROJECTS FUND TOTAL $ 203,667 $ 198,378 34,989 2,000 64,942 105 $ 203,772 198,378 34,989 2,000 64,942 $ 503,976 $ 105 $===5=o4_,o=a=1 $ 62,504 $ 62,504 $ $ 441 472 $ 441 472 $ $ 503,976 $ 105 $ 105 $ 105 441 472 441 577 105 $===5=04=,0=8=1 The notes to the basic financial statements are an integral part of this statement. -3- CHEROKEE REGIONAL 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: Land Equipment Library Collections Accumulated Depreciation Total Capital Assets $ 12,500 68,247 2,563,507 -2,192,380 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. 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 441,577 451,874 62,504 -48 195 Net Assets of Governmental Activities (Exhibit "A") $ ===90.,.7..,7,..6..0.. The notes to the basic financial statements are an integral part of this statement. -4 - CHEROKEE REGIONAL 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 Information Technology Facilities Acquisition and Construction Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending GENERAL FUND CAPITAL PROJECTS FUND TOTAL $ 447,238 $ 492,166 24,017 32,842 10,702 165,380 $ 1,172,345 $ 0 $ 447,238 492,166 24,017 32,842 10,702 165,380 0 $ 1,172,345 $ 564,816 2,938 426,734 67,449 32,716 $ $ 1,094,653 $ $ 77,692 $ $ $ -920 $ -920 $ $ 76,772 $ 364,700 $ 441 472 $ $ 815 815 $ -815 $ 564,816 2,938 426,734 67,449 32,716 815 1,095,468 76877 920 $ 920 $ 105 $ 0 920 -920 0 76,877 364,700 105 $ ===44=1=!.i5=7=7 The notes to the basic financial statements are an integral part of this statement. - 5- CHEROKEE REGIONAL 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 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: Increase in Compensated Absences Fines and Fees Revenues in the Statement of Activities that do not provide current resources are not reported as revenues in the governmental funds. $ 141,807 -53,745 76,877 88,062 -218 62,504 Change in Net Assets of Governmental Activities (Exhibit "B") $ ===22=7-,2=2=5 The notes to the basic financial statements are an integral part of this statement. -6- CHEROKEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"G" Note 1: DESCRIPTION OF LIBRARY AND REPORTING ENTITY REPORTING ENTITY The Cherokee Regional Library (Library) operates pursuant to Official Code ofGeorgia 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 eight members which are also trustees of the member library which appointed them. The Library Board membership consists ofthree members appointed from the Dade County Public Library Board and five members appointed from the LaFayette-Walker County Public Library Board. The Library Board is without authority to determine the amount ofits funding, except by submission of budget requests to local governmental units from which the Library receives support and to the State of Georgia for State and Federal flow through funding. Membership in the Library and participation in library services is at the discretion of each participating governmental agency. The Library Board has the power to designate management, the power to retain unreserved fund balances oflocal and other funds for continued operations and is the lowest level of oversight responsibility for the Library's operations. While the LaFayette-Walker County Public Library Board appoints a majority of the Cherokee Regional Library's Board, the LaFayette-Walker County Public Library Board 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 Cherokee Regional Library is therefore considered to be a related organization of the LaFayette-Walker County Public Library Board. 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 Cherokee Regional Library. Library-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall Library. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through intergovernmental revenues and other nonexchange transactions. The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the Library's governmental activities. -7- CHEROKEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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. Capital Projects Fund accounts for financial resources including grants from State sources to be used for the acquisition, construction or renovation of major capital facilities. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The Library-wide governmental financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen 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 -8- CHEROKEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 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. 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 ofGeorgia 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 are reported at fair value. The Official Code ofGeorgia 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 ofretum 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, -9- CHEROKEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (6) The Local Government Investment Pool administered by the State ofGeorgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. The Library does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks. RECEIVABLES Receivables consist ofamounts due from grant reimbursements due on Federal, Local 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 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 of art. 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 Land Equipment Library Collections All $ 5,000 All NIA 10 years 10 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. - 10 - CHEROKEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NET ASSETS The Library's net assets in the Library-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the Library's total investment in capital assets, net ofoutstanding 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 capital projects 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 ofthe Library to meet current expenses for those purposes. Note 3: DEPOSITS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. At June 30, $12,302 ofdeposits were not secured by surety bond, insurance or collateral as specified above. The Library is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the Library's deposits. 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, - 11 - CHEROKEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"G" Note 3: DEPOSITS (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 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 Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $430,720. 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 $ 12,302 2 132,342 3 0 Total $ 144,644 Note 4: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: - 12 - CHEROKEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"G" Note 4: CAPITAL ASSETS Balances July 1, 2006 Increases Balances Decreases June 30. 2007 Governmental Activities Capital Assets, Not Being Depreciated: Land $ 12,500 $ 0 $ 0 $ 12,500 Capital Assets Being Depreciated Equipment Library Collections $ 68,247 2,440,301 $ 141,807 $ $ 68,247 18,601 2,563,507 Less Accumulated Depreciation for: Equipment Library Collections 50,418 2,106,818 3,653 50,092 18,601 54,071 2,138,309 Total Capital Assets, Being Depreciated, Net $ 351,312 $ 88,062 $ 0 $ 439.374 Governmental Activity Capital Assets - Net $ 363,812 $ 88,062 $ 0 $ ~51,8:Z~ Current year depreciation expense by function is as follows: Public Services Support Services $ 50,092 3,653 Note 5: INTERFUND TRANSFERS $.===53-,7==4-5 Interfund transfers for the year ended June 30, 2007, consisted of the following: Transfer to Transfers From General Fund Capital Projects $=======9===2==0 Transfers are used to move funding from the General Fund to the Capital Projects Fund as required match or supplemental funding source for capital construction projects. 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. - 13 - CHEROKEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"G" Note 6: RISK MANAGEMENT The Library has obtained commercial insurance for risk ofloss associated with torts, assets 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. In addition, the Library has elected to self-insure for errors or omissions, which includes, among other risks, risks for sexual harassment and discrimination. 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 expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that 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 $ 10,000 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: - 14 - CHEROKEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"G" Note7: LONG-TERMDEBT Balance July 1, 2006 Governmental Funds Compensated Absences (1) $ 47,977 Additions Annual Leave Earned 51,804 Deductions Annual Leave Utilized 51,586 Balance June 30, 2007 $ 48,195 (1) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements. 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% $ 52,950 $ 49,441 $ 49,635 - 15 - (This page left intentionally blank) CHEROKEE REGIONAL 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 Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING USES Other Uses Net Change in Fund Balance Fund Balance - Beginning NONAPPROPRIATED BUDGETS ORIGINAL FINAL ACTUAL AMOUNTS $ 426,294 $ 470,234 $ 447,238 407,216 407,216 492,166 18,017 22,017 24,017 17,450 17,450 32,842 4,235 4,385 10,702 169 075 189 917 165,380 $ 1,042,287 $ 1111 219 $ 1,172,345 $ 529,784 $ 578,964 $ 564,816 1,400 2,000 2,938 488,033 497,209 426,734 60,415 56,348 67,449 26,780 43 780 32 716 $ 1,106,412 $ 1,178,301 $ 1,094,653 $ -64, 125 $ -67,082 $ 77,692 -920 $ -64,125 $ -67,082 $ 76,772 -14 064 21 940 364,700 Fund Balance - Ending $ -78 189 $ -45142 $===44===1=4..,72,_ 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. - 17 - CHEROKEE REGIONAL 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 Talking Book Library Materials Maintenance and Operations SCHEDULE "2" GOVERNMENTAL FUND TYPE GENERAL FUND $ 247,050 97,454 51,027 96,635 $ ========49=2=,1=6=6 See notes to the basic financial statements. - 18 - CHEROKEE REGIONAL LIBRARY SCHEDULE OF FEDERAL REVENUE YEAR ENDED JUNE 30, 2007 AGENCY/FUNDING GRANTS Museum and Library Services, Institute of Through Board of Regents of the University System of Georgia Library Services and Technology Act State Library Program Vacation Reading Program SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 18,017 6 000 $ ======2=4=0=17= See notes to the basic financial statements. - 19 - CHEROKEE REGIONAL LIBRARY SCHEDULE OF LOCAL REVENUE YEAR ENDED JUNE 30, 2007 LOCAL SOURCES Boards of Education City of Chickamauga Dade County Walker County City Governments Chickamauga LaFayette Rossville Trenton County Governments Boards of Commissioners Dade County Walker County SCHEDULE "4" GOVERNMENTAL FUND TYPE GENERAL FUND $ 2,640 30,925 44,895 31,850 59,955 53,500 21,060 62,350 140,063 $ ====44=7=2=3=8 See notes to the basic financial statements. -20- NAME Abernathy, Bobby J. Barrett, Carmen Beckman, Barbara Bradford, Debra C. Brewer, Gayla C. Brooks, Frances Chamblis, Darla Clark, Carmella Davison, Christy Delong, June M. Dennison, Kathy Denton, Joy Ellis, Wendy Eubanks, Lecia J. Gaither, Amy Irwin, Maria Johnson, Betty McDonald, Mayella McKeehan, Martha Moore, Adrienne Nelson, Julie Oliver, Valinda Reed, Rita C. Reyes, Misty Sharp, Marshanna Smith, Bridget Stubblefield, Charles Tinker, April Tope, Diana Ray Ward, Angela Wyatt, Brandy Totals per Report CHEROKEE REGIONAL LIBRARY SCHEDULE OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2007 SCHEDULE "5" TITLE CATEGORY Branch Manager Library Assistant Library Assistant Library Assistant Branch Services Librarian Library Assistant Library Assistant Branch Manager Library Assistant Administrative Assistant Library Assistant Library Assistant Library Assistant Director Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Branch Manager Library Assistant Business Manager Library Assistant Children Specialist TBC Manager Library Assistant Director Library Assistant Library Assistant SALARIES TRAVEL $ 17,495 15,839 $ 11,678 21,506 71,878 4,203 8,034 23,930 1,996 13,416 8,542 12,901 596 72,128 15,024 3,388 19,146 7,857 10,878 10,254 10,797 29,193 3,444 29,640 8,746 19,146 31,814 8,750 74,039 4,074 14 571 20 399 151 379 345 10 555 37 51 14 28 93 40 493 113 92 1,151 60 $ 584,903 $===4==0=3=1 See notes to the basic financial statements. - 21 - SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS CHEROKEE REGIONAL 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-7462-06-01 Previously Reported Corrective Action Implemented SECTION Ill FINDINGS AND QUESTIONED COSTS CHEROKEE REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 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 Cherokee Regional 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 Cherokee Regional Library's financial statements that is more than inconsequential will not be prevented or detected by the Cherokee Regional 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 Cherokee Regional 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 October 10, 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: FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7462-07-01 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. 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. - 1- CHEROKEE REGIONAL 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-7462-07-01 Cause: The Library did not implement an adequate system of internal control over the financial statement reporting process. Effect: The Library does 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. -2- SECTION IV MANAGEMENT'S RESPONSES CHEROKEE REGIONAL LIBRARY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Cherokee Regional Library's responses to the findings described below were not audited and accordingly, we express no opinion on it. Finding Control Number: FS-7462-07-01 We concur with this finding. The Cherokee Regional Library System realized that our past accounting system (Computrain) lacks in the proper controls and functions to accurately document and create our financial statements The system was extremely difficult to manage and therefore Cherokee Regional Library has purchased a new accounting system (Blackbaud) which we feel can provide the necessary controls in our financial reporting. Our bookkeeper has obtained training for our new accounting system and will be able to complete the necessary financial statements in accordance with generally accepted accounting principles. Contact Person: Mrs. Lecia Eubanks, Director Phone: (706) 638-7557 Fax: (706) 638-4028 E- mail: leubanks@chrl.org