CHESTATEE REGIONAL LIBRARY DAWSONVILLE, 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 CHESTATEE REGIONAL LIBRARY - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A 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 6 G NOTES TO THE BASIC FINANCIAL STATEMENTS 7 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND 17 CHESTATEE REGIONAL LIBRARY - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION SCHEDULES OF REVENUE 2 STATE 18 3 FEDERAL 19 4 LOCAL 20 5 SCHEDULE OF SALARIES AND TRAVEL 21 SECTION II FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 October 20, 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 Chestatee 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) ofthe Chestatee 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 Chestatee 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 the major fund of the Chestatee 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 Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through iv and page 17 are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally ofinquiries ofmanagement 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 Chestatee 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 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, ~~~wn~A,' i~ State Auditor RWH:gp 2007ARL-41 CHESTATEE REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Management's discussion and analysis of the financial performance of Chestatee Regional Library (the Library) is intended to provide the readers of these financial statements with an overview of the Library's financial activities for the year ended June 30, 2007. Please read it in conjunction with the Library's financial statements, which follow this section. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Library's basic financial statements. The Library's basic financial statements comprise three components: I) government-wide financial statements, 2) fund financial statements and 3) notes to the basic financial statements. GOVERNMENT-WIDE FINANCIAL STATEMENTS The government-wide financial statements are designed to provide readers with a broad overview of the Library's finances, in a manner similar to a private-sector business. The Statement of Net Assets presents information on all of the Library's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Library is improving or deteriorating. Net assets increase when revenues exceed expenses. Increases to assets without a corresponding increase to liabilities, result in increased net assets which indicates an improved financial position. The Statement ofActivities presents information showing how the Library's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. Net assets increase when revenues exceed expenses. Increase to assets without a corresponding increase to liabilities results in increased net assets, which indicates an improved financial position. Net assets may serve over time as a useful indicator of the Library's financial position. At the close of fiscal year 2007, the Library's net assets totaled $900,052.40. FUND FINANCIAL STATEMENTS A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Library uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Library are considered governmental funds. Governmental funds are used to account for essentially the same functions reported in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund statements are reported using the modified accrual basis of accounting, which measures cash and all other financial assets that can be readily converted to CHESTATEE REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 cash. Such information may be useful in evaluating a government's near term financing requirements. The General Fund is the Library's primary operating fund. It accounts for all financial resources of the Library. NOTES TO THE BASIC FINANCIAL STATEMENTS The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. THE LIBRARY AS A WHOLE The perspective of the Statement of Net Assets is of the Library as a whole. Table 1 provides a summary of the Library's net assets for fiscal year 2007 compared to fiscal year 2006. Table 1 Net Assets Governmental Activities Fiscal Fiscal Year 2007 Year 2006 Assets Cash and Cash Equivalents and Investments Capital Assets, Net $ 198,664.00 $ 172,871.00 736,399.00 752,230.00 Total Assets $ 935,063.00 $ 925,101.00 Liabilities Accounts Payable Long-Term Liabilities: Due Within One Year $ 6,416.00 28,595.00 $ 34,676.00 Total Liabilities $ 35,011.00 $ 34,676.00 Net Assets Invested in Capital Assets, Net of Related Debt Unrestricted $ 736,398.00 $ 752,230.00 163,654.00 138,195.00 Total Net Assets $ 900,052.00 $ 890,425.00 Total Liabilities and Net Assets $ 935,063.00 $ 925,101.00 The net assets of a governmental entity may serve as an indicator of the entity's financial position. The "Summary Schedule" above shows an increase in net assets for the year ending June 30, 2007. 11 CHESTATEE REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Table 2 shows the changes in net assets for fiscal year 2007 compared to the changes for fiscal year 2006. Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services Operating Grants and Contributions Total Program Revenues General Revenues: Allotments from Participating Governments Interest Income Miscellaneous Total General Revenues Total Revenues Expenses Current Services Public Services Technical Services Support Services Maintenance and Operations Information Technology Total Expenses Change in Net Assets Governmental Activities Fiscal Fiscal Year2007 Year2006 $ 48,821.00 258,095.00 $ 306,916.00 $ 34,894.00 257,252.00 $ 292,146.00 $ 839,935.00 $ 841,444.00 5,229.00 3,310.00 46,964.00 30,489.00 $ 892,128.00 $ 875,243.00 $1,199,044.00 $1,167,389.00 $ 583,608.00 83,807.00 309,820.00 53,735.00 104,416.00 $ 545,203.00 72,012.00 368,656.00 77,228.00 54,795.00 $1,135,386.00 $1,117,894.00 $ 63,658.00 $ 49,495.00 FINANCIAL ANALYSIS OF THE LIBRARY'S FUNDS State funding comprised 23.7% of the Library's total revenue for fiscal year 2007. This State funding included a $24,000.00 grant from the GATES Foundation and a $1,230.00 grant from the Georgia Archives in addition to the normal Salary/Benefit/System Services Grant. Local funding was $839,935.00 in fiscal year 2007 which was 70.8% of the total budget. Federal revenues comprise 1.2% of the total budget. Other revenues are those that are self-generated. Fines, fees for lost books, donations, investment earnings and other miscellaneous revenue totaled $62,844.00, as compared to $68,693.00 in fiscal year 2006. Self-generated revenues comprised 6.2% of Library revenues in fiscal year 2007. At the end of the current fiscal year, the Library reported a fund balance of $183,908.44 which is an increase of $11,037.46 over the previous year's fund balance. The Library holds $12,000.00 in reserve for self-insured Unemployment Insurance. Most of the remaining fund balance is held for emergency operating needs and for emergency equipment replacement as approved by the Library Board. 111 CHESTATEE REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 There was a decrease in the level of the State Revenue Funds from the prior year. State Funds were $252,986.00 in fiscal year 2006 and $243,892.04 in fiscal year 2007. The State Revenue Funds include state grants to be used in specific amounts for Personnel, Materials and System Support Services. The Library expends all State and Federal Funds by year end or other designated funding period, since these funds must be returned if not used. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET The Library's financial position for next year is expected to remain stable. State Grant Funds are expected to increase due to population increases and State Legislative approvals for increases in salaries and materials. Local funding agencies are expected to match at least the level of funding from the previous year. There are no currently known facts, decisions or conditions that are expected to have a significant effect on the Library's financial position (net assets) or results of operations (revenues, expenses and other changes in net assets). CAPITAL ASSETS At the end of 2007, the Library had $736,397.70 in capital assets net of accumulated depreciation. This included equipment and Library collections. Additions to capital assets during 2007 included only additions to the Library collections. Table 3 Capital Assets at June 30 Governmental Activities Fiscal Fiscal Year 2007 Year 2006 Equipment Library Collections $ 157,516.00 $ 157,516.00 1,438,232.00 1,308,378.00 Total Assets Less: Accumulated Depreciation $ 1,595,748.00 $ 1,465,894.00 859,349.30 713,664.00 Capital Assets - Net $ 736,398.70 $ 752,230.00 BUDGETARY HIGHLIGHTS The Library Board approves an annual budget in June for the following fiscal year that begins in July. The original adopted budget included expenditures of $1,189,758.00 and was not significantly amended during the year. CONTACTING THE LIBRARY'S FINANCIAL MANAGER The financial statements are designed to provide a general overview of the Library's finances. Questions concerning any of the information provided should be addressed to the Director, Chestatee Regional Library, 342 Allen Street, Dawsonville, Georgia 30534. IV CHESTATEE REGIONAL LIBRARY CHESTATEE REGIONAL LIBRARY STATEMENT OF NET ASSETS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Other Less: Allowance for Doubtful Accounts Capital Assets Equipment Library Collections Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Long-Term Liabilities Due Within More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 146,699.07 38,860.64 27,584.43 -14,479.57 157,516.00 1,438,232.00 -859,349.30 $ ===9=35=,0=6=3=.2=7 $ 6,415.75 28,595.12 $ 35 010.87 $ 736,398.70 163,653.70 $ 900,052.40 $ ===93=5=,0=6=3-=27= The notes to the basic financial statements are an integral part of this statement. - 1- CHESTATEE REGIONAL LIBRARY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2007 EXHIBIT "B" EXPENSES PROGRAM REVENUES OPERATING CHARGES FOR GRANTS AND SERVICES CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS GOVERNMENTAL ACTIVITIES Current Services Public Services Technical Services Support Services Maintenance and Operations Information Technology $ 583,607.61 $ 83,807.03 309,820.00 53,734.90 104416.17 48,821.27 $ 48,727.07 $ 209,368.41 -486,059.27 -83,807.03 -309,820.00 155,633.51 -104 416.17 Total Governmental Activities $ 1,135,385.71 $ 48 821.27 $ 258 095.48 $ _ _ _-_8_28~,4_6_8_.9_6 General Revenues Allotments From Participating Governments Investment Earnings Miscellaneous Revenue $ 839,934.50 5,229.21 46 963.97 Total General Revenues Change in Net Assets $ 63,658.72 Net Assets - Beginning of Year (Restated) 836,393.68 Net Assets - End of Year $ ======9=00=0=5=2=.4=0 The notes to the basic financial statements are an integral part of this statement. -2- CHESTATEE REGIONAL LIBRARY BALANCE SHEET GOVERNMENTAL FUND JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Other Less: Allowance for Doubtful Accounts Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Unreserved Designated for Self-Insurance Designated for Equipment and Emergency Funds Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances EXHIBIT"C" GENERAL FUND $ 146,699.07 38,860.64 27,584.43 -14 479.57 $ 198,664.57 $ 6,415.75 8,340.38 $ 14756.13 $ 12,000.00 159,565.50 12,342.94 $ 183,908.44 $ 198,664.57 The notes to the basic financial statements are an integral part of this statement. -3- CHESTATEE REGIONAL LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2007 EXHIBIT"D" Total Fund Balance - Governmental Fund (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Equipment Library Collections Accumulated Depreciation Total Capital Assets 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 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. $ 183,908.44 $ 157,516.00 1,438,232.00 -859,349.30 736,398.70 -28,595.12 8,340.38 Net Assets of Governmental Activities (Exhibit "A") $ 900,052.40 The notes to the basic financial statements are an integral part of this statement. -4- CHESTATEE REGIONAL LIBRARY EXHIBIT "E" STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUND YEAR ENDED JUNE 30, 2007 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 $ 839,934.50 243,892.04 14,203.44 40,480.89 5,229.21 46,963.97 $ 1,190,704.05 $ 627,888.49 83,807.03 309,820.00 53,734.90 104,416.17 $ 1,179,666.59 $ 11,037.46 172,870.98 $ 183,908.44 The notes to the basic financial statements are an integral part of this statement. -5- CHESTATEE REGIONAL LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES JUNE 30, 2007 EXHIBIT"F" Total Net Change in Fund Balance - Governmental Fund (Exhibit "E") $ Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense $ 171,095.00 -132,895.00 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 financial resources are not reported as revenues in the governmental funds. 11,037.46 38,200.00 6,080.88 8,340.38 Change in Net Assets of Governmental Activities (Exhibit "B") $ =====63=,6=5=8=7..2... The notes to the basic financial statements are an integral part of this statement. -6- CHESTATEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 1: DESCRIPTION OF LIBRARY AND REPORTING ENTITY REPORTING ENTITY The Chestatee 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 offour members appointed from the Dawson County Public Library and four members appointed from the Lumpkin County Public Library. The Library Board is without authority to determine the amount of its funding, except by submission ofbudget requests to local governmental units from which the Library receives support and to the State of Georgia for State and Federal flow through funding. Membership in the Library and participation in library services is at the discretion of each participating governmental agency. The Library Board has the power to designate management, the power to retain unreserved fund balances of local and other funds for continued operations and is the lowest level of oversight responsibility for the Library's operations. The Chestatee Regional Library is therefore determined to be a jointly governed organization. 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 Chestatee 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. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the Library related to the administration and support ofthe Library's programs, such as office and maintenance personnel and accounting) are not allocated to programs. -7- CHESTATEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the Library's funds. Eliminations have been made to minimize the double counting of internal activities. The emphasis of fund financial statements is on major governmental funds. The Library reports the following major governmental fund: General Fund is the Library's primary operating fund. It accounts for all financial resources of the Library. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The Library-wide governmental financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the Library gives (or receives) value without directly receiving (or giving) equal value in exchange, include grants and donations. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The Library uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The Library considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Interest is considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. -8- CHESTATEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Library funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the Library's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. RESTATEMENT OF PRIOR YEAR NET ASSETS For fiscal year 2007, the Library restated Capital Assets due to a formula error in the Library collections depreciation schedule. The Library increased accumulated depreciation for Library Collections by $54,031.30. This resulted in a decrease in Net Assets at July I, 2006, of$54,031.30. This change is in accordance with generally accepted accounting principles. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist of cash on hand and demand deposits 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 ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, -9- CHESTATEE 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 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, 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 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. Capitalization thresholds and estimated useful lives of capital assets reported in the Library-wide statements are as follows: Capitalization Policy Estimated Useful Life Equipment Library Collections $ 5,000.00 6 to 10 years All 10 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. NET ASSETS The Library's net assets in the Library-wide Statements are classified as follows: - 10 - CHESTATEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Invested in capital assets, net of related debt - This represents the Library's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Unrestricted net assets - Unrestricted net assets represent resources derived from grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the general operations of the Library, and may be used at the discretion of the Library to meet current expenses for those purposes. Note 3: DEPOSITS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the 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 of deposit insurance. If a depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and - 11 - CHESTATEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 3: DEPOSITS (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 $231,905.59. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk: Category 1 - Uncollateralized Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the Library's name. The Library's deposits are classified by custodial credit risk category at June 30, 2007, as follows: Custodial Credit Risk Category Bank Balance 1 $ 0.00 2 0.00 3 91,458.94 Total $ 91,458.94 Note 4: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Governmental Activities Capital Assets Being Depreciated Equipment Library Collections Less Accumulated Depreciation for: Equipment Library Collections Governmental Activity Capital Assets - Net Balances July 1, 2006 (Restated) Increases Decreases Balances June 30, 2007 $ 157,516.00 $ 157,516.00 1,308,378.00 $ 171,095.00 $ 41,241.00 1,438,232.00 73,620.30 694,075.00 15,219.00 117,676.00 41,241.00 88,839.30 770,510.00 $ 698,198.70 $ 38,200.00 $ 0.00 $ 736,398.70 - 12 - CHESTATEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 4: CAPITAL ASSETS Current year depreciation expense by function is as follows: Public Services $ 132,895.00 Note 5: RISK MANAGEMENT The Library is exposed to various risks ofloss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The Library has obtained commercial insurance for risk ofloss associated with 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. Dawson and Lumpkin County governments provide insurance coverage for the risk of loss associated with torts, assets, errors or omissions and acts of God for the Library operations within their county. 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. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid EndofYear Liability 2006 2007 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 1,625.00 $ 1,625.00 $ 0.00 The Library has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Director Bookkeeper All Other Employees $ 50,000.00 $ 25,000.00 $ 10,000.00 - 13 - CHESTATEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 6: OPERATING LEASES Chestatee Regional Library has entered into various leases as lessee for copiers. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2007, for governmental funds amounted to $6,154.00. Future minimum lease payments for these leases are as follows: Year Ending Governmental Funds 2008 2009 2010 2011 $ 7,527.00 7,527.00 7,527.00 5,872.00 Total $ 28,453.00 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, 2007, were as follows: Balance July 1, 2006 Governmental Funds Compensated Absences ( I) $ 34,676.00 Additions Annual Leave Earned 45,983.17 Deductions Annual Leave Utilized 52,064.05 Balance June 30, 2007 $ 28,595.12 (1) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements. - 14 - CHESTATEE REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 8: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all librarians and clerical personnel employed by regional and county libraries are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe Library who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The Library makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2007 2006 2005 100% 100% 100% $ 53,037.00 $ 54,046.00 $ 52,671.00 - 15 - (This page left intentionally blank) CHESTATEE REGIONAL LIBRARY GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2007 SCHEDULE "1" REVENUES Local Funds State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Public Services Technical Services Support Services Maintenance and Operations Information Technology Total Expenditures Net Change in Fund Balance Fund Balance - Beginning NONAPPROPRIATED BUDGETS ORIGINAL FINAL ACTUAL AMOUNTS $ 844,066.00 $ 844,066.00 $ 839,934.50 256,892.00 239,928.00 243,892.04 14,203.44 33,000.00 33,200.00 40,480.89 1,700.00 3,100.00 5,229.21 23,512.00 21,702.00 46,963.97 $ 1,159,170.00 $ 1,141,996.00 $ 1,190,704.05 $ 596,458.00 $ 634,025.00 $ 627,888.49 13,300.00 68,198.00 83,807.03 492,543.00 389,179.00 309,820.00 67,320.00 63,318.00 53,734.90 20,137.00 25,637.00 104416.17 $ 1,189,758.00 $ 1,180,357.00 $ 1,179,666.59 $ -30,588.00 $ -38,361.00 $ 11,037.46 0.00 0.00 172 870.98 Fund Balance - Ending $ -30,588.00 $ -38,361.00 $ ===1=83=,9=0=8=.4=4 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 - CHESTATEE 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 Benefits Library Materials Maintenance and Operations SCHEDULE "2" GOVERNMENTAL FUND TYPE GENERAL FUND $ 141,648.54 38,757.35 33,293.63 30,192.52 $ ===2=4=3=,8=92=.0====4 See notes to the basic financial statements. - 18 - CHESTATEE REGIONAL LIBRARY SCHEDULE OF FEDERAL REVENUE YEAR ENDED JUNE 30, 2007 AGENCY/FUNDING GRANT Museum and Library Services, Institute of Through Board of Regents of the University System of Georgia Library Services and Technology Act State Library Program SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ ====14=,2=0=3=.4=4 See notes to the basic financial statements. - 19 - CHESTATEE REGIONAL LIBRARY SCHEDULE OF LOCAL REVENUE YEAR ENDED JUNE 30, 2007 LOCAL SOURCES County Governments Boards of Commissioners Dawson County Lumpkin County SCHEDULE "4" GOVERNMENTAL FUND TYPE GENERAL FUND $ 428,396.75 411 537.75 $ ===8=3=9=,9=34=.5==0 See notes to the basic financial statements. - 20 - NAME Baierl, Nel Bordeaux, Heather Breyer, Kay Capponi, Debra Cisson, Sue Clark, Cathy Conaway, Sara Crowder, Dena George, Jackie Gibson, Claudia Gilbert, Greg Hopper, Lyn Ingram, Miranda Jennings, Gail Jordan, Tina King, Peggy Lemley, Marla Leonhardt, Stacey McGhee, Sarah Miller, Jo Ann Moore, Teresa Neilsen, Nancy Neubauer, Mary Pacheco, Teresa Parsons, Elizabeth Rodovich, Lauren Rohlfs, Erica Schenck, Peggy Slack, Jan Spiva, Curtis Thomaswick, Tracey Walker, Tracey Totals per Report CHESTATEE REGIONAL LIBRARY SCHEDULE OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2007 SCHEDULE "5" TITLE CATEGORY Asst Dir. For Technology Circulation Assistant Branch Manager Information Specialist Circulation Assistant Circulation Specialist Circulation Assistant LAI Youth Services Asst Circulation Assistant Associate Director Accounting Assistant Director Circulation Assistant Admin. Asst Technical Services Business Manager Technical Services Asst. Branch Manager Asst. Dir. For Public Service Circulation Assistant LAI Youth Services Asst Circulation Specialist Circulation Assistant Branch Coordinator Circulation Assistant Circulation Specialist Circulation Specialist Technical Services Circulation Assistant Circulation Assistant Circulation Assistant Circulation Specialist SALARIES $ 50,517.10 $ 8,067.25 12,958.42 29,614.23 3,381.13 1,023.98 11,436.24 2,592.74 28,093.56 70,349.40 28,795.92 11,232.30 10,447.48 10,336.99 20,255.57 47,045.28 26,119.83 12,928.42 39,211.71 12,100.28 25,564.30 8,062.21 25,483.14 15,257.76 19,520.29 11,467.92 10,892.35 15,270.90 5,191.57 23,662.26 26,459.33 22,409.30 TRAVEL 661.74 33.99 13.96 32.50 41.28 2,339.72 13.96 13.96 196.53 129.15 115.58 430.85 90.84 20.04 53.42 251.44 20.64 6.67 14.56 25.45 33.99 33.99 344.52 $ 645,749.16 $ ===4=,9=1=8.=78= See notes to the basic financial statements. - 21 - SECTION II FINDINGS AND QUESTIONED COSTS CHESTATEE REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported.