Desoto Trail Regional Library, Camilla, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2007

DESOTO TRAIL REGIONAL LIBRARY
CAMILLA, 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

DESOTO TRAIL 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

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

SUPPLEMENTARY INFORMATION

SCHEDULES OF REVENUE

2

STATE

18

3

FEDERAL

19

4

LOCAL

20

5 SCHEDULE OF SALARIES AND TRAVEL

21

DESOTO TRAIL 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
January 20, 2009

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 Desoto Trail 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 Desoto Trail 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 Desoto Trail 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 Desoto Trail 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 Desoto Trail 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 Desoto Trail 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 ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24.
Respectfully submitted,
~~ID~~~~~ State Auditor
RWH:gp
2007ARL-41

DESOTO TRAIL REGIONAL LIBRARY

DESOTO TRAIL REGIONAL LIBRARY STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net
Local Other Capital Assets Land Buildings Equipment Library Collections Less: Accumulated Depreciation
Total Assets
LIABILITIES Accounts Payable Long-Term Liabilities
Due in 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

$

44,429

146,583

494 19,764

29,925 329,786
20,080 1,151,548 -1 096 581

$ =======64=6=!=0=2=8

$

17,904

28 777

$

46 681

$

434,758

164 589

$

599 347

$ =======64=6~0=2=8

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

DESOTO TRAIL 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 Support Services Maintenance and Operations Information Technology

$

491,416 $

191,686

158,250

416

59,502 $

359,628 $ 175,836

-72,286 -191,686
17,586 -416

Total Governmental Activities

841,768 $

59,502 $

535464 $ _ _ _ _-2_4_6~,8_02_

General Revenues Allotments from Participating Governments Investment Earnings Miscellaneous

$

281,394

7,149

107 969

Total General Revenues

$ _ _ _ _3~9~6~5~1_2

Change in Net Assets

$

149,710

Net Assets - Beginning of Year

449637

Net Assets - End of Year

$ =====59.,.9,..34===7

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

DESOTO TRAIL REGIONAL LIBRARY BALANCE SHEET
GOVERNMENTAL FUND JUNE 30, 2007
ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net
Local Other
Total Assets
LIABILITIES AND FUND BALANCE LIABILITIES
Accounts Payable Deposits and Deferred Revenue
Total Liabilities FUND BALANCE
Unreserved Designated for Affiliates Undesignated Reported in: General Fund Total Fund Balance
Total Liabilities and Fund Balance

EXHIBIT"C"

GENERAL FUND

$

44,429

146,583

494 19 764

$ ======2=1=1=2,..70=

$

17,904

14 937

$

32 841

$

591

177 838

$

178 429

$ ======21=1==2=7=0

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

DESOTO TRAIL 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:
Land Buildings 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
Some of the Library's Fines and Fees Revenue will be collected after year-end but are not available soon enough to pay for the current period's expenditures.

$

$

29,925

329,786

20,080

1,151,548

-1,096,581

178,429
434,758 -28,777 14 937

Net Assets of Governmental Activities {Exhibit "A")

$ ===59=9=,3=4=7

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

DESOTO TRAIL 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 Support Services Maintenance and Operations Information Technology
Total Expenditures
Net Change in Fund Balance
Fund Balance - Beginning
Fund Balance - Ending

GENERAL FUND

$

281,394

515,346

20,118

44,565

7,149

107,969

$

976 541

$

535,738

191,686

186,048

416

$

913,888

$

62,653

115,776

$ ===1=7=8=,4=29=

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

DESOTO TRAIL 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 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

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

$
124,897 -58,323

62,653
66,574 5,546
14 937

Change in Net Assets of Governmental Activities {Exhibit "8")

$ ===14=9=7=1=0

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

DESOTO TRAIL REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"G"

Note 1: DESCRIPTION OF LIBRARY AND REPORTING ENTITY
REPORTING ENTITY
The Desoto Trail 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 of21 members which are also trustees ofthe member library which appointed them. The Library Board membership consists of 1 representative appointed from the Baker County Library Board, 6 members appointed from the Early County Library Board, 8 members appointed from the Mitchell County Library Board, and 6 members appointed from the Worth County 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. The Desoto Trail Regional Library is therefore determined to be a joint venture.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Library's basic financial statements are collectively comprised of the Library-wide financial statements, fund financial statements and notes to the basic financial statements ofthe Desoto Trail 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.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Library's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the Library related to the administration and support ofthe Library's programs, such as office and maintenance personnel and accounting) are not allocated to programs.

-7-

DESOTO TRAIL 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-

DESOTO TRAIL 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.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the Library to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the Library in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the Library to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.
-9-

DESOTO TRAIL REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Library does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks.

RECEIVABLES

Receivables consist ofamounts due from grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed, fines and fees from patrons and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do include amounts which would necessitate the need for an allowance for uncollectible receivables.

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the Library-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the Library.

Capitalization thresholds and estimated useful lives of capital assets reported in the Library-wide statements are as follows:

Capitalization Policy

Estimated Useful Life

Land Buildings Equipment Library Collections

All

NIA

$

50,000 20 to 60 years

$

10,000 4 to 25 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 -

DESOTO TRAIL 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 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.
Unrestricted net assets - Unrestricted net assets represent resources derived from grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the general operations ofthe Library, and may be used at the discretion of the Library to meet current expenses for those purposes.
Note 3: DEPOSITS
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 ofmoney which has not been secured by surety bond, by guarantee ofinsurance, 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, $4,942 of deposits 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,
(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

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DESOTO TRAIL 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 $233,311. 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

$

4,942

2

0

3

0

Total

$===4=9-4=2

Note 4: CAPITAL ASSETS

The following is a summary of changes in the Capital Assets during the fiscal year:

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DESOTO TRAIL 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

$

29,925 $

0 $

0 $

29,925

Capital Assets Being Depreciated Buildings Equipment Library Collections

$ 300,365 $ 20,080
1,109,446

29,421 95,476 $

$ 53,374

329,786 20,080
1,151,548

Less Accumulated Depreciation for: Buildings Equipment Library Collections

192,989 20,080 878,563

6,333 51.990

53,374

199,322 20,080 877,179

Total Capital Assets, Being Depreciated, Net $ 338,259 $

66,574 $

0 $ 404,833

Governmental Activity Capital Assets - Net $ 368.184 $

66.574 $

0 $ 434.758

Current year depreciation expense by function is as follows:

Public Services Maintenance and Operations

$

56,700

1,623

$====58,.,.,,3==2==3
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 and acts of God.
The Library has obtained commercial insurance for risk ofloss associated with torts and assets. 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 participates in the Association County Commissioners ofGeorgia-SelfInsured Workers' Compensation Fund, a public entity risk pool organized on July 1, 1982, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The Library pays an annual premium to the Fund for its general insurance coverage. Additional

- 13 -

DESOTO TRAIL REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"G"

Note 5: RISK MANAGEMENT

insurance coverage is provided through an agreement by the Fund with Safety National Casualty Corporation to provide coverage for potential losses by the Fund in excess of $1,000,000 loss per occurrence, up to $2,000,000.

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

Position Covered

Amount

Director Assistant Director Bookkeeper

$

10,000

$

10,000

$

10,000

Note 6: LONG-TERM DEBT

COMPENSATED ABSENCES Compensated absences represent obligations of the 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:

Balance July 1, 2006

Governmental Funds
Compensated Absences (1)

$

34,323

Additions Annual Leave Earned

25,161

Deductions Annual Leave Utilized

30 707

Balance June 30, 2007

$====28,,,.,,7==7==7

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

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DESOTO TRAIL REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"G"

Note 7: SIGNIFICANT CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The Library believes that such disallowances, if any, will be immaterial to its overall financial position.

Note 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%

$

38,090

$

36,554

$

34,245

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DESOTO TRAIL 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 Support Services Maintenance and Operations Information Technology
Total Expenditures
Net Change in Fund Balance
Fund Balance - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS

$

253,977 $

253,977 $

281,394

443,270

443,270

515,346

20,118

36,400

36,400

44,565

7,149

61 700

61 700

107 969

$

795 347 $

795 347 $

976 541

$

698,708 $

698,708 $

535,738

191,686

77,579

77,579

186,048

416

$

776 287 $

776 287 $

913 888

$

19,060 $

19,060 $

62,653

115 776

115 776

115 776

Fund Balance - Ending

$

134 836 $

134 836 $ =====1=7=8 4=2=9

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 the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

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DESOTO TRAIL 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 Library Materials Maintenance and Operations Major Repair and Renovation

SCHEDULE "2"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

291,035

48,475

96,906

78 930

$======51=5=3=4=6

See notes to the basic financial statements.

- 18 -

DESOTO TRAIL 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
$ ====2=0=1=1=8

See notes to the basic financial statements.

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DESOTO TRAIL REGIONAL LIBRARY SCHEDULE OF LOCAL REVENUE YEAR ENDED JUNE 30, 2007
LOCAL SOURCES Boards of Education Early County Mitchell County Worth County City Governments Blakely Camilla Pelham Sylvester County Governments Boards of Commissioners Baker Early Mitchell Worth

SCHEDULE "4"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

8,000

23,760

35,000

15,083 34,606 19,884 42,500

5,811 19,250 35,000 42,500

$ = = = = 2=81=39=4

See notes to the basic financial statements.

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DESOTO TRAIL REGIONAL LIBRARY SCHEDULE OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2007

SCHEDULE "5"

NAME
Anderson, Brazeale, Broadway, Coker, Crawford, Cross, Hawkins, Heard, Holton, Houston, Jackson, Jones, Martin, McDonald, McNeely, Randall, Rigsby, Sindy, Sutton, Tramell, Vaglienti, Varnadoe, Wall, Wiley, Williams, Young,

Gayle Jackie R. Marcus Kelley Barbara Deanna Tammie Terri Robert Michelle Joel Britni Wynell Tonieta Gary Leroy Lisa Sandra Caitlin Jamie Theresa Kathy Brenda Leigh Autumn Vickie

Totals per Report

TITLE CATEGORY
Branch Manager Bookkeeper Page Children's Librarian Branch Manager Clerk Library Assistant Librarian Clerk Clerk Janitor Clerk Librarian Librarian Assistant Director Cataloguer Director Clerk Clerk Clerk Clerk/Library Assistant Clerk/Library Assistant Branch Manager Assistant Director Clerk Branch Manager

SALARIES

TRAVEL

$

10,375

2,250

4,868

18,720 $

37,003

90

5,430

3,547

914

12,743

11,376

1,398

20,418

3,930

54,886

18,720

65,435

4,456

1,170

2,730

18,720

22,880

24,344

63,436

2,497

34 000

45 402
320 35
4,628
31 145 927

$

446,336 $ ====6=53=3

See notes to the basic financial statements.

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

DESOTO TRAIL 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

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FS-7012-05-01 Previously Reported Corrective Action Implemented

FS-7012-06-01 Previously Reported Corrective Action Implemented

FS-7012-06-02 Further Action Not Warranted

(1)

AUDITOR'S COMMENTS

(1) Findings/internal control deficiencies ofthis nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) 112 will be communicated in a management letter.

SECTION III FINDINGS AND QUESTIONED COSTS

DESOTO TRAIL REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

COMMUNICATION OF INTERNAL CONTROL DEFICIENCIES

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

A control deficiency exists when the design or operation of a 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 Desoto Trail 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 Desoto Trail Regional Library's financial statements that is more than inconsequential will not be prevented or detected by the Desoto Trail 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 Desoto Trail 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 January 20, 2009. 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 STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inadequate Controls over Hourly Payroll Significant Deficiency Finding Control Number: FS-7012-07-01

Condition:

The Desoto Trail Regional Library failed to implement procedures to ensure that salary payments were properly documented and approved.

Criteria:

The Library's management is responsible for designing and maintaining internal controls that provide reasonable assurance that all employees are paid according to approved salary schedules and that adequate documentation is maintained to support the salary payments.

Questioned Cost: NIA

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DESOTO TRAIL REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inadequate Controls over Hourly Payroll Significant Deficiency Finding Control Number: FS-7012-07-01

Information:

During testing ofemployee compensation, it was noted that the Library failed to maintain approved salary schedules for hourly employees. Also, time sheets were not maintained for hourly employees.

Cause:

These deficiencies were a result of management's failure to adequately monitor and implement control procedures to ensure that employee compensation payments are based on an approved salary scale and time sheets which are adequately documented.

Effect:

Employee compensation payments which are inadequately documented may result in a misstatement to the Library's financial statements resulting from incorrect amounts paid to employees.

Recommendation: The Library should implement adequate internal controls to ensure that employee compensation payments are properly documented and approved.

FINANCIAL REPORTING Inadequate Controls Over Financial Reporting Material Weakness Finding Control Number: FS-7012-07-02

Condition:

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

Criteria:

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

Questioned Cost: NIA

Information:

The Governmental Accounting Standards Board (GASB) Statement 34 reporting model requires the presentation ofboth fund level and entity-wide level statements in the Library's financial statements. Due to a lack of adequate controls over the financial statement preparation and reporting process, the auditors had to prepare the appropriate fund level and entitywide level financial statements from the Library's general ledger.

-2 -

DESOTO TRAIL REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINANCIAL REPORTING Inadequate Controls Over Financial Reporting Material Weakness Finding Control Number: FS-7012-07-02

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 are 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.

-3-

SECTION IV MANAGEMENT'S RESPONSES

DESOTO TRAIL REGIONAL LIBRARY SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Desoto Trail Regional Library's responses to the findings described below were not audited and accordingly, we express no opinion on them.
Finding Control Number: FS-7012-07-01
We concur with this finding. The Library is in the process of developing a salary scale for its hourly employees. However, the timing of the fiscal year 2007 audit and subsequent receipt of the management letter to the Library does not occur until fiscal year 2009, and therefore the Library will not have an approved salary scale for hourly employees in place for fiscal year 2008. The Library will document the salary scale for fiscal year 2009. Additionally, accounting procedures began late in fiscal year 2007, and have continued since, that prohibit paying hourly employees without formal documentation of the hours actually worked.
Finding Control Number: FS-7012-07-02
We concur with this finding. The Library developed during fiscal year 2007 an adequate system of controls over the financial statement reporting process. The Library intends to prepare the appropriate fund level and entity-wide level financial statements for future audits beginning in fiscal year 2008.