NORTHEAST GEORGIA REGIONAL LIBRARY
CLARKESVILLE, 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

NORTHEAST GEORGIA 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

STATEMENTOFNETASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

NOTES TO THE BASIC FINANCIAL STATEMENTS

8

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERALFUND

17

SUPPLEMENTARY INFORMATION

SCBEDULESOFREVENUE

2

STATE

18

3

FEDERAL

19

4

LOCAL

20

5 SCHEDULE OF SALARIES AND TRAVEL

21

NORTHEAST GEORGIA 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
September 19, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the Board of Regents of the University System of Georgia
and Director and Members of the Northeast Georgia 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) ofthe Northeast Georgia Regional Library as ofand 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 Northeast Georgia 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 Northeast Georgia 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 Northeast Georgia 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 Northeast Georgia 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,
w~~
ell W. Hinton, CPA, CGFM State Auditor
RWH:as 2007ARL-41

NORTHEAST GEORGIA REGIONAL LIBRARY

NORTHEAST GEORGIA REGIONAL LIBRARY STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS Cash and Cash Equivalents Investments Capital Assets
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 Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

81,132.22

52,550.00

1,496,464.00 -1 ,085,832.00

$ =====54..,4=,3=1=4=.2=2

$ _ _ _2___7...,..6...8.._3__._8_-'--8

$

410,632.00

105,998.34

$ _ ____,a,,5""'16'-'-,6'""3""0""'.3-'-4

$ ===5=4=4-,3=14==22=

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

NORTHEAST GEORGIA REGIONAL LIBRARY STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2007

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
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

403,805.94 $

137,258.86

188,513.94

13,020.16

120,386.44

$

862,985.34 $

74.00 74.00

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

116,493.84 $

327,681.68 162,954.33
36,000.00

$

643,129.85 $

192,630.80 $
192 630.80 $ $ $ $

-94,607.30 -137,258.86 139,167.74 149,934.17 -84 386.44
-27,150.69
50,700.00 3,408.85 4 648.18
58 757.03
31,606.34
485,024.00

$ ====5=16=6=3=0=.3=4

-3-

NORTHEAST GEORGIA REGIONAL LIBRARY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2007

EXHIBIT "C"

ASSETS Cash and Cash Equivalents Investments
Total Assets
FUND BALANCES Unreserved
Undesignated Reported in: General Fund

GENERAL FUND

CAPITAL PROJECTS
FUND

TOTAL

$ 81,132.22 $
52,550.00

0.00 $

81,132.22 52,550.00

$ 133,682.22 $

0.00 $ ===1=3=3=,6=82=.2=2=

$ 133,682.22 $

0.00 $ ====13=3=,6=82=.2=2=

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

NORTHEAST GEORGIA 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:
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

$ 133,682.22

$ 1,496,464.00 -1,085,832.00

410,632.00

-27,683.88

Net Assets of Governmental Activities (Exhibit "A")

$ 516,630.34

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

NORTHEAST GEORGIA 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
Net Change in Fund Balance
Fund Balance - Beginning
Fund Balance - Ending

GENERAL FUND

CAPITAL PROJECTS
FUND

TOTAL

$ 50,700.00

$

645,446.44 $ 128,069.61

26,244.60

74.00

3,023.17

385.68

40,648.18

$ 766,136.39 $ 128,455.29 $

50,700.00 773,516.05
26,244.60 74.00
3,408.85 40,648.18
894,591.68

$ 246,713.46 137,258.86 187,190.06 13,020.16 120,386.44 64,561.19 $
$ 769,130.17 $
$ -2,993.78 $
136,676.00

$
128,455.29 128,455.29 $
0.00 $ 0.00

246,713.46 137,258.86 187,190.06
13,020.16 120,386.44 193,016.48
897,585.46
-2,993.78
136,676.00

$ 133,682.22 $

0.00 $ 133,682.22

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

NORTHEAST GEORGIA 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

$
$ 122,167.00 -86,243.00

-2,993.78
35,924.00 -1,323.88

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

$ =====31=,6=0=6=.3=4

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

NORTHEAST GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 1: DESCRIPTION OF LIBRARY AND REPORTING ENTITY
REPORTING ENTITY
The Northeast Georgia Regional Library (Library) operates pursuant to Official Code of Georgia Annotated Sections 20-5-40 through 20-5-59 to provide public library services with costs shared by participating local governmental agencies and grants from the State of Georgia.
The Library Board is comprised of 11 members which are also trustees ofthe member library which appointed them. The Library Board membership consists of 2 members appointed from the Habersham County Library Board, 4 members appointed from the Rabun County Library Board, 1 member appointed from the Stephens County Library Board and 4 members appointed from the White 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 ofoversight responsibility for the Library's operations. The Northeast Georgia 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 of the Northeast Georgia 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 of the Library's programs, such as office and maintenance personnel and accounting) are not allocated to programs.

-8-

NORTHEAST GEORGIA 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 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 and Local sources to be used for the acquisition, construction or renovation of major capital facilities.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The Library-wide governmental financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the Library gives (or receives) value without directly receiving (or giving) equal value in exchange, include grants and donations. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The Library uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The Library considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Interest is considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds.

-9-

NORTHEAST GEORGIA 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 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 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 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,
(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.
- 10 -

NORTHEAST GEORGIA 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.

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 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

Equipment Library Collections

$ 5,000.00 All

10 years 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:

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 ofthe Library, and may be used at the discretion of the Library to meet current expenses for those purposes.

- 11 -

NORTHEAST GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"G"

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.
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 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 $151,298.72. The bank balances were entirely covered by Federal depository insurance.

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NORTHEAST GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 4: CAPITAL ASSETS

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

Governmental Activities Capital Assets Being Depreciated
Library Collections
Less Accumulated Depreciation for: Library Collections
Governmental Activity Capital Assets - Net

Balances July 1, 2006

Increases

Decreases

Balances June 30, 2007

$ 1,424,580.00 $ 122,168.00 $ 50,284.00 $ 1,496,464.00

1,049,872.00

86,243.00

50,283.00 1,085,832.00

$ 31~,108.QQ $ 35,225.00 $

l.QQ $ 410,632.QQ

Current year depreciation expense by function is as follows:

Public Services

$ 86,243.00

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 torts, assets, errors or omissions, job related illness or injuries to employees and acts of God. 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 is self-insured with regard to unemployment compensation claims. The Library accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. The Library has not experienced any unemployment compensation claims during the last two years.

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

Position Covered

Amount

All Employees

$ 10,000.00

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NORTHEAST GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"G"

Note 6: 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:

Balance July 1, 2006

Governmental Funds
Compensated Absences ( I)
$ 26,360.00

Additions Annual Leave Earned

1,323.88

Balance June 30, 2007

$ 27,683.88

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

Note 7: SIGNIFICANT CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by granter agencies. This could result in requests for reimbursement to the granter 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.

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NORTHEAST GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 8: RETIREMENT PLANS

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%

$ 79,250.00 $ 68,148.00 $ 60,528.00

Note 9: AFFILIATED LIBRARIES DISCLOSURE

The Habersham County Library, Rabun County Library, Stephens County Library and White County Library are legally separate, tax exempt organizations who participate in shared activities with the Northeast Georgia Regional Library. These affiliated libraries do not meet the criteria for reporting as either a component unit or related entity of the Northeast Georgia Regional Library.

- 15 -

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NORTHEAST GEORGIA 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 Facilities Acquistion and Construction
Total Expenditures
Net Change in Fund Balance
Fund Balance - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS

$

51,200.00 $

96,400.00 $

50,700.00

559,654.50

649,424.96

645,446.44

26,244.60

74.00

3,023.17

40 648.18

$

610 854.50 $

745,824.96 $

766,136.39

$

190,988.59 $

217,372.13 $

246,713.46

137,545.00

137,258.58

137,258.86

177,345.91

185,233.02

187,190.06

22,200.00

20,990.00

13,020.16

82,775.00

120,410.04

120,386.44

64 561.19

$

610,854.50 $

681 263.77 $

769 130.17

$

0.00 $

64,561.19 $

-2,993.78

136 676.00

136 676.00

136,676.00

Fund Balance - Ending

$

136 676.00 $

201 237.19 $ ===13=3='=,6=8=2=.2=2

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 -

NORTHEAST GEORGIA REGIONAL LIBRARY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007

SCHEDULE "2"

AGENCY/FUNDING
GRANTS Board of Regents of the University System of Georgia Office of Public Library Services Salaries Library Materials Maintenance and Operations Georgia State Financing and Investment Commission Reimbursement on Construction Projects

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

327,681.68

90,249.24

227,515.52

$

327,681.68

90,249.24

227,515.52

128,069.61

$

645 446.44 $

128,069.61 $ ===7=73='=51=6=.0=5

See notes to the basic financial statements.

- 18 -

NORTHEAST GEORGIA 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 Family Literacy

SCHEDULE "3"
GOVERNMENTAL FUND TYPE GENERAL FUND
$ ======2=6=,2=4=4=.6=0

See notes to the basic financial statements.

- 19 -

NORTHEAST GEORGIA REGIONAL LIBRARY SCHEDULE OF LOCAL REVENUE YEAR ENDED JUNE 30, 2007

SCHEDULE "4"

LOCAL SOURCES Boards of Education Habersham County White County Public Library Clarkesville

GOVERNMENTAL FUND TYPE GENERAL FUND

$

4,500.00

2,400.00

43,800.00

$ ======s="o.=10..0..=.o=o

See notes to the basic financial statements.

- 20 -

NAME
Avelar, Danielle R. Head, Elizabeth Ann Murphy, Gerald Emerson Porterfield, Lila Richardson, Martha L. Skinkle, John Leland
Totals per Report

NORTHEAST GEORGIA REGIONAL LIBRARY SCHEDULE OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2007

SCHEDULE "5"

TITLE CATEGORY
Program Services Specialist Technical Service Clerk Director Technical Service Librarian Circulation/Reference Librarian Librarian/Extension Services

SALARIES

TRAVEL

$

31,202.00 $

640.03

41,010.00

107.81

77,542.32

2,936.83

64,755.52

62.93

65,062.32

687.97

65,662.32

3,299.34

$

345,234.48 $ ==7=7=3=4=.9=1

See notes to the basic financial statements.

- 21 -

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

NORTHEAST GEORGIA 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-6682-06-01

Previously Reported Corrective Action Implemented

SECTION III FINDINGS AND QUESTIONED COSTS

NORTHEAST GEORGIA 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 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 Northeast Georgia 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 Northeast Georgia Regional Library's financial statements that is more than inconsequential will not be prevented or detected by the Northeast Georgia 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 Northeast Georgia 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 September I9, 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-6682-07-01

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.

Questioned Cost: NIA

-I-

NORTHEAST GEORGIA 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-6682-07-01

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. During the audit, numerous correcting entries were proposed by the auditor and accepted by the client to properly present the entity's fund level and entity-wide level financial statements.

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

NORTHEAST GEORGIA REGIONAL LIBRARY SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Northeast Georgia Regional Library's responses to the findings described below were not audited and accordingly, we express no opinion on it.
Finding Control Number: FS-6682-07-01
We concur with this finding.
Contact Person: Emerson Murphy Title: Regional Services Director - Main Contact Phone: (706) 754-0416, ext. 235 Fax: (706) 754-0420 E-mail Address: gemu:r:phy@negeorgialibraries.org
Contact Person: Ann Head Title: Regional Services Assistant (includes bookkeeping) Phone: (706) 754-0416, ext. 238 Fax: (706) 754-0420 E-mail Address: ahead@negeorgialibraries.org