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. - 12 - 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 - 13 - 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. - 14 - 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 - (This page left intentionally blank) 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