Piedmont Regional Library, Winder, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2004

PIEDMONT REGIONAL LIBRARY
WINDER, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

PIEDMONT 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

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

5

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

6

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

7

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

NOTES TO THE BASIC FINANCIAL STATEMENTS

IO

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

19

SUPPLEMENTARY INFORMATION

SCHEDULES OF REVENUE

2

STATE

20

3

FEDERAL

21

4

LOCAL

22

5 SCHEDULE OF SALARIES AND TRAVEL

23

PIEDMONT REGIONAL LIBRARY - TABLE OF CONTENTS -
SECTION II FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

Russell W. Hinton
STATE AUDITOR (404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 25, 2005

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 Piedmont 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 funds (Exhibits A through G) ofthe Piedmont Regional Library as ofand for the year ended June 30, 2004, which collectively comprise the Library's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Piedmont 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 funds of the Piedmont Regional Library, as ofJune 30, 2004, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America.

2004ARL-41

The Piedmont 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.
As described in Note 2, the Piedmont Regional Library has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2004.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 19 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 Piedmont 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,

RWH:as 2004ARL-41

State Auditor

PIEDMONT REGIONAL LIBRARY

PIEDMONT REGIONAL LIBRARY STATEMENT OF NET ASSETS
JUNE 30. 2004
ASSETS Cash and Cash Equivalents Investments Accounts Receivable
Local Capital Assets
Equipment Library Collections Less: Accumulated Depreciation
Total Assets
LIABILITIES Accounts Payable Deferred Revenue
Total Liabilities NET ASSETS Invested in Capital Assets. Net of Related Debt Restricted for Capital Projects Permanent Funds Unrestricted Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

88.484

83,956

13,161

361,074 1,772,227 -1 421 784

$ ====8=9=71=1=18=

$

4,154

1 600

$

5754

$

711,517

13.222 2.200
164 425

$

891 364

$====8=9=71=1=1=8

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

PIEDMONT REGIONAL LIBRARY STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30. 2004

EXHIBIT"B"

EXPENSES

PROGRAM REVENUES

OPERATING

CHARGES FOR

GRANTS AND

SERVICES

CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

GOVERNMENTAL ACTIVITIES

Current Services Public Services Technical Services Support Services Maintenance and Operations Information Technology
Total Governmental Activities

$

472,804 $

58,169

171,888

28,030

82 138

813 029 $

20,532 $ 20,532 $

394,315 $ 65,089

-57,957 -58, 169 -171,888 37,059 -82 138

459 404 $ _ _ ___;:-3;.::;3;::,3,..::.09::..:3:....

General Revenues Allotments from Participating Governments Investment Earnings Miscellaneous

$

280,311

2,590

2 897

Total General Revenues

$ _ _ ___,,2:,::8:::,5.:.;79::.,8:..

Change in Net Assets

$

-47,295

Net Assets - Beginning of Year

938 659

Net Assets - End of Year

$ ======8=9..!1.3.6=4=

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

PIEDMONT REGIONAL LIBRARY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2004

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Local Government
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for Capital Projects Permanent Funds
Unreserved Designated for Bookmobile Replacement Self-insurance Undesignated Reported in: General Fund Permanent Funds
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

CAPITAL PROJECTS
FUND

PERMANENT FUNDS

TOTAL

$

75,488 $

12,712 $

81,246

510

13 161

284 $ 2,200

88,484 83,956
13 161

$

169,895 $

13,222 $

2 484 $=====1=85=,6=0=1

$

4,154

1 600

$

5754

$

4,154

1 600

$

5 754

$

13,222

$

$

24,000

30,000

110,141

$

164 141 $

13,222 $

$ 2,200

13,222 2,200

284 2484 $

24,000 30,000
110,141 284
179 847

$

169,895 $

13,222 $

2 484 $ =====1=85=,6=0=1

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

PIEDMONT REGIONAL LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30. 2004

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:
Equipment Library Collections Accumulated Depreciation
Total Capital Assets

$

$

361,074

1,772,227

-1,421,784

179,847 711 517

Net Assets of Governmental Activities (Exhibit "A")

$ ===89=1==,3=64=

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

PIEDMONT REGIONAL LIBRARY STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2004

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
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

CAPITAL PROJECTS
FUND

PERMANENT FUNDS

TOTAL

$

280,311

456,548

2,856

20,532

2,457 $

2477

$

765,181 $

88 $ 420
508 $

$ 45 45 $

280,311 456,548
2,856 20,532
2,590 2 897
765,734

$

401,133 $

58,169

171,856

28,030

82,138

$

741,326 $

$

23,855 $

140,286

5,500 $
5,500 $ -4,992 $ 18 214

$ 32
32 $ 13 $ 2471

406,633 58,169 171,888 28,030 82,138
746,858
18,876
160,971

$

164 141 $

13,222 $

2484 $

179 847

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

PIEDMONT REGIONAL LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30. 2004

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

$
45,275 -111 446

18,876 -66 171

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

$ ===-=4=7=2=95=

The notes to the basic financial statements are an integral part of this statement. -9-

PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"G"

Note 1: DESCRIPTION OF LIBRARY AND REPORTING ENTITY
REPORTING ENTITY
The Piedmont Regional Library (Library) operates pursuant to Official Code ofGeorgia Annotated Sections 20-5-40 through 20-5-59 to provide public library services with costs shared by participating local governmental agencies and grants from the State of Georgia.
The Library Board consists of 10 members; 3 members appointed by Banks County Library Board of Trustees, 3 members appointed by Barrow County Library Board of Trustees and 4 members appointed by Jackson County Library Board ofTrustees. The Library Board is without authority to determine the amount ofits funding, except by submission ofbudget requests to local governmental units from which the Library receives support and to the State ofGeorgia for State and Federal flow through funding. Membership in the Library and participation in library services is at the discretion of each participating governmental agency. The Library Board has the power to designate management, the power to retain unreserved fund balances of local and other funds for continued operations and is the lowest level of oversight responsibility for the Library's operations. The Piedmont 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 Piedmont Regional Library.
Library-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall Library. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through intergovernmental revenues and other nonexchange transactions.
The Statement 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.
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.
- 10 -

PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. Separate statements for each category (governmental) are presented. The emphasis offund 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 Federal and State sources to be used for the acquisition, construction or renovation of major capital facilities.
Permanent Funds - Lucille Nix Memorial Fund and Ted E. Roberts Book Fund are the funds used to account for endowments ofwhich the corpus is to be invested and preserved intact with the resultant income to be used to purchase books.
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. 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. Capital asset acquisitions are reported as expenditures in governmental funds.

- 11 -

PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

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.

CHANGES IN ACCOUNTING PRINCIPLES

The Piedmont Regional Library has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis -for State and Local Governments, as of June 30, 2004.

The provisions of GASB Statement No. 34 require the inclusion of a Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following:

General Fund July 1, 2003 Capital Projects Fund Permanent Funds

$ 140,286 18,214 2 471

Governmental Funds July 1, 2003

$ 160,971

Capital Assets Balance July 1, 2003 Adjustments to Prior Year Balance
Accumulated Depreciation

$ 988,729 1,115,370

2,104,099 -1,326,411

Net Assets Beginning (See Exhibit "B") CASH AND CASH EQUIVALENTS

$==9'==3""'"8."""65==9

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. Georgia Laws OCGA 45-8-14 authorize the Library to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.

- 12 -

PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
RECEIVABLES
Receivables consist ofamounts due from grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed 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 not include any amounts which would necessitate the need for an allowance for uncollectible receivables.
CAPITAL ASSETS
Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the Library-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost
- 13 -

PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives ofthe assets is not capitalized. Depreciation is computed using the straight-line method.

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

Capitalization Policy

Estimated Useful Life

Equipment Library Collection

$

5,000

15 years

$

5,000

10 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.

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. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.

Acceptable security for deposits consists of any one of or any combination ofthe 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 ofthe State of Georgia,

- 14 -

PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30. 2004

EXHIBIT"G"

Note 3: DEPOSITS

(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

(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, 2004, the bank balances were $195,166. The bank balances were entirely covered by Federal depository insurance.

Note 4: CAPITAL ASSETS

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

Governmental Activities Capital Assets Being Depreciated
Equipment Library Collection
Less Accumulated Depreciation for: Equipment Library Collection
Total Governmental Activities Capital Assets Being Depreciated - Net

Balances July 1, 2003 (Restated)

Increases

Decreases

Balances June 30, 2004

$ 361,074 1,743,025 $

45,275 $

$ 361,074

16,073

1,772,227

23,072 1,303,339

23,072 88,374

16 073

46,144 1,375,640

$ 111,688 $ -66, 171 $

Q $ 711 517

Current year depreciation expense by function is as follows:

Public Services

- 15 -

PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"G"

Note 5: RESTRICTED ASSETS

Endowments in which donors have stipulated as a condition ofthe gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose ofproducing present and future income, which may be expended and contributions from local governments restricted for capital improvements are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable contractual agreements. Restricted assets at June 30, 2004, were as follows:

Capital Projects

Permanent Funds

Restricted Cash and Cash Equivalents: Capital Acquisitions
Restricted Investments Capital Acquisitions Book Purchases

$

12,712

$

510

$

2,200

Note 6: RISK MANAGEMENT

The Library is exposed to various risks ofloss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.

The Library has obtained commercial insurance for risk ofloss associated with assets andjob related illness or injuries to employees. The Library has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Library's insurance coverage in any ofthe past three years.

The Library has elected to self-insure for all losses related to torts and acts of God. In addition, the Library has elected to self-insure for errors or omissions, which includes, among other risks, risks for sexual harassment and discrimination. The Library has not experienced any losses related to these risks in the past three years.

The Library is self-insured with regard to unemployment compensation claims. The Library accounts for claims within the General Fund with 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 fiscal years.

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

- 16 -

PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"G"

Note 6: RISK MANAGEMENT

Position Covered

Amount

All employees

$

20,000

Note 7: 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 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2004 2003 2002

100% 100% 100%

$

36,007

$

35,968

$

29,546

- 17 -

PIEDMONT REGIONAL LIBRARY GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2004

SCHEDULE "1"

REVENUES
Local Funds State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Public Services Technical Services Support Services Maintenance and Operations Information Technology
Total Expenditures
Net Change in Fund Balances
Fund Balance - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS

$

278,770 $

278,770 $

280,311

456,547

456,547

456,548

2,856

16,975

16,975

20,532

2,850

2,850

2,457

5 926

5 926

2477

$

761 068 $

761 068 $

765181

$

434,709 $

434,709 $

401,133

67,691

67,691

58,169

196,265

196,265

171,856

34,058

34,058

28,030

83,503

83 503

82138

$

816,226 $

816,226 $

741 326

$

-55,158 $

-55,158 $

23,855

140 286

Fund Balance - Ending

$

-55 158 $

-55 158 $ ======1=6=4=14=1=

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.

- 19 -

PIEDMONT REGIONAL LIBRARY SCHEDULE OF STATE REVENUE
YEAR ENDED JUNE 30, 2004
AGENCY/FUNDING
GRANTS Board of Regents of the University System of Georgia Office of Public Library Services Salaries Travel Library Materials Maintenance and Operation

SCHEDULE "2"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

342,056

469

48,934

65089

$ =====4=56===54=8=

See notes to the basic financial statements.

- 20-

PIEDMONT REGIONAL LIBRARY SCHEDULE OF FEDERAL REVENUE
YEAR ENDED JUNE 30. 2004
AGENCY/FUNDING GRANTS Museum and Library Services, Institute of Through Board of Regents of the University System of Georgia Library Services and Technology Act State Library Program Vacation Reading Program

SCHEDULE "3"
GOVERNMENTAL FUND TYPE GENERAL FUND
$ =====2===85...,6.,..

See notes to the basic financial statements.

- 21 -

PIEDMONT REGIONAL LIBRARY SCHEDULE OF LOCAL REVENUE
YEAR ENDED JUNE 30, 2004
LOCAL SOURCES City Governments Auburn Bethlehem Braselton Carl Homer Hoschton Penderass Statham Talmo Winder County Boards of Education Banks County Barrow County City of Commerce Jackson County County Governments Boards of Commissioners Banks Barrow Jackson

SCHEDULE "4"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

32,008

1,600

400

1,600

3,500

400

400

13,540

400

33,400

3,888 52,680
800 9,000

3,500 48,195 75000

$ ======28=0=3=1=1

See notes to the basic financial statements.

-22-

NAME
Albritton. Debbie J. Davis, Robert Foil, Paula Godby, Brandi N. Graham, Margaret H. Greer, Elizabeth Harris, Harriet H. Higton, Janet
Holliday, Sandra R.
Holmes, Nancy M.
Hoover, Anna R.
Jones, Nancy Krebs, Jane G. Loomis, Harriette D. Miller, April M. Moore, Angela D. Page, Joyce F. Ray, Nancy C. Shipley, Mary Ann Sullivan, Jessica K. Thompson, Michael Thompson, Rose S. Thurmond, Gail A. Tuttle, George W. Wood, Miriam L.
Totals per Report

PIEDMONT REGIONAL LIBRARY SCHEDULE OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30. 2004

SCHEDULE "5"

TITLE CATEGORY
Clerk Library Manager Clerk Library Manager Clerk Clerk Clerk Clerk Librarian Librarian Librarian Circulation Assistant Clerk Clerk Bookkeeper Aide Library Manager Director Clerk Aide Custodian Administrative Assistant Clerk Librarian Assistant Library Manager

SALARIES

TRAVEL

$

14,869

14,403

689

5,239

9,407

4,498 $

36

5,387

69

8,154

314

41,541

59,575

59,575

5,956

26

9,243

5,782

22,744

888

3,247

12,578

65,025

4,430

3.128

16,024

690

25,253

8,077

58,975

5085

$

468 884 $ ======2=,0=23=

See notes to the basic financial statements.

-23-

SECTION II FINDINGS AND QUESTIONED COSTS

PIEDMONT REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Reportable Condition Finding Control Number: FS-6072-04-01
An examination of the internal accounting control procedures revealed that the Library did not maintain adequate general controls over the Financial Accounting System. Access controls over the Financial Accounting System did not prevent unauthorized users from accessing critical accounting information.
Access controls, both manual and automated, are the basis for achieving security over the financial system. The deficiencies noted were as a result ofmanagement's decision not to implement standard access controls thereby increasing the risk of unauthorized access to the financial system by individuals both internal and external to the Library. Management should ensure that the access controls over the accounting information system limit access to the financial system to only employees with a need for access for the performance of their job duties.
Management's Response:
Concur that the Library had not maintained adequate general controls over the Financial Accounting System in that the server given to the Piedmont Regional Library System by the Georgia Public Library Service was not equipped with a firewall at the time of receipt and Piedmont did not immediately have a firewall installed. This increased the risk ofunauthorized access to the financial system.
Corrective action was taken on August 8, 2004 when Piedmont had Cyberguard SME530 Firewall installed in front of the server.
At time ofinstallation this corrective action was approved by the Piedmont Regional Library Board, chaired by Paul Brown, (770) 995-1690, pbrownl 734@bellsouth.net.