PIEDMONT REGIONAL LIBRARY WINDER, 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 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 1 B STATEMENT OF ACTNITIES 2 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 4 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS S 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 ACTNITIES 7 G NOTES TO THE BASIC FINANCIAL STATEMENTS 9 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERALFUND 19 SUPPLEMENTARY INFORMATION SCHEDULES OF REVENUE 2 STATE 20 3 FEDERAL 21 4 LOCAL 22 s SCHEDULE OF SALARIES AND TRAVEL 23 PIEDMONT 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 December 15, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the Board of Regents ofthe University System of Georgia and Director and Members ofthe 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 of the governmental activities and each major fund (Exhibits A through G) of the Piedmont Regional Library as of and for the year ended June 30, 2007, which collectively comprise the Library's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the 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 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 ofexpressing an opinion on the effectiveness of the 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 ofthe governmental activities and each major fund information ofthe Piedmont 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 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. 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 ofSchedules 2 through 5, are presented for purposes of additional analysis and are not a required part ofthe 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:gp 2007ARL-41 sell W. Hinton, CPA, CGFM State Auditor PIEDMONT REGIONAL LIBRARY PIEDMONT REGIONAL LIBRARY STATEMENT OF NET ASSETS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Government Local Government Other Less: Allowance for Doubtful Accounts Capital Assets Construction in Progress Equipment Library Collections Less: Accumulated Depreciation Total Assets LIABILITIES Contracts Payable Retainages Payable Deposits and Deferred Revenues 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 $ 393,004.56 158,530.66 4,400.00 400.00 9,858.69 -3,568.83 687,311.00 73,017.00 2,100,767.00 -1,581,053.54 $ ===1,=84,.,2=!:i,6=6=6..5...4= $ 97,621.00 40,700.00 2,880.00 $ 141,201.00 $ 1,280,041.46 186,401.60 2,200.00 232,822.48 $ 1,701,465.54 $ ==1=,84====2'=66=6=.54= The notes to the basic financial statements are an integral part of this statement. -1- PIEDMONT 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 Revenue Total General Revenues Change in Net Assets Net Assets - Beginning of Year (Restated) Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 514,707.84 $ 23,396.39 180,302.65 11,733.92 128,587.75 $ 858.728.55 $ 17,781.22 17.781.22 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 $ 356,904.54 $ 12,951.07 120,158.87 83,389.57 $ 573,404.05 $ 545,242.29 $ 3,787.71 549,030.00 $ 405,220.21 -10,445.32 -56,356.07 -11,733.92 -45 198.18 281,486.72 $ 282,723.00 15,280.62 112,550.73 $ 410,554.35 $ 692,041.07 1,009,424.47 $ ===1=,7=01=,4=6=5=.5=4 -3- PIEDMONT REGIONAL LIBRARY BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2007 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Government Local Government Other Less: Allowance for Doubtful Accounts Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Contracts Payable Retainages Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Capital Projects Permanent Funds Unreserved Designated for Self-Insurance Designated for Bookmobile Replacement Undesignated Reported in: General Fund Permanent Funds Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND CAPITAL PROJECTS FUND PERMANENT FUNDS TOTAL $ 140,759.73 $ 251,759.08 $ 83,367.14 72,963.52 4,400.00 400.00 9,858.69 -3,568.83 485.75 $ 2,200.00 393,004.56 158,530.66 4,400.00 400.00 9,858.69 -3,568.83 $ 235,216.73 $ 324,722.60 $ 2,685.75 $ 562,625.08 $ 97,621.00 40,700.00 $ 6,594.49 $ 6,594.49 $ 138,321.00 $ 97,621.00 40,700.00 6594.49 $ 144,915.49 $ 186,401.60 $ $ 30,000.00 24,000.00 174,622.24 $ 228,622.24 $ 186,401.60 $ $ 2,200.00 485.75 2,685.75 $ 186,401.60 2,200.00 30,000.00 24,000.00 174,622.24 485.75 417,709.59 $ 235,216.73 $ 324,722.60 $ 2,685.75 $ 562,625.08 The notes to the basic financial statements are an integral part of this statement. -4- PIEDMONT 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") $ 417,709.59 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: Construction in Progress Equipment Library Collections Accumulated Depreciation Total Capital Assets $ 687,311.00 73,017.00 2,100,767.00 -1,581,053.54 1,280,041.46 Fines revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the governmental funds. 3,714.49 Net Assets of Governmental Activities {Exhibit "A") $ 1,701,465.54 The notes to the basic financial statements are an integral part of this statement. -5- PIEDMONT 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 Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND CAPITAL PROJECTS FUND PERMANENT FUNDS TOTAL $ 282,723.00 524,709.89 $ 549,030.00 48,694.16 17,706.60 74.62 6,614.86 8,566.18 $ 39,433.82 69,402.42 $ 919,882.33 $ 627,073.22 $ $ 99.58 282,723.00 1,073,739.89 48,694.16 17,781.22 15,280.62 108,836.24 99.58 $ 1,547,055.13 $ 581,098.80 $ 4,704.37 $ 23,396.39 179,457.78 150.00 11,733.92 128,587.75 687,311.00 $ 924,274.64 $ 692,165.37 $ $ -4,392.31 $ -65,092.15 $ 233,014.55 251,493.75 0.00 $ 585,803.17 23,396.39 179,607.78 11,733.92 128,587.75 687,311.00 0.00 $ 1,616,440.01 99.58 $ -69,384.88 2,586.17 487,094.47 $ 228,622.24 $ 186,401.60 $ 2,685.75 $ 417,709.59 The notes to the basic financial statements are an integral part of this statement. -6- PIEDMONT 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 Capital Outlay over Depreciation Expense Fines revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the governmental funds. Change in Net Assets of Governmental Activities (Exhibit "B") $ -69,384.88 $ 858,433.00 -100,721.54 757,711.46 3,714.49 $ 692,041.07 The notes to the basic financial statements are an integral part of this statement. -7- (This page left intentionally blank) PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 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 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 Banks County Board of Commissioners, 1 member appointed from the Barrow County Board of Commissioners, 2 members appointed from the Banks County Board of Education, 1 member appointed from the City of Commerce Board of Education, 1 member appointed from the Barrow County Library Board of Trustees, 1 member appointed from the City of Jefferson, 1 member appointed from the City ofWinder, 1 member appointed from the City ofCommerce, and 1 member appointed from the Town of Braselton. The Library Board is without authority to determine the amount of its 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 ofeach 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 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 ofActivities presents a comparison between direct expenses and program revenues for each function of the Library's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the Library related to the administration and support ofthe Library's programs, such as office and maintenance personnel and accounting) are not allocated to programs. -9- PIEDMONT 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 ofinternal 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 exclusively for the purchase of library 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 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 - 10 - PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. The Library funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the Library's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. RESTATEMENT OF PRIOR YEAR NET ASSETS/FUND BALANCE For fiscal year 2007, the Library restated various Capital Assets due to errors and omissions. The Library increased Library collections by $118,424 and increased the accumulated depreciation related to library collections by $41,306. The result was an increase in Net Assets at July I, 2006, of $77,118. This change is in accordance with generally accepted accounting principles. 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 ofGeorgia Annotated Section 45-8-14 authorizes the Library to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the Library in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code 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 ofretum 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, - 11 - PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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. The Library does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks. RECEIVABLES Receivables consist ofamounts due from grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed, fines and fees from patrons and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do include amounts which would necessitate the need for an allowance for uncollectible receivables. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the Library-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. 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: - 12 - PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Capitalization Policy Estimated Useful Life Equipment Library Collections $ 5,000.00 $ 5,000.00 15 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. Restricted net assets - These represent resources for which the Library is legally or contractually obligated to spend resources for capital projects and permanent funds in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived from grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the general operations ofthe Library, and may be used at the discretion of the Library to meet current expenses for those purposes. Note 3: DEPOSITS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum 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. I) 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, - 13 - PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"G" Note 3: DEPOSITS (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 $596,036.54. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk: Category 1 - Uncollateralized Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the Library's name. The Library's deposits are classified by custodial credit risk category at June 30, 2007, as follows: Custodial Credit Risk Category Bank Balance 1 $ 0.00 2 0.00 3 232,166.49 Total $ 232,166.49 - 14 - PIEDMONT 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, Not Being Depreciated: Construction in Progress Capital Assets Being Depreciated Equipment Library Collections Less Accumulated Depreciation for: Equipment Library Collections Total Capital Assets, Being Depreciated, Net Governmental Activity Capital Assets - Net Restated Balances Jul)'. 1, 2006 Increases Balances Decreases June 30, 2007 $ 0.00 $ 687,311.00 $ 0.00 $ 687,311.00 $ 73,017.00 $ 73,017.00 1,995,041.00 $ 171,122.00 $ 65,396.00 2,100,767.00 29,527.00 1,516,201.00 761.54 99,960.00 30,288.54 65,396.00 1,550,765.00 $ 522,330.00 $ 70,400.46 $ 0.00 $ 592,730.46 $ 522,330.QQ $ 751,111.~6 $ Q,QQ $ 1,280,04 l.~6 Current year depreciation expense by function is as follows: Public Services Support Services $ 100,654.87 66.67 $ 100,721.54 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 assets and job related illness or injuries to employees. The Library has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Library's insurance coverage in any ofthe past three years. The Library has elected to self-insure for all losses related to torts and acts ofGod. 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. - 15 - PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 5: RISK MANAGEMENT The Library is self-insured with regard to unemployment compensation claims. In connection with this program, a self-insurance reserve has been established within the General Fund by the Library. 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 of that 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 $ 20,000.00 Note 6: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the Library as of June 30, 2007, together with funding available: Project Unearned Executed Contracts Funding Available From State Auburn Building Project $ 1261689.QQ $ 2611010.0Q The amounts described in this note are not reflected in the basic financial statements. 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 - 16 - PIEDMONT REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "G" Note 7: RETIREMENT PLANS 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% $ 36,638.58 $ 36,490.00 $ 35,650.00 Note 8: AFFILIATED LIBRARIES DISCLOSURE The Banks County Library, Braselton Library, Commerce Public Library, Harold S. Swindle Library, Jefferson Public Library, Maysville Public Library, Pendergrass Public Library and Talmo Public Library are legally separate, tax exempt organizations who participate in shared activities with the Piedmont Regional Library. These affiliated libraries do not meet the criteria for reporting as either a component unit or related entity of the Piedmont Regional Library. - 17 - (This page left intentionally blank) PIEDMONT 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 Total Expenditures Net Change in Fund Balance Fund Balance - Beginning NONAPPROPRIATED BUDGETS ORIGINAL FINAL ACTUAL AMOUNTS $ 271,350.00 $ 271,350.00 $ 282,723.00 469,903.54 469,903.54 524,709.89 44,294.16 44,294.16 48,694.16 21,875.00 21,875.00 17,706.60 4,000.00 4,000.00 6,614.86 11115.00 11115.00 39,433.82 $ 822,537.70 $ 822,537.70 $ 919,882.33 $ 547,901.27 $ 547,901.27 $ 581,098.80 19,158.04 19,158.04 23,396.39 135,232.10 135,232.10 179,457.78 12,427.80 12,427.80 11,733.92 96 703.49 96 703.49 128 587.75 $ 811,422.70 $ 811,422.70 $ 924 274.64 $ 11,115.00 $ 11,115.00 $ -4,392.31 219,357.52 219 357.52 233 014.55 Fund Balance - Ending $ 230,472.52 $ 230,472.52 $ ===2=28=,6=2=2=.2=4 Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 19 - PIEDMONT 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 of Construction Projects GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 314,555.78 98,311.45 111,842.66 $ 314,555.78 98,311.45 111,842.66 - - - - - - $ 549,030.00 549,030.00 $ 524,709.89 $ 549,030.00 $ 1,073,739.89 See notes to the basic financial statements. - 20 - PIEDMONT REGIONAL LIBRARY SCHEDULE OF FEDERAL REVENUE YEAR ENDED JUNE 30, 2007 AGENCY/FUNDING GRANTS Museum and Library Services, Institute of Through Board of Regents of the University System of Georgia Library Services and Technology Act Vacation Reading Program Family Literacy SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 4,400.00 44 294.16 $ 48 694.16 See notes to the basic financial statements. - 21 - PIEDMONT REGIONAL LIBRARY SCHEDULE OF LOCAL REVENUE YEAR ENDED JUNE 30, 2007 LOCAL SOURCES City Board of Education Commerce County Boards of Education Banks County Barrow County Jackson County City Governments Auburn Bethlehem Carl Homer Hoschton Statham Winder County Governments Boards of Commissioners Banks Barrow Jackson SCHEDULE "4" GOVERNMENTAL FUND TYPE GENERAL FUND $ 900.00 4,100.00 50,000.00 10,000.00 37,750.00 900.00 900.00 4,100.00 400.00 16,500.00 34,600.00 4,100.00 53,850.00 64,623.00 $ ===2s=2=.1=2=3=.o=o See notes to the basic financial statements. - 22 - NAME Atkinson, Karen A. Conley, Stephanie Fitzgerald, Patrick Gannon, Lisa DiAngelo Graham, Margaret H. Greer, Elizabeth G. Harkness, Robert Alan Harris, Harriet H. Holmes, Nancy M. Hoover, Anna R. Hubbard, Lisa K. Jones, Nancy L. Krebs, Jane G. Loomis, Harriette D. McIntyre, Jessica McKean, Katharine Miller, April M. Moore, Angela D. Page, Joyce F. Pitts, Adam J. Ray, Nancy C. Shipley, Mary Ann Spencer, Mary Hale Thompson, Michael W. Thompson, Rose S. Tuttle, George W. Wood, Miriam L. Totals per Report PIEDMONT REGIONAL LIBRARY SCHEDULE OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2007 SCHEDULE "5" TITLE CATEGORY Clerk Clerk Clerk Clerk Clerk Clerk Director Circulation Assistant Librarian Librarian Clerk Circulation Assistant Clerk Clerk Aide Extension Services Bookkeeper Aide Library Manager Aide Director Clerk Library Manager Custodian Administrative Assistant Librarian Assistant Library Manager SALARIES TRAVEL $ 3,086.28 7,879.55 29,633.93 $ 307.07 2,100.15 10,185.41 3,990.23 34,989.40 1,108.33 6,125.45 66,862.32 349.04 67,841.48 628.63 7,861.15 103.79 11,971.62 124.81 10,775.02 8,415.13 3,416.77 21,746.18 504.72 25,513.46 3,343.01 12,705.80 15.52 237.36 23,824.44 5,748.20 6,517.80 20,873.70 26,822.24 66,555.52 543.78 5 143.63 $ 494.165.23 $ ==3=,6=8=5.=69= See notes to the basic financial statements. - 23- SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS PIEDMONT 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-6072-06-01 FS-6072-06-02 FS-6072-06-03 Previously Reported Corrective Action Implemented Unresolved - See Corrective Action Responses Unresolved - See Corrective Action Responses CORRECTIVE ACTION/RESPONSES REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-6072-06-02 The Library still has some progress to make in this area. Recently hiring a new HR/Finance Manager, implementing more internal controls, and establishing financial policies have helped us become more diligent in our accounting procedures since fiscal year 2007. There is still room for improvement, which we acknowledge. CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-6072-06-03 Over the next fiscal year, the Library will attempt to track capital assets in Fund 800 in our Blackbaud financial system in order to keep a current and accurate list. SECTION III FINDINGS AND QUESTIONED COSTS PIEDMONT 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 Piedmont 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 Piedmont Regional Library's financial statements that is more than inconsequential will not be prevented or detected by the Piedmont 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 Piedmont 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 December 15, 2008. Internal control deficiencies identified during the course ofthis engagement that were considered to be significant deficiencies and/or material weaknesses are presented below: FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINANCIAL STATEMENTS Failure to Prepare Financial Statements Material Weakness Finding Control Number: FS-6072-07-01 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 - 1- PIEDMONT REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINANCIAL STATEMENTS Failure to Prepare Financial Statements Reportable Condition - Material Weakness Finding Control Number: FS-6072-07-01 Information: The Governmental Accounting Standards Board (GASB) Statement 34 reporting model requires the presentation of both fund level and entity-wide level statements in the Library's financial statements. Due to a lack of adequate controls over the financial statement preparation and reporting process, the auditor had to prepare the appropriate fund level and entity-wide level financial statements from the Library's general ledger. Cause: The Library did not implement an adequate system on internal control over financial statement reporting process. Effect: The Library did 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. CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-6072-07-02 Condition: The accounting procedures of the Library were insufficient to provide for adequate internal controls. Criteria: The Library's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are properly approved, processed, and reported. -2 - PIEDMONT REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-6072-07-02 Questioned Cost: NIA Information: (1) Cash and Cash Equivalents Bank reconciliations were not performed by someone independent ofthe general ledger function. Also, reconciling items on the bank reconciliations were not corrected in a timely manner. An unknown variance totaling $5,905.74 was noted on the bank reconciliation for the operating account at June 30, 2007. (2) Revenues/Receivables/Receipts Numerous misclassifications were noted between local revenue sources. State revenue was incorrectly classified. An audit adjustment was necessary to ensure that financial statements were materially correct. (3) Expenditures/Liabilities/Disbursements Contracts and Retainage Payables were not recorded on the general ledger. An audit adjustment was necessary to ensure that financial statements were materially correct. Numerous instances where expenditures were recorded in the wrong fund were noted. (4) General Ledger The Library did not have adequate procedures in place to ensure that all journal entries made to the accounting records were approved and posted to the appropriate accounts. Audit adjustments were necessary to ensure that financial statements presented for audit were materially correct. -3 - PIEDMONT REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-6072-07-02 Cause: Management failed to implement adequate controls to ensure that cash, revenues, and expenditures were properly processed and posted to the appropriate accounts on the ledger. Effect: Without satisfactory accounting controls and procedures in place, the Library could place itself in a position where potential misappropriation of assets could occur. In addition, the lack of controls could impact reporting of its financial position and results of operations. Recommendation: Management should review accounting controls and procedures currently in place, identify weaknesses, and implement procedures relative to the above control categories to strengthen the internal controls over the accounting functions. EMPLOYEE COMPENSATION Inadequate Controls over Employee Compensation Significant Deficiency Finding Control Number: FS-6072-07-03 Condition: The Library failed to adopt adequate controls to ensure an employee's compensation was based on State and/or Board approved salary schedules. Criteria: The Library's management is responsible for designing, implementing, and maintaining internal controls that provide for reasonable assurance that employee compensation is calculated based on State and/or Board approved salary schedules. Questioned Cost: NIA -4 - PIEDMONT REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION Inadequate Controls over Employee Compensation Significant Deficiency Finding Control Number: FS-6072-07-03 Information: Compensation for certified and hourly employees could not be traced to State and/or Board approved compensation schedules. State salaried employees were paid additional supplements which could not be substantiated by documentation provided by the Library. Hourly rates for employees were either miscalculated and/or incorrectly entered into the financial system after a two percent pay increase in October 2006. It was also noted that salary calculations were prepared and entered into the payroll system by the same person. Cause: The Library failed to adopt adequate controls to ensure the appropriate calculation ofemployee's salary was performed and entered into the financial system accurately. Additionally, the Library failed to document such calculations and/or additional pay. Effect: Without satisfactory internal controls and procedures in place, the Library could place itself in a position where potential misappropriation of assets could occur. In addition, the lack of controls could impact reporting of its financial position and results of operation. Recommendation: The Library should develop and implement internal controls over employee compensation to ensure the all salary calculations are based on State and/or Board approved salary schedules. Additional pay should be well documented and maintained on file. Also, proper separation of duties should be maintained for payroll related functions and an independent administrative review should be performed on salary information entered into the payroll system. CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Material Weakness Finding Control Number: FS-6072-07-04 Condition: The Library failed to adequately maintain an updated capital assets listing. -5- PIEDMONT REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Material Weakness Finding Control Number: FS-6072-07-04 Criteria: The Library's management is responsible for designing, implementing, and maintaining internal controls that provide reasonable assurance that Capital Asset records are maintained in accordance with the Library's capitalization policies and generally accepted accounting principles. Questioned Cost: NIA Information: Library personnel failed to calculate and/or record Construction in Progress as additions to Capital Assets. An audit adjustment was necessary to ensure that the financial statements were materially correct. Cause: The Library's management failed to implement satisfactory controls and procedures necessary to record and maintain accurate Capital Asset records. Effect: Without proper accounting controls and procedures in place, capital acquisitions, capital deletions, and depreciation expense could be inaccurately reported resulting in the overall inaccurate reporting of net assets. Recommendation: The Library should review the accounting controls and procedures currently in place, identify weaknesses, and design and implement procedures necessary to strengthen controls over Capital Assets. Additionally, the Library should review its Capital Asset records and make appropriate adjustments to ensure that the subsidiary records properly support activity reported on the financial statements. -6- SECTION IV MANAGEMENT'S RESPONSES PIEDMONT REGIONAL LIBRARY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Piedmont Regional Library's responses to the findings described below were not audited and accordingly, we express no opinion on them. Finding Control Number: FS-6072-07-01 We concur with this finding. While GASB 34 requires the preparation offinancial statements, due to the hiring of new staff, we did not have the level of internal expertise sufficient to credibly produce these documents. We will be able to do so in the future. Finding Control Number: FS-6072-07-02 We concur with this finding. The previous HR/Finance Manager had insufficient skills in general accounting and working within our accounting system, and did not make management aware of problems, or areas of needed training. This had implications across the general ledger. With a new Manager on board we are optimistic of our long-term outlook. We also concur that better controls need to be documented. Finding Control Number: FS-6072-07-03 We concur with this finding. This has been addressed in Finding #2. While every attempt was made to pay according to State and Piedmont Regional Library System Library Board approved payroll budgets, several clerical mistakes did occur. We will implement controls/procedures which will eliminate/resolve future mistakes sooner. Finding Control Number: FS-6072-07-04 We concur with this finding. This has been addressed in Finding #2. We will have better controls/procedures in place prior to the next construction project. Contact Person: Alan Harkness Phone: (770) 867-2762 Fax: (770) 867-7483 E-mail Address: aharkness@prlib.org