Sara Hightower Regional Library, Rome, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2004

SARA HIGHTOWER REGIONAL LIBRARY
ROME, 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

SARA HIGHTOWER REGIONAL LIBRARY - TABLE OF CONTENTS -

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

8

G

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

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

23

5 SCHEDULE OF SALARIES AND TRAVEL

24

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
November 7, 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 Sara Hightower 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 Sara Hightower Regional Library as of and 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 Sara Hightower 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 each major fund of the Sara Hightower Regional Library, as of June 30, 2004, 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.

2004ARL-41

As described in Note 2, the Sara Hightower 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.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through iv and page 19 are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally ofinquiries ofmanagement regarding the methods of measurement and presentation of the 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 Sara Hightower 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 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 submitt~

RWH:as 2004ARL-41

State Auditor

SARA HIGHTOWER REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
As management of the Sara Hightower Regional Library (the "Library"), we offer readers of the Library's financial statements this narrative overview and analysis of the financial activities of the Library for the fiscal year ending June 30, 2004. Please read it in conjunction with the Library's financial statements, which follow this section.
FINANCIAL HIGHLIGHTS
The assets of the Library exceeded its liabilities at the close of the most recent fiscal year by $1,877,582 (net assets). Of this amount, $722,215 (unrestricted assets) may be used to meet the Library's ongoing obligations to citizens and creditors.
As of the close of the current fiscal year, the Library's governmental funds reported combined ending fund balances of $773,504. Of this amount, $602,709 or 77.9% is available in the general fund for spending at the Library's discretion (unreserved fund balance).
OVERVIEW OF THE FINANCIAL STATEMENTS
The discussion and analysis are intended to serve as an introduction to the Library's basic financial statements. The Library's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.
Government-wide Financial Statements
The government-wide financial statements are designed to provide readers with a broad overview of the Library's finances using the accrual basis of accounting, which is similar to the accounting used by most private-sector business.
The statement of net assets presents information on all of the Library's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Library is improving or deteriorating. Net assets increase when revenues exceed expenses. Increases to assets without a corresponding increase to liabilities, result in increased net assets, which indicates an improved financial position.
The statement of activities presents information showing how the Library's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in the statement for some items that will only result in cash flows in future fiscal periods (e.g., earned but unused vacation leave).
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SARA HIGHTOWER REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
Fund Financial Statements
The fund financial statements of the Library consist of a series of statements that focus on information about the Library's major governmental funds. A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. The Library's governmental funds are used to account for essentially the same functions reported as government activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of usable resources as well as on balances of usable resources available at the end of the fiscal year. Such information may be useful in evaluating the Library's near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the Library's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund . statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
Notes to the Financial Statements
The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.
Other Information
The basic financial statements are followed by a section of required supplementary information. This section includes a budgetary comparison schedule, which includes comparison between the statutory fund balance for budgetary purposes and the fund balance for the general fund as presented in the governmental fund financial statements.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
Net assets may serve, over time, as a useful indicator of the Library's financial position. In the case of the Library, assets exceeded liabilities by $1.88 million at the close of the most recent fiscal year.
The largest portion of the Library's net assets (62%) reflects its investment in capital assets (e.g., capital improvement, furniture, equipment, and materials). The Library uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. The remaining balance of net assets (38%) represents unrestricted net assets available to meet the Library's ongoing obligations to citizens and creditors.
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SARA HIGHTOWER REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
FINANCIAL ANALYSIS OF THE LIBRARY'S FUNDS
At the end of the current fiscal year, the Library's governmental funds reported combined fund balances of $773,504. Approximately 78% of this total constitutes unreserved fund balance, which is available for spending at the Library's discretion. The remainder of the fund balance is designated for capital improvements.
The general fund is the principal operating fund of the Library. At June 30, 2004, the general fund reported a fund balance of $602,709. For the fiscal year ended June 30, 2004, total revenues in the general fund reported a balance of $2,311,101. Total cost of all programs and services were $2,139,774 showing an excess of $171,327. A portion of this excess is due to salaries and salary expenses held in the budget for positions now being paid by state programs which may end.
The capital projects fund balance increased by $138,146 in fiscal year 2004. This is attributable to a portion of the excess of revenues over expenditures in the general fund which was transferred to the capital improvements fund.
BUDGETARY HIGHLIGHTS
The Library makes funding requests of the nine local funding agencies in the two counties the Library serves. These funding requests are consolidated into the annual operating budget. The operating budget includes proposed expenses and the means of financing them. The Library's operating budget is revised during the year to reflect funding actually provided from these nine agencies and expenditures that can reasonably be made from those funds.
Total revenues were $82,718 over the final budget, which represents approximately a 4% increase. This increase is primarily attributable to an increase in revenues from fines and service fees and an increase in donations in the fiscal year 2004. Actual expenditures were $195,498 under the final budget. A portion of this is attributed to the increased revenues. The other portion is the amounts held in the budget for salary positions.
CAPITAL ASSETS
At the end of 2004, the Library has $1,155,367 invested in capital assets net of accumulated depreciation. Additions to capital assets during 2004 include additions to the collections and equipment.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGET
The management of the Library prepares funding requests for each of its funding agents. These requests include cost of continued operations and any new programs the Library wants in the next fiscal year. These requests are consolidated into the Library's Operating Budget. The state requires local funding agencies to, at a minimum, match the level of funding from the previous
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SARA HIGHTOWER REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 year. This requirement provides some protection from volatile economic factors for the Library. Once funding is approved by the funding agents, an operating budget is prepared and approved by the Board. In or around midyear, a budget adjustment or amendment may be made to more accurately reflect expenses and approved funding from the funding agents. CONTACTING THE LIBRARY'S FINANCIAL MANAGER This financial report is designed to provide our citizens and creditors with a general overview of the Library's finances and to demonstrate the Library's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Sara Hightower Regional Library, 205 Riverside Parkway, Rome, Georgia 30161.
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SARA HIGHTOWER REGIONAL LIBRARY

SARA HIGHTOWER REGIONAL LIBRARY STATEMENT OF NET ASSETS JUNE 30. 2004
ASSETS Cash and Cash Equivalents Accounts Receivable. Net
Federal Government Other Capital Assets Equipment Library Collections Less: Accumulated Depreciation
Total Assets
LIABILITIES Accounts Payable Long-Term Liabilities
Due Within One Year Total Liabilities NET ASSETS
Invested in Capital Assets, Net of Related Debt Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

796,707

621 11,771

382,073 4,106,564 -3,333,270

$ ===1:l:9=6=4==4=66=

$

35,595

51 289

$

86884

$

1,155,367

722 215

$

1877582

$ ===1=",9=6=4-=,4=66=

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

SARA HIGHTOWER 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 SeNices Public SeNices Technical SeNices Support SeNices Maintenance and Operations Information Technology
Total Governmental Activities

$ 1,372,853 $ 109,252 140,087 445,602 23 103
$ 2,090,897 $

69,887 $ 69 887 $

446,777 $ 63,284

-856, 189 -109,252 -140,087 -382,318
-23 103

510 061 $ _ _ _-_1'--,5_10~,_94_9_

General Revenues Allotments from Participating Governments Investment Earnings Miscellaneous

$

1,670,723

7,719

79 450

Total General Revenues

Change in Net Assets

$

246,943

Net Assets - Beginning of Year (Restated)

1 630 639

Net Assets - End of Year

$ ===1:!.8=7=7'=5=82=

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

SARA HIGHTOWER REGIONAL LIBRARY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30. 2004

EXHIBIT"C"

ASSETS Cash and Cash Equivalents Accounts Receivable, Net
Federal Government Other
Total Assets
LIABILITIES AND FUND BALANCES LIABILITIES
Accounts Payable FUND BALANCES
Unreserved Designated Reported in: Capital Projects Undesignated Reported in: General Fund Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

CAPITAL PROJECTS
FUND

TOTAL

$

624,564 $

621 11 771

172,143 $

796,707
621 11 771

$

636,956 $

172 143 $ ====8=09====09=9=

$

34247 $

1 348 $

35 595

$

$

602,709

$

602,709 $

$

636,956 $

170,795 $ 170 795 $

170,795 602 709 773 504

172 143 $ ====8=09====09=9=

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

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

EXHIBIT "D"

Total Fund Balance - 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
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

$

773.504

$

382.073

4,106.564

-3,333,270

1,155,367

-51 289

Net Assets of Governmental Activities (Exhibit "A")

$ ==1,,,,,8=7=7==,5=82=

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

SARA HIGHTOWER 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
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balance - Beginning
Fund Balance - Ending

GENERAL FUND

CAPITAL PROJECTS
FUND

TOTAL

$ 1,641,723 $ 482,243 27,818 69,887 7,719 81 711
$ 2,311,101 $

29,000 $ 29,000 $

1,670,723 482,243 27,818 69,887 7,719 81 711
2,340,101

$ 1,441,542 109,252 136,868 429,009 $ 23,103

$ 2,139,774 $

$

171 327 $

$ 16,593 16,593 $ 12 407 $

1,441,542 109,252 136,868 445,602 23,103
2,156,367
183 734

$

125,739 $

$

-125,739

$

-125,739 $

125,739 $

$

45,588 $

138,146 $

557,121

32,649

125,739 -125 739
0 183,734 589770

$

602,709 $

170 795 $===7;,,;,7~3~50~4~

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

SARA HIGHTOWER 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 Balance - Governmental Fund (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Depreciation Expense over Capital Outlay
In the Statement of Activities, only the gain on the sale of the equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the equipment sold.
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 (Decrease) in Compensated Absences

$

183,734

$

274,342

-206,045

68,297

-2,261

-2 827

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

$ ===2=4=6=9=4=3

The notes to the basic financial statements are an integral part of this statement. -8-

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

EXHIBIT"G"

Note 1: DESCRIPTION OF LIBRARY AND REPORTING ENTITY
REPORTING ENTITY
The Sara Hightower 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 16 members which are also trustees ofthe member library which appointed them. The Library Board membership consists of 11 members appointed from the Floyd County Library Board and 5 members appointed from the Polk County Library Board. 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 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.
While the Floyd County Library Board appoints a majority ofthe Sara Hightower Regional Library's Board, the Floyd County Library Board is neither able to impose its will upon the Library nor is there a financial benefit/burden relationship between the two boards as defined by Governmental Accounting Standards Board. The Sara Hightower Regional Library is therefore considered to be a related organization of the Floyd County Library Board.
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 Sara Hightower 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.

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

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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 Federal, State and Local sources to be used for the acquisition, construction or renovation of major capital facilities.
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
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SARA HIGHTOWER REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

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, 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. Proceeds of acquisitions under capital leases are reported as other financing sources.

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 Sara Hightower 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

$ 557,121 32,649

Governmental Funds July 1, 2003 Capital Assets
Balance July 1, 2003 Adjustments to Prior Year Balance Accumulated Depreciation Compensated Absences

$ 589,770

$ 5,414,613 -996,493

4,418,120 -3,328,789
-48,462

Net Assets Beginning (See Exhibit "B")

$ 1,630.639

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. 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.

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

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 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 Collections

$

3,000 4 to 20 years

All

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 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. If a 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.

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

EXHIBIT"G"

Note 3: DEPOSITS
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(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 $855,752. The amounts of the total bank balances are classified into three categories of credit risk:
Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the Library or by the Library's agent in the Library's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the Library's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the Library's name.)
The Library's deposits are classified by risk category at June 30, 2004, as follows:

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

EXHIBIT"G"

Note 3: DEPOSITS

Risk Category

Bank Balance

1

$ 100,000

2

755,752

3

0

Total Note 4: CAPITAL ASSETS

$==8==55="=,7==5==2

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

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

Balances July 1, 2003
(Restated)

Increases

Balances Decreases June 30, 2004

$ 422,585 $ 22,970 $ 63,482

3,995,535

251,372

140,343

$ 382,073 4,106,564

321,631 3,007,158

15,691 190,354

61,221 140,343

276,101 3,057,169

$1,089.331 $ 68.297 $ 2,261 $ 1 155 367

Current year depreciation expense by function is as follows:

Public Services Support Services

$ 192,586 13 459

$===2===0=='6,===04===5 Note 5: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2004, consisted of the following:

Transfer to Capital Projects

Transfer From General Fund
$===1=25-,7~3='=9

- 14 -

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

EXHIBIT"G"

Note 5: INTERFUND TRANSFERS

Transfers are used to move funding from the General Fund to the Capital Projects Fund as supplemental funding source for renovation projects and equipment purchases.

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 torts, assets, errors or omissions 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 of the past three years.

The Library has elected to self-insure for all losses related to acts of God. The Library has not experienced any losses related to this risk 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 years.

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

Position Covered

Amount

All Employees

$

10,000

Note 7: 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. The Library uses the vesting method to compute compensated absences.

The changes in Long-Term Debt during the fiscal year ended June 30, 2004, were as follows:

- 15 -

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

EXHIBIT"G"

Note 7: LONG-TERM DEBT

Governmental Funds
Compensated Absences

Balance July 1, 2003

$

48,462

Additions Annual Leave Earned

49,590

Deductions Annual Leave Utilized

46,763

Balance June 30, 2004
Portion of Long-Term Debt Due within One Year

$==5===-1,==28===9 $_ _"'-'51=,2=8'--"--9

Note 8: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all librarians and clerical personnel employed by regional and county libraries are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe Library who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The Library makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

- 16 -

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

EXHIBIT"G"

Note 8: RETIREMENT PLANS
Fiscal Year
2004 2003 2002

Percentage Contributed
100% 100% 100%

Required Contribution
$ 101,476 $ 111,821 $ 99,660

- 17 -

SARA HIGHTOWER 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
Excess of Revenues over (under) Expenditures
OTHER FINANCING USES
Other Uses
Net Change in Fund Balances
Fund Balances - Beginning

NONAPPROPRIATED BUDGET

ORIGINAL

FINAL

ACTUAL AMOUNTS

$

1,669,210 $ 1,743,524 $

469,618

482,659

2,200

27,200

7,000

40 800

$

2,213,828 $ 2,228,383 $

1,641,723 482,243 27,818 69,887 7,719 81 711
2 311101

$

1,402,439 $ 1,540,672 $

137,959

138,759

331,837

352,898

341,593

277,183

25,760

$

2,213,828 $ 2,335,272 $

$

0 $ -106,889 $

1,441,542 109,252 136,868 429,009 23103
2139 774
171,327

$

0 $ -106,889 $

557 121

557 121

-125 739 45,588 557 121

Fund Balances - Ending

$

557 121 $

450,232 $ ===6=0=2"=7=09=

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 -

SARA HIGHTOWER 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 of Operations Department of Technical and Adult Education Talking Book Centers

SCHEDULE "2"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

272,375

1,500

64,565

63,284

80 519

$ ====4=8=2,=24=3=

See notes to the basic financial statements.

-20-

SARA HIGHTOWER REGIONAL LIBRARY SCHEDULE OF FEDERAL REVENUE
YEAR ENDED JUNE 30. 2004
AGENCY/FUNDING GRANT Museum and Library Services, Institute of Through Board of Regents of the University System of Georgia Library Services Technology Grant State Library Program

SCHEDULE "3"
GOVERNMENTAL FUND TYPE GENERAL FUND
$ =======2=7=8=18=

See notes to the basic financial statements.

- 21 -

LOCAL SOURCES Boards of Education Floyd County Polk County Rome, City of City Governments Cave Spring Cedartown Rockmart Rome County Governments Boards of Commissioners Floyd Polk

SARA HIGHTOWER REGIONAL LIBRARY SCHEDULE OF LOCAL REVENUE YEAR ENDED JUNE 30, 2004

SCHEDULE "4"

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

8,000

8,000

8,000

16,012 40,643 44,589 277,325

1,133,500 $ 105,654

$

8,000

8,000

8,000

16,012 40,643 44,589 277,325

29,000

1,162,500 105 654

$

1,641,723 $

29,000 $ ===1,=67=0=,7=2=3

See notes to the basic financial statements.

-23-

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

SCHEDULE "5"

NAME
Allen, Barkley, Barnes, Barnes, Beach, Bouchard, Bowers, Bowling, Bridges, Bright, Broome, Burkhalter, Carlson, Cleveland, Cooley, Couch, Daniels, Dollar, Dollar, Doyle, Drummond, Duden, Early, Early, Edmondson, Ellis, Evans, Evans, Feld, Fennell, Fingerle, Frazier, French, Fuller, Gibbons, Gilbert, Gillespie, Grant, Guthrie, Hall, Hall, Hampton, Hardy, Hargett, Harmison, Harrison, Havens, Head, Holt, Howard, Kinzer, Kirkpatrick, Kirkpatrick, Lackey, Lance, Mann, Martin, Millican,

Randall J. Allison L. Angela T. Patti Lynn Teia Marie Harvey L. James D. Mark Gerald Jane C. TommyR. Sandra J. Sara G. Susan M. Sharon C. Susan Sexton Julie A. David M. Edward L., Jr. Stephanie D. James D. Regina Ann Ruth Ann Judy D. Tamatha Leigh Brucew. Theresa M. Barbara P. James David Jennifer Ann Amber Candice A. Lauren Gay Brian Alisha Dawn Mary B. Anne E. Jewell S. Jeannie I. Katherine Jennifer M. Kathryn C. DawnW. Tiffany Rachel Fait Jennifer J. Kimberly D. Sarah Ashley Stephen R. Jennifer Gail Valerie M. Jacqueline D. Joan K. R. Diane E. Kayla Anne Jeanne Lynn Amanda L. Patricia

TITLE CATEGORY

Library Assistant

$

Specialist

Library Assistant

Library Assistant

Library Assistant

Branch Manager/Supervisor

Security

Library Assistant

Support/Clerical Staff

Janitor/Custodian

Specialist

Library Assistant

Specialist

Library Assistant

Director

Library Assistant

Library Assistant

Branch Manager/Supervisor

Library Assistant

Certified Librarian

Library Assistant

Bookkeeper

Library Assistant

Library Assistant

Security

Library Assistant

Branch Manager/Supervisor

Specialist

Library Assistant

Library Assistant

Library Assistant

Library Assistant

Library Assistant

Specialist

Para-professional

Specialist

Library Assistant

Library Assistant

Specialist

Library Assistant

Library Assistant

Library Assistant

Library Assistant

Library Assistant

Library Assistant

Library Assistant

Library Assistant

Certified Librarian

Library Assistant

Library Assistant

Library Assistant

Library Assistant

Library Assistant

Branch Manager/Supervisor

Library Assistant

Library Assistant

Library Assistant

Library Assistant

- 24-

SALARIES

TRAVEL

23,255 $
19,749 25,205
4,693 347
16,398 5,897 140
29,291 7,743
32,802 2,909
33,042 29,003 67,448
1,154 15,235 38,270
1,453 59,875 22,274 39,893 24,462
222
84
1,316 39,893 35,423
6,474 717
2,779 1,360 15,627 16,910 27,561 13,826 16,324 18,018 14,733 19,872 4,328 25,205
360 2,481 16,732
163 365 49,391 1,391 164 3,856 1,349 1,459 33,620 865 22,161 4,539
90

16 9
27
88 86 2,131 27 80 988 78
35
161
75

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

SCHEDULE "5"

NAME
Mills, Mills, Morgan, Niedermeier, Parris, Pearson, Penn, Perrow, Perry, Pruitt, Raine, Reid, Rogers, Russell, Ryan, Schulz, Smith, Smith, Smith, Stanley, Stephens, Sutton, Taylor, Thornbury, Tilley, Treadaway, Vanmeter, Wallace, Ward, Webb, Wheeler, White, White, Wilkerson, Woodard,

DianaC. Jennifer N. Timothy Tracey Jaime Liana Kristin N. Zina A. Tammy Jean Jessica Leigh Rosa Lee Theodore M. James Phil Lula Carole Lucie Michael Sean Barbara F. Cindi Leticia Mya Leigh Philip Wesley Andrea R. Michael T. Carolyn A. Cassie Lynn Courtney Lisa A. Brenda Jo Derrick T. Deana M. Amanda Dawn Janet Hefner Mary Ann Michael Savannah Jean Carolyn D. Frances

Totals per Report

TITLE CATEGORY
Certified Librarian Library Assistant Security Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Specialist Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Support/Clerical Staff Library Assistant Library Assistant Specialist Library Assistant Library Assistant Library Assistant Library Assistant

SALARIES

TRAVEL

$

52,998 $

240

3,316

7,213

14,585

1,335

731

24,762

3,554

10,825

4,852

2,897

20,181

2,987

21,882

3,110

20,053

949

9,398

472

1,398

21,755

530

14,240

67

706

4,738

20,222

1,483

9,991

7,783

3,101

28,853

86

342

1,247

4,214

4 396

$

1,231,295 $===4==1=9=4

See notes to the basic financial statements.

-25-