SCREVEN-JENKINS REGIONAL LIBRARY SYLVANIA, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor SCREVEN-JENKINS 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 ACTIVITIES 2 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUND 3 D RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE STATEMENT OF NET ASSETS 4 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUND 5 F RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES 6 G NOTES TO THE BASIC FINANCIAL STATEMENTS 7 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERALFUND 17 SUPPLEMENTARY INFORMATION SCHEDULES OF REVENUE 2 STATE 18 3 FEDERAL 19 4 LOCAL 20 5 SCHEDULE OF SALARIES AND TRAVEL 21 SCREVEN-JENKINS REGIONAL LIBRARY - TABLE OF CONTENTS - SECTION II FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION III 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 August 29, 2007 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 Screven-Jenkins Regional Library Board INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities and the major fund (Exhibits A through G) of the Screven-Jenkins Regional Library as of and for the year ended June 30, 2006, which collectively comprise the Library's basic financial statements as listed in the table ofcontents. These financial statements are the responsibility ofthe Screven-Jenkins Regional Library's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and the major fund of the ScrevenJenkins Regional Library, as of June 30, 2006, 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. 2006ARL-41 The Screven-Jenkins Regional Library has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 17 is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Screven-Jenkins Regional Library's basic financial statements. The accompanying supplementary information which consist ofSchedules 2 through 5, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit ofthe basic financial statements, and in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, RWH:gp 2006ARL-41 sell W. Hinton, CPA, CGFM State Auditor SCREVEN-JENKINS REGIONAL LIBRARY SCREVEN-JENKINS REGIONAL LIBRARY STATEMENT OF NET ASSETS JUNE 30, 2006 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Federal Government Capital Assets Library Collections Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Long-Term Liabilities Due Within One Year Due in More Than 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 $ 191,735 42,129 2,300 909,371 -6951549 $ ====44====9=19=86= $ 9,936 3,555 19 981 $ 33472 $ 213,822 2021692 $ 416 514 $====4=4,..9=98=6= The notes to the basic financial statements are an integral part of this statement. -1- SCREVEN-JENKINS REGIONAL LIBRARY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2006 EXHIBIT"B" EXPENSES PROGRAM REVENUES OPERATING CHARGES FOR GRANTS AND SERVICES CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS GOVERNMENTAL ACTIVITIES Current Services Public Services Technical Services Support Services Maintenance and Operations Information Technology $ 212,272 $ 26,492 292,416 57,379 14,383 14,596 $ 223,805 $ 19,584 26,129 -26,492 -292,416 -37,795 -14 383 Total Governmental Activities $=====6=0=2=,=942 $ General Revenues Allotments from Participating Governments Investment Earnings Miscellaneous 14 596 $ 243,389 $ ----'-34'--'-"'4'"-95"-'7- $ 364,247 2,775 20,365 Total General Revenues $ _ _ _-'3-8~7=38~7- Change in Net Assets $ 42,430 Net Assets - Beginning of Year 374084 Net Assets - End of Year $ -===--=4=1=6=5=14.., The notes to the basic financial statements are an integral part of this statement. -2- SCREVEN-JENKINS REGIONAL LIBRARY BALANCE SHEET GOVERNMENTAL FUND JUNE 30, 2006 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Federal Government Total Assets LIABILITIES AND FUND BALANCE LIABILITIES Accounts Payable FUND BALANCE Unreserved Undesignated Reported in: General Fund Total Liabilities and Fund Balance EXHIBIT"C" GENERAL FUND $ 191,735 42,129 2,300 $ =====2=3=6=1,.6..4..,... $ 9,936 226,228 $ ==2=3=6=1,=64= The notes to the basic financial statements are an integral part of this statement. -3- SCREVEN-JENKINS REGIONAL LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2006 EXHIBIT "D" Total Fund Balance - Governmental Fund (Exhibit "C") $ Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Library Collections Accumulated Depreciation Total Capital Assets $ 909,371 -695,549 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 226,228 213,822 -23,536 Net Assets of Governmental Activities (Exhibit "A") $ ===4=16=5=1=4 The notes to the basic financial statements are an integral part of this statement. -4 - SCREVEN-JENKINS REGIONAL LIBRARY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUND YEAR ENDED JUNE 30, 2006 EXHIBIT"E" REVENUES Local Funds State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Public Services Technical Services Support Services Maintenance and Operations Information Technology Total Expenditures Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending GENERAL FUND $ 364,247 239,099 4,290 14,596 2,775 20,365 $ 645,372 $ 214,834 26,492 288,861 57,379 14 383 $ 601,949 $ 43,423 182,805 $ =====2=2=6'=2=28= The notes to the basic financial statements are an integral part of this statement. -5- SCREVEN-JENKINS REGIONAL LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES JUNE 30, 2006 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 Capital Outlay over Expenditures Compensated absences increases 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. $ 43,423 $ 38,946 -36,384 2,562 -3,555 Change in Net Assets of Governmental Activities (Exhibit "B") $===4=2=4=30= The notes to the basic financial statements are an integral part of this statement. -6 - SCREVEN-JENKINS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "G" Note 1: DESCRIPTION OF LIBRARY AND REPORTING ENTITY REPORTING ENTITY The Screven-Jenkins 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 membership consists offive members serving on member County Library Boards who are appointed to the Regional Library Board by each County Library as specified in the by laws. The Library Board is without authority to determine the amount ofits funding, except by submission of budget requests to local governmental units from which the Library receives support and to the State of Georgia for State and Federal funding. Membership in the Library and participation in library services is at the discretion of each participating governmental agency. The Library Board has the power to designate management, the power to retain unreserved fund balances of local and other funds for continued operations and is the lowest level of oversight responsibility for the Library's operations. The Screven-Jenkins 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 ScrevenJenkins Regional Library. Library-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall Library. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through intergovernmental revenues and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Library's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the Library related to the administration and support 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. -7- SCREVEN-JENKINS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fund Financial Statements: The fund financial statements provide information about the Library's funds. Eliminations have been made to minimize the double counting of internal activities. The emphasis of fund financial statements is on major governmental funds. The Library reports the following major governmental fund: 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. 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 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. 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. -8- SCREVEN-JENKINS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the Library in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the Library to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. RECEIVABLES Receivables consist ofamounts due from grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been -9- SCREVEN-JENKINS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "G" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 $ 5,000 All 10 years 10 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. 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, - 10 - SCREVEN-JENKINS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "G" Note 3: DEPOSITS AND INVESTMENTS (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, 2006, the bank balances were $257,419. The amounts of the total bank balances are classified into four categories of custodial credit risk: Category 1 - Cash that is insured (e.g., Federal Deposit 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 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the Library's name. Category 4 - Uncollateralized. The Library's deposits are classified by custodial credit risk category at June 30, 2006, as follows: Custodial Credit Risk Category Bank Balance 1 $ 203,309 2 54,110 3 0 4 0 Total $===2==5=='7,-41==9 - 11 - SCREVEN-JENKINS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"G" Note 3: DEPOSITS AND INVESTMENTS CATEGORIZATION OF INVESTMENTS Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event ofa failure ofthe counterparty to a transaction, the Library will not be able to recover the value ofthe investment or collateral securities that are in the possession of an outside party. The Library does not have a formal policy for managing custodial credit risk. At June 30, 2006, the fair value ofthe Library's total investments was $10,000 and this entire amount consisted of a U.S. Treasury Bill. Interest Rate Risk Interest rate risk is the risk that changes in interest rates ofdebt investment will adversely affect the fair value of an investment. The Library does not have a formal policy for managing interest rate risk. At June 30, 2006, the Library's investment consisted of a U. S. Treasury Bill which had an investment maturity of less than one year. Note 4: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Governmental Activities Capital Assets Being Depreciated Library Collections Less Accumulated Depreciation for: Library Collections Governmental Activity Capital Assets - Net Balances July 1. 2005 Increases Balances Decreases June 30. 2006 $ 887,387 $ 38,946 $ 16,962 $ 909,371 676.127 -~3~6,=38~4 16,962 695,549 $ 211,260 $ 2,562 $======0 $ 213.822 Current year depreciation expense by function is as follows: Public Services $=="'=36-,3"=8===4 - 12 - SCREVEN-JENKINS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "G" 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 of loss associated with torts, assets and errors or omissions. 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. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2005 2006 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 0 $ 2,231 $ 2,231 $ 0 $ 0 $ 2,111 $ 2,111 $ 0 The Library participates in the Association County Commissioners ofGeorgia-Selflnsured Workers' Compensation Fund, a public entity risk pool organized on July 1, 1982, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The Library pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with Safety National Casualty Corporation to provide coverage for potential losses by the Fund in excess of $600,000 loss per occurrence, up to $2,000,000. The Library has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Each Library Bond Treasurer All Other Employees Amount $ 10,000 $ 200,000 - 13 - SCREVEN-JENKINS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"G" Note 6: OPERATING LEASES Screven-Jenkins Regional Library has entered into various leases as lessee for copying machines. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2006, for governmental funds amounted to $8,172. Future minimum lease payments for these leases are as follows: Year Ending Governmental Funds 2007 $ 7,782 2008 1,946 Total Note 7: LONG-TERM DEBT $====9-,7==2==8 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, 2006, were as follows: Balance July 1, 2005 Governmental Funds Compensated Absences (1) $ 19,981 Additions Annual Leave Earned 26,329 Deductions Annual Leave Utilized 22,774 Balance June 30, 2006 Portion of Long-Term Debt Due within One Year $==2=3-,5=3==6 $_ _...,3,.5..5..-.-"-5 (1) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements. - 14 - SCREVEN-JENKINS REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "G" 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: Fiscal Year Percentage Contributed Required Contribution 2006 2005 2004 100% 100% 100% $ 28,265 $ 25,380 $ 27,586 - 15 - (This page left intentionally blank) SCREVEN-JENKINS REGIONAL LIBRARY GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2006 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 $ 380,852 $ 380,852 $ 364,247 239,099 239,099 239,099 1,990 1,990 4,290 25,494 25,494 14,596 4,239 4,239 2,775 328 328 20,365 $ 652,002 $ 652,002 $ 645 372 $ 214,835 $ 214,835 $ 214,834 26,493 26,493 26,492 288,376 288,376 288,861 57,865 57,865 57,379 14 382 14 382 14 383 $ 601 951 $ 601 951 $ 601 949 $ 50,051 $ 50,051 $ 43,423 0 0 182,805 Fund Balance - Ending $ 50 051 $ 50 051 $======2=2=-6,=22==8= 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 basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. -17 - SCREVEN-JENKINS REGIONAL LIBRARY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006 AGENCY/FUNDING GRANTS Board of Regents of the University System of Georgia Office of Public Library Services Salaries Library Materials Maintenance and Operations SCHEDULE "2" GOVERNMENTAL FUND TYPE GENERAL FUND $ 207,857 11,658 19 584 $ ====2=39='=09=9 See notes to the basic financial statements. - 18 - SCREVEN-JENKINS REGIONAL LIBRARY SCHEDULE OF FEDERAL REVENUE YEAR ENDED JUNE 30, 2006 AGENCY/FUNDING GRANT Museum and Library Services, Institute of Through Board of Regents of the University System of Georgia Library Services and Technology Act State Library Program SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $====4-29===0 See notes to the basic financial statements. - 19 - SCREVEN-JENKINS REGIONAL LIBRARY SCHEDULE OF LOCAL REVENUE YEAR ENDED JUNE 30, 2006 LOCAL SOURCES Boards of Education Jenkins County Screven County County Governments Boards of Commissioners Jenkins Screven SCHEDULE "4" GOVERNMENTAL FUND TYPE GENERAL FUND $ 19,629 25,000 98,462 221 156 $ 364 247 See notes to the basic financial statements. - 20 - NAME Bartley, Blank, Boyton, Bynes, Chance, Gainey, Gilbert, Kelly, Motto, Sasser, Seemueler, Wade, Ward, Waters, Watson, Weaver, Weinberger, Williams, Youles, Young, Regina T. Sharon Genesis Jeremy Joanne R. WilmaT. Barbara W. Ebony Penny Kayla Jennifer Constance Rebecca C. Belinda S. Pauline B. Colby Wendy Lillian Kathryn E. Phillip Totals per Report SCREVEN-JENKINS REGIONAL LIBRARY SCHEDULE OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2006 SCHEDULE "5" TITLE CATEGORY Technical Services Assistant Library Assistant Library Assistant Library Assistant Library Assistant Branch Manager Extension Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Business Manager Children's Program Coordinator Circulation Manager Library Assistant Director Library Assistant Assistant Director/Operations Manager Library Assistant SALARIES TRAVEL $ 18,274 $ 41,597 1,341 3,372 4,019 17,284 19,275 4,294 3,845 180 625 8,182 12,803 22,079 21,549 3,824 67,656 3,551 64,332 10 161 17 237 303 75 11 61 141 58 1,785 303 $ 328,243 $ ===2=9=9=1 See notes to the basic financial statements. - 21 - SECTION II FINDINGS AND QUESTIONED COSTS SCREVEN-JENKINS REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Reportable Condition Finding Control Number: FS-7242-06-01 Condition: Our examination ofthe Library included a review ofgeneral controls related to their financial systems. We noted weaknesses in internal controls which we consider relevant to the Library's financial statements for the fiscal year ended June 30, 2006. Criteria: Policies and procedures should be in place to reasonably mitigate the risk of loss, manipulation or corruption of data due to internal or external threats. Questioned Cost: NIA Information: Weaknesses in internal control over financial information systems were identified at the Library. Cause: Management did not implement proper policies and controls over disaster recovery and access to financial information systems. Effect: Without satisfactory controls in place, losses, changes or misuses of data could occur and possibly not be detected. Recommendation: Management should perform a complete risk assessment to identify internal and external threats that could cause loss, manipulation or corruption ofdata maintained in the financial information system. Policies and procedures should be developed and implemented to address the weaknesses. CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Control Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7242-06-02 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, documented, processed and reported. - 1- SCREVEN-JENKINS REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Control Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7242-06-02 Information: While conducting test of controls, the following deficiencies were noted: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and check preparation functions. The bank reconciliations were not properly reviewed by an administrator not directly connected with cash operations. The bank statements for all seven bank accounts were not reconciled to the general ledger for ten of the twelve months under review. Rather than reconciling the bank statement balances to the general ledger balances the Library simply prepared a summary of activity as shown on the bank statements. Upon request, the June 2006 bank reconciliations were performed by the Library during audit field work. Two of these seven bank reconciliations were not properly reconciled to the general ledger balances. One bank reconciliation erroneously omitted a deposit in transit of$14,721.75 and the outstanding check list failed to include check numbers for all outstanding checks. A Certificate ofDeposit was understated by $546.66 due to errors when posting interest. Revenues/Receivables/Receipts The deposit preparation function was not separated from the record keeping and cash custody functions. Based on a review of eighty receipts the following deficiencies were noted: 1. Six deposits were made fifteen to fifty-three days after the funds were receipted. 2. June 2006 cash receipts for $867.55 were not deposited in the bank nor recorded on the books until August 28, 2006. 3. Numerous receipts were not recorded in numerical sequence. The deposit and posting dates indicate receipts were possibly back dated. -2- SCREVEN-JENKINS REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Control Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7242-06-02 4. Two receipts with numerical sequence dates of January 2006 were back dated to June 30, 2005. The receipts were each for $9,814.50. One receipt was "voided" and the other was "pending" according to computer generated copies of these receipts. Expenditures/Liabilities/Disbursements The record keeping function was not separated from the check writing and electronic transfer functions. Based on a review of forty-two vouchers, twenty-nine did not contain purchase orders. One electronic vendor payment included a late fee of $79.50. The Library failed to provide adequate documentation to support accounts payable. General Ledger Based on a review of all manually prepared and approved journal entries, the following deficiencies were noted: 1. All thirty-two journal entries lacked supporting documentation. 2. Two journal entry numbers were used for multiple journal entries. 3. Eight journal entries lacked adequate descriptions. 4. Dates on the journal entries were not in chronological order according to the numerical sequence. The Library's beginning fund balance per the general ledger did not tie to the prior year's ending fund balance at closing. It appears that transactions are being posted to previous fiscal years that should be closed. Numerous adjustments were made to the general ledger to record manual checks, various corrections, revenue, transfers and voided checks without journal entry documentation, journal entry reference numbers or management approval. -3- SCREVEN-JENKINS REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Control Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7242-06-02 Cause: These deficiencies were the result of management's decision to limit the number ofadministrative staffmade responsible for accounting functions and management's failure to ensure that internal controls were established, implemented and functioning. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: Management should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight for these incompatible activities. In addition, management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures. -4- SECTION III MANAGEMENT'S RESPONSES SCREVEN-JENKINS REGIONAL LIBRARY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-7242-06-01 We concur with this finding. The bookkeeper has contacted Fundware to see ifthere are procedures to ensure that data can not be lost, manipulated or corrupted. If there are procedures that can be implemented, the Director and Assistant Director will then begin the process of writing the necessary policies and procedures to ensure that there will not be a loss of data, manipulation or corruption of data. The new policy and procedure will be implemented as soon as possible. At the time of this writing we have not heard back from Fundware. Finding Control Number: FS-7242-06-02 We concur with this finding. The bookkeeper and the Director have implemented a new procedure for the bank reconciliation function. After performing the reconciliation, the bookkeeper gives the bank statements to the Director for review and she will initial each statement reflecting her review. The bank statements have now been reconciled to the general ledger per the auditor's instructions. Each outstanding check list now has the numbers ofthe checks on the list. All future statements will be reconciled per auditor's instructions. The CD interest of$546.66 has also been posted correctly. The procedures for bank reconciliations were implemented immediately, and are now in place. All deposits are now made on a daily basis and entered into the financial accounting system (Fundware) in a timely manner. Each receipt number is recorded in numerical sequence. Three individuals are involved in the cash deposit process. One employee balances the cash drawer, prepares the deposit slip, and gives the cash to the Director. The Director verifies the amount of deposit and she, or another employee that she designates, takes the deposit to the bank. The deposit information is given to the bookkeeper to record in Fundware. This corrective action for handling deposits was implemented immediately. Expenditure voucher packets will include sequential purchase order, packing slip, invoice and a copy of the check. This procedure was implemented July 2007. The Director ensures that there will not be any future electronic payments to vendors, with the exception of payment to the Teacher's Retirement Plan. New journal entry procedures have been implemented to ensure proper documentation, proper descriptions, and the Director will assign all journal entry numbers and will review and sign each journal entry before the bookkeeper can manually enter them into the Fundware system. No journal entries will be allowed to be entered on prior fiscal years, and that will ensure no change in beginning fund balances. The corrective action for journal entries began immediately. - 1- SCREVEN-JENKINS REGIONAL LIBRARY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-7242-06-02 Management has contacted a CPA to come in once a month to meet with the bookkeeper to advise on journal entries, to review trial balances and the general ledger. Management feels that this will ensure that proper controls and procedures are being implemented and will eliminate future control findings by the State Audit Department. This action was implemented in September, 2007. Contact Person: Wendy Weinberger, Director Phone: (912) 564-7526 Fax Number: (912) 564-7580 E-mail Address: wendyweinberger@sjrls.org -2 -