South Georgia Regional Library, Valdosta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2007

SOUTH GEORGIA REGIONAL LIBRARY
VALDOSTA, 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

SOUTH GEORGIA REGIONAL LIBRARY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

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

SOUTH GEORGIA 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
September 17, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe Board of Regents ofthe University System of Georgia
and Director and Members of the South Georgia Regional Library Board
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities and the major fund (Exhibits A through G) of the South Georgia 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 South Georgia Regional Library's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe Library's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position ofthe governmental activities and the major fund ofthe South Georgia Regional Library, as of June 30, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2007ARL-41

The South Georgia Regional Library has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 17 is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the South Georgia Regional Library's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit ofthe basic financial statements, and in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
A copy 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:as 2007ARL-41

Lo~
sell W. Hinton, CPA, CGFM
State Auditor

SOUTH GEORGIA REGIONAL LIBRARY

SOUTH GEORGIA REGIONAL LIBRARY STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net
Other Capital Assets
Land Buildings Equipment Library Collections Less: Accumulated Depreciation
Total Assets
LIABILITIES Accounts Payable
NET ASSETS Invested in Capital Assets, Net of Related Debt Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES

$

170,454

100,000

7,413

233,583 4,357,477
497,140 4,252,521 -5,231,986

$ ===4='==38=6=,6==0=2

$ _ _ _ _...;;5-'-',6'-'-9-'-0

$

4,108,735

272,177

$ _ _ _4_,_,_38_0..,.9.._1_2

$ ===4='=38=6=,6=0=2

The notes to the basic financial statements are an integral part of this statement. - 1-

SOUTH GEORGIA REGIONAL LIBRARY STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2007

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

$ 1,162,593 $ 82,297 194,874
223,120 76 413

58,582 $

351,529 $
80,864 109,490
108

-752,482 -82,297
-114,010 -113,630
-76 305

Total Governmental Activities
General Revenues Allotments from Participating Governments Investment Earnings Miscellaneous

1 739 297 $

58 582 $ ======;,5,;4;1,;9;=91= $ $

-1,138,724
1,073,807 1,115
294 528

Total General Revenues

Change in Net Assets

$

230,726

Net Assets - Beginning of Year

4 150 186

Net Assets - End of Year

$ ====-4=38=0"=9=1=2

The notes to the basic financial statements are an integral part of this statement. -2-

SOUTH GEORGIA REGIONAL LIBRARY BALANCE SHEET
GOVERNMENTAL FUND
JUNE 30, 2007
ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net
Other
Total Assets
LIABILITIES AND FUND BALANCE LIABILITIES
Accounts Payable Deferred Revenue
Total Liabilities FUND BALANCE
Unreserved Undesignated Reported in: General Fund
Total Liabilities and Fund Balance

EXHIBIT"C"

GENERAL FUND

$

170,454

100,000

7 413

$ ===2===77=,8=6===7

$

5,690

1 991

$

7,681

270,186 $===2===77=,8=6===7

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

SOUTH GEORGIA REGIONAL LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2007

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:
Land Buildings Equipment Library Collections Accumulated Depreciation
Total Capital Assets
Some of the Library's fines and fees revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.

$

270,186

$

233,583

4,357,477

497,140

4,252,521

-5,231,986

4,108,735

1991

Net Assets of Governmental Activities (Exhibit "A")

$ =====4'=3=80=,9=1=2

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

SOUTH GEORGIA REGIONAL LIBRARY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
GOVERNMENTAL FUND 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
Total Expenditures
Net Change in Fund Balance
Fund Balance - Beginning
Fund Balance - Ending

GENERAL FUND

$

1,073,807

516,022

25,969

56,591

1,115

41 560

$

1,715,064

$

1,069,436

82,297

200,784

223,120

76 413

$

1,652,050

$

63,014

207,172

$ ===27=0=1=8=6

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

SOUTH GEORGIA REGIONAL LIBRARY RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES JUNE 30, 2007

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
Some Capital Assets acquired this year were donated. In Governmental Funds, these assets, as well as, the associated revenue are not recognized, but in the Statement of Activities, the contribution of donated Capital Assets is recognized as a miscellaneous revenue.
Fines and Fees Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in governmental funds.

$

63,014

$ 234,737 -321,984

-87,247

252,968 1 991

Change in Net Assets of Governmental Activities (Exhibit "8")

$ ===23=0=,7=26,..

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

SOUTH GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 1: DESCRIPTION OF LIBRARY AND REPORTING ENTITY
REPORTING ENTITY
The South Georgia Regional Library (Library) operates pursuant to Official Code of Georgia Annotated Sections 20-5-40 through 20-5-59 to provide public library services with costs shared by participating local governmental agencies and grants from the State of Georgia.
The Library Board is comprised of nine members which are also trustees of the member library which appointed them. The Library Board membership consists ofone member appointed from the Echols County Library Board, one member appointed from the Lanier County Library Board and seven members appointed from the Lowndes 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 ofGeorgia for State and Federal flow through funding. Membership in the Library and participation in library services is at the discretion of each participating governmental agency. The Library Board has the power to designate management, the power to retain unreserved fund balances of local and other funds for continued operations and is the lowest level of oversight responsibility for the Library's operations.
While the Lowndes County Library Board appoints a majority of the South Georgia Regional Library's Board, the Lowndes 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 South Georgia Regional Library is therefore considered to be a related organization of the Lowndes County Library.
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 ofthe South Georgia 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.

-7-

SOUTH GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

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 ofthe Library's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues.
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. Capital asset acquisitions are reported as expenditures in governmental funds.
-8-

SOUTH GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Library funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the Library's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code 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 ofGeorgia 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 ofGeorgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.
-9-

SOUTH GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Library does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks.

RECEIVABLES

Receivables consist ofamounts due for uncollected fines and fees. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do 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 of purchase (including ancillary charges). On the Library-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The Library does not capitalize book collections or works ofart. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the Library.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment Library Collections

Any Amount

$

5,000

$

5,000

$

5,000

All

NIA 15 to 20 years
40 years 5 to 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:

- 10 -

SOUTH GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Invested in capital assets, net of related debt - This represents the Library's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Unrestricted net assets - Unrestricted net assets represent resources derived from grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the general operations ofthe Library, and may be used at the discretion of the Library to meet current expenses for those purposes.
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 11 Opercent 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. At June 30, $3,317 of deposits were not secured by surety bond, insurance or collateral as specified above. The Library is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the Library's deposits.
Acceptable security for deposits consists of any one of or any combination of the following:
(I) 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

- I1-

SOUTH GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"G"

Note 3: DEPOSITS

(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 $327,321. 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

$

3,317

2

0

3

124,004

Total

Note 4: CAPITAL ASSETS

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

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SOUTH GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 4: CAPITAL ASSETS

Balances July 1. 2006

Increases

Decreases

Balances June 30, 2007

Governmental Activities

Capital Assets, Not Being Depreciated:

Land

$ 233,583 $

0 $

0 $ 233,583

Capital Assets Being Depreciated Buildings and Improvements Equipment Library Collections

$ 4,357,477 468,234 $
3,919,647

28,906 458,799 $

$ 125,925

4,357,477 497,140
4,252,521

Less Accumulated Depreciation for: Buildings and Improvements Equipment Library Collections

1,713,548 375,887
2,946,492

109,100 17,346
195,538

125,925

1,822,648 393,233
3,016,105

Total Capital Assets, Being Depreciated, Net $ 3,709,431 $ 165,721 $

0 $ 3,875,152

Governmental Activity Capital Assets - Net $ 3.943.014 $ 165.721 $

0 $ 4,108.735

Current year depreciation expense by function is as follows:

Public Services Support Services

$ 321,327 657

Note 5: RISK MANAGEMENT

$====3==21=".9===8==4

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 participates in the Association County Commissioners of Georgia Interlocal Risk Management Agency, a public entity risk pool organized in 1987 to provide an alternative source for members to acquire property and liability insurance coverage. The Agency's general objectives are to formulate, develop and administer a program of insurance on behalf of the members and to develop a comprehensive loss control program. The Agency reinsures amounts in excess of certain limits to protect itself from large losses. The payment of excess insurance for the Agency varies by line of coverage.

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.

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SOUTH GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 5: RISK MANAGEMENT

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 $1,000,000 loss per occurrence, up to $2,000,000.

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

Position Covered

Amount

Director Board of Directors All Employees

$ 500,000

$ 500,000

$

50,000

Note 6: 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 9.28% 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%

$

71,681

$

67,387

$

64,522

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SOUTH GEORGIA REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "G"

Note 7: AFFILIATED LIBRARIES DISCLOSURE
The Echols County Library, Lanier County Library and Lowndes County Library are legally separate, tax exempt organizations who participate in shared activities with the South Georgia Regional Library. These affiliated libraries do not meet the criteria for reporting as either a component unit or related entity of the South Georgia Regional Library.

- 15 -

(This page left intentionally blank)

SOUTH GEORGIA REGIONAL LIBRARY

SCHEDULE "1"

GENERAL FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL

YEAR ENDED JUNE 30, 2007

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
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS

$

1,062,200 $

1,062,200 $

1,073,807

519,814

519,814

516,022

25,969

25,969

41,850

41,850

56,591

2,000

2,000

1,115

3 700

33,700

41 560

$

1,629,564 $

1,685,533 $

1,715,064

$

1,070,116 $

1,096,085 $

1,069,436

78,458

78,458

82,297

79,663

178,396

200,784

268,900

247,762

223,120

132 427

84,832

76 413

$

1,629,564 $

1,685,533 $

1,652,050

$

0 $

0 $

63,014

202,055

202,055

207,172

3 652

3,652

Fund Balance - Ending

$

205,707 $

205,707 $ ===2=70=,1=8=6

Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 17 -

SOUTH GEORGIA REGIONAL LIBRARY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007
AGENCY/FUNDING
GRANTS Board of Regents of the University System of Georgia Office of Public Library Services Salaries Library Materials Maintenance and Operations Talking Book Centers

SCHEDULE "2"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

261,959

66,936

109,490

77637

$ ====5=1=6,=02===2

See notes to the basic financial statements.

- 18 -

SOUTH GEORGIA REGIONAL LIBRARY SCHEDULE OF FEDERAL REVENUE YEAR ENDED JUNE 30, 2007
AGENCY/FUNDING GRANT Museum and Library Services, Institute of Through Board of Regents of the University System of Georgia Library Services and Technology Act Family Literacy Program

SCHEDULE "3"
GOVERNMENTAL FUND TYPE GENERAL FUND
$ =======2=5-,9=6=9

See notes to the basic financial statements.

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SOUTH GEORGIA REGIONAL LIBRARY SCHEDULE OF LOCAL REVENUE YEAR ENDED JUNE 30, 2007
LOCAL SOURCES Boards of Education City of Valdosta Echols County Lanier County Lowndes County City Government Lakeland County Governments Boards of Commissioners Echols Lanier Lowndes

SCHEDULE "4"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

5,000

4,500

14,000

5,000

10,000

19,000 16,000 1,000,307

$ ====1,=07=3=,8=0=7

See notes to the basic financial statements.

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SOUTH GEORGIA REGIONAL LIBRARY SCHEDULE OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2007

SCHEDULE "5"

NAME
Allen, Altobello, Antonoff, Armstrong, Bennett, Berckman, Bittner, Brinson, Brower, Bulemu, Butts, Butts, Carter, Clary, Cressey, Culpepper, Culpepper, Doak, Elliott, Fisher, Gaines, Gibson, Gollihar, Greene, Gutnik, Humphrey, Hutchison, James, Jernigan, Lenz, Mathis, Mcinnes, Mcumber, Milner, Monroe, Newsom, Paulk, Peeples, Peyton, Poirier, Prout, Prudent, Pyles, Quinoes, Reames, Register, Rivera-Arriaga, Robinson, Sanders, Sirmans, Sirmons, Soler, Strickland, Thomas, Tierney, Travis, Vigerstol,

Joan Debra Deborah Jerry Paula Sara Kimberly Erline Lisa Bernard Mildred Kayla Deborah Ellen Debra Jackie Naomi Susan Sara Antonetta Elizabeth David Judith Willencia Serena Mathew Ryan Kathy Diane Kelly Eric Pam Michele Faith Tangelia Liza Christie David Madeline Pam Theresa Diane Jeanna Mary Tania Janet Pablo Latonia Beverly Harikleia Carolyn Renee Elba Sean Jamie Cathleen Sharon Patricia

TITLE CATEGORY
Library Aide Library Aide Catalog Clerk Library Aide Branch Manager Processing Library Aide Circulation Manager Branch Manager Library Aide Library Aide Library Aide Library Aide Library Aide Library Aide Branch Manager Library Aide Library Aide Bookvan Manager Reference Aide Reference Aide Director Business Manager Library Aide Childrens Librarian Maintenance Maintenance Library Aide Branch Manager Library Aide Senior Librarian Library Aide Public Relations Library Aide Library Aide Director Library Aide Systems Manager Library Aide Library Aide Administrative Assistant Library Aide Branch Coordinator Library Aide Library Aide Branch Manager Maintenance Reference Aide Branch Manager Processing Library Aide Library Aide Technical Services Library Aide Library Aide Library Aide Library Aide

Totals per report See notes to the basic financial statements.

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SALARIES

TRAVEL

$

5,865

22,838

13,352 $

121

1,471

20,632

15,342

803

25,834

21,808

173

5,074

22,433

705

17,484

12,722

21,653

85

15,086

2,034

50

13,473

22,287

5,896

22,838

8,640

676

12,228

85

19,573

7,486

3,526

626

1,680

28,101

203

3,309

53,986

155

105

9,724

87

2,420

9,259

74,468

944

26,795

114

49,917

505

473

1,313

24,326

5,948

17,247

135

1,509

10,486

610

28,101

1,137

10,072

28,551

21,133

36

5,657

308

41,820

3,937

6,591

3,683

13

24 357

1 507

$

838122 $===5~4=99=

SECTION II FINDINGS AND QUESTIONED COSTS

SOUTH GEORGIA REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

COMMUNICATION OF INTERNAL CONTROL DEFICIENCIES

The auditor is required to communicate to management and those charged with governance control deficiencies identified during the course of the financial statement audit that, in the auditor's judgment, constitute significant deficiencies or material weakness.

A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the South Georgia Regional Library's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the South Georgia Regional Library's financial statements that is more than inconsequential will not be prevented or detected by the South Georgia Regional Library's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the South Georgia Regional Library's internal control.

Any identified deficiencies in internal controls that we did not consider to be significant deficiencies and/or material weaknesses have been communicated to management and those charged with governance within a separate management letter dated September 17, 2008. Internal control deficiencies identified during the course of this engagement that were considered to be significant deficiencies and/or material weaknesses are presented below:

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Material Weakness Finding Control Number: FS-6922-07-01

Condition:

The Library failed to adequately maintain capital assets records.

Criteria:

The Library's management is responsible for designing, implementing and monitoring internal controls to ensure that capital assets are properly recorded, maintained, and documented in accordance with generally accepted accounting principles.

Questioned Cost: NIA

Information:

A review of the Library's Capital Assets policies and procedures and the related Capital Asset records disclosed the following deficiencies: (1) the Library had donated collections of $252,968 without sufficient supporting documentation, and (2) of the 20,178 volumes added during the year under review, 73 were added with a zero value.

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SOUTH GEORGIA REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Material Weakness Finding Control Number: FS-6922-07-01

Cause:

The Library's management failed to implement satisfactory controls to record and maintain its' capital asset records.

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 the reporting of its' financial position and results of operations.

Recommendation:

The Library should implement appropriate controls to ensure that capital asset activity and records are properly maintained, accurate and sufficiently documented.

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-6922-07-02

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

Information:

The Governmental Accounting Standards Board (GASB) Statement 34 reporting model requires the presentation ofboth fund level and entity-wide level statements in the Library's financial statements. Due to a lack of adequate controls over the financial statement preparation and reporting process, the auditors had to prepare the appropriate fund level and entitywide level financial statements from the Library's general ledger.

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SOUTH GEORGIA REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-6922-07-02

Cause:

The Library did not implement an adequate system of internal control over the 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.

-3-

SECTION III MANAGEMENT'S RESPONSES

SOUTH GEORGIA REGIONAL LIBRARY SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
South Georgia Regional Library's responses to the findings described below were not audited and accordingly, we express no opinion on it.
Finding Control Number: FS-6922-07-01
South Georgia Regional Library (SGRL) has taken steps to resolve this finding. The Library is a member of the Georgia Public Information Network for Electronic Service (PINES) System, and was not aware that PINES has a system to account for this transaction. PINES instructed the Library how to input the data to record the transaction. Beginning July 1, 2008, the Technical Services staff is required:
When adding donated items to the catalog, the item is listed as "GIFT" under the Statistics column in the PINES: Legacy CAT 1 box in the Copy Editor Screen.
The price of the item is calculated as: For donated secondhand books, half the original cost is listed plus $5.00 processing fee. For brought books (for example, memorials, those purchased in honor of someone, etc.) the full price of the book is listed plus $5.00 processing fee.
This is recorded under Price Box on the Copy Editor screen.
Notifications of all brought donations are sent to the Administrative Assistant once the Manager of Technical Services catalogs them.
Contact Person: Patricia Vigerstol, Manager of Technical Services Phone: (229) 333-0086 Ext. 211 Fax: (229) 339-7669
Finding Control Number: FS-6922-07-02
South Georgia Regional Library (SGRL) has taken steps to resolve this finding. It was the understanding of the Library's previous management and as had been done in previous audits, the Department ofAudits' auditors made adjustments to the general ledger and prepared certain financial reports. However, beginning July 1, 2008, SGRL converted to a new financial system, Blackbaud. This system has the capability to produce all the required reports from the general ledger. The financial statements can be presented in both fund level and entity-wide level statements as required by the Governmental Accounting Standards Board (GASB). In addition, to provide adequate internal controls, the Library purchased a small safe to better safeguard Library funds and hired a bookkeeper to work along with the business manager to maintain all the financial reporting requirements.
Contact Person: Wynette Dobard, Business Manager Phone: (229) 333-0086 Ext. 217 Fax: (229) 333-7669