Statesboro Regional Library, Statesboro, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2006

STATESBORO REGIONAL LIBRARY
STATESBORO, 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

STATESBORO REGIONAL LIBRARY - TABLE OF CONTENTS -

SECTION I

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

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

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

7

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

8

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCE - BUDGET AND ACTUAL

GENERAL FUND

17

STATESBORO REGIONAL LIBRARY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

SCHEDULES OF REVENUE

2

STATE

18

3

FEDERAL

19

4

LOCAL

20

5 SCHEDULE OF SALARIES AND TRAVEL

21

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
July 30, 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 Statesboro 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, the major fund and the aggregate remaining fund information (Exhibits A through H) of the Statesboro 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 of contents. These financial statements are the responsibility ofthe Statesboro 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, the major fund and the aggregate remaining fund information of the Statesboro 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

Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balance - Budget and Actual, as presented on pages i through vi and page 17 are not a required part ofthe basic financial statements but are 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 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 Statesboro 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,
--:__~ LJ-~
Ru sell W. Hinton, CPA, CGFM State Auditor
RWH:as 2006ARL-41

STATESBORO REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2006
The discussion and analysis of the Library System's financial performance provides an overall review of the activities for the fiscal year ended June 30, 2006. The intent of this discussion and analysis is to look at the Library System's financial performance as a whole. Readers should also review the basic financial statements and notes to enhance their understanding of the Library's financial performance.
Overview of the Financial Statements
Statesboro Regional Library System's statements are presented in three parts: District-wide financial statements, fund financial statements, and notes to the basic financial statements.
District-wide Financial Statements
The District-wide Financial Statements are designed to provide readers with a broad overview of the Library System's finances, in a manner similar to a 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 System is improving or deteriorating.
The Statement ofActivities presents information showing how the Library's net assets changed during the most recent fiscal year. The Statement of Activities presents governmental activity expenses in the following categories: Public Services (costs of providing library services including library materials), Technical Services (costs of selecting and preparing library materials for public use), Support Services (administrative costs of providing library services), Maintenance and Operations (costs incurred for the maintenance of grounds and facilities), and Information Technology (costs associated with providing access to electronic materials and services).
Program revenues include Charges for Services (fees charged to customers) and Operating Grants and Contributions (State of Georgia and Federal grants used for library operations). General Revenues include the contribution for library operations from the Bryan, Bulloch, Candler, Emanuel, and Evans Counties (local funds), Interest Revenue, and Miscellaneous Revenue from donations and other sources.
As is evident from the Statement of Activities (Exhibit "B''.), the majority of Library System expenditures are paid from revenue provided by area city, county, and/or boards of education in the amount of $1,104,428.
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STATESBORO REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2006
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been separated for specific activities or objectives. The Statesboro Regional Library System like other state and local government entities uses fund accounting to ensure and demonstrate compliance with finance related legal requirements.
The Statesboro Regional Library System uses one governmental fund, the General Fund. This fund is accounted for using the modified accrual basis of accounting. Under this basis of accounting, revenue is posted when amounts are both measurable and available to fund current operations. Expenditures are posted when amounts will be disbursed in the near future (typically within sixty days).
Because the focus of the fund financial statements is narrower than that of the District-wide financial statements, it is useful to compare the information presented for the governmental fund (in the fund financial statements) with similar information presented for government activities (in the District-wide financial statements).
The fund balance of $797,732 reported on the Balance Sheet: Governmental Fund (Exhibit "C") is reconciled to the total net assets of $1,579,523 in the Statement ofNet Assets (Exhibit "A"). The difference $781,791 in these is due to the fact that capital assets are not financial resources and are not reported in the funds.
In addition, it can be noted that the "Net Change in Fund Balance" of $114,041 shown in the Statement ofRevenues, Expenditures and Changes in Fund Balance (Exhibit "E") is reconciled to the "Change in Net Assets" of $101,382 in the Statement of Activities (Exhibit "B"). The difference $-12,659 is the change reported in the fund and the District-wide statements results from the fund financial statements reporting capital outlays as expenditures at the time of purchase, while the District-wide statement allocates the cost of capital assets over time through depreciation expense. (See Note 4: Capital Assets.)
Notes to the Basic Financial Statements
The Notes to the Basic Financial Statements provide additional information that is essential to the full understanding of the data provided in the District-wide and fund financial statements.
Financial Analysis - District-wide
The Statesboro Regional Library System's overall financial position and operations at the District-wide level for the past two years is summarized as follows:
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STATESBORO REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2006

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Net

Year 2006 Year 2005

Change

Assets Current Assets Capital Assets, Net

$ 823,144 $ 698,209 $ 124,935

781,791

794,450

-12,659

Total Assets

$1,604.935 $1,492.659 $ 112.276

Liabilities Current Liabilities

$ 25,412 $ 14,518 $ 10,894

Net Assets Invested in Capital Assets Unrestricted

$ 781,791 $ 794,450 $ -12,659

797,732

683,691

114,041

Total Net Assets

$ 1,579,523 $ 1,478,141 $ 101,382

Total Liabilities and Net Assets

$1,604,935 $1,492.659 $ 112,276

- 111 -

STATESBORO REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2006

Table 2 Change in Net Assets

Revenues Program Revenues: Charges for Services
Operating Grants and Contributions

Governmental Activities

Fiscal

Fiscal

Net

Year 2006 Year 2005

Change

$ 85,609 658,469

$ 75,030 616,329

$ 10,579 42,140

Total Program Revenues

$ 744,078 $ 691,359 $ 52,719

General Revenues: Participating Governments Investment Earnings Miscellaneous

$1,104,428 9,448
133,283

$1,022,902 5,539
115,414

$ 81,526 3,909 17,869

Total General Revenues

$ 1,247,159 $ 1,143,855 $ 103,304

Total Revenues

$ 1,991,237 $ 1,835,214 $ 156,023

Program Expenses Public Services Technical Services Support Services Maintenance and Operations Information Technology

$1,135,636 115,401 444,387 172,977 21,454

$1,071,425 99,969
430,167 164,849 25,754

$ 64,211 15,432 14,220 8,128 -4,300

Total Expenses

$1,889,855 $ 1,792,164 $ 97,691

Change in Net Assets

$ 101,382 $ 43,050 $ 58,332

Beginning Net Assets

1,478,141

1,435,091

43,050

Ending Net Assets

$ 1,579.523 $1,478,141 $ 101,382

At June 30, 2006, the assets of Statesboro Regional Library System exceeded its liabilities by $1,579,523. A significant portion of net assets is the Library System's investment in capital assets totaling $781,791. The Libraries use the assets (furniture, equipment, books, and collections) to provide services to library customers, so they are not available to fund current operations. Unrestricted net assets in the amount of $797,732 are available to fund future library operations.

Total current assets increased $124,935 primarily due to an increase in investments of $209,276.
.. Note that cash and cash equivalents decreased by $126,749.
The net balance of capital assets decreased by $12,659 due to depreciation exceeding the value of assets added. Future replacement of capital assets is considered in the preparation of all annual budgets and in long-term budget planning.

- IV -

STATESBORO REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2006

Current liabilities reflect the amount of outstanding items in accounts payable $25,412.

Total expenses increased by $97,691 or over 5%, primarily due to increased salary and benefit expenses coupled with increases in the cost of maintenance and operations.

Financial Analysis - Fund Level

The Library's overall financial position and operations at the fund level for the past two years is summarized as follows:

Table3 Governmental Activities

Total Assets Total Liabilities

Total Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

$ 823,144 $ 698,209

25,412

14,518

Net Change
$ 124,935 10,894

Total Fund Balance

$ 797,732 $ 683,691 $ 114,041

Total Revenues

$ 1,991,237 $1,835,214 $ 156,023

Total Expenditures

$1,877.196 $ 1,761,713 $ 115,423

Total revenues for 2006 increased $156,023, primarily as a result of increased income from local funding agencies, state funding, investments from establishing a 90-day reserve of funds, and an increase in memorial gifts, particularly in Bulloch County.

Budgetary Highlights

The Business Services Department prepares funding requests for ten (10) local funding agencies on behalf of the six (6) affiliated libraries in Bryan, Bulloch, Candler, Emanuel, and Evans Counties. All funds are handled on an individual basis in each community. The Statesboro Regional Library System Library Boards approve annual budgets by June in preparation for the new fiscal year.

The operating budgets include proposed expenses and means of financing them. Individual library operating budgets are rarely revised during the year. The adopted fiscal year 2006 budgets were not amended during the year.

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STATESBORO REGIONAL LIBRARY MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2006

Table 4 Budgetary Comparison Schedule
General Fund

Budgeted Amounts

Original

Final

Actual

Variance With Final
Budget

Fund Balance Beginning of Year

$ 683,691 $ 683,621 $ 683,691 $

Q

Revenues Local Funds State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous

$1,051,630 $1,051,630 $ 1,104,428 $

628,860

628,860

650,606

7,863

36,850

36,850

85,609

9,448

49,803

49,803

133,283

52,798 21,746
7,863 48,759 9,448 83,480

Total Revenues

$1,767,143 $1,767,143 $ 1,991,237 $ 224,094

Expenditures
Current Public Services Technical Services Support Services Maintenance and Operations Information Technology Facilities Acquisition and Construction

$1,012,846 $ 1,012,846 $1,109,513 $

114,562

114,562

115,401

443,515

443,515

445,251

172,490

172,490

172,977

23,730

23,730

21,454

12,600

96,667 839
1,736 487
-2,276
12,600

Total Expenditures

$ 1,767,143 $1,767,143 $1,877,196 $ 110,053

Net Change in Fund Balance

$

0 $

0 $ 114,041 $ 114,041

Fund Balance - End of Year

$ 683,691 $ 683,691 $ 797,732 $ 114,041

Actual miscellaneous revenue $133,283 reflects gifts, memorials, United Way funding for Literacy Services in Bulloch County, and several Friends of the Library group donations.

Economic Factors and Next Year's Budget

The Library's financial position for next year is projected to remain stable. State Grant Funds are expected to increase due to State Legislative approvals for increases in salaries and materials. Local funding agencies are likely to match at least the level of funding from the previous year. Preliminary budget information forecasts approximately a 5% increase for fiscal year 2007. There are no currently known facts, decisions or conditions that are expected to have a significant effect on Statesboro Regional Library System's financial position (net assets) or result of operations (revenues, expenses, and other changes in net assets).

Requests for Information

This financial report is designed to provide the Statesboro Regional Library System's citizens, taxpayers, investors, and creditors with a general overview of the Library System's finances and to clearly illustrate the Library System's accountability for the money it receives. Questions concerning any of the information provided should be addressed to Lois M. Roberts, Director, Statesboro Regional Library System, 124 South Main Street, Statesboro, Georgia 30458.

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STATESBORO REGIONAL LIBRARY

STATESBORO REGIONAL LIBRARY STATEMENT OF NET ASSETS
JUNE 30, 2006
ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net
Local State Government Other Capital Assets Capitalized Special Collections 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

$

334,046

442,936

33,921 11,340
901

18,000 152,237 2,319,687 -1,708,133

$ ===1=,6=0=-4,=93=5=

$ _ _ _ _2--'-5,_4_12_

$

781,791

797 732

$ _ _ _1....._,5'--7-'-9,'-'-5_23'--

$ ===1=,6=0=4'=9=35=

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

$ 1,135,636 $ 115,401 444,387 172,977 21454

85,609 $

560,232 $ 98,237

-489,795 -115,401 -444,387
-74,740 -21 454

Total Governmental Activities

1,889,855 $

85609 $

658 469 $ _ _____.-1-"1,--'-4.;;..:5,.;_77--'-7-

General Revenues Allotments from Participating Governments Investment Earnings Miscellaneous

$

1,104,428

9,448

133,283

Total General Revenues

$ _ _____.1.2'-'4""-'7-"'15=-=9'--

Change in Net Assets

$

101,382

Net Assets - Beginning of Year

1 478 141

Net Assets - End of Year

$ ==--=1.,..5..7..,9,,..52..,3=

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

STATESBORO REGIONAL LIBRARY BALANCE SHEET
GOVERNMENTAL FUND JUNE 30, 2006
ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net
Local State Government Other
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

$

334,046

442,936

33,921 11,340
901

$ ===82=3=1=44=

$

25,412

797 732 $ ==8=2=3=1,=44=

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

STATESBORO 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:

Capitalized Special Collections Equipment Library Collections Accumulated Depreciation
Total Capital Assets

$

18,000

152,237

2,319,687

-1,708, 133

797,732 781 791

Net Assets of Governmental Activities (Exhibit "A")

$ ==1,=57=9=,5=2=3

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

STATESBORO REGIONAL LIBRARY

EXHIBIT "E"

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

GOVERNMENTAL FUND

YEAR ENDED JUNE 30, 2006

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

GENERAL FUND
$ 1,104,428 650,606 7,863 85,609 9,448 133,283
$ 1,991,237

$ 1,109,513 115,401 445,251 172,977 21,454 12 600

$ 1,877,196

$

114,041

683,691

$ =====i7=9=7,=73=2=

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

STATESBORO 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 Depreciation Expense over Capital Outlay
Change in Net Assets of Governmental Activities (Exhibit "B")

$

114,041

$ 175,869 -188,528

-12,659

$===10=1..,,3=8=2

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

STATESBORO REGIONAL LIBRARY STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2006
ASSETS Cash and Cash Equivalents
LIABILITIES Accounts Payable Funds Held for Others
Total Liabilities

EXHIBIT"G"

AGENCY FUNDS
$ ====1=5=23=

$

150

1 373

$ ===1=5==23=

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

STATESBORO REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 1: DESCRIPTION OF LIBRARY AND REPORTING ENTITY
REPORTING ENTITY
The Statesboro Regional Library (Library) operates pursuant to Official Code ofGeorgia Annotated Sections 20-5-40 through 20-5-59 to provide public library services with costs shared by participating local governmental agencies and grants from the State of Georgia.
The Library Board is comprised often members which are also trustees ofthe member library which appointed them. The Library Board membership consists oftwo members appointed from the Bryan County Library Board, two members appointed from the Bulloch County Library Board, two members appointed from the Candler County Library Board, two members appointed from the Emanuel County Library Board and two members appointed from the Evans County Library Board. 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 flow through funding. Membership in the Library and participation in library services is at the discretion of each participating governmental agency. The Library Board has the power to designate management, the power to retain unreserved fund balances of local and other funds for continued operations and is the lowest level of oversight responsibility for the Library's operations. The Statesboro 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 Statesboro Regional Library.
Library-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities of the overall Library, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through intergovernmental revenues and other nonexchange transactions.
The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the Library's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the Library related to the administration and support of the Library's programs, such as office and maintenance personnel and accounting) are not allocated to programs.

-8-

STATESBORO REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the Library's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. 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.
The Library reports the following fiduciary fund type:
Agency funds account for assets held by the Library as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The Library-wide governmental and fiduciary fund 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.
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STATESBORO REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

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. 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 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 and equity investments 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 of return 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

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STATESBORO REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(8) Obligations of other political subdivisions ofthe State of Georgia.

RECEIVABLES

Receivables consist ofamounts due from grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the Library-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost 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 Capitalized Special Collections

$

5,000 5 to 10 years

$

5,000

10 years

$

5,000

NIA

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 of money which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value ofsuch 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.

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STATESBORO REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
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,
(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 $811,099. 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.

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STATESBORO REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

The Library's deposits are classified by custodial credit risk category at June 30, 2006, as follows:

Custodial Credit Risk Category

Bank Balance

1

$ 493,867

2

313,526

3

3,706

4

0

Total

$====""8==11-,0=9==9

CATEGORIZATION OF INVESTMENTS Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a 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 of the Library's total investments was $45 and this entire amount consisted ofcommon stock which was insured or registered, or securities held by the Library or the Library's agent in the Library's name.

Note 4: CAPITAL ASSETS

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

- 13 -

STATESBORO REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 4: CAPITAL ASSETS

Balances July 1, 2005

Increases

Decreases

Balances June 30, 2006

Governmental Activities

Capital Assets, Not Being Depreciated:

Capitalized Special Collections

$

18,000 $

0 $

0 $

18,000

Capital Assets Being Depreciated Equipment Library Collections

$ 176,091 $ 2,284,687

20,280 $ 155,589

44,134 $ 152,237

120,589

2,319,687

Less Accumulated Depreciation for: Equipment Library Collections

135,621 1,548,707

21,275 167,253

44,134 120,589

112,762 1,595,371

Total Capital Assets, Being Depreciated, Net $ 776 450 $

-12,659 $

0 $ 763 791

Governmental Activity Capital Assets - Net $ 794.450 $

-12.659 $

0 $ 781.791

Current year depreciation expense by function is as follows:

Public Services Support Services

$ 177,652 10,876

$=~1=88-,5==2==8
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 and acts of God.
The Library has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions, job related illness or injuries to employees and flood, mudslide, and mudflow. 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 ofGod, except for flood, mudslide, and mudflow. The Library has not experienced any losses related to these risks in the past three years.
The Library has purchased surety bonds to provide additional insurance coverage as follows:

Position Covered
All Employees All Board Treasurers

Amount

$

15,000

$

15,000

- 14 -

STATESBORO REGIONAL LIBRARY NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

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 9.24% 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%

$ 88,296 $ 86,014 $ 81,548

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STATESBORO 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 Facilities Acquisition and Construction
Total Expenditures
Net Change in Fund Balance
Fund Balance - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS

$

1,051,630 $

1,051,630 $

1,104,428

628,860

628,860

650,606

7,863

36,850

36,850

85,609

9,448

49 803

49 803

133 283

$

1 767 143 $

1 767 143 $

1,991,237

$

1,012,846 $

1,012,846 $

1,109,513

114,562

114,562

115,401

443,515

443,515

445,251

172,490

172,490

172,977

23,730

23,730

21,454

12 600

$

1 767 143 $

1 767 143 $

1 877 196

$

0 $

0 $

114,041

683 691

683 691

683 691

Fund Balance - Ending

$

683 691 $

683 691 $ ======7=9=7=7=32=

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 balance 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 -

STATESBORO 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 Repairs and Maintenance

SCHEDULE "2"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

501,886

50,483

86,897

11 340

$ ====65=0=,6=06=

See notes to the basic financial statements.

- 18 -

STATESBORO 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
$ =====7=86=3=

See notes to the basic financial statements.

-19-

STATESBORO REGIONAL LIBRARY SCHEDULE OF LOCAL REVENUE YEAR ENDED JUNE 30, 2006
LOCAL SOURCES County Boards of Education Bryan County Bulloch County Candler County City Governments Claxton Metter Swainsboro County Governments Boards of Commissioners Bryan Bulloch Candler Emanuel Evans

SCHEDULE "4"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

4,500

12,000

22,079

771 56,771 104,383

207,775 449,000
56,183 105,350
85 616

$ ===1='=10=4=,4=2=8

See notes to the basic financial statements.

- 20 -

STATESBORO REGIONAL LIBRARY SCHEDULE OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2006

SCHEDULE "5"

NAME
Anderson, Nancy K. Asbell, Cameron M. Atkinson, Jack Bacon, Barbara K. Barker, Kathryn T. Bolton, Virginia F. Bragg, Alicia Kim Buxton, Ann C. Carter, Andrea L. Collins, Gladys DeFoe, Adrienne L. Deloach, Charlotte B. Drake, Tara Anne Durham, Jennifer M. Fay, Cora E. Glisson, Judy C. Griffin, Maxine Rose Gross, Irene Marie Hadden, Kathryn Louise Hein, Rebekah Joy Herrington, David E. Hodges, Melinda A. Howard, Anglenette R. Hugensmith, Carolyn G. Humphries, Linder A. James, Christine Louise Johnson, LaTashaR. Kinnion, Judith E. Lee, Sue F. Lora, Ashley D. McCarthy, Evelyn C. McDuffie, Elaine H. Meadows,RachelM. Moore, Barbara L. Moore, Lucy F. Morris, Tia Nicole Mosley, Angela J. Nubern, Nancy D. Odom, Nancy B. Palmer, Judy D. Pierce, Douglas Reid Rickerson, Robert J. Roberts, Lois M. Royal, Sandra G. Samer, Linda H. Scott, Patti C. Sowards, Sharon S. Strickland, Janice W. Sullivan, Karen A. Taylor, Don V. Watkins, Betty 0. Weinberger, Paul Whiddon, Shainia A. Williams, Minnie K. Williford, Lora C. Varley, Carol Anne

TITLE CATEGORY
Circulation Manager Library Assistant Library Manager Library Assistant Library Manager Library Assistant Library Assistant Assistant Library Manager Library Assistant Library Assistant Library Assistant Assistant Library Manager Library Assistant Assistant Director Assistant Director Librarian Assistant Library Manager Library Assistant Student Assistant Student Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Library Assistant Student Assistant Bookkeeping Assistant Bookkeeping Assistant Student Assistant Library Manager Youth and Family Services Coordinator Student Assistant Library Assistant Library Assistant Student Assistant Library Assistant Assistant Library Manager Library Manager Library Assistant Student Assistant Librarian Library Director Bookkeeper Assistant Library Manager Library Assistant Library Assistant Librarian Library Assistant Librarian Library Assistant Library Manager Library Assistant Administrative Assistant Library Assistant Student Assistant

SALARIES

TRAVEL

$

26,166

21,593

27,518 $

181

3,710

24,929

663

4,242

4,387

22,859

436

3,189

3,316

8,428

53

13,015

106

2,218

57,869

2,075

63,179

1,202

62,579

9,973

94

4,115

2,332

2,001

22,071

10,843

309

21,967

24,628

23,443

1,136

560

23,547

297

28,578

319

509

21,282

201

32,588

1,834

459

3,976

72

10,191

315

21,655

10,145

49

19,022

36

19,023

30

3,641

57,269

71,579

1,348

48,173

198

10,356

4,831

55

17,437

58,704

859

5,155

38,925

209

3,648

47

18,127

327

3,295

9,168

5,883

1 385

Totals per Report See notes to the basic financial statements.

- 21 -

$

1 021 132 $ ======11=0=0=0

SECTION II FINDINGS AND QUESTIONED COSTS

STATESBORO REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Reportable Condition Finding Control Number: FS-6162-06-01

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.

- 1-

STATESBORO REGIONAL LIBRARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EXPENDITURES/LIABILITIES/DISBURSEMENTS CAPITAL ASSETS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6162-06-02

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 processed according to established procedures.

Questioned Cost: NIA

Information:

Expenditures/Liabilities/Disbursements Based on a review of forty-two items, the following deficiencies were noted: 1. Two vouchers failed to include purchase orders. 2. Two items lacked evidence of receipt. 3. Two vouchers did not have original invoices attached. 4. Four vouchers were not approved by authorized personnel prior to the disbursement of funds.

Capital Assets Depreciation Expense reported on the Library's general ledger was understated by $120,589 due to a posting error. An audit adjustment was made to correct this understatement.

Cause:

These deficiencies were the result of management's failure to ensure that internal controls were established, implemented and functioning.

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 ofcontrols could impact the reporting ofits financial position and results of operations.

Recommendation:

Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

-2-

SECTION III MANAGEMENT'S RESPONSES

STATESBORO REGIONAL LIBRARY SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-6162-06-01
We concur with this finding. We will implement proper policies and controls over disaster recovery and access to financial information systems. We will conduct a risk assessment and prepare a Disaster Recovery Plan. In addition, we will develop a written password policy and require passwords to be alphanumeric with special characters. Finally, we will implement a lock-out system for repeated log-on attempts.
Contact Person: Lois M. Roberts, Regional Library Director Phone: (912) 764-1328 Fax Number: (912) 764-1348 E-mail Address: loisr@srls.public.lib.ga.us
Finding Control Number: FS-6162-06-02
We concur with this finding. We will review our processes, evaluate where we see system weakness, and revise procedures as needed. We will continue to remind employees of the importance of following established procedures. We will build a time into four (4) Staff Development Workshops to highlight pertinent topics related to the business operations of the library - explaining reasons for internal controls and the importance of following established procedures.
Contact Person: Sandra G. Royal, Business Services Manager Phone: (912) 764-1331 Fax Number: (912) 764-1349 E-mail Address: sandrar@srls.public.lib.ga.us