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MILLE LACS SOIL AND WATER CONSERVATION DISTRICT

NOTES TO THE FINANCIAL STATEMENTS

December 31,2006

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Note 1 - Summary of SiQnificant AccountinQ Policies

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Financial Reportinq Entitv

The Mille Lacs Soil and Water Conservation District is organized under the provisions of Minnesota

Statutes Chapter 103C. The District is governed by a Board of Supervisors composed of five members

nominated by voters of the District and elected to four-year terms by the voters of the County.

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The purpose of the District is to assist land occupiers in applying practices for the conservation of soil and

water resources. These practices are intended to control wind and water erosion, pollution of lakes and

streams, and damage to wetlands and wildlife habitats.

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The Mille Lacs Soil and Water Conservation District, in cooperation with the U.S. Department of

Agriculture Natural Resources Conservation Service and other agencies, provides technical and financial

assistance to individuals, groups, organizations, and governments in reducing costly waste of soil and

water resulting from soil erosion, sedimentation, pollution and improper land use.

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Each fiscal year the District develops a work plan which is used as a guide in using resources effectively

to provide maximum conservation of all lands within its boundaries. The work plan includes guidelines for

employees and technicians to follow in order to achieve the District's objectives.

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The District is not considered a part of Mille Lacs County because, even though the County provides a

significant amount of the District's revenues in the form of an appropriation, it does not retain any control

over the operations of the district.

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Generally accepted accounting principles require that the financial reporting entity include the primary

government and component units for which the primary government is financially accountable. Under

these principles the District does not have any component units.

Government-Wide Financial Statements

The government-wide financial statements (ie., the Statement of Net Assets and The Statement of

Activities) report information on all of the nonfiduciary activities of the District.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function or

segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a

specific function.

The government-wide 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 when a liability is incurred, regardless of the timing of cash flows. Grants and similar items are

recognized as revenues as soon as all eligibility requirements imposed by the provider have been met.

Fund Financial Statements

The government reports the general fund as its only major governmental fund. The general fund accounts

for all financial resources of the government.

The District's financial statements (general fund) are presented on the modified accrual basis of

accounting. Under the modified accrual basis of accounting, revenues are recognized when they become

susceptible to accrual, that is, both measurable and available. Available means collectible within the

current period or soon enough thereafter to be used to pay liabilities of the current period. Revenue

sources susceptible to accrual include intergovernmental revenues, charges, and interest. Expenditures

are recorded when the corresponding liabilities are incurred.

Intergovernmental revenues are reported in conformity with the legal and contractual requirements of the

individual programs. Generally, grant revenues is recognized when the corresponding expenditures are

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