MILLE LACS SOIL AND WATER CONSERVATION DISTRICT

NOTES TO THE FINANCIAL STATEMENTS

December 31, 2006

incurred. The District also receives an annual appropriation from the County, which is recognized as

revenue when received, unless it is received prior to the period to which its applies. In that case, revenue

recognition is then deferred until the appropriate period.

Investment earnings and revenue from sale of trees are recognized when earned. Agricultural

conservation fees and other revenue are recognized when they are received in cash because they usually

are not measurable until then.

Project expenditures represent costs that are funded from federal, state, or district revenues. State

project expenditures consist of grants to participants of the Cost-Share Program and other state

programs. District project expenditures are costs of materials and supplies in District projects.

In accordance with Governmental Accounting Standards Board Statement No. 33, Accounting and

Financial Reporting for Nonexchange Transactions, revenues for nonexchange transactions are

recognized based on the principal characteristics of the revenue. Exchange transactions are recognized

as revenue when the exchange occurs.

Budqet Information

The District adopts an estimated revenue and expenditure budget for the General Fund. Comparisons of

estimated revenues and budgeted expenditures to actual are presented in the financial statements in

accordance with generally accepted accounting principles. Amendments to the original budget require

board approval. Appropriations lapse at year-end. The District does not use encumbrance accounting.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles

requires management to make estimates and assumptions that affect the reported amounts of assets and

liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and

reported amounts of revenues and expenditures during the reporting period. Actual results could differ

from those estimates.

Assets, Liabilities and Fund Equitv Accounts

Investments are stated at fair value, except for non-negotiable certificates of deposits, which are

on a cost basis, and short-term money market investments, which are stated at amortized cost.

Capital assets are reported on a net (depreciated) basis. General capital assets are still valued at

historical or estimated historical cost.

Liabilities

Long-term liabilities, such as compensated absences, are accounted for as an adjustment to Net

Assets.

Equitv

Reserved fund balance indicates the portion of fund equity, which has been legally segregated for

specific purposes or is not appropriable for spending.

Unreserved, designated account indicates the portion of fund equity that the District has set aside

for planned future expenditures.

Unreserved, undesignated fund balance account indicates the portion of fund balance that is

available for budgeting and spending in future periods.

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