MILLE LACS SOIL AND WATER CONSERVATION DISTRICT

NOTES TO THE FINANCIAL STATEMENTS

December 31,2006

Deposits

Minn. Statutes 118A.02 and 118A.04 authorize the District to designate a depository for public funds and

to invest in certificates of deposit. Minnesota Statute 118A.03 requires that all district deposits be

protected by insurance, surety bond, or collateral. The market value of collateral pledged shall be at least

ten percent more than the amount on deposit plus accrued interest at the close of the financial institution's

banking day, not covered by insurance or bonds.

Authorized collateral includes treasury bills, notes and bonds; issues of U.S. government agencies;

general obligations rated "A" or better, revenue obligations rated "AA" or better; irrevocable standard

letters of credit issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota Statutes

require that securities pledged as collateral be held in safekeeping in a restricted account at the Federal

Reserve Bank or in an account at a trust department of a commercial bank or other financial institution

that is not owned or controlled by the financial institution furnishing the collateral.

Custodial Credit Risk Deposits

At December 31,2006, the District's deposits totaled $115,716, all of which were cash. Custodial credit

risk is the risk that in the event of a financial institution failure, the District's deposits may not be returned

to it. The District does not have a deposit policy for custodial credit risk. As of December 31, 2006, the

District's deposits were not exposed to custodial credit risk.

Note 3 - Defined Benefit Pension Plans - Statewide

Plan Description - Public Emplovees Retirement Association

The district contributes to a cost-sharing multiple-employer defined pension plan administered by the

Public Employee Retirement Association of Minnesota (PERA). The PERA provides retirement benefits

as well as disability to members, and benefits to survivors upon death of eligible members. The plan and

its benefits are established and administered in accordance with Minn. Statute Chapters 353 and 356.

PERA issues a publicly available financial report that includes financial statements and required

supplementary information. That report may be obtained by writing to the Public Employees Retirement

Association, 60 Empire Drive, Suite 200, St. Paul, Minnesota, 55103-1855.

Fundinq Policv

Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes

are established and amended by the state legislature. The District makes annual contributions to the

pension plans equal to the amount required by state statutes. PERF Basic Plan members and

Coordinated Plan members were required to contribute 9.10% and 5.5%, respectively, of their annual

covered salary. The District is required to contribute the following percentages of annual covered payroll:

11.78% for Basic Plan PERF members and 6.0% for Coordinated Plan PERF members. The District's

contributions to the Public Employees Retirement Fund for the years ending December 31, 2006, 2005

and 2004 were $3,241, $3,060 and $2,966 respectively. The District's contributions were equal to the

contractually required contributions for each year as set by Minnesota statute.

Note 4 - OperatinQ Leases

The District leases office space on a yearly basis. Under the current agreement, total costs for 2006 were

$8,617.

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