MANAGEMENT'S DISCUSSION AND ANALYSIS

2006

The Mille Lacs SWCD's discussion and analysis provides an overview of the SWCD's financial

activities for the fiscal year ended December 31, 2006. Since this information is designed to

focus on the current year's activities, resulting changes, and currently known facts, it should be

read in conjunction with the SWCD's financial statements.

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FINANCIAL HIGHLIGHTS

Included with the Management Discussion and Analysis are the complete financial breakdowns

of the fiscal year ending December 31, 2006.

Including:

Statement of Net Assets and Governmental Fund Balance Sheet

Statement of Activities and Governmental Revenues, Expenditures and Changes in Fund

Balance

Budgetary Comparison Schedule Budget and Actual General Fund

Each financial report works closely together with the Notes to the Financial Statements.

USING THIS ANNUAL REPORT

This annual report consists of two parts: management's discussion and analysis and the basic

financial statements. The basic financial statements include a series of financial statements. The

Statement of Net Assets and the Statement of Activities provide information about the activities

of the SWCD as a whole and present a longer-term view of the SWCD's finances. For

governmental activities, these statements tell how these services were financed in the short term

as well as what remains for future spending. Fund financial statements also report the SWCD's

operations in more detail than the government-wide statements by providing information about

the SWCD's most significant funds. Since SWCD's am single-purpose special purpose

governments they are generally able to combine the government-wide and fund financial

statements into single presentations. Mille Lacs SWCD has elected to present in this format.

The Statement of Net Assets and the Statement of Activities

One of the most important questions asked about the SWCD's finances is, "Is the SWCD as a

whole better or worse off as a result of the year's activities?" The Statement of Net Assets and

the Statement of Activities report inforn1ation about the SWCD as a whole and about its

activities in a way that helps answer this question. These statements include all assets and

liabilities using accrual basis of accounting. All of the current year's revenues and expenses are

taken into account regardless of when cash is received or paid.

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