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SOUTHEASTERN COLORADO WATER CONSERVANCY DISTRICT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Under GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that use Proprietary Fund Accounting, the District has elected not to apply Financial Accounting Standards Board statements issued after November 30, 1989 to its enterprise fund. GOVERNMENTAL FUND The District reports the following major governmental fund: • The general fund is the primary operating fund of the District and is always classified as a major fund. The general fund is used to account for all financial resources of the District except those required to be accounted for in a separate fund. Major revenue sources include property taxes, specific ownership taxes, and contractual revenue. Primary expenditures include general government and debt service. PROPRIETARY FUND The following is a description of the major proprietary fund of the District: • The water activity fund was established to account for the sale and administration of return flow. This fund is also responsible for the safety of dams repayment obligation and the implementation of the preferred storage options plan. In addition, this fund accounts for water bank administration and is exploring the Arkansas Valley conduit and its associated issues. All costs are financed through charges to users and participants. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. An exception to this rule is the administrative charge imposed on the water activity enterprise fund by the general fund. Elimination of this charge would distort the direct costs and program revenues reported for the functions affected. When both restricted and unrestricted resources are available for use, it is the District's policy to use unrestricted resources first and then use restricted resources as they are needed. D. BUDGETARY PRINCIPLES The District adheres to the following procedures in establishing its budgets: On or before October 15 of each year, the executive director submits to the board of directors a proposed budget for the fiscal year commencing the following January 1. The budget includes proposed expenditures and the means of financing them. Public hearings are conducted by the board of directors to obtain taxpayer comments and the District adopts budgets for all funds. All funds, including the enterprise fund, use the current financial resources measurement focus and the modified accrual basis of accounting in preparing the budgets. Expenditure estimates in the annual budget are enacted into law through the passage of appropriation resolutions. Budgetary control exists at the total fund level and the budget amounts reported reflect all amendments enacted by the District and these amendments were approved in accordance with state law. -19-