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SOUTHEASTERN COLORADO WATER CONSERVANCY DISTRICT <br />NOTES TO FINANCIAL STATEMENTS <br />DECEMBER 31, 2005 <br />NOTE 9 -RISK MANAGEMENT <br />The District is exposed to various risks of loss related to torts, property and casualty, errors and omissions, <br />injuries to employees and health claims. Risks of loss from property and liability coverage are covered by the <br />District's participation in the Colorado Special District's property and liability pool which is a separate and <br />independent governmental public entity risk pool formed through intergovernmental agreement by member <br />special districts to provide defined liability and property coverage. The aggregate limit of losses paid by the <br />pool for property claims is limited to $1,000,000 with commercial company reinsurance covering any losses in <br />excess of that amount up to $3,000,000. All other risks of loss are handled by the purchase of commercial <br />insurance. <br />NOTE 10 -EMPLOYEE BENEFITS <br />The District maintains a qualified defined contribution plan covering all of its existing employees. The plan <br />was formed under Section 401(a) of the Internal Revenue Code. The District is the plan administrator but has <br />designated administration of the plan to Equitable Life Assurance. The plan provides for employer <br />contributions of 10% of compensation and the District contributed $50,485 to the plan during 2005. The plan <br />is administered under the terms outlined in the plan document and may be modified or amended as outlined by <br />the plan document. <br />In conjunction with the above described plan, the District also maintains an Internal Revenue Code Section <br />457 plan which provides for employee contributions and a District match of up to 3% of employee's base pay. <br />During the year ended December 31, 2005, the employees contributed $15,563 to the plan and the District <br />contributed $12,529. <br />NOTE 11-COMMITMENTS AND CONTINGENCIES <br />Colorado voters passed an amendment to the state constitution which contains several limitations, including <br />revenue raising, spending abilities and other specific requirements affecting state and local governments. The <br />amendment, commonly known as the Tabor amendment, is complex and subject to judicial interpretation; <br />however, the District believes it is in compliance with the requirements of the amendment. The District has <br />made certain interpretations of the amendment's language in order to determine its compliance. <br />The District has contracted with the U.S. government to repay approximately $63 million of costs incurred by <br />the U.S. government in the construction of the Fountain Valley conduit which is operated by the Fountain <br />Valley Authority (the Authority). A related contract with the Authority provides that the Authority will pay an <br />annual conveyance service charge to the District in an amount equal to the payment due the U.S. government. <br />Terms of the contract provide that the District is not responsible for repayment in the event of default by the <br />Authority. The 2005 charge and related revenue totals $4,877,576. The outstanding obligation at December <br />31, 2005 is estimated at approximately $76,713,820. <br />-31- <br />