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Stonegate Village Metropolitan District NOTES TO FINANCIAL STATEMENTS December 31, 2006 Note 1: Summaiv of Significant Accounting Policies A. Definition of reporting enti Stonegate Village Metropolitan Distinct (the District), aquasi-municipal corporation, was organized on July 20, 1983 and is governed pursuant to provisions of the Colorado Special District Act. The District's service area is located in Douglas County, Colorado. The District provides construction of arterial streets and landscaping, installation of storm drainage facilities, water and sanitation supply and distribution facilities, construction and maintenance of recreation facilities, parks and trails. Effective as of November 30, 1996, as a result of the Second Amended and Restated Regional Facilities Construction Agreement dated November 22, 1996 with Lincoln Park Metropolitan District, the operation and ownership of the Water and Sewer Funds was conveyed to the District. The District currently provides water and sewer services to both districts' properly service area. The District has no employees and contracts for all of its management and professional services. The District follows the Governmental Accounting Standards Board (GASB) accounting pronouncements which provide guidance for determining which governmental activities, organizations and functions should be included within the financial reporting entity. GASB pronouncements set forth the financial accountability of a govenunental organization's elected governing body as the basic criterion for including a possible component governmental organization in a primary government's legal entity. Financial accountability includes, but is not limited to, appointment of a voting majority of the organization's governing body, ability to impose its will on the organization, a potential for the organization to provide specific financial benef is or burdens and fiscal dependency. As of December 31, 2006, no component unit has been identified as reportable to the District, nor is the District a component unit of any other primacy governmental entity. The following is a summary of the more significant policies: B. Basis of presentation The government-wide financial statements (i.e. the statement of net assets and the statement of activities) report information on all of the non-fiduciary activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-[y~e activities, which rely to a significant extent on fees and charges for support. 10