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Stonegate Village Metropolitan District NOTES TO FINANCIAL STATEMENTS Deccmber 31, 2006 Note 1: Summary of Si~aiif cant Accounting Policies (continued Capital Projects Fund -The Capital Projects Fund is used to account for financial resources to be used for the acquisition and construction of capital equipment and facilities. The goverrunent reports the following major proprietary fund: The Enterprise Fund is used to account for operations (a) that are financed and operated in a manner similar to private business enterprises -where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the GASB. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The government has elected not to follow subsequent private-sector guidance. Enterprise funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues are charges to customers for water and sewer service. Operating expenses for enterprise funds include the costs of the services, administrative expenses, and the depreciation on capital assets. All revenues and expenses not meeting this definition are repotted as non-operating revenues and expenses. The Enterprise Fund consists of two parts, the Water Utility and the Sewer Utility. The Water Utility provides both potable and non-potable (irrigation) water to the District's citizens, while the Sewer Utility provides sanitation services. The District has deposited water and sewer tap fees to the Debt Service Fund to meet debt service requirements by Board policy since all capital outlay leas been made from bond proceeds. The District has deposited system development fees received fiom Compark Business Campus Metropolitan District (Compark), formerly Compark and E-470 Business Campus Metropolitan District, (see Note 6) to the Enterprise Fund by Board policy. 12