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UPPER COLORADO RIVER COMMISSION Notes to Financial Statements June 30, 1998 11 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES History and Activitie The Upper Colorado River Commission was formed pursuant to the terms of the Upper Colorado River Basin Compact on October 1 1, 1948, and consented to by the Congress of the United States of America by Act on April 6, 1949, as an administrative agency representing the Upper Division States of the Colorado Basin, namely Colorado, New Mexico, Utah and Wyoming. The Commission consists of one commissioner representing each of the four states and one representing the United States of America. The activities of the Commission are conducted for the purpose of promoting and securing agricultural and industrial development of the Upper Basin's water resources. The Commission is the reporting entity and it approves the budget. The Commission hires a director and other personnel to administer the day-to-day activities of the Commission. The Commission is exempt from Federal income taxes under provisions of Section 5011c)(1) of the Internal Revenue Code. The Commission is also exempt from state income taxes. Basis of Accountin The financial statements are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, expenditures are recorded at the time liabilities are incurred. Revenues are recognized as received except for revenue susceptible to accrual and revenues of a material amount that have not been received at the normal time of receipt. Revenues susceptible to accrual are those that are both measurable and available to finance the Commission's operations during the year. Budgets and Budgetary Accoun Annual budgets are prepared on the modified accrual basis of accounting and adopted as required by law. The Commission approves the annual budget in total and by major sub-items as identified in the statement of revenues, expenditures and changes in fund balance -budget and actual. The Executive Director has authority to transfer budget accounts within the sub-items with Commissioner approval required to transfer monies between expenditure categories. The budget amounts shown in the financial statements are the final authorized amounts as revised during the year. 80