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1 � Swan's Nest Metropoli#an District Notes to Financial Statements December 31, 2008 � � � � � � � ', Summary of Significant Accounting Policies (Continued) Cash Equivalents For purposes of the statements of cash flows, the District considers all highly liquid investments with maturity, when purchased, of three months or less to be cash equivalents. Capital Assets It is the District's policy to capitalize items that cost more than $500 and have a usefu( life 'rn excess of one year. Capital assets are recorded at cost except for those assets that have been contributed which are stated at estimated fair market value at the date of contribution or at developer's cost. Depreciation is computed using the straight-line method over the estimated usefui lives. Budgets and Budgetary Accounting The District is required by state s#atute to adopt an annual budget. The budget is prepared on a cash basis. The supp(ementary information on page 15 compares the budgeted activity to the actual activity and reconcites to the actual revenues earned and expenses incurred as shown in the basic financial statements. After a budget is approved it can be amended in accordance with state statute only by approval of a majority of the members of the Board of Directors. A copy of the adopted resolutions must be filed with the State Division of Local Governments. There were no supplementary appropriations or budget amendments in 2008 or 20Q7 other than during 2008 the Board of Directors resolved to amend the budget to expend all funds not required by December 31, 2008 to meet expenditure obiigations as originatly set forth in the budget into Unrestricted Operating Reserve Fund. The District's budget establishes control over the following categories of expenditures: principal and interest payments, operation and maintenance, emergency, capital outlay, and general operating. Unexpended budgeted amounts lapse at year-end. fl �