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COLORADO WATER PROTECTIVE <br /> AND <br /> DEVELOPMENT ASSOCIATION <br /> NOTES TO FINANCIAL STATEMENTS <br /> DECEMBER 31, 2011 <br /> Note 1 —Brief history and description of Colorado Water Protective and <br /> Development Association. <br /> The Colorado Water Protective and Development Association is a non-profit corporation, <br /> incorporated in the State of Colorado in 1965. The stated primary purpose of the <br /> association is to protect and develop the underground and surface waters of the Arkansas <br /> River Basin, Colorado. The membership is composed of individuals, corporations, <br /> municipalities, and other entities that own or control wells within the Arkansas River <br /> Basin, Colorado. The board of directors; selected annually, is composed of no more than <br /> two directors from each county in the Arkansas River Basin, Colorado, who are properly <br /> selected by members who reside in the county and no more than one director selected by <br /> the municipal entities. <br /> State rules and regulations governing use of ground water in the Arkansas River Basin, <br /> Colorado, curtails well diversions without proper augmentation. The primary function of <br /> the Colorado Water Protective and Development Association has been to assist in <br /> providing augmentation water to replace depletions resulting from member wells; <br /> however, CWPDA acts only as a facilitator in the process, as the final responsibility for <br /> proper augmentation rest with the well owner. <br /> Note 2—Significant Accounting Policies <br /> The financial statements have been prepared on the accrual basis of accounting, which <br /> recognizes revenues when earned and expenses when liability for them is incurred. The <br /> statements are prepared in accordance with fund accounting concepts for non-profit <br /> organizations. <br /> The preparation of financial statements in conformity with generally accepted accounting <br /> principles requires management to make estimates and assumptions that affect certain <br /> reported amounts and disclosures. Accordingly, actual results could differ from those <br /> estimates. <br /> Cash and Cash Equivalents <br /> For purposes of the Statement of Cash Flows, the Association considers all highly liquid <br /> investments with a maturity of three months or less when purchased to be cash <br /> equivalents. <br /> 5 <br />