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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2006 <br />M. RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS <br />1. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND <br />STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE AND <br />THE GOVERNMENT -WIDE STATEMENT OF ACTIVITIES <br />The governmental fund statement of revenues, expenditures and changes in fund balance includes a <br />reconciliation between net changes in fund balance — total governmental funds and changes in net <br />assets of governmental activities as reported in the government -wide statement of activities. One <br />element of that reconciliation states that "some expenses reported in the statement of activities do not <br />require the use of current fmancial resources and therefore are not reported as expenditures in <br />governmental funds." The details of this $239 difference is as follows: <br />Compensated absences: <br />At December 31, 2005 <br />At December 31, 2006 <br />Net adjustment to increase net changes in fund balances - <br />total governmental funds to arrive at changes in net assets <br />of governmental activities. <br />Note 2 DEPOSITS AND INVESTMENTS <br />A. DEPOSITS <br />$3,059 <br />(2,820) <br />$239 <br />In accordance with Minnesota Statutes, the Organization maintains deposits at those depository banks <br />authorized by the Board, all of which are members of the Federal Reserve System. <br />Minnesota Statutes require that all Organisation deposits be protected by insurance, surety bond, or <br />collateral. The market value of collateral pledged must equal 110% of the deposits not covered by <br />insurance or bonds. <br />Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the <br />Organization Treasurer or in a financial institution other than that furnishing the collateral. Authorized <br />collateral includes the following: <br />a) United States government treasury bills, treasury notes, treasury bonds; <br />b) Issues of United States government agencies and instrumentalities as quoted by a recognized <br />industry quotation service available to the government entity; <br />20 <br />