VLAWMO Annual Financial Report 2013

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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Special assessments Special assessments represent storm sewer utility charges. These assessments are recorded as receivables upon certification to the County. Special assessments are recognized as revenue in the year they are collected or received in cash or within 60 days after year end. Governmental fund special assessments receivables are offset by deferred inflows of resources liabilities or unearned revenue in the fund financial statements. Capital assets Capital assets, which include property, plant and equipment, are reported in the applicable governmental activities columns in the government -wide financial statements. Capital assets are defined by the Organization as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets is included as part of the capitalized value of the assets constructed. Property, plant, and equipment of the Organization are depreciated using the straight-line method over the following estimated useful lives: Assets Infrastructure Equipment Deferred inflows of resources Useful Lives in Years 20-30 5-7 In addition to liabilities, the statement of financial position and fund financial statements will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The government has only one type of item, which arises only under a modified accrual basis of accounting, that qualifies as needing to be reported in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from one source: special assessments. The unavailable amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. Compensated absences It is the Organization's policy to permit employees to accumulate earned but unused vacation and sick benefits, which will be paid to the employee upon separation without the considerations of number of years of service. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements. -36-