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 Fund balance In the fund financial statements, fund balance is divided into five classifications based primarily on the extent to which the Organization is bound to observe constraints imposed upon the use of resources reported in the governmental funds. These classifications are defined as follows: Nonspendable - Amounts that cannot be spent because they are not in spendable form, such as prepaid items. Restricted - Amounts related to externally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions. Committed - Amounts constrained for specific purposes that are internally imposed by formal action (resolution) of the Board of Directors, which is the Organization's highest level of decision -making authority. Committed amounts cannot be used for any other purpose unless the Board of Directors modifies or rescinds the commitment by resolution. Assigned - Amounts constrained for specific purposes that are internally imposed. In governmental funds other than the General fund, assigned fund balance represents all remaining amounts that are not classified as nonspendable and are neither restricted nor committed. In the General fund, assigned amounts represent intended uses established by the Board of Directors itself or by an official to which the governing body delegates the authority. The Board of Directors has adopted a fund balance policy which delegates the authority to assign amounts for specific purposes to the Administrator. Unassigned - The residual classification for the General fund and also negative residual amounts in other funds. The Organizations considers restricted amounts to be spent first when both restricted and unrestricted fund balance is available. Additionally, the Organization would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made. The Organization has formally adopted a fund balance policy for the General fund. The Organization's policy is to maintain a minimum unassigned fund balance of 35 - 50 percent of budgeted operating expenditures for cash -flow timing needs. Net position Net position represents the difference between assets and liabilities. Net position is displayed in three components: a. Net investment in capital assets - Consists of capital assets, net of accumulated depreciation reduced by any outstanding debt attributable to acquire capital assets. b. Restricted net position - Consist of net position balances restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, laws or regulations of other governments. c. Unrestricted net position - All other net position balances that do not meet the definition of "restricted" or "net investment in capital assets". Comparative data/reclassijications Comparative total data for the prior year has been presented for the fund financial statements in order to provide an understanding of the change in financial position. Certain amounts presented in prior year data have been reclassified in order to be consistent with the current year's presentation. -37-