VLAWMO Annual Financial Report 2013

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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION VADNAIS HEIGHTS, NIINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budgetary information Annual budgets are prepared on a basis consistent with accounting principles generally accepted in the United States of America for the General fund. All annual appropriations lapse at year end. The Organization does not use encumbrance accounting. During the budget year, supplemental appropriations and deletions are or may be authorized by the Board of Directors. The budget was amended by the Board of Directors in 2013. The amended budget called for expenditures exceeding revenues by $273,800. Note 3: DETAILED NOTES ON ACCOUNTS A. Deposits and investments Deposits Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the Organization's deposits may not be returned or the Organization will not be able to recover collateral securities in the possession of an outside party. In accordance with Minnesota statutes and as authorized by the Board of Directors, the Organization maintains deposits at those depository banks which are members of the Federal Reserve System. Minnesota statutes require that all Organization deposits be protected by insurance, surety bond or collateral. The market value of collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds. Authorized collateral in lieu of a corporate surety bond includes: • United States government Treasury bills, Treasury notes, Treasury bonds; • Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; • General obligation securities of any state or local government with taxing powers which is rated "A" or better by a national bond rating service, or revenue obligation securities of any state or local government with taxing powers which is rated "AA" or better by a national bond rating service; • General obligation securities of a local government with taxing powers may be pledged as collateral against funds deposited by that same local government entity; • Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by written evidence that the bank's public debt is rated "AA" or better by Moody's Investors Service, Inc., or Standard & Poor's Corporation; and • Time deposits that are fully insured by any federal agency. Minnesota statutes require that all collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Bank, or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The selection should be approved by the Organization -38-