FY 2005 MWMC Annual Financial Statements

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METROPOLITAN WASTEWATER MANAGEMENT COMMISSION NOTES TO FINANCIAL STATEMENTS . June 30, 2005 and 2004 i ___ NOTE A -SUMMARY OF SIGI\~ICANT ACCOUNTING POLICIES The Metropolitan Wastewater Management Commission (MWMC) (a component unit of the City of Springfield, Oregon) was established on February 9, 1977 through an intergovernmental agreement among Lane County and the Cities of Eugene and Springfield. It was formed to construct, operate and maintain regional sewage facilities. The Commission is composed of seven. voting members from Eugene, Springfield and Lane County. Three of the seven . members aze elected officials from each of the partner agencies' governing bodies. The financial operations of MWMC are .reported as an entity using enterprise fund accounting. It is MWMC's intent that the costs of providing services to users in the Service District on a continuing basis will be financed or recovered primarily through an equitable, district-wide fee levied on all user classes. The annual budget is prepared for management purposes only. MWMC distinguishes operating revenue and expenses from non-operating items. Operating revenues and expenses generally result from providing services to its users. The principal operating revenues involve charges for services, and the major operating expenses include the costs of plant operation and maintenance, administration and depreciation of capital assets. All revenues and expenses not meeting these defmitions are reported in these financial statements as non-operating revenues and expenses. The City of Springfield performs all administrative duties for MWMC in accordance with the provisions of a July 14, 1983 service agreement,. which was updated and reaffirmed in 2001. The City of .Eugene performs all operations and maintenance duties for MWMC under the same updated service agreement. The agreement is part of an arrangement between the Cities of Eugene and Springfield, Lane County and MWMC whereby the two Cities perform all necessary operational and staff support activities of MWMC. The Commission has elected to apply all applicable GASB pronouncements as well as Financial Accounting Standards Boazd (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions and Accounting Research Bulletins (ARB) issued on or before November 30, 1989 unless those pronouncements conflict with or contradict GASB pronouncements. Accordingly, the accounting polices of the Commission conform to generally accepted accounting principles (GAAP) as applicable to governmental entities reporting as a proprietary activity. The following is a summary of the more significant policies. Reporting Entity These financial statements include all funds, organizations, departments, and offices that are not legally separate from the Commission.. The City of Springfield, Oregon, under the criteria of the GASB, considers the Commission to be a component unit. The City provides all administrative functions for MWMC in accordance with an intergovernmental agreement. Given the nature and significance of MWMC's relationship to the City, the City believes it would be misleading to exclude MWMC from its basic financial statements. Basis of Accounting The financial operations of MWMC are accounted for using the accrual basis of accounting. 'As such, revenues are recognized when they are earned and expenses are. recognized when they are incurred. All activities of the MWMC are accounted for within a single proprietary (enterprise) fund. Proprietary funds aze used to account for operations that are (a) fmanced and operated in a manner similar to a private .business enterprises where the intent of the governing body is that the cost (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be fmanced or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. ~_ ~_ ~= 13