FY 2005 MWMC Annual Financial Statements

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METROPOLITAN WASTEWATER MANAGEMENT COMMISSION NOTES TO FINANCIAL STATEMENTS June 30, 2005 and 2004 - NOTE A -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued The accounting and fmancial reporting treatment applied to the MWMC is determined by its measurement focus. The transactions of the MWMC are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operations are included on the balance sheet. Net assets (i.e.; total assets net of total liabilities) are segregated into three categories: invested in capital assets, net of related debt; restricted for capital improvements; and unrestricted net assets. The preparation of fmancial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date, and reported amounts of revenues and expenses during the reporting period. An estimate is used to determine depreciation expense. Cash and Investments MWMC participates in a cash and investment pool maintained by the City of Springfield for all funds under the City's administrative control. The amount reported as cash and investments are the MWMC -share of the total City of Springfield cash and investment pool. MWMC does not maintain bank accounts or investments separate from the City's investment pool. State statues authorize the Ciry to invest in obligations of the U.S. Treasury and its agencies, bankers' acceptances; high grade commercial paper; the State of Oregon Local Government Investment Pool and repurchase agreements. Investments are stated at fair value. For purpose of the statement of cash flows, cash and investments in the City-wide investment pool (including restricted cash and investments) are considered cash and cash equivalents. The pool has the general characteristics of a demand deposit account for MWMC in that MWMC may deposit additional cash at anytime and may withdraw cash at any time without prior notice or penalty. 4. Accounts Receivable The municipal water utilities for the Cities of Eugene and Springfield bill and collect sewer user fees. The collected amounts are due to MWMC. Accordingly, MWMC records the amounts due from the local water utilities as its accounts receivable. Both utilities have historically collected over 99% of accounts receivable. Therefore. no allowance for uncollectible amounts is recorded. 5. Restricted Assets Assets whose use is restricted for construction or other purposes by provisions of state law, grants or other agreements are segregated. When both restricted and unrestricted resources are available for use it is MWMC's practice to use restricted resources first, when applicable, then unrestricted resources as they are needed. 6. Capital Assets All capital assets are valued at historical cost or estimated historical cost. Cost includes labor, materials and related indirect costs. The cost of additions, renewals and betterments is capitalized. Repairs and minor replacements are charged to operating expenses: All depreciation is accumulated and shown as a reduction of historical costs reported on the Statement of Net Assets. Depreciation has been provided over the estimated useful lives of the assets using the straight-line method.. Upon disposal of such assets, the accounts are relieved of the related historical costs and accumulated depreciation, and resulting gains and losses are reflected in income. 14