Independent Auditor's Report                                                                  1-2

Management's Discussion and Analysis                                                  3-5

Statement of Net Assets and Governmental Fund Balance Sheet                6

Statement of Activities and Governmental Fund Revenues, Expenditures

And Changes In Fund Balance                                                                 7

Budgetary Comparision Statement, Budget and Actual, General Fund         8

Notes to Financial Statements                                                                 9-13

Report on Legal Compliance                                                                    14

Report on Internal Control Over Financial Reporting and on Compliance and

other matters based on an Audit of Financial Statements Performed

in accordance with Government Auditing Standards                                     15-16

The Winona County Soil and Water Conservation District's discussion and analysis provides an overview of the District's financial activities for the fiscal year ended December 31, 2008. Since this information is designed to focus on the current years activities, resulting changes, and currently known facts, it should be read in conjunction with the financial statements.

This annal report consists of two parts: management's discussion and analysis (this section) and the basic tinancial statements. The basic financial statements include a series of financial  statements. The Statement of Net Assets and the Statement of Activities provide information about the activities of the Winona County Soil and Water Conservation District (SWCD) as a whole and present a longer-term view of the Winona County SWCD's finances. Fund financial statements, governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the Winona Com1ty SWCD's operations in more detail than the government-wide statements by providing information about the Winona County SWCD's most significant funds. Since SWCD's are single-purpose special purpose governments they are generally able to combine the government-wide and fund financial statements into single presentations. Winona County SWCD has elected to present in this format.

One of the most important questions asked abont the Winona COlmty SWCD's finances is, "Is the Winona County SWCD as a whole better or worse off as a result of the year's activities?" The Statement of Net Assets and the Statement of Activities report information about the Winona County SWCD as a whole and about its activities in a way helps answer this question. These statements include all assets and liabilities using accrual basis of acconnting, which is  similar to the accounting used by the most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid.

These two statements report the Winona County SWCD's net assets and changes in them. You can think of the Winona COlmty SWCD's net assets the difference between assets and liabilities as one way to measure the Winona County SWCD's financial health, or financial position. Over time, increases or decreases in the Winona County SWCD's net assets are one indicator of whether its financial health is improving or deteriorating.

In the Statement of Net Assets and the Statement of Activities, the Winona County SWCD presents Governmental activities. All of the Winona County SWCD' s basic services are reported here. Appropriations from the county and state finance most activities. 

Reporting the Winona County SWCD's General Fund

Fund Financial Statements

The fund financial statements provide detailed information about the general fund not the Winona County SWCD as a whole. The Winona County SWCD presents only a general fund, which is a governmental fund. All of the Winona County SWCD's basic services are reported in the general fund, which focuses on how money flows into and out of those funds and the balances left at year-end that are available for spending. The fund is reported using an accounting method called modified accrual accounting. This method measures cash and all other financial assets that can be readily converted to cash. The general fund statements provide a detailed short-term view of the Winona County SWCD's general government operations and the basic services it provides. Governmental timd information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the Winona County SWCD's programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental flll1ds in a reconciliation included with the financial statements.

THE WINONA COUNTY SWCD AS A WHOLE

The Winona County SWCD's combined net assets changed from $157,786 to $234,847. Looking at the net assets. and net expenses of governmental and business-type activities separately, however, two very different stories emerge. Our analysis below focuses on the net assets and changes in net assets of the Winona County SWCD's governmental activities.

Net Assets                                                                                                               Governmental Activities

                                                                                                                                    2008                         2007                                                                 

Current and other assets                                                              $1,322,380            $651,479

Capital assets                                                                                   40,435                  5,651

Total assets                                                                                 $1,362,815           $657,130

Long-term liabilities                                                                             23,678              16,489

Current liabilities                                                                            $1,104,290          $482,855

Total liabilities                                                                                $1,127,968          $499,344

Net assets                                                                                    

Invested in capital assets, net of debt                                                    $40,435             $5,651

Unrestricted                                                                                      $194,412          $152,135

Total net assets                                                                                $234,847           $157,786

The Winona County SWCD's total revenues increased by $504,248. The total cost of all programs and services increased by $437,670. The significant increase of revenue and expenses  as the result of grant funds received to correct flood damage.

State project revenue and the corresponding expense are not budgeted. Because these projects are completed over several years, the timing of the revenues and expenses vary from budget.

As the Winona County SWCD completed the year, its general flmd reported a combined fund balance $218,090.

At the end of 2008, the Winona County SWCD had $40,435 invested in a broad range of capital assets, including computers, vehicles, etc.

Winona Com1ty SWCD obligations include accrued vacation pay and sick leave. More detailed information about the Winona County SWCD's long-term liabilities is presented in the Notes to the Financial Statements.

Financial Reporting Entity

The Winona County Soil and Waler Conservation District is organized under the provisions of Minnesota Statutes Chapter 103C. The District is governed by a Board of Supervisors composed of five members nominated by voters of the District and elected to four-year terms by the voters of the County.

The purpose of the District is to assist land occupiers in applying practices for the conservation of soil and water resources. These practices are intended to control wind and water erosion, pollution of lakes and streams, and damage to wetlands and wildlife habitats.

The Winona County Soil and Water Conservation District, in cooperation with the U.S. Department of Agriculture Natural Resources Conservation Service and other agencies, provides technical and financial assistance to individuals, groups, organizations, and governments in reducing costly waste of soil and water resulting from soil erosion, sedimentation, pollution and improper land use.

Each fiscal year the District develops a work plan which is used as a guide in using resources effectively to provide maximum conservation of all lands within its boundaries. The work plan includes guidelines for employees and technicians to follow in order to achieve the District's objectives.

The District is not considered a part of Winona County because, even though the County provides a significant amount of the District's revenues in the form of an appropriation, it does not retain any control over the operations of the district.

Generally accepted accounting principles require that the financial reporting entity include the primary government and component units for which the primary government is financially accountable. Under these principles the District does not have any component units.

Government-Wide Financial Statements

The government-wide financial statements (ie., the Statement of Net Assets and The Statement of Activities) report information on all of the nonfiduciary activities of the District.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function.

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are  recorded when a liability is incurred, regardless of the timing of cash flows. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met.

Fund Financial Statements

The government reports the general fund as its only major governmental fund. The general fund accounts for all financial resources of the government. 

The District's financial statements (general fund) are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when they become susceptible to accrual, that is, both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Revenue sources susceptible to accrual include intergovernmental revenues, charges, and interest. Expenditures are recorded when the corresponding liabilities are incurred.

Intergovernmental revenues are reported in conformity with the legal and contractual requirements of the individual programs. Generally, grant revenues is recognized when the corresponding expenditures are

incurred. The District also receives an annual appropriation from the County, which is recognized as revenue when received, unless it is received prior to the period to which its applies. In that case, revenue recognition is then deferred until the appropriate period.

Investment earnings and revenue from sale of trees are recognized when earned. Agricultural conservation fees and other revenue are recognized when they are received in cash because they usually are not measurable until then.

Project expenditures represent costs that are funded from federal, state, or district revenues. State project expenditures consist of grants to participants of the Cost-Share Program and other state programs. District project expenditures are costs of materials and supplies in District projects.

Budget Information

The District adopts an estimated revenue and expenditure budget for the General Fund. Comparisons of estimated revenues and budgeted expenditures to actual are presented in the financial statements in accordance with generally accepted accounting principles. Amendments to the original budget require board approval. Appropriations lapse at year-end. The District does not use encumbrance accounting.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates.

Assets, Liabilities and Fund Eguity Accounts

Assets

Investments are stated at fair value, except for non-negotiable certificates of deposits, which are on a cost basis, and short-term money market investments, which are stated at amortized cost.

Capital assets are reported on a net (depreciated) basis. General capital assets are still valued at historical or estimated historical cost.

Liabilities

Long-term liabilities, such as compensated absences, are accounted for as an adjustment to Net Assets.

Equity

Reserved fund balance indicates the portion of fund equity, which has been legally segregated for specific purposes or is not appropriable for spending.

Unreserved, designated account indicates the portion of fund equity that the District has set aside for planned future expenditures.

Unreserved, undesignated fund balance account indicates the portion of fund balance that is available for budgeting and spending in future periods.

Vacation and Sick Leave

Under the District's personnel policies, employees are granted vacation leave in varying amounts based on their length of service. Vacation leave accrual varies from 8 to 17 hours per month. Sick leave accrual is 12 days per year. The limit on the accumulation of annual leave is 175 hours and the limit on sick leave is 800 hours. Upon termination of employment from the district, employees are paid accumulated annual leave and up to 400 hours of accrued sick leave.

Risk Management

The District is exposed to various risks of loss related to tort; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; worker's compensation claims; and natural disasters.  Property and casualty liabilities and workers' compensation are insured through Minnesota Counties Insurance Trust. The District retains risk for the deductible portion of the insurance. The amounts of these deductibles are considered immaterial to the financial statements.

The Minnesota Counties Insurance Trust is a public entity risk pool currently operated as a common risk management and insurance program for its members. The District pays an annual premium based on its annual payroll. There were no significant increases or reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years.

Note 2 - Detailed Notes

Capital Assets

Changes in Capital Assets, Asset Capitalization and Depreciation.

                                                                   Beginning        Addition          Deletion           Ending

Equipment                                                   $44,525           $38,982           $        0           $83,507

Less: Accumulated Depreciation                    $38,874             $4,198           $       0           $43,072

Net Capital Assets                                        $  5.651                                                       $40,435

The cost of property, plant and equipment is depreciated over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the lesser of the term of the related lease or the estimated useful lives of the assets. Depreciation is computed on the straight-line method. The useful lives of property, plant and equipment for the purpose of computing depreciation are Machinery and equipment 5 to 10 years. Current year depreciation is $4,198.

The district uses the threshold of $500 for capitalizing assets purchased.

Deferred Revenue

Deferred revenue represents unearned advances from the Minnesota Board of Water and Soil Resources (BWSR) for administrative service grants and for the cost-share program. Revenues will be recognized when the related program expenditures are recorded. Deferred revenue for the year ended December 31, 2008, consists of the following: BWSR Service Grant, $8,959; BWSR Cost Share Programs $916,120; BWSR Native Buffer Cost Share, $29,280; Clean Water Legacy Feedlot, $20,000; Clean Water Legacy; Feedlot Technical Assistance, $118,227; Farm Bill Assistance Grant, $6,160; Nature Conservancy Cover Crop Funds, $970; Total, $1,099,716.

Long-Term Liabilities - Compensated Absences Payable

Changes in long-term liabilities for the period ended December 31,2008 are:

Balance January 1, 2008                                          $16,489

Net Change in Compensated Absences                        7,189

Balance December 31, 2008                                      $23,678

WINONA COUNTY SOIL AND WATER CONSERVATION DISTRICT

NOTES TO THE FINANCIAL STATEMENTS

December 31, 2008

Deposits

Authorized collateral includes treasury bills, notes and bonds', issues of U.S. government agencies; general obligations rated "A" or better, revenue obligations rated "AA" or better; irrevocable standard letters of credit issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota Statutes require that securities pledged as collateral be held in safekeeping in a restricted account at the 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.

Custodial Credit Risk Deposits

Note 3 - Defined Benefit Pension Plans - Statewide

Plan Description - Public Employees Retirement Association

Funding Policy

Note 4 - Operating Leases

Note 5 - Stewardship, Compliance, and Accountability

WINONA COUNTY SOIL AND WATER CONSERVATION DISTRICT

NOTES TO THE FINANCIAL STATEMENTS

December 31, 2008

Note 6- Reconciliation of Fund Balance to Net Assets

Governmental Fund Balance, January 1                                        $168,624

Plus: Excess of Revenue Over Expenditures                                $49,466

Governmental Fund Balance, December 31                                 $218,090

Adjustments from Fund Balance to Net Assets:

Plus: Capital Assets                                                                 $  40,466

Less: Long Term Liabilities                                                         ($23,678)

Net Assets                                                                               $234,847

Note 7 - Reconciliation of Change in Fund Balance to Change in Net Assets

Change in fund balance                                                             $49,466            

Capital Outlay                                                                           $38,982

The cost of capital assets are allocated over the capital

asset's useful lives at the government·wide level.                          ($4,198)

In the statement of activities certain operating expenses

including compensated absences are measured by

the amounts earned.                                                                 ($7,189)

Net change in net assets                                                           $77,061

Board of Supervisors

Winona County Soil and Water Conservation District

Board of Supervisors

Winona County Soil and Water Conservation District

Lewiston, Minnesota

I have audited the financial statements of the governmental activities, and the General fund of the Winona County Soil and Water Conservation District as of and for the year ended December 31, 2008, and have issued my report thereon dated September 15, 2009. I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

In planning and performing my audit of the financial statements of the governmental activities, and the General fund of the Winona County Soil and Water Conservation District, Lewiston, Minnesota as of and for the year ended December 31, 2008, in accordance with auditing standards generally accepted in the United States of America, I considered the District's internal control over financial reporting as a basis for designing my auditing procedures for the purpose of expressing my opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control over financial reporting. Accordingly, I do not express an opinion on the effectiveness of the District's internal control over financial reporting.

Internal Control

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected by the entity's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity's internal control.

My consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. I did not identify any deficiencies in internal control over financial reporting that I consider to be material weaknesses, as defined above.

This report is intended solely for the information and use of management and others within the organization and the Board of Supervisors, Board of Soil and Water Resources, State Auditor and is not intended to be and should not be used by anyone other parties.

JAMES MAISER