TOWN OF BLUE RIVER, COLORADO ____________________ ANNUAL FINANCIAL REPORT AND INDEPENDENT AUDITORS REPORT _____________________ DECEMBER 31,

2010

TOWN OF BLUE RIVER, COLORADO CONTENTS

Page Independent Auditors Report ................................................................................................ 1 Basic Financial Statements General Fund Balance Sheet/Statement of Net Assets ............................................ 2 General Fund Statement of Revenues, Expenditures and Changes in Fund Balance/Statement of Activities ................................................................ 3 General Fund Statement of Revenues, Expenditures and Changes in Fund Balance Budget (Non - US GAAP) basis and actual ............................. 4-5 Notes to Financial Statements ...................................................................................... 6-11 State Required Report Independent Auditors Report on the Local Highway Finance Report ........................... 12 Local Highway Finance Report ..................................................................................... 13-14

Steven T. Hiratsuka, CPA Bryan T. Schmitt, CPA, CFP Don W. Gruenler, CPA

INDEPENDENT AUDITORS REPORT The Honorable Mayor and Town Trustees Town of Blue River, Colorado We have audited the accompanying financial statements of the governmental activities and each major fund of the Town of Blue River, Colorado, as of and for the year ended December 31, 2010, which collectively comprise the Towns basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the Town of Blue River, Colorados management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities and each major fund of the Town of Blue River, Colorado, as of December 31, 2010, and the respective changes in financial position and the respective budgetary comparison for the General Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Town has elected not to present Managements Discussion and Analysis that accounting principles generally accepted in the United States of America have determined is necessary to supplement, although not required to be part of, the basic financial statements.

Hiratsuka & Schmitt, LLP

Denver, Colorado April 14, 2011

1873 South Bellaire Street, Suite 1550 Denver, CO 80222 303.295.7077 (fax) 303.295.6866 www.hiratsukaschmitt.com

Denver

P.O. Box 29 79050 U.S. Highway 40 Winter Park, CO 80482 970.726.0322 (fax) 970.726.032

Winter Park

TOWN OF BLUE RIVER, COLORADO General Fund - Balance Sheet/Statement of Net Assets December 31, 2010 General Adjustments Fund (Note 5) Assets: Cash 431,230 Cash with County Treasurer Investments Property taxes receivable Capital assets: Land Bridge Streets Town Hall Vehicles Furniture Computers Accumulated depreciation Total assets Liabilities: Other liabilities Long-term debt: Due with in one year Deferred revenue Total liabilities Fund balance: Fund balances: Reserved for: TABOR Conservation Trust Fund Unreserved - undesignated Total fund balance Total liabilities and fund balance Net Assets: Invested in capital assets, net of related debt Restricted for: TABOR Conservation Trust Fund Unrestricted $ Statement of Net Assets

$ 2,267 2,219 616,853 1,052,569

128,870 533,396 574,545 371,457 31,596 13,846 2,392 (103,573) 1,552,529

431,230 2,267 2,219 616,853 128,870 533,396 574,545 371,457 31,596 13,846 2,392 (103,573) 2,605,098

8,909 616,853 625,762

4,417 4,417

8,909 4,417 616,853 630,179

25,490 102,961 298,356 426,807 $ 1,052,569

(25,490) (102,961) (298,356) (426,807)

1,548,112 25,490 102,961 298,356 1,974,919

1,548,112 25,490 102,961 298,356 1,974,919

The accompanying notes are an integral part of this statement. -2-

TOWN OF BLUE RIVER, COLORADO General Fund - Statement of Revenues, Expenditures and Changes In Fund Balance/Statement of Activities For the year ended December 31, 2010 Statement of Activities $ 705,396 27,573 116,770 849,739

General Fund Revenues: Taxes Intergovernmental Other Total revenues Expenditures: General government Administration Judicial Town Hall Public Safety: Public Works: Maintenance Capital outlay Depreciation Total expenditures Excess of revenue over (under) expenditures Change in net assets Fund balance - beginning of the year Fund balance - end of the year $ 576,694 426,807 705,396 27,573 116,770 849,739

Adjustments (Note 5) $ -

174,435 20,597 9,281 96,441 209,768 489,104 999,626 (149,887)

(468,876) 15,993 (452,883) 149,887 302,996 1,095,229 $ 1,548,112 $

174,435 20,597 9,281 96,441 209,768 20,228 15,993 546,743 302,996 1,671,923 1,974,919

The accompanying notes are an integral part of this statement. -3-

TOWN OF BLUE RIVER, COLORADO General Fund - Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the year ended December 31, 2010 Original and Final Budget Revenues: Taxes: Local property Specific ownership Sales tax Cigarette Lodging tax registrations Homestead tax Highway users tax Interest on taxes Total taxes Intergovernmental: Conservation Trust Road and bridge Total intergovernmental Other: Interest on investments Miscellaneous Architectural review fees Boat decals Building inspection fees Donations Municipal court fines Natural gas franchise Motor Vehicle fees Total other Total revenues Positive (Negative) Variance

Actual

$ 581,760 24,000 53,000 140 -980 38,373 250 698,503

575,577 20,556 65,966 206 1,800 -40,433 858 705,396

(6,183) (3,444) 12,966 66 1,800 (980) 2,060 608 6,893

-18,000 18,000

6,613 20,959 27,572

6,613 2,959 9,572

2,000 1,000 600 80 50,000 -9,000 30,000 3,000 95,680 812,183

695
33,892

1,025 245 34,201 2,300 8,149 33,072 3,192 116,771 849,739

(1,305) 32,892 425 165 (15,799) 2,300 (851) 3,072 192 21,091 37,556 (continued)

The accompanying notes are an integral part of this statement. -4-

TOWN OF BLUE RIVER, COLORADO General Fund - Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (continued) For the year ended December 31, 2010 Original and Final Budget Expenditures: General government: Administration Judicial Town Hall Public safety Public works Maintenance Capital projects Total expenditures Positive (Negative) Variance

Actual

155,300 21,300 10,396 86,000 236,200 450,000 959,196

174,435 20,597 9,281 96,441 209,768 489,104 999,626

(19,135) 703 1,115 (10,441) -26,432 (39,104) (40,430)

Excess of revenues over expenditures Fund balance - beginning of year Fund balance - end of year

$ (147,013)

(149,887) 576,694 $ 426,807

(3,174)

The accompanying notes are an integral part of this statement. -5-

TOWN OF BLUE RIVER, COLORADO Notes to Financial Statements December 31, 2010

1.

Summary of significant accounting policies The accounting policies of the Town of Blue River, Colorado (the Town) conform to accounting principles generally accepted in the United States of America as applicable to governments (US GAAP). The following is a summary of the more significant policies consistently applied in the preparation of the Towns financial statements. Reporting Town The Town is a statutory town (a municipal corporation), as defined by Colorado Revised Statutes, and is governed by an elected six-member Board of Trustees and an elected Mayor. The Town provides general government, public safety and public works (road and streets). The Town has no component units as defined by the Governmental Accounting Standards Board (GASB), Statement No 14, The Financial Reporting Entity and GASB Statement No. 39, Determining Whether Certain Organizations Are Component Units. Basis of presentation The accompanying financial statements are presented in accordance with GASB Statement No. 34, Sp 20 Special Purpose Governments. The government-wide financial statements (i.e. the statement of net assets and the statement of activities) report information on the governmental-type activities of the Town, which rely to a significant extent on taxes and intergovernmental payments for support. The statement of activities demonstrates the degree to which expenses of the governmental-type activities are supported by taxes and intergovernmental payments. Measurement focus, basis of accounting and financial statement presentation 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 the related cash flow. Property taxes are recognized as revenues in the year for which they are levied. The governmental fund financial statements are reported using the current financial measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. The Town has one governmental fund, which accounts for the financial resources of the Town.

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TOWN OF BLUE RIVER, COLORADO Notes to Financial Statements December 31, 2010

1.

Summary of significant accounting policies (continued) Assets, liabilities and net assets/fund balance Cash and investments Cash and investments include investments with original maturities of three months or less. Investments are recorded at fair value. Capital assets Capital assets are reported in the governmental activities column in the government-wide financial statements. In the governmental fund financial statements, capital assets are charged to expenditures as purchased. Capital assets are recorded at historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value as of the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the asset lives are not capitalized. Capital assets of the Town are depreciated using the straight-line method over the following estimated lives. Buildings and bridges Vehicles 5 Computer Equipment 5 Furniture and Equipment Estimates The preparation of financial statements in conformity with US GAAP requires Town management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Property taxes Property taxes are levied on December 15 of each year and attach as an enforceable lien on property as of January 1. Taxes are due as of January 1 of the following year and are payable in two equal installments due February 28 and June 15, if paid in installments, or April 30 with a single payment. Taxes are delinquent as of August 1. If the taxes are not paid within subsequent statutory periods, the lien will be sold at public auction. The County Treasurers Office bills and collects the property taxes on a monthly basis and remits collections to the Town. No provision has been made for uncollected taxes, as all taxes are deemed collectible. Net assets/Fund balances In the government-wide financial statements, net assets are restricted when constraints placed on the net assets are externally imposed. In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. 40 years years years 7 years

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TOWN OF BLUE RIVER, COLORADO Notes to Financial Statements December 31, 2010

2.

Stewardship, compliance and accountability Budgetary information Annual budgets are adopted on a US GAAP budgetary basis for the general fund where capital purchases are expensed in the fund, depreciation expense is not budgeted. Annual appropriated budgets are adopted for the fund. Prior to September 30 of each year, the Treasurer (not an elected member of the Board of Trustees) submits a proposed operating budget for the fiscal year commencing the following January 1 to the Town Trustees (elected officials). The operating budget for the fund includes proposed expenditures and the means of financing them. A public hearing is held at a Board of Trustees meeting to obtain taxpayer input. Prior to December 1 the budget is legally enacted through passage of a budget resolution. The Town Trustees are authorized to transfer budgeted amounts within the department of any fund. The Trustees must approve revisions that change total expenditures of any fund or department within a fund. Appropriations are controlled and the budget is only amended in conformity with Colorado Revised Statues, which require a balanced budget. General fund expenditures exceed budget by $40,430 as capital project funds were expended to complete the Town Bridge. The excess was materially covered by revenues that exceeded budget. Employees Employees of the Town include one part-time Town Clerk and one part-time Court Clerk. Other services are provided to the Town on a fee or independent contract basis as needed.

3.

Detailed notes concerning the funds Cash and investments Custodial credit risk The Colorado Public Deposit Protection Act, (PDPA) requires that all units of local government deposit cash in eligible public depositories. State regulators determine eligibility. Amounts on deposit in excess of federal insurance levels must be collateralized. The eligible collateral is determined by the PDPA. PDPA allows the institution to create a single collateral pool for all public funds. The pool is to be maintained by another institution, or held in trust for all the uninsured public deposits as a group. The market value of the collateral must be equal to 102% of the aggregate uninsured deposits. The State Commissioners for banks and financial services are required by Colorado Revised Statutes to monitor the naming of eligible depositories and reporting of the uninsured deposits and assets maintained in the collateral pools. As of December 31, 2010, all of the Towns deposits were either held in deposit accounts insured by the Federal Deposit Insurance Corporation or in eligible depositories as required by PDPA.

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TOWN OF BLUE RIVER, COLORADO Notes to Financial Statements December 31, 2010 3. Detailed notes concerning the funds Cash and investments (continued) Investments Colorado Revised Statutes specify investment instruments meeting defined rating and risk criteria in which local government may invest. The allowed investments include participation in state regulated investment pools. The Town invests in the Colorado Surplus Asset Fund Trust (CSAFE) and the Colorado Local Government Liquid Assets Trust (COLOTRUST) which is both rated AAAm by Standards and Poors. These investments are not categorized because the investments are not evidenced by securities that exist in physical or book entry form. The balances in COLOTRUST and CSAFE are $103.58 and $100.00 respectively. The Town also holds $2,015.84 in the Colorado Diversified Trust which constitutes a nonliquid balance in the failed investment pool. Receivables It is the policy of the Town to record the property tax receivable in the year in which the taxes are levied and to recognize the property tax revenues in the year in which the lien attaches to the property. Property taxes are reported as receivables and deferred revenue in the amount of $616,853.00. Capital assets The changes in capital assets for the year ended December 31, 2010 are as follows:
Beginning Balance Non-depreciable assets: Land Streets Construction in progress Total non-depreciable Depreciable assets: Town Hall Bridge Furniture and fixtures Computer equipment Vehicles Total depreciable Accumulated Depreciation Capital assets, net Increases Decreases Ending Balance

128,870 $ 574,545 64,519 767,934

-- $ ----

-- $ -64,519 64,519

128,870 574,545 -703,415

371,457 -- 533,396 13,846 2,392 31,596 419,291 533,396

-----

-------

371,457 533,396 13,846 2,392 31,596 952,687

(87,580) (15,993) $ 1,099,645 $ 517,403

-- (103,573) 64,519 $ 1,552,529

Depreciation expense is attributable to: Town Hall Administration Public Safety Total $ 8,440 4,508 1,463

$ 15,993 -9-

TOWN OF BLUE RIVER, COLORADO Notes to Financial Statements December 31, 2010

3.

Detailed notes concerning the funds (continued) Long-term debt The Town has entered into a lease agreement as lessee for financing the acquisition of a police car. The lease agreement qualifies as a capital lease for accounting purposes and therefore has been recorded at the present value of the future minimum lease payments as of the inception date. The police car acquired through the capital lease had an original cost of $23,450. The Town paid $8,147 for additional equipment for the car. The future minimum lease obligation and the net present value of the minimum lease payments as of December 31, 2010, are as follows: Year ending December 31, 2010 $ Less: amount representing interest Present value of minimum lease payments 6,380 (499 ) 4,417

4.

Other information Tax, spending and debt limitations In November 1992, Colorado voters approved Amendment 1 to the state Constitution that is commonly known as The Taxpayers Bill of Rights or the TABOR Amendment. The amendment applies to all units of local government and limits taxes, spending, revenue, and multi-year debt (excepting bond refundings to lower interest rates and adding employees to pension plans). The amendment does not apply to units that are defined as Enterprises. The Town of Blue River, Colorado does not quality as an Enterprise. The amendment defined the Towns year-end, December 31, 1992, as the initial base year for purposes of defining compliance with the amendment. The amendment defines inflation and local growth. Future years revenue, based upon prior years revenue, is only allowed to increase based upon the inflationary and local growth factors. The Town must refund revenue received in excess of the prior years revenue to the voters, unless the voters approve retention of the excess revenue. The Town passed a ballot question on November 7, 1995. The ballot question authorized the Town, to collect and increase fiscal year spending such that the full revenue generated during 1994 and each subsequent year thereafter by its existing mill levy, without any increase in general property taxes, may be expended without any limitation under Article X, Section 20 of the Colorado Constitution for (a) snow removal; (b) road maintenance; (c) police protection; (d) other municipal services; and without limiting in any year the amount of other revenues that may be collected and spent by the Town of Blue River, Colorado under Article X, Section 20 to the Colorado Constitution or any other law, provided there shall be no increase in the Towns present mill levy of 12.325 mills, unless approved by a majority of voters voting on any such increase.

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TOWN OF BLUE RIVER, COLORADO Notes to Financial Statements December 31, 2010 4. Other information (continued) Tax, spending and debt limitations (continued) The amendment also requires the Town to establish an Emergency Reserve which must be equal to 3% of the current years revenue. Conditions under which these reserves may be spent are severely limited. The Town believes that it is in compliance with the provisions of TABOR, as it is currently understood. Many of the provisions may not become fully understood without judicial review. Risk management The Town is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the Town carries commercial insurance. There have been no claims brought against the Town any of the past three years. 5. Reconciliation of government-wide and fund financial statements The Governmental Fund Balance Sheet/Statement of Net Assets includes an adjustment column. The adjustments have three elements: 1) capital assets used in governmental activities are not financial resources and therefore not reported in the fund; 2) long-term liabilities are not due and payable in the current period and therefore are not reported in the fund; 3) amounts reported as fund balances have been reclassified for inclusion in net assets. The Statement of Governmental Fund Revenues, Expenditures and Changes in Fund Balance/Statement of Activities include an adjustment column. The adjustment has one element: 1) governmental funds report capital outlays as expenditures; however in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense.

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