PUEBLO COUNTY SCHOOL DISTRICT NO. 70 PUEBLO, COLORADO BASIC

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					  PUEBLO COUNTY SCHOOL DISTRICT NO. 70


           PUEBLO, COLORADO


      BASIC FINANCIAL STATEMENTS


  WITH INDEPENDENT AUDITOR'S REPORT


AND CERTAIN SUPPLEMENTAL INFORMATION


PRESENTED FOR PURPOSES OF A SINGLE AUDIT


               June 30, 2007

                                                       Table of Contents


Independent Auditor's Report on Basic Financial Statements and Supplementary Schedules                     I-2

Basic Financial Statements

 Management's Discussion and Analysis                                                                     3 - 10

 Government-wide Financial Statements

  Statement of Net Assets                                                                                   II

  Statement of Activities                                                                                   12


 Governmental Fund Financial Statements

  Balance Sheet                                                                                             13

  Reconciliation of Balance Sheet to Statement of Net Assets                                                14

  Statement of Revenues, Expenditures and Changes in Fund Balances                                          15

  Reconciliation of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities      16


 Proprietary Fund Financial Statements

  Statement of Net Assets                                                                                   17

  Statement of Revenues, Expenses and Changes in Fund Net Assets                                            18

  Statement of Cash Flows                                                                                   19


 Fiduciary Fund Financial Statement

  Statement of Fiduciary Net Assets                                                                         20


 Notes to Financial Statements                                                                            21 - 35

 Budgetary Comparison Reporting - General Fund

  General Fund                                                                                              36


Other Supplementary Information

 Combining Balance Sheet - Nonmajor Governmental Funds - Special Revenue Funds                              37

 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor

  Governmental Funds - Special Revenue Funds                                                                38

 Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (Budget Basis)

   Capital Reserve Fund                                                                                     39

   Pupil Athletic Fund                                                                                      40

   Designated Grants Fund                                                                                   41

   School District No. 70 EducatiqnFoundation                                                               42

   Debt Service Fund                                                                                        43

   Capital Projects Fund                                                                                    44

   Food Service Enterprise Fund                                                                             45

   Print Shop Internal Service Fund                                                                         46

 Combining Statement of Component Units

   Balance Sheet                                                                                            47

   Statement of Revenues, Expenditures and Changes in Fund Balances                                         48

   Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (Budget Basis)

     Connect School                                                                                         49

     Swallows Charter Academy                                                                               50

                                                Table of Contents (Continued)


Additional Reports and Schedules
 Schedule of Expenditures of Federal Awards                                                               51

 Notes to the Schedule of Expenditures of Federal Awards                                                  52


 Auditor's Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of
  Financial Statements Perfonned in Accordance with Government Auditing Standards                       53 - 54
 Auditor's Report on Compliance with Requirements Applicable to each Major Program and Internal
  Control over Compliance in Accordance with OMS Circular A-133                                         55 - 56

 Schedule of Findings and Questioned Costs                                                              57 - 59

 Schedule of Fiscal Year Spending Computations Pursuant to Article X, Section 20                          60

 Reconciliation of Auditor's Electronic Financial Data Integrity Check Figures to Governmental Fund

  Financial Statements                                                                                  61 - 64

 Colorado School District Auditor's Electronic Financial Data Integrity Check Figures                     65

                                                     CERTIFIED PUBLIC ACCOUNTANTS
  JAMES E. GARREN, CPA                                                                                                         SUITE 200
  MEL J. ROSS, CPA                                                                                               3673 PARKER BOULEVARD
  SAM J. DeNARDO, CPA                                                                                           PUEBLO, COLORADO 81008
                                                                                                                            719/544-9872
                                                                                                                        FAX 719/253-5417
                                                                                                                             www.grdcpa.com

  December 21. 2007



 Board of Education
 Pueblo County School District No. 70
 Pueblo. Colorado


 Independent Auditor's Report on Basic Financial Statements Accompanied by Required Supplementary Information and
 Supplementary Information

 We have audited the accompanying financial statements of the governmental activities. business-type activities. aggregate discretely
 presented component units. each major fund. and the aggregate remaining fund information of Pueblo County School District No. 70 as
 of and for the year ended June 30. 2007. which collectively comprise the District's basic financial statements as listed in the table of
 contents: These financial statements are the responsibility of Pueblo County School District No. 70~s management. Our responsibility
 is to express an opinion 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 and the standards
 applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those
 standards require that we plan and pellform 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 respective financial position of the
governmental activities. business-type activities. aggregate discretely presented component units. each major fund. and the aggregate
remaining fund information of Pueblo County School District No. 70 as ofJune 30. 2007. and the respective changes in financial position,
and where applicable. cash flows thereofforthe year then ended in conformity with accounting principles generally accepted in the United
States of America. .                                                                                                    .

  In accordance with Government Auditing Standards. we have also issued our report dated December 21. 2007, on our consideration of
. Pueblo County School District No. 70's internal control over financial reporting and on our tests of its compliance with certain provisions
  of laws, regulations, contracts. grant agreements and other matters. The purpose of that report is to describe the scope of our testing of
  internal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control
 over financial reporting or on compliance. That report is an integral part ofour audit performed in accordance with Government Auditing
 Standards and should be considered in assessing ~he results of our audit.

The management's discussion and analysis and budgetary comparison information for the General Fund on pages 3 through 10 and 36,
are not a required part of the basic financial statements but are supplementary information required by accounting principles generally
accepted in the United States of America. We have applied certain limited procedures. which consisted principally of inquiries of
management regarding the methods of measurement and presentation of the management's discussion and analysis. However, we did
not audit the information and express no opinion on it. The budgetary 'comparison information for the General Fund has been subjected
to the auditing procedures applied in the audit of the basic financial statements arid. in our opinion. is fairly stated in all material respects,
in relation to the basic financial statements taken as a whole.



MEMBER COLORADO SOCIETY OF CPA'S                                      _1_                     MEMBER AMERICAN INSTITUTE OF CPA'S

                                         MEMBER PRIVATE COMPANIES PRACTICE SECTION
Board of Education
Pueblo County School Dis!. No 70
Page 2


Our audit was conducted for the purpose offonningopinions on the financial statements that collectively comprise Pueblo County School
District No. 70's basic financial statements. The combining and individual nonmajor fund financial statements, budgetary comparisons
for nonmajor funds, Auditor's Electronic Financial Data Integrity Check Figures Report, Schedule of Computations of Fiscal Year
Spending Under Section 20 of Article X of the State Constitution as required by the State of Colorado, and the schedule of expenditures
of federal awards required by U.S. Office of Management and Budget Circular A~ 133, Audits ofStates. Local Governments, and Non­
Profit Organizations are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such
infonnation has been subjected to the auditing prDcedures applied in the audit ofthe basic financial statements and, in our opinion, is fairly
stated, in all material respects, in relation to the basic financial statements taken as a whole.




                                                                    -2­
MANAGEMENT'S DISCUSSION AND ANALYSIS

                            PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                     PUEBLO, COLORADO



                          MANAGEMENT'S DISCUSSION AND ANALYSIS

                           As of and for the fiscal year ended June 30, 2007



As management of the Pueblo County School District No. 70, Pueblo County, Colorado (the District), we
offer readers of the District's financial statements this narrative and analysis of the financial activities of
the District for the fiscal year ended June 30, 2007. We encourage readers to consider the information
presented here in conjunction with the financial statements, which immediately follow this section.

Financial Highlights

    •	   The total net assets, which is the amount by which the assets of the District exceeded its liabilities,
         at the close of the most recent fiscal year were $40,916,457.

    •	   The total net assets of the District increased by $2,651,182 for the year ended June 30, 2007.

    •	   Fund balance of the District's governmental funds increased by $584,256 resulting in an ending
         fund balance of $18,246,211. The District continued to expend the last of the Series 2003 bond
         proceeds on District Capital Improvements.

    •	   During the current fiscal year, the fund balance in the District's General Fund decreased by
         $284,409 to $9,180,548.

    •	   The District's long-term obligations decreased by $3,840,522 to $66,813,305 which is the result of
         current year payments on existing debt, capital leases, and other long-term obligations.

Overview of the Financial Statements

This annual report consists of three parts: Management's Discussion and Analysis (MD&A), the basic
financial statements, and supplementary information. The MD&A provides an analysis of the District's
overall financial position and results of the previous year's operations to assist the users of financial
statements to assess whether the government's finances have improved or deteriorated. The basic financial
statements include two kinds of statements that present different views of the District.

    •	   The first two statements are district-wide financial statements that provide both short-term and
         long-term information about the District's overall financial status.

    •	   The remaining statements are fund financial statements that focus on individual parts of the
         District, reporting the District's operations in more detail than the District-wide statements.

    •	   The governmental funds statements tell how basic services, such as instruction, were financed in
         the short-term as well as what remains for future spending.

    •	   Proprietary funds statements offer short and long-term financial information about the activities
         the District operates like businesses. Included are Enterprise Funds and Internal Service Funds.
         The Food Service Fund is the only Enterprise Fund of the School District. The Print Shop is the
         only Internal Service Fund of the District.

    •	   Fiduciary funds statements provide information about the financial relationship in which the
         District acts solely as a trustee or agent for the benefit of others.




                                                      3

The financial statements also include notes that explain some of the information in the statements and
provide more detailed data. The statements are followed by a section of required supplemental information
that further explains and supports the financial statements with a comparison of the District's budget for the
year.

District-wide Financial Statements

The district-wide statements report information about the District as a whole using accounting methods
similar to those used by private-sector companies. The statement of net assets includes all of the District's
assets and liabilities. All of the current year's revenues and expenses are accounted for in the statement of
activities regardless of when cash is received or paid.

The two district-wide statements report the District's net assets and how they have changed. Net assets ­
the difference between the District's assets and liabilities - is one way to measure the District's financial
health or position.

     •	   Over time, increases or decreases in the District's net assets are an indicator of whether its
          financial position is improving or deteriorating, respectively.

     •	   To assess the District's overall health, you need to consider additional non-financial factors such
          as changes in the District's property tax base and the condition of school buildings and other
          facilities.

In the district-wide financial statements, the District's activities are divided into three categories:

     •	   Governmental activities: Most of the District's basic services are included here, such as
          instruction, transportation, custodial and maintenance, and administration. The School Finance
          Act of 1994, as amended, made up of property taxes and state equalization, finances most of these
          activities.

    •	    Business-type activities: The District charges fees to help cover the costs of certain services it
          provides. The District's nutritional services program is included here.

    •	    Component Units: The District has two separate charter schools, Swallows Academy and Connect
          School. These component units are important because the District is financially accountable for
          them.

Fund Financial Statements

The Fund financial statements provide more detailed information about the District's funds, focusing on its
most significant or "major" funds - not the District as a whole. Funds are accounting devices the District
uses to keep track of specific sources of funding and spending on particular programs:

    •	    Some funds are required by state law and by bond covenants.

    •	    The District establishes other funds to control and manage money for particular purposes (such as
          repaying its long-term debts) or to show that it is properly using certain revenues (such as federal
          grants).

The District has three kinds of funds:

    •	    Governmental funds: Most of the District's basic services are included in governmental funds,
          which generally focus on (I) how cash and other financial assets that can read iIy be converted to
          cash flow in and out and (2) the balances left at year-end that are available for spending.
          Consequently, the governmental funds statements provide a detailed short-term view that helps



                                                        4

          you determine whether there are more or fewer financial resources that can be spent in the near
          future to finance the District's programs. Because this information does not encompass the
          additional long-term focus of the district-wide statements, additional information at the bottom of
          the governmental funds statements explains the relationship (or differences) between them.

     •	   Proprietary funds: Services for which the District charges a fee are generally reported in
          proprietary funds. Proprietary funds are reported in the same way as the district-wide statements.
          The district's enterprise funds (one type of proprietary fund) are the same as its business-type but
          provide more detail and additional information such as cash flows. The District uses internal
          service funds (the other kind of proprietary funds) to report activities that provide supplies and
          services for its other programs and activities. The District currently has one internal service fund,
          the Print Shop Fund.

     •	   Fiduciary funds: The District is the agent, or fiduciary, for assets that belong to others, such as the
          Trust and Agency Fund, which includes funds collected on behalf of school-sponsored pupil
          organizations and activities. The District is responsible for ensuring that the assets reported in
          these funds are used only for their intended purposes and by those to whom the assets belong. The
          District excludes these activities from the district-wide financial statements because it cannot use
          these assets to finance its operations.

Notes to the Basic Financial Statements

The notes to the basic financial statements provide additional information that is essential to a full
understanding of the data provided in the basic financial statements. The notes can be found on pages 21­
35 of this report.

District-wide Financial Analysis

The assets of the District are classified as current assets and capital assets. Cash, investments, receivables,
inventories and prepaid expenses are current assets. These assets are available to provide resources for the
near-term operations of the District. The majority of the current assets are the result of the property tax
collection process; the District receives approximately 60% of the annual property tax assessment in April,
May and June.

Capital assets are used in the operations of the District. These assets are land, improvements, buildings,
equipment and vehicles. Capital assets are discussed in greater detail in the section titled, Capital assets
and Debt Administration, elsewhere in this analysis.

Current and long-term liabilities are classified based on anticipated liquidation either in the near-term or in
the future. Current liabilities include accounts payable, accrued salaries and benefits, unearned revenues,
and current debt obligations. The liquidation of current liabilities is anticipated to be either from currently
available resources, current assets, or new resources that become available during Fiscal 2008. Long-term
liabilities such as long-term debt obligations and compensated absences payable will be liquidated from
resources that will become available after Fiscal 2008.

The assets of the District activities exceed liabilities by $40,916,457 with an unrestricted balance of
$8,118,225.

A net investment of $22,517,578 in land, improvements, building, equipment, and vehicles which provide
the services to the District's approximately 8,800 public school students represents 55% of the District's
net assets. Net assets of $8,634, 154 accumulated due to voter approved bonded debt mill levy assessments
have been restricted to provide resources to liquidate the current general obligation bond principal and
related interest payments. The legally required TABOR reserves have also been restricted in the amount of
$1,646,500.

The following table provides a condensed summary of the District's net assets for 2007 compared to 2006:



                                                       5

                                                                               Table 1

                                                                   Condensed Statement of Net Assets

                                                                         As of June 30, 2007


                                                    Governmental                           Business-Type                                Total                        Total Percentage
                                                      Activities                              Activities                         Primary Government                      Change
                                                 2007            2006                    2007            2006                    2007          2006                     2006·2007
              Assets
Current and Other Assets                     27,196,054           25,737,359              644,947             650,674         27,841,001           26,388,033                          6%
Capital Assets                               89,179,428           91,204,769              120,555              23,671         89,299,983           91,228,440                         -2%
                       Total Assets 116,375,482                 116,942,128               765,502             674,345        117,140,984         117,616,473                           0%

             Liabilities
Current Liabilities                          12,976,583          12,259,618               158,348             133,179         13,134,931           12,392,797                          6%
Non-Current Liabilities                      63,089,596          66,958,401                                                   63,089,596           66,958,401                         -6%
                    Total Liabilities        76,066,179           79,218,019              158,348             133,179         76,224,527           79,351,198                         -4%

             Net Assets
Invested in Capital Assets,
  Net of Related Debt                        22,397,023          20,510,454               120,555               23,671        22,517,578          20,534,125                          10%
Restricted                                   10,280,654           9,029,940                                                   10,280,654           9,029,940                          14%
Unrestricted                                  7,631,626           8,183,715               486,599             517,495          8,118,225           8,701,210                          -7%
                                                                        7~2~4,k' ~0:;9==,;;6~0~7~,
                  Total Net Assets =4,;;0~,3;;;0;,;9;f,3;,;0~3=,,;3;;;,7~,     1                              ,~16;;;6~==::,40~,:;9,;;16;o,4,;;5;;;7==3;;;8;o,2;:;6;,;5;f,2;;;7.;;5~=====7="A=o
                                                                                                 1,;;54~=~5~4~1


Table 2 shows the changes in net assets for fiscal year 2007 compared to 2006:

                                                                                   Table 2

                                                                            Changes in Net assets

                                                                             As of June 30, 2007


                                                                                           Fiscal Year 2007
                                                   Governmental                             Business-Type                               Total
                                                     Activities                                Activities                        Primary Government
                                                2007            2006                     2007             2006                   2007          2006
            Revenues
Program Revenues:
 Charges for Services                            657,316             546,350           1,382,582            1,386,851           2,039,898           1,933,201
 Operating Grants & Contributions              6,517,923           6,086,964           1,344,168            1,296,783           7,862,091           7,383,747
 Capital Grants and Contributions                 76,243              51,363                                                       76,243              51,363
General Revenues:
 Taxes:
  Local Property Taxes                       19,330,781          18,464,150                                                   19,330,781          18,464,150
  Specific Ownership Taxes                    2,291,855           2,259,715                                                    2,291,855           2,259,715
 School Finance Act                          33,634,862          31,694,424                                                   33,634,862          31,694,424
 Earnings on Investments                        831,357             554,454                                                      831,357             554,454
 Other                                           30,366             101,033                   52,513            37,152            82,879             138,185
                   Total Revenues            63,370,703          59,758,453            2,779,263           2,720,786          66,149,966          62,479,239

              Expenses
Governmental Activities:
 Direct Instruction                          33,631,087          30,979,791                                                   33,631,087           30,979,791
 Indirect Instruction                        11,224,965          11,353,877                                                   11,224,965           11,353,877
 Transportation                               3,493,417           3,198,258                                                    3,493,417            3,198,258
 Custodial and Maintenance                    4,197,152           3,697,602                                                    4,197,152            3,697,602
 Other Support Services                       4,362,462           4,197,524                                                    4,362,462            4,197,524
 General Administration                         746,469             678,553                                                      746,469              678,553
 Interest Expense-Unallocated                 3,129,957           3,123,287                                                    3,129,957            3,123,287
Business-type Activities
 Food Services                                                                         2,713,275           2,518,826            2,713,275           2,518,826
                   Total Expenses            60,785,509          57,228,892            2,713,275           2,518,826          63,498,784           59,747,718

            Change in Net Assets              2,585,194           2,529,561                   65,988          201,960          2,651,182            2,731,521

Net Assets - July 1                         37,724,109           35,194,548              541,166              339,206         38,265,275          35,533,754

Net Assets - June 30                        40,309,303           37,724,109              607,154              541,166         40,916,457          38,265,275





                                                                                        -6­
State equalization and taxes (Property Taxes and Specific Ownership Taxes) accounted for most of the
District's total revenue. As shown in the graph below, State Equalization (School Finance Act) contributed
52% of total revenues, while Property Taxes and Specific Ownership Taxes contributed 32% of every
dollar raised. Another 12% came from state and federal grants for specific programs and the remaining 4%
from fees charged for services, investment earnings and miscellaneous sources.


                                                 Table 3




                                      Governmental Revenues

                                                           Charges for
                                              Other         Services
                                               0%             3%
                             Investment                           J

                              Earnings
                     ///         Operating Grants
                                 1%              _--rI--""         //        12%
                                                                       ______ Capital Grants
                                                                                   0%


                   School Finance Act ./
                          52%                                           '.,_ Property Taxes
                                                                                 29%



                                                           Specific Ownership

                                                                  Taxes

                                                                   3%





As shown in Table 4 below, a total of 76% of the District's expenses are related to instructing, caring for
(pupil services) and transporting students. Direct and Indirect Instructional Expenses decreased 2% from
the previous year. The District's administrative expenses accounted for only 1% of total costs.




                                                      7

                                                         Table 4

                                        Governmental Expenses
                                Interest Expense
                                       5%
                                  General                Food Services
                                Administration \              4%
                                      1%            I
                              Other Support         I[
                   Custodial & Services
                   Maintenance -J"!,,--_
                        7%                                               Direct Instruction
                     Transportation                                            52%
                          6%



                             Indirect Instruction
                                    18%




Governmental Activities

The primary source of operating revenue for school districts comes from the School Finance Act of 1994
(SFA). Under the SFA the District received $5,909 per funded student in FY 07. In Fiscal Year 2006-07
the funded pupil count was 8,352. For the 2006-07 tiscal year the District continued to be one of the lowest
funded districts in the state. Funding for the SFA comes from property taxes, specific ownership tax and
state equalization. The District receives approximately 69.8% of SFA funding from state equalization
while the remaining amounts come from property taxes and specific ownership taxes. The District's
assessed valuation generated $19,330,781 in total property taxes (for both operations and bond redemption
payments) in fiscal year 2006-07. A similar amount is expected to be generated in the 2007-08 fiscal year

The District sets the bond mill rate annually in an amount sufficient to make the annual debt service
payment. As a result of significant enrollment growth, the District has requested and received voter
approval for bond issues in 1994, 1995, 1999, and 2002. Accordingly, the bond redemption mill levy
increased from 12.925 mills in fiscal year 1996 to 21.964 mills in fiscal year 2005. Subsequently, however,
the combined effect of a reduction in the scheduled debt service payment, together with an increase in
assessed valuation, has resulted in a decrease in the bond redemption mill levy to 14.81 mills for fiscal year
2008.

Financial Analysis of the District's Funds

Detailed information about the District's major funds starts on page 13. These funds are accounted for
using the modified accrual basis of accounting. All government funds have total revenues of $63,462,833
and expenditures of $63,143,315. The Debt Service Fund experienced an increase in fund balance,
increasing by $1,158,214. The General Fund change in fund balance, after considering Capital Leases and
Transfers, was a modest decrease of$284,409.




                                                            8
General Fund Budgetary Highlights.

The District's budget is prepared according to Colorado law and is based on accounting for certain
transactions on a basis of cash receipts and disbursements. The most significant budgeted fund is the
General Fund.

In November, 2000, the voters of Colorado passed a statewide ballot issue to amend the State Constitution,
Amendment 23. This amendment required that the state fund public education at a minimum of growth at
inflation plus one percent for the next ten years beginning with fiscal year 2001-2002 and thereafter at
inflation.

For fiscal year 2007, primarily due to the combination of Amendment 23 funding and additional funding
from enrollment increases, the District experienced a total increase in General Fund revenues of
$3,120,001.

Capital Assets and Debt Administration

By the end of2007, the District had invested $122, 111,225 in land, buildings, equipment and transportation
vehicles. Table 5 shows fiscal 2007 compared to 2006:


                                                        Table 5

                                       Capital Assets at June 30, 2007 and 2006


Additional information on the District's capital assets can be found in Note E on pages 28-29 of this report.

                                 Governmental            Business-Type              Total             Total Percentage
                                   Activities              Activities           School District           Change
                                2007           2006      2007     2006         2007           2006       2006-2007
Land                          564,859        564,859                         564,859        564,859          0.0%
Construction in Progress      124,000         183,488                        124,000        183,488        -32.4%
Bldg & Improvements        111,052,860 110,504,1 15                       111,052,860 110,504,115            0.5%
Furniture & Fixtures         2,852,029     2,668,424    559,809 467,814     3,411,838     3,136,238          8.8%
Automotive Equip             6,957,668     6,664.491                        6,957,668     6,664.491          4.4%
Total Capital Assets       121,551,416 120,585,377      559,809 467,814   122,111,225 121,053,191            0.9%



Major capital asset events during the 2006-07 fiscal year included the following:

     •	   Furniture and Fixtures Capital Assets increased 8.8% over Fiscal Year 2006. The major item
          accounting for this increase was the acquisition of a modular unit and associated furnishings.
     •	   Projects in progress as of the close of the fiscal year were $124,000, which is a significant
          reduction from levels occurring during prior years when the District was spending bond proceeds.

Long-term Debt.

At June 30, 2007, the District had total bonded debt outstanding of $63,559,995 backed by the full faith and
credit of the District. Additionally, the District has long-term debt obligations for capital leases in the
amount of $2,722,685 outstanding at the end of the current fiscal year.

The total General Obligation Bonds outstanding, for the District, decreased during the fiscal year as a result
of District bond payments. Total principal payments during the year were $3,135,000. The District did
not issue any new debt during the Fiscal Year.

The District continues to maintain it's "A" rating from Standard & Poor's Corporation and an "A2" rating
from Moody's Investors Service for General Obligation bond issues,



                                                            9

State statutes limit the amount of General Obligation debt that the District may issue. At the end of the
current fiscal year the District had over $15 million of unused bond capacity. Additional increases in
Assessed Valuation, combined with the scheduled payment of principal, is projected to free up more
capacity in the ensuing fiscal years, thus providing the needed capacity for future bond issues to be
presented to the voters. The amount and timing of additional debt issuance in the future, subject to
statutory debt limitations and voter approval, will depend on the rate of enrollment growth, assessed
valuation growth, and the continuing repayment of existing debt.

Additional information on the District's long-term obligations can be found in Notes Land M on pages 32­
33 of this report.

Economic Factors and Next Year's Budget and Rates

An increase in per pupil funding by at least inflation plus I % was provided by the State Constitutional
Amendment 23, passed by the voters in November 2000.

    •	   For calendar year 2006, the inflation rate was 3.6 percent. Thus, the District will be receiving
         $6,275 per pupil (FTE basis) for fiscal year 2007-2008, which is an increase of 6.2 percent over
         the 2006-2007 funding of $5,909 per pupil.

The District is committed to an ongoing review of its programs and services for both effectiveness and
efficiency. To accomplish this, the District examines how to best provide essential services on a cost­
effective basis and to re-direct resources to the schools.

Requests for Information

This financial report is designed to provide a general overview of the District's finances for all those with
an interest in the District. Questions concerning any of the information provided in this report or requests
for additional financial information should be addressed to:

                                  Pueblo County School District No. 70

                                Office of the Director of Business Services

                                         24951 Highway 50 East

                                          Pueblo, Colorado 81006





                                                     10

BASIC FINANCIAL STATEMENTS

 GOVERNMENT-WIDE


FINANCIAL STATEMENTS

                                                             STATEMENT OF NET ASSETS
                                                     PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                                 June 30, 2007



                                                                                       Primary                                Component
                                                                                      Government                                Unit
                                                              Governmental           Business-Type                             Charter
                        Assets                                  Activities             Activities           Total              Schools
Current Assets
 Cash in bank and on hand                                 $         1,897,291    $            89,270    $     1,986,561   $            1,224
 Cash with County Treasurer                                           357,192                                   357,192
 Investments, at fair value                                        22,410,100                407,287         22,817,387
 Accounts receivable                                                  179,839                                   179,839
 Property taxes receivable                                            345,000                                   345,000
 Other taxes receivable                                             1,066,048                                 1,066,048
 Internal balances                                                      3,389                 (3,389)
 Due from primary government                                                                                                       1,823,458
 Accrued federal revenue                                             246,596                 115,784            362,380
 Other assets                                                          1,260                                      1,260
 Prepaid expenses                                                    148,466                                    148,466
 Inventories                                                         540,873                  35,995            576,868

                                 Total Current Assets              27,196,054                644,947         27,841,001            1,824,682

Non-current Assets
 Capital assets, net ofdepreciation                               89,179,428                 120,555         89,299,983             900,376

                                          Total Assets   $        116,375,482    $           765,502    $   117,140,984   $       2,725,058


             Liabilities and Net Assets
Current Liabilities
 Checks in excess of bank balance                        $                       $                                        $
 Accounts payable                                                    516,513                   3,755            520,268               5,532
 Accrued salaries and P.E.R.A.                                     5,908,088                 154,593          6,062,681             212,508
 Due to component unit                                             1,823,458                                  1,823,458
 Deferred revenue                                                    232,907                                    232,907
 Interest payable                                                    333,664                                    333,664
 Bonds payable current                                             3,052,920                                  3,052,920
 Capital leases current                                            1,109,033                                  1,109,033

                           Total Current Liabilities              12,976,583                 158,348         13,134,931             218,040

Non-current Liabilities
 Bonds payable non-current                                        60,945,319                                 60,945,319
 Capital leases non-current                                        1,675,133                                  1,675,133
 Compensated absences                                                469,144                                    469,144

                      Total Non-Current Liabilities               63,089,596                                 63,089,596

                                     Total Liabilities            76,066,179                158,348          76,224,527             218,040


Net Assets
 Investment in capital assets, net of related debt                22,397,023                120,555          22,517,578             900,374
 Restricted for debt service                                       8,634,154                                  8,634,154
 Restricted for emergency                                          1,646,500                                  1,646,500              62,500
 Unrestricted                                                      7,631,626                486,599           8,118,225           1,544,144

                                    Total Net Assets              40,309,303                607,154          40,916,457           2,507,018

                    Total Liabilities and Net Assets     $       116,375,482     $          765,502     $   117,140,984   $       2,725,058

                              The accompanying notes to financial statements are an integral part of this statement.

                                                                          -11­
                                                                                 STATEMENT OF ACTIVITIES
                                                                            PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                                                                  For the year ended June 30, 2007


                                                                                                                                                    Net (Expense) Revenue and Changes in Net Assets
                                                                                       Program                                                               Primary                                Component
                                                                                       Revenue                                                              Government                                Unit
                                                                                      Operating                   Capital
                                                              Charges for             Grants and                 Grants and             Governmental           Business-Type                              Charter
        FunctionslPrograms                Expenses             Services              Contributions              Contributions             Activities             Activities            Total              Schools

Governmental Activities
 Direct instruction                   $    33,631,087     $         347,935      $        4,361,356        $                    -   $      (28,921,796)    $                   -   $   (28,921,796)   $
 Indirect instruction                      11,224,965                       -             1,319,565                                         (9,905,400)                        -        (9,905,400)
 Transportation                             3,493,417               183,928                 757,580                             -           (2,551,909)                        -        (2,551,909)
 Custodial and maintenance                  4,197,152                       -                        -                          -           (4,197,152)                                 (4,197,152)
 Other support services                     4,362,462                17,358                   7,955                     76,243              (4,260,906)                        -        (4,260,906)
 General administration                       746,469               108,095                  71,467                             -             (566,907)                        -          (566,907)
 Interest expense, unallocated              3,129,957                                                -                          -           (3,129,957)                                 (3.129.957)

      Total Governmental Activities         60,785,509              657,316               6,517,923                     76,243             (53,534,027)                                (53,534,027)


Business-Type Activities
 Food service                                2,713,275            1,382,582               1,344,168                             -                      -               13,475               13,475

         Total Primary Government     $     63,498,784    $       2,039,898      $        7,862,091         $           76,243      $      (53,534,027)    $           13,475      $   (53,520,552)   $

Component Unit ­
 Charter Schools                      $      1,871,224    $                      $                   -      $                   -   $                      $                       $             -    $     (1,871,224)


                                                         General Revenues
                                                           Local property taxes                                                     $       19,330,781     $                       $    19,330,781    $
                                                           Specific ownership taxes                                                          2,291,855                                   2,291,855
                                                           School finance act                                                               33,634,862                                  33,634,862          2,123,518
                                                           Earnings on investments                                                             831,357                                     831,357                163
                                                           Gain on sale of capital assets                                                        2,400                         -             2,400
                                                           Other                                                                                27,966                 52,513               80,479
                                                                                                Total General Revenues                      56,119.221                 52,513           56,17\,734          2,123.681

                                                         Changes in Net Assets                                                               2,585,194                 65,988            2,651,182            252,457

                                                         Net Assets - July 1                                                                37,724,109                541,166           38,265,275           2,254,561
                                                         Net Assets - June 30                                                       $       40,309,303     $          607,154      $    40,916,457    $      2,507,018




                                                           The accompanying notes to financial statements are an integral part of this statement.

                                                                                                         -12­
GOVERNMENTAL FUND


FINANCIAL STATEMENTS

                                                         BALANCE SHEET
                                                      GOVERNMENTAL FUNDS
                                               PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                                           June 30, 2007


                                                                                       Debt                   Other                    Total
                                                             General                  Service              Governmental             Governmental
Assets                                                        Fund                     Fund                   Funds                    Funds
 Cash in bank and on hand                              $          844,742       $                  -     $       1,037,501        $       1,882,243
  Cash with County Treasurer                                      300,439                    56,753                           -             357,192
 Investments, at fair value                                    14,026,748                 8,305,750                      77,602          22,410,100
 Accounts and other receivables                                   146,490                    24,737                       2,197             173,424
  Other taxes receivable                                          819,134                   246,914                           -           1,066,048
 Due from other funds                                             911,026                          -                    588,765           1,499,791
  Property taxes receivable                                       220,000                   125,000                           -             345,000
  Accrued federal revenue                                            7,891                         -                    238,705             246,596
  Inventories                                                     540,873                          -                          -             540,873
  Other assets                                                             -                        -                  1,260                  1,260
                                      Total Assets     $        17,817,343      $         8,759,154      $         1,946,030      $      28,522,527

Liabilities and Fund Equity
  Checks in excess of bank balance                     $                   -    $                   -    $                    -   $
  Accounts payable                                                  329,254                         -                   173,606             502,860
  Accrued salaries and P.E.R.A.                                   5,453,918                         -                   438,505           5,892,423
  Due to other funds                                              2,625,824                         -                   677,302           3,303,126
  Deferred property tax revenue                                     220,000                 125,000                           -             345,000
  Deferred federal revenue                                            7,799                         -                225,108                232,907
                                  Total Liabilities               8,636,795                 125,000                1,514,521             10,276,316

  Fund Balance
    Reserved for encumbrances                                       332,290                         -                    16,525             348,815
    Reserved for inventory                                          540,873                         -                         -             540,873
    Reserved for building projects                                         -                        -                    48,896              48,896
    Reserved for debt service                                              -               8,634,154                          -           8,634,154
    Reserved for emergency                                        1,646,500                         -                         -           1,646,500
    Unreserved                                                    6,660,885                         -                   366,088           7,026,973
                               Total Fund Equity                  9,180,548                8,634,154                    431,509          18,246,211

                Total Liabilities and Fund Equity       $        17,817,343      $         8,759,154     $          1,946,030     $      28,522,527


                               The accompanying notes to financial statements are an integral part of this statement.

                                                                        -13­
                        RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET

                                   TO THE STATEMENT OF NET ASSETS

                                 PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                             June 30, 2007




Total Fund Balances - Governmental Fund                                                                      $   18,246,211

 Deferred property tax revenue-Revenues that do not provide current financial resources are
 deferred on the governmental fund financial statements but recognized on the government­
 wide financial statements.                                                                                         345,000

 Expenditures for services which benefit future periods are treated as prepaid expenses and
 included in current assets in the government wide financial statements.                                            148,466

 Capital assets used in governmental activities are not considered current financial resources
 and, therefore, are not reported in the governmental funds.                                                     89,066,727

 Internal service funds are used by management to charge costs of printing activities to the
 general and other funds. The net assets of the internal service fund are included in the
 governmental activities statement of net assets.                                                                    26,631

 Long-term liabilities for general obligation debt ($63,998,239), capital leases ($2,722,685),
 and compensated absences ($469,144) are not due and payable in the current period and,
 therefore, are not reported in the governmental funds.                                                          (67,190,068)

 Interest payable on general obligation debt is not recorded on the fund statements because it
 is not a current use of cash. Interest is accrued on the government-wide statements since
 the liability is to be paid in the near term.                                                                     (333,664)

                                                  Total Net Assets - Governmental Activities                 $   40,309,303




                    The accompanying notes to financial statements are an integral part of this statement.

                                                            -14­
                             STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
                                                   GOVERNMENTAL FUNDS
                                            PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                                        June 30, 2007


                                                                                                    Debt                     Other                 Total
                                                                          General                  Service                Governmental          Governmental
Revenues                                                                   Fund                     Fund                     Funds                 Funds
 Local property tax                                                 $       12,231,258       $        6,989,523       $                  -    $      19,220,781
 Specific ownership tax                                                      2,291,855                          -                        -            2,291,855
 State sources                                                              37,784,659                          -                 225,304            38,009,963
 Federal sources                                                               398,324                          -               3,475,961             3,874,285
 Other sources                                                               1,194,605                   267,577                  624,490             2,086,672
 Fund allocations                                                           (3,327,331)                         -               1,306,608            (2,020,723)
                                               Total Revenues               50,573,370                 7,257,100                5,632,363            63,462,833
Expenditures
 Direct instruction                                                          28,774,872                         -               3,611,773            32,386,645
  Indirect instruction                                                       10,211,554                         -               1,146,849            11,358,403
 Transportation                                                               3,116,126                         -                        -            3,116,126
  Custodial and maintenance                                                   3,993,403                         -                 121,361             4,114,764
  Other support services                                                      2,971,446                         -                  70,990             3,042,436
  General administration                                                        736,300                         -                   4,836               741,136
  Capital outlay                                                                266,869                         -                 747,916             1,014,785
 Debt service:
    Principal retirement                                                         178,128               3,135,000                  925,641             4,238,769
    Interest and fiscal charges                                                   32,301               2,963,886                  134,064             3,130,251
                                           Total Expenditures                ~0,280,999                6,098,886                6,763,430            63,143,315

           Excess of Revenues Over (Under) Expenditures                          292,371               1,158,214                (1,131,067)             319,518

Other Financing Sources (Uses)
 Proceeds from capital lease                                                     152,850                         -                151,906               304,756
 Transfers to other funds                                                       (729,630)                        -                       -             (729,630)
 Transfers from other funds                                                             -                        -                689,612               689,612
                     Total Other Financing Sources (Uses)                       (576,780)                        -                841,518               264,738


                                  Net Change in Fund Balances                   (284,409)               1,158,214                (289,549)              584,256

Fund Balance - July 1                                                          9,464,957                7,475,940                 721,058             17,661,955

Fund Balance - June 30                                               $         9,180,548     $          8,634,154     $           431,509     $       18,246,211

                                       The accompanying notes to financial statements are an integral part of this statement.

                                                                                -15­
            RECONCILIATION OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

                   OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES

                             PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                   For the year ended June 30, 2007




Total Change in Fund Balances - Governmental Funds                                                           $     584,256

   Expenditures for services which benefit a future period are reported as prepaid expenses and
   included in current assets in the government wide statement of net assets. In the
   governmental fund financial statements they are treated as expenditures when paid.                              148,466

   Change in deferred property tax revenue - Revenues that do not provide current financial
   resources are deferred on the governmental fund financial statements but recognized on the
   government-wide financial statements.                                                                           110,000

   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. This is the amount by which depreciation expense ($3,001,547)
   exceeds capital outlay ($1,014,785) in the period.                                                            (1,986,762)

   Principal retirements - Retirements of principal outstanding on the District's debt result in a
   reduction of accumulated resources on the fund financial statements. The government-wide
   statements show these reductions against the long-term liabilities.                                           4,137,499

   Internal service funds are used by management to charge costs of printing activities to the
   general and other funds. The net income (loss) of the internal service fund are included in
   the governmental activities statement of activities.                                                            (59,317)

   Premiums on general obligation debt are amortized on the government-wide statements, but
   are recognized in full in the governmental funds.                                                                28,426

   Some of the capital assets acquired this year were financed with capital leases. The amount
   financed by the leases is reported in the governmental funds as a source of financing. On
   the other hand, the capital leases are not revenues in the statement of activities, but rather
   constitute long-term liabilities in the statement of net assets.                                               (304,756)

   In the government-wide statements, accrued compensated absences are measured by the
   amount earned and unused. In the governmental funds, the expenditures for compensated
   absences are measured by the amount of financial resources used (essentially, the amounts
   actually paid). Therefore, the change in the accrued compensated absences is recognized.                        (42,961)

   Interest payable on general obligation debt is not recorded on the fund statements because it
   is not a current use of cash. Interest is accrued on the government-wide statements, and the
   change in the liability is recognized.                                                                           (29,657)

                                         Total Change in Net Assets - Governmental Activities                $   2,585,194




                    The accompanying notes to financial statements are an integral part of this statement.

                                                            -16­
 PROPRIETARY FUND


FINANCIAL STATEMENTS

                                          STATEMENT OF NET ASSETS

                                             PROPRIETARY FUNDS

                                     PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                                 June 30, 2007


                                                                                       Enterprise                Internal
                                                                                         Fund                  Service Fund
                                                                                      Food Service              Print Shop
 Assets
  Current Assets
    Cash in bank and on hand                                                      $          89,270        $           15,048
    Investments, at fair value                                                              407,287
    Accounts receivable
    Due from other funds                                                                                                1,339
    Accrued federal revenue                                                                  115,784
    Inventories                                                                               35,995

                                                       Total Current Assets                 648,336                    16,387

  Non-current Assets
   Equipment, net of depreciation                                                            120,555                  112,701

                                                                   Total Assets   $         768,891        $         129,088

Liabilities and Net Assets
  Current Liabilities
    Accounts payable                                                              $            3,755       $          13,653
    Accrued salaries and P.E.R.A.                                                            154,593                  15,665
    Due to other funds                                                                         3,389                  11,658
    Capital lease current                                                                                             52,233

                                                    Total Current Liabilities               161,737                   93,209
 Non-current Liabilities
  Capital lease non-current                                                                                             9,248

                                                            Total Liabilities               161,737                  102,457

 Net Assets
  Invested in capital assets, net of related debt                                           120,555                    51,220
  Unrestricted                                                                              486,599                   (24,589)

                                                            Total Net Assets                607,154                   26,631

                                            Total Liabilities and Net Assets      $         768,891        $         129,088




                  The accompanying notes to financial statements are an integral part of this statement.

                                                            -17­
               STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS

                                     PROPRIETARY FUNDS

                             PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                         June 30, 2007


                                                                              Enterprise               Internal
                                                                                Fund                 Service Fund
                                                                             Food Service             Print Shop
Operating Revenues
 Food service sales                                                      $         1,382,582     $
 Charges for printing sales                                                                                 163,032

                                        Total Operating Revenues                   1,382,582                163,032

Operating Expenses
 Salaries                                                                            903,797                110,875
 Benefits                                                                            266,169                 21,999
 Purchased services                                                                   57,078                 39,835
 Supplies and materials                                                            1,408,701                 41,070
 Equipment - noncapital                                                               67,470
 Depreciation                                                                          9,487                 38,579
 Other                                                                                   573

                                        Total Operating Expenses                   2,713,275                252,358

                                         Operating Income (Loss)                  (1,330,693)               (89,326)

Nonopertaing Revenues (Expenses)
 Federal sources                                                                   1,344,168
 State sources                                                                        33,700
 Other sources                                                                        18,813                    167
 Interest on capital lease                                                                                  (10,176)

                        Total Nonoperating Revenues (Expenses)                     1,396,681                00,009)

                                 Net Income (Loss) Before Other
                                        Financing Sources (Uses)                      65,988                (99,335)

  Other Financing Sources (Uses)
   Transfers from other funds                                                                                40,018

                                             Change in Net Assets                     65,988                (59,317)

Net Assets - July 1                                                                 541,166                  85,948

Net Assets - June 30                                                    $           607,154      $           26,631




                  The accompanying notes to financial statements are an integral part of this statement.

                                                          -18­
                                             STATEMENT OF CASH FLOWS

                                                  PROPRIETARY FUNDS

                                         PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                               For the year ended June 30, 2007



                                                                                           Enterprise                 Internal
                                                                                             Fund                   Service Fund
                                                                                          Food Service               Print Shop
Cash Flows From Operating Activities:
 Cash received from lunch sales                                                       $          1,382,582      $
 Cash received from printing sales                                                                                         211,007
 Cash payments for goods & services                                                             (1,408,551)                (63,221)
 Cash payments for employees                                                                      (884,877)               (105,966)
 Cash payments for benefits                                                                       (263,342)                (21,406)
                             Net Cash Provided (Used) by Operating Activities                   (1,174,188)                 20,414

Cash Flows From Noncapital Financing Activities:
 Cash received from federal sources                                                              1,208,342
 Cash received from state sources                                                                   33,703
 Cash received from other sources                                                                                           40,018
                 Net Cash Provided (Used) by Noncapital Financing Activities                     1,242,045                  40,018

Cash Flows From Capital and Related Financing Activities:
 Principal paid on capital lease                                                                                           (50,741)
 Interest paid on capital lease                                                                                            (10,176)
 Purchase of fixed assets                                                                        (106,371)
                      Net Cash Provided (Used) by Capital Financing Activities                   (106,371)                 (60,917)

Cash Flows From Investing Activities:
 Receipts of interest                                                                              18,813                      167
 Purchase of investments                                                                         (103,536)
                           Net Cash Provided (Used) by Investing Activities                       (84,723)                     167

                                               Net Increase (Decrease) in Cash                   (123,237)                    (318)
Cash - July 1                                                                                     212,507                   15,366
Cash - June 30                                                                        $            89,270       $           15,048

Reconciliation of Operating Income (Loss) to Net Cash Provided
 (Used) by Operating Activities:
   Operating income (loss)                                                            $        (1,330,693)      $          (89,326)
   Adjustment to reconcile operating income (loss) to net cash
      provided (used) by operating activities:
        Depreciation expense                                                                        9,487                   38,579
        Commodities used                                                                          143,934
   (Increase) decrease in accounts receivable                                                                                  883
   (Increase) decrease in due from other funds                                                                              47,092
   (Increase) decrease in inventories                                                             (22,802)
   Increase (decrease) in accounts payable                                                          4,344                    6,085
   Increase (decrease) in accrued liabilities                                                      21,071                    5,443
   Increase (decrease) in due to other funds                                                          471                   11,658
                              Net Cash Provided (Used) by Operating Activities        $        (1,174,188)      $           20,414




                       The accompanying notes to financial statements are an integral part of this statement.

                                                               -19­
  FIDUCIARY FUND


FINANCIAL STATEMENT

                                    STATEMENT OF FIDUCIARY NET ASSETS

                                    PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                June 30, 2007



                                                                                                           Student
                                                                                                           Activity
                                                                                                           Agency

  Cash in bank: and on hand                                                                          $         693,521
  Accounts receivable
  Due from other funds

                                                                                    Total Assets     $         693,521
                                                                                                     ~==,;;,;;,;;;~,;;,




Liabilities and Fund Equity

 Accounts payable                                                                                               14,418
 Due to other funds                                                                                              6,415
 Due to student groups                                                                                         672,688

                                                             Total Liabilities and Fund Equity      =$===6=9=3,==5=2=1




                  The accompanying notes to financial statements are an integral part of this statement.

                                                          -20­
NOTES TO BASIC FINANCIAL STATEMENTS

                                       NOTES TO FINANCIAL STATEMENTS
                                     PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                  June 30, 2007



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accounting policies of Pueblo County School District No. 70, (the School District) confonn to generally accepted accounting

     principles, as applicable to governmental units. For the fiscal year ending June 30, 2003, the School District has implemented

     the financial reporting requirements ofGASB Statement No. 34.


     Reporting Entity

     Pueblo County School District No. 70 is an independent school district governed by an elected five member board of education.

     As required by generally accepted accounting principles, the financial statements of the reporting entity include those of Pueblo

     County School District No. 70 (the primary government) and its component units.


     A component unit is a legally separate organization for which elected officials of the primary government are considered to be

     financially accountable. The component units discussed below are included in the School District's reporting entity. None of

     the component units are considered to be a major fund.


     Discretely Presented Component Units - Charter Schools The School District has two charter schools - Connect School and

     Swallows Charter Academy. The charter schools are financed from a portion ofthe School District's school finance act revenues,

     property taxes and from revenues generated by the charter school, within established limits. The charter schools are discretely

     presented component units as the School District is financially accountable for them.


     Blended Component Unit - The School District 70 Education Foundation The Foundation is a 501 (c)(3) non profit entity

     organized to operate exclusively for educational and charitable purposes exclusively for the benefit of the School District,

     including the support and enrichment of the education of the student. The Foundation is governed by a board approved by the

     Board of Education of the School District. The Foundation is reported as a special revenue fund within the School District's

     financial statements. The Foundation issues compiled financial statements. That report may be obtained by writing the

     Foundation, 24951 E U.S. Highway 50, Pueblo, CO 81006 or by calling 1-719-542-0220.


    Government-Wide and Fund Financial Statements

    Effective July 1,2002, the School District adopted Governmental Accounting Standards Board (GAS B) statement number 34,

    "Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments." As a result, an

    entirely new financial presentation fonnat has been implemented. As allowed by GASB, the School District has elected not to

    apply FASB standards issued after November 30, 1989 for its proprietary funds, and has chosen to continue to follow FASB

    standards issued on or before that date.


    The government-wide financial statements (the statement of net assets and the statement of activities) report infonnation on all

    of the non fiduciary activities of the School District and its component units. For the most part, the effect of interfund activity

    has been removed from these statements. Governmental activities, which nonnally are supported by taxes and intergovernmental

    revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.

    Likewise, the primary government is reported separately from certain legally separate component units for which the primary

    government is financially accountable.


    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. Program revenues include I)

    charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given

    function and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular

    function. Taxes and other items not properly included among program revenues are reported instead as general revenues.


    Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds

    (General Fund and Debt Service Fund) and individual enterprise funds are reported as separate columns in the fund financial

    statem~nts.




                                                               -21­
                                 NOTES TO FINANCIAL STATEMENTS (Continued)

                                   PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                               June 30, 2007



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Measurement Focus, Basis of Accounting, and Financial Statement Presentations

     The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. The government-wide

     financial statements are presented using the economic resources measurement focus and the accrual basis of accounting, as are

     the proprietary fund statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred,

     regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied.

     Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.


     As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions
     to this general rule are charges between the School District's governmental and business-type activities. Elimination of these
     charges would distort the direct costs and program revenues reported for the various functions concerned.

     Governmental fund financial statements are reported using the current financial resources measurement focus and the modified
     accrual basis of accounting, as are the fiduciary fund statements. 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 government 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. However, debt service expenditures, as well as expenditures related to compensated absences and
     claims and judgements, are recorded only when payment is due.

     Property and specific ownership taxes are reported as receivables and deferred revenue when levied and as revenues when due
     for collection in the following year and determined to be available.

     Grants and entitlement revenues are recognized when compliance with matching requirements are met. A receivable is established
     when the related expenditures exceed revenue receipts.

     Expenditures are recorded when the related fund liability is incurred with the exception of general obligation and capital lease
     debt service which is recognized when due and certain sick and retirement pay which are accounted for as expenditures when
     expected to be liquidated with expendable financial resources.

     The proprietary fund types are accounted for on the accrual basis of accounting. Revenues are recognized when earned and
     expenses are recognized when incurred. The measurement focus in these funds is on the flow of economic resources and
     emphasizes the determination of net income. All assets and all liabilities associated with their activity are included on their
     balance sheets. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in net total
     assets.

     Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses
     generally result from providing goods and services in connection with a proprietary fund's ongoing operations. The principal
     operating revenues ofthe School District's proprietary funds are charges to customers for sales and services. Operating expenses
     for enterprise funds include the cost ofsales and services, administrative expenses, and depreciation on capital assets. All revenue
     and expenses not meeting this definition are reported as nonoperating revenues and expenses.

    Fund Accounting
    The accounts of the School District are organized on the basis of funds, each of which is considered a separate accounting entity.
    The School District has created several types of funds and a number of discrete funds within each fund type. Each fund is
    accounted for by a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenues and
    expenditures/expenses. The individual funds account for governmental resources allocated to them for the purpose of carrying
    on specific activities in accordance with laws, regulations or other restrictions.




                                                                -22­
                                 NOTES TO FINANCIAL STATEMENTS (Continued)

                                   PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                               June 30, 2007



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Fund Accountine: (Continued)

     The following major funds and fund types are used by the School District:


                                                        Governmental Fund Types

     The focus of the governmental fund types' measurement is upon detennination of financial position and changes in financial

     position rather than upon net income. The following is a description of the major and nonmajor governmental fund types of the

     School District:


     General Fund

     The General Fund. a major fund. records financial transactions for the current educational operations of the School District. All

     revenues and expenditures not allocated by law or contractual agreement to a special fund are accounted for in this fund.


     Activities relating to the Preschool and Self Insurance funds have been included in the General Fund.


     Special Revenue Funds

     Special Revenue Funds are used to account for the proceeds of specific revenue sources which are legally restricted to

     expenditures for specified purposes. The Special Revenue Funds consist of the Capital Reserve, Governmental Designated­

     Purpose Grants. Pupil Athletic Fund and the School District 70 Education Foundation.


     The Capital Reserve Fund accounts for financial resources to be used for acquisition or construction of major capital facilities

     other than those financed by the Proprietary Funds.


     The Governmental Designated-Purpose Grants Fund is used to account for financial resources received from the federal

     government and other designated-purpose grants for expenditures incurred in carrying out the objectives of these programs.


     The Pupil Athletic Fund accounts for funds used for all student athletics.


     The School District 70 Education Foundation is organized to operate exclusively for educational and charitable purposes

     exclusively for the benefit of the School District.


     Debt Service Fund

     The Debt Service Fund. a major fund, is used to account for the accumulation of resources for, and the payment of interest and

     principal on long-tenn debt other than those which may be payable from proprietary fund types.


     Capital Projects Fund

     The Capital Projects Fund is used to account for all resources for the acquisition of capital facilities by the School District.


                                                            Proprietary Funds

     The focus of proprietary fund types measurement is upon detennination of net income, financial position, and cash flows. The
     generally accepted accounting principles applicable are those similar to business in the private sector. The following is a
     description of the proprietary fund types of the School District:

    Enterprise Funds
    Enterprise Funds are used to account for operations that are financed and operated in a manner similar to private business
    enterprises - where the intent is that costs (expenses, including depreciation) of providing goods or services on a continuing basis
    are financed or recovered primarily through user charges; or where the governing body has decided that periodic detennination
    of revenues earned, expenses incurred. and/or net income is appropriate for capital maintenance, public policy, management
    control, accountability, or other purposes.



                                                                -23­
                                  NOTES TO FINANCIAL STATEMENTS (Continued)

                                    PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                 June 30, 2007



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      Enterprise Funds- Continued
      The Food Service Fund is the only Enterprise Fund of the School District. This fund accounts for the acquisition, operation and
      maintenance of the School District's food service facilities and operations.

     Internal Service Funds
     Internal Service Funds are used to account for financing of goods or services provided by one department to other departments
     of the School District on a cost-plus basis.

     The Print Shop Fund is the only Internal Service Fund of the School District. This fund accounts for the acquisition, operation
     and maintenance of the School District's printing facilities and operations.

                                                               Fiduciary Funds

     These funds account for assets held by the School District as trustee or agent for individuals, private organizations, and other units

     of government. Agency funds or custodial funds do not involve the measurement ofresults ofoperations (assets equal liabilities).

     The following is a description of the Fiduciary Fund of the School District:


     Trust and A2ency Fund

     This fund accounts for assets held by the School District which have been collected on behalf of school-sponsored pupil

     organizations and activities.


     Cash and Cash Equivalents

     For purposes of the statement of cash flows in the Proprietary Fund, the School District considers all highly liquid investments

     with a maturity of three months or less when purchased, net of outstanding checks in excess of bank balance, to be cash

     equivalents.


     Budgets and Budgetary Data

     The School District follows these procedures in establishing the budgetary data reflected in the financial statements:


     a.	      Formal budgetary accounting is employed by the School District as a management control for all funds. Annual
              operating budgets are adopted each fiscal year through the passage ofan annual appropriation resolution for the general
              fund, special revenue funds, debt service fund and the proprietary funds. For each legally adopted budget, budgetary
              control exists at the total fund level.

     b.	      These budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP).

    c.	       All unencumbered budget appropriations lapse at the end of each fiscal year.

    Inventories
    Purchased inventories of the General Fund and Food Service Fund are stated at cost using the first-in, first-out method of
    determining inventories on hand. Commodity inventories in the Food Service Fund are stated at their fair market value on the
    date received. Perpetual inventory records are maintained for instructional supplies, automotive parts, plumbing and electrical
    supplies, and food service inventories. Physical counts were made of all inventories as of June 30, 2006. Inventories were
    adjusted to reflect the amounts determined by physical count.

    Food Service Fund inventories consist of donated commodities of $19,026 and purchased inventories of $16,969.




                                                                 -24­
                                 NOTES TO FINANCIAL STATEMENTS (Continued)

                                   PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                June 30, 2007



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Investments
     The School District's policy is to state investments in their financial statements at fair value. All investment income, including
     changes in the fair value of investments are reported as investment income on the School District's financial statements.

     Capital Assets
     All capital assets are capitalized at cost or estimated historical cost. Donated assets are recorded at fair market value at the time
     ofdonation. The costs ofnormal maintenance, repairs and minor renovations are recorded as expenditures when incurred. Major
     additions and improvements are capitalized. The proceeds from the sale ofassets used in the operations ofthe governmental fund
     types are recorded as revenues in the appropriate fund. The School District does not capitalize interest on the construction of
     capital assets. The School District maintains a capitalization threshold of $5,000.

     Capital assets are depreciated using the straight-line method over the estimated useful lives of the assets. Depreciation of all
     capital assets used in governmental activities and by proprietary funds is charged as an expense against their operations.
     Depreciation is recorded starting in the month the asset is placed in service. Estimated useful lives are as follows:

                                                                                               ESTIMATED USEFUL LIFE
               Buildings and improvements                                                           20 to 50 years
               Furniture and fixtures                                                                5 to 20 years
               Automotive equipment                                                                  5 to 10 years

     Accounts Payable and Encumbrances

     Accounts payable represent obligations due to vendors for goods delivered or services rendered prior to June 30, 2007.


     Encumbrances represent outstanding purchase orders for goods or services not yet delivered or provided as of June 30, 2007.

     Encumbrances are not recognized as liabilities or expenditures until the period in which the payable becomes fixed.


     Outstanding encumbrances at year-end are recognized as a reservation of fund balance.


     Outstanding encumbrances at June 30, 2007 by fund are as follows:

            General Fund                                                                                     $            332,290
            Governmental Designated-Purpose Grants Fund                                                                    16,525
                                                                             Total Encumbrances              $            348,815

     Property Taxes
     The School District's ad valorem property tax is levied by each December 15 for all real and business personal property located
     in the District. The assessed value of the roll on January I, 2007, upon which the levy for the 2006 fiscal year was based, was
     $394,872,190.

    The tax rates assessed for the year ended June 30, 2007 to finance general fund operations and the payment of principal and
    interest on general long-term debt were $31.081 and $17.750 per $1 ,000 valuation, respectively, for a total of$48.83 I per $1 ,000
    valuation.

    Property taxes attach as an enforceable lien on property as of January I following the levy date. Taxes are payable in two equal
    payments due before the last day of February and the 15th day of June or in one full payment before the last day of April.




                                                                -25­
                                 NOTES TO FINANCIAL STATEMENTS (Continued)

                                   PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                               June 30, 2007



NOTE A • SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Compensated Absences
     The School District affords certain employees sick leave benefits which are vesting, accumulating rights and are carried forward
     to subsequent years. Payment ofunused sick leave, or liabi lity ofthe School District to the employee, ifany, is payable only upon
     termination of an employee with ten years of continuous service to the District. The benefits are paid at varied rates applied to
     varied maximum accumulated days, depending on the employee group. The sick pay benefits are recognized at the time of the
     employee absence (i.e.: days offfor sick leave) which is in accordance with generally accepted accounting principles for these
     on-going benefits.

     The School District also affords certain employees vacation benefits. These benefits are earned based upon the length ofservice
     and accumulation is limited to a maximum of40 days. Accrued vacation is paid to employees upon termination of employment.

     Amounts recognized as expenditures on the fund financial statements are those which have been paid in the current year or are
     expected to be liquidated with currently available expendable financial resources.

     Total accrued vacation is included in the government-wide financial statements.

NOTE B - RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS

     The governmental funds balance sheet includes a reconciliation between fund balances - total governmental funds and net assets­
     governmental activities as reported in the government-wide statement of net assets. Additionally, the governmental fund
     statement ofrevenues, expenditures, and changes in fund balances includes a reconciliation between net change in fund balances­
     total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of
     activities.

     These reconciliations detail items that require adjustment to convert from the current resources measurement and modified accrual
     basis for governmental fund statements to the economic resources measurement and full accrual basis used for government-wide
     statements. However, certain items having no effect on measurement and basis were eliminated from the government fund
     statements during the consolidation of governmental activities.

NOTE C - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY

     Expenditures in Excess of Budget Amounts
     During the year ended June 30, 2007, the following individual fund incurred actual expenditures in excess of budgeted
     expenditures:
                                                           Actual                Budget           Actual Over Budget
         Food Service                                 $       2,713,275     $       2,683,400      $         29,875
         Capital Reserve Fund                         $       1,691,239     $       1,585,680      $        105,559

     Expenditures in excess of amounts budgeted and appropriated may be a violation of Colorado Local Government Budget Law.

    Risk Management
    The School District is exposed to various risks of loss related to torts; theft of; damage to; and destruction of assets; errors and
    omissions; injuries to employees; and natural disaster. The School District carries commercial insurance for such risks, including
    workers' compensation. The premiums for insurance coverage are paid primarily through the Self Insurance Reserve Fund. Such
    activities are included in the General Fund. Settled claims resulting from these risks did not exceed commercial insurance
    coverage during the fiscal year.

    Deficit Fund Eguity
    As of June 30, 2007 the District had one fund with a deficit fund balance. The Pupil Athletic Fund had a deficit fund balance of
    $27,531.



                                                               -26­
                                  NOTES TO FINANCIAL STATEMENTS (Continued)

                                    PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                June 30, 2007



NOTE D - CASH DEPOSITS AND INVESTMENTS

     Deposits
     Colorado State statutes govern the School District's deposits of cash. The statutes specify eligible depositories for public cash
     deposits which must be Colorado institutions and must maintain federal insurance (FDIC or FSLIC) on deposits held.

     Each eligible depository with deposits in excess of the insured levels must pledge a collateral pool of defined eligible assets
     maintained by another institution or held in trust for all of its local government depositors as a group with a market value at least
     equal to 102% of the total uninsured deposits held by that institution. The State regulatory commissions for banks and savings
     and Joan associations are required by statute to monitor the naming ofeligible depositories and reporting ofthe uninsured deposits
     and assets maintained in the collateral pool.

     Custodial credit risk is the risk that. in the event ofa bank failure. the District's deposits may not be returned to it. The District's
     policy for custodial risk parallels Colorado statutes.

     At June 30, 2007, the School District. including the fiduciary fund. had cash balances and certificates of deposit stated at cost
     plus accrued interest as follows:
                                                                             Carrying Amount              Bank Balance
           Insured (FDIC or FSLIC)                                          $            432,167       $            441,188
           Uninsured - required to be collateralized
            under State statutes                                                       2,247.514                  6.131 ,863
                                                                                       2,679,681       $          6,573,051
           Cash held by County Treasurer                                                       357,192
           Imprest petty cash funds                                                              1.625
                                                            Total Deposits       $           3,038,498

     The differences between carrying values and bank balances are due to checks outstanding and deposits not yet processed by the
     bank.

     A summary of cash and deposits held at June 30, 2007 follows:

                                                       Maturity                Interest                                        Market
                Cash and Deposits                       Date                     Rate                    Cost                  Value
      Demand Deposit Accounts:
       Wells Fargo Bank                                   N/A                 Variable           $        2.330,646      $        2,330,646
       Vectra Bank - Pueblo                               N/A                 Variable                       94,343                  94,343
       US Bank                                            N/A                 Variable                      116.868                 116,868
       Canon National Bank                                N/A                 Variable                       67,603                  67,603
       Pueblo Bank & Trust                                N/A                 Variable                       32,290                  32,290
      Certificate of Deposit Accounts:
       American Bank of Commerce                       10/10/07                 5.68%                        18,211                  18,211
       Sunflower Bank                                   6/8/08                 3.928%                        19,720                  19,720
      Petty Cash                                                                                              1,625                   1,625
      Cash held by County Treasurer                                                                         357.192                 357,192
                                                                  Total Cash and Deposits       $         3.038,498      $        3,038,498
    Cash consists of:
     Primary government                                                                         $         2,343,753
     Component Unit                                                                                           1,224
     Fiduciary Fund                                                                                         693,521
                                                                                                $         3,038,498




                                                                  -27­
                                 NOTES TO FINANCIAL STATEMENTS (Continued)

                                   PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                               June 30, 2007



NOTE D - CASH DEPOSITS AND INVESTMENTS (Continued)

     Investments
     Colorado statutes specify investment instruments meeting defined rating and risk criteria in which local government entities may
     invest. The law outlines the types of securities that public entities in Colorado may acquire and hold as investments. These
     include U.S. government and agency securities, certain bonds of political subdivisions, banker's acceptances, commercial paper,
     local government investment pools, repurchase agreements. money market funds and guaranteed insurance contracts. The statute
     also includes a provision limiting any investment to a five year maturity unless the governing body authorizes a longer period.

     Interest rate risk - The District's policy oflimiting investment maturities as a means of managing its exposure to fair value losses
     arising from increasing rates parallels Colorado statutes. Specifically. all securities are limited to a maximum maturity of five
     years from the date of purchase unless the governing body authorizes a longer period.

     Credit risk - The District does not have a policy that would further limit its choices beyond the requirements of Colorado statutes.
     As of June 30. 2007. the District's investment in ColoTrust was rated AAm by Standard and Poor's and Aaa by Moody's.

     As of June 30, 2007. the District held the following investments:
                                                                                                           Investment Maturities
                                                           Interest                                              (In Years)
                   Investments                               Rate                      Fair Value             Less Than One
       U.S. Government Securities                           4.34%              $               8,305,750 $              8,305,750
       ColoTrust                                           Variable                           14,511,637               14,511,637

                                                          Total Investments    $                 22,817,387    $               22,817,387
                                                                                                               =============
NOTE E - CHANGES IN CAPITAL ASSETS

     The following is a summary of the changes in capital assets for the year ended June 30, 2007:

                                                          July 1, 2006         Additions              Deletions             June 30, 2007
             Governmental Activities
     Non-Depreciable Assets:
      Land                                            $         564,859 $                    -    $                 -   $          564,859
      Construction in progress                                  183,488               124,000                 183,488              124,000
                 Total Non-Depreciable Assets                   748,347               124,000                 183,488              688,859

     Depreciable Assets:
      Bldg. and improvements                                110,504,115               548,745                                  111,052,860
      Furniture and fixtures                                  2,668,424               192,350                  8,745             2,852,029
      Automotive equipment                                    6,664,491               333,177                 40,000             6,957,668
                        Total Depreciable Assets            119,837,030             1,074.272                 48,745           120,862,557

     Less Accumulated Depreciation for:
      Bldg. and improvements                                 23,989,572             2,412,573                                   26,402,145
      Furniture and fixtures                                  1,594,734               233,539                  8,745             1,819,528
      Automotive equipment                                    3,796,302               394,013                 40,000             4,150,315
               Total Accumulated Depreciation                29,380,608             3,040,125                 48,745            32,371,988

                       Total Capital Assets, Net $           91,204.769 $          (1,841,853)    $           183,488   $       89,179,428




                                                                -28­
                                 NOTES TO FINANCIAL STATEMENTS (Continued)

                                   PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                               June 30, 2007



NOTE E - CHANGES IN CAPITAL ASSETS (Continued)

                                                         July 1,2006           Additions           Deletions           June 30, 2007
               Business-Type Activity
                 Food Service Fund
      Equipment                                 $              467,814 $            106,371 $             14,376 $            559,809
      Accumulated depreciation                                 444,143                9,487               14,376              439,254
                      Total Capital Assets, Net $               23,671 $             96,884 $                  - $            120,555

                    Component Unit
                     Charter Schools
      Non-Depreciable Assets:
       Land                                          $                 -   $               -   $               -   $
       Construction in progress
                  Total Non-Depreciable Assets

      Depreciable Assets:
       Bldg. and improvements                                1,021,472                6,975                                 1,028,447
       Furniture and fixtures
                         Total Depreciable Assets            1,021,472                6,975                                 1,028,447

      Less Accumulated Depreciation for:
       Bldg. and improvements                                  104,292               23,779                                   128,071
       Furniture and fixtures
                Total Accumulated Depreciation                 104,292               23,779                                   128,071

                        Total Capital Assets, Net $            917,180 $           (16,804) $                  -   $          900,376

      Depreciation expense was charged to functions/programs of the District as follows:

                      Governmental activities:
                       Direct instruction                                                                          $       1,240,519
                       Transportation                                                                                        377,291
                       Custodial and maintenance                                                                              60,169
                       Other support services                                                                              1,362,146
                                                    Total Depreciation Expense - Governmental Activities           $       3,040,125

     Depreciation expense for the business-type activity-Food Service Fund was $9,487 for the year ended June 30, 2007.

NOTE F - ACCRUED SALARIES AND P.E.R.A.

     Salaries of certain contractually employed personnel are paid over a twelve month period, but are earned during the school year,
     a period of approximately nine months. The amounts representing accrued salaries are those earned through June 30,2007, but
     not yet paid by the School District. Accrued P.E.R.A. represents the School District's 11.15% contribution on the accrued
     salaries. At June 30, 2007 accrued salaries and P.E.R.A. have been recognized as a liability in each of the affected funds.




                                                              -29­
                                   NOTES TO FINANCIAL STATEMENTS (Continued)

                                       PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                   June 30, 2007



NOTE F - ACCRUED SALARIES AND P.E.R.A. (Continued)

      The accrued salaries and P.E.R.A. by fund at June 30, 2007 were as follows:

                        General Fund                                                                                   $       5,453,918
                        Governmental Designated-Purpose Grants Fund                                                              382,578
                        Food Service Enterprise Fund                                                                             154,593
                        Pupil Athletic Fund                                                                                       55,927
                        Print Shop Fund                                                                                           15,665
                        Component Unit - Charter Schools                                                                         212,508
                                                                  Total Accrued Salaries and P.E.R.A.                  $       6,275,189

NOTE G - DEFINED BENEFIT PENSION PLAN

      Plan Description. Pueblo County School District No. 70 contributes to the Combined State and School Division Trust Fund
      (CSSDTF), a cost-sharing multiple-employer defined benefit pension plan administered by the Public Employees' Retirement
      Association ofColorado (PERA). CSSDTF provides retirement and disability, annual increases, and death benefits for members
      or their beneficiaries. All employees of Pueblo County School District No. 70 are members ofCSSDTF. Title 24, Article 51 of
      the Colorado Revised Statutes (CRS), as amended, assigns the authority to establish benefit provisions to the State Legislature.
      PERA issues a publicly available annual financial report that includes financial statements and required supplementary
      information for CSSDTF. That report may be obtained by writing PERA of Colorado, 1300 Logan Street, Denver, Colorado
      80203 or by calling PERA at 832-9550 or 1-800-759-PERA(7372).

      Funding Policy: Plan members and the Pueblo County School District No. 70 are required to contribute at a rate set by statute.
      The contribution requirements of plan members and the Pueblo County School District No. 70 are established under Title 24,
      Article 51, Part 4 of the CRS, as amended. The contribution rate for members is 8.0% and for the School District 10.65% from
      July I - December 31, 2006 and 11.15% from January I - June 30, 2007 of covered salary. A portion of the School District's
      contribution (0.8% of covered salary) is allocated for the Health Care Fund (See Note I). The Pueblo County School District's
      contributions to CSSDTF for the years ending June 30, 2007, 2006 and 2005 were $3,658,117. $3.242,984, and $2,864,818 and
      respectively. equal to their required contributions for each year.

NOTE H - POSTEMPLOYMENT HEALTHCARE BENEFITS

      Plan Description: The Pueblo County School District No. 70 contributes to the Health Care Fund (HCF). a cost-sharing multiple­
      employer postemployment healthcare plan administered by the PERA. The HCF provides a health care premium subsidy to PERA
      participating benefit recipients and their eligible beneficiaries. Title 24, Article 51. Part 12, of the CRS, as amended. assigns
      authority to establish the HCF benefit provisions to the State Legislature. PERA issues a publicly available annual financial report
      that includes financial statements and required supplementary information for the HCF. That report may be obtained by writing
      PERA of Colorado, 1300 Logan Street, Denver, Colorado 80203 or by calling PERA at 832-9550 or 1-800-759-PERA(7372).

     Funding Policy: The Pueblo County School District No. 70 is required to contribute at a rate of 0.8% of covered salary for all
     PERA members as set by statute. No member contributions are required. The contribution requirement for the Pueblo County
     School District No. 70 are established under Title 24. Article 51. Part 4 of the CRS, as amended. The apportionment of the
     contribution to the health care fund is established under Title 24, Article 51, Section 208 of the Colorado Revised Statues, as
     amended. The Pueblo County School District No. 70's contributions to HCF for the years ending June 30. 2007, 2006, and 2005
     were $280,060, $266,464. and $245,049, respectively, equal to their required contributions for each year.

NOTE I - LINE OF CREDIT

     The School District has a line ofcredit agreement with Wells Fargo Bank that is annual1y renewable. The maximum loan amount
     permitted is $600,000, and interest is due on any outstanding principal at the rate of6.0%. There was no outstanding balance at
     June 30, 2007.



                                                                 -30­
                                 NOTES TO FINANCIAL STATEMENTS (Continued)

                                   PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                June 30, 2007



NOTE J - CAPITAL LEASES AND OTHER LONG-TERM OBLIGATIONS

     The District has entered into several capital lease agreements for the purchase of equipment and other assets. The lease terms
     range from 4 to 10 years with interest ranging from 5.1 % percent to 7.5% percent. Capital lease and other long term obligations
     for the fiscal year ended June 30, 2007 are comprised of the following:
                                                                                                                        Current
                                         July 1.2006          Additions        Retirements        June 30. 2007          Portion
     Governmental Funds
      Energy management system $              2,452,559 $                 - $         567,152 $         1,885,407 $          596,766
      Computer equipment and
       software                                  34,896                                34,896
      12 School Buses                           525,628                               257,219             268,409            268,409
      2 School Buses                             69,985                                22,360              47,625             23,315
      Computer equipment                        264,772                                82,841             181,931             88,144
      Utility vehicles                           72,588                                15,998              56,590             17,353
      Utility vehicles                                             152,850             22,033             130,817             27,637
      2 School Buses                                              151,906                                 151,906             35,176
               Total Capital Lease ­
              Governmental Funds $            3,420,428 $         304,756 $         1,002,499 $        2,722,685 $         1,056,800

                                                                                                                                 Current
                                          July 1.2006          Additions            Retirements          June 30. 2007           Portion
    Proprietary Funds
     Internal service fund:
      Printing equipment              $        112,221    $                 -   $         50,740 $              61,481       $       52,233

    Component Unit
     Building                         $        244,025    $                 -   $        244,025     $                   -   $

    Other Obligations
     Compensated absences             $        426,183    $            45,812 $            2,851     $         469,144 $

    For financial reporting purposes, the School District follows the requirements of FASB Statement No. 13. Under certain
    circumstances, for capital leases, the present value of future minimum lease payments should be shown as a liability and related
    assets should be capitalized in the basic financial statements. It is the expectation that the leases will be renewed annually until
    title to the related property is acquired pursuant to the leases.

    The assets acquired through capital leases which have outstanding balances are as follows:

                                                              Governmental              Internal
                                                                Activities            Service Fund

    Equipment                                             $            6,605,555 $           217,917

    Less: Accumulated depreciation                                ( 1,026,418)               (83,535)
                                                 Total $            5,579,137 $               134,382




                                                                -31­
                               NOTES TO FINANCIAL STATEMENTS (Continued)

                                 PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                             June 30, 2007




NOTE J - CAPITAL LEASES AND OTHER LONG-TERM OBLIGATIONS (Continued)

     Capital leases have the following minimum annual lease payments:

     Fiscal Year          Governmental                               Proprietary                  Component Unit
       Ending                 Funds                                    Funds                      Charter Schools
      June 30      Principal        Interest                 Principal         Interest      Principal        Interest
        2008     $    1,056,800 $       124,104 $                  52,233 $          3,998 $           - $
        2009            831,303          69,516                     9,248               124
        2010            751,449          24,231
        2011             74,407           4,037
        2012              8,726              143

        Total     $     2,722,685    $         222,031   $          61,481   $         4,122   $                 -   $

NOTE K - GENERAL OBLIGATION BONDS

     General obligation bonds payable and payments on the bonds for the fiscal year ended June 30, 2007 are comprised of the
     following:

     $14,900,000 1997 Series, General Obligation Refunding Bonds, due in semi-annual installments with
     annual payments ranging from $305,000 to $1,340,000 through December I, 2014. Interest rates
     range from 3.8% - 5.0%                                                                                          $     9,060,000

     $26,400,000 200 I Series, General Obligation Refunding bonds, due in semi-annual installments with annual
     payments ranging from $120,000 to $3,985,000 through December I, 2019. Interest rates range from
     3.25% - 5.0%.                                                                                                        24,740,000

     $29,900,000 2003 Series, General Obligation Bonds, due in semi-annual installments with annual payments
     ranging from $1,030,000 to $2,300,000 through December I, 2022. Interest rates range from 2.0% to
     5.375%.                                                                                                              24,430,000

     $6,074,995 2003 Series B, General Obligation Refunding Bonds, due in semi-annual installments with
     annual payments ranging from $85,000 to $775,000 through December 1,2015. Interest rates range from
     2.0% to 3.5%.                                                                                                         5,329,995
                                                                                                                     $    63,559,995

                                                                                                                         Current
                                         July 1,2006         Issued              Retired         June 30, 2007           Portion
     General Obligation Bonds
      Refunding 1997                $        9,965,000 $                 -   $       905,000 $        9,060,000 $            950,000
      Refunding 2001                        25,505,000                               765,000         24,740,000              785,000
      Building 2003                         25,540,000                             1,110,000         24,430,000            1,130,000
      Refunding 2003B                        5,684,995                               355,000          5,329,995              187,920
      Unamortized premiums                     466,670                                28,426            438,244

                          Totals    $      67,161,665    $               -   $     3,163,426 $      63,998,239       $     3,052,920




                                                             -32­
                                NOTES TO FINANCIAL STATEMENTS (Continued)

                                  PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                               June 30, 2007



NOTE K - GENERAL OBLIGATION BONDS (Continued)

      Future Years Repayment Schedule:

                         Fiscal Year Ending June 30                              Principal            Interest            Total
                                    2008                                     $      3,052,920 $         3,175,691 $        6,228,611
                                    2009                                            3,162,075           3,196,144          6,358,219
                                    2010                                            3,735,000           2,605,814          6,340,814
                                    2011                                            3,895,000           2,447,339          6,342,339
                                    2012                                            4,060,000           2,284,620          6,344,620
                                 2013-2017                                         22,975,000           8,628,953         31,603,953
                                 2018-2022                                         20,550,000           2,684,747         23,234,747
                                    2023                                            2,130,000              55,911          2,185,911

                                                                     Total   $     63,559,995    $     25,079,219 $       88,639,214

     The bonds are secured by the School District's covenant to certify a rate of levy sufficient to meet the principal and interest
     payments with respect to the bonds. Payment of principal and interest for general obligation bonds is made from the Bond
     Redemption Fund.

NOTE L - DEFEASED DEBT

     In prior years, the School District has defeased various bond issues by creating separate irrevocable trust funds. New debt has
     been issued and the proceeds have been used to purchase U.S. government securities that were placed in the trust funds. The
     investments and fixed earnings from the investments are sufficient to fully service the defeased debt until the debt is called or
     matures. For financial reporting purposes, the debt has been considered defeased and therefore removed as a liability from the
     School District's government-wide financial statements. As of June 30, 2007, the amount of defeased debt outstanding but
     removed from the General Long-Term Debt Account Group amounted to $23,480,000.

NOTE M - INDIVIDUAL FUND INTERFUND RECEIVABLES AND PAYABLES

     A summary of the individual fund receivables and payables at June 30, 2007 follows:

                                                                                      DUE FROM                     DUE TO
                                                                                     OTHER FUNDS                 OTHER FUNDS
            General Fund                                                           $        911,026            $       2,625,824
            Nonmajor Governmental Funds                                                     588,765                      677,302
            Food Service Enterprise Fund                                                                                   3,389
            Print Shop Internal Service Fund                                                         1,339                11,658
            Student Activity Trust & Agency Fund                                                                           6,415
            Component Unit                                                                      2,625,824                802,366
                                                            Total All Funds        $            4,126,954      $       4,126,954

     The General Fund receivable is a result of financing programs in other funds. The General Fund payable is a result of per pupil
     funding allocations. Other balances are a result of miscellaneous reimbursements.




                                                              -33­
                                 NOTES TO FINANCIAL STATEMENTS (Continued)

                                     PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                 June 30, 2007



NOTE N - INTERFUND TRANSFERS

     Transfers and allocations are used to move revenues from the fund that statute or budget requires to collect them to the fund that
     statute or budget requires to expend them or to use unrestricted revenues collected in the General Fund to finance various
     programs accounted for in other funds in accordance with budgetary authorizations. Interfund transfers during the fiscal year
     ending June 30, 2007 consisted oftransfers and allocations to nonmajor governmental funds from the general fund in the amount
     of $1,826,060.

NOTE 0 - FUND EQUITY

     Reservations of fund balances of governmental funds are created to either (I) satisfy legal covenants that require that a portion
     of the fund balance be segregated or (2) identify the portion of fund balance that is not appropriable for future expenditures.
     Specific reservations of the fund balance accounts are summarized below:

     Reserve for inventories This reserve was created to segregate a portion ofthe fund balance that is not available for expenditures
     because the School District expects to use these resources within the next budgetary period.

     Reserve for encumbrances This reserve was created to represent encumbrances outstanding at the end of the year based on
     purchase orders and contracts signed by the School District but not completed as of the close of the year.

     Reserve for debt service This reserve was created to segregate a portion ofthe fund balance account for debt service, including
     both principal payments and interest payments. The purpose of the reserved fund balance is to service long-term debt.

     Reserve for emergency This amount represents 3% of fiscal year spending required by TABOR.

NOTE P - JOINT VENTURE

     The School District is a participant with other school districts in ajoint venture known as South Central Board of Cooperative
     Educational Services (Cooperative). The Cooperative is organized under provisions ofColorado law to provide special education
     services to member school districts in the Cooperative's general area. The member school districts provided approximately 7%
     of the Cooperative's total annual local resources and each member district appoints a member of its Board of Education to serve
     on the governing body of the Cooperative. For the year ended June 30, 2007, the District provided $21,417 to the Cooperative.
     Complete financial statements for the Cooperative can be obtained from their administrative office at 323 South Purcell
     Boulevard, Pueblo West, Colorado, 81007.

NOTE Q - COMMITMENTS AND CONTINGENCIES

     Tax, Revenue, Spending and Debt Limitation
     In November, 1992 Colorado voters amended Article X of the Colorado Constitution by adding Section 20, commonly known
     as the Taxpayer's Bill of Rights (TABOR). TABOR imposes tax raising, revenue, spending and debt limitations on local
     government entities within the State of Colorado. These limitations became effective for the first fiscal year beginning after
     December 31, 1992, which for the School District was the year ended June 30, 1994.

     On November 4, 1997, the School District passed a referendum regarding the revenue and spending limits imposed by Article
     X, section 20 ofthe Colorado constitution. The referendum allows the District, without increasing or adding any taxes ofany kind,
     to collect. retain and expend all revenues and other funds collected during 1997 and thereafter.

     The amendment is complex and subject to judicial interpretation. The School District has made certain interpretations of the
     amendment's language in order to determine its compliance. The School District believes it is in compliance with the tax raising,
     revenue. spending, debt and other limitations.




                                                               -34­
                                 NOTES TO FINANCIAL STATEMENTS (Continued)

                                   PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                June 30, 2007



NOTE Q - COMMITMENTS AND CONTINGENCIES (Continued)

     Tax, Revenue, Spending and Debt Limitation (Continued)
     In addition to the tax raising, revenue, spending and debt limitation provisions ofTABOR, there is also a requirement that every
     entity to which TABOR applies establish an "emergency reserve". To be used for declared emergencies only, each entity must
     reserve 3% or more of its fiscal year spending excluding bonded debt service. For the year ended June 30, 2007, the School
     District's reserve requirement was approximately $1,709,000 which represents 3% of fiscal year spending. The District has
     recognized the emergency reserve in the Insurance Reserve Fund, the General Fund, and the Component Unit.

     Federal and State Grants
     Federal and State grants are subject to audit by the grantor agencies and any adjustments may become a liability ofthe appropriate
     fund. Management believes these adjustments, if any, will not materially affect the District's results of operations or financial
     position.

     Economic Dependency
     Funding provided by the State to all public school systems in Colorado is primarily based upon the October I student count. The
     State provided $35,758,380, which represents approximately 52% ofthe District's total governmental fund revenues for the year.

     Arbitrage Liability
     The School District issued general obligation bonds for the purpose of financing voter approved capital construction projects.
     An arbitrage liability is the requirement to refund a portion ofthe investment earnings on bond proceeds temporarily invested until
     construction payments are made if certain statutory spend down requirements are not met. The potential arbitrage liability is not
     yet determinable. When such a liability, ifany, is determined it would be recorded in the government-wide statement ofnet assets
     as long-term debt until it is required to be refunded to the Federal government and becomes a current liability.

NOTE R - NET CHANGES IN AGENCY FUNDS
                                                                        Original                  Final
                                                                        Budget                   Budget                   Actual
     Fund Balance - June 30, 2006                                 $                        $                        $         689,703

     Revenue                                                                1,004,670                1,540,670               1,245,862

     Expenditures                                                           1,004,670                1,504,670               1,262,877

     Fund Balance - June 30,2007                                  $                        $                        $          672,688

     The fund balance as of June 30, 2007 on the District's general ledger is reported as the Statement of Fiduciary Net Assets.
BUDGETARY COMPARISON REPORTING

                        STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
                                        BUDGET AND ACTUAL (BUDGET BASIS)
                                                    GENERAL FUND

                                       PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                             For the year ended June 30, 2007



                                                                                                               Variance With
                                                               Budgeted Amount                                      Final Budget
                                                                                                                     Favorable
                                                          Original           Final               Actual            (Unfavorable)
Revenues
 Local property tax                                   $    11,849,938    $   11,993,818      $   12,231,258    $         237,440
 Specific ownership tax                                     2,100,000         2,100,000           2,291,855              191,855
 State sources                                             37,418,506        37,586,264          37,784,659              198,395
 Federal sources                                              475,000           475,000             398,324              (76,676)
 Other sources                                                455,200           656,300           1,194,605              538,305
 Fund allocations                                          (3,135,047)       (3,278,730)         (3,327,331)             (48,601)

                                     Total Revenues        49,163,597        49,532,652          50,573,370             1,040,718

Expenditures
 Direct instruction                                        28,354,007        28,317,432          28,774,872              (457,440)
 Indirect instruction                                      11,504,397        11,259,525          10,211,554             1,047,971
 Transportation                                             3,168,031         3,172,930           3,116,126                56,804
 Custodial and maintenance                                  4,256,891         4,132,036           3,993,403               138,633
 Other support services                                     2,889,298         3,204,468           2,971,446               233,022
 General administration                                       780,521           742,420             736,300                 6,120
 Capital outlay                                               330,660           324,426             266,869                57,557
 Debt service:
   Principal retirement                                                                             178,128              (178,128)
   Interest and fiscal charges                                                                       32,301               (32,301)
 Contingency                                                3,657,531         2,912,197                                 2,912,197

                                 Total Expenditures        54,941,336        54,065,434          50,280,999             3,784,435

                            Excess of Revenues Over
                              (Under) Expenditures         (5,777,739)       (4,532,782)            292,371             4,825,153


Other Financing Sources (Uses)
 Proceeds from capital lease                                                                        152,850              152,850
 Transfers to other funds                                    (792,031)           (976,465)         (729,630)             246,835
 Transfers from other funds

              Total Other Financing Sources (Uses)           (792,031)           (976,465)         (576,780)             399,685


            Excess of Revenues and Other Sources
        Over (Under) Expenditures and Other Uses           (6,569,770)       (5,509,247)           (284,409)            5,224,838

Fund Balance - July 1                                       6,569,770         5,509,247           9,464,957             3,955,710

Fund Balance - June 30                                $                  $                   $    9,180,548    $        9,180,548




                                                               -36­
OTHER SUPPLEMENTARY


  INFORMATION AND


      REPORTS

                                                              COMBINING BALANCE SHEET
                                                            NONMAJOR GOVERNMENTAL FUNDS
                                                          PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                                                      June 30, 2007
                                                                                   -
                                                                                         Governmental                            The School
                                                Capital            Pupil                  Designated          Capital            District 70
                                                Reserve           Athletic              Purpose Grants        Projects           Education
                                                 Fund              Fund                     Fund               Fund              Foundation            Totals
Assets

  Cash in bank and on hand                  $         7,232   $        29,273          $       856,682    $        36,033    $         108,281     $    1,037,501
  Investments at cost                                 5,503                  -                  47,236             24,863                      -           77,602
  Accounts receivable                                     -                  -                   2,197                   -                     -            2,197
  Due from other funds                             588,765                   -                        -                  -                     -          588,765
  Accrued federal revenue                                 -                  -                 238,705                   -                     -          238,705
  Other assets                                            -                  -                        -                  -               1,260              1,260

                             Total Assets   $      601,500    $        29,273          $     1,144,820    $        60,896    $         109,541     $    1,946,030

Liabilities and Fund Equity

  Checks in excess of bank balance          $             -   $              -         $              -   $              -   $                 -   $
  Accounts payable                                    1,775               502                  159,329             12,000                      -          173,606
  Accrued salaries and P.E.R.A.                           -            55,927                  382,578                   -                     -          438,505
  Due to other funds                               476,894                375                  200,033                   -                     -          677,302
  Deferred federal revenue                                -                  -                 225,108                   -                     -          225,108

                       Total Liabilities           478,669             56,804                  967,048             12,000                      -        1,514,521

Fund Balance
  Reserved for encumbrances                               -                  -                  16,525                   -                     -           16,525
  Reserved for emergency
  Reserved for building projects                          -                  -                        -            48,896                      -           48,896
  Unreserved                                        122,831            (27,531)                161,247                   -             109,541            366,088

                     Total Fund Equity              122,831            (27,531)                177,772             ~8,896              109,541            431,509

     Total Liabilities and Fund Equity      $       601,500   $        29,273          $      1,144,820   $        60,896    $         109,541     $     1,946,030



                                                                                 -37­
                                   COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES

                                                        NONMAJORGOVERNMENTALFUNDS

                                                      PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                                            For the year ended June 30, 2007


                                                                                                 Governmental                             The School
                                                           Capital             Pupil              Designated          Capital             District 70
                                                           Reserve            Athletic          Purpose Grants        Projects            Education
                                                            Fund               Fund                 Fund               Fund               Foundation            Totals
Revenues
 State sources                                         $       76,243     $                 -   $      149,061    $              -    $                 -   $      225,304
 Federal sources                                                     -                      -        3,475,961                   -                      -        3,475,961
 Other sources                                                     276            280,441              251,073             10,076                82,624            624,490
 Fund allocations                                            1,306,608                      -                 -                  -                      -        1,306,608
                                     Total Revenues          1,383,127            280,441            3,876,095             19,076                82,624          5,632,363
Expenditures
  Direct instruction                                             8,759            936,283            2,666,731                   -                      -        3,611,773
  Indirect instruction                                               -                      -        1,146,849                   -                      -        1,146,849
  Transportation
  Custodial and maintenance                                    121,361                      -                 -                  -                      -          121,361
  Other support services                                           269                    387            5,541              8,943                55,850             70,990
  General administration                                             -                      -            4,836                   -                      -            4,836
  Capital outlay                                               501,145             30,957               40,212            175,602                       -          747,916
  Debt service:
    Principal retirement                                       925,641                      -                 -                  -                      -          925,641
    Interest and fiscal charges                                134,064                      -                 -                  -                      -          134,064
                                  Total Expenditures         1,691,239            967,627             3,864,169       __184,545                  55,850          6,763,430

                            Excess of Revenues Over
                              (Under) Expenditures         _ (308,112)           (687,186)               11,926          1174,469)               26,774          (1,131,067)


Other Financing Sources (Uses)
 Proceeds from capitalleases                                   151,906                      -                 -                  -                      -          151,906
 Transfers from other funds                                          -            689,612                     -                  -                      -          689,612
              Total Other Financing Sources (Uses)             151,906            689,612                     -                  -                      -          841,518


                         Net Change in Fund Balance           (156,206)              2,426               11,926           (174,469)              26,774            (289,549)

Fund Balance - July 1                                          279,037             (29,957)             165,846           223,365                82,767            721,058

Fund Balance - June 30                                 $       122,831    $        (27,531)     $       177,772   $         48,896    $         109,541     $      431,509




                                                                                   -38­
               STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES
                               BUDGET AND ACTUAL (BUDGET BASIS)
                                     CAPITAL RESERVE FUND
                              PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                    For the year ended June 30, 2007


                                                                                                   Variance With
                                                  Budgeted Amount                                   Final Budget
                                                                                                     Favorable
                                              Original              Final            Actual        (Unfavorable)
Revenues
 State sources                            $        58,538       $       60,072   $       76,243    $       16,171
 Federal sources
 Other sources                                                                              276               276
 Fund allocations                               1,370,560            1,525,608        1,306,608          (219,000)

                         Total Revenues         1,429,098            1,585,680        1,383,127          (202,553)

Expenditures
 Direct instruction                                                                       8,759            (8,759)
 Indirect instruction
 Transportation
 Custodial and maintenance                         96,000              96,000           121,361           (25,361)
 Other support services                                                                     269              (269)
 Capital outlay                                   528,885             677,885           501,145           176,740
 Debt service:
   Principal                                      586,264             586,264           925,641          (339,377)
   Interest                                       193,357             193,357           134,064            59,293
 Contingency                                       24,592              32,174                              32,174

                    Total Expenditures          1,429,098            1,585,680        1,691,239          (105,559)

             Excess of Revenues Over
               (Under) Expenditures                                                    (308,112)         (308,112)

Other Finance Sources (Uses)
 Proceeds from capita11eases                                                            151,906           151,906

             Excess of Revenues and
         Other Sources Over (Under)
        Expenditures and Other Uses                                                    (156,206)         (156,206)

Fund Balance - July 1                                                                   279,037          279,037

Fund Balance - June 30                    $                     $                $      122,831    $      122,831




                                                         -39­
                  STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
                                  BUDGET AND ACTUAL <BUDGET BASIS)
                                         PUPIL ATHLETIC FUND
                                 PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                       For the year ended June 30, 2007


                                                                                                             Variance With
                                                        Budgeted Amount                                       Final Budget
                                                                                                               Favorable
                                                   Original              Final             Actual            (Unfavorable)
Revenues
 Other sources                                 $       398,173       $      398,173    $      280,441    $         (117,732)

Expenditures
 Direct instruction                                    978,928              969,339           936,283                33,056
 Indirect instruction
 Other support services                                                                           387                  (387)
 Capital outlay                                                                                30,957               (30,957)

                          Total Expenditures           978,928              969,339           967,627                 1,712

                 Excess of Revenues Over
                   (Under) Expenditures               (580,755)            (571,166)         (687,186)             (116,020)

Other Financing Sources (Uses)
 Transfers from other funds                            580,755              571,166           689,612               118,446

                 Excess of Revenues and
             Other Sources Over (Under)
            Expenditures and Other Uses                                                         2,426                 2,426

Fund Balance - July 1                                                                         (29,957)              (29,957)

Fund Balance - June 30                         $                     $                 $      (27,531)   $          (27,531)




                                                              -40­
              STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
                              BUDGET AND ACTUAL <BUDGET BASIS)
                      GOVERNMENTAL DESIGNATED-PURPOSE GRANTS FUND
                             PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                         June 30, 2007


                                                                                                  Variance With
                                                   Budgeted Amount                                 Final Budget
                                                                                                    Favorable
                                              Original              Final            Actual       (Unfavorable)
Revenues
 Federal sources                          $     4,395,500       $    4,707,214   $    3,475,961   $   (1,231,253)
 State sources                                                                          149,061          149,061
 Other sources                                  1,054,720            1,061,720          251,073         (810,647)

                         Total Revenues         5,450,220            5,768,934        3,876,095       (1,892,839)

Expenditures
 Direct instruction                             3,969,233            3,995,010        2,666,731        1,328,279
 Indirect instruction                           1,452,487            1,745,424        1,146,849          598,575
 Other support services                            20,000               20,000            5,541           14,459
 General administration                             8,500                8,500            4,836            3,664
 Capital outlay                                                                          40,212          (40,212)

                   Total Expenditures           5,450,220            5,768,934        3,864,169        1,904,765

             Excess of Revenues Over
               (Under) Expenditures                                                      11,926           11,926

Fund Balance - July 1 - Restated                                                        165,846          165,846

Fund Balance - June 30                    $                     $                $      177,772   $     177,772




                                                         -41­
              STATEMENT OF REVENUES. EXPENDITURES AND CHANGE IN FUND BALANCES

                              BUDGET AND ACTUAL (BUDGET BASIS)

                         SCHOOL DISTRICT 70 EDUCATION FOUNDATION

                             PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                         June 30, 2007



                                                                                              Variance With
                                               Budgeted Amount                                     Final Budget
                                                                                                    Favorable
                                           Original              Final           Actual           (Unfavorable)
Revenues
 Other sources                         $       165,067       $     165,067   $       82,624   $          (82,443)

Expenditures
 Other support services                         69,565              69,565           55,850               13,715


             Excess of Revenues Over
               (Under) Expenditures             95,502              95,502           26,774              (68,728)

Fund Balance - July 1                           82,767              82,767           82,767

Fund Balance - June 30                 $       178,269       $     178,269   $      109,541   $          (68,728)




                                                      -42­
                  STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

                                  BUDGET AND ACTUAL (BUDGET BASIS)

                                          DEBT SERVICE FUND
                                 PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                       For the year ended June 30, 2007


                                                                                                       Variance With
                                                          Budgeted Amount                                   Final Budget
                                                                                                             Favorable
                                                      Original          Final             Actual           (Unfavorable)
Revenues
 Taxes                                            $     6,833,967   $    6,970,715    $    6,989,523   $           18,808
 Other sources                                             75,000           75,000           267,577              192,577

                                 Total Revenues         6,908,967        7,045,715         7,257,100             211,385

Expenditures
 Debt service:
   Principal retirement                                 2,961,437        2,961,437         3,135,000             (173,563)
   Interest and fiscal charges                          3,139,100        3,139,100         2,963,886              175,214

                          Total Expenditures            6,100,537        6,100,537         6,098,886                1,651

                     Excess of Revenues Over
                       (Under) Expenditures               808,430           945,178        1,158,214             213,036

Fund Balance - July 1                                   1,000,000        1,000,000         7,475,940            6,475,940

Fund Balance - June 30                            $     1,808,430   $    1,945,178    $    8,634,154   $        6,688,976




                                                            -43­
                   STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
                                   BUDGET AND ACTUAL (BUDGET BASIS)
                                        CAPITAL PROJECTS FUND
                                  PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                        For the year ended June 30, 2007


                                                                                                          Variance With
                                                          Budgeted Amount                                      Final Budget
                                                                                                                Favorable
                                                      Original           Final              Actual            (U nfavorable)
Revenues
 Other sources                                    $                  $                  $       10,076    $           10,076

                                Total Revenues                                                  10,076                10,076

Expenditures
 Direct instruction
 Custodial and maintenance
 Other support service                                                                           8,943                (8,943)
 Capital outlay                                           216,968           202,000            175,602                26,398
 Contingency                                               66,800            21,635                                   21,635

                             Total Expenditures           283,768           223,635            184,545                39,090


                        Excess of Revenues Over
                          (Under) Expenditures           (283,768)          (223,635)         (174,469)               49,166

Fund Balance - July 1                                     283,768           223,635            223,365                  (270)

Fund Balance - June 30                            $                  $                  $       48,896    $           48,896




                                                            -44­
                       STATEMENT OF REVENUES EXPENSES AND CHANGE IN NET ASSETS
                                  BUDGET AND ACTUAL (BUDGET BASIS)
                                    FOOD SERVICE ENTERPRISE FUND
                                 PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                       For the year ended June 30, 2007


                                                                                                  Variance With
                                                Budgeted Amount                                    Final Budget
                                                                                                    Favorable
                                            Original              Final             Actual        (Unfavorable)
Operating Revenues
 Food service sales                     $     1,619,400       $    1,619,400    $    1,382,582    $     (236,818)

Operating Expenses
 Salaries                                       834,766              820,581           903,797           (83,216)
 Benefits                                       274,392              280,334           266,169            14,165
 Purchased services                              49,200               49,200            57,078            (7,878)
 Supplies and materials                       1,386,500            1,386,500         1,408,701           (22,201)
 Equipment - noncapital                          39,000               39,000            67,470           (28,470)
 Depreciation                                    32,700               32,700             9,487            23,213
 Other                                           66,842               75,085               573            74,512

             Total Operating Expenses         2,683,400           2,683,400          2,713,275           (29,875)

              Operating Income (Loss)        (1,064,000)          (1,064,000)       (1,330,693)         (266,693)

Nonoperating Revenues (Expenses)
 Federal sources                              1,028,000           1,028,000          1,344,168          316,168
 State sources                                   35,000              35,000             33,700           (1,300)
 Other sources                                    1,000               1,000             18,813           17,813

                   Total Nonoperating
                  Revenues (Expenses)         1,064,000           1,064,000          1,396,681          332,681

                 Change in Net Assets                                                   65,988           65,988

Net Assets - July 1                                                                    541,166          541,166

Net Assets - June 30                    $                     $                 $      607,154    $     607,154




                                                       -45­
                          STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
                                      BUDGET AND ACTUAL <BUDGET BASIS)
                                      PRINT SHOP INTERNAL SERVICE FUND
                                     PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                           For the year ended June 30, 2007


                                                                                                    Variance With
                                              Budgeted Amount                                        Final Budget
                                                                                                      Favorable
                                          Original                  Final             Actual        (Unfavorable)
Operating Revenues
 Charges for printing sales           $       175,000    $            175,000     $      163,032    $      (11,968)

Operating Expenses
 Salaries                                     114,558                 113,850            110,875            2,975
 Benefits                                      22,898                  22,820             21,999              821
 Purchased services                            34,800                  34,800             39,835           (5,035)
 Supplies and materials                        42,000                  42,000             41,070              930
 Depreciation                                  30,000                 100,000             38,579           61,421
 Other objects

          Total Operating Expenses            244,256                 313,470            252,358           61,112

           Operating Income (Loss)            (69,256)               (138,470)           (89,326)          49,144

Nonoperating Revenues (Expenses)
 Other sources                                   300                        300              167              (133)
 Interest on capital lease                                                               (10,176)          (10,176)

                Total Nonoperating
               Revenues (Expenses)               300                        300          (10,009)          (10,309)

    Net Income (Loss) Before Other
           Financing Sources (Uses)           (68,956)               (138,170)           (99,335)          38,835

Other Financing Sources (Uses)
 Transfers from other funds                    68,956                 138,170             40,018           (98,152)

               Change in Net Assets                                                      (59,317)          (59,317)

Net Assets - July 1                                                                       85,948           85,948

Net Assets - June 30                  $                  $                        $       26,631    $      26,631




                                                             -46­
                                         COMBINING BALANCE SHEET

                                    COMPONENT UNIT - CHARTER SCHOOLS

                                    PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                June 30, 2007



                                                                                     Swallows             Total
                                                                   Connect           Charter             Charter
 Assets                                                             School           Academy             Schools

   Cash in bank and on hand                                  $          68,393   $        (67,169)   $         1,224
   Due from other funds                                              1,305,249          1,320,575          2,625,824

                                            Total Assets     $       1,373,642   $      1,253,406    $     2,627,048

 Liabilities and Fund Equity

  Accounts payable                                           $          1,512    $         4,020     $         5,532
  Accrued salaries and P.E.R.A.                                       100,985            111,523             212,508
  Due to other funds                                                  338,892            463,474             802,366

                                        Total Liabilities             441,389            579,017           1,020,406

Fund Balance
  Reserved for encumbrances
  Reserved for emergency                                               33,900             28,600              62,500
  Umeserved                                                           898,353            645,789           1,544,142

                                    Total Fund Equity                 932,253            674,389           1,606,642

                  Total Liabilities and Fund Equity         $        1,373,642   $      1,253,406    $     2,627,048



  Amounts reported for component unit activities in
  the statement of net assets are different because:

Component Unity Total Fund Equity                                                                    $     1,606,642

 Add:
  Capital assets, net of depreciation                                                                        900,376

            Net Assets of Component Unit Activities                                                  $     2,507,018




                                                            -47­
        COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
                            COMPONENT UNIT - CHARTER SCHOOLS
                           PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                  For the year ended Jooe 30, 2007


                                                                                       Swallows            Total
                                                                     Connect           Charter            Charter
                                                                      School           Academy            Schools
 Revenues
  Other sources                                                  $            82   $            81    $           163
  Food allocations                                                     1,096,542           924,181          2,020,723

                                                Total Revenues         1,096,624           924,262          2,020,886

 Expenditures
  Direct instruction                                                    699,811            525,835          1,225,646
  Indirect instruction                                                  242,004            202,814            444,818
  Custodial and maintenance                                              31,993             50,866             82,859
  Other support services                                                 31,290             29,422             60,712
  General administration                                                 17,719             15,691             33,410
  Capital outlay                                                                             6,975              6,975
  Debt Service:
    Principal retirement                                                                   142,755           142,755

                                         Total Expenditures            1,022,817           974,358          1,997,175

                                   Excess of Revenues Over
                                     (Under) Expenditures                73,807            (50,096)           23,711

 Fund Balance - July 1                                                  858,446            724,485          1,582,931

Fund Balance - June 30                                           $      932,253    $       674,389    $     1,606,642



  AmOOOts reported for component unit activities in
  the statement of activities are different because:

Component Unit Net change in Fund Balances                                                            $       23,711

  Add:
   Capital asset additions                                                                                     6,975
   Principal payment on long-term liabilities                                                                244,025
   Decrease in accrued interest                                                                                1,525
  LESS:
   Depreciation expense                                                                                      (23,779)

Change in Net Assets of Component Unit Activities                                                     $      252,457
              STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
                              BUDGET AND ACTUAL (BUDGET BASIS)
                                        CONNECT SCHOOL
                             PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                   For the year ended June 30, 2007


                                                                                                 Variance With
                                                 Budgeted Amount                                  Final Budget
                                                                                                   Favorable
                                             Original              Final            Actual       (Unfavorable)
Revenues
 Other sources                           $                     $                $           82   $          82
 Fund allocations                                996,359            1,037,993        1,096,542          58,549

                        Total Revenues           996,359            1,037,993        1,096,624          58,631

Expenditures
 Direct instruction                              790,124             783,964           699,811           84,153
 Indirect instruction                            247,156             232,780           242,004           (9,224)
 Custodial and maintenance                       127,944             127,949            31,993           95,956
 Other support services                           20,903              21,107            31,290          (10,183)
 General administration                                                                 17,719          (17,719)
 Capital outlay
 Contingency                                     601,257             663,218                           663,218

                    Total Expenditures         1,787,384            1,829,018        1,022,817         806,201

             Excess of Revenues Over
               (Under) Expenditures             (791,025)           (791,025)           73,807         864,832

Fund Balance - July 1                           791,025              791,025           858,446          67,421

Fund Balance - June 30                   $                     $                $      932,253   $     932,253




                                                        -49­
             STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
                             BUDGET AND ACTUAL <BUDGET BASIS)
                               SWALLOWS CHARTER ACADEMY
                            PUEBLO COUNTY SCHOOL DISTRICT NO. 70
                                  For the year ended June 30, 2007


                                                                                                  Variance With
                                                 Budgeted Amount                                   Final Budget
                                                                                                    Favorable
                                             Original              Final            Actual        (Unfavorable)
Revenues
 Other sources                           $                     $                $           81    $           81
 Fund allocations                                862,319             934,129           924,181            (9,948)

                        Total Revenues           862,319             934,129           924,262            (9,867)

Expenditures
 Direct instruction                              508,911             533,997           525,835             8,162
 Indirect instruction                            202,940             201,658           202,814            (1,156)
 Custodial and maintenance                        31,884              38,000            50,866           (12,866)
 Other support services                           19,007              26,561            29,422            (2,861)
 General administration                            5,000               5,000            15,691           (10,691)
 Capital Outlay                                                                          6,975            (6,975)
 Debt Service:
   Principal retirement                                                                142,755          (142,755)
 Contingency                                     571,504             605,840                             605,840

                    Total Expenditures         1,339,246           1,411,056           974,358          436,698

            Excess of Revenues Over
              (Under) Expenditures              (476,927)           (476,927)          (50,096)         426,831

Fund Balance - July 1                           476,927              476,927           724,485          247,558

Fund Balance - June 30                   $                     $                $      674,389    $     674,389




                                                        -50­
ADDITIONAL REPORTS


       AND


    SCHEDULES

                                 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

                                     PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                           For the year ended June 30, 2007



                                                                                          Federal
                                                                                           CFDA           Federal
                                                                                          Number        Expenditures
U.S. Department of Education
  Passed Through State Department of Education
    Title 1 - Grants to Local Educational Agencies                                         84.010   $           741,924
    Special Education - Grants to States                                                   84.027             1,616,633
    Vocational Education - Basic Grants to States                                          84.048                41,987
    Special Education - Rehabilitation Services-Vocational Rehabilitation                  84.126               208,283
      Grants to States
    Special Education Preschool Grant                                                      84.173                35,053
    Safe and Drug-Free Schools and Communities - State Grants                              84.186                30,542
    Fund for the Improvement of Education                                                  84.215               576,063
    Innovative Education Program Strategies                                                84.298                 6,686
    Technology Literacy Challenge Fund Grants                                              84.318                 2,514
    English Language Acquistion Grants                                                     84.365                19,122
    Improving Teacher Quality State Grants                                                 84.367               197,155
    Hurrican Education Recovery                                                            84.938                 4,236
                                              Total U.S. Department of Education                    $         3,480,198

U.S. Department of Agriculture
  Direct Programs:
    Food Distribution                                                                      10.550   $          136,398
  Passed Through State Department of Education
    School Breakfast Program                                                               10.553               231,092
    National School Lunch Program                                                          10.555               944,969
    Summer Food Service Program for Children                                               10.559                23,524
                                                    Total Passed Through State                                1,199,585
                                          Total U.S. Department of Agriculture                      $         1,335,983

Other Federal Assistance
 Department of the Army
   ROTC Salary reimbursement                                                               12.000              107,792

                                                        Total Federal Assistance                    $         4,923,973




                                   The accompanying notes are an integral part of this schedule.

                                                               -51­
                    NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL A WARDS

                              PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                    For the year ended June 30, 2007



NOTE A - BASIS OF ACCOUNTING

     The accompanying schedule ofexpenditures offederal awards includes the federal grant activity ofPueblo County School District
     No. 70 and is presented on the modified accrual basis of accounting for governmental fund types and the accrual basis of
     accounting for proprietary fund types. The information in this schedule is presented in accordance with the requirements ofOMB
     Circular a-133, Audits o/States, Local Governments, and Non-Profit Organizations.

NOTE B - RISK BASED AUDIT APPROACH

     The dollar threshold used to distinguish between Type A and Type B programs is $300,000. The District does qualify as a low­
     risk auditee.

NOTE C - FOOD DISTRIBUTION

     Nonmonetary assistance is reported in the Schedule at the fair value ofthe commodities received and disbursed. At June 30,2007
     the District had food commodities totaling $19,026 in inventory.




                                                             -52­
                                                   CERTIFIED PUBLIC ACCOUNTANTS
 JAMES E. GARREN, CPA                                                                                                       SUITE 200
 MEL J. ROSS, CPA                                                                                            3673 PARKER BOULEVARD
 SAM J. DeNARDO, CPA                                                                                        PUEBLO, COLORADO 81008
                                                                                                                        719/544-9872
 December 21, 2007
                                                                                                                    FAX 719 / 253-5417
 Board of Education                                                                                                      www.grdcpa.com
 Pueblo County School District No. 70
 Pueblo. Colorado

 Report on Internal Control Over Financial Reporting and oil Compliance and Other Matters Based on an Audit of Financial
 Statements Performed in Accordance with Govemment Auditing Standards

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate
discretely presented component units. each major fund and the aggregate remaining fund information of Pueblo County School District
No. 70 as of and for the year ended June 30.2007. which collectively comprise Pueblo County School District No. 70's basic financial
statements and have issued our report thereon dated December 21. 2007. We conducted our audit in accordance with auditing standards
generally accepted in the United States of America and the standards applicable to financial audits contained in Government Audit
Standards. issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing our audit. we considered Pueblo County School District No. 70's internal control over financial reporting in
order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose
of expressing an opinion on the effectiveness of Pueblo County School District No. 70's internal control over financial reporting.
Accordingly. we do not express an opinion on the effectiveness of Pueblo County School District No. 70's internal control over financial
reporting.

Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would
not necessarily identify all deficiencies in intt<rnal control over financial reporting that might be significant deficiencies ·or material
weaknesses. However. as discussed below. we identified certain deficiencies in internal control over financial reporting that we consider
to be significant deficiencies.

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 Pueblo County School District No. 70'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 ,Pueblo County School District No. 70's financial statements that is more than inconsequential will
not be prevented or detected by the Pueblo County School District No. 70's internal control. We consider the deficiencies described in
the accompanying schedule of findings and questioned costs to be significant deficiencies in internal control over financial reporting.

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 Pueblo County School District No. 70's
internal control.

Our consideration ofthe internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section
and would not necessarily identify all deficiencies in the internal control that might be significant deficiencies and, accordingly, would
not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that none
of the significant deficiencies described above is a material weakness.




MEMBER COLORADO SOCIETY OF CPA'S                                   -53-                    MEMBER AMERICAN INSTITUTE OF CPA'S

                                       MEMBER PRIVATE COMPANIES PRACTICE SECTION
 Board of Education
 Pueblo County School District No. 70
 Page 2


Compliance and Other Matters

As part of obtaining reasonable assurance about whether Pueblo County School DistrictNo. 70's financial statements are free of material
misstatement, we performed tests of its compliance with certain provisions of laws., regulations, contracts, and grant agreements,
noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However,
providing an opinion on compliance with those provisions was not an objective of our audit, and, accordingly, we do not express such
an opinion. The results ofour tests disclosed no instances of noncompliance that are required to be reported under Government Auditing
Standards.

We noted certain matters that we reported to management of Pueblo County School District No. 70 in a separate letter dated December
21,2007.

Pueblo County School District No. 70's response to the findings identified in our audit is described in the accompanying schedule of
findings and questioned costs. We did not audit Pueblo County School District No. 70's response and. accordingly. we express no opinion
on it.

This report is intended solely for the information and use of the Board of Education. management. federal awarding agencies, and pass­
through entities and is not intended to be and should not be used by anyone other than these specified parties.




                                                               -54­
                                                  CERTIFIED PUBLIC ACCOUNTANTS
  JAMES E. GARREN, CPA                                                                                                    SUITE 200
  MEL J. ROSS, CPA                                                                                         3673 PARKER BOULEVARD
  SAM J. DeNARDO, CPA                                                                                     PUEBLO, COLORADO 81008
                                                                                                                      719 / 544-9872
                                                                                                                  FAX 719 / 253-5417
 December 21, 2007
                                                                                                                       www.grdcpa.com
 Board of Education
 Pueblo County School District No. 70
 Pueblo, Colorado

 Report on Compliance With Requirements Applicable to Each Major Program and Internal Control Over Compliance in
 Accordance With OMB Circular A-133

 Compliance

We have audited the compliance of Pueblo County School District No. 70 with the types of compliance requirements described in the
U.S. Office ofManagement and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal
programs for the year ended June 30,2007. Pueblo County School District No. 70's major federal programs are identified in the summary
of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws,
regulations, contracts and grants applicable to each of its major federal programs is the responsibility of Pueblo County School District
No. 70's management. Our responsibility is to express an opinion on Pueblo County School District No. 70's compliance based on our
audit.

We conducted our audit of compliance in accordance with auditing standards general1y accepted in the United States of America; the
standards applicable to financial audits contained in Government Auditing Standards. issued by the Comptrol1erGeneral of the United
States; and OMB Circular A-133, Audit ofStates. Local Governments. and Non-Profit Organizations. Those standards and OMS Circular
A-133 require that we plan and perfonn the audit to obtain reasonable assurance about whether noncompliance with the types of
compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit
includes examining, on a test basis, evidence about Pueblo County School District No. 70's compliance with those requirements and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion. Our audit does not provide a legal determination on Pueblo County School District No. 70's compliance with those
requirements.

In our opinion, Pueblo County School District No. 70 complied, in all material respects, with the requirements referred to above that are
applicable to each of its major federal programs for the year ended June 30, 2007.

Internal Control Over Compliance

The management of Pueblo County School District No. 70 is responsible for establishing and maintaining effective internal control over
compliance with the requirements oflaws, regulations. contracts, and grants applicable to federal programs. In planning and perfonning
our audit, we considered Pueblo County School District No. 70's internal control over compliance with requirements that could have a
direct and material effect oil a major federal program in order to detennine our auditing procedures for the purpose of expressing our
opinion on compliance, but not for the purpose of an opinion on the effectiveness of internal control over compliance. Accordingly, we
do not express an opinion on the effectiveness of Pueblo County School District No. 70's internal control over compliance.

Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and would not
necessarily identify all defiCiencies in Pueblo County School District No. 70's internal control that might be significant deficiencies or
material weaknesses as defined below. However, as discussed below, we identified certain deficiencies in internal control over
compliance that we consider to be significant deficiencies.




MEMBER COLORADO SOCIETY OF CPA'S                                  -55-                   MEMBER AMERICAN INSTITUTE OF CPA'S

                                      MEMBER PRIVATE COMPANIES PRACTICE SECTION
 Board of Education
 Pueblo County School District No. 70
 Page 2


A COl/trol deficiency in an entity's internal control over compliance 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 noncompliance with a type
of compliance requirement of a federal program on a timely basis. A significant defidency is a control deficiency, or combination of
control deficiencies, that adversely affects the entity's ability to administer a federal program such that there is more than a remote
likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be
prevented or detected by the entity's internal control. We consider the deficiencies in internal control over compliance described in the
accompanying schedule of findings and questioned costs as items 07-02, 05-03, 02-1 and 00-2 to be significant deficiencies.

A material weakness is a signi ficant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood
that material noncompliance with a type of compliance requirement ofa federal program will not be prevented or detected by the entity's
internal control. We did not consider any of the deficiencies described in the accompanying schedule of findings and questioned costs
to be material weaknesses.

Pueblo County School District No. 70's response to the findings identified in our audit are described in the accompanying schedule of
findings and questioned costs. We did not audit Pueblo County School District No. 70's response and, accordingly, we express no opinion
on it.

This report is intended solely for the information and use ofthe Board of Education, management, federal awarding agencies, and pass­
through entities and is not intended to be and should not be ~sed by anyone other than these specified parties.




                                                                  -56­
                               SCHEDULE OF FINDINGS AND OUESTIONED COSTS

                                  PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                        For the year ended June 30, 2007



A. SUMMARY OF AUDIT RESULTS

      I.	 The auditor's report expresses an unqualified opinion on the general purpose financial statements of Pueblo County School
          District No. 70.

     2.	 Two new significant deficiencies were disclosed during the audit of the financial statements are reported in Section B below.

     3.	 No instances of noncompliance material to the financial statements of Pueblo County School District No. 70 were disclosed
         during the audit.

     4.	 No new significant deficiencies were disclosed during the audit of the major federal award programs.

     5.	 The auditor's report on compliance for the major federal award programs for Pueblo County School District No. 70 expresses
         an unqualified opinion.

     6.	 Audit findings relative to the major federal award programs for Pueblo County School District No. 70 are reported in Part
         C of this Schedule.

     7.	 The programs tested as major programs included:

                 Fund for the Improvement of Education

                 School Breakfast Program

                 National School Lunch Program

                 Summer Food Service Program for Children

                 Special Education - Grants to States

                 Special Education Preschool Grant


     8.	 The threshold for distinguishing Types A and B programs was $300,000.

     9.	   Pueblo County School District No. 70 was determined to be a low-risk auditee.

B. FINDINGS-FINANCIAL STATEMENT AUDIT

     SIGNIFICANT DEFICIENCIES

     07-01       Ticket sales at athletic and other similar events

     Condition
     The procedures and reports being used for ticket sales at athletic events and other similar events are not standardized and should
     include appropriate controls.

     Criteria

     Additional procedures should be established to improve internal controls.


     Effect

     A failure to implement better controls could lead to misappropriation of funds.


     Recommendation

     Standard reports should be developed and used at all locations for ticket sales at such events. This should include the use of pre­

     numbers tickets and related control over their access and distribution.





                                                                -57­
                       SCHEDULE OF FINDINGS AND OUESTIONED COSTS (Continued)

                              PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                     For the year ended June 30, 2007



B. FINDINGS-FINANCIAL STATEMENT AUDIT (Continued)

     Response

     The District will review the recommendation and determine what procedures need to be improved.


     07-02       Fund Balance Not Agreeing With Prior Fiscal Year Audit


     Condition

     It was noted that the fund balance in several funds did not agree with the balances shown after closing the prior fiscal year.


     Criteria

     Fund balances should reflect the correct balances to ensure that fund equity in total is correct and reflects any reservations or

     restrictions.


     Effect

     A failure to reflect the correct fund equity may result in misrepresentation ofresources available or incorrect reporting ofrevenues

     or expenditures in the fiscal year.


     Recommendation

     The fund balance in each fund should be verified to ensure that all yearend adjustments, including any reversing adjusting entries

     are posted correctly.


     Response

     The District agrees with this recommendation and will review current procedures.


C. FINDINGS AND QUESTIONED COSTS-MAJOR FEDERAL AWARD PROGRAMS AUDIT.

     None

D. SUMMARY SCHEDULE OF PRIOR AUDITING FINDINGS

     SIGNIFICANT DEFICIENCIES

     05-3       Coding of Salaries and Benefits Relating to Federal Programs

     Condition
     Several grants permit. or are sometimes specifically designed to provide for the payment of salaries and benefits which are
     program specific. Individuals being paid with such funds are subject to the approval of the granting agency, which is often times
     CDE. When the individuals being paid with such funds changes from that originally budgeted due to this approval process, it
     may be after some salary and benefit payments have already been made. On these occasions, corrections should be made on a
     timely basis to reflect the salaries and benefits being paid from the appropriate funds.

    Recommendation
    Although these corrections are sometimes made on a timely basis, this has not been the case with Title VI-B funds. If this
    condition should present itselfin future years. the corrections/adjustments should be made as soon as administratively feasible.
    Further, we believe the School District should consider developing and using a standardized form to communicate any changes
    to the budget codes/funds from which salaries are being paid. This should only be initiated at the appropriate level of authority
    and the distribution list should include all affected departments.

    Response

    Such a recommendation is in the process of being implemented.

                      SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)

                             PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                    For the year ended June 30, 2007



D. SUMMARY SCHEDULE OF PRIOR AUDITING                  FINDINGS (Continued)

     00-2       Coding Federal Expenditures

     Condition

     Coding of federal expenditures in Designated Grant Fund could be improved.


     Recommendation
     Internal control procedures need to be implemented to ensure that the expenditures are coded correctly. Grant administrators
     should verify their records with the general ledger. Elementary school employees who process purchase orders for federal
     programs need to be infonned on how these expenditures should be coded and what documentation needs to be retained.

    Response

    Such a recommendation is in the process of being implemented.


     02-1       Purchase Order Processing

    Condition

    Several instances were noted where purchase orders were not being prepared and approved on a timely basis.


    Recommendation
    The District has policies and procedures which should remedy the described condition if they are adhered to and followed
    consistently. These policies and procedures should be communicated to all employees involved in this process on a regular basis.

    Response

    Such a recommendation is in the process of being implemented.





                                                             -59­
                                SCHEDULE OF FISCAL YEAR SPENDING COMPUTATIONS

                                       PURSUANT TO ARTICLE X, SECTION 20

                                     PUEBLO COUNTY SCHOOL DISTRlCT NO. 70

                                            For the year ended June 30, 2007



 1.   Total Fiscal Year Expenditures for All Funds Listed (Expenditures,
        plus changes in fund balances, less transfers)

       a. General Fund (includes Preschool Fund and Insurance Reserve Fund)          $       50,580,365
       b. Governmental Designated-Purpose Grants Fund                                         3,876,095
       c. Capital Reserve Fund                                                                1,691,239
       e. Pupil Athletic Fund (Special Revenue Funds)                                           970,053
       f. Capital Projects Fund                                                                 184,545
      g. Bond Redemption Fund                                                                 6,098,886
      h. Food Service Fund                                                                    2,779,266
      i. Internal Service Fund not Included in General Fund                                     262,534
      j Charter Schools                                                                       2,020,886


                                                Total Fiscal Year Expenditures                              $   68,463,869

2.    Deduct the Following Expenditures Included in Above Totals

      a. Expenditures from GiftslFoundations                                                    325,884
      b, Expenditures from Federal Grants                                                     5,218,453
      c. Revenue Transfers                                                                      276,213
      d. Expenditures from Designated Reserves                                                  968,453
      e. Expenditures from Proceeds of Damage Awards                                             23,345
      f. Expenditures from the Sale of School Property                                            2,400
      g. Other Sources, Additions, and Debt Proceeds                                          6,403,642

                                                  Total Fiscal Year Deductions                                  13,218,390

3.    Total Spending Subject to TABOR for FYE 6-30-2007                                                     $   55,245,479


4.    Total Spending Subject to TABOR for FYE 6-30-2006                                                     $   52,058,573

5.    Percentage Change in DenverlBoulder CPI                                                      2.21 %

6.    Percentage Change in Student Enrollment                                                      2.77 %

7.    Total Percentage Change                                                                      4.98 %

8.    Change in Permitted Spending Based on Percentage Changes                                                   2,592,517

9.    Maximum Spending Subject to TABOR for FYE 6-30-2006                                                   $   54,651,090

10. FYE 6-30-2007 Spending Over (Under) Allowable Amount                                                    $     594,389




                                   The accompanying notes are an integral part of this schedule.

                                                               -60­
                                              RECONCILIATION OF AUDITOR'S ELECTRONIC FINANCIAL DATA INTEGRITY

                                                CHECK FIGURES TO GOVERNMENTAL FUND FINANCIAL STATEMENTS

                                                            PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                                  For the year ended June 30, 2007




                                                                                                                         Balance Per
                                                  Balance                                                               Governmental
                                                    Per                                                                 Fund Financial
                                                   ADE                 Roundinl!:                Transfers                Statements

General FundlPreschool Fund
  Revenues                                          49,996,592                      (2)               729,630               50,726,220
  Ending fund balance                                9,180,549                      (1)                      -               9,180,548

Debt Service Fund
  Revenues                                           7,257,101                      (1)                      -                7,257,100

Charter Schools
  Expenditures                                       1,997,174                       1                       -                1,997,175

Capital Reserve Fund
  Expenditures                                       1,691,240                      (1)                                       1,691,239

Pupil Athletic Fund
  Revenues                                            970,053                        0               (689,612)                 280,441

Print Shop Fund
  Beginning fund balance                                85,950                      (2)                      -                  85,948
  Revenues                                             203,217                       0                (40,018)                 163,199
  Expenditures                                         262,535                      (1)                      -                 262,534
  Ending fund balance                                   26,632                      (1)                      -                  26,631

Pupil Activity Fund
  Expenditures                                       1,262,876                       1                                        1,262,877
  Ending fund balancelDue to student groups            672,689                      (1)                                         672,688




                                                            The accompanying notes are an integral part of this schedule.

                                                                                          -61­
                                               RECONCILIAnON OF AUDITOR'S ELECTRONIC FINANCIAL DATA INTEGRITY

                                                 CHECK FIGURES TO GOVERNMENTAL FUND FINANCIAL STATEMENTS

                                                                PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                                      For the year ended June 30, 2007



                                                                          Combined            Reserve          Categories        Due TolFrom
                                                                           Accounts            Fund              Shown           Netted When             Balance per
                                                                            on the           Balance on        Separate on        Combining             Governmental
                                           Balance                        Combining          Combining         Combining       General, Insurance           Fund
                                             Per                           Balance            Balance           Balance          and Preschool            Financial
                                            ADE          Rounding           Sheet              Sheet              Sheet              Funds               Statements
Bolded Balance Sheet Report

Special Revenue Funds
  Cash                                                                                                                                              $        1,054,207
  Other investment accounts
  Other assets                                                                                                                                                  1,260
  Machinery and equipment                                                                                                                                              -
  Total assets                                                                                                                                               1,885,134
  Other payables                                                                                                                                               161,606
  Payroll deductions and withholdings
  Deferred revenue
  Grants deferred revenue                                                                                                                                      225,108
  Unreserved fund balance                                                                                                                                      366,088
  Fund balance reserved for encumbrances                                                                                                                        16,525
  Total liabilities and fund equity                                                                                                                          1,885,134

Debt Service Funds
  Cash with treasurer                                                                                                56,753                                    56,753
  Other taxes receivable                     428,667                                                               (181,753)                                  246,914
  Property tax receivable                                                                                           125,000                                   125,000
  Unreserved fund balance                   8,634,154                                          (8,634,154)
  Fund balance reserved for debt service                                                        8,634,154                                                    8,634,154

Capital Projects Funds
  Unreserved fund balance                      48,896                                             (48,896)
  Fund balance reserved capital projects                                                           48,896                                                      48,896


Enterprise Fund
  Total assets                                768,890                                                                                                          768,891
  Other payables                                4,431                             (677)                                                                          3,755
  Payroll deductions and withholdings            (677)                             677
  Unreserved fund balance                     607,154                                            (120,555)                                                     486,599
  Investment in capital assets                                                                    120,555                                                      120,555
  Total liabilities and fund equity           768,890                                                                                                          768,891



                                                          The accompanying notes are an integral part of this schedule.

                                                                                      -62­
                                             RECONCILIATION OF AUDITOR'S ELECTRONIC FINANCIAL DATA INTEGRITY

                                               CHECK FIGURES TO GOVERNMENTAL FUND FINANCIAL STATEMENTS

                                                           PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                                                 For the year ended June 30, 2007



                                                                                   Combined              Reserve         Categories          Due TolFrom
                                                                                    Accounts              Fund             Shown             Netted When             Balance per
                                                                                     on the             Balance on       Separate on          Combining             Governmental
                                            Balance                                Combining            Combining        Combining         General, Insurance           Fund
                                              Per                                   Balance              Balance           Balance           and Preschool            Financial
                                             ADE              Rounding               Sheet                Sheet             Sheet               Funds                Statements
Bolded Balance Sheet Report

General FundlPreschool Fund
  Taxes receivable                      $    1,339,573    $                    $               -    $                -   $    (520,439)    $               -    $          819,134
  Cash with treasurer                                 -                   -                    -                               300,439                     -               300,439
  Property tax receivable                             -                   -                    -                     -         220,000                     -               220,000
  Other receivables                            146,489                   1                     -                     -                 -                   -               146,490
  Due from other funds                       1,446,610                                                               -                 -            (535,584)              911,026
  Total assets                              18,352,926                    I                    -                                       -            (535,584)           17,817,343
  Due to other funds                         3,161,408                    -                                          -                              (535,584)            2,625,824
  Other payables                               333,046                   1              (3,793)                                        -                   -               329,254
  Payroll deductions and withholdings           (3,793)                   -              3,793
  Total liabilities                          9,172,378                    1                    -                                       -            (535,584)            8,636,795
  Unreserved fund balance                    7,534,049                   (1)                   -           (873,163)                                       -             6,660,885
  Reserve fund balance - encumbrances                 -                   -                    -            332,290                                        -               332,290
  Reserve fund balance - inventory                    -                   -                    -            540,873                    -                   -               540,873
  Total liabilities and fund equity         18,352,926                    1                                          -                 -            (535,584)           17,817,343

Charter School/Component Unit
  Other payables                                 6,230                    -               (698)                                                                              5,532
  Payroll deductions and withholdings             (698)                   -                698




                                                              The accompanying notes are an integral part of this schedule.

                                                                                          -63­
                                 RECONCILIATION OF AUTOMATED DATA EXCHANGE (ADE)

                            FINANCIAL DATA TO GOVERNMENTAL FUND FINANCIAL STATEMENTS

                                        PUEBLO COUNTY SCHOOL DISTRICT NO. 70

                                               For the year ended June 30, 2007



                                   Balance
          Balance

                                     Per
              Per

                                    CDE
             District
          Variance                             Explanation

Warnings
Balance Sheet Information
  General Fund
    Payroll ded. and Withholding    (3,953.76)         (3,953.76)                       Negative balance is correct at 6·30

  Charter School Fund
    Payroll ded. and Withholding      (698.30)           (698.30)                       Negative balance is correct at 6-30

  Preschool Fund

    Ending fund balance
           (54,241.89)        (54,241.89)                       Negative balance is correct at 6-30
    Cash in bank
                  (33,446.71)        (33,446.71)                       Negative balance is correct at 6-30

  Designated Purpose Grant Fund
    Payroll ded. and Withholding      (109.28)           (109.28)                       Negative balance is correct at 6-30

  Pupil Athletic Fund
    Ending fund balance            (27,530.97)        (27,530.97)                       Negative balance is correct at 6-30
    Payroll ded. and Withholding      (129.73)           (129.73)                       Negative balance is correct at 6-30

  Food Service Fund
    Payroll ded. and Withholding     (676.54)            (676.54)                       Negative balance is correct at 6-30

  Print Shop Fund
    Payroll ded. and Withholding       (59.16)            (59.16)                       Negative balance is correct at 6-30




                                    The accompanying notes are an integral part of this schedule.

                                                                 -64­
Lo[orauo Department ot 1:ducatIon - Data J::.xchange View Report	                                                                                                  Page 10f2




::cde                         Colorado Department of Education
                                                              Automated Data Exchange View Report
                                            --_.----- - . - - _ . - - - - - - - - - - ­


02107/2008	                                                           Colorado Department of Education                                       PUEBLO PUEBLO COUNTY RURAL 70
09:56 AM	                                                                   Fiscal Year 2006 -2007                                                     District Code: 2700
                                                                      Colorado	 School Distric t!BOCES
                                                                       Auditor's Integrity Re port

Revenues, Expenditures, & Fund Balance by          Fund

                                                                                                    1000 - 5999               0001 - 0999            6700 - 6799
Fund Type   &                                                   Beg Fund Balance &            Total Revenues &       Total Expenditures &   & Prior Per Adj (6880*)
Number                                                        Prior Per Adj (6880*)    +         at her Sources ­              Other Uses   Ending Fund Bala nce

Governmental
10           General Fund	                                              7,872,918                    48,195,598               48,763,435              7,305,081
18           Risk Mgmt Sub -Fund of General Fund                        1,630, 342                    1,197,729                   898,362             1,929,709
19           Colorado Preschool Program Fu nd	                             -38,304                      603,264                   619,202               -54,242
                Subtotal	                                               9,464,957                    49,996,592               50,280,999              9,180,549
11           Charter School Fund	                                       1,582,931                     2,020,886                1,997,174              1,606,642
20           Special Revenue Fund	                                          82,767                       82,624                   55,850                 109,541
21           Capital Reserve Spec Revenue Fund	                            279,037                    1,535,033                1,691,240                 122,831
22           Govt Designated -Purpose Grants Fund	                        165,84 6                    3,876,095                3,8 64,169               177,772
23           Pupil Activity Special Revenu e Fund	                          -29,957                     970,053                   967,627               -27,531
25           Transportation Fund	                                                 o                            o                       o                       o
30           Debt Service Fund	                                                   o                            o                       o                       o
31           Bond Redemption Fund	                                       7,475,940                    7,257,101                6,098,886              8,634,154
41           Building Fund	                                                223,365                       10,076                  184,545                 48,896
42           Special Building Fund	                                               o                                                    o                       o
43           Capital Reserve Capital Proje cts Fund                               o	                           °
                                                                                                               o                       o                       o
             TOTALS	                                                    19,244,886                   65,748,460               65,140,492             19,852,853
Proprietary
51           Food Service Fund	                                            541,166                    2,779,263                2,713,275                607,154
50           Other Enterprise Funds	                                              o                            o                       o                      o
64 (63)      Risk-Related Activity Fund	                                          o                            o                       o                      o
60,65-69     Other Internal Service Funds	                                  85,950                      20 3,217                  262,535                26,632
             TOTALS	                                                       627,116                    2,982,480                2,97 5,810               633,786

Fiduciary
70              Other Trust and Agency Funds                                     0                            0                        0                      0
72              Private Purpose Trust Fund                                       0                            0                        0                      0
73              Agency Fund                                                      0                            0                        0                      0
74              Pupil Activity Agency Fund                                 689,703                    1,245,862                1,262,876                672,689
85              Foundations                                                      0                            0                        0                      0
                TOTALS	                                                    689,703                    1,245,862                1,262,876                672,689


 *If you have a prior period adjustment in          any fund (Balance Sheet 6880), the amoun t of your prior
 period adjustment is added into both your          ending and beginning fund balances on th is report.

 From submitted data file: fd2700.08a                     Program: fdrdh.sqr               File: fd2 700.dha        FINAL
 o
                                                                                                    -65­