THE PINNACLE HOMEOWNERS ASSOCIATION. Financial Statements. December 31, 2014

Transcription

1 THE PINNACLE HOMEOWNERS ASSOCIATION Financial Statements

2 Table of Contents Independent Auditors' Report 1-2 Page Balance Sheet 3 Statement of Revenues and Expenses 4 Statement of Changes in Fund Balances 5 Statement of Cash Flows 6 Notes to Financial Statements 7-10 Supplementary Information 11-16

3 HAWKINS CLOWARD & SIMISTER CERTIFIED PUBLIC ACCOUNTANTS, LC To the Board of Directors of The Pinnacle Homeowners Association INDEPENDENT AUDITORS REPORT We have audited the accompanying balance sheet of The Pinnacle Homeowners Association (the Association) as of, and the related statements of revenues, expenses, and changes in fund balances and cash flows for the year then ended. These financial statements are the responsibility of the Association's management. Our responsibility is to express an opinion on these financial statements based on our audit. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Audit Tax Solutions Business Support Medical Management Valuations Retirement Plans 1095 South 800 East, Suite 1 Orem, UT FAX: hcs@mycpa.com

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Pinnacle Homeowners Association as of and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Supplementary Information The supplementary information about future repairs and replacements on page 14 is not a required part of the financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. The supplementary information comparing the budget to actual income and expenses, target reserve fund balances on pages and statement of definition for selected expense accounts on pages and are not a required part of the financial statements. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Information for the year ended December 31, 2013, is presented for comparative purposes only and was extracted from the financial statements presented by fund for that year, on which we expressed an unqualified opinion in our report dated March 10, HAWKINS CLOWARD & SIMISTER, LC CERTIFIED PUBLIC ACCOUNTANTS March 9,

5 Assets Pinnacle Homeowners Association Total (For Comparative Purposes Only) Operating Replacement Operating Replacement Fund Fund Fund Fund Current Assets Cash, including interest-bearing deposits $ 348,815 $ 723,877 $ 183,287 $ 552,682 Assessments receivable less allowance for doubtful accounts of $17,789 7,813 18,877 Due from operating fund 239, ,635 Prepaid insurance and other 545 5,168 Income taxes receivable Total current assets 357, , , ,317 Other Assets Security boxes 5,000 5,000 Accumulated depreciation (5,000) (5,000) Total other assets Total assets $ 357,873 $ 963,529 $ 208,032 $ 717,317 Liabilities and Fund Balances Balance Sheet Liabilities Accounts payable and accrued expenses $ 44,755 $ 41,313 Assessments received in advance 73,466 2,084 Due to replacement fund 239, ,635 Total current liabilities 357, ,032 - Fund Balances Undesignated fund balance $ 60,296 $ (22,893) Designated fund balance - roof 71,667 7,167 Designated fund balance - doors 17,200 13,760 Designated fund balance - lighting 10,320 8,256 Designated fund balance - decks 100,333 80,267 Designated fund balance - painting 35,833 Designated fund balance - wood siding 563, ,060 Designated fund balance - irrigation 27,300 26,000 Designated fund balance - landscaping 40,850 38,700 Designated fund balance - paving 36,000 32,000 Total fund balances 963, ,317 Total liabilities and fund balances $ 357,873 $ 963,529 $ 208,032 $ 717,317 The accompanying notes are an integral part of the financial statements - 3 -

6 Pinnacle Homeowners Association Statement of Revenues and Expenses Year Ended Replacement & Total (For Operating Restoration Comparative Fund Fund Total Purposes Only) Revenues Regular assessments $ 732,468 $ 732,468 $ 727,050 Special assessments - 155,660 Interest 1,006 1,006 1,027 Recovery of bad debt 6,658 6,658 Other late fees, lien fees, transfer fees 6,185 6,185 9,990 Total revenues 746, , ,727 Expenses Bad debt expense 0-14,505 Bank charges Cable television 32,161 32,161 28,785 Chimney sweeping 2,975 2,975 2,975 Christmas decorations 9,945 9,945 9,640 Common area cleaning 12,996 12,996 12,996 Freeze protection 2,003 2,003 8,139 Insurance 52,176 52,176 44,265 Landscaping 143, , ,417 Legal 1,610 1,610 3,481 Audit and accounting 7,995 7,995 8,395 Property management fee 37,232 37,232 36,569 Meetings Office supplies 1,173 1, Pest control ,285 Exterior painting 0-389,229 Repairs and maintenance 57,600 57,600 72,413 Security 34,319 34,319 34,527 Snow removal 61,432 61,432 64,197 Shuttle service 12,900 12,900 12,578 Trash removal 15,359 15,359 15,360 Utilities 7,959 7,959 6,790 Window cleaning 6,160 6,160 6,160 Total expenses 500, , ,007 Excess (deficiency) of revenues over expenses $ 246,212 $ - $ 246,212 $ (29,280) The accompanying notes are an integral part of the financial statements - 4 -

7 Pinnacle Homeowners Association Statement of Changes in Fund Balances Year Ended Roof Doors Lighting Decks Paving Wood Siding Painting Landscaping Irrigation Total (For Operating Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Undesignated Comparative Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Total Purposes Only) Balance, at January 1 $ - $ 7,167 $ 13,760 $ 8,256 $ 80,267 $ 32,000 $ 534,060 $ 38,700 $ 26,000 $ (22,893) $ 717,317 $ 746,598. Excess (deficiency) of revenues over expenses $ 246, ,212 (29,280) - Use of reserve funds - (350,000) - Fund transfers (Note 4) (246,212) 64,500 3,440 2,064 20,066 4,000 29,670 $ 35,833 2,150 1,300 83,189 $ - 349,999 Balance, at December 31 $ $ 71,667 $ 17,200 $ 10,320 $ 100,333 $ 36,000 $ 563,730 $ 35,833 $ 40,850 $ 27,300 $ 60,296 $ 963,529 $ 717,317 The accompanying notes are an integral part of the financial statements - 5 -

8 Pinnacle Homeowners Association Statement of Cash Flows Year Ended Total (For Comparative Purposes Only) Cash flows from operating activities Operating income (loss) $ 246,212 $ (29,280) Interest income (1,006) (1,027) Bad debt expense - 14,505 Changes in assets and liabilities Decrease (increase) in receivables 11,065 (6,293) Decrease (increase) in prepaid and other 4,623 7,540 Increase (decrease) in payables 3,441 (7,858) Increase (decrease) in assessments received in advance 71,382 2,084 Net cash provided (used) by operating activities 335,717 (20,329) Cash flows from investing activities Interest income 1,006 1,027 Net cash provided by investing activities 1,006 1,027 Net increase (decrease) in cash and cash equivalents 336,723 (19,302) Cash, at January 1 735, ,271 Cash, at December 31 $ 1,072,692 $ 735,969 $ - Supplemental Disclosures Cash payments for income taxes during 2014 and 2013 totaled $0 and $0. Cash payments for finance and interest expense during 2014 and 2013 totaled $0 and $0. The accompanying notes are an integral part of the financial statements - 6 -

9 THE PINNACLE HOMEOWNERS ASSOCIATION Notes to Financial Statements Note 1 - Nature of Organization The Pinnacle Homeowners Association ("Association") is a statutory condominium association incorporated in the State of Utah on December 6, The Association is responsible for the operation and maintenance of the common property of the Association. The Association consists of 86 residential units located on approximately 39 acres in Park City, Utah. Note 2 - Summary of Significant Accounting Policies Fund Accounting The Association's governing documents provide certain guidelines for governing its financial activities. To ensure observance of limitations and restrictions on the use of financial resources, the Association maintains its accounts using fund accounting. Financial resources are classified for accounting and reporting purposes in the following funds established according to their nature and purpose: Operating Fund - This fund is used to account for financial resources available for the general operations of the Association. Replacement and Restoration Funds - These funds are used to accumulate financial resources designated for future major repairs, replacements and exterior restoration projects. Ten such funds are currently established: Undesignated, Painting, Paving, Wood Siding, Landscaping, Irrigation, Roof, Doors, Lighting, and Decks (See Note 4). Comparative Totals Comparative total information for the prior year has been provided in the financial statements to provide an understanding of changes in financial position and operations of the Association. Member Assessments Association members are subject to quarterly assessments, at the beginning of each quarter, to provide funds for the Association's operating expenses, future capital acquisitions, and major repairs and replacements. Assessments receivable at the balance sheet date represent assessments due from unit owners. The Association's policy is to retain legal counsel and place liens on the properties of homeowners whose assessments are delinquent, which minimizes doubtful accounts. Assessments are considered delinquent after 60 days of nonpayment. The allowance is based on a review of individual account balances. Uncollectible accounts are charged to the allowance account when collection appears doubtful. Financing charges are applied to the homeowner s account if dues are thirty days past due. Any excess assessments at year end are retained by the Association for use in future years. Pursuant to the Condominium Declaration and Bylaws of the Association, dues are allocated to the unit owners on the basis of their relative ownership interests in the condominium property

10 THE PINNACLE HOMEOWNERS ASSOCIATION Notes to Financial Statements Note 2 - Summary of Significant Accounting Policies (Continued) Income Taxes In 2014, the Association filed as a Homeowners Association in accordance with Internal Revenue Service Code section 528. Under that section, the Association excludes from taxation exempt function income, which generally consists of revenue from uniform assessments to owners. The Association's investment interest and dividends were subject to tax. Property and Common Areas Real property and common areas acquired from the developer and related improvements to such property are not recorded in the Association's financial statement because those properties are owned by the individual unit owners in common and not by the Association (See Note 8). Depreciation Equipment is depreciated using the straight-line method, over the estimated useful lives of the assets. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Fair Value of Financial Instruments The carrying amounts reported in the accompanying balance sheet for cash, assessments receivable and accounts payable approximate fair values because of the immediate or short-term maturities of these financial instruments. Note 3 - Cash The Association considers all short-term investments purchased with a maturity of three months or less to be cash equivalents. At the bank balance of all demand and savings deposits was $1,072,692 of which $500,000 was insured by FDIC insurance, including amounts insured under the Dodd- Frank Wall Street Reform and Consumer Protection Act

11 THE PINNACLE HOMEOWNERS ASSOCIATION Notes to Financial Statements Note 4 - Future Major Repairs and Replacements The Association s governing documents require funds to be accumulated for future major repairs and replacements. Funds are being accumulated based on estimated future costs and actual costs may vary from those estimates and the variations may be material. Accumulated funds were $963,529 at December 31, The board has conducted their own study to estimate the remaining useful lives and the replacement costs of the common property components. A majority of the unit owners voted not to fund the association s future needs for major repairs and replacements through increased systematic assessments. Therefore, amounts are being accumulated in the replacement fund based on reserve guidelines established by the board (See Note 9). Should these funds not be adequate to meet future needs, the Association has the right to increase regular annual dues, pass special assessments, or delay major repairs and replacements until funds are available. Note 5 - Managing Agent Burnside Property Maintenance Company was retained as managing agent for The management company was paid a fee of $36.08 per unit, per month, as management fees through December Burnside Property Maintenance Company also provided repairs and maintenance and supervisory of subcontractor services to the Association during the year. Note 6 - Special Assessment No special assessments were made during the year to the homeowners. Note 7 - Revenue Concentration Annual dues and assessments charged to the homeowners of the Pinnacle Homeowners Association comprise 99% of the total revenues for The remainder of the income is attributable to interest income, transfer fees, late fees and bad debt recovery. Note 8 - Common Property Common property to which Pinnacle Homeowners Association (HOA) holds title, but are not recognized as assets on the balance sheet include the Gatehouse (996 sq. ft), the Gatehouse furnishings, landscaped areas (including irrigation systems), and roads. The HOA has no existing land or recreation leases. The HOA is responsible for normal maintenance, repair, or replacement of Common Areas and Facilities (including Limited Common Areas). Major repairs to Limited Common Areas are the responsibility of the Unit owners

12 THE PINNACLE HOMEOWNERS ASSOCIATION Notes to Financial Statements Note 8 - Common Property (Continued) The Board of Directors may dispose of items of personal property for cash or claims to cash with the HOA retaining the proceeds; however, to dispose of real property the directors must obtain the approval of the owners in accordance with the Declaration of Condominium, Covenants, Conditions, and Restrictions and a percentage of the mortgagees. The HOA property, real, personal, or mixed, may not be used by the HOA to generate significant cash flows from members on the basis of usage or from homeowners. The property is for the use and benefit of the owners (members of the HOA). Note 9 - Reserve Funds Per Utah law requirements, Pinnacle Homeowners Association has conducted a reserve analysis determining the needs of the association to accumulate money to cover the cost of repairing, replacing, and restoring common areas and facilities that have a useful life of three years or more. Costs that can be reasonably funded from the association s general budget or from other association funds were excluded. The study includes the appropriate amount of reserve funds including target levels of reserves versus actual levels of reserves. The HOA appropriately maintains reserve funds separate from other funds of the association. Moneys in this fund are not used for daily maintenance expenses or for any purpose other than the purpose for which the reserve fund was established, unless a majority of the members of the association of unit owners vote to approve the use of reserve fund money for that purpose. Note 10 - Subsequent Events Subsequent events were evaluated by management through March 9, 2015, which is the date the financial statements were available to be issued. However, there are no subsequent events to disclose

13 Supplemental Information

14 Pinnacle Homeowners Association Budget to Actual (Unaudited) Year Ended Variance Favorable Budget Actual (Unfavorable) Revenues 3020 Association dues $ 727,050 $ 732,468 $ 5, Finance charges 3,000 6,165 3, Interest income 800 1, Recovery of bad debt 6,658 6, Returned check charges Total revenues 730, ,317 8,789 Expenses 4000 Management fees 37,282 37, Legal expenses-misc 3,000 1,590 1, Legal expenses - liens/collections 20 (20) 4003 Bad debt expense (1) 10, , Audit expense 8,500 7, Long distance phone chgs 2,400 2, Postage expense Bank charges Office supplies / xerox (432) 4012 Insurance expense-coverage (2) 65,112 52,176 12, Insurance expense - deductible 2, , Meeting expense Water-sprinklers (3) 65,000 47,615 17, Sprinkler repairs 10,000 9, Utah power-electricity 5,000 4, Trash removal 15,360 15, Cable television 32,599 32, Gatehouse utilities 800 1,197 (397) 4028 Pest control 5, , Landscaping maintenance 65,000 67,910 (2,910) 4032 Landscaping repairs (4) 5,000 11,226 (6,226) 4033 Landscaping improvements 5,000 6,617 (1,617) 4034 Common area cleaning 13,000 12, Ext. paint touch-up ,287 (3,287) 4039 Shuttle bus 15,588 12,900 2, Security patrol 35,000 34, Fire sprinkler inspection 2,500 3,288 (788) 4042 Fire sprinkler repairs 5,000 3,836 1, R&M plumbing repairs 3, , Water damage repairs 6, , R&M sewer & drain maintenance 1, , Window/screen replacement 1, , R&M siding & bldg repair 10,000 8,589 1, R&M roof repairs (5) 10,000 3,843 6, R&M electrical repairs 6,000 2,872 3, Light bulb replacement 2,000 4,000 (2,000) 4061 Sidewalk & driveway repair 10,000 9, Exterior garage & door repair (43) 4067 Christmas decorations 8,000 9,945 (1,945) 4068 Chimney sweeping 3,000 2, Window washing 6,500 6,

15 Pinnacle Homeowners Association Budget to Actual (Unaudited) Year Ended Variance Favorable Budget Actual (Unfavorable) 4070 Driveway snow removal (6) 60,000 54,205 5, Snow removal-pathways (6) 30,000 7,227 22, Freeze protection (6) 8,500 2,003 6, Miscellaneous expenses 1,000 2,624 (1,624) 4093 Nitrogen bottles 7,000 7,181 (181) 4095 Dryer vent repair 500 1,124 (624) 4096 Front door repair Total expenses 589, ,105 89,586 Excess of revenues over expenses $ 141,159 $ 246,212 $ 105,053 Budgeted revenues transferred to(from): (7) Roof reserves $ 37,983 $ 64,500 Doors reserves 3,853 3,440 Lighting reserves 2,312 2,064 Streets reserves 4,800 4,000 Wood siding reserves 41,538 29,670 Decks - sealing and maintenance reserves 22,475 20,066 Painting reserves 37,998 35,833 Landscaping reserves 3,010 2,150 Irrigation reserves 1,872 1,300 Undesignated (14,682) 83,189 $ 141,159 $ 246,212 (1) During 2014 the association has no bad debt expense as no accounts have been written off in the current year. (2) In 2014 the board decided to change insurance carriers which resulted in lower premiums. This decision was made after the budget was determined. (3) The rainy weather in 2014 resulted in lower water costs. In addition the property management group is using water management practices that resulted in less water used. (4) Extra monies were spent to replace the wood and gravel borders around the drip edges in the landscape areas. (5) With the mild weather there is less roof repairs required. (6) The lighter snow in the winter resulted in lower snow removal and associated costs. (7) The Association had budgeted to add $141,159 to the replacement and operating funds during Actual excess of revenues over expenses available to build the reserve funds was $246,212. The increased amount available to add to the replacement and operating funds was primarily due to budgeted weather related repairs and maintenance that were not needed with warmer than expected winter. No replacement funds were used for major projects during

16 THE PINNACLE HOMEOWNERS ASSOCIATION Supplementary Information on Future Major Repairs and Replacements (Unaudited) Target Reserve (Reserve Study) The Pinnacle Homeowners Association's board of directors has reviewed and revised the reserve analysis which estimates the remaining useful lives and the replacement costs of the components of common property. These estimates were based on current estimated replacement costs as of. The following table is based on the board members' estimates and presents significant information about the components of common property. The schedule illustrates targeted fund balances based on estimated useful life and replacement cost, actual amounts may vary. Components Estimated Remaining Useful Lives Estimated Current Replacemen t Costs Target Fund Balance at 12/31/ Target Build Amount in Fund Balances (7) 2015 Proposed (Decrease) in Fund Balances Target Fund Balance at 12/31/15 Designated Funds: Streets Reserves (1) 6 $ 120,000 $ 72,000 $ 9,600 $ 81,600 Wood Siding Reserves (2) 11 1,780,200 1,127,460 83,076 1,210,536 Decks/railings- sealing and 25 1,204, ,667 44, ,616 maintenance Reserves (3) - Painting Reserves (4) 5 430,000 71,667 75, ,662 Roof (5) 28 2,150, ,333 75, ,300 Garage Doors, Front Doors ,000 34,400 7,706 42,106 Building Lights, Luminaries ,200 20,640 4,623 25,263 Landscaping - Trees, bushes, etc (6) 9 43,000 27,520 2,305 29,825 Landscaping - Hardscape (6) 4 64,500 54,180 3,715 57,895 Irrigation 4 65,000 54,600 3,744 58,344 Gatehouse ,000 23,333 3,867 27,200 $ 6,331,900 $ 1,829,800 $ 315,547 $ - $ 2,145,347 (1)$19,208 was spent in 2010 to repave and reseal the roads. (2) $1.5 million was spent on siding and painting during the restoration project which ended in We expect the remaining life of the wood siding to be between and 13 years. (3) The decks and railings were replaced as part of the exterior upgrade project in 2007 and (4) $389,229 was spent on painting in the fall of 2013 and is expected to have a useful life of 6 years. (5) Roof replacement is being funded over 30 years. (6) $40,253 was spent in 2011 to improve the landscaping. (7) It is the Board's objective, adopted in 2011, for the operating surplus and the reserve funding to equal 50% of their respective targets. The 50% target represents a balance between funding capital expenditures from dues, based on larger annual increases, versus major assessments at the time of the project. Dues are expected to rise commensurate with the rate of inflation

17 THE PINNACLE HOMEOWNERS ASSOCIATION Supplementary Information on Future Major Repairs and Replacements (Unaudited) Budgeted Reserve Fund Balances The Pinnacle Homeowners Association's board of directors has reviewed and revised the reserve analysis which estimates the remaining useful lives and the replacement costs of the components of common property. These estimates were based on current estimated replacement costs as of. The following table is based on the board members' estimates and presents significant information about the components of common property. The schedule illustrates budgeted fund balances based on projected net cash flows for Actual amounts may vary. Any items with expenditures expected within 5 years should be funded or partially funded. Components Estimated Remaining Useful Lives Estimated Current Replacement Costs Fund Balance at 12/31/ Budget Build Amount in Fund Balances (7) 2015 Proposed (Decrease) in Fund Balances Budgeted Fund Balance at 12/31/15 Designated Funds: Streets Reserves (1) 6 $ 120,000 $ 36,000 $ 4,800 $ 40,800 Wood Siding Reserves (2) 11 1,780, ,730 41, ,268 Decks/railings- sealing and 25 1,204, ,333 22, ,808 maintenance Reserves (3) Painting Reserves (4) 5 430,000 35,833 37,998 73,831 Roof (5) 28 2,150,000 71,667 37, ,650 Garage Doors, Front Doors ,000 17,200 3,853 21,053 Building Lights, Luminaries ,200 10,320 2,312 12,632 Landscaping - Trees, bushes, etc (6) 9 43,000 13,760 1,152 14,912 Landscaping - Hardscape (6) 4 64,500 27,090 1,858 28,948 Irrigation 4 65,000 27,300 1,872 29,172 Gatehouse ,000 Undesignated Funds - 60, ,021 $ 6,331,900 $ 963,529 $ 156,566 $ - $ 1,120,095 (1) $19,208 was spent in 2010 to repave and reseal the roads. 2) $1.5 million was spent on siding and painting during the restoration project which ended in We expect the remaining life of the wood siding to be between 8 and 13 years. (3) The decks and railings were replaced as part of the exterior upgrade project in 2007 and (4) 389,229 was spent on painting in the fall of 2013 and is expected to have a useful life of 6 years. (5) Roof replacement is being funded over 30 years. (6) $40,253 was spent in 2011 to improve the landscaping. (7) It is the Board's objective, adopted in 2011, for the operating surplus and the reserve funding to equal 50% of their respective targets. The 50% target represents a balance between funding capital expenditures from dues, based on larger annual increases, versus major assessments at the time of the project. Dues are expected to rise commensurate with the rate of inflation

18 THE PINNACLE HOMEOWNERS ASSOCIATION Statement of Definition for Selected Expense Accounts 4000 Management Fees Management fee paid for accounting and administrative services such as processing vendor payments, depositing cash receipts, preparing quarterly invoices for homeowners dues and assessments, provide collection services on delinquent accounts, provide monthly financial information to the board members, act as agent on behalf of Pinnacle for various utility companies, respond to title and mortgage companies and other office support to homeowners Long Distance Phone Charges Flat fee of $200 per month is charged to this account for all long distance calls Water-Sprinklers Water usage for the sprinklers paid to Park City Municipal Corporation Landscaping Maintenance Regular mowing, weeding, fertilizing and other day-to-day maintenance of the landscape Landscaping Repairs Replacement of plants, trees, shrubs, borders and other winter damage to landscape Common Area Cleaning Flat fee paid for cleaning 37 acres of common area Fire Sprinkler Inspection Fire sprinkler fee paid for required annual inspection Fire Sprinkler Repairs Repairs and upgrades (compressors) to the fire sprinkler system Plumbing Repairs Repairs to outside plumbing systems and other plumbing within exterior walls Water Damage Repairs Covers repairs from association-responsible water damage. If damage exceeds insurance deductible, then insurance claim will be submitted Window Screen Replacement Repairs to outside window screens caused by snow and ice

19 THE PINNACLE HOMEOWNERS ASSOCIATION Statement of Definition for Selected Expense Accounts 4056 Siding & Building Repairs Repairs to all outside structure such as siding, handrails, decks or other Roof Repairs Any maintenance to copper roofing (sealing and flashings) Electrical Repairs Common area electrical repairs such as street lights and sprinkler system Sidewalk & Driveway Repair Asphalt, curb and gutter repairs Chimney Sweeping Annual cleaning of chimneys Freeze Protection Preventative maintenance for possible frozen pipes or other damage that could be caused by freezing temperatures. Includes temperature checks inside every unit Nitrogen Bottles Cost of nitrogen tanks for fire sprinkler system and the time to install them