GRAND RESERVE CONDOMINIUM ASSOCIATION (A Michigan Nonprofit Corporation) Grand Blanc Township, Michigan

Transcription

1 (A Michigan Nonprofit Corporation) Grand Blanc Township, Michigan FINANCIAL STATEMENTS For the Years Ended December 31, 2014 and 2013

2 TABLE OF CONTENTS Page Independent Accountants Review Report... 1 Financial Statements: Balance Sheets... 2 Statements of Changes in Members Equity... 3 Statements of Revenues and Expenses... 4 Statements of Cash Flows... 5 Notes to the Financial Statements Supplementary Information: Future Major Repairs & Replacements... 9

3 AHC ADVISORS, P.L.L.C. CERTIFIED PUBLIC ACCOUNTANTS ACCOUNTING TAX CONSULTING To the Board of Directors and Members Grand Reserve Condominium Association Grand Blanc Township, Michigan Independent Accountants Review Report We have reviewed the accompanying balance sheets of Grand Reserve Condominium Association (a Michigan nonprofit corporation) as of December 31, 2014 and 2013, and the related statements of changes in members equity, revenues and expenses, and cash flows for the years then ended. A review includes primarily applying analytical procedures to management s financial data and making inquiries of Association management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion. Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Our responsibility is to conduct the review in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. Those standards require us to perform procedures to obtain limited assurance that there are no material modifications that should be made to the financial statements. We believe that the results of our procedures provide a reasonable basis for our report. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America. Accounting principles generally accepted in the United States of America require that the information about future major repairs and replacements of common property on page 9 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Financial Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have not audited, reviewed, or compiled the required supplementary information, and, accordingly, we do not assume any responsibility for it. AHC Advisors, P.L.L.C. Troy, Michigan July 10, Livernois, Suite 102, Troy, MI (248) Fax (248) tonyh@mhccpas.com

4 BALANCE SHEETS December 31, 2014 and 2013 ASSETS Current Assets: Cash - undesignated $103,430 $40,648 Cash - designated for future repairs and replacements 51,146 34,289 Assessments receivable 17,549 - Total Assets $172,125 $74,937 LIABILITIES AND MEMBERS EQUITY Current Liabilities: Accounts payable $ 840 $32,917 Prepaid assessments 14,444 4,305 Total Liabilities 15,284 37,222 Members Equity: Undesignated 105,695 3,426 Designated for future repairs and replacements 51,146 34,289 Total Members Equity 156,841 37,715 Total Liabilities and Members Equity $172,125 $74,937 See accompanying independent accountants review report and notes to the financial statements. Page 2

5 STATEMENTS OF CHANGES IN MEMBERS EQUITY For the Years Ended December 31, 2014 and Designated for Future Repairs and Undesignated Replacements Total Members (Deficit) Beginning of year $( 2,572 ) $16,734 $ 14,162 Excess of revenues over expenses 23,553-23,553 Transfer to reserves (17,518 ) 17,518 - Interest income ( 37 ) 37 - Members Equity End of year $ 3,426 $34,289 $37, Designated for Future Repairs and Undesignated Replacements Total Members Equity Beginning of year $ 3,426 $34,289 $37,715 Excess of revenues over expenses 119, ,126 Transfer to reserves ( 16,801 ) 16,801 - Interest income ( 56 ) 56 - Members Equity End of year $105,695 $51,146 $156,841 See accompanying independent accountants review report and notes to the financial statements. Page 3

6 STATEMENTS OF REVENUES AND EXPENSES For the Years Ended December 31, 2014 and Revenues: Association fees $223,839 $248,669 Developer contribution 201,362 87,420 Late fees and fines Interest income Other income Total Revenues 426, ,154 Expenses: Administrative expenses Grounds and landscaping expenses 135, ,253 Insurance Master fees - 108,066 Snow removal and supplies 117,832 25,488 Utilities 52,648 - Total Expenses 307, ,601 Excess of Revenues Over Expenses $119,126 $ 23,553 See accompanying independent accountants review report and notes to the financial statements. Page 4

7 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2014 and 2013 Cash flows from operating activities: Excess of revenues over expenses $119,126 $23,553 Adjustments to reconcile excess of revenues over expenses to net cash provided by operating activities: (Increase) decrease in: Assessments receivable, net ( 17,550) 244 Increase (decrease) in: Accounts payable ( 32,077) 22,979 Prepaid assessments 10,140 ( 4,659 ) Net cash provided by operating activities 79,639 42,117 Net increase in cash 79,639 42,117 Cash, beginning of year 74,937 32,820 Cash, end of year $154,576 $74,937 Interest paid $-0- $-0- Taxes paid $-0- $-0- See accompanying independent accountants review report and notes to the financial statements. Page 5

8 Notes to Financial Statements December 31, 2014 and 2013 NOTE 1 NATURE OF OPERATIONS Grand Reserve Condominium Association (the Association ) is incorporated under the laws of the State of Michigan and operated to perform those services normally associated with this type of association, which include preserving and maintaining the common property of the Association. The property is located in Grand Blanc Township, Michigan and consists of 319 units which were occupied as follows: December 31, units December 31, units January 1, units NOTE 2 DATE OF MANAGEMENT S REVIEW In preparing the financial statements, the Association has evaluated events and transactions for potential recognition or disclosure through July 10, 2015, the date that the financial statements were available to be issued. NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The Association applies the accrual basis of accounting in the presentation of these financial statements. Member Assessments Association members are subject to monthly assessments to provide funds for the Association s operating expenses, future capital acquisitions, and major repairs and replacements. Regular monthly assessments were $241 and $216 per unit for 2014 and 2013, respectively. Assessments Receivable Assessments receivable at the balance sheet date represent fees due from unit owners. Any excess assessments at year end are retained by the Association for use in the succeeding year. The Association s policy is to retain legal counsel and place liens on the properties of homeowners whose assessments are delinquent. The Association considers all assessments receivable at December 31, 2014 and 2013 to be fully collectible. See accompanying independent accountants review report. Page 6

9 Notes to Financial Statements (Continued) December 31, 2014 and 2013 NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property and Equipment Real property and common areas acquired from the developer and related improvements to such property are not recorded in the Association s financial statements because those properties are owned by the individual unit owners in common and not by the Association. The Association capitalizes personal property to which it has title at cost. The Association did not own any personal property as of December 31, 2014 and Income Tax The Association qualifies as a tax-exempt homeowners association under Internal Revenue Code Section 528 for the years ended December 31, 2014 and Under that section, the Association is not taxed on income related to its exempt purposes, which is the acquisition, construction, management, maintenance and care of Association property. Net non-exempt function income, which includes earned interest and revenues received from non-members, is taxed at 30% by the Federal Government. The Association may, at its discretion, be taxed as a corporation or homeowners association. This election is made yearly by filing either a form 1120 or form 1120-H with the IRS. The Association s federal tax returns are generally subject to examination by the Internal Revenue Service for three years after the returns are filed. The tax returns for 2011, 2012 & 2013 remain open to examination. The Association continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax laws and new authoritative rulings. Reserves The Association requires funds to be accumulated for future repairs and replacements. These funds will be maintained in a separate account. A sufficiency of reserves schedule is not presented. The Condominium law of Michigan requires that the reserve fund be, at a minimum, equal to ten (10) percent of the Association s current annual budget on a non-cumulative basis. The fund was above this minimum standard as of December 31, Future Major Repairs and Replacements The Association s governing documents require the Association to finance estimated future major repairs and replacements through common assessments. An on-site reserve study was conducted in 2012 to determine the remaining useful lives of the components of common properties and to estimate the current costs of the major repairs and replacements that may be required in future years. The Association plans to have adequate reserves as needed for these major repairs and replacements. For this purpose, the replacement fund cash balance totaled $51,146 and $34,289 at December 31, 2014 and 2013, respectively. See accompanying independent accountants review report. Page 7

10 Notes to Financial Statements (Concluded) December 31, 2014 and 2013 NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Concluded) Cash The Association considers all highly liquid investments with maturities of less than three months to be cash. Cash includes checking and savings accounts. Interest Income Interest income is allocated to operating and replacement members equity accounts in proportion to the interest-bearing deposits of each equity account. Estimates The preparation of financial statements in conformity with generally accepted accounting principles require management to make estimates and assumptions that affect reported amounts and disclosures. Accordingly, actual results could differ from those estimates. NOTE 4 RELATED PARTY TRANSACTIONS The Association changed their property management company effective January NOTE 5 COMMITMENTS AND CONTINGENCIES The Association is subject to various contractual arrangements and commitments arising in the ordinary course of business. See accompanying independent accountants review report. Page 8

11 SUPPLEMENTARY INFORMATION

12 SUPPLEMENTARY INFORMATION ON FUTURE MAJOR REPAIRS & REPLACEMENTS December 31, 2014 Reserve Advisors completed a study in January 2012 to estimate the remaining useful lives and the replacement costs of the components of common property. The estimates were based on current and local replacement costs. Funding requirements consider an annual inflation rate of 1.3% and an investment rate of 1.2%, net of taxes, on amounts funded for future major repairs and replacements. The reserve study is based on a 30 year projection of non-annual maintenance. The following table is based on the study and presents significant information about the components of common property. It was recommended that Management adopt an annual reserve budget that has gradual annual increases to fund the reserve requirement. Estimated Estimated 30 Year Remaining Current 2014 Future Useful Replacement Actual Funding Components Lives (Years) Costs Expenditures Requirement Site: Concrete sidewalks - partial replacement 1 $ 35,700 Irrigation system controls 8 5,000 Irrigation system ,800 $150,500 $-0- $601,600 See accompanying independent accountants review report. Page 9