Reston Association and Friends of Reston for Community Projects, Inc.

Transcription

1 Friends of Reston for Community Projects, Inc. Consolidated Financial Statements and Supplementary Material Years Ended December 31, 2013 and 2012 The report accompanying these financial statements was issued by BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited, a UK company limited by guarantee.

2 Friends of Reston for Community Projects, Inc. Consolidated Financial Statements and Supplementary Material Years Ended December 31, 2013 and 2012

3 Contents Independent Auditor s Report 3-4 Consolidated Financial Statements Consolidated Balance Sheets 5-6 Consolidated Statements of Revenues and Expenses 7-8 Consolidated Statement of Changes in Fund Balance 9 Consolidated Statements of Cash Flows Summary of Accounting Policies Notes to Consolidated Financial Statements Supplementary Material Consolidated Summary Schedule of Operating Fund Revenues and Expenses 20 Consolidated Summary Schedule of Operating Fund Expenses 21 Friends of Reston Summary Schedule of Revenues and Expenses Modified Cash Basis Unaudited 22 Supplementary Information on Future Major Repairs and Replacements Unaudited 23 2

4 Tel: Fax: Wisconsin Ave, Suite 800 Bethesda, MD Independent Auditor s Report To the Board of Directors Reston Association and Reston, Virginia We have audited the accompanying consolidated financial statements of Reston Association and (collectively referred to as the Association), which comprise the consolidated balance sheets as of December 31, 2013 and 2012, and the related consolidated statements of revenues and expenses, changes in fund balance and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 3

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6 Consolidated Financial Statements

7 Consolidated Balance Sheet December 31, 2013 Repair/ Operating Replacement Fund Fund Total Assets Cash and cash equivalents $ 5,018,337 $ 4,019,419 $ 9,037,756 Investments 452, ,493 Accounts receivable, net of allowance for doubtful accounts of $153,090 1,009,747-1,009,747 Prepaid expenses 172, ,170 Property and equipment Land and land improvements 11,048,863-11,048,863 Leasehold improvements 2,378,281-2,378,281 Recreation facilities 19,852,832-19,852,832 Furniture and equipment 4,316,082-4,316,082 Improvements in progress 661, ,902 Central services facilities 1,316,831-1,316,831 39,574,791-39,574,791 Less accumulated depreciation and amortization (20,414,491) - (20,414,491) Net property and equipment 19,160,300-19,160,300 Total assets $ 25,813,047 $ 4,019,419 $ 29,832,466 Liabilities and Fund Balances Liabilities Accounts payable $ 250,586 $ - $ 250,586 Accrued wages and benefits 483, ,273 Deferred compensation 452, ,493 Revenue collected in advance 1,461,868-1,461,868 Capital lease obligations 23,675-23,675 Deferred rent liability 2,284,903-2,284,903 Total liabilities 4,956,798-4,956,798 Commitments and contingencies Fund balances 20,856,249 4,019,419 24,875,668 Total liabilities and fund balances $ 25,813,047 $ 4,019,419 $ 29,832,466 See accompanying summary of accounting policies and notes to consolidated financial statements. 5

8 Consolidated Balance Sheet December 31, 2012 Repair/ Operating Replacement Fund Fund Total Assets Cash and cash equivalents $ 4,777,035 $ 4,019,419 $ 8,796,454 Investments 357, ,211 Accounts receivable, net of allowance for doubtful accounts of $152, , ,435 Prepaid expenses 138, ,761 Property and equipment Land and land improvements 11,040,917-11,040,917 Leasehold improvements 2,378,281-2,378,281 Recreation facilities 18,338,403-18,338,403 Furniture and equipment 3,975,006-3,975,006 Improvements in progress 1,871,170-1,871,170 Central services facilities 1,316,831-1,316,831 38,920,608-38,920,608 Less accumulated depreciation and amortization (19,181,215) - (19,181,215) Net property and equipment 19,739,393-19,739,393 Total assets $ 25,976,835 $ 4,019,419 $ 29,996,254 Liabilities and Fund Balances Liabilities Accounts payable $ 193,067 $ - $ 193,067 Accrued wages and benefits 581, ,397 Deferred compensation 357, ,211 Revenue collected in advance 1,989,350-1,989,350 Capital lease obligations 36,002-36,002 Deferred rent liability 2,430,310-2,430,310 Total liabilities 5,587,337-5,587,337 Commitments and contingencies Fund balances 20,389,498 4,019,419 24,408,917 Total liabilities and fund balances $ 25,976,835 $ 4,019,419 $ 29,996,254 See accompanying summary of accounting policies and notes to consolidated financial statements. 6

9 Consolidated Statement of Revenues and Expenses Year ended December 31, 2013 Repair/ Operating Replacement Fund Fund Total Revenues Homeowner assessments $ 12,006,689 $ - $ 12,006,689 Recreation programs 1,143,038-1,143,038 Late fees, penalties and service charges 920, ,317 Open space programs 695, ,595 Covenants administration and POAA 230, ,874 Interest and other (14,436) - (14,436) Contributions - Friends of Reston 52,938-52,938 Total revenues 15,035,015-15,035,015 Expenses Management and staff services 5,706,132-5,706,132 Operating programs 4,939,941-4,939,941 Recreation programs 2,320,312-2,320,312 Depreciation and amortization expense 1,591,279-1,591,279 Friends of Reston 10,600-10,600 Total expenses 14,568,264-14,568,264 Excess of revenues over expenses $ 466,751 $ - $ 466,751 See accompanying summary of accounting policies and notes to consolidated financial statements. 7

10 Consolidated Statement of Revenues and Expenses Year ended December 31, 2012 Repair/ Operating Replacement Fund Fund Total Revenues Homeowner assessments $ 11,536,445 $ - $ 11,536,445 Recreation programs 1,157,028-1,157,028 Late fees, penalties and service charges 801, ,188 Open space programs 683, ,352 Covenants administration and POAA 214, ,784 Interest and other 123, ,107 Contributions - Friends of Reston 36,423-36,423 Total revenues 14,552,327-14,552,327 Expenses Management and staff services 5,341,282-5,341,282 Operating programs 4,981,061-4,981,061 Recreation programs 2,218,989-2,218,989 Depreciation and amortization expense 1,509,572-1,509,572 Friends of Reston 29,280-29,280 Total expenses 14,080,184-14,080,184 Excess of revenues over expenses $ 472,143 $ - $ 472,143 See accompanying summary of accounting policies and notes to consolidated financial statements. 8

11 Consolidated Statement of Changes in Fund Balance Operating Fund Total Repair/ Fund Land and Land Operating Replacement Years ended December 31, 2013 and 2012 Balance Improvements Facilities Fund Fund Total Fund balance, December 31, 2011 $ 2,391,000 $ 8,536,528 $ 9,043,206 $ 19,970,734 $ 3,966,040 $ 23,936,774 Transfers (705,504) 210, ,429 (53,379) 53,379 - Excess of revenues over expenses 472, , ,143 Fund balance, December 31, ,157,639 8,747,224 9,484,635 20,389,498 4,019,419 24,408,917 Transfers 421,787 (187,273) (234,514) Excess of revenues over expenses 466, , ,751 Fund balance, December 31, 2013 $ 3,046,177 $ 8,559,951 $ 9,250,121 $ 20,856,249 $ 4,019,419 $ 24,875,668 See accompanying summary of accounting policies and notes to consolidated financial statements. 9

12 Consolidated Statement of Cash Flows Year ended December 31, 2013 Repair/ Operating Replacement Fund Fund Total Cash flows from operating activities Excess of revenues over expenses $ 466,751 $ - $ 466,751 Adjustments to reconcile excess of revenues over expenses to net cash provided by operating activities Depreciation and amortization 1,591,279-1,591,279 Bad debt expense 92,000-92,000 Capital appreciation on deferred compensation investments (63,303) - (63,303) Loss on sale of property and equipment 8,152-8,152 (Increase) decrease in assets Accounts receivable (137,312) - (137,312) Prepaid expenses (33,409) - (33,409) Increase (decrease) in liabilities Accounts payable 57,519-57,519 Accrued wages and benefits (98,124) - (98,124) Deferred compensation 95,282-95,282 Revenue collected in advance (527,482) - (527,482) Deferred rent liability (145,407) - (145,407) Net cash provided by operating activities 1,305,946-1,305,946 Cash flows from investing activities Proceeds from sale of property and equipment Purchases of deferred compensation investments (31,979) - (31,979) Capital expenditures (1,021,138) - (1,021,138) Net cash used in investing activities (1,052,317) - (1,052,317) Cash flows used in financing activities Principal payments under capital lease obligations (12,327) - (12,327) Board designated fund transfers Net increase in cash and cash equivalents 241, ,302 Cash and cash equivalents, beginning of year 4,777,035 4,019,419 8,796,454 Cash and cash equivalents, end of year $ 5,018,337 $ 4,019,419 $ 9,037,756 See accompanying summary of accounting policies and notes to consolidated financial statements. 10

13 Consolidated Statement of Cash Flows Year ended December 31, 2012 Repair/ Operating Replacement Fund Fund Total Cash flows from operating activities Excess of revenues over expenses $ 472,143 $ - $ 472,143 Adjustments to reconcile excess of revenues over expenses to net cash provided by operating activities Depreciation and amortization 1,509,572-1,509,572 Bad debt expense 125, ,000 Capital appreciation on deferred compensation investments (43,804) - (43,804) Loss on sale of property and equipment 1,581-1,581 (Increase) decrease in assets Accounts receivable (133,606) - (133,606) Prepaid expenses 71,665-71,665 Increase (decrease) in liabilities Accounts payable (23,786) - (23,786) Accrued wages and benefits 29,048-29,048 Deferred compensation 75,831-75,831 Revenue collected in advance 366, ,489 Deferred rent liability (122,456) - (122,456) Net cash provided by operating activities 2,327,677-2,327,677 Cash flows from investing activities Proceeds from sale of property and equipment 2,730-2,730 Purchases of deferred compensation investments (32,027) - (32,027) Capital expenditures (1,968,149) - (1,968,149) Net cash used in investing activities (1,997,446) - (1,997,446) Cash flows used in financing activities Principal payments under capital lease obligations (4,626) - (4,626) Board designated fund transfers (53,379) 53,379 - Net increase in cash and cash equivalents 272,226 53, ,605 Cash and cash equivalents, beginning of year 4,504,809 3,966,040 8,470,849 Cash and cash equivalents, end of year $ 4,777,035 $ 4,019,419 $ 8,796,454 See accompanying summary of accounting policies and notes to consolidated financial statements. 11

14 Summary of Accounting Policies Organization The Reston Association was created April 16, 1970, as a nonprofit, non-stock corporation to serve as the representative of the owners and inhabitants of the approximately 7,500 acre tract of land located in Fairfax County, Virginia, known as the community of Reston. The Reston Association serves over 21,400 units. The purposes of the Reston Association are to operate and maintain such property as may be deeded to it as parks, parking areas, paths or other facilities; to enforce the covenants, agreements, easements and liens provided; to assess, collect and disburse such amounts as are provided; and to accomplish such other acts deemed necessary for the general welfare of the owners and inhabitants. The Reston Association's main source of revenue is annual assessments. The (Friends of Reston) was established in October 1999 as a support organization to the Reston Association. The Reston Association and the Friends of Reston are collectively referred to as the Association in these consolidated financial statements. The consolidated statements of revenues and expenses are presented in summary format by program areas. Operating programs include open space management and development and covenants and Property Owners' Association Act (POAA) administration. Management and staff services include management and administrative services and member services, financial services, legal services, communications with members, corporate and board, and park and recreation capital administration. Recreation programs include community pools, community buildings, tennis programs, senior programs and events. Consolidation Policy The consolidated financial statements were prepared using the accrual basis of accounting, and all significant interorganization transactions have been eliminated. Fund Accounting The Association uses fund accounting, which requires that funds, such as operating funds and funds designated for future major repairs and replacements, be classified separately for accounting and reporting purposes. Disbursements from the repairs and replacement fund may be made by approval of the Board of Directors (BOD) for designated purposes. Disbursements from operating funds are made based on the annual budget approved by the BOD. Cash and Cash Equivalents The Association considers all highly liquid instruments, which are to be used for current operations and which have an original maturity of three months or less, to be cash and cash equivalents. Investments Investments are reported in accordance with Accounting Standards Codification (ASC) , Accounting for Certain Investments in Debt and Equity Securities. Assets classified as held-tomaturity are carried at amortized cost. Assets classified as available-for-sale are carried at fair value. 12

15 Summary of Accounting Policies All of the Association s investments have been identified as Level 1 in the fair value hierarchy as they have values based on quoted prices in active markets for identical assets in accordance with ASC , Fair Value Measurements. Allowance for Doubtful Accounts An allowance is maintained for possible losses on homeowners assessments. It is at least reasonably possible that the Association s estimate for the allowance for doubtful accounts will change in the near term. Property and Equipment Property, consisting of land and land improvements, leasehold improvements, recreation facilities, furniture and equipment and central services facilities, is recognized in assets on the consolidated balance sheets of the Association. The Association capitalizes property with an original cost of $5,000 or greater and an estimated useful life of 3 years or greater. Land and improvements consist of parcels of land and improvements thereon, contributed to the Association by the developer and various builders. At the time of contribution, the estimated fair market value or cost, where appropriate, of the land is recorded as a contribution. Leasehold improvements, recreation, furniture and equipment, improvements in progress, and central services facilities are stated at cost. Depreciation and amortization expense is computed using the straight-line method over estimated useful lives of 5 to 45 years or the anticipated term of the lease, if shorter, for leasehold improvements. Costs associated with improvements in progress are held until the asset is placed in service, at which point the asset is transferred out of improvements in progress and depreciated over its estimated useful life. Certain costs of internally developed software and website development are capitalized in accordance with ASC , Accounting for the Cost of Computer Software Developed or Obtained for Internal Use and ASC , Accounting for Website Development Costs, respectively. These costs are being amortized over the estimated useful lives of the software and website. Impairment of Long-Lived Assets In accordance with ASC , Accounting for the Impairment or Disposal of Long-Lived Assets, the Association reviews asset carrying amounts whenever events or circumstances indicate that such carrying amounts may not be recoverable. When considered impaired, the carrying amount of the asset is reduced, by a charge in the consolidated statements of revenues and expenses, to its current fair value. Deferred Rent Liability A deferred rent liability has been recorded to reflect the benefit of lease incentives in the lease of the headquarters facilities. The benefits of the lease incentives, including free rent and a tenant improvement allowance, are being recognized ratably over the term of the lease. 13

16 Summary of Accounting Policies Revenue Recognition Revenue is recognized over the assessment period, which is generally one year. Other revenues are recognized during the period when earned. Revenue received in advance and not yet earned is deferred to the applicable periods. Contributions received are reported when an unconditional promise to give is received in accordance with the provisions of ASC , Accounting for Contributions Received and Contributions Made. Investment Income Allocation Prior to 2012, the BOD s policy allocates the equivalent of 100% of interest income from the operating fund to the repair and replacement fund. In 2012, the BOD changed its policy to allocate only the portion of investment income earned from the repair and replacement fund. This amount is included in transfers on the consolidated statement of changes in fund balance. Investment income from the Friends of Reston remains in the operating fund. See Note 6. Use of Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Financial Instruments and Credit Risk Financial instruments, which potentially subject the Association to concentrations of credit risk, consist principally of cash and cash equivalents held at creditworthy financial institutions. Risk is limited because excess cash is maintained in a money market trust account. Credit risk with respect to trade and other receivables is limited because the Association deals with a large number of homeowners and each individual receivable is immaterial to these financial statements. 14

17 Notes to Consolidated Financial Statements 1. Tax Status The Reston Association is exempt from federal income tax under Section 501(c)(4) of the Internal Revenue Code. However, the Reston Association is required to report unrelated business income to the Internal Revenue Service and the Commonwealth of Virginia taxing authorities. The Reston Association s unrelated business income consists of pool party rentals, pool rental, day care, vending machine income, advertising income and small group swimming and tennis lessons. There is no current liability for income taxes and no temporary differences resulting in deferred taxes. The Friends of Reston is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and has no sources of unrelated business income. The Friends of Reston is not considered by the Internal Revenue Service to be a private foundation. Under ASC , Accounting for Uncertainty in Income Taxes, the Association must recognize the tax benefit associated with tax positions taken for tax return purposes when it is more likely than not that the position will be sustained. The Association does not believe there are any unrecognized tax benefits that should be recorded. The Association is still open to examination by taxing authorities from the year 2010 forward. 2. Investments Investments consist of assets held in the Association s deferred compensation Internal Revenue Code Section 457 plan as discussed in Note 5. The fair market values, which are the same as the carrying value of investment securities available-for-sale, are as follows at: December 31, Mutual Funds: U.S. Equity - Large Cap Growth $ 89,515 $ 70,160 U.S. Equity Large Cap Value 59,348 38,433 U.S. Equity Small Cap Blend 15,955 7,134 Diversified Emerging Markets 53,124 51,238 Foreign Large Blend 70,346 69,503 Foreign Small Value 15,293 5,142 Real Estate 70,994 62,774 Retirement Income 34,463 26,577 Federated Capital Preservation 34,304 6,082 High Yield Bond 9,151 20,168 $ 452,493 $ 357,211 The investment income/(losses) from stock/mutual funds are recorded directly to the asset account and the corresponding liability account for the deferred compensation. 15

18 Notes to Consolidated Financial Statements 3. Accounts Receivable Accounts receivable consist of the following at: December 31, Homeowners assessments $ 940,403 $ 878,819 Contributions receivable 162, ,300 Other 59,634 76,918 1,162,837 1,117,037 Less: allowance for doubtful accounts 153, ,602 $ 1,009,747 $ 964,435 The Association's policy is to retain legal counsel and place liens on the properties of homeowners whose assessments are 90 days in arrears. All homeowners assessments that are receivable as of December 31, 2013 and 2012 are delinquent. It is the opinion of management that the Association will ultimately prevail against the majority of homeowners whose assessments are delinquent. The allowance is based upon the Association s policy and management s analysis of accounts. Accounts receivable are written off if reasonable collection efforts prove unsuccessful. Contributions receivable are recorded when an unconditional promise to give is received. Management considers all contributions receivable to be fully collectible; therefore, no allowance for doubtful accounts has been established. 4. Improvements in Progress Improvements in progress consist of the following at: December 31, Other facility renovation $ 375,227 $ 179,587 Bridge replacements 94,382 93,468 Pool and spa renovation 90,663 1,438,025 Customized software 79, ,698 Reston on foot 22,392 22,392 $ 661,902 $ 1,871,170 16

19 Notes to Consolidated Financial Statements 5. Deferred Compensation and Retirement Benefits The Association has two deferred compensation plans for former employees. The original plan was substantially amended in 1986 to conform with the requirements of Section 457 of the Internal Revenue Code, as amended by the Tax Reform Act of A second Section 457 plan (new plan) was established for key employees in November The original and new plans have an outside administrator who invests the funds at the direction of the participants. The deferred compensation liability and the related funds associated with these plans are reflected in the accompanying consolidated financial statements. Participants may withdraw their funds under the new plan upon leaving the Association. See Note 2. The funds are deposited in a rabbi trust to separate them from the general assets of the Association. In the event of the Association s bankruptcy, the funds are subject to claims of the Association s creditors. Effective April 1, 1985, a 401(k) plan was established by the Association. The defined contribution plan has an outside administrator and is available to all full-time and part-time employees who have completed at least one year of employment and who have worked more than 1,000 hours during the plan year. Participants are immediately vested for their voluntary contributions plus any income, gains or losses thereon. Additionally, employees of the Association who were hired on or before December 31, 1987, were immediately vested for the employer matching contributions (of up to 7%) when they became eligible to participate in the plan. Employees hired subsequent to December 31, 1987, become fully vested over a five-year period for the employer matching contributions. Effective February 10, 2010, the plan was amended to allow eligible employees with less than one year of employment to make employee contributions. Employer contributions to the 401(k) plan were $275,996 and $278,313 during the years ended December 31, 2013 and 2012, respectively. 6. Future Major Repairs and Replacements The bylaws of the Reston Association require that an adequate level of funds be maintained for the timely repair and replacement of capital improvements in a separate repair and replacement fund. In 2009, as required by the POAA, the BOD authorized a study of future major repairs and replacements to estimate the remaining useful lives and the replacement costs of the components of common property. The estimates were based on the licensed capital reserve consultants visual inspection of the common property components and the calculation of their full replacement value. The study contains various estimates that may vary significantly from actual results. The table included in the unaudited supplementary information on future major repairs and replacements is based on this study. The POAA requires the Association to conduct a study at least once every five years to determine the necessity and amount of reserves required to repair, replace and restore the capital components. The Association is required to conduct its next study on or before December 31, Prior to 2012, the Association planned to fund most future major repairs and replacements from current assessment revenues. The BOD established a repair and replacement fund to be used to fund capital improvements in excess of available assessment revenue. 17

20 Notes to Consolidated Financial Statements In 2012, the BOD changed its policy to allocate only the portion of investment income earned from the repair and replacement fund for the years ended December 31, 2013 and For the year ended December 31, 2013, there were no allocations to the reserve due to a net loss on investments. For the year ended December 31, 2012, $53,379 was allocated to the reserve from investment earnings. Starting January 1, 2014, the repair and replacement fund shall be funded by an annual appropriation of the current year s revenues at 1/10th of the forecasted 10 year repair and replacement expenditures based upon the latest 10 year repair and replacement of capital assets forecast. The repair and replacement fund was not used to fund capital improvements during 2013 and Friends of Reston The Reston Association elects the BOD of the Friends of Reston and, therefore, exerts control over its operations. For the years ended December 31, 2013 and 2012, the Friends of Reston recognized $52,938 and $36,423 in contributions revenue, of which $30,044 and $27,942 were restricted by the donor, and had $103 and $95 in interest income, respectively. In addition, for the years ended December 31, 2013 and 2012, the Friends of Reston expended cash of $10,600 and $29,280, respectively. 8. Commitments and Contingencies Capital and Operating Leases On November 24, 2009, the Association entered into a 12-year lease agreement for new headquarters facilities commencing on August 1, 2010 through July 31, The lease contains a one year rent abatement period and escalation clauses of two and three-fourths percent annually. In addition, the landlord made concessions to reimburse the Association for leasehold improvements up to $1,887,730. Total rent expense for the years ended December 31, 2013 and 2012 under the operating leases for facilities was $719,510 and $712,877, respectively. The asset under capital lease, acquired in June 2012, had a gross value of $40,628 and is included in property and equipment on the consolidated balance sheet. The capital lease is the only noncash financing transaction during The related accumulated depreciation was $20,314 and $6,771 at December 31, 2013 and 2012, respectively. Depreciation of office equipment under capital lease is included in depreciation expense. 18

21 Notes to Consolidated Financial Statements Net future minimum lease payments under the non-cancelable operating and capital leases at December 31, 2013 are as follows: Year Ending December 31, Capital Leases Operating Leases 2014 $ 16,897 $ 881, , , , , ,072 Thereafter - 3,742,558 Total minimum lease payments 26,752 $ 8,397,020 Interest (3,077) Present value of minimum lease payments $ 23,675 Contingencies In the ordinary course of activities, the Association is party to various legal and administrative actions. In the opinion of management, the potential adverse impact of these legal and administrative actions is insignificant to the consolidated financial statements of the Association. 9. Line-of-Credit The Association maintains a revolving line-of-credit with SunTrust Bank. Any outstanding principal is due on demand. The maximum borrowing amount is $500,000 and no principal was outstanding at December 31, 2013 and Interest is calculated at 1.5% over the one month London Interbank Offered Rate (LIBOR). The interest rate was 1.67% and 1.71% at December 31, 2013 and 2012, respectively. The line-of-credit is secured by a first lien security interest upon all deposits maintained by the Association with SunTrust Bank. The Association maintains two letters of credit issued by SunTrust Bank. One letter of credit is issued to the Association s landlord in the amount of $66,918. The other letter of credit is issued to The Board of Supervisors of Fairfax County in the amount of $97,500. There were no amounts drawn on the letters of credit at December 31, 2013 and Subsequent Events The Association has evaluated subsequent events through March 31, 2014, which is the date the consolidated financial statements were available to be issued. There were no events noted that required adjustments to or disclosure in the consolidated financial statements. 19

22 Supplementary Material

23 Consolidated Summary Schedule of Operating Fund Revenues and Expenses Years ended December 31, Revenues Assessments and other fees $ 12,927,006 $ 12,337,633 Community pools 788, ,024 Open space programs 695, ,352 Tennis programs 262, ,629 Covenants administration and POAA 230, ,784 Community buildings 59,529 67,421 Contributions - Friends of Reston 52,938 36,423 Senior programs and events 32,636 33,954 Investment income - Friends of Reston Investment income - Reston Association (14,539) 123,012 Total revenues 15,035,015 14,552,327 Expenses Open space management and development 3,955,107 3,978,229 Management and administrative and member services 2,729,935 2,593,213 Community pools 1,636,965 1,564,007 Depreciation and amortization 1,591,279 1,509,572 Financial services 1,124,610 1,034,486 Covenants and POAA administration 984,834 1,002,832 Legal services 623, ,725 Communications with members 617, ,599 Tennis programs 439, ,415 Park and recreation capital administration 332, ,831 Corporate and board 269, ,847 Senior program and events 133, ,872 Community buildings 109, ,695 Friends of Reston expenditures 10,600 29,280 Loss on sale of property and equipment 8,152 1,581 Total expenses 14,568,264 14,080,184 Excess of revenues over expenses $ 466,751 $ 472,143 20

24 Consolidated Summary Schedule of Operating Fund Expenses Years ended December 31, Expenses Salaries $ 6,285,068 $ 6,162,498 Other employee costs 1,766,813 1,685,426 Depreciation and amortization 1,591,279 1,509,572 Professional and technical support 1,190,671 1,045,792 Facility rental 719, ,877 Utilities 356, ,906 Insurance 355, ,081 Accounting expenses 224, ,392 Facility repair and maintenance 185, ,064 Vehicles and related expenses 163, ,578 Miscellaneous 151,272 66,855 Printing 144, ,080 Repair and maintenance contracts 112, ,360 Postage and delivery 111, ,530 Tools and equipment 95,893 84,463 Bad debt expense 92, ,000 Refreshments supplies 89,693 90,246 Computer equipment and supplies 87,392 85,618 Taxes 78,230 79,554 Furnitures and fixtures 74,264 58,005 Board election expenses 73,883 71,661 Chemicals 64,274 65,917 Construction materials and supplies 61,456 92,657 Landscaping supplies 59,942 56,520 Recreational materials and supplies 59,491 53,396 Office supplies 58,591 68,976 Lighting 57,358 56,427 Equipment rental 47,822 66,384 Janitorial supplies 41,642 40,339 Uniforms and badges 36,103 17,861 Dams, lakes and underpasses repairs and maintanance 27,025 50,248 Electrical supplies 21,152 10,659 Equipment repair and maintenance 20,438 26,564 Advertising 16,227 18,870 Miscellaneous supplies 12,971 15,027 Friends of Reston expenditures 10,600 29,280 Loss on sale of property and equipment 8,152 1,581 Tennis materials and supplies 7,592 7,263 Licenses and permits 7,053 10,270 VDOT Roadway contract Total operating expenses $ 14,568,264 $ 14,080,184 21

25 Summary Schedule of Revenues and Expenses (Modified Cash Basis) (unaudited) Year ended December 31, 2013 Nature House Summer Camps Projects Others Total Revenues Contributions $ 45,258 $ 2,841 $ 2,435 $ 2,404 $ 52,938 Interest income Total cash received 45,258 2,841 2,435 2,507 53,041 Expenses Nature House 3,274 3,667 2, ,550 Administrative expenses Total expenses (cash disbursed) 3,274 3,667 2, ,600 Excess revenues (expenses) $ 41,984 $ (826) $ (360) $ 1,643 $ 42,441 Notes to Summary Schedule of Revenues and Expenses (unaudited) 1. Friends of Reston conducts activities on behalf of Reston Association. Thus, an agency relationship exists between the two entities. The activity reflected in Friends of Reston is cash, contributions receivable and a liability to Reston Association. 2. This schedule has been prepared on the modified cash basis to reflect the amounts received in cash by the Friends of Reston and the cash disbursed by Friends of Reston. 22

26 Supplementary Information on Future Major Repairs and Replacements (unaudited) As required by the POAA, the BOD authorized a study in 2009 to estimate the remaining useful lives and the replacement costs of the components of common property. The POAA requires the Association to conduct a study at least once every five years to determine the necessity and amount of reserves required to repair, replace and restore the capital components. The Association will be required to conduct its next study on or before December 31, The estimates were based on the licensed capital reserve consultants visual inspection of the common property components and the calculation of their full replacement value. The study contains various estimates that may vary significantly from actual results. Actual repairs and replacements of the components of common property will occur over time based on conditions assessed by the Association. The following is a summary of the ten year projection of future major repairs and replacements based on this study. Components Estimated Remaining Useful Life (Years) Estimated Current Replacement Costs Swimming pools 0 to 39 $ 15,718,403 Lakes, ponds, and dams 0 to 21 11,280,299 Pathways and asphalt trails 0 to 26 5,994,000 Administrative equipment 0 to 5 5,824,500 Vehicles and equipment 0 to 16 5,235,126 Tennis and multi-purpose courts 1 to 39 4,014,374 Footbridges 0 to 23 2,530,547 Totlots 4 to 16 1,115,400 Underpasses 3 to 27 1,068,000 Parking and RV lots 5 to ,742 Central service and community buildings 0 to ,446 Boat docks 3 to 5 436,978 Ballfields 0 to ,490 Pavilions and arbors 4 to ,000 Miscellaneous site features 0 to ,051 Sidewalks, curbs, and gutters 0 to ,780 The balance of the repair and replacement fund as of December 31, 2013 is $4,019,419. $ 56,014,136 23