PINEWOOD SOUTH CONDOMINIUM ASSOCIATION, INC. FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION WITH INDEPENDENT ACCOUNTANT S COMPILATION REPORT

Transcription

1 PINEWOOD SOUTH CONDOMINIUM ASSOCIATION, INC. FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION WITH INDEPENDENT ACCOUNTANT S COMPILATION REPORT FOR THE YEAR ENDED

2 PINEWOOD SOUTH CONDOMINIUM ASSOCIATION, INC. TABLE OF CONTENTS Independent Accountant s Compilation Report... 1 Financial Statements: Statement of Financial Position... 2 Statement of Activities... 3 Statement of Cash Flows... 4 Notes to Financial Statement Additional Information: Schedule of Components of Common Property Repair and Replacement.11 Page

3 INDEPENDENT ACCOUNTANT S COMPILATION REPORT To the Board of Directors Pinewood South Condominium Association, Inc. Fort Myers, Florida Management is responsible for the accompanying financial statements of Pinewood South Condominium Association, Inc. (a not-for-profit corporation), which comprise the statement of financial position as of December 31, 2017, and the related statement of activities and cash flows for the year then ended, and the related notes to the financial statements in accordance with accounting principles generally accepted in the United States of America. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the financial statement, nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, a conclusion, nor provided any form of assurance on this financial statement. The supplementary information included in Schedule #1 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management. The supplementary information was subject to our compilation engagement. We have not audited or reviewed the supplementary information and do not express an opinion, a conclusion, nor provide any assurance on such supplementary information. Orlando, Florida March 23,

4 STATEMENT OF FINANCIAL POSITION ASSETS Operating Replacement Fund Fund Total Cash and cash equivalents - Note 3 and 9 $56,719 $474,446 $531,165 Assessments receivable 7,879-7,879 Insurance receivable 24,715-24,715 Fixed assets,net of depreciation of $840 10,920-10,920 Prepaid expenses 8,488-8,488 Deposits 28,235-28,235 Due from operating fund - 80,929 80,929 Total assets $ 136,956 $ 555,375 $ 692,331 LIABILITIES AND FUND BALANCES Liabilities: Prepaid assessments - Note 5 $56,027 $ - $ 56,027 Due to replacement fund 80,929-80,929 Total liabilities 136, ,956 Fund Balances - 555, ,375 Total liabilities and fund balances $ 136,956 $ 555,375 $ 692,331 See accompanying notes and independent accountant s compilation report. 2

5 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED Revenues Operating Replacement Fund Fund Total Member assessments $ 422,803 $ 69,101 $ 491,904 Application fees 1,762-1,762 Interest Miscellaneous 1,700-1,700 Total revenues 426,727 69, ,828 - Expenditures Administrative 3,444-3,444 Refuse and recycling 24,768-24,768 Depreciation Insurance 59,708-59,708 Lawn and landscaping 66,835-66,835 Legal and accounting 25,078-25,078 Professional and management fees 30,000-30,000 Pool repair and maintenance 17,204-17,204 Building/pavement repair and maintenance 50,668-50,668 Taxes license and fees 1,411-1,411 Utilities 131, ,142 Miscellaneous 2,000-2,000 Total expenses 413, ,098 Excess of revenues over expenditures before non recurring items 13,629 69,101 82,730 Non recurring items (revenues) expenditures: Hurricane expenses 24,925 24,925 Hurricane recovery (24,715) (24,715) 210 Excess of revenues over expenditures after non recurring items 13,419 69,101 82,520 Beginning fund balance - 472, ,855 Transfer between funds 13,419) ( 13,419 - Ending fund balance $ - $ 555,375 $ 555,375 See accompanying notes and independent accountant s compilation report. 3

6 STATEMENT OF CASH FLOWS Operating Replacement Fund Fund Total Cash flows from operating activities: Excess of revenues over expenditures after non recurring items $ 13,419 $ 69,101 $ 82,520 Adjustments to reconcile excess of revenues over expenditures after non recurring items to net cash (used) provided by operating activities: Depreciation (Increase) decrease in: Assessments receivable (1,041) - (1,041) Insurance receivable (24,715) (24,715) Prepaid expenses (4,655) - (4,655) Deposits (28,235) - (28,235) Other assets Increase (decrease) in: Prepaid assessments (6,176) - (6,176) Due to (from) replacement fund, net 1,668 (1,668) - Total Adjustments (61,364) (1,668) (63,032) Net cash (used) provided by operating activities (47,945) 67,433 19,488 Net (decrease) increase in cash (47,945) 67,433 19,488 Cash - beginning 104, , ,677 Cash - ending $ 56,719 $ 474,446 $ 531,165 Supplemental disclosures of cash flow information: Cash paid during the year for : Interest expense $ - $ - $ - Income taxes $ - $ - $ - See accompanying notes and independent accountant s compilation report. 4

7 NOTES TO FINANCIAL STATEMENT Note 1 - Association: Nature of Activities Pinewood South Condominium Association, Inc. (The Association) is a common interest realty association consisting of 168 condominium units on approximately 6.5 acres. The Association was incorporated under the laws of the State of Florida as a not-for-profit corporation for the purpose of administering and operating the property located in Fort Myers, Florida, in accordance with the terms of Florida Statute Chapter 718 and the provisions of the Declaration of Condominium. Operations of the Association commenced in Note 2 Summary of Significant Accounting Policies: Financial Statement Presentation 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 Associations. Replacement Fund This fund is used to accumulate financial resources designated for future major repairs and replacements. Basis of Accounting The Association prepares financial statements on the accrual basis and presents them as separate funds based on its different funding policies for operations and replacement expenditures. Interest Earned The Board s policy is to allocate to the operating fund interest earned on all operating fund cash accounts, and to allocate replacement fund interest selectively to the components. Cash and Cash Equivalents - For the purpose of the statement of cash flows, the Association considers cash in operating and replacement fund bank accounts, cash on hand, and certificates of deposit with original maturities of three months or less, as cash and cash equivalents. Recognition of Assets and Depreciation Policy The Association recognizes personal property assets, if any, at cost. The property is depreciated over its estimated useful life using the straight-line method of depreciation. Real property, common areas 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. Revenue Recognition Revenue from maintenance fees is recognized in the period to which it applies, and payments in advance are deferred to the appropriate future period. 5

8 NOTES TO FINANCIAL STATEMENT Note 2 Summary of Significant Accounting Policies (Continued): Assessments Receivable Association members are subject to monthly assessments, paid quarterly, 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 member assessments due from unit owners. The Association s policy is to retain legal counsel and place liens or foreclose on the units of members whose assessments are thirty days or more delinquent. Allowances for doubtful accounts is based upon a review of outstanding receivables, historical collection information and existing economic conditions. At December 31, 2017 no allowance for doubtful accounts was required. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration of Credit Risk The Association maintains cash in demand deposit accounts with federally insured banks. At times, the balances in these accounts may exceed the federally insured limits. The Association does not believe that it is exposed to any significant credit risk in connection with cash and cash equivalents. At December 31, 2017 no bank accounts exceeded the FDIC limits. Allocation of Income and Expenses The income and expenses of the Association are allocated to unit owners based on the number of units. Marketable Securities Debt securities are classified as held-to-maturity as defined by Financial Accounting Standards ASC 320, Accounting for Certain Debt and Equity Securities. Advertising Costs The Association s policy is to expense advertising costs if incurred. Note 3 Cash and Cash Equivalents: At December 31, 2017, the Association has cash balances as follows: Operating Fund Replacement Fund BB & T Bank - Checking $ 56,719 $ - BB & T Bank - Money Market - 474,446 $ 56,719 $ 474,446 6

9 NOTES TO FINANCIAL STATEMENT Note 4 Owners Assessments: Monthly assessments to owners, billed quarterly, are based on the approved annual budget. During 2017, owners were assessed approximately $244 per month per unit. Included in this amount is a per unit per month designated amount for the replacement fund. The annual budget and assessments of owners are determined and approved by the Board of Directors. The Association retains excess operating funds at the end of the operating year, if any, for use in future operating periods, and/or it is transferred to the replacement fund. Note 5 Prepaid Assessments: Prepaid assessments consisted of 2018 maintenance fees received by the Association prior to January 1, 2018 is the amount of $56,027. Note 6 Management Services: The Association uses a management company, on a contract basis, for its management and administrative services. Note 7 Uncertain Tax Position: Condominium associations may elect to be taxed as a regular corporation or as homeowners association. The Association elected to be taxed as a homeowners association for the year ended December 31, Under that election, the Association is not taxed on uniform assessments to unit owners and other income received from Association unit owners solely as a function of their membership in the Association. The Association is taxed at a rate of 30 percent on its nonexempt function income, which includes interest income, less a portion of allocated Association expenses. The Association had no tax due (nor did they pay, accrue or expense any income taxes) for the year ended December 31, 2017 utilizing the 1120-H method of tax filing. The Association has evaluated its tax positions taken for all open tax years and has not identified any uncertain tax positions. The 2015, 2016 and 2017 tax years are open and subject to examination by the Internal Revenue Service (IRS) and state taxing authorities. The Association is not currently under audit or has the Association been contacted by federal or state taxing authorities. Note 8 Future Major Repairs and Replacements: The Association s governing documents require that funds be accumulated for future major repairs and replacements, unless the members determine by majority vote to waive all or a portion of the replacement fund funding. Accumulated funds are held in separate savings investment accounts and generally are not available for expenditures for normal operating. 7

10 NOTES TO FINANCIAL STATEMENT Note 8 Future Major Repairs and Replacements (Continued): The Board conducted a study in 2017 to estimate the remaining useful lives and the replacement costs of the components of common property. The estimates were obtained through an inspection of the property. The table included in the un-audited supplementary information for Future Major Repairs and replacements is based on the study. The Board is funding a major repairs and replacements over the remaining useful lives of the components based on the study s estimates of current replacement costs and considering amounts previously accumulated in the replacement fund. Funds are being accumulated in the replacement fund based on the Board s estimates of future needs for repairs and replacements of common property components. Actual expenditures, however, may vary from the estimated future expenditures, and the variations may be material. Therefore, amounts accumulated in the replacement fund may not be adequate to meet all future needs for major repairs and replacements. If additional funds are needed, the Association has the right to, subject to membership approval, increase regular assessments, pass special assessments, or delay major repairs and replacements until funds are available. The effect on future assessments has not been determined at this time. The following table presents the changes in the components of the replacement fund balances: Fund Fund Common Area Balance Additions Balance Component 12/31/2016 To Fund Expenditures Transfers 12/31/2017 Roofs $ 200,028 $ 18,000 $ - $ 2,000 $ 220,028 Painting 41,428 12,000-3,000 56,428 Paving 56,071 18,000-5,000 79,071 Pool 35,815 10,000-45,815 Capital expenditures and deferred maintenance 113,413 2,101 (47,581) 67,933 Gate ,000 50,000 Audit 5,000 1,000-6,000 Mail box replacement 21,100 8,000-1,000 30,100 $ 472,855 $ 69,101 $ - $ 13,419 $ 555,375 8

11 NOTES TO FINANCIAL STATEMENT Note 9 - Fair Value of Financial Instruments: The Association adopted Financial Accounting Standards ASC 820, Fair Value Measurements and Disclosures, as it relates to their financial assets and liabilities, which establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. The following methods and assumptions were used by the Association in estimating the fair value of its financial instruments: a) Cash and cash equivalents: The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. b) Money market account Fair values, which are the amounts reported in the balance sheet are based on quoted market prices in active markets for identical assets. At December 31, 2017, the carrying amounts and fair values of the Association s financial instruments are as follows: Operating Fund Carrying Fair Amount Value Cash and cash equivalents $ 56,719 $ 56,719 Replacement Fund Carrying Fair Amount Value Money market account $ 474,446 $ 474,446 Note 10 Legal Action: A legal action was filed against the Association in 2017 for a fall at the pool two years prior. Our attorneys have evaluated the case and believe it is without merit. The Association is covered by insurance and the Board does not anticipate any effect on Association fees. Note 11 Gated Entrance: The Association has engaged a firm to construct a gated entrance which is expected to be operational in late May or June of The Board of Directors does not anticipate any effect on Association fees as a result of this capital improvement. 9

12 NOTES TO FINANCIAL STATEMENT Note 12 Subsequent Events: The financial statements were evaluated for subsequent events through March 23, 2018, the date the financial statements were available to be issued. There were no material reportable subsequent events. 10

13 SCHEDULE #1 SCHEDULE OF COMPONENTS OF COMMON PROPERTY REPAIR AND REPLACEMENT FOR THE YEAR ENDED Supplementary Information of Future Major Repairs and Replacements The Board conducted a replacement fund study in 2017 to estimate the remaining useful lives and the replacement costs of the components of common property. Replacement costs were based on the estimated costs to repair or replace the common property components at the date of the study. Estimated current replacement costs have not been revised since that date and do not take into account the effects of inflation between the date of the study and the date that the components will require repair or replacement. The following information is based on the study and presents significant information about the components of common property: Estimated Estimated Estimated Component Remaining Current 2018 of Fund Useful Replacement funding Balance Life Cost Requirement 12/31/2017 Roofs (average) 3 to 8 $ 420,000 $ 18,000 $ 220,028 Painting 5 102,000 18,000 56,428 Paving 3 200,000 18,000 79,071 Pool 1 56,000 10,000 45,815 Capital expenditures and deferred maintenance - 130,000 5,000 67,933 Gate 1 55,000-50,000 Mail box replacement 1 30,000 30,100 Audit 2 6,000 1,000 6,000 $ 999,000 $ 70,000 $ 555,375 See accompanying notes and independent accountant s compilation report. 11