Landings Yacht, Golf and Tennis Club, Inc. Financial Report September 30, 2018

Transcription

1 Landings Yacht, Golf and Tennis Club, Inc. Financial Report September 30, 2018

2 Contents Independent auditor s report 1-2 Financial statements Balance sheet 3 Statement of revenues, expenses and changes in fund balances 4-5 Statement of cash flows 6-7 Notes to financial statements 8-13 Supplementary information on future major repairs and replacements (unaudited) 14 Independent auditor s report on the supplementary information 15 Supplementary information Statements of revenues, expenses and changes in fund balances information: Departmental schedules of certain revenues and certain expenses operating fund 16-17

3 Independent Auditor s Report Board of Directors Report on the Financial Statements We have audited the accompanying financial statements of (the Association), which comprise the balance sheet as of September 30, 2018, the related statements of revenues, expenses and changes in fund balances and cash flows for the year then ended and the related notes to the financial statements. 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. Auditor s 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 from 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 auditor s 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. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of as of September 30, 2018, and the changes in its fund balances and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. 1

4 Other Matter Accounting principles generally accepted in the United States of America require that the supplementary information on future major repairs and replacements on page 14 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 applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquires, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Report on Summarized Comparative Information We have previously audited s 2017 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated February 19, In our opinion, the summarized comparative information presented herein as of and for the year ended September 30, 2017, is consistent, in all material respects, with the audited financial statements from which it has been derived. Naples, Florida February 4,

5 Balance Sheet September 30, 2018 With Comparative Totals for 2017 Major Repairs and Operating Replacements Combined Funds Assets Fund Fund Cash $ 588,194 $ 807,873 $ 1,396,067 $ 1,871,045 Less Board designated funds (Note 2) - 318, , ,500 Accounts receivable, net of allowance for doubtful 588, ,373 1,077,567 1,577,545 accounts of $13, , ,983 13,999 Inventories 232, , ,720 Prepaid expenses 78,730-78,730 78,210 Due from Major Repairs and Replacements Fund 64, * Total current assets 1,081, ,373 1,505,790 1,900,474 Board designated funds (Note 2) - 318, , ,500 Property and equipment, less accumulated depreciation (Note 3) 18,135,619-18,135,619 18,406,104 Other assets 29,873-29,873 3,512 Liabilities and Fund Balances $ 19,246,750 $ 807,873 $ 19,989,782 $ 20,603,590 Current maturities of notes payable (Note 4) $ 759,097 $ - $ 759,097 $ 681,072 Accounts payable 168, , ,158 Accrued expenses 200, , ,172 Membership assessments and fees collected in advance 109, , ,971 Due to Operating Fund - 64, * Total current liabilities 1,237,855 64,841 1,237,855 1,452,373 Notes payable, net of current maturities and unamortized loan closing costs (Note 4) 1,774,501-1,774,501 2,388,376 Total liabilities 3,012,356 64,841 3,012,356 3,840,749 Commitments and contingency (Notes 6 and 10) Fund balances 16,234, ,032 16,977,426 16,762,841 $ 19,246,750 $ 807,873 $ 19,989,782 $ 20,603,590 * Eliminated in combination of funds. See notes to financial statements. 3

6 Statement of Revenues, Expenses and Changes in Fund Balances Year Ended September 30, 2018 With Comparative Totals for 2017 Operating Major Repairs and Replacements Fund Fund Revenues: Maintenance fees (Notes 4 and 7) $ 4,036,533 $ 751,972 $ 4,788,505 $ 4,701,918 Associate member dues (Note 4) 107, , ,472 Food sales 1,241,940-1,241,940 1,157,885 Beverage sales 526, , ,582 Cart fees 134, , ,043 Greens and guest fees 38,965-38,965 38,390 Pro shop sales 130, , ,127 Other golf revenue 71,220-71,220 61,087 Tennis revenue 188, , ,850 Marina 2,109,844-2,109,844 1,994,767 Rental income 33,900-33,900 33,150 Other 131, ,808 87,756 Expenses: 8,751, ,972 9,503,088 9,108,027 Food and beverage 2,194,531-2,194,531 2,050,095 Golf activities 446, , ,548 Golf course maintenance 925, , ,077 Tennis activities 481, , ,740 Marina 2,002,183-2,002,183 1,888,167 Administrative and general 801, , ,947 Management and accounting fees (Note 6) 172, , ,700 Security 362, , ,271 Utilities 354, , ,495 Property taxes 4,832-4,832 6,867 Insurance 510, , ,242 Landings environmental, waterway and road maintenance 699, , ,803 8,956,163-8,956,163 8,390,952 Excess (deficiency) of revenues over expenses before Combined Funds depreciation and other contributions (expenses), forward (205,047) 751, , ,075 (Continued) 4

7 Statement of Revenues, Expenses and Changes in Fund Balances (Continued) Year Ended September 30, 2018 With Comparative Totals for 2017 Excess (deficiency) of revenues over expenses before Operating Major Repairs and Replacements Combined Funds Fund Fund depreciation and other contributions (expenses), forwarded $ (205,047) $ 751,972 $ 546,925 $ 717,075 Depreciation 1,279,224-1,279,224 1,337,842 Excess (deficiency) of revenues over expenses before other contributions (expenses) (1,484,271) 751,972 (732,299) (620,767) Other contributions (expenses): Debt repayment fees 796, , ,987 Capital contributions - 368, , ,000 Transfer contributions 10,900-10,900 9,350 Gain (loss) on disposition of property and equipment (875) Hurricane revenue (Note 11) 180, ,746 - Hurricane expense (Note 11) (261,070) - (261,070) (180,447) Interest expense (Note 4) (149,119) - (149,119) (178,180) 578, , , ,835 Excess (deficiency) of revenues over expenses (905,387) 1,119, , ,068 Fund balance, beginning 16,134, ,149 16,762,841 16,583,773 Property and equipment replacements transferred to Operating Fund 1,005,089 (1,005,089) - - Fund balance, ending $ 16,234,394 $ 743,032 $ 16,977,426 $ 16,762,841 See notes to financial statements. 5

8 Statement of Cash Flows Year Ended September 30, 2018 With Comparative Totals for 2017 Cash flows from operating activities: Operating Major Repairs and Replacements Fund Fund Excess (deficiency) of revenues over expenses $ (905,387) $ 1,119,972 $ 214,585 $ 179,068 Adjustments to reconcile excess (deficiency) of revenues over expenses to net cash provided by (used in) operating activities: Depreciation 1,279,224-1,279,224 1,337,842 Amortization of loan closing costs 28,681-28,681 25,518 (Gain) loss on disposition of property and equipment (500) - (500) 875 Debt principal repayment fees collected (696,963) - (696,963) (593,572) Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (102,984) - (102,984) 148,338 Inventories (1,790) - (1,790) 10,642 Prepaid expenses (520) - (520) 15,746 Other assets (26,361) - (26,361) 1,387 Increase (decrease) in: Accounts payable (38,971) - (38,971) 134,925 Accrued expenses (167,571) - (167,571) 233,262 Membership assessments and Combined Funds fees collected in advance (22,015) - (22,015) (77,719) Net cash provided by (used in) operating activities (655,157) 1,119, ,815 1,416,312 Cash flows used in investing activities: Disbursements for property and equipment (67,136) (1,005,089) (1,072,225) (1,360,627) (Continued) 6

9 Statement of Cash Flows (Continued) Year Ended September 30, 2018 With Comparative Totals for 2017 Operating Major Repairs and Replacements Combined Funds Fund Fund Cash flows from financing activities: Principal payments on notes payable $ (696,963) $ - $ (696,963) $ (593,572) Proceeds from notes payable 132, , ,746 Payments for loan closing costs (54,900) Change in due to (from) funds 278,534 (278,534) - - Debt principal repayment fees collected 696, , ,572 Net cash provided by (used in) financing activities 410,966 (278,534) 132, ,846 Net increase (decrease) in cash (311,327) (163,651) (474,978) 414,531 Cash: Beginning 899, ,524 1,871,045 1,456,514 Ending $ 588,194 $ 807,873 $ 1,396,067 $ 1,871,045 Supplemental disclosures of cash flow information: Cash payments for interest $ 120,438 $ - $ 120,438 $ 152,662 Supplemental schedule of noncash investing and financing activities: Property and equipment replacements transferred to Operating Fund $ 1,005,089 $ (1,005,089) $ - $ - Supplemental schedule of noncash investing and financing activities: Property and equipment purchases included in accounts payable $ - $ - $ - $ 63,986 *Eliminated in the combination of funds. See notes to financial statements. 7

10 Notes to Financial Statements Note 1. Nature of Organization and Significant Accounting Policies Nature of organization: (the Association), located in Fort Myers, Florida, was incorporated in October 1973 under the laws of the state of Florida as a not-for-profit corporation. The Association is comprised of 1,127 Landings units and 30 Riverside units. All unit owners are responsible for the operation and maintenance of the common areas and recreational facilities of the Association, including but not limited to, the golf course, clubhouse, roadways, swimming pool, tennis courts, guard house and water retention areas. Riverside unit owners are not responsible for maintenance and expenses associated with the operation of the marina. A summary of the Association s significant accounting policies follows: Fund accounting: The Association uses fund accounting which requires that funds, such as operating funds and funds designated for major repairs and replacements, be classified separately for accounting and reporting purposes. Disbursements from the Operating Fund are generally at the discretion of the Board of Directors. Disbursements from the Major Repairs and Replacements Fund generally may be made only for designated purposes. Accounting estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Revenue recognition: Maintenance fees and associate member dues are recognized as revenue on a pro rata basis over the period covered by the billing. Golf and tennis fees, pro shop sales, food and beverage and marina sales are recognized as revenue at the time of sale or when the service is provided. Capital contributions: Capital assessments and capital contributions are recognized as revenue when received. A capital contribution of $5,000 is charged to the Landings unit owners for the transfer of a conveyance of a lot or unit. A capital contribution of $4,000 is charged to Riverside unit owners upon the activation of membership. Capital contributions are used for the acquisition of new capital assets or applied to reserves created for maintenance, repair and replacement of capital improvements of the Association. The Association collected $368,000 in capital contributions for the year ended September 30, Owners assessments: Association members are subject to annual maintenance, debt service and major repairs and replacement assessments to provide funds for the Association s operating expenses, debt service, future capital acquisitions and major repairs and replacements. The amount billed to all residents was $4,800 for Landings unit owners and $3,915 for Riverside unit owners for the year ended September 30, The budget of the Association does not provide for reserve accounts for all capital expenditures and deferred maintenance that may result in special assessments. Owners may elect to provide for reserve accounts pursuant to Section (6) Florida Statutes, upon obtaining the approval of a majority of the total voting interests of the Association by vote of the members at a meeting or by written consent. The budget of the Association provides for limited voluntary deferred expenditure accounts, including capital expenditures and deferred maintenance, subject to limits on funding contained in our governing documents. Because the owners have not elected to provide for reserve accounts pursuant to Section (6), Florida Statutes, these funds are not subject to the restrictions on use of such funds set forth in that statute, nor are reserves calculated in accordance with that statute (see Note 7). 8

11 Notes to Financial Statements Note 1. Nature of Organization and Significant Accounting Policies (Continued) Cash and concentration of credit risk: For cash flow purposes, the Association considers Board designated funds to be cash. The Association maintains its excess cash in noninterest-bearing bank deposit accounts. Excess funds are also maintained in certificates of deposit. Accounts receivable: Accounts receivable are carried at the original charge amount less an estimate made for doubtful accounts, if any, based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received. Accounts receivable are considered to be past due if any portion of the receivable balance is outstanding for more than 60 days. Interest of 1.5% per month to a maximum rate of 18% per annum is charged on accounts receivable that are outstanding for more than 60 days and is recognized as it is charged. Inventories: Inventories are stated at weighted average for marina fuel and the lower of cost (first-in, first-out method) or net realizable value for all other inventories which consist of food, beverage and merchandise sold in the pro shop and marina. Property and equipment: The Association capitalizes property and equipment to which it holds title or has evidence of ownership. Capitalized property and equipment is recorded at cost and depreciated using the straight-line method of depreciation as follows: 9 Years Furniture, fixtures and equipment 3-15 Building and site improvements Ownership of certain commonly-owned assets is vested directly or indirectly in the unit owners, and those assets are not deemed to be severable. As a result, certain commonly-owned assets contributed by the Developer to the Association are not recorded on the Association s financial statements. The Association recognizes all personal property on its balance sheet. Subsequent to turnover, the Association s policy is to recognize roadway improvements and commonlyowned real property, not directly associated with the units, to which it has title and that it can dispose of for cash while retaining the proceeds. Loan closing costs: Loan closing costs are amortized using the effective interest method over the term of the loan agreement and are presented on the balance sheet as a direct reduction to the long term notes payable balance. Income taxes: The Association is incorporated as a not-for-profit corporation under the laws of the State of Florida. However, the Association is not exempt from income taxes. For income tax purposes, the Association is required to segregate the results of its member activities from its nonmember activities and may be, subject to certain elections, taxed on each element. Nonmember activity losses may be used to offset member activity profits in current or future periods. Membership activity losses are referred to as deferred expense carryforwards and cannot be used to offset nonmember activity profits. Due to the nature of the Association s operations, the Association believes it is remote that it would utilize its deferred expense or net operating loss carryforwards, if any. As a result, it is the Association s policy not to disclose the deferred tax asset and related valuation allowances associated with the carryforwards.

12 Notes to Financial Statements Note 1. Nature of Organization and Significant Accounting Policies (Continued) The Association has evaluated its tax positions and concluded that the Association has taken no uncertain tax positions that require adjustment to the financial statement to comply with the provisions of the Income Tax Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification. Operating income(loss)/performance measurement: The Association considers the excess (deficiency) of revenues over expenses before depreciation and other contributions (expenses) on the accompanying statement of revenues, expenses and changes in fund balances to be operating income (loss) for performance measurement purposes as this is the line item budgeted for financial management and internal reporting purposes. Comparative amounts: The financial statements include certain prior-year summarized comparative information in total but not by funds. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Association s financial statements for the year ended September 30, 2017, from which the summarized information was derived. Recent accounting pronouncements: In May 2014, the FASB issued Accounting Standards Update (ASU) No , Revenue from Contracts with Customers (Topic 606). This standard outlines a single comprehensive model for Associations to use in accounting for revenue from contracts with members and supersedes the most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that revenue is recognized when a member obtains control of a good or service. A member obtains control when it has the ability to direct the use and obtains benefits from the good or service. Transfer of control is not the same as transfer of risk and rewards, as it is considered in the current guidance. The Association will also need to apply new guidance to determine whether revenue should be recognized over time or at a point in time. ASU No , as deferred by ASU No , will be effective for annual reporting periods beginning after December 15, 2018, using either of two methods: (a) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU No ; or (b) retrospective with cumulative effect of initially applying ASU No recognized at the date of initial application and providing certain additional disclosures as defined in ASU No The Association is currently evaluating the effect that the updated standard will have on the financial statements. In February 2016, the FASB issued its new lease accounting guidance in ASU No , Leases (Topic 842). Under the new guidance, lessees will be required to recognize at the commencement date for all leases (with the exception of short-term leases): (a) a lease liability, which is a lessee s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee s right to use, or control the use of, a specified asset for the lease term. Lessees will no longer be provided with a source of off-balance sheet financing. This standard will be effective for fiscal years beginning after December 15, 2019, with early application permitted. Lessees (for capital and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. The Association is currently evaluating the effect that the updated standard will have on the financial statements. 10

13 Notes to Financial Statements Note 1. Nature of Organization and Significant Accounting Policies (Continued) Subsequent events: Management has assessed subsequent events through February 4, 2019, the date on which the financial statements were available to be issued. Note 2. Board Designated Funds In fiscal year 2016, the Board of Directors approved renaming the Special Funds/Set-Aside Funds, which contained the Hurricane Insurance and Stormwater System Reserve Funds. These funds have been consolidated and renamed the Emergency Infrastructure Reserve. This reserve was established to remain separate from all other reserves and each year following the establishment of the fund, the Board of Directors will place an additional $25,000 into the fund until it reaches a minimum of $500,000. In the event of an emergency need to replace damaged infrastructure resulting in use of a portion of the fund, the Board of Directors must replace the funds used within a two year timeframe. As of September 30, 2018, the balance of these designated funds was $318,500. Note 3. Property and Equipment Property and equipment consists of the following as of September 30, 2018: Land $ 4,918,633 Furniture, fixtures and equipment 8,682,782 Building and site improvements 18,364,804 31,966,219 Less accumulated depreciation 13,830,600 18,135,619 Note 4. Notes Payable Long-term debt as of September 30, 2018, consists of the following: Note payable with a bank in the original amount of $8,000,000, payable in monthly installments of principal and interest of $66,022 at a fixed rate of 7.55%. The note payable is collateralized by all assessments and dues. In May 2008, the Association modified the original loan agreement to lower the interest rate to 6.93%. In December 2016, the Association refinanced the remaining balance by lowering the fixed interest rate to 3.99%. The note matures on November 10, $ 2,151,099 Advance term loan with a bank with maximum available borrowings of $700,000 for the renovation of the Helm Club payable in monthly interest payments at an adjustable rate of one-month London Interbank Offered Rate (LIBOR) plus 2.30% through the draw period. Following the termination of the draw period, the Association will pay monthly installments of principal and interest at a fixed rate of 2.30% through the maturity date of January 1, ,354 2,624,453 Less current maturities 759,097 1,865,356 Less unamortized loan closing costs 90,855 $ 1,774,501 11

14 Notes to Financial Statements Note 4. Notes Payable (Continued) In connection with these debt instruments, the Association has agreed, among other things: (a) provide audited financial statements to the bank within 150 days of fiscal year end; (b) maintain a debt service coverage ratio of at least 1.0 to 1.0; and (c) maintain minimum liquidity of at least $250,000. Aggregate maturities required on the notes payable as of September 30, 2018, based upon the refinanced note payable, are due in future years as follows: Years ending September 30: 2019 $ 759, , , , $ 36,412 2,624,453 Interest expense for the year ended September 30, 2018, totaled $120,438. Note 5. Line of Credit The Association has an unsecured line of credit agreement in the amount of $250,000 with a financial institution. Interest is payable at the Wall Street Journal Prime Rate minus.5% (4.75% as of September 30, 2018). The line has been renewed through April 30, As of September 30, 2018, the Association had no outstanding borrowings under this agreement. Note 6. Commitments Management agreement: In 2016, the Association entered into amended management and accounting agreements with Coral Hospitality. Coral Hospitality provides on-site management and maintenance and off-site administrative and accounting services. Under the new agreements, effective May 1, 2016, management fees will be $8,550 per month and accounting fees will be $6,175 per month for the first 2 years of the contracts. For the remaining 3 years of the contracts, the management fees will be $8,100 per month and accounting fees will be $5,850 per month. The management agreement had a $50,000 cancellation penalty in the first year of the contract and otherwise either party may terminate the agreements at any time for any reason without cause by giving the non-terminating party 120 days notice. During the year ended September 30, 2018, a total of $172,825 was paid under the agreement of which $100,350 was management fees and $72,475 was accounting fees. Operating equipment leases: The Association is committed under various noncancelable operating leases for golf carts, golf course maintenance equipment and administrative office equipment through April As of September 30, 2018, future minimum lease payments under noncancelable operating leases are as follows: Years ending September 30: 2019 $ 162, , $ 29, ,299 Total rent expense for the year ended September 30, 2018, was $208,

15 Notes to Financial Statements Note 7. Future Major Repairs and Replacements The Association s Board has elected to designate funds to be accumulated for future major repairs and replacements. Accumulated funds are held in separate bank accounts and generally are not available for expenditures for normal operations. As of September 30, 2018, the Association has accumulated $807,873 in cash for future major repairs and replacements. An annual capital contribution of $636 per Landings unit owner and $612 per Riverside unit owner for 2018 is used to fund normal capital expenditures. The total amount collected for the year ended September 30, 2018, was approximately $752,000. The Board has committed to fund $636 per Landings unit owner and $572 per Riverside unit owner for major repairs and replacements for the year ending September 30, 2019, totaling approximately $735,000. If additional funds are needed, the Association has the ability to pass special assessments, subject to membership approval, or delay major repairs and replacements until funds are available. Note 8. Utility Services The Association provides the billing function for water and sewer utility service in the Landings community. For the year ended September 30, 2018, the Association collected $594,174 in utility fees and paid $594,174 to Lee County Utilities. Note 9. Employee Benefit Plan The Association sponsors a qualified deferred compensation plan under Section 401(k) of the Internal Revenue Code. Under the plan, employees may elect to defer a percentage of their salary, subject to Internal Revenue Service limits. All eligible employees who have reached the age of 21 and have at least one year of service are eligible. Contributions by the Association are at the discretion of the Board of Directors. The Association s contributions for the year ended September 30, 2018, totaled $12,143. Note 10. Insurance Matters Where possible, the Association attempts to mitigate risk of hurricane damage through insurance. The Association s insurance policies were renewed through June 15, Due to the Association s coverages and deductibles, losses from future catastrophic weather events may require special membership assessments or funding from existing reserves. As of September 30, 2018, the Association has cash of $318,500 designated as Emergency Infrastructure Reserve Funds in the event of a named storm (see Note 2). Note 11. Hurricane Activity In September 2017, the Association s facilities sustained damages related to Hurricane Irma. The Association s expenses related to the storm totaled $261,070 for the year ended September 30, The Association received $180,746 in insurance proceeds for damages caused by the hurricane during the year ended September 30, The claim is now closed. 13

16 Supplementary Information on Future Major Repairs and Replacements (Unaudited) September 30, 2018 The Board of Directors engaged an independent capital reserve analyst to conduct a study in 2018 to estimate the remaining useful lives and the replacement costs of the components of common property. The estimates were based on future estimated replacement costs at the date of the study. A rate of return of 0.70% were used by the replacement reserve analyst to determine the funding requirements. The following table is based on the study and presents significant information about the components of common property: Estimated Estimated Remaining Current Useful Lives Replacement (Years) Costs Component: Administrative buildings 1 20 $ 297,923 Golf course ,185,316 Helm club components ,048,703 Marina components ,931,341 Painting and waterproofing ,108 Pool components ,545 Property maintenance ,242,401 Roofing ,363,131 Security/guardhouse ,361 Site improvements ,768 Tennis components ,856 Wheelhouse components ,431 $ 12,520,884 The Association does not establish separate accounts for each major component of the Replacement Fund and treats the Replacement Fund as a single general reserve for major repairs and replacements. As of September 30, 2018, the Association had an accumulated fund balance of $743,032 for future major repairs and replacements. 14

17 Independent Auditor s Report on the Supplementary Information Board of Directors We have audited the financial statements of as of and for the year ended September 30, 2018, and have issued our report thereon, which contains an unmodified opinion on those financial statements. See pages 1 and 2. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplemental information is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The supplemental information for the year ended September 30, 2017, was audited by us previously and we expressed an unqualified audit opinion on those financial statements in our report dated February 19, Naples, Florida February 4,

18 Statements of Revenues, Expenses and Changes in Fund Balances Information Years Ended September 30, 2018 and Departmental Schedules of Payroll and Certain Revenues and Certain Cost of Related Other Excess Expenses Operating Fund Revenues Sales Expenses Expenses (Deficiency) General revenues: Maintenance fees and associate member dues, excluding Helm Club Dining and Tennis $ 4,144,039 $ - $ - $ - $ 4,144,039 Rental income 33, ,900 Other 131, ,808 Departments: 4,309, ,309,747 Helm club food and beverage and dues 857, , , ,335 (156,315) Wheelhouse food and beverage 910, , , ,539 (269,601) Golf activities 374,394 83, ,705 88,933 (71,685) Golf course maintenance , ,034 (925,439) Tennis activities and dues 188,516 67, ,606 45,066 (292,648) Marina 2,109,844 1,628, , , ,661 Excess of revenues over expenses before undistributed expenses, depreciation and other contributions 4,441,369 2,398,160 2,691, ,315 (1,608,027) (expenses) 8,751,116 2,398,160 2,691, ,315 2,701,720 Undistributed expenses: Administrative and general , ,134 (801,349) Management fees ,825 (172,825) Security ,560 40,209 (362,769) Utilities ,628 (354,628) Property taxes ,832 (4,832) Insurance ,414 (510,414) Landings environmental, waterway and road maintenance , ,449 (699,950) Excess (deficiency) of revenues over expenses before depreciation and - - 1,160,276 1,746,491 (2,906,767) other contributions (expenses) $ 8,751,116 $ 2,398,160 $ 3,852,197 $ 2,705,806 $ (205,047) 16

19 2017 Payroll and Cost of Related Other Excess Revenues Sales Expenses Expenses (Deficiency) $ 4,118,248 $ - $ - $ - $ 4,118,248 33, ,150 87, ,756 4,239, ,239, , , , ,573 (143,015) 902, , , ,415 (245,613) 327,647 64, ,234 82,352 (79,901) , ,791 (880,077) 199,850 71, ,600 87,107 (266,890) 1,994,767 1,527, ,586 95, ,600 4,183,731 2,234,719 2,500, ,265 (1,508,896) 8,422,885 2,234,719 2,500, ,265 2,730, , ,984 (781,947) ,700 (176,700) ,160 29,111 (345,271) ,495 (360,495) ,867 (6,867) ,242 (331,242) , ,348 (695,803) - - 1,156,578 1,541,747 (2,698,325) $ 8,422,885 $ 2,234,719 $ 3,657,221 $ 2,499,012 $ 31,933 17