ABITARE HOMEOWNERS ASSOCIATION (A CONDOMINIUM) FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED DECEMBER 31, 2017

Transcription

1 ABITARE HOMEOWNERS ASSOCIATION (A CONDOMINIUM) FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED DECEMBER 31, 2017

2 Table of Contents INDEPENDENT ACCOUNTANT S REVIEW REPORT... 1 FINANCIAL STATEMENTS Balance Sheet... 2 Statement of Revenues and Expenses... 3 Statement of Changes in Fund Balance... 4 Statement of Cash Flows... 5 Notes to Financial Statements SUPPLEMENTARY INFORMATION Supplementary Information on Future Major Repairs and Replacements (Compiled)

3 INDEPENDENT ACCOUNTANT S REVIEW REPORT To the Board of Directors and Members Portland, Oregon We have reviewed the accompanying financial statements of, which comprise the balance sheet as of December 31, 2017, and the related statements of revenues and expenses, changes in fund balance, and cash flows for the year then ended, and the related notes to the financial statements. 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 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. Accountant s Responsibility Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion. Accountant s Conclusion on the Financial Statements 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 accordance with accounting principles generally accepted in the United States of America. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the information about future major repairs and replacements of common property on pages 8 through 10 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, which 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 compiled the supplementary information in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA; however, we have not audited or reviewed the required supplementary information and, accordingly, do not express an opinion, a conclusion, nor provide any form of assurance on it. Portland, Oregon March 27, 2018

4 Balance Sheet December 31, 2017 ASSETS Operating Replacement Capital Fund Fund Fund Total Cash, including interest bearing deposits $ 78,352 $ 117,552 $ - $ 195,904 Assessments receivable 5, ,145 Prepaid insurance 1, ,349 Deposit 5, ,000 Property and equipment, net of accumulated depreciation of $1,363 3, ,914 Interfund balance (32,924) 1,690 31,234 - Total assets $ 60,836 $ 119,242 $ 31,234 $ 211,312 LIABILITIES AND FUND BALANCE Accounts payable $ 3,418 $ - $ - $ 3,418 Deferred special assessment revenue ,234 31,234 Assessments received in advance 4, ,925 Total liabilities 8,343-31,234 39,577 Fund balance 52, , ,735 Total liabilities and fund balance $ 60,836 $ 119,242 $ 31,234 $ 211,312 See accompanying notes and independent accountant's review report

5 Statement of Revenues and Expenses For the Year Ended December 31, 2017 Operating Replacement Capital Fund Fund Fund Total REVENUES Regular assessments $ 129,311 $ 45,000 $ - $ 174,311 Special assessment ,584 99,584 Interest Late fees Move in fee 2, ,190 Other income Total revenues 132,492 45,149 99, ,225 EXPENSES Property maintenance 72, ,989 Major repairs and replacements - 57,125 87, ,114 Utilities 35, ,756 Landscaping 18, ,233 Insurance 14, ,491 Professional fees 5,415-4,575 9,990 Office expense Licenses, permits and fees Depreciation 1, ,055 Total expenses 148,174 57,125 92, ,863 Excess of revenues over (under) expenses $ (15,682) $ (11,976) $ 7,020 $ (20,638) See accompanying notes and independent accountant's review report

6 Statement of Changes in Fund Balance For the Year Ended December 31, 2017 Operating Replacement Capital Fund Fund Fund Total Fund balance, as of December 31, 2016 $ 68,175 $ 131,218 $ (7,020) $ 192,373 Excess of revenues over (under) expenses (15,682) (11,976) 7,020 (20,638) Fund balance, as of December 31, 2017 $ 52,493 $ 119,242 $ - $ 171,735 See accompanying notes and independent accountant's review report

7 Statement of Cash Flows For the Year Ended December 31, 2017 CASH FLOWS FROM OPERATING ACTIVITIES Operating Replacement Capital Fund Fund Fund Total Excess of revenues over (under) expenses $ (15,682) $ (11,976) $ 7,020 $ (20,638) Adjustments to reconcile excess of revenues over (under) expenses to net cash provided (used) by operating activities: Depreciation expense 1, ,055 Decrease (Increase) in assets: Assessments receivable (1,009) - - (1,009) Prepaid insurance (26) - - (26) Other prepaid expenses Deposit (5,000) - - (5,000) Increase (Decrease) in liabilities: Accounts payable (12,694) - - (12,694) Deferred special assessment revenue ,234 31,234 Assessments received in advance (16) - - (16) Net cash provided (used) by operating activities (33,282) (11,976) 38,254 (7,004) CASH FLOWS FROM FINANCING ACTIVITIES Interfund balance 38,254 - (38,254) - NET INCREASE (DECREASE) IN CASH 4,972 (11,976) - (7,004) CASH AND CASH EQUIVALENTS, BEGINNING 73, , ,908 CASH AND CASH EQUIVALENTS, ENDING $ 78,352 $ 117,552 $ - $ 195,904 See accompanying notes and independent accountant's review report

8 Notes to Financial Statements December 31, 2017 Note 1 - Nature of Organization was organized on October 25, 1978 under the provisions of the Oregon Unit Ownership Law. The Association is responsible for the operation and maintenance of the common property within the project including, but not limited to items detailed in the supplementary information. The project consists of 57 condominium units located in Portland, Oregon. Note 2 - Summary of Significant Accounting Policies Accounting Method The Association prepares its year-end financial statements on the accrual basis of accounting. Under this method of accounting, revenue is recognized when earned, and expenses are recognized when goods or services are received, whether paid or not. Fund Accounting The Association's governing documents provide certain guidelines for governing its financial activities. To ensure observance of limitations and restrictions on the use of financial resources, the Association maintains its accounts using fund accounting. Financial resources are classified for accounting and reporting purposes in the following funds established according to their nature and purpose: Operating Fund - This fund is used to account for financial resources available for the general operations of the Association. Replacement Fund - This fund is used to accumulate financial resources designated for future major repairs and replacements. Capital Fund This fund is used to accumulate financial resources designated for major repairs and replacements to the structure of the buildings. 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. The Association s policy is to charge late fees of $25 against any owner whose maintenance fee or special assessment payment is not received by the tenth day of the month. Any delinquent amount, including assessed late and enforcement fees, is treated as a lien against the unit owner s account until paid. Any excess assessments at year-end are retained by the Association for use in future years. The Association generally considers assessments receivable collectible until the unit has been foreclosed or the unit owner has filed for bankruptcy. Cash Equivalents For purposes of the statement of cash flows, the Association considers all highly liquid debt instruments purchased with an original maturity date of three months or less to be cash equivalents. 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. Capitalization and Depreciation The Association records capitalized assets at cost and depreciation on the straight-line basis over the estimated useful life of the asset. See Independent Accountant s Review Report - 6 -

9 Notes to Financial Statements Continued December 31, 2017 Note 3 - Income Taxes Homeowner associations may be taxed either as homeowner associations or as nonexempt membership organizations. For the year ended December 31, 2017, the Association elected to be taxed as a homeowner association. Under that election, the Association generally is taxed only on non-exempt income, such as interest earnings, at applicable federal and state tax rates. The Association files returns in the U.S. federal jurisdiction as well as the state of Oregon jurisdiction. Tax filings are subject to federal and state examination for three years after they are filed. The returns filed for periods ended December 31, 2014 and prior are generally no longer subject to examination by tax authorities. Note 4 - Common Property Real property and common areas acquired by the original homeowners from the developer and related improvements to such property are not capitalized on the Association s financial statements, as they are owned by the individual owners and not the Association. Common areas are restricted to use by the Association members, their tenants, and guests. The Association s policy is to expense all personal property acquisitions of $5,000 or less. The Association holds title to scaffolding equipment. Note 5 - Future Major Repairs and Replacements The Association s governing documents require funds to be accumulated for future major repairs and replacements. Accumulated funds, which aggregated $119,242 at December 31, 2017, are generally not available for operating purposes. The Association engaged a consultant who conducted a study in March 2016 to estimate the remaining useful lives and the replacement costs of the common property components. The excerpt included in the compiled Supplementary Information on Future Major Repairs and Replacements is based on the study. The Association is funding for such major repairs and replacements over the estimated useful lives of the components based on the study s estimates of current replacement costs, considering amounts previously accumulated in the replacement fund. Funds are being accumulated in the replacement fund based on estimates of future needs for repairs and replacements of common property components. Actual expenditures and investment income, however, may vary from the estimated amounts and the variations may be material. Therefore, amounts accumulated in the replacement fund may not be adequate to meet future needs. If additional funds are needed, however, the Association has the right to increase regular assessments or levy special assessments, or it may delay major repairs and replacements until funds are available. Note 6 - Interfund Balance As of December 31, 2017, the operating fund owed $1,690 to the replacement fund and $31,234 of capital fund cash was held in the operating fund cash account. Note 7 - Special Assessments During 2016, the board of directors approved a special assessment of $130,817 to repair and replace capital structures specifically for the E and F balcony replacement and the Barbur Boulevard parking lot stair replacement. At December 31, 2017, the Association had collected the full amount and $31,234 of the special assessment has been deferred to be matched with expenses in Note 8 - Date of Board of Directors Review In preparing the financial statements, the Association has evaluated events and transactions for potential recognition or disclosure through March 27, 2018, the date the financial statements were available to be issued. See Independent Accountant s Review Report - 7 -

10 SUPPLEMENTARY INFORMATION

11 Supplementary Information on Future Major Repairs And Replacements (Compiled) December 31, 2017 The Association engaged a consultant who conducted a full on-site reserve study in March 2016 to estimate the remaining useful lives and the replacement costs of the components of common property. The estimates were based upon bids received, prior costs paid, and various construction pricing and scheduling manuals to determine useful lives and replacement costs. Replacement costs were based on the estimated costs to repair or replace the common property components on the date of the study assuming an annual inflation rate of 2.00% and a rate of return on investments of 0.90% without a provision for income taxes. The study used the threshold-funding method with a threshold of $80,788. 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 Association plans to update the 2016 reserve study after the repairs/replacement to the building envelope. The attached excerpt on pages 9 to 10 includes significant information about the components of common property. The reserve study should be read in its entirety. Replacement Funding Summary for the Year Ended December 31, 2017: Current year s assessments Reserve assessments $ 45,000 Amount recommended by reserve study 39,693 Difference $ 5,307 Replacement fund balance at end of year $ 119,242 See Independent Accountant s Review Report - 8 -

12 Analysis Date - January 1, 2016 InHation:2.00% Investment:0.90% Contribution FactDr:0.00% calc:future Component List - Summary Basis Replace Current Est Adj Rem Future Cost Quantity Date Cost Life Life Life Cost Awning Olnvas $ 1, /01/2023 $ 87,400 15:00 15:00 7:01 $ 100,560 Oltdl Basin 1, /01/2020 2,000 10:00 10:00 4:01 2,168 03dar Slingles Paint , /18-04/18 30,013 9:00 9:00 2:03 31,378 03dar Slingles Feplare , ,148 45:00 46:04 17:05 466,207 Cbnaete S:air Tres: /01/ ,080 40:00 40:00 11:01 31,235 Cbnaete Walkways , / 17 3,972 10:00 10:00 1:01 4,058 Iner - Utility Exterior Metal /01/ :00 20:00 4: Driveway Cbnaete , /01/2017 5,300 10:00 10:00 1:01 5,414 Dryer S:nable /01/2019 1,900 10:00 10:00 3:01 2,019 Rre Exting.1isher /01/ :00 8:00 O:D1 540 G.rtters/ Cownspouts- Rlplare /32-02/38 5,416 25:00 25:00 16:07 7,520 Light lklit Rxtures /01/ ,690 20:00 20:00 12:01 18,661 Light Rxture R:>le /01/ :00 20:00 11: Light L.ands::ape /01/2022 4,940 15:00 15:00 6:01 5,572 LDuvered ,150 30:00 35:00 6:01 27,238 Mail Ebx /01/2020 5,400 30:00 30:00 4:03 5,874 Metal 11/2'' Pailings'Handrails /30-02/30 2,790 30:00 30:00 14:00 3,681 Metal 2'' Pailings'Handrails , /30-02/30 8,239 30:00 30:00 14:00 10,871 Metal 3" Rulings Balcony /30-02/30 5,936 30:00 30:00 14:00 7,833 Metal 4" Pailings'Handrails /30-02/30 1,827 30:00 30:00 14:00 2,411 Metal G.Jards /01/ :00 40:00 14: Metal Pailings'Handrails Paint , /23-02/23 6,467 10:00 10:00 7:00 7,429 Metal Rx>f /01/2030 2,880 40:00 40:00 14:03 3,818 Oterlay 1" , /01/ ,050 30:00 30:00 14:01 29,142 Rltaining Walls , /01/ ,540 25:00 25:00 11:01 23,090 Rlof - R.Jbber Membrane , /01/ ,940 30:00 30:00 22:01 80,430 SurryS:lal , /01/2016 3,150 8:00 8:00 0:01 3,155 TrexWalkway , /01/2049 5,230 35:00 35:00 33:01 10,069 Wood Decks , /01/ ,596 20:00 20:00 11:01 35,614 PRN:03/17/2016 FacilitiesMvisors, Inc. - Ucense# F Page 25 of26 Percipient S:Jftware, Inc. QJpyright 2016 All Fights Reserved See Independent Accountant's Review Report - 9 -

13 Analysis Date - January 1, 2016 InHation:2.00% Investment:0.90% Contribution FactDr:0.00% calc:future Component List - Summary Basis Cost Quantity Replace Date Current Cost Est Adj Rem Future Life Life Life Cost Wood Rlilings'Handrails $ /01/2017 $ 1,680 30:00 30:00 1:01 $ 1,716 Wood Sair Treoos /17-02/34 5,180 20:00 20:00 8:00 6,151 Wood Walkways , /01/ ,830 10:00 10:00 1:01 11,064 $ 717,975 $ 946,966 PRN:03/17/2016 FacilitiesMvisors, Inc. - Ucense# F Percipient S:Jftware, Inc. QJpyright 2016 All Fights Reserved Page 26 of26 See Independent Accountant's Review Report