Fairfield Williamsburg Property Owners Association, Inc. Annual Report

Transcription

1 Fairfield Williamsburg Property Owners Association, Inc. Annual Report Dear Member, Per your request, enclosed, please find the Annual Report for your Association. This report has been prepared in accordance with Virginia Statute B. Management Firm: Glenn Callahan, Resort Manager Wyndham Vacation Resorts, Wyndham Patriot s Place 220 House of Burgess Way Williamsburg, VA (757) The Board of Directors of the Association includes: Ed Ashnault, President 6604 Chapel Crossing Williamsburg, VA Ron Lukas, Vice President 4053 Frances Berkeley Williamsburg, VA Annie Lou Robinson, Secretary/Treasurer 55 Piney Mountain Drive, Apt.219 Asheville, NC Pursuant to Virginia Statute B., attached, please find the information necessary to satisfy the referenced statute B. (2), (3), (4), (6)(c) and (6)(d): Please review the 2015 year-end financial statement B. (5) and (6): Please review the attached 2016 Annual Budget B. (6)(a): The 2016 Annual Budget has been prepared by the Board of Directors of the Association with the assistance of Wyndham Vacation Management, Inc B. (6)(b): Normal budgetary assumptions are based on historical occupancy typically inclusive of the figures of the prior year in addition to cost increases related to inflation. The Annual Budget is based on and prepared in accordance with the information available at the time of preparation. If expenses during the year exceed the estimates used in preparing the budget or if unforeseen events occur that result in additional expenses, in order to properly run the resort properties, the Association may have to either increase the budget during the year or levy a special assessment or a combination thereof. The Annual Budget contains a list of projected common expenses, occupancy expenses, assessments and other charges related to the use and enjoyment of the resort B. (6)(e): The projected financial liability of time-share owners are the annual assessments levied against an owner to fund the operation of the resort. Please review the 2016 Annual Budget for all current assessments B. (6)(f): Currently, there are no services or expenses which the developer provides that at any subsequent time may become an expense of the Association.

2 2015 AUDITED FINANCIAL STATEMENT

3 THE FAIRFIELD WILLIAMSBURG PROPERTY OWNERS ASSOCIATION, INC. FINANCIAL STATEMENTS Year ended December 31, 2015 and INDEPENDENT AUDITORS REPORT

4 C O N T E N T S INDEPENDENT AUDITORS REPORT 2 FINANCIAL STATEMENTS BALANCE SHEET 4 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCE 5 STATEMENT OF CASH FLOWS 6 NOTES TO FINANCIAL STATEMENTS 7 SUPPLEMENTARY INFORMATION ON FUTURE MAJOR REPAIRS AND REPLACEMENTS 14

5 Kantor, Palmetto, Zeigler, Chamberlain & Perrella, PL Certified Public Accountants 1000 NW 65 Street, Suite 201 Fort Lauderdale, FL (954) (954) Fax INDEPENDENT AUDITORS REPORT Board of Directors The Fairfield Williamsburg Property Owners Association, Inc. Williamsburg, Virginia We have audited the accompanying financial statements of The Fairfield Williamsburg Property Owners Association, Inc., which comprise the balance sheet as of December 31, 2015, and the related statements of revenues, expenses, and changes in fund balance 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 The Fairfield Williamsburg Property Owners Association, Inc. as of December 31, 2015, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

6 Board of Directors The Fairfield Williamsburg Property Owners Association, Inc. Disclaimer on Required Supplementary Information Accounting principles generally accepted in the United States of America require that 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 inquiries, 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. Kantor, Palmetto, Zeigler, Chamberlain & Perrella, PL Fort Lauderdale, Florida May 3, 2016

7 BALANCE SHEET December 31, 2015 ASSETS Operating Reserve Fund Fund Total CURRENT ASSETS Cash and cash equivalents $ 3,076,998 $ 3,300,840 $ 6,377,838 Certificates of deposit - 698, ,000 Investments available for sale - 39,170 39,170 Accounts receivable, net of allowance for doubtful accounts $1,288, Due from Club Wyndham Plus 24,533-24,533 Accounts receivable, other 12,113-12,113 Prepaid expense 32,077-32,077 Prepaid income tax Deposit - 132, ,936 Interfund receivable (payable) 39,352 (39,352) - $ 3,185,454 $ 4,131,594 $ 7,317,048 LIABILITIES AND FUND BALANCE CURRENT LIABILITIES Accounts payable and accrued expenses $ 398,403 $ 46,530 $ 444,933 Due to Management Company 10,135-10,135 Prepaid member assessments 2,207,264 1,497,000 3,704,264 2,615,802 1,543,530 4,159,332 FUND BALANCE Accumulated excess of revenues over expenses 569,652 2,588,967 3,158,619 Accumulated other comprehensive income: Net unrealized loss on investments - (903) (903) $ 3,185,454 $ 4,131,594 $ 7,317,048 See accompanying notes to financial statements. -4-

8 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCE For the year ended December 31, 2015 Operating Reserve Fund Fund Total REVENUE Member assessments $ 6,016,078 $ 2,270,384 $ 8,286,462 Housekeeping income 306, ,612 Interest income 5,751 8,026 13,777 Other income 86,642-86,642 6,415,083 2,278,410 8,693,493 EXPENSES Maintenance 1,109,299-1,109,299 Housekeeping 1,369,112-1,369,112 Resort management 1,367,689-1,367,689 Utilities 568, ,321 Bad debt 554, ,616 Common area and ground maintenance 359, ,147 Property and other taxes 341, ,915 Guest services 291, ,950 Laundry 185, ,112 Accounting 37,679-37,679 Telephone 97,417-97,417 Security 46,300-46,300 Recreation Reserve expenses - 1,950,196 1,950,196 6,328,628 1,950,196 8,278,824 Excess of revenues over expenses 86, , ,669 Accumulated excess of revenues over expenses, beginning of year 483,197 2,260,753 2,743,950 Accumulated excess of revenues over expenses, end of year $ 569,652 $ 2,588,967 $ 3,158,619 See accompanying notes to financial statements. -5-

9 STATEMENT OF CASH FLOWS For the year ended December 31, 2015 Operating Reserve Fund Fund Total RECONCILIATION OF EXCESS OF REVENUES OVER EXPENSES TO NET CASH FROM OPERATING ACTIVITIES Excess of revenues over expenses $ 86,455 $ 328,214 $ 414,669 Adjustments to reconcile excess of revenues over expenses to net cash from operating activities: (Increase) decrease in: Accounts receivable, net of allowance 72,799-72,799 Due from Club Wyndham Plus (220) - (220) Accounts receivable, other (8,099) - (8,099) Prepaid expenses (32,077) - (32,077) Prepaid income taxes 1,612-1,612 Deposit (132,936) (132,936) Increase (decrease) in: Accounts payable and accrued expenses 50,059 (567,422) (517,363) Income taxes payable Prepaid member assessments (2,754,067) (205,788) (2,959,855) Due from/to Management Company (14,768) - (14,768) Net cash used by operating activities (2,598,306) (577,932) (3,176,238) CASH FLOWS FROM INVESTING ACTIVITIES Return of principal - 31,832 31,832 Redemption of certificates of deposit - 796, ,000 Net cash provided by investing activities - 827, ,832 CASH FLOWS FROM FINANCING ACTIVITIES Due to other Association Interfund (repayment) borrowing (17,480) 17,480 - Net cash provided (used) by financing activities (17,480) 17,480 - NET INCREASE (DECREASE) IN CASH (2,615,786) 267,380 (2,348,406) CASH BALANCE, at beginning of year 5,692,784 3,033,460 8,726,244 CASH BALANCE, at end of year $ 3,076,998 $ 3,300,840 $ 6,377,838 Income taxes of $2,550 were paid in There was no interest paid in See accompanying notes to financial statements. -6-

10 NOTES TO FINANCIAL STATEMENTS December 31, 2015 NOTE A - GENERAL The Fairfield Williamsburg Property Owners Association, Inc. (Association) is a nonstock Virginia corporation formed pursuant to the Virginia Nonstock Corporation Act. The Association is responsible for the management and operation of a time-share estate program located in Williamsburg, Virginia, consisting of 196 units (10,192 unit-weeks of which 392 unit-weeks are reserved for maintenance) and for the maintenance, repair, and furnishing of the units. NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accounting records of the Association are maintained on the accrual basis of accounting, in accordance with generally accepted accounting principles. The accrual basis of accounting recognizes revenue when earned and expenses when incurred. Funds The Association utilizes fund accounting, which requires revenues and expenditures for the operating and reserve funds to be classified separately for accounting and reporting purposes. The Operating Fund reflects the operating assessments paid by owners to meet the normal recurring costs of operations. Expenditures of this fund are limited to those connected with the day-to-day operations. The Reserve Fund is composed of all capital assessments paid by owners to fund future replacements, major repairs and purchases of additional commonly owned assets. Interest earned on the Reserve Fund is retained in the fund. The Reserve Fund disbursements may be made only for their designated purposes. 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. Member Assessments The Association assesses an annual maintenance fee based on the annual budget as determined by the Board of Directors. Each Association member is a unit-week owner and a proportionate amount of the maintenance fees is assessed for each unit-week. -7-

11 NOTES TO FINANCIAL STATEMENTS December 31, 2015 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Member Assessments continued For 2015, the annual assessments were as follows: Operating Replacement Fund Fund Total Maintenance fee - Saturday weeks $ 595 $ 225 $ 820 Maintenance fee - Sunday weeks $ 630 $ 238 $ 868 The Association retains all excess operating funds, if any, at the end of the operating year, for use in future operating years. Property and Equipment Real property and common areas acquired from the Developer and related improvements to such property, are not recorded in the Association s financial statements because these properties are owned by the individual unit week owners in common and not by the Association. That is, each unit week owner is considered to own, in fee simple, an undivided interest in the common elements of the Association s real and personal property. These assets are deemed to not be severable. Additions to these assets are accounted for as major repairs and replacements by the Reserve Fund. In accordance with the prevailing industry standards and practices, personal property acquired by the Association has not been capitalized. Title to all common real property is held by the Developer, which markets the program throughout the United States along with similar programs it manages elsewhere in the United States and maintains control of the Association until certain requirements are met. Income Taxes The Association may elect on an annual basis to be taxed as a non-profit "homeowner s association. The effect of the election is to tax the Association only on its "non-exempt function" income, reduced by a specific $100 deduction at a flat 32% rate. If such election is not made, the Association's net income is subject to tax at statutory corporate rates. The Association has elected to be taxed as a non-profit homeowner s association resulting in federal and state income taxes as of December 31, 2015 of $3,470 and $692, respectively. The Association's tax filings are subject to audit by various taxing authorities. The Association's income tax returns for 2012 through 2015 remain open to examination by the governing agencies. The Association believes that its estimates used for income tax reporting are appropriate based on current facts and circumstances. -8-

12 NOTES TO FINANCIAL STATEMENTS December 31, 2015 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED Fair Value Measurement The Association has determined that there were no material differences between the cost and carrying values and cost of its financial assets and liabilities at December 31, Cash and Cash Equivalents The Association considers all money market accounts and certificates of deposit with an original maturity date of three months or less to be cash equivalents. Compensated Absences The Association provides vacation benefits to regular full-time employees based on years of service. Unused vacation as of December 31, 2015 is forfeited. Date of Management s Review Subsequent events have been evaluated through May 3, 2016 which is the date the financial statements were available to be issued. NOTE C CONCENTRATION OF CREDIT RISK Cash The Association maintains its cash balances at several insured financial institutions which at times, may exceed federally- insured limits. The Association has not experienced any losses on such accounts and believes it is not exposed to any significant risk on cash. Accounts with the financial services company consisted of interest-bearing cash management accounts, insured savings accounts, money funds and certificates of deposit. Certificates of deposit and insured savings accounts are insured by the FDIC up to $250,000 at each issuing bank. The accounts with the financial services company are protected by the Securities Investor Protection Corporation ( SIPC ) up to $500,000 for fraud. Cash is insured up to $100,000 under SIPC for fraud. Investments The association invests idle cash balances in debt securities. The amortized historical cost, aggregate fair value, and gross unrealized holding loss, summarized by major security type, as of December 31, 2015: Replacement Fund Available for sale Asset backed securities Amortized Historical Cost Aggregate Fair Value Gross Unrealized Holding (Loss) $40,073 $39,170 $(903) -9-

13 NOTES TO FINANCIAL STATEMENTS December 31, 2015 NOTE D ECONOMIC DEPENDENCY Account Receivable Approximately 6.5% of maintenance fees $536,970 were received from the Developer for the year ended December 31, NOTE E CERTIFICATES OF DEPOSIT At December 31, 2015, the Association held certificates of deposit of $698,000 with interest rates between.3% and.4% maturing between January 2016 through April NOTE F ACCOUNTS RECEIVABLE AND ALLOWANCE FOR BAD DEBT Accounts receivable for member assessments as of December 31, 2015, consisted of: Accounts receivable $ 1,288,084 Less: allowance for uncollectible accounts (1,288,084) $ - The Association s policy for estimating the allowance was based on historical information. The policy requires all assessments that are 365 days past due to be reserved at 100%. All 2015 and prior assessments receivable are included in the allowance for doubtful accounts as they are greater than 365 days past due. The net provision for bad debt expense for the year ended December 31, 2015 was $554,616. Assessments collected in advance are recorded as prepaid maintenance fees. NOTE G RELATED PARTY TRANSACTIONS Wyndham World Wide and several of its affiliates provide various services for the Association. The affiliates include Wyndham Vacation Ownership (WVO), the Developer, and Wyndham Vacation Management, Inc. (WVM), the Management Company. The Association entered into a management agreement on January 26, 2006 with Wyndham Vacation Management, Inc. (WVM) as manager of the resort. The initial term of the contract expired on December 31, The contract renews automatically for successive five-year terms. The contract may be terminated by the Management Company, or by a vote of the majority of the owners. It is understood and agreed that any such notice by the POA must have been approved by the greater of 75% of all members or otherwise required under the governing documents or applicable law. -10-

14 NOTES TO FINANCIAL STATEMENTS December 31, 2015 NOTE G RELATED PARTY TRANSACTIONS - CONTINUED On behalf of the Association, WVM provides certain operating expenses incidental to management and operation of the resort facility. WVM provided salaries, office, other miscellaneous expenses and depreciation of assets for the following services for the year ended December 31, 2015: Maintenance Resort management Common area and ground maintenance Guest services Accounting Security Under the Management Company contract, WVM receives fees equal to ten percent of the budgeted common expenses exclusive of the management fees. During 2015, management fee expense incurred by the Association was $768,375, and is included in resort management expense on the statement of revenues, expenses and changes in fund balance. Amounts due to Management Company as a result of the management agreement and the above at December 31, 2015 are $10,135. These payables are included in due to Management Company on the balance sheet. There is also a resort reimbursement fee charged to the Association on an annual basis. The fee in 2015 was $143,964. Due from Club Wyndham Plus at December 31, 2015 represents amounts due to the Association of $24,533 for split week cleaning fees. Split week cleaning fees originate when a reservation is made for less than a full week, resulting in the room having to be cleaned twice. The Association bills CWP for these extra cleaning costs. For 2015, the Association billed $306,612 for the split week cleaning activities, which is shown as housekeeping revenue on the statement of revenues, expenses and changes in fund balance. NOTE H - RESERVE FUND The Association has established a replacement fund for future repairs and replacements in accordance with the Public Offering Statement and Timeshare Plan. Therefore, a portion of the annual maintenance fee is assessed to fund future major capital repairs and replacements. In 2015, $2,270,384 was allocated to the replacement fund. In November 2012, the Association had a reserve study to determine future funding, which was updated in The components actual replacement costs, useful lives and investment income, may vary from estimates and the variation may be material. If additional funds are needed, the Association, through its Board, has the authority to increase assessments, pass special assessments or delay major repairs and replacements until funds are available. Accumulated funds are to be held in separate investment accounts and are not available for normal operations. Interest earned is retained in the fund. The reserve fund balance at December 31, 2015 is $2,588,

15 NOTES TO FINANCIAL STATEMENTS December 31, 2015 NOTE I - COMMITMENTS The Association leases office equipment and maintenance services under various operating leases, one of which is on a month-to-month basis and the other expires in Lease expense related to these leases in 2015 was $14,063 and is included in resort management on the statement of revenues, expenses and changes in fund balance. In May 2015 the Association entered into an agreement with Safety NetAccess for internet service. The agreement provides for an operating lease of the hardware and installation for a cost of $6,494 per month, and call center support of $1,568 per month, for 36 months. The Association entered into an agreement with Cox Business for cable services, which began in August In June 2015 the Association signed a renewed and expanded agreement which will expire in 60 months. The cable service expense in 2015 was $53,287, and is included in utilities on the statement of revenues, expenses and changes in fund balance. Future minimum payments under such commitments are as follows: $157,746 $153,888 $89,392 $57,144 $33,

16 SUPPLEMENTARY INFORMATION

17 SUPPLEMENTARY INFORMATION ON FUTURE MAJOR REPAIRS AND REPLACEMENTS (Unaudited) December 31, 2015 The Board of Directors hired a consultant to conduct a reserve study in 2012 and updated in 2015 to estimate the remaining useful lives and the replacement costs of the components of common property. The Association is funding such major repairs and replacements over the estimated useful lives of the components based on the study. The following is a summary of the current estimates of the components, which include the current estimated replacement costs, the estimated life remaining, the balance of funds accumulated at December 31, 2015, and the 2016 budgeted funding. Estimated Average Estimated Remaining Future Replacement Useful Lives Replacement Fund 2016 Components (Years) Cost December 31, 2015 Funding Capital improvements 9 $ 11,057,794 $ - $ 881,460 Interior 6 18,595,979-1,481,959 Painting 4 259,253-19,116 Paving ,580-18,995 Roof 4 992,580-73,189 $ 31,185,186 $ 2,588,967 * $ 2,474,719 * * The Association is funded on a pooled basis. See independent auditors' report. -14-

18 2016 ANNUAL BUDGET

19 Fairfield Williamsburg Property Owners' Association Inc. January 1, 2016 through December 31, Per Interval Total Saturday Side Sunday Side Budget Revenue Maintenance Fee Revenue 8,532, Housekeeping Revenue 220, Interest Income Special Assessments Food & Beverage Revenue Other Revenue 78, Total Association Revenues 8,831, Expenses Laundry & Linen service 258, Housekeeping 1,196, Recreation & Amenities 2, Food & Beverage Telephone 151, Repair & Maintenance 1,133, Grounds & Landscaping 289, Trash Removal 28, Utilities - Fuel 20, Utilities - Water & Sewer 143, Utilities - Electricity 368, Cable Television 54, Real Estate and Property Taxes 333, Federal & State Income and Other Taxes 10, Membership, Dues and Fees Fees payable to Division CDD Bond Insurance 126, Management Fees 802, Reservation & Inventory Management Bad Debt Expense 450, Audit & tax prep 8, Accounting & Data Processing 70, Collection Fees 36, Security Service 47, Other Expenses License & Inspection Fees Legal Fees 1, Professional fees Master Association Dues Guest Services 373, General and Administrative 447, SUBTOTAL 6,356, Replacement Reserves Capital Improvements 2,474, Total Replacement Reserves 2,474, Total Association Expenses 8,831, Less all Other Revenues (298,993) (29.57) (31.34) Total Maintenance Fee 8,532, Real Estate Tax for 2015 Building #1 to 17, 38, 39 $33.03 Building #18 to 37, 40, 41 $35.00 The budget, including all expense and revenue projections, is based on and prepared in accordance with the information available at the time of preparation, including without limitation, historical records, forecasted data and other sources believed to be reliable, but which are not guaranteed. Normal budgetary assumptions are that costs will increase with inflation. If expenses during the year exceed the estimates used in preparation of the budget, or if unforeseen events occur, the Association may have to increase the budget during the year, levy a special assessment or a combination thereof. Further, all revenue projections included herein are being furnished for informational purposes and remain subject to market fluctuations, Acts of God or other extrinsic and uncontrollable factors.