THE LINKS AT HAILE PLANTATION CONDOMINIUM ASSOCIATION, INC.

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1 THE LINKS AT HAILE PLANTATION CONDOMINIUM ASSOCIATION, INC. AUDITED FINANCIAL STATEMENTS AND REQUIRED SUPPLEMENTARY INFORMATION AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2016 REDDISH & WHITE CERTIFIED PUBLIC ACCOUNTANTS

2 THE LINKS AT HAILE PLANTATION CONDOMINIUM ASSOCIATION, INC. December 31, 2016 TABLE OF CONTENTS PAGE Independent Auditor s Report 1-2 Financial Statements Balance Sheet 3 Statement of Revenues, Expenses and Changes in Fund Balances 4 Statement of Cash Flows 5 Notes to the Financial Statements 6 10 Supplementary Information on Future Repairs And Replacements 11

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5 The Links at Haile Plantation Condominium Association, Inc. Balance Sheet As of December 31, 2016 ASSETS Operating Replacement Fund Fund Total Current Assets Cash and Cash Equivalents $ 172,539 $ 446,127 $ 618,666 Investment in Time Certificate of Deposits 0 202, ,470 Assessments Receivable, Net 10, ,970 Total Current Assets 183, , ,106 Total Assets $ 183,509 $ 648,597 $ 832,106 LIABILITIES AND FUND BALANCES Current Liabilities Accounts payable $ 8,635 $ 13,720 $ 22,355 Prepaid Assessments 18, ,427 Total current liabilities 27,062 13,720 40,782 Fund Balances 156, , ,324 Total Liabilities and Fund Balance $ 183,509 $ 648,597 $ 832,106 See accompanying notes to the financial statements. 3

6 The Links at Haile Plantation Condominium Association, Inc. Statement of Revenues, Expenses, and Changes in Fund Balances For the Year Ended December 31, 2016 REVENUES Operating Replacement Fund Fund Total Regular Assessments $ 475,518 $ 162,000 $ 637,518 Legal Fee Income 2, ,785 Late Fee Income 1, ,669 Interest Income 0 4,657 4,657 Other Income 3, ,242 Total Revenues 483, , ,871 EXPENSES Administration 3, ,766 Insurance 68, ,873 Landscaping 123, ,335 Management 37, ,000 Pest Control 13, ,396 Audit and Accounting Fees 6, ,300 Legal Fees 7, ,120 Repairs and Maintenance 154, , ,057 Trash 20, ,965 Utilities 34, ,365 Total Expenses 469, , ,177 Excess of Revenues over Expenses 13,958 17,736 31,694 Fund Balance, Beginning of Year 142, , ,630 Fund Balance, End of Year $ 156,447 $ 634,877 $ 791,324 See accompanying notes to the financial statements. 4

7 The Links at Haile Plantation Condominium Association, Inc. Statement of Cash Flows For the Year Ended December 31, 2016 Operating Replacement Fund Fund Total Cash Flows from Operating Activities Excess (Deficiency) of Revenues over Expenses $ 13,958 $ 17,736 $ 31,694 Adjustments to Reconcile Excess (Deficiency) of Revenues Over Expenses to Net Cash Provided by (Used) by Operating Activities (Increase) Decrease in Current Assets: Assessments Receivable (191) 0 (191) Allowance for Doubtful Accounts Increase (Decrease) in Current Liabilities: Accounts Payable 3,832 13,720 17,552 Prepaid Assessments 5, ,666 Net Cash Provided (Used) By Operating Activities 23,265 31,456 54,721 Cash Flows from Investing Activities Investment in Time Certificate of Deposits 0 (202,470) (202,470) Net Cash Provided (Used) By Investing Activities 0 (202,470) (202,470) Net Cash From Financing Activities Net Increase (Decrease) in Cash and Cash Equivalents 23,265 (171,014) (147,749) Cash and Cash Equivalents, Beginning of Year 149, , ,415 Cash and Cash Equivalents, End of Year $ 172,539 $ 446,127 $ 618,666 See accompanying notes to the financial statements. 5

8 The Links at Haile Plantation Condominium Association, Inc. Notes to the Financial Statements For the Year Ended December 31, NOTE 1 - NATURE OF ORGANIZATION The Links at Haile Plantation Condominium Association, Inc. (the Association) was incorporated as a not for profit corporation on May 19, 2005, in the State of Florida. The primary function of the Association is to provide for the efficient and effective administration of the condominium including all common areas. The condominium consists of 200 residential units located in Gainesville, Florida. The assessment per unit is based pro rata on the square footage of each unit in relation to the total for all units in assessment and expense allocations. In addition, 76 units have a garage and those units also pay an additional assessment and reserve amount. As of December 3, 2008, Haile Unit 17, Ltd. owned by Arlington Pebble Creek, LLC (the Developer) turned over control of the Association to its owners. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. Disbursements from the replacement fund may only be utilized in accordance with the established purposes for accumulation. These replacement expenditures include painting, building, plumbing, electrical, roof replacement, paving/sidewalks/curbs, drainage system, air conditioning, clubhouse furniture, and pool and deck. 6

9 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Common Areas As provided in the Declaration of the Condominium, each unit owner owns an undivided share in the common elements of the condominium. In conformity with industry practice, the Association recognizes the following common property as assets, if applicable: Common personal property used by the Association in operating, preserving, maintaining, repairing and replacing common property and providing other services. Common real property to which the Association has title and that it can dispose of for cash while retaining the proceeds or that is used to generate significant cash flows from members on the basis of usage from nonmembers. Accordingly, common property including buildings, parking lots, sidewalks, and building roofs, are not recognized as assets. As of December 31, 2016, the Association has not recognized any common property as assets. Limited Common Elements The Association maintains limited common elements consisting of 76 garages. For 2016, operating and reserve assessments for the limited common elements was $9,000 and $15,000, respectively. 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. Contributed Capital All initial unit owners were required at closing to make a capital contribution to the Association in the amount of $300. This is not the advance payment of monthly maintenance fees, but a contribution to the operating fund available for use by the Association for any common expense incurred by the Association after turnover. 7

10 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Member Assessments Association members are subject to monthly assessments to provide funds for the Association s operating expenses, and future major repairs and replacements. The Association is dependent upon the receipt of members monthly assessments for operating and reserve expenditures. Assessments receivable at the balance sheet date represent fees due from unit owners. The Association s Declaration of Condominium provides for various collection remedies for delinquent assessments including the filing of liens, foreclosing on the unit owner and obtaining judgment on other assets of the unit owner. At December 31, 2016, the allowance for doubtful accounts was $5,000. Revenue Recognition Revenue from assessments are recognized in the periods for which they are assessed, and payments in advance are deferred to the appropriate future period. Prepaid assessments at the balance sheet date represent fees paid in advance by unit owners. Monthly assessments ranged from $186 to $310 per unit through December 31, Units with a garage paid an additional assessment ranging from $4 per month to $45 per month. Income Taxes The Association may be taxed either as a homeowners association or as a regular corporation. For the year ended December 31, 2016, the Association was taxed as a homeowners association and filed Form 1120-H, Income Tax Return for Homeowners Associations in the U.S. federal jurisdiction. Consequently, membership income is exempt from taxation if certain elections are made. The Association is taxed only on its non-membership income, such as interest earnings from reserve accounts offset by any related deductions. The net income from non-membership income is taxed at a 30% rate. For the year ended December 31, 2016, The Association incurred no income tax expense. With few exceptions, the Organization is no longer subject to U.S. federal income tax examinations by federal taxing authorities for years before

11 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes (concluded) The Association has reviewed and evaluated the relevant tax merits of each of its tax positions in accordance with accounting principles generally accepted in the United States of America for accounting for uncertainty in income taxes, and determined that there are no uncertain tax positions that would have a material impact on the financial statements of the Association. The Association recognizes interest and penalties in administrative expenses. During the year ended December 31, 2016, there were no interest and penalties incurred by the Association. Subsequent Events The Association has evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through March 10, 2017 the date the financial statements were available to be issued. No subsequent events have been disclosed. NOTE 3 MAJOR REPAIRS AND REPLACEMENTS RESERVES Florida Statutes require the Association to accumulate funds for future major repairs and replacements. The Board of Directors is collecting funds for the future major repairs and replacements in conformity with the Association s policy to fund for those needs based on a study conducted by an independent company in July As part of this review, the estimated useful lives and estimated current replacement costs of the components of the replacement fund were evaluated. The reserve study is being used as a guide to establish the estimated current replacement costs and estimated remaining useful lives. The Board of Directors believes the funds will adequately provide for future major repairs and replacements. The Board of Directors intends to fund for major repairs and replacements over the estimated useful lives of the components based on estimates of current replacement costs. Effective January 1, 2012, the Association adopted the pooling method for reserves. Actual expenditures 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 increase regular assessments, pass special assessments, or delay major repairs and replacements until funds are available. 9

12 NOTE 4 CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Association considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. The Federal Deposit Insurance Corporation (FDIC) insures cash accounts up to $250,000 per financial institution. As of December 31, 2016, the cash balances of the Association did not exceed the Federal Deposit Insurance Corporation (FDIC) insured limits. 10

13 The Links at Haile Plantation Condominium Association, Inc. Supplementary Schedule of Future Major Repairs and Replacements - Unaudited For the Year Ended December 31, 2016 The Association had a reserve study conducted, by an independent company, to estimate the remaining useful lives and the replacement costs of the components of common property. The study was performed in July The Association has adopted the pooling method (cash-flow method) for funding reserves. This method allows the Association to fund the assets as a group instead of funding each component individually. Replacements costs were based on estimated costs to repair or replace the common property components at the date of the study and based on future estimated replacement dates with an annual inflation factor of 2% and an annual investment rate of return of.8%. Estimated Estimated Estimated Remaining Current Replacement Useful Lives Useful Lives Replacement Balance as of Components (in years) (in years) Cost Dec. 31, 2016 Exterior Building Elements $4,159,390 $0 Property Site Elements ,681,023 0 Clubhouse Elements ,990 0 Pool Elements ,528 0 Garage Elements Pooled - Limited Common Elements 0 78,626 Pooled - Other than LCE 0 556,251 Interest 0 0 Totals $6,185,931 $634,877 The following table presents significant information concerning the replacement fund as required by Rule 61B (3), Florida Administrative Code: Fund Balance Net Reserve Interest Fund Balance Components Jan. 1, 2016 Assessments Expenditures Income Dec. 31, 2016 Pooled - Limited Common Elements $63,282 $15,000 $0 $344 $78,626 Pooled - Other than LCE 553, ,000 (148,921) 4, ,251 Interest Income Totals $617,141 $162,000 ($148,921) $4,657 $634,877 assessments are net of transfers to the operating fund. See notes to the financial statements and the independent auditor's report on the suplementary information. 11