THE CLARIDGE CONDOMINIUM ASSOCIATION, INC. FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

Transcription

1 FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED DECEMBER 31, 2017 (WITH SUMMARIZED FINANCIAL INFORMATION FOR YEAR ENDED DECEMBER 31, 2016)

2 TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2017 (WITH SUMMARIZED FINANCIAL INFORMATION FOR YEAR ENDED DECEMBER 31, 2016) INDEPENDENT AUDITORS REPORT 1 FINANCIAL STATEMENTS BALANCE SHEET 3 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND BALANCES 4 STATEMENT OF CASH FLOWS 5 NOTES TO FINANCIAL STATEMENTS 7 SUPPLEMENTARY INFORMATION FUTURE MAJOR REPAIRS AND REPLACEMENTS (UNAUDITED) 12

3 CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS REPORT Board of Directors The Claridge Condominium Association, Inc. Naples, Florida Report on the Financial Statements We have audited the accompanying financial statements of The Claridge Condominium Association, Inc. (the Association), which comprise the balance sheet as of December 31, 2017, and 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. Auditors 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 Association 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 Association 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. (1)

4 Board of Directors The Claridge Condominium Association, Inc. Basis for Qualified Opinion As more fully described in Note 1 to the financial statements, capital expenditures have been charged to expense in the accompanying financial statements. In our opinion, all capital expenditures should be capitalized and depreciated over their useful lives to conform with accounting principles generally accepted in the United States of America. The effect on the financial statements of the preceding practice is not reasonably determinable. Qualified Opinion In our opinion, except for the effects of the matters discussed in the Basis for Qualified Opinion paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of the Association as of December 31, 2017, and the changes in its members equity and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Disclaimer of Opinion on Required Supplementary Information Accounting principles generally accepted in the United States of America require that the supplementary information on future major repairs and replacements (unaudited) on page 12 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. Report on Summarized Comparative Information We have previously audited the Association s 2016 financial statements, and we expressed a qualified audit opinion on those audited financial statements in our report dated March 13, In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2016 is consistent, in all material respects, with the audited financial statements from which it has been derived. CliftonLarsonAllen LLP Naples, Florida March 21, 2018 (2)

5 BALANCE SHEET DECEMBER 31, 2017 (WITH SUMMARIZED FINANCIAL INFORMATION FOR YEAR ENDED DECEMBER 31, 2016) ASSETS Operating Operating Replacement Replacement Total Fund Fund Fund Fund Cash and Cash Equivalents $ 516,740 $ 6,620 $ 184,066 $ 3,947 $ 711,373 $ 593,520 Assessments Receivable 244, ,922 22,582 Certificates of Deposit ,654 50, , ,630 Prepaid Expenses and Other Assets 29, ,529 27,542 Due from (to) Other Funds 2,370 2,689 (14,239) 9, Total Assets $ 793,147 $ 9,723 $ 296,481 $ 64,050 $ 1,163,401 $ 819,274 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable and Accrued Expenses $ 90,888 $ - $ 668 $ - $ 91,556 $ 79,322 Assessments Received in Advance 279, , ,415 Deferred Insurance Advance 100, ,000 - Deferred Special Assessments 116, ,482 - Total Liabilities 587, , ,737 FUND BALANCES 206,029 9, ,813 64, , ,537 Total Liabilities and Fund Balances $ 793,147 $ 9,723 $ 296,481 $ 64,050 $ 1,163,401 $ 819,274 See accompanying Notes to Financial Statements. (3)

6 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND BALANCES YEAR ENDED DECEMBER 31, 2017 (WITH SUMMARIZED FINANCIAL INFORMATION FOR YEAR ENDED DECEMBER 31, 2016) Operating Operating Replacement Replacement Total Fund Fund Fund Fund REVENUES Maintenance Assessments $ 793,633 $ 20,656 $ 319,205 $ 9,180 $ 1,142,674 $ 1,113,941 Special Assessments 1,010, ,010,470 - Pelican Bay Assessments 184, , ,480 Storage Fees 12, ,273 11,591 Guest Suite Revenue 23, ,860 26,655 HVAC Maintenance Income 9, ,720 9,720 Interest Income 207-1, , Other Income 33, ,225 53,561 Total Revenues 2,067,420 20, ,567 9,786 2,418,429 1,384,940 EXPENSES Administrative 31, ,142 23,692 Cable 3, ,265 3,233 Guest Suite Expenses 9, ,713 9,753 Insurance 158,462 3, , ,197 Management Fees 49, ,131 48,068 Master Association Fees 184, , ,480 Pest Control 3, ,050 5,400 Professional Fees 14, ,859 13,953 Repairs and Maintenance 215,238 2, ,636 2, , ,390 Salaries and Benefits 270,336 2, , ,864 Special Assessment 1,010, ,010,470 - Storage Locker Expenses 11, ,550 10,958 Supplies 24, ,649 22,647 Utilities 89,374 9, ,943 89,935 Total Expenses 2,075,311 19, ,636 2,755 2,316,351 1,241,570 EXCESS (DEFICIT) OF REVENUES OVER EXPENSES (7,891) 1, ,931 7, , ,370 Fund Balance - Beginning of Year 213,920 8, ,882 57, , ,167 FUND BALANCE - END OF YEAR $ 206,029 $ 9,723 $ 295,813 $ 64,050 $ 575,615 $ 473,537 See accompanying Notes to Financial Statements. (4)

7 STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2017 (WITH SUMMARIZED FINANCIAL INFORMATION FOR YEAR ENDED DECEMBER 31, 2016) Operating Operating Replacement Replacement Total Fund Fund Fund Fund CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Member Assessments $ 768,658 $ 20,656 $ 319,205 $ 9,180 $ 1,117,699 $ 1,316,400 Cash Received From Special Assessments 1,126, ,126,952 - Cash Received from Storage Fees 12, ,273 11,591 Cash Received from Guest Suite Revenue 23, ,860 26,655 Cash Received from HVAC Maintenance - Income 9, ,720 9,720 Cash Received from Interest Income 207-1, , Cash Received from Other Income 133, ,225 30,979 Cash Paid to Suppliers (2,063,485) (20,063) (217,968) (2,755) (2,304,271) (1,243,400) Cash Paid for Taxes (1,833) (1,833) (2,811) Net Cash Provided by Operating Activities 9, ,599 7, , ,126 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Certificates of Deposit - - (1,342) (605) (1,947) (175,630) Net Cash Used by Investing Activities - - (1,342) (605) (1,947) (175,630) CASH FLOWS FROM FINANCING ACTIVITIES Change in Interfund Borrowings (4,466) (593) 14,239 (9,180) - - Net Cash Provided (Used) by Financing Activities (4,466) (593) 14,239 (9,180) - - NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5, ,496 (2,754) 117,853 (25,504) Cash and Cash Equivalents - Beginning of Year 511,629 6,620 68,570 6, , ,024 CASH AND CASH EQUIVALENTS - END OF YEAR $ 516,740 $ 6,620 $ 184,066 $ 3,947 $ 711,373 $ 593,520 See accompanying Notes to Financial Statements. (5)

8 STATEMENT OF CASH FLOWS (CONTINUED) YEAR ENDED DECEMBER 31, 2017 (WITH SUMMARIZED FINANCIAL INFORMATION FOR YEAR ENDED DECEMBER 31, 2016) Operating Operating Replacement Replacement Total Fund Fund Fund Fund RECONCILIATION OF EXCESS (DEFICIT) OF REVENUES OVER EXPENSES TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Excess (Deficit) of Revenues Over Expenses $ (7,891) $ 1,007 $ 101,931 $ 7,031 $ 102,078 $ 143,370 Adjustments to Reconcile Excess (Deficit) of Revenues Over Expenses to Net Cash Provided (Used) by Operating Activities: (Increase) Decrease In: Assessments Receivable (222,340) (222,340) 380 Insurance Receivable Accrued Interest Receivable (22,582) Prepaid Expenses and Other Assets (1,573) (414) - - (1,987) (15,986) Increase (Decrease) in: Accounts Payable and Accrued Expenses 11, ,234 23,414 Deferred Insurance Advance 100, ,000 - Assessments Received in Advance 13, ,333 21,530 Deferred Special Assessments 116, ,482 - Net Cash Provided by Operating Activities $ 9,577 $ 593 $ 102,599 $ 7,031 $ 119,800 $ 150,126 See accompanying Notes to Financial Statements. (6)

9 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Activities The Claridge Condominium Association, Inc., hereinafter referred to as the Association, is a nonprofit organization incorporated on January 7, 1991 in the state of Florida as a condominium association for the purposes of preserving, operating, and maintaining the common property of the Association. The Association consists of 81 residential units and 24 pool cabanas, located on 5.65 acres in Collier County, Florida. Fund Accounting The financial statements of the Association are prepared on the accrual basis of accounting, which recognizes revenue when earned, regardless of when received, and expenses when incurred, regardless of when paid. 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 financial statements have been prepared 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. Operating Fund This fund is used to account for financial resources available for the general operations of the cabanas. Replacement Fund This fund is used to accumulate financial resources designated for future major repairs and replacements. Replacement Fund This fund is used to accumulate financial resources designated for future major repairs and replacements for the cabanas. Liquidity Assets are presented in the accompanying balance sheet according to their nearness to conversion to cash and liabilities according to the nearness of their maturity and resulting use of cash. Cash and Cash Equivalents For purposes of the statement of cash flows, the Association considers all highly liquid accounts with an original maturity date of three months or less to be cash equivalents. The Association maintains bank accounts with balances which, at times, may exceed federally insured limits. (7)

10 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Commonly Owned Assets Real common property acquired by the Association is not capitalized because those properties are owned by the individual unit owners in common and not by the Association. Common property not capitalized includes pool and spa, walkways, elevators, lobbies, storage areas, two guest suites, a manager s unit, various recreational and maintenance rooms, and parking areas. Replacement and major repairs are not capitalized; rather, these costs are accounted for as expenditures in the replacement fund. Common personal property, including pool furniture, lobby furnishings, and office equipment has not been recorded as assets and depreciated by the Association. This is inconsistent with accounting principles generally accepted in the United States of America, and the impact of this departure has not been determined. Limited Common Property Real common property that is reserved for the use of a certain unit or units to the exclusion of the other units is not capitalized because the individual unit owners own that property. Limited common property consists of 24 cabanas, storage units, 85 covered parking spaces, and 5 private garages. Assessments billed to limited common property owners for the year ended December 31, 2017 amounted to $29,836, which were used to pay expenses directly related to the properties, and were recorded in maintenance assessments and storage fee revenue. Income Taxes Condominium associations may be taxed either as homeowners associations or as regular corporations. The financial statements have been prepared under the assumption the Association will elect to be taxed as a regular corporation. As a regular corporation, membership income is exempt from taxation if certain elections are made, and the Association is taxed only on its nonmembership income, such as interest earnings, at regular federal and state corporate rates. The Association has income tax expense of $1,833 for the year ended December 31, The Association follows the income tax standard for uncertain tax positions and as a result, evaluated its tax positions and determined it has no uncertain tax positions as of December 31, Maintenance Assessments Association members are subject to quarterly assessments to provide funds for the Association s operating expenses. In accordance with the Association s bylaws, quarterly assessments are imposed on each member on the first day of each quarter. Each unit owner is assessed based on their proportional share of ownership in the common elements. (8)

11 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Maintenance Assessments (Continued) The Association s policy is to place liens on the units of members whose assessments are delinquent. Management has evaluated the assessments receivable and has determined that an allowance for uncollectible accounts is unnecessary. 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. Prior Year Information The financial statements include certain prior-year summarized comparative information in total but not by fund. 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 December 31, 2016, from which the summarized information was derived. Fair Value of Financial Instruments The Association follows a policy related to the fair value of financial instruments that applies to reported balances that are required or permitted to be measured at fair value under an existing accounting pronouncement. The Association currently does not measure any of its assets or liabilities at fair value and is not required under generally accepted accounting principles to disclose the fair value of its financial instruments. The Association also follows the standard related to the fair value option for financial assets and liabilities. This allows entities the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-bycontract basis. The Association has not elected to measure any newly acquired financial instruments at fair value. However, the Association may elect to measure newly acquired financial instruments at fair value in the future. Subsequent Events In preparing these financial statements, the Association has evaluated events and transactions for potential recognition or disclosure through March 21, 2018, the date the financial statements were available to be issued. Reclassifications Certain reclassifications of amounts previously reported have been made to the accompanying consolidated financial statements to maintain consistency between periods presented. The reclassifications had no impact on previously reported net assets. (9)

12 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 2 ASSESSMENTS RECEIVED IN ADVANCE Assessments received in advance, totaling $279,748 at December 31, 2017, consist of 2018 assessments and Community Association fees received by the Association prior to January 1, 2018 for assessments related to the following year. NOTE 3 CERTIFICATES OF DEPOSIT The certificates of deposit at December 31, 2017 mature as follows: Maturity Date Value Rate January 25, 2018 $ 50, % February 26, , % Total $ 177,577 NOTE 4 MASTER ASSOCIATION AND RECREATION FACILITIES In accordance with the Condominium Declaration, each unit owner is a member of the Pelican Bay of Naples Foundation, Inc. (the Foundation). As a member of the Foundation, unit owners have the right to use the various facilities and beach areas operated by the Foundation. For the year ended December 31, 2017, the Association collected assessments from the unit owners for the Foundation prior to year-end in the amount of $193,104. The amount collected was remitted subsequent to year-end and is included in the accompanying balance sheet as Assessments Received in Advance as of December 31, NOTE 5 FUTURE MAJOR REPAIRS AND REPLACEMENTS Florida Statutes and the Association s bylaws require that the annual budget include reserve amounts for capital expenditures and deferred maintenance. These include, but are not limited to, roof replacement, building painting, and pavement resurfacing. The Association has elected to fund reserves using the cash flow method. Reserves are funded unless the members subsequently determine by majority vote of those present at a duly called meeting to fund no reserves or less than adequate reserves for the year. The cash flow method is a form of calculating reserve requirements whereby contributions to the reserve funds are designed to offset the variable annual expenditures from the reserve fund. This method calculates the current replacement cost for reserve components when they are due for replacement. Funds from the beginning balances are pooled together and a yearly contribution rate is calculated to arrive at a positive cash flow and reserve account balance to adequately fund the future projected expenditures throughout the period. (10)

13 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 5 FUTURE MAJOR REPAIRS AND REPLACEMENTS (CONTINUED) During the year ended December 31, 2017, the Association calculated the funding for future major repairs and replacements based on a February 13, 2018 reserve study, of remaining useful lives and current replacement, in accordance with Florida Statutes. The statutory funding for 2018 is $326,400 for the replacement fund and $17,040 for the cabana replacement fund, as shown in the unaudited supplementary information. The budgeted funding for 2018 is $326,400 for the replacement fund and $17,040 for the cabana replacement fund. The components actual replacement costs, useful lives, and investment income may vary from estimated amounts, and the variation may be material. Because funds are not accumulated by component, amounts accumulated in the fund may not be adequate to meet all future needs for major repairs and replacements. In addition, the timing and amount of actual expenditures will vary and these variations may be material. When funds are needed for major repairs and replacements, the Association has the right to increase regular assessments, pass special assessments, or delay the repair or replacement until funds are available. NOTE 6 BANK LOAN The Association has entered into a loan with a financial institution for $234,246, with an interest rate of 4.35% in 2017 but was not funded until The loan is due January 1, As of December 31, 2017, the balance was $-0-. NOTE 7 SPECIAL ASSESSMENT The board declared a special assessment to be used for damage sustained by Hurricane Irma, including, but not limited to, dry out of the Condominium building, water intrusion mitigation, drywall and insulation removal and replacement, exterior lighting, and roof repairs. The total amount of the special assessment is $1,126,949, as of December 31, 2017 hurricane expenses total $1,010,470. (11)

14 FUTURE MAJOR REPAIRS AND REPLACEMENTS (UNAUDITED) DECEMBER 31, 2017 (SEE INDEPENDENT AUDITORS REPORT) The following table represents a study (cash flow analysis) performed in 2018 by an independent specialist. The analysis calculates the minimum annual contributions necessary to fund reserve components under a set of stated parameters. The table presents significant information about the components of common property. The study assumes a 0.00% rate of inflation and a 0.65% rate of return on investments. At December 31, 2017, the Association had $64,050 accumulated for cabana future major repairs and replacements and $295,813 for noncabana future major repairs and replacements. Estimated Estimated Estimated Remaining Current 2018 Useful Useful Replacement Statutory Components Lives (Years) Lives (Years) Costs Funding Roofs 33 7 $ 140,017 Paint ,208 Glass 1 4 3,000 Total $ 178,225 $ 17,040 Estimated Estimated Estimated Remaining Current 2018 Useful Useful Replacement Statutory Components Lives (Years) Lives (Years) Costs Funding Roof 33 7 $ 373,245 Resurfacing (Paving) ,880 Building Paint ,930 Glass ,000 Garage Floor ,190 Machinery ,975 Elevators ,080,000 Air Conditioning ,659 Furniture/Carpet ,248 Pool and Spa ,837 Decks and Planter Boxes ,440 Property Condition Assessment ,000 Site Improvements ,800 Total $ 4,662,204 $ 326,400 The 2018 budgeted funding is $17,040 for the cabana replacements and $326,400 for the noncabana replacements. (12)