HAYDEN ON THE HUDSON CONDOMINIUM. Financial Statements and Supplementary Information March 31, 2016 and 2015

Transcription

1 Financial Statements and Supplementary Information March 31, 2016 and 2015

2 Table of Contents Independent Auditor's Report 1-2 Financial Statements Page Balance Sheets 3 Statements of Revenues, Expenses and Accumulated Equity 4-5 Statements of Cash Flows 6 Notes to Financial Statements 7-13 Supplementary Information Supporting Schedules 14

3 MILLER & CUSENZA, P.C. CERTIFIED PUBLIC ACCOUNTANTS The Lincoln building 60 east 42 nd street Suite 1638 NEW YORK, N.Y (212) FAX (212) To the Board of Managers and Unit Owners Hayden on the Hudson Condominium Report on the Financial Statements Independent Auditor's Report We have audited the accompanying financial statements of Hayden on the Hudson Condominium, a New York condominium association, which comprise the balance sheets as of March 31, 2016 and 2015 and the related statements of revenues, expenses and accumulated equity, and cash flows for the years 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 representation 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 representation 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of 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 risk 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 statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a 1

4 Independent Auditor s Report Hayden on the Hudson Condominium 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 Hayden on the Hudson Condominium, as of March 31, 2016 and 2015 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Future Major Repairs and Replacements Management has omitted information about the estimates of future costs of major repairs and replacements that will be required in the future that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by the missing information. Report on Supplementary Information Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The supporting schedules are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of the Condominium s 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. MILLER & CUSENZA, P.C. New York, New York June 14, 2016 MILLER & CUSENZA, P.C. CERTIFIED PUBLIC ACCOUNTANTS 2

5 FINANCIAL STATEMENTS

6 Balance Sheets March 31, 2016 and Assets Current Assets Cash and cash equivalents $ 757,356 $ 581,857 Accounts receivable 42,707 6,500 Prepaid expenses 47,670 67,310 Total Current Assets 847, ,667 Investment in Condominium Unit less depreciation of $29,533 and $28,733 in 2016 and ,467 3,267 Other assets 617, ,927 Total Assets $ 1,467,811 $ 1,319,861 Liabilities and Unit Owners' Equity Current Liabilities Accounts payable and accrued expenses $ 200,858 $ 180,579 Contract payable 47,125 - Common charges paid in advance 39,203 40,641 Current portion of loan payable 123, , , ,804 Long-term Liabilities Loan payable 471, ,080 Total Liabilities 882, ,884 Unit Owners' Equity Accumulated equity 585, ,977 Total Unit Owners' Equity 585, ,977 Total Liabilities and Unit Owners' Equity $ 1,467,811 $ 1,319,861 See Notes to Financial Statements 3

7 Statements of Revenues, Expenses and Accumulated Equity For the Years Ended March 31, 2016 and Revenues Common charges $ 1,621,752 $ 1,639,802 Parking 309, ,066 Fuel assessments - 110,000 Interest income 5,084 3,918 Pool and health club 43,622 43,523 Late fees and interest from owners 3,969 3,669 Laundry 22,473 21,600 Storage 74,886 72,706 Workers' compensation dividend and audit refund 8,096 1,295 Miscellaneous income 25,565 10,737 Total Revenues 2,114,821 2,220,316 Expenses Payroll and payroll taxes 515, ,350 Employees' pension and welfare 154, ,680 Fuel 176, ,775 Gas and electric 163, ,872 Water and sewer 121, ,760 Repairs and maintenance 203, ,166 Supplies 43,495 55,677 Insurance 65,593 77,697 Workers' compensation 32,079 30,337 Keylink 6,820 - Telephone and cable 9,854 5,082 Real estate taxes 5,341 5,396 Licenses, permits and violations 2, Security 1, Income and franchise taxes 1,804 1,317 Management fees 146, ,709 Garage 201, ,640 Professional fees 10,934 16,467 Legal fees 16,929 19,295 Miscellaneous 21,780 19,486 Loan interest 17,111 20,245 Total Expenses 1,918,785 1,988,771 Excess of revenues over expenses before special items and depreciation 196, ,545 NYSERDA Grant income 53,100 - Special assessments 412, ,692 Major repairs and replacements (458,334) (226,570) 7,332 58,122 Excess of revenues over expenses before depreciation 203, ,667 See Notes to Financial Statements 4

8 Statements of Revenues, Expenses and Accumulated Equity (Continued) For the Years Ended March 31, 2016 and Excess of revenues over expenses before depreciation 203, ,667 Depreciation Excess of revenues over expenses 202, ,867 Accumulated equity, beginning of year 382,977 94,110 Accumulated equity, end of year $ 585,545 $ 382,977 See Notes to Financial Statements 5

9 Statements of Cash Flows For the Years Ended March 31, 2016 and Cash Flows from Operating Activities Excess of revenues over expenses $ 202,568 $ 288,867 Adjustments to reconcile deficiency of revenues over expenses to net cash provided by operating activities: Depreciation Escrow 33,465 21,750 (Increase) decrease in: Common charges receivable (36,207) 20,964 Prepaid expenses 19,640 (37,428) Interest earned - reserve (2,358) (1,962) Increase (decrease) in: Accounts payable and accrued expenses 18,841 (57,785) Contract payable 47,125 - Net Cash Used by Operating Activities 283, ,206 Cash Flows from Investing Activities Increase in reserve fund - transfer 12, ,831 Net Cash Used by Investing Activities 12, ,831 Cash Flows from Financing Activities Loan amortization (120,584) (117,458) Net Cash Provided by Financing Activities (120,584) (117,458) Net Increase in Cash and Cash Equivalents 175, ,579 Cash and Equivalents - Beginning of Year 581, ,278 Cash and Equivalents - End of Year $ 757,356 $ 581,857 Supplemental cash flow information Interest paid * $ 17,111 $ 20,245 Corporate taxes paid $ 1,804 $ 1,317 All from the energy loan See Notes to Financial Statements 6

10 Notes to Financial Statements March 31, 2016 and 2015 Note 1. Organization Hayden on the Hudson Condominium (the Condominium ) was organized on September 1, 1977 as a homeowners association for the purpose of maintaining and preserving the common property located at Douglas Avenue, Riverdale, New York. The Condominium consists of 176 residential units and one superintendent s unit, of which there are 19 townhouses and one main apartment complex. Note 2. Use of Estimates The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and related disclosures. The actual results could differ from those estimates. Note 3. Significant Accounting Policies Cash and Cash Equivalents: The Condominium considers all highly liquid investments available for current use with original maturities of three months or less to be cash or cash equivalents. Cash in bank is insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) per financial institution. Money market funds are insured by SIPC for up to $500,000 per depositor. At times during the year, these balances might exceed insured levels. The Condominium maintains various bank accounts that at times may exceed federally insured credit limits. The Condominium has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk with respect to such accounts. Investments: The Condominium classifies its investments as held to maturity and, accordingly, presents such investments at amortized cost. Asset Recognition and Depreciation Policy: The Condominium recognizes real property as an asset if the real property is not directly associated with the units and the Condominium has title to the property. The Condominium recognizes personal property as an asset. Property is depreciated over its estimated useful life using the straight-line method. Cash Flow Statements: For purposes of the statements of cash flows, the Condominium has established a policy that considers all money market funds to be cash equivalents. Common Charges: Monthly assessments to owners are based on an annual budget determined by the Board of Managers. The Condominium retains excess operating funds at the end of the operating year, if any, for use in future operating periods. Common charges and 7

11 Notes to Financial Statements March 31, 2016 and 2015 capital contributions are shown net of the amount allocated to the unit owned by the Condominium (the superintendent s apartment), which represents 0.48% undivided interest in the common elements of the Condominium. Fiscal Year: The Condominium s financial statements are based on a fiscal year of March 31, and not on a calendar year of December 31. Note 4. Prepaid Expenses Prepaid expenses consisted of: March 31, Prepaid insurance $ 47,670 $ 49,663 Prepaid real estate taxes - 1,303 Prepaid other - 16,344 $ 47,670 $ 67,310 Note 5. Other Assets Other assets consist of the following: March 31, Escrow - Signature Bank $ - $ 33,465 Reserve fund 617, ,462 $ 617,611 $ 660, Escrow represents the portion of the loan that has not been advanced as of March 31, 8

12 Notes to Financial Statements March 31, 2016 and 2015 March 31, Reserve Fund -April 1, $ 627,462 $ 740,331 Add: Interest earned 2,358 1,962 Transfer to/from operations (12,209) (114,831) Reserve Fund -March 31, $ 617,611 $ 627,462 Consisting of: Signature Bank - Money market $ 420,832 $ 176,577 Hudson Valley Bank - Money market 196, ,885 Reserve Fund - March 31, $ 617,611 $ 627,462 The reserve fund is restricted and may only be used for major repairs and replacements. Note 6. Restricted and Unrestricted Funds Total restricted and unrestricted funds consist of the following: March 31, Unrestricted $ 757,356 $ 581,857 Restricted 617, ,462 $ 1,374,967 $ 1,209,319 All these funds may be used for any catastrophic event that involves major repairs and replacements. Note 7. Contract Payable During 2015, the Condominium entered into a contract for cogeneration equipment at a cost of $241,053. $139,853 has been paid and the contract payable is $47,125. The remaining $54,075 on the contract is not due and payable as of March 31, Note 8. Long Term Debt 9

13 Notes to Financial Statements March 31, 2016 and 2015 The Condominium is undertaking an energy reduction plan through New York State Energy Research & Development Authority ( NYSERDA ). The Condominium obtained a low cost NYSERDA subsidized loan to finance the entire project. The loan with Signature Bank is for $885,000. It has a seven year term and it is to be paid in equal monthly payments of $11,496.70, which are applied first to interest at a rate of 2.63% per annum and the remainder as a reduction in principal. The loan matures on October 1, Prepayments of the loan may be made in whole or part subject to a prepayment penalty of 3% if prepaid prior to January 1, 2015, 2% if prepaid prior to January 1, 2016; thereafter the prepayment penalty will be 1% of the amount prepaid. The loan is collateralized by the equipment associated with this loan. The balance of this loan as of March 31, 2016 is $595,080. The principal payments for the next five year of the loan are as follows: 2017 $ 123, , , , ,777 Note 9. Accumulated Equity This represents the excess or deficiency of revenues over expenses from inception through the current year end. Note 10. Assessments The Condominium s policy is to retain legal counsel and place liens on the properties of homeowners whose assessments are in arrears. For the years ended March 31, 2016 and 2015, there were special assessments totaling $15,385 per month for major repairs and replacements. This assessment will continue until November In addition, for the years ended March 31, 2016 and 2015, $108,000 and $90,000, respectively, of common charges was assessed for major repairs and replacements. For the year ended March 31, 2015, there were fuel surcharge fees totaling $10,000 per month. This fee character and length of time was changed. Effective March 1, 2015, this $10,000 per month fee is for 40 months which commenced March 1, This total of $400,000 has become special assessments for major repairs and replacements. Note 11. Income Taxes 10

14 Notes to Financial Statements March 31, 2016 and 2015 The Condominium is a Condominium Association, which by a yearly election may or may not elect status as a tax-exempt homeowners association. Electing associations are generally taxed only on income from investments and business with nonmembers. However, electing associations cannot avail themselves of any net operating loss or carryover loss deductions or any of the special corporate deductions, e.g., the dividend received deduction. The Association has elected tax-exempt homeowner status for Federal income tax purposes for the periods ending March 31, 2016 and 2015 and will incur no Federal income tax. For tax purposes, the Condominium is taxed on all net income from nonmembership activities reduced only by losses from nonmembership activities for which a profit motive exists. Nonmembership income may not be offset by membership losses, and any excess membership deductions may only be carried forward to offset membership income of future tax periods. At March 31, 2016, the Condominium has available net operation loss carryforwards of approximately $1,712,128 expiring in various years through Since the Condominium does not anticipate significant taxable income, no related deferred tax asset accounts have been reflected in the accompanying financial statements. The Condominium has recorded taxes for New York State and City purposes based on capital rather than income due to higher taxes on capital. Such taxes are included in general expenses. These taxes have been provided for in the amount of $1,804 and $1,317 for the years ended March 31, 2016 and 2015, respectively. The only periods subject to examination for the Condominium s income tax returns are the 2013 through 2016 tax years. Note 12. Union Benefits Substantially all of the Condominium s employees are members of the Service Employees International Union ( SEIU ) Local 32BJ and covered by a union sponsored, collectively bargained, multiemployer defined benefit pension, annuity and health insurance plan (the Plan ). The current union agreement, which began on February 20, 2014, expires on May 31, The Condominium makes contributions to the Plan based on the number of weeks worked by each employee covered under the union contract. During the years ended March 31, 2016 and 2015, the Condominium contributed $154,792 and $136,680, respectively, to the Plan of which $31,168 and $27,831 respectively, was for pension expense. The Condominium s contributions to the Plan were less than 5% of the Plan s total contributions. Contributions to the Building Service 32BJ Pension Fund (Employer Identification Number , Plan 001) (the Fund ) are not segregated or otherwise restricted to provide benefits only to the Condominium s employees. The risk of participating in a 11

15 Notes to Financial Statements March 31, 2016 and 2015 multiemployer pension plan is different from a single-employer pension plan in the following aspects: 1) assets contributed to a multiemployer pension plan by one employer may be used to provide benefits to employees of other participating employers, 2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers, and 3) if the Condominium chooses to stop participating in its multiemployer pension plan, the Condominium may be required to pay the plan an amount based on the underfunded status of the plan, which is referred to as a withdrawal liability. In accordance with the Pension Protection Act of 2006, the Fund receives an annual certified zone status from its actuary, which summarizes its funding status. Plans in the red zone are generally less than 65% funded, plans in the yellow zone are 65% to 80% funded, and plans in the green zone are at least 80% funded. As of the date of issuance of these financial statements, the Fund s most recently available certified zone status was red as of March 31, The Fund is considered to be in critical status for the plan year beginning January 1, 2015 and its actuary has determined that there will be a funding deficiency within the next ten plan years. A rehabilitation plan aimed at restoring the Fund s financial health has been adopted. This rehabilitation plan may involve a surcharge on employers or a reduction or elimination of certain employee adjustable benefits. Information as to the Condominium s portion of the unfunded vested benefits and Plan assets has not been determined. The Condominium has no intention of withdrawing from the Plan. The Building Service 32BJ Health Fund (Employer Identification Number , Plan 501) provides health benefits and life insurance coverage for eligible participants and their covered dependents. Retired employees are eligible for health benefits if they retire before age 65, but after 62; accumulated 15 combined years of pension service credit; worked both 90 days immediately before retirement and at least 36 months of the 60 months before retiring; are receiving an early or regular retirement pension from Building Service 32BJ Pension Fund. These benefits continue for the retired employee and eligible dependents until they become eligible for Medicare, until age 65 or until the retiree s pension is suspended, whichever occurs first. During the years ended March 31, 2016 and 2015, the Condominium contributed $121,329 and $106,751 respectively to the Health Fund. Note 13. Commitments and Contingencies The Condominium is subject to Federal and local income taxes. State and City taxes are based on capital at reduced rates applicable to housing cooperatives. No provision for Federal income tax has been made since the Condominium had no taxable income. However, in certain instances, Subchapter T of the Internal Revenue Code would require Federal income taxes to be paid on non-shareholder income, reduced only by expenses incurred in generating this income. Any income tax liability that may result from the Internal Revenue Service s position is not reflected in these financial statements. 12

16 Notes to Financial Statements March 31, 2016 and 2015 In March 2016, the Condominium entered into a contract with Century Elevator Maintenance Corp. at a total cost of $18,509. As of March 31, 2016, the work has not commenced. The Condominium received a claim from Local 32BJ for alleged unpaid contributions of one employee. This claim is for $15,530. The Condominium does not believe it is responsible for this claim. What if any liability the Condominium will have is unknown at this time. During 2015 the plaintiff, a condominium unit owner alleges she was caused to fall in a yoga class, sustaining a left wrist fracture requiring surgical intervention. This matter was turned over to the Condominium s insurance carrier (the Carrier ). To date, the Carrier is investigating this matter. Per the Carrier it appears that the reported injuries fall within the insured s policy limit. It is too early to determine liability and outcome of the lawsuit. Note 14. Future Major Repairs and Replacements The Condominium's governing documents do not require that funds be accumulated for future major repairs and replacements. The Condominium has not conducted a study to determine the remaining useful lives of the components of common property and current estimates of costs of major repairs and replacements that may be required in the future. The Board, although not legally required, has also not developed a plan to fund all future needs. Major repairs and replacements are incurred on an as needed basis. When replacements funds are needed to meet future needs for major repairs and replacements, the Condominium plans to make funds available. If funds are insufficient, the Condominium has the right to increase regular assessments, pass special assessments, or delay major repairs and replacements until funds are available. The effect on future assessments has not been determined at this time. Note 15. Subsequent Events In April 2016, the Condominium entered into a contract for garage and terrace repairs at a cost of $24,500. In April 2016, the Condominium entered into a contract for Local Law 11 at a cost of $8,500. In preparing the financial statements, the Condominium has evaluated events and transactions for potential recognition or disclosure through June 14,

17 SUPPLEMENTARY INFORMATION

18 Supporting Schedules For the Years Ended March 31, 2016 and Repairs and Maintenance Electrical & Lighting $ 3,904 $ 1,696 Exterior 1,371 - Flowers & Decoration 2, Heating & Air Conditioning 45,905 25,850 Landscaping Maintenance 45,473 38,193 Elevator 26,518 27,136 Pool & Health Club 35,054 30,991 Plumbing & Pump Expenses 13,864 20,259 Painting 2,232 1,851 Flooring 1,579 3,250 Compactor 299 2,124 Intercom 3,576 4,931 Glass Doors Windows 3, Exterminating 4,769 5,939 Miscellaneous 13,415 16,814 Total Repairs and Maintenance $ 203,692 $ 180,166 Major Repairs and Replacements Energy Project - Chiller $ 82,499 $ 3,712 Energy Project - Gas conversion 46, ,019 Energy Project - Lighting 21,750 21,750 Energy Project - Equipment 206,433 - Tennis Court Replacement 34,500 - Window and Door Restoration 12,250 - Garage 15,540 13,600 Keylink equipment 11,432 - Local Law Compliance and rrofing - 21,641 Tractor - 14,966 Canopy - 3,266 Pool Shower Stalls - 8,795 Island new planting - 13,500 Plow Equiptment - 4,974 Other 27,210 16,347 Total Major Repairs and Replacements $ 458,334 $ 226,570 See Notes to Financial Statements 14