Gulf Dunes Condominium Owners' Association, Inc.

Transcription

1 Gulf Dunes Condominium Owners' Association, Inc. Financial Statements and Supplementary Information December 31, 2007

2 Table of Contents December 31, 2007 INDEPENDENT AUDITOR'S REPORT FINANCIAL STATEMENTS: Balance Sheet Statement of Revenue, Expenses, and Changes in Fund Balances Statement of Cash Flows Notes to Financial Statements SUPPLEMENTARY INFORMATION: Schedule of Operating Fund Expenses - Budget and Actual Schedule of Future Major Repairs and Replacements Supplementary Information on Future Major Repairs and Replacements

3 CARR, RIGGS & INGRAM, LLC 151 Mary Esther Blvd Suite 301 Mary Esther, FL I RIGGS & INGRAM Independent Auditor's Report To the Board of Directors and Members Gulf Dunes Condominium Owners' Association, Inc. Fort Walton Beach, Florida We have audited the accompanying balance sheet of Gulf Dunes Condominium Owners' Association, Inc., as of December 31, 2007, and the related statements of revenue, expenses, and changes in fund balances and cash flows for the year then ended. These financial statements are the responsibility of the Association's management. 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 of material misstatement. An audit includes examining, on a test basis, evidence su~~ortina the amounts and disclosures in the financial statements. An audit also inclides assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basisfor our opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Gulf Dunes Condominium Owners' Association, Inc., as of December 31,2007, and the results of its operations and its cash flows forthe year then ended in conformity with accounting principles generally accepted in the United States of America. American Institute of Certified Publlc Accountants Alabama Society of Certfed Public Accountants Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying schedules on pages are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information, except for that portion marked "unaudited" on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Florida Institute of Certified Publc Accountants Missis~ipp Society of Certfed Public Accountants AICPA Alliance for CPA Firms Center for Public Company Audit Firms

4 The Supplementary Information on Future Major Repairs and Replacements on page 14 is not a reauired oart of the basic financial statements of Gulf Dunes Condominium Owners' Association, lnd. but 'is supplementary information required by the American Institute of Certified Public Accountants. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Mary Esther, Florida April 18, 2008

5 Balance Sheet December 31, 2007 Operating Replacement Fund Fund Total Assets Cash $ 72,391 $ 202,368 $ 274,759 Assessments receivable, net 13,624 6,558 20,182 lnterfund balance - 90,113 90,113 Prepaid expenses 47,082 3,348 50,430 Property and equipment, net Total assets $ 133,424 $ 302,387 $ 435,811 Liabilities and Fund Balances Liabilities Accounts payable $ 4,369 $ - $ 4,369 Deferred revenue 19,616 19,616 lnterfund balance 90,113 90,113 Prepaid assessments 13,425 13,425 Taxes payable Total liabilities 107,976 19, ,592 Fund balances 25, , ,219 Total liabilities and fund balances $ 133,424 $ 302,387 $ 435,811 See accompanying notes to financial statements. -3-

6 Statement of Revenue, Expenses and Changes in Fund Balances Year ended December 31, 2007 Operating Replacement Fund Fund Total Revenue Assessment fees $ 574,592 $ 88,000 $ 662,592 Special assessment 62, , ,604 Beach service 19,553 19,553 Interest and late fees 3,537 7,754 11,291 Miscellaneous 2,247-2,247 Rental 7,055-7,055 Total revenue 669, , ,342 Expenses Administrative 73,680 73,680 Courtesy patrol 12,610 12,610 Insurance 202, ,933 Repairs and maintenance 170, , ,515 Utilities 138, ,070 Total expenses 598, , ,808 Excess revenueoverexpenses 71,327 73, ,534 Beginning fund balances (43,879) 207, ,685 Interfund transfer (2,000) 2,000 Ending fund balances $ 25,448 $ 282,771 $ 308,219 See accompanying notes to financial statements. -4-

7 Statement of Cash Flows Year ended December 31, 2007 Operating Replacement Fund Fund Total Operating activities Regular assessments collected $ 750,317 $ 81,442 $ 831,759 Special assessments collected 62,605 62,605 Interest received 3,537 7,754 11,291 Other income received 28,855 28,855 Cash paid for expenses (597,811) (178,894) (776,705) Net cash provided by (used in) operating activities 247,503 (89,698) 157,805 Financing activities Payments on note payable (23,196) - (23,196) Interfund balances (1 64,544) 164,544 - Net cash provided by (used in) financing activities (187,740) 164,544 (23,196) Net increase in cash 59,763 74, ,609 Cash at beginning of year 12, , ,150 Cash at end of year $ 72,391 $ 202,368 $ 274,759 See accompanying notes to financial statements. -5-

8 Statement of Cash Flows (Continued) Year ended December 31, 2007 Operating Replacement Fund Fund Total Reconciliation of excess revenue over expenses to net cash provided by (used in) operating activities: Excess revenue over expenses Adjustments to reconcile excess revenue over expenses to net cash provided by (used in) operating activities: Bad debt 8,637 8,637 Depreciation (Increase) decrease in assets: Assessments receivable 216,268 (6,558) 209,710 Prepaid expenses 5,470 (3,348) 2,122 Increase (decrease) in liabilities: Accounts payable (3,177) (3,177) Deferred revenue (62,605) (152,999) (215,604) Prepaid assessments 13,425-13,425 Taxes payable (2,495) (2,495) Net cash provided by (used in) operating activities $ 247,503 $ (89,698) $ 157,805 See accompanying notes to financial statements. -6-

9 Notes to Financial Statements December 31,2007 NOTE 1 - NATURE OF ORGANIZATION Gulf Dunes Condominium Owners' Association, Inc., a Florida Not-For-Profit Corporation, was formed February 15, 1999 as a condominium association for the operation, management, maintenance and control of Gulf Dunes Condominium. The condominium complex consists of 102 residential unit owners on approximately 3.24 acres in Fort Walton Beach, Florida. The Association was organized for the purpose of maintaining and protecting the elements owned by the owners in common, including roofs, building exteriors, parking areas, recreation areas, landscaping, etc. The Association also provides cable television, water, sewer, pesticide and sanitation services for the individual units. All policy decisions, including the annual budget and owners' assessments are formulated by the Board of Directors. Major decisions are referred to the general association membership before action is taken. Management and accounting services are provided to the Association by Brooks and Shorey Resorts, Inc. The Association does not operate a rental program; instead, individual unit owners have contracted with various real estate companies to lease their individual rental units. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTIN; POLICIES A summary of the Association's significant accounting policies applied in the preparation of the accompanying financial statements is as follows: Basis of Presentation The accompanying financial statements include the assets, liabilities, fund balances, revenue and expenses as determined using the accrual basis of accounting. Funds The Association is a not-for-profit organization which employs the fund method of accounting in orderto properlv account for restrictions on the expenditures resulting from actions of the Board of ~irectork, the ~ssociation voting membership, or Florida statute; The financial statements segregate the accounting for such funds as operating or replacement. At the end of the year, excess funds are retained by the fund generating such excess during the year. The operating fund is used to account for financial resources available for the general operations of the association. Disbursements from the operating fund are generally - at the discretion of the Board of Directors and the Association's manager. - The replacement fund is generally used to account for assessments made for major repair and replacement of common property and related expenses. Disbursements from the replacement fund may only be utilized in accordance with Florida Statutes and the purposes established by the Board of Directors and the Association membership

10 Notes to Financial Statements December 31, 2007 NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounts Receivable from Owners andallowance for Doubfful Accounts Accounts receivable from owners are reported as the outstanding balance due from owners, net of any allowance for doubtful accounts. TheAssociation provides for doubtful accounts based on experience and analyses of individual accounts. When the collectibility of a receivable becomes questionable, an allowance for doubtful accounts is established. When specific accounts are determined to be uncollectible, they are written off by charging the allowance and crediting assessments receivable. Capitalization and Depreciation Real property acquired by the Association is capitalized when it is used to generate significant cash flows from members on the basis of usage or from nonmembers or can be disposed of for cash with the association retaining the proceeds. Real property acquired by the Association that does not meet these guidelines is not capitalized, and accordingly, replacements, major repairs, and improvements to this property are not capitalized; instead, they are reported as expenses in the fund making the expenditure. Real property that has not been capitalized includes parking areas, sidewalks, green areas, rook, exterior walls, swimming pools, etc. Personal property acquired by the association is capitalized at cost. It is depreciated over its estimated useful life using the straighkline method of depreciation. Revenue Recognition Regular assessments to members are recognized as revenue during the period for which they are assessed. Assessments received in advance of this period are reported as prepaid assessments on the balance sheet. Special assessments are recognized as revenue when the corresponding liabilities and expenses are incurred with any excess revenue reported as deferred revenue on the balance sheet. Cash Equivalents For purposes of the statement of cash flows, the Association considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Estimates The preparation of financial statements in conformity with generally accepted accounting princi~les reauires management to make estimates and assumptions that affect certain reported amou'nts and disclosure; Accordingly, actual results could differ from those estimates

11 Notes to Financial Statements December 31, 2007 NOTE 3 - OWNER'S ASSESSMENTS Revenue and expenses are allocated to the unit owners based on square footage of the unit and accordingly, assessment fees are established using this formula. Residential monthly assessments range from $379 to $666. Regular assessments for the current year totaled $662,592, of which $88,000 was allocated to the replacement fund. NOTE 4 - FUTURE MAJOR REPAIRS AND REPLACEMENTS The Association's governing documents and Florida Statutes require the Association to accumulate funds for future major repairs and replacements, unless otherwise decided by the voting membership. The Association has adopted a program to accumulate funds for estimated future major repairs and replacements through regular assessments. The owners voted to utilize the pooling method of accounting for the replacement fund revenue and expenditures. As of December 31, 2007, the operating fund owed the replacement fund $90,113. Interest income is being accumulated as part of the pooled components. For 2007, the amounts being accumulated are based in part on an independent study performed in 2004 of the reulacement cost and useful life of each maior comwonent of the condominium urouertv. In 2007, an independent study to determine the adeq;acy of ihe current funding program for thk replacement and preservation of the Association's common areas was conducted by GAB Robins of ~merica, Inc. In 2008, the Association plans to fund for future major repairs anb replacements based on the new study. Actual expenditures may vary from the estimated amounts and the variations may be significant. Therefore, amounts accumulated in the replacement fund may not be adequate to meet future needs. If additional funds are needed, the Association has the right to increase regular assessments, to levy special assessments, or it may delay major repairs and replacements until funds are available. NOTE 5 -CONTINGENCIES The insurance policy for windstorm coverage renewed February 16, The deductible amount for named storms is estimated at $452,857, which represents 3% of the insured value of the residential building. In addition, the Association's windstorm policy is underwritten by the State of Florida's Citizens Property Insurance Corporation (Citizens). In the event Citizens incurs a deficit that exceeds the amount collected via regular premiums, an emergency assessment may be levied. The Association may be required to pay substantially more in insurance premiums relating to the year for which the emergency assessment is levied. The Association entered into a contract with Douglas J. Sheppard Restoration Contractors for $200,000 to paint the building. The Association paid $145,952 in The painting was not finished until 2008, and the balance owed on the contract as of December 31, 2007 was $54,048.

12 Notes to Financial Statements December 31, 2007 NOTE 6 - INCOME TAXES The Association filed its tax returns for December 31, 2007 in accordance with Internal Revenue Code (IRC) Section 277, which applies to certain membership organizations. Accordingly, the Association is required to separate membership income and expenses from non membership income and expenses. Each component is taxed separately; however, net membership income is exempt from taxation if certain elections are made. For the year ended December 31, 2007, the Association's net non membership income was $1 0,967, which resulted in federal and state income taxes of $1,596 and $328 respectively. NOTE 7 - CREDIT RISK The Association assesses reaular and soecial assessments to its members. It is the Association's policy to turn over significantlypast due accounts for collection and to file liens against the individual condominium units. Should the collection of any such liens be enforced by the sale of the unit, the collectibility of the receivable is dependent on-the quick sale market vilue of the unit, and the amount of any such other liens which have priority. Market value may be influenced by the real estate market in Okaloosa County, Florida. The Association places its cash with federally ~nsured financial institutions. At times, the balances at these f nancial instit~tions may exceed the FDIC insured limit of $100,000. NOTE 8 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31, 2007: Furniture and equipment $ 5,728 Less accumulated depreciation (5,401) Property and equipment, net $ 327 Depreciation expense for 2007 was $653. NOTE 9 -ASSESSMENTS RECEIVABLE Assessments receivable consisted of the following at December 31, 2007: Assessments receivable $ 21,094 Less allowance for doubtful accounts (7,470) Assessments receivable, net $ 13,624 NOTE 10 - SPECIAL ASSESSMENT In 2006, the owners approved a special assessment of $172,615 for painting the exterior of the building and $62,605 for funding prior year's operating deficits, for a total of $235,220. The assessment was due in 2007 and ranged from $1,471 to $2,869. In 2007, the expenses for painting the building totaled $152,999. The balance of $19,616 is shown on the balance sheet as deferred revenue. All of the operating fund assessment has been recognized in 2007.

13 Supplementary Information

14 Schedule of Operating Fund Expenses - Budget and Actual Year ended December 31, 2007 Variance - (Favorable) Unfavorable Expenses: Actual Budget Unaudited Administrative Accounting $ 3,798 $ 3,000 $ 798 Bad debt expense 8,637 8,637 Depreciation Dues and subscriptions 1, Income tax 1,924 1,924 Legal 14,994 3,000 11,994 Licenses, fees and taxes 235 1,365 (1,130) Management fees 30,600 32,300 (1,700) Miscellaneous 7,555 3,400 4,155 Office supplies 1,269-1,269 Postage and printing 1,799 2,000 (201) Professional fees Penalties and interest Total administrative 73,680 45,473 28,207 Courtesy patrol 12,610 18,000 (5,390) Insurance 202, ,525 (59,592) Repairs and maintenance Boardwalk and fence 278 1,500 (1,222) Buildings 107, , Elevators 15,735 11,200 4,535 Fire system 7,893 6,500 1,393 Grounds 23,912 20,000 3,912 Hurricane repairs 2,267 2,267 Janitorial 7,638 3,500 4,138 Light bulbs 622 3,000 (2,378) Swimming pool 4,770 7,550 (2,780) Total repairs and maintenance 170, ,382 10,587 (Continued on next page)

15 Schedule of Operating Fund Expenses - Budget and Actual (Continued) Year ended December 31, 2007 Variance - (Favorable) Unfavorable Actual Budget Unaudited Utilities Cable television 51,043 39,584 11,459 Electricity 23,973 22, Gas 8,811 7,500 1,311 Pest control 2,079 3,500 (1,421) Sanitation 13,652 15,000 (1,348) Telephone 3,171 3, Water and sewer 35,341 36,000 (659) Total utilities 138, ,578 10,492 Total expenses $ 598,262 $ 613,958 $ (15,696)

16 Schedule of Future Major Repairs and Replacements Beginning Interfund Ending Component Balance Revenue Expenses Transfers Balance Pooled Beachwalk (12,500) Electrical Elevators Fire alarm system Lightpoles Paving Pool Railings Roof Water booster pumps Interest income 7,754 Total pooled components $ 181,301 $ 70,753 $ (22,547) $ 2,000 $ 231,507 Building exterior (painting) 26, ,000 (1 52,999) 51,264 Total $ 207,564 $ 248,753 $ (175,546) $ 2,000 $ 282,771

17 Supplementary Information on Future Major Repairs and Replacements The following table presents significant information about the components of common property: Estimated Remaining Estimated Replacement Useful Life Replacement Fund Balance Component Years Cost Pooled Beachwalk 18 $ 40,000 Electrical 32 40,000 Elevators 17 80,000 Fire alarm system ,000 Lightpoles 12 80,000 Paving ,000 Pool ,000 Railings 2 62,000 Roof ,904 Water booster pumps 17 25,000 Accumulated interest NIA NIA Total pooled components 790, ,507 Building exterior (painting) 2 250,000 51,264 Total $ 1,040,904 $ 282,771