LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC.

Transcription

1 CASH LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. HARRIS COUNTY, TEXAS ANNUAL FINANCIAL REPORT - FOR THE YEAR ENDED BASIS McCALL GIBSON SWEDLUND BARFOOT PLLC Certified Public Accountants

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3 LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. HARRIS COUNTY, TEXAS ANNUAL FINANCIAL REPORT - CASH BASIS FOR THE YEAR ENDED

4 BUDGET CASH TABLE OF CONTENTS INDEPENDENT AUDITOR S REPORT 1-2 FiNANCIAL STATEMENTS: STATEMENT OF ASSETS, LIABILITIES ANI FTJNI BALANCES - PAGE BASIS 3 STATEMENT OF CASH RECEIPTS ANT) DISBURSEMENTS 4 NOTES TO FINANCIAL STATEMENTS 5-8 REQUIRED SUPPLEMENTARY INFORMATION: SUPPLEMENTARY INFORMATION ON FUTURE MAJOR REPAIRS AN]) REPLACEMENTS OTHER SUPPLEMENTARY INFORMATION: SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS - AND ACTUAL SCHEDULE OF insurance COVERAGE 15 BOARD OF DIRECTORS 16

5 McCALL GIBSON SWEDLUND BARFOOT PLLC Certified Public Accountants Worthain Center Drive 7801 N. Capital of Texas Hwy. Suite 235 Suite 350 Houston, Texas Austin, Texas (713) (512) Fax (713) Fax: (512) www. mgshp/ic. corn Board of Directors Lakewood Park Two Homeowners Association, Inc. Harris County, Texas Independent Auditor!s Report We have audited the statement of assets, liabilities and fund balances - cash basis of Lakewood Park Two Homeowners Association, Inc. ( Association ) as of December 31, 2010, and the related statement of cash receipts and disbursements 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 consideration of internal control over financial reporting as a basis for designing 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 over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 basis for our opinion. As described in Note 2, these financial statements were prepared on the cash basis of accounting, which is a comprehensive basis of accounting other than generally accepted accounting principles. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities, and fund balances arising from cash transactions of the Association as of December 31, 2010, and its cash receipts and disbursements during the year then ended, on the basis of accounting described in Note 2. Member of American Institute of CertUied Public Accountants Texas Society of CertUied Public Accountants

6 Board of Directors Lakewood Park Two Homeowners Association, Inc. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information on pages 13 through 16 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information 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 The supplementary information on future major repairs and replacements on pages 10 and 11 is not a required part of the basic financial statements of the Association but is supplementary information required by accounting principles generally accepted in the United States of America. 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. Q JtLe-LLJ2 McCall Gibson Swedlund Barfoot PLLC Certified Public Accountants July 19, 2011

7 Unreserved CASH LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. STATEMENT OF ASSETS, LIABILITIES AiND FUND BALANCES - BASIS ASSETS Cash-Undesignated $ (36,582) Cash-Designated, Note 5 101,103 TOTAL ASSETS $ 64,521 FUND BALANCE Designated for Future Major Repairs and Replacements, Note 5 $ 101,103 Undesignated (36,582) TOTAL FUND BALANCE $ The accompanying notes to financial statements are an integral part of this report. -3-

8 - - DECEMBER LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS FOR THE YEAR ENDED CASH RECEIPTS Maintenance Assessments: Current Operations S 75,622 Future Major Repairs and Replacements 11,345 Interest on Investments 897 Delinquent Fee Interest 1,369 Transfer Fees 1,975 Legal Fee Income 6,380 Miscellaneous Income 236 TOTAL CASH RECEIPTS $ 97,824 CASH DISBURSEMENTS SERVICE EXPENSES: Landscaping Maintenance $ 10,303 Street Lights 12,202 General Repairs and Maintenance 399 Trash Collection 54,664 Water 799 TOTAL SERVICE EXPENSES $ 78,367 ADMINISTRATIVE EXPENSES: Accounting $ 7,511 Auditing 5,000 Insurance 5,748 Legal Fees - Association 11,465 Legal Fees - Homeowners 9,516 Miscellaneous 1,047 Newsletter 253 Office Supplies and Expenses 1,155 Property Taxes 8 Social Activities 690 Welcome Wagon 250 TOTAL ADMINISTRATIVE EXPENSES $ 42,643 TOTAL CASH DISBURSEMENTS $ EXCESS OF CASH DISBURSEMENTS OVER CASH RECEIPTS $ (23,186) CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS JANUARY 1, ,707 31, 2010$ The accompanying notes to financial statements are an integral part of this report. -4-

9 The LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1. ORGANIZATION Lakewood Park Two Homeowners Association, Inc., (the Association ) a Texas non-profit corporation, was chartered on July 5, 1984, to provide for the maintenance and preservation of the common property within Lakewood Park Section Two. The Association is empowered by its state charter to administer and enforce covenants, restrictions, easements and liens and to levy and collect charges and assessments to pay necessary expenses. Lakewood Park Section Two is a residential community with 194 homes located in an unincorporated area on the northwest side of Harris County, Texas. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements have been prepared using the cash basis of accounting which is a comprehensive basis of accounting other than generally accepted accounting principles in the United States of America as promulgated by the Financial Accounting Standards Board. A. Basis of Accounting - financial statements were prepared using the cash basis of accounting. Under this method, revenues were recorded in the period received. Expenses are recognized in the period they were paid. Asset purchases/sales and other balance sheet transactions are shown as disbursements and/or receipts in the year the transaction occurred. The cash basis differs from generally accepted accounting principles primarily because the effects of outstanding maintenance assessments and obligations for expenses unpaid at the date of the financial statements are not included in the financial statements. B. Cash and Cash Equivalents - The Association considers all amounts in checking accounts, money market deposit accounts, money market funds and petty cash to be cash and cash equivalents. Certificates of deposit are included in cash and cash equivalents regardless of their maturity date. The carrying value of cash and cash equivalents approximates fair value because of the short maturities of these financial instruments. C. Property and Equipment - The Association does not capitalize purchases for land, buildings and equipment nor is equipment depreciated. See Note 5 regarding the reserve for future major repairs and replacements. The Association has had park land and park improvements deeded to it by a developer on September 18, The land and improvements were appraised at a market value of $81,425 as of September 10, The property was conveyed for the purpose of establishing and maintaining recreational facilities. The land and improvements will revert to the developer -5-

10 The LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. NOTES TO FINANCIAL STATEMENTS NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Property and Equipment (Continued) or successors should the Association cease to use the property as a recreational facility or at any time abandon, or attempt to sell, lease or otherwise dispose of the property. D. Income Taxes The Association was granted an exemption under Section 501(c)(4) of the Internal Revenue Code on September 3, 1996, effective back to July 5, Since the Association was determined to be exempt from federal income tax, no provision for income taxes has been made. E. Other Taxes Association was granted an exemption from state franchise tax as a homeowners association by the Comptroller of Public Accounts effective May 1, The Association is also exempted from paying the Texas limited sales, excise and use tax when purchasing taxable items or services, effective July 5, NOTE 3. MAINTENANCE ASSESSMENT The bylaws of the Association provide for the assessment of annual and special assessments which are secured by a continuing lien upon the property against which the assessment is made. Assessments are due and payable on January 1 of each year. Assessments not paid within 30 days after the due date are delinquent and any services provided from such assessments may be terminated. In addition, delinquent assessments shall be charged interest at the rate of 10 percent per annum from the due date. The Association may bring legal action against the owner of the assessed property or foreclose against the property. As established in the Declaration of Covenants, Conditions and Restrictions as amended on November 6, 1985, the maximum annual assessment was set at $240 per lot. The maximum assessment may be increased effective January 1 of each year in conformance with the rise in the Consumer Price Index for Urban Wage Earners and Clerical Workers or any successor publication for the preceding month of July or by an amount equal to a 10 percent increase over the prior year s annual assessment, whichever is greater, without a vote of the membership. An increase in excess of the above limits requires the vote of two-thirds of each class of members in attendance at a special meeting called for the purpose of increasing the assessment above such limits or written approval of two-thirds of each class of membership if a door-to-door canvass is used. Homeowners shall be assessed 100 percent of the annual assessment for each residential lot or portion thereof owned. The rate of assessment for each lot shall change as the character of ownership and status changes. -6-

11 January December LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. NOTES TO FINANCIAL STATEMENTS NOTE 3. MAINTENANCE ASSESSMENT (Continued) Annual assessments shall be used exclusively to promote the recreation, health, safety and welfare of the residents. See Note 5 for additional disclosure. The annual assessment for 2010 was $350 per lot. The following is a summary of the assessment activity for 2010: Assessments Receivable 1,2010 $ 26,781 Maintenance Assessment 89,425 Legal Fees 3,921 Current Collections (96,691) Adjustments (434) Assessments Receivable 31, 2010 $ NOTE 4. SECURITY OF CASH AND CASH EQUIVALENTS At December 31, 2010, the carrying amount of the Association s deposits was $64,521 and the bank balance was $64,580. All the Association s funds were deposited through Edward Jones and covered by Securities Investor Protection Corporation or federal depository insurance. NOTE 5. FUTURE MAJOR REPAIRS AND REPLACEMENTS The Association s governing documents do not require the accumulation of funds to finance estimated future major repairs and replacements; however, they do provide for the levying of a special assessment for capital improvements. The Association s Board of Directors conducted a study in November 1996 to determine the remaining useful lives of the components of common property and estimates of the costs that may be required for future major repairs and replacements. The study is usually reviewed annually by the Board of Directors as part of the budget preparation. The last review and update were done in conjunction with the preparation of the 2011 budget. The Association is funding such major repairs and replacements over the estimated useful lives of the components based upon estimates of current replacement costs, considering amounts previously accumulated for such major repairs and replacements. Actual expenditures, however, may vary from the estimated amounts and the variations may be material. Therefore, amounts accumulated may not be adequate to meet future needs. If additional funds are needed, however, the Association has the right, subject to member approval, to increase regular assessments or it may delay major repairs and replacement until funds are available. -7-

12 LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. NOTES TO FINANCIAL STATEMENTS NOTE 5. FUTURE MAJOR REPAIRS AND REPLACEMENTS (Continued) Reserve activity for the current year is summarized below: Reserve at January 1, 2010 $ 92,499 Current Funding 11, Repairs and Replacements (399) 2010 Reallocations (2,342) Reserve at December 31, 2010 $ 101,103 NOTE 6. EVALUATION OF SUBSEQUENT EVENTS The Association has evaluated subsequent events through July 19, 2011, the date which the financial statements were available to be issued. -8-

13 LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. REQUIRED SUPPLEMENTARY INFORMATION

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15 LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. SUPPLEMENTARY INFORMATION ON FUTURE MAJOR REPAIRS AND REPLACEMENTS The Board of Directors conducted a study in November 1996 to estimate the remaining useful lives and the replacement costs of the components of the common property. The estimates were determined by the Board of Directors based upon estimated current replacement cost. The study is usually reviewed annually by the Board of Directors as part of the budget preparation. The last review and update were done in conjunction with the preparation of the 2011 budget. The following table is based on the study and presents significant information about the components of the common property. Estimated Estimated Components of Remaining Life End Fund Balance Current Useful Lives Replacement January 1, Year Components (Years) Costs 2010 Funding Playground Equipment 2-12 $ 84,000 $ 47,586 $ 5,193 Pavilion 4 6,095 4, Park Fences ,204 15,678 1,486 Park Sprinklers 1 4,020 3, Entrance Signs 9 24,899 6,808 1,810 Baseball Back Stop/Fence 1 4,595 4, Park Signs 1 1, Entrance Sprinklers 1 4,020 3, Park Lights 1 5,169 4, HP Laserjet Printer Drinking Fountain 1 2,000 1, Total $ 159,367 $ 92,499 $ 11,345 See accompanying independent auditor s report

16 Components of 2010 Repairs Fund Balance and 2010 December31, 2011 Funding Replacements Reallocations 2010 Requirements $ $ (525) $ 52,254 $ 5,281 (19) 4, (102) 17,062 1,511 (225) (103) 3, (284) 8,334 1,840 (301) 4, (188) (8) 3, (174) (333) 4, (27) (452) 1, $ (2,342) $ $ 11,530 See accompanying independent auditor s report. -11-

17 LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. OTHER SUPPLEMENTARY INFORMATION

18 Association Homeowners LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS - BUDGET AND ACTUAL FOR THE YEAR ENDED Variance Favorable Budget Actual (Unfavorable) CASH RECEIPTS Maintenance Fees $ 89,425 $ 86,967 $ (2,458) Interest on Investments 2, (1,653) Delinquent Fee Interest 1,000 1, Transfer Fees 1,200 1, Legal Fee Income 10,500 6,380 (4,120) Miscellaneous Income TOTAL CASH RECEIPTS $ 104,900 $ $ (7,076) CASH DISBURSEMENTS SERVICE EXPENSES: Landscaping Maintenance $ 10,016 $ 10,303 $ (287) Street Lights 12,000 12,202 (202) General Repairs and Maintenance Trash Collection 51,500 54,664 (3,164) Water 1, TOTAL SERVICE EXPENSES $ 75,316 $ 78,367 $ (3,051) ADMINISTRATIVE EXPENSES: Accounting $ 7,500 $ 7,511 $ (II) Auditing 5,000 5,000 Insurance 6,296 5, Legal Fees ,465 (10,965) Legal Fees - 14,000 9,516 4,484 Miscellaneous 950 1,047 (97) Newsletter (103) Office Supplies and Expenses 1,292 1, Property Taxes 8 8 Social Activities Welcome Wagon (50) TOTAL ADMINISTRATIVE EXPENSES $ 36,746 $ $ (5,897) See accompanying independent auditor s report

19 - LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS - BUTGET AND ACTUAL FOR THE YEAR ENDED Variance Favorable Budget Actual (Unfavorable) TOTAL CASH DISBURSEMENTS $ 112,062 $ 121,010 $ (8,948) EXCESS OF CASH DISBURSEMENTS OVER CASH RECEIPTS $ (7,162) $ (23,186) $ (16,024) CASH AND CASh EQUWALENTS JANUARY 1, ,707 87,707 CASH AND CASH EQUiVALENTS $ S 64,521 S (16,024) See accompanying independent auditor s report

20 LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. SCHEDULE OF INSURANCE COVERAGE From Amount of Type of Coverage To Coverage Insurer/Name PROPERTY 09/11/10 ACE American Lloyds Blanket Amount 09/1 1/1 1 $ 125,079 Insurance Company Deductible 500 GENERAL LIABILITY 09/11/10 ACE American Lloyds General Aggregate 09/1 1/11 $ 2,000,000 Insurance Company Products/Completed Operations 2,000,000 Personal and Advertising Injury 1,000,000 Each Occurrence 1,000,000 Fire Legal 100,000 DIRECTORS AND OFFICERS 09/11/10 St. Paul Travelers LIABILITY 09/1 1/1 1 Casualty and Surety Each Loss $ 1,000,000 Company Each Policy Year 1,000,000 FIDELITY BOND 05/16/10 S 100,000 St. Paul Travelers 05/16/1 1 Casualty and Surety Company AUTOMOBILE LIABILITY 09/11/10 ACE American Lloyds Combined Single Limit 09/11/11 $ 1,000,000 Insurance Company See accompanying independent auditor s report

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22 LAKEWOOD PARK TWO HOMEOWNERS ASSOCIATION, INC. BOARD OF DIRECTORS Association Mailing Address: Lakewood Park Two Homeowners Association, Inc Avenplace Road Tomball, TX Board Member Don Abrens Willowpark Drive Tomball, TX David Grimme Lakestone Drive Tomball, TX Sara Beth Bruton Willowpark Drive Tomball,TX Roger Huntington Lakestone Drive Tomball, TX Marty Resweber Willowpark Dr. Tomball, TX Mark Taylor Willowpark Dr. Tomball, TX Title President/Director Vice President/Director Secretary/Director Treasurer/Director Director Director See accompanying independent auditor s report