The Keystone Neighbourhood Company, Inc. (A Colorado Non-Profit Corporation. Financial Statements December 31, 2017

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1 (A Colorado Non-Profit Corporation Financial Statements

2 Table of Contents INDEPENDENT AUDITOR'S REPORT 1-2 Basic Financial Statements: Balance Sheets 3 Statements of Revenues, Expenses and Changes in Fund Balances 4 Statements of Cash Flows 5 Page Notes to the Financial Statements 6-12 Supplementary Schedules: Schedule of Operating Revenues and Expenses - Budget and Actual Supplementary Schedule of Community Capital Reserve Fund Future Repairs and Replacements i

3 M & A McMahan and Associates, l.l.c. Certified Public Accountants and Consultants Web Site: Chapel Square, Bldg C Main Office: (970) Chapel Place, Suite 300 Facsimile: (970) P.O. Box 5850, Avon, CO mcmahan@mcmahancpa.com INDEPENDENT AUDITOR S REPORT To the Board of Directors The Keystone Neighbourhood Company, Inc. Keystone, Colorado Report on the Financial Statements We have audited the accompanying financial statements of The Keystone Neighbourhood Company, Inc. (the Association ), a Colorado non-profit corporation, which comprise the balance sheets as of, 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 Responsibilities 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. Auditor s 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 of material misstatement. An audit includes 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 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 purposes 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 financial statements. We believe that the audit evidence we obtained is sufficient and appropriate to provide a 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 The Keystone Neighbourhood Company, Inc. as of, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Member: American Institute of Certified Public Accountants Paul J. Backes, CPA, CGMA Avon: (970) Michael N. Jenkins, CA, CPA, CGMA Aspen: (970) Daniel R. Cudahy, CPA, CGMA Frisco: (970)

4 INDEPENDENT AUDITOR S REPORT To the Board of Directors The Keystone Neighbourhood Company, Inc. Keystone, Colorado Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplemental schedules on pages are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of the Association 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 audit 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, except for that portion marked unaudited, on which we express no opinion, is fairly stated in all material respects in relation to the financial statements as a whole. Disclaimer of Opinion on Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Schedule of Future Major Repairs and Replacements on pages 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 December 31, 2016 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated May 11, 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. McMahan and Associates, L.L.C. June 21,

5 BASIC FINANCIAL STATEMENTS

6 Balance Sheets With Comparative Totals For the Year Ended Replacement Funds Community Community Capital Community Operating Facilities Reserve Improvements Fund Fund Fund Fund Total Total Assets: Current assets: Cash and cash equivalents 1,256,097 (3,460) 423,888 1,770 1,678, ,520 Investments 2,436,804 1,041,691 3,082,910 1,644,830 8,206,235 7,989,999 Accounts receivable, net of allowance for doubtful accounts 95, , ,164 Prepaid expenses 77, ,770 51,294 Inventory 22, ,968 19,825 Due (to) from other fund (3,528,440) 446,997 2,470, , Total Current Assets 360,271 1,485,228 5,977,189 2,257,652 10,080,340 8,513,802 Fixed assets: Equipment 609, , ,326 Tenant improvements 187, , ,607 Less: Accumulated depreciation (434,924) (434,924) (365,123) Net Fixed Assets 362, , ,810 Total Assets 722,455 1,485,228 5,977,189 2,257,652 10,442,524 8,758,612 Liabilities and Fund Equity: Current liabilities: Accounts payable 110, , ,905 Other payable 111, ,796 93,803 Deposits 241, , ,391 Total Liabilities 462, , ,099 Fund equity: Fund balances 259,457 1,485,228 5,977,189 2,257,652 9,979,526 8,367,513 Total Fund Equity 259,457 1,485,228 5,977,189 2,257,652 9,979,526 8,367,513 Total Liabilities and Fund Equity 722,455 1,485,228 5,977,189 2,257,652 10,442,524 8,758,612 The accompanying notes are an integral part of these financial statements. 3

7 Statements of Revenues, Expenses and Changes in Fund Balances For the Year Ended (With Comparative Totals For the Year Ended 2016) Replacement Funds Community Community Capital Community Operating Facilities Reserve Improvements Fund Fund Fund Fund Total Total Revenues: Real estate assessments - 181,917 1,637,254-1,819,171 1,566,888 Real estate transfer assessments 1,957, ,957,666 1,046,036 Sales assessments 216, , ,334 Recreation assessments 22, ,936 23,327 Event revenue and sponsorships 481, , ,321 Warren Station 291, , ,490 Interest income 17,969 7,860 24,105 14,185 64,119 29,666 Commercial trash 188, , ,203 Other 102, ,464 49,537 Total Revenues 3,279, ,777 1,661,359 14,185 5,144,368 3,758,802 Expenses: General and administrative 494, , ,190 Depreciation 69, ,801 52,132 Security 98, ,144 98,144 Road snow removal and maintenance 111,151-16, , ,853 Plaza snow and litter removal 718, , ,345 Common area maintenance 332, , , , ,346 Pool maintenance 65,660-6,888-72,548 83,114 Community events 1,094, ,094, ,013 Other capital projects ,127 11,055 75,182 78,837 Other 35, ,351 23,549 Total Expenses 3,019, , ,184 3,532,355 3,120,523 Excess (Deficiency) of Revenues Over Expenses 259, ,777 1,351,778 (188,999) 1,612, ,279 Fund Balances - Beginning of Year - 1,295,451 4,625,411 2,446,651 8,367,513 7,729,234 Fund Balances - End of Year 259,457 1,485,228 5,977,189 2,257,652 9,979,526 8,367,513 The accompanying notes are an integral part of these financial statements. 4

8 Statements of Cash Flows For the Year Ended (With Comparative Totals For the Year Ended 2016) Replacement Funds Community Community Capital Community Operating Facilities Reserve Improvements Fund Fund Fund Fund Total Total Cash Flows From Operating Activities: Cash received from members and others 2,328, ,917 1,637,254-4,147,540 2,830,367 Other cash received 1,063, ,063, ,551 Interest received 19,754 8,284 24,476 13,584 66,098 24,946 Cash paid for goods and services (1,757,450) - (309,581) (203,184) (2,270,215) (1,862,622) Interest paid (670) Cash paid for salaries and benefits (1,250,795) (1,250,795) (1,145,633) Transfers 1,050,915 (25,789) (1,052,285) 27, Net Cash Provided (Used) by Operating Activities 1,454, , ,864 (162,441) 1,756, ,939 Cash Flows From Investing Activities: Cash payments for purchase of fixed assets (187,175) (187,175) (98,363) Sale of investments 1,336, ,000 1,944,000 1,175,000 5,138,648 6,111,172 Purchase of investments (1,491,414) (866,968) (1,981,979) (1,016,500) (5,356,861) (7,848,430) Net Cash Provided (Used) by Investing Activities (341,941) (183,968) (37,979) 158,500 (405,388) (1,835,621) Net Increase (Decrease) in Cash 1,112,387 (19,556) 261,885 (3,941) 1,350,775 (1,098,682) Cash - Beginning of Year 143,708 16, ,004 5, ,520 1,426,202 Cash - End of Year 1,256,095 (3,460) 423,889 1,771 1,678, ,520 Reconciliation of Excess (Deficiency) of Revenues Over Expenses to Net Cash Provided (Used) by Operating Activities: Excess (deficiency) of revenues over expenses 259, ,777 1,351,778 (188,999) 1,612, ,279 Adjustments: Depreciation 69, ,801 52,132 Unrealized (gain) loss on investments 1, (601) 1,979 (4,720) (Increase) decrease in accounts receivable 30, ,090 3,138 (Increase) decrease in prepaid expenses (26,476) (26,476) (2,285) (Increase) decrease in inventory (3,143) (3,143) 481 Increase (decrease) in accounts payable (46,830) (46,830) 42,769 Increase (decrease) in other payable 17, ,993 18,501 Increase (decrease) in deposits 100, ,736 (11,354) Increase (decrease) in due to/from other funds 1,050,915 (25,789) (1,052,285) 27,159 - (2) Total Adjustments 1,194,871 (25,365) (1,051,914) 26, ,150 98,660 Net Cash Provided (Used) by Operating Activities 1,454, , ,864 (162,441) 1,756, ,939 The accompanying notes are an integral part of these financial statements. 5

9 NOTES TO THE FINANCIAL STATEMENTS

10 Notes to the Financial Statements 1. Organization The Keystone Neighbourhood Company, Inc. (the Company ), a Colorado non-profit corporation, is the owners association for a large planned community located in Summit County, Colorado. The Neighbourhoods at Keystone was created by Keystone/Intrawest, L.L.C., (the Declarant ) pursuant to the Colorado Common Interest Ownership Act on November 30, During the year ended December 31, 2003, the Declarant changed to Vail Summit Resorts, Inc. Effective November 30, 2015 the Association s control transferred to non-declarant property owners. The Company s purposes are (1) to acquire, own, lease and manage the common elements; (2) to provide facilities and services to owners, guests and general public; (3) administer and enforce the covenants, conditions, restrictions, reservations and easements created by the Declaration of Covenants, Conditions and Restrictions for The Neighbourhoods at Keystone (the Declaration ); (4) to levy, collect and enforce the assessments imposed by the Declaration; (5) to promote the Neighbourhoods at Keystone as a four season destination resort community; (6) to maintain and enhance property values; (7) to take any action it deems necessary to protect the general welfare of owners, guests and general public; (8) to enter into agreements with respect to the foregoing; and (9) to regulate and manage the Neighbourhoods at Keystone. The membership in the Company is comprised of every owner of property within the boundaries of The Neighbourhoods at Keystone. There are five classes of members; residential, commercial, lodges, resort parcels and undeveloped land. The operations of the Company are managed by an executive board of nine directors; this executive board is comprised of three residential directors, two commercial directors, one lodging director, one resort director and two at large directors. 2. Summary of Significant Accounting Policies A. Fund Accounting The Company uses the fund method of accounting, which requires funds, such as operating funds, funds for future major repairs, replacements and capital expenditures, and funds collected for specially designated purposes, be classified separately for accounting and reporting purposes. B. Basis of Accounting The financial statements have been prepared using the accrual method of accounting, which recognizes revenue when earned or assessed and expenses when incurred. C. Cash Equivalents Checking, money market savings, and money market fund accounts are considered cash equivalents by the Company for the purpose of the Statement of Cash Flows since these accounts have no stated maturities. D. Investments The Company invests certain excess funds in certificates of deposit. Because these securities are intended to fund future Replacement Fund expenditures and may provide a ready source of cash when so required, these investments are classified as trading. Accordingly, these securities are reported on the financial statements at fair value and all realized and unrealized gains and losses are included in current period earnings. 6

11 Notes to the Financial Statements 2. Summary of Significant Accounting Policies (continued) E. Recognition of Assets Real and personal common property acquired by the original homeowners is not recognized on the financial statements of the Company because it is commonly owned by individual owners and its disposition by the Board is restricted. The Company recognizes as assets on its financial statements only common real and personal property to which it has title and that it can dispose of for cash, while retaining the proceeds thereto. Such assets are recorded at cost. Equipment owned by the Company is depreciated on the straight-line method over estimated useful lives ranging from five to seven years, while tenant improvements are depreciated over a twenty year useful life. For the year ended, fixed assets were comprised of the following: Beginning Ending Balance Additions Deletions Balance Fixed assets: Equipment $ 422, , ,501 Tenant improvements 187, ,607 Total fixed assets 609, , ,108 Less: Accumulated depreciation (365,123) (69,801) - (434,924) Total fixed assets, net $ 244, , ,184 F. Allowance or Uncollectible Accounts The Company uses the allowance method for recognizing the future potential uncollectibility of accounts receivable. This reserve is generally calculated based on the estimated uncollectible accounts 90 or more days overdue. At, the Company considered all amounts collectible, therefore, no allowance was established to estimate the uncollectible balances. The Company s policy is to charge late fees to owner accounts that are 61 or more days overdue. G. Due To/From Other Funds The Company has chosen to record all accounts receivable and accounts payable in the Operating Fund. In accordance with generally accepted accounting principles, the differences in the individual funds caused by this accounting policy results in interfund assets and liability accounts on the financial statements. H. Inventory Inventory is stated at cost, which approximates market value, utilizing the first-in, first-out method. 7

12 Notes to the Financial Statements 2. Summary of Significant Accounting Policies (continued) I. Investment Income Investment income is allocated among funds based on average fund balances. J. Use of 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 account differ from those estimates. K. Comparative Information The financial statements include certain prior year comparative information in total but not by fund. Such information does not include sufficient detail to constitute a presentation in conformity to generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Company s financial statements for the year ended December 31, 2016, from which the comparative totals were derived. Certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year s presentation. L. Subsequent Events Management has evaluated subsequent events through June 21, 2018, the date these financial statements were available to be issued. M. Income Taxes For federal income tax purposes, as of June 12, 2017, The Company has qualified as a tax-exempt organization under Section 501(c)(4) of the Internal Revenue Code and, accordingly, is not subject to federal income taxes on its related income. The Company s returns are no longer subject to examination for tax years prior to 2014 by the Internal Revenue Service. 8

13 Notes to the Financial Statements 3. Cash and Cash Equivalents At, the Company s cash and cash equivalents consist of the following: Cash and Cash Equivalents: Cash on hand 7,750 Checking 394,576 Money funds - U.S. Treasuries 1,275,969 Total cash and cash equivalents $ 1,678, Investments The Company has the following investments at : Certificates of deposit: Bearing interest at 0.850% % per annum, maturing within one year 7,313,807 Bearing interest at 1.700% % per annum, maturing 892,428 in more than one year Total investments $ 8,206, Assessments and Common Expenses The Board prepares an annual budget to estimate the annual expenses of maintaining the Company s common elements. Since the Company is signed only to operate as a conduit to collect assessments and pay operating expenses on behalf of members, any excess of deficiency of revenues over expenses is repaid to or recovered from the members in a subsequent year by reducing or increasing assessments, or, with the approval of the Company s membership, transferred to the Replacement Funds The Declaration empowers the Company to levy the following assessments to defray the costs of operations and to provide for future major repairs, replacements and improvements. A. Annual Real Estate Assessment Owners property is subject to an annual real estate assessment, of which 10 percent shall be deemed to be contributions of capital to be placed in a Community Facilities Fund for use to construct and/or finance community development projects. The Annual Real Estate Assessment (AREA) is based on Summit County s assessed value for the real estate within the Neighbourhoods at Keystone (KNC). The Company calculated a shared percentage of this overall KNC assessed value to come up with the budgeted amount of AREA. 9

14 Notes to the Financial Statements 5. Assessments and Common Expenses (Continued) B. Sales and Recreation Assessments The Company also collects sales and recreational assessments on all local sales and operations of recreational activities at the rate of ½ of 1 percent. C. Real Estate Transfer Assessments The occurrence of any transfer of property within the boundaries of the Company is subject to a real estate transfer assessment at 2 percent of the sales price or transfer at fair market value. D. Special Assessments 6. Related Party The Company has the right to assess special assessments in the event there is a budget deficit. No special assessments were levied in Effective January 1, 2011, the Company signed an agreement with Vail Summit Resorts, Inc. (Vail Resorts) to provide the Company with security. The initial term was for one year with renewal for subsequent one-year terms upon mutual written agreement. Additionally, effective August 19, 2011 the Company has entered into an agreement with Vail Summit Resorts, Inc. in which the Company will not request conveyance of the Dercum Square Property for twenty years except under certain conditions after fifteen years. Such conveyance to the Company is allowed by the Keystone Resort Planned Unit Development ( PUD ) for conditions as noted in the PUD. The agreement has been entered into in order to facilitate the Vail Resorts construction and operation of an ice rink at the site which is agreed will be a benefit to both parties. The Company paid the following expenses in 2017 for services provided from Vail Resorts and/or its related companies Security $ 98,143 Common area maintenance 77,649 Plaza maintenance and utilities 14,715 Pool labor and maintenance 16,858 Office expense 13,360 Rent 44,854 Warren Station events 3,089 Total $ 268,668 At, the Company owed Vail Resorts $10,556. The Company received assessments and other various revenues from Vail Resorts and/or its related companies in 2017 totaling $646,670, which comprised approximately 17% of the Company s fiscal year 2017 revenues. At, Vail Resorts and/or its related companies owed the Company $23,

15 Notes to the Financial Statements 7. Replacement Funds The Company has established replacement funds to comply with the Declaration and to provide funds for future capital projects and major repairs and replacements. The following replacement funds have been established: The Community Facilities Fund was established in accordance with the provisions of the Declaration which requires that 10 percent of the real estate assessments by put into the fund for the purpose of facilitating the construction and financing of community facilities. The Capital Reserve Fund was established by the Company to repair and replace existing capital improvements and to support any other project that the Company decides is a capital project priority. The Community Improvements Fund was established to fund improvements for the community that are not major facilities (i.e. buildings). These could include playgrounds, public furniture, fire pits, outdoor amphitheaters, information kiosks, lights/stage/sound systems, trails, signage, parks and other community improvements. 8. Future Major Repairs and Replacement Reserve The Company s governing documents allow for the accumulation of funds for future major repairs and replacements. Accumulated funds are held in separate accounts and generally are not available for expenditures for normal operations. For 2017, the Company did not levy any specific assessments to fund Replacement Fund expenses; rather, such expenses were funded from accumulated fund balances and from allocations of annual real estate assessments from the Operating Fund. In accordance with industry guidelines, it is the Company s primary duty to maintain and preserve the common property of the owners. Therefore, it is the Company s responsibility to determine a method for funding the costs of future major repairs and maintenance by assessing owners when funds are needed or by anticipating costs over extended time periods, assessing owners for the anticipated costs, and accumulating funds in reserve to meet the future funding requirements. During the fiscal year ended, the Company commissioned a study to estimate the remaining useful lives and the replacement costs of the components of common property. The study assumes a 3.00% rate of inflation, a 1.0% annual contribution inflation rate, and a 0.5% - 0.1% return on investments through The table included in the unaudited supplementary information on future major repairs and replacements is based on the study. The Company is funding for major repairs and replacements over the remaining useful lives of the components based on the study s estimates of current replacement costs and consideration of amounts previously accumulated in the reserve funds. Funds are being accumulated in the reserve funds based on estimates of future needs for repairs, replacements and new additions to common property components. Actual expenditures may vary from the estimated future expenditures, and the variations may be material. Therefore, amounts accumulated in the reserve funds may not be adequate to meet all future needs for major repairs and replacements. If additional funds are needed, the Company has the right, subject to the Board s approval, to increase regular assessments, pass special assessments, or delay major repairs and replacements until funds are available. 11

16 Notes to the Financial Statements 9. Concentration The Company s revenues for real estate transfer assessments, sales assessments and recreation assessments are materially produced as a result of the sales of real estate and the leasing of commercial real estate units by Vail Resorts, or its related parties. The Association s cash balances held with financial institutions were insured by the Federal Deposit Insurance Corporation (the FDIC ) at up to $250,000 per depositor at each separately chartered FDIC-member financial institution. At, the Association s uninsured cash balances totaled $1,196, Retirement Plan On January 1, 1998, the Company established a SIMPLE Retirement Plan for employees who have worked for the Company during any one prior year and received at least $5,000 in compensation during such prior year. The Company is required to make a matching contribution not in excess of 3% of an employee s compensation and not to exceed $6,000. Each employee s amount is 100% vested immediately and non-forfeitable at all times. For the year ended, the Company contributed $10,895 to employees who were eligible and participated in the plan. 11. Operating Lease Office Space The Company leases office space under an operating lease agreement with Vail Summit Resorts, Inc. The lease calls for monthly rentals through expiry in February In addition to base rent, the Company is responsible for its allocated share of taxes, common area charges, and other operating costs related to this space. The lease contains a five year renewal option. Rent for the year ended was $47,925. Future minimum rental payments (base rent) due under terms of the Company s operating lease at are as follows: Year Minimum Rental Payments , , ,817 Total $ 62,617 12

17 SUPPLEMENTARY SCHEDULES

18 Schedule of Operating Revenues and Expenses Budget (Non-GAAP Basis) and Actual With Reconciliation to GAAP Basis For the Year Ended (With Comparative Actual Amounts For the Year Ended 2016) Variance Budget Positive (Unaudited) Actual (Negative) Actual Revenues: Real estate assessments 1,763,377 1,819,171 55,794 1,566,888 Less: Allocation to reserve funds - (1,819,171) (1,819,171) (916,843) Real estate transfer assessments 850,000 1,957,666 1,107,666 1,046,036 Sales assessments 190, ,941 26, ,334 Recreation assessments 22,000 22, ,327 Event revenue and sponsorships 435, ,438 45, ,321 Warren Station 220, ,415 70, ,490 Interest income 11,975 17,969 5,994 5,109 Commercial trash 165, ,218 23, ,203 Other 18, ,464 84,436 34,837 Total Revenues 3,676,570 3,279,047 (397,523) 2,802,702 Expenses: General and administrative: Payroll and benefits 285, ,174 1, ,178 Audit and tax preparation 16,974 18,280 (1,306) 9,840 Legal 17,500 18,034 (534) 19,921 Insurance 60,183 40,985 19,198 51,091 Income taxes 1,500 4,045 (2,545) - Bad debt expense 3, ,201 - Office expense 139, ,194 11, ,077 Total general and administrative 524, ,011 30, ,107 Security: Commercial & residential 100,428 98,144 2,284 98,144 Total security 100,428 98,144 2,284 98,144 Road snow removal and maintenance: Snow removal and hauling 77,000 40,129 36, ,265 Trail Head Drive utilities 92,000 71,001 20,999 77,687 Road repairs 1, ,379 - Total road snow removal and maintenance 170, ,151 59, ,952 Plaza snow and litter removal: Commercial trash 52,600 70,240 (17,640) 55,279 Labor 614, ,091 4, ,323 Machine time/service 24,349 24,783 (434) 23,233 Snowmelt utilities 17,250 13,138 4,112 13,510 Total plaza snow and litter removal 709, ,252 (9,118) 656,345 (continued) The accompanying notes are an integral part of these financial statements. 13

19 Schedule of Operating Revenues and Expenses Budget (Non-GAAP Basis) and Actual With Reconciliation to GAAP Basis For the Year Ended (With Comparative Actual Amounts For the Year Ended 2016) (Continued) Variance Budget Positive (Unaudited) Actual (Negative) Actual Expenses (continued): Common area maintenance: Plaza maintenance 80,878 98,399 (17,521) 86,662 Plaza utilities 48,500 39,339 9,161 40,528 Restroom cleaning 81,351 84,053 (2,702) 74,819 Signage 2, , Summer landscaping 110, ,624 (21) 95,046 Total common area maintenance 323, ,524 (9,192) 298,042 Pool maintenance: Restroom cleaning 7,496 9,271 (1,775) 9,300 Chemicals 10,930 4,746 6,184 4,367 Utilities 28,678 31,090 (2,412) 27,449 Maintenance and repair 19,145 20,553 (1,408) 17,302 Total pool maintenance 66,249 65, ,418 Community events: Community events 642, ,450 (19,174) 612,641 Weddings 23,500 26,456 (2,956) 24,828 Warren Station 365, ,790 (41,736) 322,544 Total community events 1,030,830 1,094,696 (63,866) 960,013 Design review, transit and other: Design review 28,571 35,351 (6,780) 23,549 Depreciation 32,000 69,801 (37,801) 52,132 Total Expenses 2,985,180 3,019,590 (34,410) 2,802,702 The accompanying notes are an integral part of these financial statements. 14

20 Supplementary Schedule of Community Capital Reserve Fund Future Repairs and Replacements (Unaudited) The Association's Board of Directors commissioned a study by independent reserve study engineers to estimate the remaining useful lives and the replacement costs of components of common property. The final report was issued August 15, The study projected fund balance, but did not allocate fund balance between the individual reserve study items, nor has the Board elected to allocate fund balance between the components of common property. The following table is based on the study and presents significant information about the components of the Association's common property. Estimated Estimated Remaining Current Useful Lives Replacement Components (Years) Cost River Run Village: Common Area Exterior - Asphalt 5 1,613,167 Common Area Exterior - Concrete ,784 Common Area Exterior - Boardwalk 2 140,424 Common Area Exterior - Pavers 3 306,647 Common Area Mechanical - Pavers and snow melt tubing 3 316,552 Common Area Mechanical - Boilers 1 100,934 Pool and Spa Equipment Room 1 207,863 Pool and Spa Exterior Area and Bath 5 142,245 Playground 5 81,750 Amphitheatre 3 37,060 Information Center ,550 Public Restrooms - Silver Mill 5 43,600 Public Restrooms - Buffalo 3 43,600 Pedestrian Bridges 5 43,600 Bear Pit Maintenance - Interior 3 240,394 Bear Pit Maintenance - Exterior 5 291,575 Bear Pit Maintenance - Equipment 3 239,800 Warren Station - Interior 9 542,493 Warren Station - Exterior 13 1,600,992 Management Office - Interior 4 166,034 Subtotal 6,683,064 (continued) The accompanying notes are an integral part of these financial statements. 15

21 Supplementary Schedule of Community Capital Reserve Fund Future Repairs and Replacements (Unaudited) (Continued) Estimated Estimated Remaining Current Useful Lives Replacement Components (Years) Cost Keystone Neighbourhood - East Common Area Exterior - Asphalt 11 3,193,999 Common Area Exterior - Concrete ,674 Pedestrian Bridges 14 98,100 Vehicular Bridges (non-structural components) ,000 Subtotal 3,732,773 Keystone Neighbourhood - Trailhead Drive Common Area Exterior - Concrete and snowmelt tubing ,936 Common Area Exterior - Pavers and snowmelt tubing 3 134,053 Timber Railing 1 81,750 Common Area Exterior - Stone 10 18,312 Common Area Exterior - Boilers 1 402,864 Subtotal 1,456,915 Total Current Replacement Cost 11,872,752 Fully funded balance per the Reserve Study 6,394,409 Community Facilities Fund 1,485,228 Capital Reserve Fund 5,977,189 Total Reserve Funds at 7,462,417 The accompanying notes are an integral part of these financial statements. 16