FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED DECEMBER 31, 2016
TABLE OF CONTENTS Independent Auditor's Report.......................................................................... 1-3 Financial Statements Balance Sheet......................... 4 Statement of Revenues and Expenses............................ 5 Statement of Changes in Fund Balances.... 6 Statement of Cash Flows..................... 7-8 Notes to the Financial Statements..... 9-19 Supplementary Information Schedule of Future Major Repairs and Replacements (Unaudited)...... 20-22 Statement of Revenues and Expenses - Operating Fund - By Category (Unaudited)..... 23-27
INTEGRITY... KNOWLEDGE.... SERVICE.... COMMITMENT Independent Auditor's Report Taylor Morrison of Florida, Inc. Sarasota, FL We have audited the accompanying financial statements of Esplanade Golf & Country Club at Lakewood Ranch, Inc., which comprise the balance sheet as of December 31, 2016, and the related statements of revenues and expenses, changes in fund balances, and cash flows for the year then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the. assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the 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 Affiliations Florida Institute of Certified Public Accountants American Institute of Certified Public Accountants - Management Consulting Services Division/Private Companies Practice Section/Tax Division 1-855-STROEMER www.stroemercpa.com 14030 Metropolis Avenue, Suite 200, Fort Myers, FL 33912 Aventura Fort Myers Jacksonville Naples Orlando' Sanibel Tampa' West Palm Beach' 'By Appointment Only
Taylor Morrison of Florida, Inc. Page 2 evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Esplanade Golf & Country Club at Lakewood Ranch, Inc. as of December 31, 2016 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. sisahpm~ of Matters As discussed in Note C to the financial statements, due to an ambiguity in the Florida statutes, there is an uncertainty as to whether the Declarant is excused from funding contributions to the reserve accounts. It is not possible to predict at this time whether the Declarant will ultimately be responsible for funding their share of the reserve accounts. Our opinion is not modified with respect to this matter. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. We have not applied procedures to determine whether the funds designated for future major repairs and replacements as discussed in Note Gare adequate to meet such future costs because that determination is outside the scope of our audit. Our opinion is not modified with respect to this matter. As reflected in the balance sheet of the financial statements, there is an interfund receivable/payable payable/receivable of $9,971. Even though management does not maintain detail reflecting the interfund activity, these balances exist because of the relationship between the operating and replacement fund, and the movement of cash. On a combined basis, there is no economic impact on the Association. Because management does not maintain the interfund activity, the account detail is not presently determinable. Our opinion is not modified with respect to this matter. Disclaimer of Opinion on Required Supplementary Information Accounting principles generally accepted in the United States of America require that the information about future major repairs and replacements of common property be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is
Taylor Morrison of Florida, Inc. Page 3 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. Disclaimer of Opinion on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplementary Statement of Revenues and Expenses - Operating Fund - By Category, which is the responsibility of the Association's management, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the financial statements, and, accordingly, we do not express an opinion or provide any assurance on it..\ L--:rt--J:i, LL(, STROE:MER & COMP ANY, LLC Fort Myers, Florida March 10, 2017 (_j
BALANCE SHEET December 31, 2016 Page 4 of27 Operating Replacement Fund Fund Total ASSETS Cash and cash equivalents $ 193,775 $ 260,985 $ 454,760 Assessments receivable 6,819 6,819 Other receivables 122,766 122,766 Due from Declarant 528,726 528,726 Interfund receivable/(payable) (9,971) 9,971 Prepaid expenses 2,722 2,722 Utility deposits 17, 190 17, 190 Inventory 86,830 86,830 Property and equipment, net 263z480 263,480 TOTAL ASSETS $ 1,212,337 $ 270,956 $ 1,483,293 LIABILITIES AND FUND BALANCES Capital lease payable $ 265,093 $ $ 265,093 Accounts payable and accrued liabilities 579,329 579,329 Prepaid assessments 288,147 288,147 Deferred revenue 71,768 71,768 Security deposits 8 000 8 000 TOT AL LIABILITIES 1,212,337 1,212,337 FUND BALANCES 270,956 270,956 TOT AL LIABILITIES AND FUND BALANCES $ 1,212,337 $ 270,956 $ 1,4831293 The accompanying notes are an integral part of this statement.
STATEMENT OF REVENUES AND EXPENSES Year ended December 31, 2016 Page 5 of27 Operating Replacement Fund Fund Total REVENUES Golf operations $ 2,056,042 $ $ 2,056,042 Declarant subsidy 1,876,420 1,876,420 Assessments 1,335,897 110, 110 1,446,007 Concessions 563,646 563,646 Club benefit assessments 529,977 529,977 Fitness 103,632 103,632 Spa 96,426 96,426 Voluntary Declarant subsidy 88,000 88,000 Working fund contribution 39,502 39,502 Gates 27,409 27,409 Tennis 24,523 24,523 Lifestyle learning 17,236 17,236 Other income 11,110 11,110 Interest income 109 261 370 TOT AL REVENUES 6,769,929 110,371 6,880,300 EXPENSES Payroll 1,858,048 1,858,048 Repairs and maintenance 1,680,248 1,680,248 General administration 956,856 956,856 Supplies 877,917 877,917 Cost of goods sold 648, 161 648, 161 Utilities 537,017 537,017 Fixed expenses 154,728 154,728 Depreciation 38,404 38,404 Insurance 13,500 13,500 Marketing 5 050 5,050 TOT AL EXPENSES 6,769,929 6,769,929 EXCESS OF REVENUES OVER(UNDER)EXPENSES $ $ 110,371 $ 110,371 The accompanying notes are an integral part of this statement.
STATEMENT OF CHANGES IN FUND BALANCES Year ended December 31, 2016 Page 6 of27 Operating Fund Replacement Fund Total Balances, January 1, 2016 $ $ 160,585 $ 160,585 Excess of revenues over (under) expenses 110,371 110,371 Balances, December 31, 2016 $ $ 270,956 _$ 2_70..,,9_5_6 The accompanying notes are an integral part of this statement.
STATEMENT OF CASH FLOWS Year ended December 31, 2016 Page 7 of27 Operating Replacement Fund Fund Total CASH FLOWS FROM OPERATING ACTIVITIES Cash collected from assessments $ 1,970,201 $ 110,110 $ 2,080,311 Cash collected from Declarant 1,615,648 1,615,648 Cash paid to suppliers (6,615,840) (6,615,840) Golf operations income received 2,056,042 2,056,042 Concessions income received 563,646 563,646 Spa and fitness income received 200,058 200,058 Voluntary deficit funding by Declarant 88,000 88,000 Working fund contribution income received 39,502 39,502 Gates income received 27,409 27,409 Tennis income received 24,523 24,523 Lifestyle learning income received 17,236 17,236 Other income received 11,110 11,110 Interest income received 109 261 370 Interest paid {1,836) (1,836) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (4,192) 110,371 106,179 CASH FLOWS FROM INVESTING ACTMTIES CASH FLOWS FROM FINANCING ACTMTIES Principal payments on capital leases (38,228) (38,228) Interfund transfers 2 333 (2,333) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (35,895) {2,333) {38,228) NET CHANGE IN CASH AND CASH EQUIVALENTS (40,087) 108,038 67,951 Cash and cash equivalents, as of January 1, 2016 233,862 152,947 386,809 CASH AND CASH EQUIVALENTS, AS OF DECEMBER 31, 2016 $ 193,775 $ 260,985 $ 454 760 SUPPLEMENTAL DISCLOSURES Noncash investing and financing transactions: Fixed assets acquired under capital lease $ 233,264 NON-CASH TRANSACTIONS For the year ended December 31, 2016, the Association recorded expenses of $56,285 for expenses paid by the Declarant on behalf of the Association using Declarant funds. The accompanying notes are an integral part of this statement.
STATEMENT OF CASH FLOWS, CONTINUED Year ended December 31, 2016 Page 8 of27 RECONCILIATION OF EXCESS OF REVENUES OVER (UNDER) EXPENSES TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Operating Replacement Fund Fund Total Excess of revenues over (under) expenses $ $ 110,371 $ 110,371 Adjustments to reconcile excess of revenues over (under) expenses to net cash provided by (used in) operating activities: Depreciation expense 38,404 38,404 (Increase)/decrease in assets: Assessments receivable 11,017 11,017 Other receivables (40,227) (40,227) Due from Declarant (204,487) (204,487) Prepaid expenses 4,069 4,069 Utility deposits (3,650) (3,650) Inventory (21,664) (21,664) Increase/ (decrease) in liabilities: Accounts payable and accrued liabilities 156,053 156,053 Prepaid assessments 93,310 93,310 Deferred revenue (29,517) (29,517) Security deposits {7,500) (7,500) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (4,192) $ 110,371 $ 106,179 The accompanying notes are an integral part of this statement.
NOTES TO THE FINANCIAL STATEMENTS December 31, 2016 Page 9 of27 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of organization Esplanade Golf & Country Club at Lakewood Ranch, Inc. (the "Association"), which is located in Sarasota, Florida was incorporated on October 3, 2011 under Chapter 617 of the Florida Statutes as a not-for-profit organization. The Declaration of Covenants, Conditions, Restrictions and Easements (the "Declaration") was filed in the official records of Manatee County, Florida on March 13, 2012. The Association is responsible for the preservation and maintenance of the common property in accordance with the terms of Florida Statutes, Chapter 720, and the provisions of the Declaration. The Association consists of 1,250 residential units of which 621 were closed as of December 31, 2016. The Association's operations began in May, 2012. Fund accounting The Association maintains its accounts using fund accounting. Financial resources are classified for accounting and reporting purposes in the following funds established according to their nature and purpose: Operating fund This fund is used to account for financial resources available for the general operations of the Association. Replacement fund This fund is used to accumulate financial resources designated for future major repairs and replacements. The Association prepares its financial statements on the accrual basis of accounting and in accordance with the "Real Estate - Common Interest Realty Associations" topic of the Financial Accounting Standards Board ("F ASB ") Accounting Standard Codification ("ASC"). Management estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Association to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of
NOTES TO THE FINANCIAL STATEMENTS December 31, 2016 Page 10 of27 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Management estimates, continued contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents For purposes ofreporting cash flows, the Association considers all short-term highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Other receivables Other receivables consist of golf member obligations for consumptions at the clubhouse. Inventory Inventory consists primarily of food, beverage, tennis, spa and pro shop merchandise and are stated at the lower of cost or market using the specific cost method. Deferred revenue Deferred revenue includes the amount of annual fitness membership, and golf membership paid before December 31, 2016 that will be earned after December 31, 2016. Deferred revenue also includes the amount of gift certificates and rain checks sold before December 31, 2016 that had not been claimed as of December 31, 2016. Prepaid assessments Prepaid assessments represents amounts paid to the Association before the assessments were due. Security deposits Security deposits represent amounts paid to the Association by unit owners who are making improvements to their homes. The deposit will be refunded once the improvements have been completed and inspected, if they meet the Association's architectural requirements.
NOTES TO THE FINANCIAL STATEMENTS December 31, 2016 Page 11 of27 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Capital contributions Pursuant to the purchase agreements, purchasers of units are required to pay a capital contribution to the Developer of $1,500. The Developer has given the amount collected in capital contributions to the Association to fund the budget deficit. As such, this is considered a voluntary Declarant subsidy. The amount that was given to the Association was $88,000 for the year ended December 31, 2016 and it is included in the accompanying Statement of Revenues and Expenses. Working fund contribution Pursuant to Section 8 of the amended and restated Declaration each subsequent owner of a lot shall pay to the Association a working fund contribution of $1,500. During the year ended December 31, 2016 the Association collected $39,502 in working fund contributions. Property and equipment The Association follows prevalent industry practice, as contained in ASC Subtopic 972-360, "Real Estate - Common Interest Realty Associations - Property, Plant and Equipment" in accounting for the common property of the Association. Property is capitalized only if the Association has title or other evidence of ownership of the property, and either the Association can dispose of the property or the property is used by the Association to generate significant cash flow from members on the basis of usage or from nonmembers. Property directly associated with the units is not capitalized. Property not directly associated with the units consists of buildings, golf facilities, clubhouse facilities, learning center facilities, wellness center facilities, sports center, pump house, pool, cabana, roadways, and gatehouses. These items are not capitalized as they do not meet the capitalization criteria. Should the Association capitalize assets, it would record the assets at cost and depreciate them using the straight-line method over the estimated useful lives of the assets.
NOTES TO THE FINANCIAL STATEMENTS December 31, 2016 Page 12of27 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Income taxes The Association has selected a December 31 year-end and files its income tax return as a homeowners' association in accordance with Internal Revenue Code Section 528. Under that Section, the Association is not taxed on uniform assessments to unit owners and other income received from Association unit owners solely as a function of their membership in the Association. The Association is taxed at the rate of 3 0% on its nonexempt function income, which includes interest income, less a portion of allocated Association expenses. The Association had no tax due for the year ended December 31, 2016 using the 1120H method of tax filing. The Association's tax filings are subject to audit by various taxing authorities. Certain income tax returns filed by the Association remain open to examination by these government agencies. The Association follows the 11 Income Taxes 11 topic of the FASB ASC in accounting for uncertain tax positions. The Association has evaluated its tax positions and any estimates utilized in its tax returns, and concluded that the Association has taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. Interest and penalties associated with uncertain tax positions will be recognized in income tax expense, if required. Interest earned Interest income earned in the operating fund or the replacement fund is recorded in its respective fund. Concentration of credit risk The Association maintains accounts at a financial institution in bank deposits which, at times, may exceed federally-insured limits. The Association has not experienced any losses on such accounts and believes it is not exposed to any significant risk on cash. Concentration of credit risk with respect to the receivables relate to billings to unit owners who pay quarterly assessments and live within the complex. The Association does not anticipate credit losses in the near future.
NOTES TO THE FINANCIAL STATEMENTS December 31, 2016 Page 13of27 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Fair value of financial instruments The carrying value of cash and cash equivalents, receivables, payables, and amounts due from Declarant approximate fair value due to the short maturity of these financial instruments. Revenue recognition Assessment revenue is billed quarterly and revenue is recognized monthly, in the amount of the assessment allocation specified for current period operations, based on the annual budget adopted by the Board of Directors. Each unit owner is an Association member and a square foot percentage of the assessment is assessed for each unit. The revenues generated by golf operations, concessions, spa, lifestyle learning, gates, and tennis are treated as revenues when sold. Fitness memberships are sold on an annual basis. Revenue is recorded monthly for the prorated amount of one month of the annual membership. Cost of goods sold Cost of goods sold consist primarily of merchandise for golf operations, concession merchandise, personal training, spa and fitness, tennis, lifestyle, and resident social events expenses. Advertising costs The Association's policy is to expense advertising costs as such costs are incurred. NOTE B - ASSESSMENTS RECEIVABLE Assessments receivable are carried at the original charge amount less an estimate made for doubtful receivables, if any, based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Assessments receivable are written off when deemed uncollectible. Recoveries of assessments receivable previously written off are recorded as mcome when received.
NOTES TO THE FINANCIAL STATEMENTS December 31, 2016 Page 14of27 NOTE B - ASSESSMENTS RECEIVABLE, CONTINUED An assessment receivable is considered to be past due if any portion of the receivable balance is outstanding for more than one month. A late fee is charged on assessments receivable that are outstanding for more than one month and is recognized as income as it is charged. As of December 31, 2016, the Association had assessments receivable of: Assessments receivable Allowance for doubtful accounts Amount $ 6,819 $ 6,819 NOTE C - DUE FROM DECLARANT The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America, requires the use of assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such assumptions primarily relate to unsettled transactions which could be effected by changes in state statutes, interpretations of state statutes and/ or the Association's Declaration as of the date of the financial statements. Accordingly, upon settlement actual results may differ from amounts presented in the financial statements. Pursuant to Article VII, Section 7 of the Amended and Restated Declaration the Developer has elected to fund the budget deficit. As part of the deficit funding calculations, the Declarant has used assessments and all other Association income to offset their subsidy obligation. The Declarant's total subsidy obligation to the Association for the year ended December 31, 2016 is $1,876,420. For the year ended December 31, 2016, the Declarant had made total payments of $1,615,648 to the Association, paid $56,285 of Association expenses directly to vendors, and had a due from Declarant of $324,239 at December 31, 2015, leaving a due from Declarant of $528, 726 at December 31, 2016.
NOTES TO THE FINANCIAL STATEMENTS December 31, 2016 Page 15of27 NOTEC- DUE FROM DECLARANT, CONTINUED This is comprised of the following items: Operating Replacement Fund Fund Total Common expenses (other than reserves) $ 6,769,929 $ $ 6,769,929 Funded reserves 110,110 110,110 Assessments from unit owners and all other sources other than the Declarant ( 4,893,509) (110,110) (5,003,619) Declarant's subsidy obligation 1,876,420 1,876,420 Payments made by the Declarant (1,615,648) (1,615,648) Association expenses paid by Declarant (56,285) (56,285) Due from Declarant at December 31, 2015 324,239 324,239 Due from Declarant at December 31, 2016 $ 528,726 $ $ 528i726 The accompanying financial statements have been prepared assuming that since the Declarant has elected to fund the deficit in operating expenses, they are excused from any obligation to fund their share of contributions to the reserve accounts. Due to an ambiguity in the Florida statutes, there is an uncertainty as to whether the Declarant is excused from funding contributions to the reserve accounts or if they are merely excused from paying regular assessments. It is not possible to predict at this time whether the Declarant will ultimately be responsible for funding their share of the reserve accounts.
NOTES TO THE FINANCIAL STATEMENTS December 31, 2016 Page 16 of27 NOTE D - PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 2016. Golf equipment (under capital lease) Gym equipment (under capital lease) Accumulated depreciation Amount $ I 14,326 233,264 (84, 110) $ 263,480 Depreciation expense for the year ended December 31, 2016 was $38,404. NOTE E - CAPITAL LEASES Equipment lease of a turf vacuum, trailer, two spreaders and a sod cutter. The cost and accumulated depreciation of the equipment included in property and equipment at December 31, 2016 is $67,917 and $40,724, respectively. The capital lease requires monthly payments of $1, 19 5, including interest at an imputed rate of2.14% through December, 2018. Amount $ 28,041 Equipment lease of a two sod cutter grinders and a box blade. The cost and accumulated depreciation of the equipment included in property and equipment at December 31, 2016 is $46,408 and $27,829, respectively. The capital lease requires monthly payments of $816, including interest at an imputed rate of2.14% through December, 2018. 19, 161
NOTES TO THE FINANCIAL STATEMENTS December 31, 2016 Page 17 of27 NOTE E - CAPITAL LEASES, CONTINUED Gym equipment. The cost and accumulated depreciation of the equipment included in property and equipment at December 31, 2016 is $233,264 and $15,551, respectively. The capital lease requires monthly payments of $3,923, including interest at an imputed rate of0.994% through August, 2021. Less current portion Long term portion Amount 217,890 265,092 (69, 193) $ 195,899 Future payments under capital leases are as follows for the years ended December 3 1 : Year Ending December 31, Amount 2017 $ 69, 193 2018 70, 156 2019 46,764 2020 47,231 2021 31,749 Total minimum lease payments 265,093 Less: amount representing interest (6,242) Present value of minimum lease payments $ 258,851 NOTEF- OPERA TING LEASES The Association's operating leases consist of the following: Numerous leases with John Deere Financial for various pieces of golf course maintenance equipment. Minimum monthly payments under the leases range from $52 to $1,674 and expire at various times through November, 2018.
NOTES TO THE FINANCIAL STATEMENTS December 31, 2016 Page 18 of27 NOTE F - OPERA TING LEASES, CONTINUED Numerous leases with Yamaha Motor Corporation for various types of golf carts. Minimum monthly payments under the leases range from $126 to $6,000 and expire at various times through December, 2019. Minimum lease payments under these leases are as follows : Year Ending December 31, Amount 2017 $ 105,822 2018 71,621 2019 38,945 $ 216,388 Total lease expense for the year ended December 31, 2016 was, $116,571 and is included in fixed expenses on the accompanying statement of revenues and expenses. NOTE G - REPLACEMENT FUND The Association's governing documents allow the accumulation funds for future major repairs and replacements, unless funding is waived or modified by the unit owners at a unit owner meeting. These funds are generally not available for expenditures for normal operations. Management periodically reviews the major components of common property and establishes estimated remaining useful lives and replacement costs for Association assets. No outside independent analysis of remaining useful lives or future replacement costs has been conducted by the Association. The Association is currently fully funding for such major repairs and replacements over the estimated useful lives of the components based on current replacement costs, using the pooling method. Actual expenditures may vary from the estimated amounts and the variations may be material. Therefore, amounts accumulated in the replacement fund may not be adequate to meet all future major repairs and replacements. If additional
NOTES TO THE FINANCIAL STATEMENTS December 31, 2016 Page 19 of27 NOTE G - REPLACEMENT FUND, CONTINUED funds are needed, the Association has the right to increase regular assessments, levy special assessments, borrow, or delay repairs and replacements until funds are available. The following presents the changes in the replacement fund: NOTE H - Restricted for: Future deferred maintenance and capital expenditures RELATED PARTIES TRANSACTIONS Declarant Beginning Fund Balance Revenues Expenses $ 160,585 $ 110,371 $ ---- Ending Fund Balance $ 270,956 During the year ended December 31, 2016, the Association's Board of Directors was controlled by Taylor Morrison of Florida, Inc. (the "Declarant"). As such, the Declarant controls the Association's management, policy setting, and finances. For year ended December 31, 2016, 28% of the Association's revenue was derived from the Declarant. As of December 31, 2016, the Association had a balance due from the Declarant of $528,726. NOTE I - COMMITMENTS AND CONTINGENCIES The Association maintains insurance coverage for damage sustained by the common property. The insurance coverage in force includes substantial deductible amounts which the Association would be required to fund. In addition, inasmuch as certain other expenses may be incurred by the Association in the event of a hurricane, the ultimate extent of any such loss in excess of the aforementioned maximum deductible cannot be determined. The insurance policy is not recorded on the Association's books. It is included as part of a Master policy in the name of the Declarant. NOTE J - SUBSEQUENT EVENTS Management has assessed subsequent events through March 10, 2017, the date on which the financial statements were available to be issued.
SUPPLEMENTARY INFORMATION
SCHEDULE OF FUTURE MAJOR REPAIRS AND REPLACEMENTS (UNAUDITED) Year ended December 31, 2016 Page 20 of27 There has not been a formal study to estimate the remaining useful lives or to calculate the replacement costs of future major repairs and replacements. The estimated current replacement costs do not include the possible effect of inflation or interest rates between the date of the estimate and the date that the components will require repair or replacement. These estimates were made at the inception of the Association and were established by the Developer based on its knowledge of what it would cost to replace the common property. The Declarant used its contractors to assist in estimating the current replacement costs of the future major repairs and replacements. The following table is based on estimates provided by the Declarant and presents information about the significant components of common property: Estimated Remaining Useful tneno~moc Life Golf Green renovation 17 years Tee renovation 17 years Driving range renovation 7 years Bunker renovation 12 years Golf bridges 17 years Golf bulk head 17 years Irrigation pump station 17 years Golf rest station building roof 17 years Golf rest station building paint 4 years Facilities Gathering center clubhouse (north amenity campus) Roof 20 years Painting 7 years Cart barn chargers 2 years Locker room flooring 10 years Audio video 5 years Aluminum fence 25 years Furniture 7 years Pavers 30 years Estimated Current Replacement $ Costs 450,000 200,000 50,000 120,000 56,000 55,000 30,000 8,000 4,000 75,000 20,000 72,000 20,000 21,500 30,000 95,000 80,000
SCHEDULE OF FUTURE MAJOR REPAIRS AND REPLACEMENTS (UNAUDITED), CONTINUED Year ended December 31, 2016 Page 21 of27 Component Estimated Remaining Useful Life Facilities, continued Learning center (south amenity campus) Roof 16 years Painting 3 years Pickle court resurface 1 year Pickle fences 21 years Pool spa resurfacing 6 years Pool spa equipment 3 years Audio video 1 year Aluminum fence 21 years Furniture 6 years Pavers 30 years Wellness center (north amenity campus) Roof 19 years Painting 6 years Pool spa resurfacing 9 years Pool spa equipment 6 years Secondary pools (multi-family) 9 years Pool spa equipment 6 years Audio video 4 years Exercise equipment 6 years Aluminum fence 24 years Furniture 9 years Pavers 30 years Sports center, pump house, pool cabana Roof 19 years Painting 6 years Tennis court resurface Tennis fences Pool spa resurfacing Pool spa equipment 3 years 23 years 9 years 6 years Estimated Current Replacement Costs 30,000 20,000 46,000 20,000 84,000 12,000 18,500 40,000 75,000 10,500 28,500 7,600 110,000 24,000 75,000 24,000 18,500 80,000 30,000 36,100 30,400 51,000 13,600 120,000 80,000 15,000 16,320
SCHEDULE OF FUTURE MAJOR REPAIRS AND REPLACEMENTS (UNAUDITED), CONTINUED Year ended December 31, 2016 Page 22 of27 Component Estimated Remaining Useful Life Facilities, continued Sports center, pump house, pool cabana, continued Audio video 4 years Aluminum fence 24 years Furniture 9 years Pavers 30 years Roads Roads phase 1 Roads phase 2 Roads phase 3 Roads phase 4 Roads phase 5 Entry Gates - front Gates - rear Gate access system Roof gate house Paint entry 20 years 20 years 20 years 20 years 20 years 19 years 17 years 15 years 20 years 7 years Estimated Current Replacement Costs 15,500 20,400 20,000 30,000 112,800 112,800 112,800 112,800 112,800 37,500 37,500 15,000 3,000 18,000 $ 31263,420 The Association has accumulated funds totaling $270,956 that are restricted for future deferred maintenance and capital expenditures. The Association's Board of Directors is using the pooling method to accumulate these funds and, accordingly, has not designated the funds to individual components.
STATEMENT OF REVENUES AND EXPENSES - OPERATING FUND - BY CATEGORY (UNAUDITED) Year ended December 31, 2016 Golf Concessions REVENUES Declarant subsidy $ 133,388 $ 57,766 Golf operations 2,056,042 Assessments 370,416 Concessions 563,646 Club benefit assessments Fitness Spa Voluntary Declarant subsidy Working fund contribution Gates Tennis Lifestyle learning Other income Interest income TOT AL REVENUES 2,559,846 621,412 EXPENSES PAYROLL Gross payroll 616,309 285,413 Commission 10,200 Employee benefits 43,272 15, 121 Employee related 64, 134 422726 Total payroll 733,915 343,260 REP AIRS AND MAINTENANCE Street cleaning Alarm and security Contract services - benefit assessment Contract services - commons Repairs and maintenance - equipment 25,470 827 Fitness Tennis $ 81,842 $ 92,692 103,632 24,523 185,474 117,215 26,302 78, 159 572 5,734 3,075 9,000 29,949 92,893 7,185
Page 23 of27 Spa Club Membership Gates General Administration Lifestyle Learning Total $ 78,487 96,426 174,913 $ 431,283 965,481 529,977 88,000 39,502 11,110 109 2,065,462 $ 134,687 27,409 162,096 $ 546,320 $ 319,955 17,236 546,320 337,191 $ 1,876,420 2,056,042 1,335,897 563,646 529,977 103,632 96,426 88,000 39,502 27,409 24,523 17,236 11,110 109 6,769,929 77,478 857 8,591 86,926 110,681 11,356 11,482 133,519 254,811 104,116 18,847 16,487 6,868 25, 122 11,335 315,267 122,319 1,553,269 29,047 100,267 175,465 1,858,048 128 5,615 128 5,615 429,688 285,256 429,688 285,256 3,027 36,509
STATEMENT OF REVENUES AND EXPENSES - OPERATING FUND - BY CATEGORY (UNAUDITED), CONTINUED Year ended December 31, 2016 Golf Concessions Fitness EXPENSES, CONTINUED REP AIRS AND MAINTENANCE, CONTINUED Repairs and maintenance - gatehouse Repairs and maintenance - irrigation 12,590 Repairs and maintenance - irrigation - homes Lake maintenance Preserve maintenance Equipment rental 3,900 Cart repair 3,699 Repairs and maintenance - buildings 2,130 497 Repairs and maintenance - HV AC Contract services 443,597 11, 162 4,067 Pool service contract Pool repairs and maintenance Security service Street light maintenance Range expense 7,183 Repairs and maintenance - gate Repairs and maintenance - drainage 905 Total repairs and maintenance 499,474 11,989 4,564 Tennis 370 7,555 GENERAL ADMINISTRATION Accounting fees Payroll - administration 13,076 Bank charges 32,678 Computer support and repairs 13,850 959 Continuing education Decorations
Page 24 of27 Club General Lifestyle Spa Membership G_at...;..es Administration Learning Total 16,497 16,497 62,062 74,652 81,605 81,605 32,208 32,208 4,373 4,373 3,900 3,699 497 6,135 166 3,555 12,980 584 584 2,142 56,557 11,020 5,895 534,810 7,600 7,600 19,878 19,878 93,877 93,877 2,543 2,543 7, 183 25,640 25,640 118 1,023 2,639 988,151 147,034 166 18,676 1,680,248 18,484 18,484 23,645 36,721 670 20,932 54,280 15,864 67 30,740 550 550 18,679 18,679
STATEMENT OF REVENUES AND EXPENSES - OPERA TING FUND - BY CATEGORY (UNAUDITED), CONTINUED Year ended December 31, 2016 Golf Concessions Fitness EXPENSES, CONTINUED GENERAL ADMINISTRATION, CONTINUED Dues and subscriptions 1,629 Handicap expense 1,826 Licenses and permits 342 795 Management fees 120,000 Employee meals Office supplies 342 170 Printing 951 Postage 995 Telephone 3,289 1,057 Opening supplies 101,331 Cable and internet 2,532 5,006 Cash over and short 109 229 Travel expense 2,237 Tangible property tax Total general administration 295,187 1,983 6,233 Tennis SUPPLIES Equipment fuel and oil 38,960 Operating supplies 14,955 32,438 18,431 Score cards and pencils 3,692 Small tools 5,957 Linen and towels 12,942 4,119 173 Uniforms 10,989 474 Fertilizer 59,844 Shop supplies 1,583 Seed and sod 70,180 Sand top dressing 16,272 Chemicals 106,451 Golf course supplies 7,813 Landscaping - mulch 45,724 Landscaping - annuals 25,936 1,883 392
Page 25 of27 Club General Lifestyle -----"S..._pa-"--- Membership G_at_es Administration Learning Total 85 375 116 27 2,232 1,826 500 1,637 118,158 238, 158 4,747 4,747 18,723 19,235 113 65 104 5,920 7,153 2,712 3,707 368 1,820 2,216 8,750 380, 135 481,466 113 210 9,915 17,776 338 15 750 3,074 6,076 4 301 4 301 581 405,753 210 228,264 18,645 956,856 38,960 11,158 1,466 2,358 770 6,772 90,231 3,692 623 6,580 4,601 87,507 3,086 112,428 393 596 152 12,996 3,015 62,859 1,583 70,180 16,272 106,451 7,813 100,858 146,582 34,244 60,180
STATEMENT OF REVENUES AND EXPENSES - OPERATING FUND - BY CATEGORY (UNAUDITED), CONTINUED Year ended December 31, 2016 EXPENSES, CONTINUED SUPPLIES, CONTINUED Landscaping - trees 9,082 Amenity supplies Golf Concessions Fitness Total supplies 430,3 80 37,031 18,604 Tennis 2,275 COST OF GOODS SOLD Golf operations 144, 171 Concessions 216,809 Spa and fitness 95,855 Tennis Gates Lifestyle learning Total cost of goods sold 144, 171 216,809 95,855 14,492 14,492 UTILITIES Electric 28,832 9,680 23, 156 Gas 660 315 Debris removal 7,788 Trash removal 4,935 Water - irrigation 197,242 Water - operations 6,777 3,784 Water - potable 720 3,01 4 Total utilities 246,294 10,340 30,269 FIXED EXPENSES Equipment lease 32,461 Cart lease 84, 110 Building rental 36,321 Interest expense on capital lease 1,836 Total fixed expenses 154,728
Page 26 of27 Club General Lifestyle S_._pa Membership G_at_es Administration Learning Total 121,559 10 469 15,759 349,665 2,358 1,366 20,479 130,641 10,469 877,917 54,828 6,260 115,746 54,828 6,260 115,746 144, 171 216,809 150,683 14,492 6,260 115. 746 648, 161 11,495 39,326 5,425 32,682 5,679 865 1,128 7,692 2,152 134,549 2,685 809 5,627 14,180 188,374 6,234 41,326 150,596 7,519 8,916 14,779 331,791 10,561 12,855 537,017 32,461 84, 110 36,321 1,836 154,728
STATEMENT OF REVENUES AND EXPENSES - OPERATING FUND - BY CATEGORY (UNAUDITED), CONTINUED Year ended December 31, 2016 Golf Concessions Fitness Tennis EXPENSES, CONTINUED DEPRECIATION 38,404 INSURANCE 13,500 MARKETING Advertising and marketing 3,369 Promotional expense 424 Website Total marketing 3,793 TOT AL EXPENSES 2,559,846 621,412 185,474 117,215 EXCESS OF REVENUES OVER(UNDER)EXPENSES $ - $ - $ - $
Page 27 of27 Club General Lifestyle S_...pa Membership G_a_t_es Administration Learning Total 38,404 13,500 3,369 52 476 1,205 1,205 1,257 5,050 174,913 2,065,462 162,096 546,320 3371191 6,7691929 $ - $ - $ -$ -$ - $ ---- -'------ ---- ---- ~ - =~ -