LINDEN GREEN CONDOMINIUM ASSOCIATION FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REPORT
TABLE OF CONTENTS Page No. Independent Auditors' Report 1 Financial Statements - Cash Basis Statement of Assets, Liabilities, and Fund Balances 2 Statement of Revenues, Expenses, and Changes in Fund Balances 3 Notes to Financial Statements 4
$1-5 BELFINT LYONS SHUMAN C ertifie d Public Accounta nts ----------------------------------------------- ~.belfint.corn ------------------------------------------------ Independent Auditors' Report To the Members of Linden Green Condominium Association We have audited the accompanying financial statements of Linden Green Condominium Association, which comprise the statement of assets, liabilities, and fund balances - cash basis as of December 31, 2012, and the related statement of revenues and expenses, and changes in fund balances - cash basis for the year then ended, and the related notes to the fmancial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the cash basis of accounting described in Note 2; this includes determining that the cash basis of accounting is an acceptable basis for the preparation of the financial statements in the circumstances. Management is also responsible for 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. Auditors' 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 fmancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fmancial statements. The procedures selected depend on the auditors' 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 auditors consider 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. 1011 Centre Road Suite 310 I Wilmington DE 19805 I Phone 302.225.0600 I Fax 302.225.0625 A Professional Service Corporation with Offices in Wilmington, Delaware and West Chester, Pennsylvania Member of the American Institute of Certified Public Accountants An Independent Member Firm ofprimeglobal
To the Members of Linden Green Condominium Association 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 have 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 assets, liabilities, and fund balances of Linden Green Condominium Association as of December 31, 2012, and its revenues and expenses and changes in fund balances for the year then ended in accordance with the cash basis of accounting as described in Note 2. Basis of Accounting We draw attention to Note 2 of the financial statements, which describes the basis of accounting. The financial statements are prepared on the cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to that matter. Omission of Required Supplementary Information about Future Major Repairs and Replacements Management has omitted the supplementary information about future major repairs and replacements that the cash basis of accounting requires to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Financial Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by the missing information. February 18, 2014 Wilmington, Delaware 2
STATEMENT OF ASSETS, LIABILITIES, AND FUND BALANCES CASH BASIS ASSETS ASSETS Cash - Undesignated $ 77,814 Cash - Designated 65,341 TOTAL ASSETS $ 143,155 LIABILITIES AND FUND BALANCES LIABILITIES $ - FUND BALANCES Undesignated 77,814 Designated for Future Repairs and Replacements 65,341 TOTAL FUND BALANCES 143,155 TOTAL LIABILITIES AND FUND BALANCES $ 143,155 The accompanying notes are an integral part of these financial statements. 2
STATEMENT OF REVENUE, EXPENSES, AND CHANGES IN FUND BALANCES CASH BASIS YEAR ENDED DECMEBER 31, 2012 Undesignated Designated Total REVENUES Operating Fund Fees $ 592,959 $ - $ 592,959 Laundry Income 25,491-25,491 Finance Charges and Late Fees 5,605-5,605 Interest Income 19 190 209 Other Income 965-965 TOTAL REVENUES 625,039 190 625,229 EXPENSES Cleaning 21,522-21,522 Utilities 238,383-238,383 Building Maintenance 51,134-51,134 Grounds Maintenance 32,318-32,318 Swimming Pool Maintenance 20,408-20,408 General and Administrative 93,293-93,293 Capital Improvements 180,902-180,902 TOTAL EXPENSES 637,960-637,960 EXCESS OF EXPENSES OVER REVENUES (12,921) 190 (12,731) FUND BALANCES - Beginning of Year 90,735 65,151 155,886 FUND BALANCES - End of Year $ 77,814 $ 65,341 $ 143,155 The accompanying notes are an integral part of these financial statements. 3
NOTES TO FINANCIAL STATEMENTS NOTE 1: NATURE OF THE ORGANIZATION Linden Green Condominium Association (Association) was formed as a statutory condominium association in the state of Delaware on September 15, 1981. The Association is responsible for the operation and maintenance of the common property of Linden Green Condominiums. Linden Green Condominiums consists of 163 residential units located in the Linden Green Condominium subdivision in Wilmington, Delaware. The Association maintains the exterior of the buildings and common areas; water service to apartment style units; and basic cable to all units. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting - The accompanying financial statements have been prepared on the cash basis of accounting, which is a comprehensive basis of accounting other than generally accepted accounting principles. That basis differs from generally accepted accounting principles in that revenues are recognized when received instead of when the service is provided, and payments to vendors are recognized when paid instead of when goods or services are received. Cash and Cash Equivalents - The Association considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. Operating Fund Fees - Owners are subject to monthly assessments to provide funds for the Association's operating expenses, future capital acquisitions, and major repairs and replacements. Any excess assessments at year end are retained by the Association for use in the succeeding year. Income Taxes - The Association may elect to be taxed either as a homeowners' association or as a regular corporation. A homeowners' association is not taxed on tax-exempt functions, only on interest and investment-type income. The election is made annually. For the year ended December 31, 2011, the Association elected to be taxed as a homeowners association and filed Form 1120-H. For state income tax purposes, the Association files a return annually. The Association s income is not subject to state taxation. The Association's federal and state income tax returns for the years ended December 31, 2009, 2010, and 2011 are subject to examination, generally for three years after they were filed. Use of Estimates - The preparation of financial statements in conformity with the cash basis of accounting requires management to make estimates and assumptions that affect certain reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. 4
NOTES TO FINANCIAL STATEMENTS - CONTINUED NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Advertising Costs - Advertising costs are charged to operations when paid. For the year ended December 31, 2012 total advertising expenses were $149. Subsequent Events - The Association's policy is to evaluate events and transactions subsequent to its year end for potential recognition in the financial statements or disclosure in the notes to the financial statements. Management has evaluated events and transactions through the date of the independent auditors' report, which is the date the financial statements were available to be issued. NOTE 3: FUTURE MAJOR REPAIRS AND REPLACEMENTS The Association has not conducted a study to determine the remaining useful lives of the components of common property and estimates of the costs of major repairs and replacements that may be required in the future. The Association, however, has a capital reserve fund to accumulate funds for the estimated costs of future major repairs and replacements. As of December 31, 2012, accumulated funds of $65,151 are held in a separate account and are generally not available for operating purposes. Actual expenditures, however, 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 future needs. If additional funds are needed, however, the Association has the right to increase regular assessments or levy special assessments, or it may delay major repairs and replacements until funds are available. NOTE 4: CONCENTRATIONS OF CREDIT RISK The Association maintains cash balances at two financial institutions located in Delaware. As of December 31, 2012, cash accounts were insured by the Federal Deposit Insurance Corporation up to $250,000 per institution. As of December 31, 2012, the Association's cash balances were fully insured. NOTE 5: CONTINGENCIES The Association is a defendant in a case related to the alleged breach of contract with the Association's former management company. The trial ended in a verdict of $165,000 in favor of the Association's former management company. The Association's insurance carrier has indicated that as of January 20, 2014 it is prepared to respond to the verdict without contribution from the Association. Post-trial motions seek to increase the amount of the verdict or in the alternative to obtain a new trial, as well as to request an award of additional costs and fees that could be slightly more than $165,975. The Association's counsel does not anticipate a new trial, or a significant award of additional damages, but some of the fees and costs are likely to be awarded. The Association's counsel expects the total amount to be within the range that the carrier will cover so that no contribution from the Association is anticipated. 5
NOTES TO FINANCIAL STATEMENTS - CONTINUED NOTE 6: COMMITMENTS During the period January 1, 2013 through the date of the report, the Association entered into $75,340 of contracts for maintenance and management services. NOTE 7: RELATED PARTY TRANSACTIONS Certain members of the Board of Directors are also residents and owners of Linden Green Condominiums. During the year ended December 31, 2012, the Association s Board of Directors paid the Association $18,101 in Condominium Association Fees. 6