Suncoast Lakes Single Family Homeowners Association, Inc. Financial Statements and Supplementary Information December, 31,2011 Cole & Associates, LLC _~_O:rtf/ifilPu1iicAccauntants, --------~----
Cole &Associ~tes, LLC CertifiedPublicAtcountants ~~ ~ Ronald A. Cole, CPA www.colecpa.com 407-351-4730 Ron@ColeCPA.com Fax 407-654-1544 INDEPENDENT ACCOUNTANTS' REVIEW REPORT Suncoast Lakes Single Family Homeowners Association, Inc. To the Board of Directors: We have reviewed 1he accompanying balance sheet of Suncoast Lakes Single Family Homeowners Association, Inc. as of December 31, 2011 and the related statements of revenues, expenses, and changes in fund balance and cash flows for the year then ended. A review includes primarily applying analytical procedures to management's financial data and making inquiries of Association management A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion. Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing,. implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. OUf responsibility is to conduct the review in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. Those standards require us to perform procedures to obtain limited assurance that there are no material modifications that should be made to the financial statements. We believe that the results of our procedures provide a reasonable basis for our report. Based on our review, we are not aware of any material modifications that should be made to the accompanying financia/statements in order for them to be in conformity with accounting principles generally accepted in the United States of America. The supplementary information about future major repairs and replacements of common property on page 11 is not a required part of the basic financial statements, but is supplementary information required by accounting principles generally accepted in the United States of America. The supplemental schedules on pages 12-13 are presented for analytical purposes only. We have compiled the supplementary information from information that is the representation of management of Suncoast Lakes Single Family Homeowners Association, Inc., without audit or review. Accordingly, we do not express an opinion or any assurance on the supplementary information. Cole & Associates, CPA, LLC Certmed Public Accountants Winter Garden, FL February 29,2012 15502 Stoneybrook W. Pkwy Ste 104-411 Winter Garden, FL 34787
BALANCE SHEET DECEMBER 31, 2011 ASSETS: Cash Assessments receivable (Note 3) Prepaid expenses Due from operating fund Due to replacement fund Other assets Operating $ 30,413 36,040 1,875 (1,124) 2.994 Replacement $ 72,060 1,124 $ Total 102,473 36,040 1,875 1,124 (1,124) 2.994 TOTAL ASSETS $ 70,198 ~ 73.184 ~ 143,382 LIABILITIES: Accounts payable and accrued expenses Prepaid assessments $ 3.918 5 1 428 $ $ 3,918 5 1 428 TOTAL LIABILITIES 9,346 9,346 FUND BALANCE 60,852 73,184 1~4,0;26 TOTAL LIABILITIES AND FUND BALANCE ~. IO,198 ~ 73!18~ ~ 14~,Ja2 See accompanying notes and accountant's review report. Page 2
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED DECEMBER 31, 2011 REVENUE: Operating Replacement Assessment income Capital Contribution Interest income $ 241,941 8,050 197 $ 13,487 340 $ 255,428 8,050 537 Other income 750 750 TOTAL REVENUE 250,938 _...l3,827, 264,765 EXPENDITURES: Accounting & legal Bad debt Contract grounds maintenance Insurance Irrigation repair Janitorial Licenses, permits & taxes Management fees Office & other expenses Other grounds maintenance Other pool maintenance Pest control Pool maintenance Recreation repairs &maintenance Utilities 2,027 13,857 56,728 5,949 4,038 7,325 511 13,791 9,353 20,645 1,669 128 '9,982 601 99,589 Total 2,027 13,857 56,728 5,949 4,038 7,325 511 13,791 9,353 20,645 1,669 128 9,982 601 99,589 TOTAL EXPENDITURES 246!193 246 1 193 REVENUE IN EXCESS OF EXPENDITURES 4,745 13,827 18,572 BEGINNING FUND BALANCE 56,107 59,35Z 115,464 ENDING FUND BALANCE 60,6i:i2 ~ 73,184 ~ 134,036 ~ See accompanying notes and accountant's review report. Page.3
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2011 Operating Replacement CASH FLOWS FROM OPERATING ACTIVITIES: Assessment fees collected $ 237.096 $ 12,363 Capital Contribution 8,050 I nterest received 197 340 Other income 750 Cash paid for operating expenses (243 1 208) Net cash provided {used} by operating activities 2.885 12,703 NET CHANGE IN CASH 2,885 12,703 CASH AND CASH EQUIVALENTS - Beginning of Year 27,528 59,357 CASH AND CASH EQUIVALENTS - End of Year ~ ~0.413 ~ 72,060 See accompanying notes and accountant's review report. Page 4
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2011 Operating Replacement RECONCILIATION OF NET REVENUES AND EXPENDITURES TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Excess of revenues over expenditures $ 4,745 $ 13,827 Adjustment to reconcile net revenues and expenditures to net cash provided by operating activities: Bad debt expense (Increase) decrease in: Assessments receivable Prepaid expenses Due from operating fund Due to replacement fund Other assets 13,857 (18,915) 2,569 1,124 81 (1,124) Increase (decrease) in: Accounts payable and accrued expenses Prepaid assessments Net cash provided (used) by operating activities: (789). 213 2,885 12,703 NET CHANGE IN CASH 2,885 12,703 CASH AND CASH EQUIVALENTS - Beginning of Year 27,528 59,357 CASH AND CASH EQUIVALENTS End of Year ~ 30,413 ~ 72,060 See accompanying notes and accountant's review report. Page 5
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Org an ization Suncoast Lakes Single Family Homeowners Association, Inc. (lithe Association") is incorporated in the State of Florida. The Association is responsible for the operation and maintenance of the common property within the development. The development consists of 205 residential units located in Charlotte County, Florida. Financial Statements The accompanying financial statements were prepared pursuant to the requirements of Florida Statutes and the American Institute of Certified Public Accountants. Accounting The Association presents its financial statements on the accrual basis using fund accounting. The financial statements are therefore segregated into funds based upon different funding policies established for operating and capital expenditures. The Operating reflects the maintenance assessments paid by unit owners to meet the regular, recurring costs of operations. Expenditures from this fund are limited to those connected with daily operations. The Replacement is composed of capital assessments paid by unit owners to fund future replacements and major repairs. Expenditures from this fund are restricted to those items for which assessments were specifically collected. Interest earned on replacement funds remains in the Replacement and may only be expended for components previously funded. Revenue Recognition Regular assessments to members are recognized as revenue during the period for which they are assessed. Assessments received in advance of this period are reported as prepaid assessments on the balance sheet. Cash and Cash Equivalents For purpose;ls of the Statement of Cash Flows, cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less. See independent accountant's report. Page 6
SUNGOAST LAKES SINGLE FAMILY HOMEOWNERS ASSOCIATION, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Real and Common Area Property The Association capitalizes all property and equipment to which it holds title or has other evidence of ownership. Real and common area property acquired from the developer is not capitalized in the Association's financial statements, as it is owned by the individual unit owners in common and not by the Association. As a result, improvements made to the real property and common areas are expensed as incurred. 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 expenditures during the reporting period. Actual results could differ from those estimates. Concentrations of Risk The Association maintains cash balances at several banks. Deposits at banks are insured by the Federal Deposit Insurance Corporation up to $250,000. As of December 31, 2011, the uninsured portion of cash balances is $0. The Association has obtained insurance coverage for damages covered by windstorm. The Association would be responsible for losses up to the amount of the deductible and has the right to increase regular assessments, levy a special assessment or delay repairs until adequate funds are available. Commitments and Contingency The Association has entered into various short-term contractual agreements with outside vendors and service providers to maintain its common property and to administer the Association. These contracts have different expiration dates and renewal terms. Subsequent Events In preparing the financial statements, the Association has evaluated events and transactions for potential recognition or disclosure through the date that the financial statements were issued. See independent accountant's report. Page 7
NOTES TO FINANCIAL STATEMENTS DECEMBER 31 f 2011 NOTE 2: RESERVE FOR MAJOR REPAIRS AND REPLACEMENTS Florida statues consider reserves intiated by the developer or required by the association's documents to be statutory reserves, pursuant to section 720.303. The association's reserves were initiated by the developer and as such. are subject to restrictions on use of such funds set forth in the statute. The reserve funds are segregated and are not generally available for expenditures for normal operations. Florida statutes require disclosure of the amount of annual funding required to fully fund each reserve account over the remaining useful life of the applicable assets. This calculation is presented in the Supplementary Information on Future Repairs and Replacements based upon estimates of replacement values and remaining lives as discussed below. In the fall of 2011, the Association estimated the remaining useful lives and current replacement costs of common property components. Estimates were based on professional judgment, which may include contractor estimates for major components. The Association is funding for major repairs and replacements over the remaining useful lives, and considering amounts previously accumulated in the replacement fund. 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 lhe right to increase regular assessments or levy special assessments, or it may delay major repairs and replacements until funds are available. The following table presents significant information about the components of common property: FUNDING INTEREST BALANCE DURING OTHER CHARGES BALANCE COMPONENT 12f31/10 YEAR INCOME TO FUND TRANSFER 12/31/11 Gate $ 7,469 $ 317 $ $ $ 45 $ 7.831 Pool 8,568 7.858 52 16,478 Recreation Facilities 4,"128 791 25 4,944 Streets 38,836 4,521 234 43,59i Unalloc. Interest 356 340 {356} 340 TOTAL 5lil.~Q7 ;l! 13.!lSZ 340 $ ~ n.:l84 ~ :Ii ~ See Independent accountant's report. Page 8
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE 3: MEMBER ASSESSMENTS Association members are subject to assessments to provide funds for the Association's operating expenses, future capital acquisitions, and major repairs and replacements. Assessments receivable at the balance sheet date represent fees due from unit owners. It is the Association's policy to retain legal counsel and place liens on the property of delinquent homeowners. Assessments that have been deemed to be uncollectible as of the report date have been charged to bad debts. The allowance for uncollectible accounts is $33,934 on December 31, 2011. NOTE 4: INCOME TAXES Associations may elect to be taxed as homeowners' associations or as regular corporations. In 2011, the Association has elected to be taxed as a homeowners' association. Under that election, the Association is taxed on its nonexempt function income, such as interest earnings, net of directly related expenses, at a rate of 30%. Income tax expense was $0 for the year then ended. Under federal and state income tax laws, an entity's tax returns are subject to examination by the applicable taxing authorities. The time period during which a return may be selected by a taxing authority for examination generally ends at the latter of three years after the initial due date of the return or three years after the return is filed. At Decenib~r 31',2011, the Association's tax years that remain. subject to examination are 2008-2011. See independent accountant's report. Page 9
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE 5: DEVELOPER CONTROL Association members are subject to monthly assessments to provide for the Association's operating expenses and major repairs and replacements. In lieu of paying assessments on unsold units, the Association's documents allow the Developer to pay the amount of common expenses incurred during the guaranteed period that exceed the Association's revenues. As of year end December 31, 2011, the Association was under the control of the devefoper. For the year end, there was an operating fund surplus of $4,745. The developer's obligation under the guarantee for 2008 ~ 2011 was as follows: Operating Replacement Tota! s Common expenses $ 887,472 $ 56,945 $ 944,417 Less: Assessments from unit owners other than the developer 941,780 56,945 998 1 725 Developer objigation/{surplus) ~ (f!4.3q8l ~ $ '541~Q~! The developer turned over control of the association to the owners on January 17,2012. NOTE 6: LIGHTING CONTRACT The Association entered into a contract with Florida Power & light Company (FPL) on February 7, 2006 to install and maintain street lighting facilities at various locations on the association property. Florida Power & Light is receiving monthly installments of $502 for a period of 20 years. See independent accountant's report. Page 10
SUPPLEMENTAL INFORMATION - ------- --------- -------------
SUPPLEMENTARY INFORMATION ON FUTURE MAJOR REPAIRS AND REPLACEMENTS (UNAUDITED) DECEMBER 31, 2011 In the fall of 2011 j the Association estimated the remaining useful lives and current replacement costs of common property components. Estimates were based upon professional judgment, which may include contractor estimates for major components. The following is based on the estimate and presents significant information about the components of common property: COMPONENT ESTIMATED ESTIMATED REPAIRS I 2012 REMAINING CURRENT REPLACEMENTS FUNDING USEFUL LIFE REPLACEMENT DECEMBER 31,2011 REQUIRED (YEARS) COST Gate 7 $ 10,000 $ 7,831 $ 310 Pool 3 40,000 16,478 7,841 Recreation Facilities 2 6,500 4,944 778 Streets 7 75,000 43,591 4,487 Una/Joc. Interest 340 TOTAL ~ 131.50g m 73,184 $ 13.416 See independent accountant's report. Page 11 --------...~-~-
SUPPLEMENTARY INFORMATION - STATEMENT OF REVENUES AND EXPENDITURES ACTUAL TO BUDGET (UNAUDITED) FOR THE YEAR ENDED DECEMBER 31, 2011 REVENUE: Actual Budget Variance Assessment income $ 255,428 $ 264,860 $ (9,432) Capital Contribution 8,050 8,050 Interest income 197 197 Other income 750 750 TOTAL REVENUE 264,425 264,860 (435) EXPENDITURES: Accounting & legal 2,027 2,200 (173) Bad debt 13,857 1,551 12,306 Contract grounds maintenance 56,728 58,600 (1,872) Insurance 5,949 5,454 495 Irrigation repair 4,038 4,000 38 Janitorial 7,325 7,700 (375) Licenses, permits &taxes 511 500 11 Management fees 13,791 13,561 230 Office &other expenses 9,353 6,500 2,853 Other grounds maintenance 20,645 20,812 (167) Other pool maintenance 1,669 4,500 (2,831) Pest control 128 250 (122) Pool maintenance 9,982 9,000 982 Recreation repairs & maintenance 601 500 101 Safety & security 2,000 (2,000) Utilities 99,589 114,245 (14,656) Reserve funding 13 1 487 13A87 TOTAL EXPENDITURES 259,680 264 1 860 (5 1 180) REVENUE IN EXCESS OF EXPENDITURES $ 4J45 ~ ~ 4 1 745 See independent accountant's report. Page 12 ----..-... -~~-
SUPPLEMENTARY INFORMATION M STATEMENT OF REVENUES AND EXPENDITURES ACTUAL TO PRIOR YEAR (UNAUDITED) FOR THE YEAR ENDED DECEMBER 31, 2011 REVENUE: 2011 2010 Variance Assess ment income $ 255,428 $ 249,549 $ 5,879 Capital Contribution 8,050 3,500 4,550 Interest income 197 95 102 Other income 750 602 148 TOTAL REVENUE 264,425 253,746 10,679 EXPENDITURES: Accounting &legal 2,027 3,885 (1,858) Bad debt 13,857 4,302 9,555 Building repairs & maintenance 2,157 (2,157) Contract grounds maintenance 56,728 56,821 (93) Insurance 5,949 5,611 338 Irrigation repair 4,038 2,204 1,834 Janitorial 7,325 6,862 463 Licenses, permits &taxes 511 361 150 Management fees 13,791 12,650 1,141 Office & other expenses 9,353 6,126 3,227 Other grounds maintenance 20,645 19,753 892. Other pool maintenance 1,669 1,104 565 Pest control 128 513 (385) Pool maintenance 9,982 9,245 737 Recreation repairs & maintenance 601 625 (24) Utilities 99,589 93,472 6,117 Reserve funding 13 1 487 16,195 (2,70B} TOTAL EXPENDITURES 259 1 680 241,886 17 1 794 REVENUE IN EXCESS OF EXPENDITURES $ 4,745 $ 11,860 $ (71115} See independent accountant's report. Page 13