WOODBRIDGE AT EAGLE HARBOR CONDOMINIUM ASSOCIATION, INC. FINANCIAL STATEMENTS DECEMBER 31, 2016
TABLE OF CONTENTS INDEPENDENT ACCOUNTANTS COMPILATION REPORT 1 BALANCE SHEET 2 STATEMENT OF REVENUES AND EXPENSES 3 STATEMENT OF CHANGES IN MEMBERS EQUITY 4 STATEMENT OF CASH FLOWS 5 NOTES TO FINANCIAL STATEMENTS 6-8 SUPPLEMENTARY INFORMATION: SCHEDULE OF FUTURE MAJOR REPAIRS AND REPLACEMENTS 9-10
DESROCHES & COMPANY C E R T I F I E D P U B L I C A C C O U N T A N T S INDEPENDENT ACCOUNTANTS COMPILATION REPORT The Board of Directors Woodbridge at Eagle Harbor Condominium Association, Inc. Management is responsible for the accompanying financial statements of Woodbridge at Eagle Harbor Association, Inc., which comprise the balance sheet as of December 31, 2016, and the related statements of revenues and expenses, changes in members' equity and cash flows for the year then ended, and the related notes to the financial statements in accordance with accounting principles generally accepted in the United States of America. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the financial statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, a conclusion, nor provide any form of assurance on these financial statements. 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 required by the Financial Accounting Standards Board, which 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 compiled the required supplementary information without audit or review, and, accordingly, we do not express an opinion, a conclusion, nor provide any assurance on it. April 27, 2017 REFLECTIONS II, SUITE 200 200 GOLDEN OAK COURT VIRGINIA BEACH, VA 23452 (757) 498-3000 FAX (757) 340-5447 MEMBER AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
BALANCE SHEET December 31, 2016 ASSETS Cash and cash equivalents: Operating $ 60,839 For future major repairs and replacements 80,197 Certificates of deposit for future major repairs and replacements 405,288 Total cash and cash equivalents 546,324 Accounts receivable: Member assessments 3,652 Water and sewer reimbursements 13,953 Less: allowance for uncollectible accounts (500) Total accounts receivable, net 17,105 Prepaid expenses 10,187 Total assets $ 573,616 LIABILITIES AND MEMBERS' EQUITY Accounts payable $ 16,577 Income taxes payable 166 Prepaid assessments 11,607 Total liabilities 28,350 Members' equity: Undesignated 46,066 Designated for future major repairs and replacements 499,200 Total members' equity 545,266 Total liabilities and members' equity $ 573,616 See notes to financial statements and independent accountants' compilation report. 2
STATEMENT OF REVENUES AND EXPENSES For the year ended December 31, 2016 Operating Undesignated Designated for Replacements Total Revenues: Member assessments $ 237,627 $ 112,293 $ 349,920 Water and sewer reimbursements 101,433 0 101,433 Late and legal fees 1,113 0 1,113 Interest income 93 3,512 3,605 Total revenues 340,266 115,805 456,071 Expenses: Accounting 1,380 0 1,380 Bad debts 666 0 666 Electric 6,543 0 6,543 General repairs and maintenance 47,673 0 47,673 Grounds improvements 19,461 4,000 23,461 Income tax 166 0 166 Insurance 46,472 0 46,472 Lake maintenance 1,100 0 1,100 Lawn maintenance 67,248 0 67,248 Legal 1,102 0 1,102 Management fee 23,029 0 23,029 Miscellaneous 1,037 0 1,037 Pest control 6,600 0 6,600 Postage and printing 2,516 0 2,516 Trash removal 13,697 0 13,697 Water and sewer 103,673 0 103,673 Total expenses 342,363 4,000 346,363 Excess (deficit) revenues over expenses $ (2,097) $ 111,805 $ 109,708 See notes to financial statements and independent accountants' compilation report. 3
STATEMENT OF CHANGES IN MEMBERS' EQUITY For the year ended December 31, 2016 Designated Operating for Undesignated Replacements Total Members' equity - beginning of year $ 48,163 $ 387,395 $ 435,558 Excess (deficit) revenues over expenses (2,097) 111,805 109,708 Members' equity - end of year $ 46,066 $ 499,200 $ 545,266 See notes to financial statements and independent accountants' compilation report. 4
STATEMENT OF CASH FLOWS For the year ended December 31, 2016 CASH FLOWS FROM OPERATING ACTIVITIES: Excess revenues over expenses $ 109,708 Adjustments to reconcile excess revenues over expenses to net cash provided by operating activities: Bad debts 666 Changes in assets and liabilities: Increase in accounts receivable, net (2,681) Decrease in prepaid insurance 6,444 Decrease in accounts payable (1,978) Increase in income taxes payable 166 Increase in prepaid assessments 844 Net cash provided by operating activities 113,169 CASH FLOWS FROM INVESTING ACTIVITIES: Net cash provided by investing activities 0 CASH FLOWS FROM FINANCING ACTIVITIES: Net cash provided by financing activities 0 Increase in cash and cash equivalents 113,169 Cash and cash equivalents at beginning of year 433,155 Cash and cash equivalents at end of year $ 546,324 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for income taxes $ 0 Cash paid during the year for interest $ 0 See notes to financial statements and independent accountants' compilation report. 5
NOTES TO FINANCIAL STATEMENTS December 31, 2016 [1] NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Woodbridge at Eagle Harbor Condominium Association, Inc. ( the Association ) is a condominium management association organized as a corporation for the purposes of maintaining and preserving the common property of the condominium. The condominium consists of 120 units and is located in Isle of Wight County, Virginia. Method of Accounting The Association follows the accrual method of accounting in which revenues are recognized when earned and expenses are recognized when incurred. Member Assessments Association members are subject to monthly assessments to provide funds for the Association s operating expenses and major repairs and replacements. Members also reimburse the Association for their usage of water and sewer. Assessments receivable at the balance sheet date represent fees due from unit owners. The Association s policy is to retain legal counsel and place liens on the properties of owners whose assessments are several months delinquent. Member assessments in the statement of revenues and expenses have been allocated between undesignated (operating) and designated (replacements) equity based upon the Association s 2016 budget reserve requirements. The Association retains excess operating funds at the end of the year, if any, for use in future periods. Allowance for Uncollectible Assessments The Association s policy is to record an allowance for uncollectible assessments for those accounts which the owner has filed Chapter 7 bankruptcy, the property has been foreclosed, or accounts which are substantially delinquent that management feels are doubtful of collection. Recognition of Assets Real property and common areas acquired from the developer and related improvements to such property are not recorded in the Association s financial statements because those properties are owned by the individual unit owners in common and not by the Association. Cash and Cash Equivalents The Association includes all cash accounts, money market accounts, and certificates of deposit with an original maturity of three months or less or that do not include a substantial penalty for early withdrawal, to be cash and cash equivalents. 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. See independent accountants compilation report. 6
NOTES TO FINANCIAL STATEMENTS December 31, 2016 [2] INCOME TAXES The Association has elected to be tax-exempt with respect to its exempt function income under Internal Revenue Code Section 528. However, income tax is due on its nonexempt function income, such as interest earnings. Accordingly, a provision for income taxes of $166 has been made for the year ended December 31, 2016. As of December 31, 2016, the tax years that remain subject to examination by taxing authorities begin with 2013. The Association believes it has appropriate support for any tax positions taken, and as such, does not have any uncertain tax positions that are material to the financial statements. [3] FUTURE MAJOR REPAIRS AND REPLACEMENTS The Association s governing documents require that funds be accumulated for future major repairs and replacements. Accumulated funds are to be held in a separate savings account and generally are not available for expenditures for normal operations. During 2009, the Board of Directors hired an outside professional firm to conduct a study to estimate the remaining useful lives and the replacement costs of the components of common property. The study was updated during 2014 to reflect changes in the condition of the Association s common property. The table included in the compiled supplementary information of future major repairs and replacements is based on this updated study. The Board of Directors 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 considering amounts previously accumulated in the replacements fund. Accordingly, a funding requirement of $112,293 has been included in the 2017 budget. Funds are being accumulated in the replacements fund based on estimates of future needs for repairs and replacements of common property components. Actual expenditures may vary from the estimated future expenditures, and the variations may be material. Therefore, amounts accumulated in the replacements fund may not be adequate to meet all future needs for major repairs and replacements. If additional funds are needed, the Association has the right, under certain circumstances, to increase regular assessments, pass special assessments, or delay major repairs and replacements until funds are available. During the year ended December 31, 2016, the actual net amount of cash transferred to the reserve for major repairs and replacements was less than the amount budgeted. The unfunded amount totaled $13,715. The amount was subsequently transferred during 2017. As of December 31, 2016, the Association had allocated $499,200 for future major See independent accountants compilation report. 7
NOTES TO FINANCIAL STATEMENTS December 31, 2016 repairs and replacements of the common property and separated $485,485 into designated bank and investment accounts. [4] SUBSEQUENT EVENTS Subsequent events have been evaluated through the date that the financial statements were available to be issued, April 27, 2017. See independent accountants compilation report. 8
SUPPLEMENTARY INFORMATION
SCHEDULE OF FUTURE MAJOR REPAIRS AND REPLACEMENTS December 31, 2016 Compiled During 2009, Miller-Dodson Associates, Inc. conducted a study to estimate the remaining useful lives and the replacement costs of the components of common property. The study was updated during 2014 to reflect changes in the condition of the Association s common property. Replacement costs were based on the estimated costs to repair or replace the common property components as of the date of the study using actual replacement cost data, industry standard estimating manuals and a cost database. The study does not consider the effects of inflation on estimated replacement costs or interest earnings on accumulated reserve funds. The following table is a summary of information contained in the professional study concerning the components of common property. The data contained below is for informational purposes only and has not been subjected to auditing procedures. All data is as of the effective date of the study, June 13, 2014. Component Estimated Remaining Useful Life Current Replacement Cost Concrete sidewalk 0-54 years $ 3,520 Concrete curb and gutter 6-60 years 76,320 Asphalt pavement, seal coat 6 years 23,174 Asphalt pavement, mill and overlay 18 years 221,440 Repoint masonry entrance feature 5 years 1,491 Carved composite mat'l signage 8 years 1,904 Irrigation system (partial) 7 years 1,200 Community lights, pole and fixture 5-20 years 46,896 Mail box shelters (roof and siding) 13 years 1,890 Mailboxes 13 years 5,265 Wood bridge 13 years 19,866 Gazebo 18 years 7,900 Gazebo roofing 3 years 800 Tot lot 20 years 9,200 Dredging BMP 8 years 39,000 Overflow structure 8 years 2,100 Wood fence - 6' 3-5 years 119,574 Asphalt shingle roof 24-27 years 1,208,024 Vinyl siding 19-25 years 819,942 Trim and soffit 26-30 years 233,400 Gutters and downspouts 24-27 years 259,600 See independent accountants' compilation report. 9
SCHEDULE OF FUTURE MAJOR REPAIRS AND REPLACEMENTS December 31, 2016 Compiled Component Estimated Remaining Useful Life Current Replacement Cost Shutters 15 years 27,280 Metal roofs 23 years 70,920 Masonry, repointing 10% 5 years 32,550 $ 3,233,256 The Association s 2017 minimum recommended annual reserve contribution as stated in the reserve study totals $112,293. See independent accountants' compilation report. 10