HALTON COMMON ELEMENTS CONDOMINIUM CORPORATION NO. 626 Financial Statements For the period March 18, 2014 to February 28, 2015
Index to Financial Statements For the period March 18, 2014 to February 28, 2015 INDEPENDENT AUDITOR'S REPORT 1-2 Page FINANCIAL STATEMENTS Statement of Financial Position 3 Statement of Changes in Net Assets 4 Statement of Revenues and Expenditures 5 Statement of Reserve for Major Repairs and Replacements (Schedule 1) 6 Statement of Cash Flows 7 Notes to Financial Statements 8-12
INDEPENDENT AUDITOR'S REPORT To the Members of Halton Common Elements Condominium Corporation No. 626 We have audited the accompanying financial statements of Halton Common Elements Condominium Corporation No. 626, which comprise the statement of financial position as at February 28, 2015 and the statements of revenues and expenditures and changes in net assets for the for the period March 18, 2014 to February 28, 2015, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation 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 Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of 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. (continues) 1
Independent Auditor's Report to the Members of Halton Common Elements Condominium Corporation No. 626 (continued) Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Halton Common Elements Condominium Corporation No. 626 as at February 28, 2015 and the results of its operations and its cash flows for the period then ended in accordance with Canadian accounting standards for not-for-profit organizations. Halton Hills, Ontario May 15, 2015 BUTTLE AND TAVANO PROFESSIONAL CORPORATION Authorized to practise public accounting by the Chartered Professional Accountants of Ontario 2
Statement of Financial Position As at February 28, 2015 Feb 28 2015 ASSETS CURRENT Cash (Note 5) $ 21,635 Reserve Fund Cash 10,008 Prepaid expenses 256 $ 31,899 LIABILITIES AND NET ASSETS CURRENT Accounts payable $ 4,329 Deferred income 191 4,520 NET ASSETS General fund 17,371 Reserve fund (Note 4) 10,008 CONTINGENT LIABILITY (Note 7) COMMITTMENTS (Note 6) 27,379 $ 31,899 ON BEHALF OF THE BOARD Director Director Director The accompanying notes are an integral part of these financial statements 3
Statement of Changes in Net Assets For the period March 18, 2014 to February 28, 2015 General Reserve February 28 Fund Fund 2015 NET ASSETS - BEGINNING OF PERIOD $ - $ - $ - Excess of assessment and other revenue over expenses 17,371 10,008 27,379 NET ASSETS - END OF PERIOD $ 17,371 $ 10,008 $ 27,379 The accompanying notes are an integral part of these financial statements 4
Statement of Revenues and Expenditures For the period March 18 to February 28, 2015 Budget February February 2015 2015 ASSESSMENT AND OTHER REVENUE Common Elements Assessment $ 39,493 $ 36,730 Less allocations to: - - Reserve fund (6,583) (10,008) 32,910 26,722 Interest income - 65 32,910 26,787 EXPENSES Consulting fees 10,170 - Landscaping and snow removal 10,400 4,791 Insurance 4,000 2,595 Utilities 3,500 904 Repairs and maintenance 2,000 385 Accounting fees 1,525 (395) Office 750 981 Legal fees 565 - Bank charges - 155 32,910 9,416 EXCESS OF ASSESSMENT AND OTHER REVENUE OVER EXPENSES $ - $ 17,371 The accompanying notes are an integral part of these financial statements 5
Statement of Reserve for Major Repairs and Replacements (Schedule 1) For the period March 18, 2014 to February 28, 2015 Budget 2015 2015 ASSESSMENT AND OTHER REVENUES $ 6,582 $ 10,008 MAJOR REPAIRS AND REPLACEMENTS Mechanical - - Reserve Fund Study 3,955 - EXCESS OF REVENUE OVER EXPENDITURES $ 2,627 $ 10,008 The accompanying notes are an integral part of these financial statements 6
Statement of Cash Flows For the period March 18, 2014 to February 28, 2015 OPERATING ACTIVITIES Cash receipts from owners' assessments $ 36,921 Cash paid for common expenses (5,343) Cash receipts from investment income 65 Cash flow from operating activities 31,643 INVESTING ACTIVITY Decrease (Increase) in Reserve Fund Cash (10,008) INCREASE IN CASH FLOW 21,635 Cash - beginning of period - CASH - END OF PERIOD (Note 5) $ 21,635 The accompanying notes are an integral part of these financial statements 7
Notes to Financial Statements Period Ended February 28, 2015 1. PURPOSE OF THE CORPORATION Halton Common Elements Condominium Corporation No. 626 (the "Corporation") was incorporated without share capital on March 18, 2014 under the laws of the Condominium Act of Ontario. The Corporation was formed to manage and maintain, on behalf of the unit owners, the common elements of 37 units located in Georgetown, Ontario. 2. SIGNIFICANT ACCOUNTING POLICIES Fund accounting Halton Common Elements Condominium Corporation No. 626 follows the restricted fund method of accounting. The statement of operating fund reports all owners' assessments, budgeted allocations of those assessments to other funds and expenses related to the operation and maintenance of the common elements of the Corporation. The statement of reserve for major repairs and replacements reports the portion of owners' assessments allocated to it and expenditures for the major repair and replacement of the common elements and assets of the Corporation. The basis for determining the reserve fund requirements is explained in Note 3. All major repairs and replacements must be charged to the reserve fund with the exception of the cost of the reserve fund study which may be charged to the reserve fund. Minor repairs and replacements must be charged to expense in the statement of operations. The Corporation segregates amounts accumulated for the purpose of financing future charges to the reserve fund in special accounts, for use to finance such charges. Interest earned on these accounts is credited directly to the reserve fund. Assessment and expense of all funds are recorded on the accrual basis, whereby they are reflected in the accounts in the period in which they have been earned and incurred respectively, whether or not such transactions have been settled by the receipt of payment of money. Revenue recognition Halton Common Elements Condominium Corporation No. 626 recognizes revenue from common element fees as they are assessed. All common element fees are considered collectible when assessed. Any common element fees outstanding for more than 90 days are subject to a lien on the respective condominium unit. The collection of such amounts would ultimately occur upon the sale of the unit if it is not paid before such time. Interest is charged on overdue common element fees at a rate determined by the Board of Directors. Interest and other revenue are recognized as revenue of the related fund when earned. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and balances with banks and investments in money market instruments, with a term to maturity of 90 days or less at acquisition. Investing and financing activities that do not require the use of cash or cash equivalents are excluded from the Cash Flow Statement and disclosed separately. (continues) 8
Notes to Financial Statements Period Ended February 28, 2015 2. SIGNIFICANT ACCOUNTING POLICIES (continued) Interfund Transfers Interfund transfers not included in the annual budget or that are in excess of budgeted amounts are not recorded in the statement of operations. They are recorded in the related fund statements as additions or deductions, as applicable. Measurement uncertainty The preparation of financial statements in conformity with Canadian accounting standards for Not For Profit Organizations requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Such estimates are periodically reviewed and any adjustments necessary are reported in earnings in the period in which they become known. Actual results could differ from these estimates. Financial instruments policy Financial instruments are recorded at fair value when acquired or issued. In subsequent periods, financial assets with actively traded markets are reported at fair value, with any unrealized gains and losses reported in income. All other financial instruments are reported at amortized cost, and tested for impairment at each reporting date. Transaction costs on the acquisition, sale, or issue of financial instruments are expensed when incurred. When the Corporation issues financial instruments that include both a debt and equity component, the entire proceeds are allocated to the debt component, and the equity component is assigned a measurement amount of $nil. When financial instruments that include both a debt and an equity component are issued, the proceeds are allocated firstly to the component for which the fair value is more readily determinable, and the residual is allocated to the other component. Capital Expenditures Capital expenditures are expensed in the year in which the expenditures are incurred. Common Elements The common elements of the Corporation are owned proportionately by the unit owners and consequently are not reflected as assets in these financial statements. Contributed services Directors, committee members and owners volunteer their time to assist in the corporation's activities. While these services benefit the corporation considerably, a reasonable esimate of their amount and fair value cannot be made and, accordingly, these contributed services are not recognized in the financial statements. 9
Notes to Financial Statements Period Ended February 28, 2015 3. RESERVE FUND INVESTMENTS A Reserve fund investment was were made subsequent to year end on March 30, 2015. The investment consists of one guaranteed investment certificate, in the amount of $10,000. It is bearing interest at 0.85% and matures on July 8, 2015. 4. RESERVE FOR MAJOR REPAIRS AND REPLACEMENTS The Corporation, as required by the Condominium Act, 1988, has established a reserve fund for financing future major repairs and replacements of the common elements. Annual contributions to this fund must be the greater of 10% of the total contributions to common expenses and the recommendations of the most recent reserve fund study prepared. Only major repairs and replacements of the common elements are charged to this reserve. The Condominium Act of Ontario also requires that an updated reserve fund study be done a minimum of every three years and that an on-site visit be part of the study a minimum of every six years. The first reserve study was completed in February 2015. Exp Services Inc was retained by the Board of Directors of the Corporation to conduct a Comprehensive Reserve Fund Study of the future repair and replacement requirements for the condominium's commom element components. The Corporations Annual Contribution is recommended to be $10,000 (2015/2016). A 12% annual increase is then recommended until the year 2024/2025. A 2 % annual increase is then recommmended for the remaining years. Any evaluation of the adequacy of the reserve fund is based upon assumptions as to the future interest and inflation rates and estimates of the life expectancy of the building components and their replacement costs. These factors are subject to change over time and the changes may be material; accordingly, the Condominium Act requires that reserve fund studies be updated every three years. 5. CASH Cash in bank $ 21,635 6. COMMITMENTS The Board has made a committment to The Ontario Parking Control Bureau Corp. for the enforcement of parking regulations as per the Town of Halton Hills. No other company is authorized to issue tickets for the Town of Halton Hills and therefore no bids were sought. Payment terms are $361.51 per month by pre-authorized bank payments. A snow removal contract with Bill Van Ryn was accepted in October 2014 to commence for the November 2014 to March 2015 period. Payments are $1,017 per month. Contractual obligation repayment schedule: 2016 $ 3,186 2017-2018 - 2019 - Thereafter - 10
Notes to Financial Statements Period Ended February 28, 2015 7. CONTINGENT LIABILITY In the normal course of operations, the Corporation may be subject to certain litigation claims. There have been no claims made nor is management aware of any pending claims or other litigation. 8. AUDIT FEES AND AUDIT FEES-SUBSIDY The Corporation has entered into a contract and accrued fees for the period ended February 28, 2015 for $2,147 inclusive of applicable taxes. This expense was offset by a subsidy agreed to by the Declarant whom would pay for the audit. 9. PERFORMANCE AUDIT FEES AND PERFORMANCE AUDIT FEES-SUBSIDY The board of the Corporation has estimated that the cost of a performance audit, more commonly known as a reserve fund study to be $4,252 for the period ended February 28, 2015. The Declarant has agreed to subsidize the cost of this study to a maximum of $4,469 including applicable taxes. Actual cost was $2,147 including applicable taxes and was paid in March 2015 with funds received from the Declarant. 10. FINANCIAL INSTRUMENTS The Corporation is exposed to various risks through its financial instruments and has a comprehensive risk management framework to monitor, evaluate and manage these risks. The following analysis provides information about the Corporation's risk exposure and concentration as of February 28, 2015. Credit risk Credit risk arises from the potential that a counter party will fail to perform its obligations. The Corporation is exposed to credit risk from unit holders. The Corporation minimizes its credit risk through the use of liens on units. Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Corporation is exposed to this risk mainly in respect of its receipt of funds from its unit holders. Interest rate risk Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. In seeking to minimize the risks from interest rate fluctuations, the Corporation manages exposure through its normal operating and financing activities. The Corporation is exposed to interest rate risk primarily through its floating interest rate bank indebtedness and credit facilities. (continues) 11
Notes to Financial Statements Period Ended February 28, 2015 10. FINANCIAL INSTRUMENTS (continued) Interfund Transfers During the year, the directors approved a transfer of $10,008 from the operating fund to the reserve fund. Investment Risk Management Investment risk management relates to the understanding and active management of risks associated with all areas of the Corporation and the associated operating environment. Investments are primarily exposed to interest rate risk. The Corporation has formal policies and procedures regarding liquidity and investment maturity dates 11. BUDGET The 2015 budget amounts are presented for information purposes only. They are unaudited. 12