Financial Statements and Supplementary Information For the Year Ended December 31, 2014
Table of Contents Independent Auditor s Report..... 1 Financial Statements Balance Sheet.. 3 Statement of Revenues, Expenses, and Changes in Fund Balances.... 4 Statement of Cash Flows 5 Notes to Financial Statements... 6 Supplementary Information Supplementary Information on Future Major Repairs and Replacements (Unaudited). 9
Independent Auditor s Report To the Board of Directors and Members of Park Rise Homeowners Association, Inc. Report on the Financial Statements I have audited the accompanying financial statements of Park Rise Homeowners Association, Inc. (the Association ) which comprises the balance sheet as of December 31, 2014, and the related statements of revenues, expenses, and 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 The Association s Board of Directors 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 My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 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 Association 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 Association s internal control. Accordingly, I express no such opinion. 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. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Park Rise Homeowners Association, Inc. as of December 31, 2014, 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. 9251 W Brandt Ave Littleton, Colorado 80123 303.931.5471
Other Matters Disclaimer of Opinion on Required Supplementary Information on Future Major Repairs and Replacements Accounting principles generally accepted in the United States of America require that the information on future major repairs and replacements 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, 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. I 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 my inquiries, the basic financial statements, and other knowledge I obtained during my audit of the basic financial statements. I do not express an opinion or provide any assurance on the information because the limited procedures do not provide me with sufficient evidence to express an opinion or provide any assurance. Ryan E. Lee, CPA May 26, 2015 Littleton, Colorado Principal Lee Public Accounting, LLC
Balance Sheet As of December 31, 2014 Assets Operating Fund Replacement Fund Total Cash $ 61,336 $ 20,000 $ 81,336 Assessments receivable 21,664 21,664 Total Assets $ 83,000 $ 20,000 $ 103,000 Liabilities and Fund Balances Accounts payable $ 21,057 $ 10,540 $ 31,597 Assessments received in advance 2,695 2,695 Total Liabilities 23,752 10,540 34,292 Fund Balance 59,248 9,460 68,708 Total Liabilities and Fund Balances $ 83,000 $ 20,000 $ 103,000 See Notes to Financial Statements 3
Statement of Revenues, Expenses, and Changes in Fund Balances For The Year Ended December 31, 2014 Revenues Operating Fund Replacement Fund Assessments $ 260,929 $ 38,920 $ 299,849 Special assessments 45,906 45,906 Late fees, collection and compliance 1,925 1,925 Other income 1,767 1,599 3,366 Net investment and interest income 34 34 Expenses Total Revenues $ 310,527 $ 40,553 $ 351,080 Water and sewer $ 89,893 $ - $ 89,893 Insurance 32,149 32,149 Landscape and grounds maintenance 28,922 28,922 Other supplies repairs and maintenance 22,130 22,130 Management fees 19,250 19,250 Snow removal 18,693 18,693 Trash removal 13,101 13,101 Electricity 12,436 12,436 Driveway/parking repairs and maintenance 10,149 10,149 Fire system repair and maintenance 4,909 4,909 Pool supplies/repairs and maintenance 4,889 4,889 Lighting supplies/repairs and maintenance 4,706 4,706 Plumbing repairs and maintenance 4,492 4,492 Tree and shrub maintenance 4,085 4,085 Legal and professional fees 3,101 3,101 Pest control 2,625 2,625 Roof and gutter repairs 2,021 2,021 Sprinkler repairs and maintenance 1,808 1,808 Building repairs and maintenance 1,540 1,540 Office and administrative 1,398 1,398 Garage repairs and maintenance 750 750 Sidewalk and concrete repair and maintenance 700 700 Locks and keys repairs and maintenance 668 668 Janitorial services 450 450 Community events 255 255 Telephone service 172 172 Signage repair and maintneance 42 42 Concrete 10,540 10,540 Interest expense 1,562 1,562 Total Expenses 285,334 12,102 297,436 Total Excess of Revenues Over Expenses $ 25,193 $ 28,451 $ 53,644 Fund transfers 57,451 (57,451) - Beginning Fund Balances (23,396) 38,460 15,064 Ending Fund Balances $ 59,248 $ 9,460 $ 68,708 See Notes to Financial Statements 4
Statement of Cash Flows For The Year Ended December 31, 2014 Cash Flows From Operating Activities Operating Fund Replacement Fund Excess of Revenues Over Expenses $ 25,193 $ 28,451 $ 53,644 Adjustments to reconcile excess of revenues over expenses to net cash provided by operating activities: Prior period adjustments 4,874 4,874 (Increase) decrease in: Assessments receivable (14,244) (14,244) Prepaid expenses 2,253 2,253 Increase (decrease) in: Accounts payable 20,095 10,540 30,635 Assessments received in advance (2,248) (2,248) Net cash provided by operating activities 35,923 38,991 74,914 Cash Flows From Financing Activities Principal payments on loan (57,392) (57,392) Interfund activities 79,686 (79,686) - Net cash provided (used) by financing activities 22,294 (79,686) (57,392) Cash, beginning of year 3,119 60,695 63,814 Cash, end of year $ 61,336 $ 20,000 $ 81,336 Supplemental Cash Disclosures Cash paid for interest $ 1,562 $ - $ 1,562 Total See Notes to Financial Statements 5
Notes to Financial Statements For The Year Ended December 31, 2014 Note 1 Nature of the Association Park Rise Homeowners Association, Inc. (the Association ) is a nonprofit corporation organized in the State of Colorado in 1997. The purpose of the Association is to provide for the operation, administration, use, and maintenance of the common property as defined in the Declaration of Park Rise at Summit Pointe. The Association consists of the Owners of 130 residential townhome and condominium units located in Adams County, Colorado. In April of 1999, The Summit Point Condominium Community, which was created in 1985 by the Condominium Declaration for Summit Point, A Condominium, was terminated by its members and the 27 units within that community were annexed by Park Rise Homeowners Association, Inc. Note 2 Summary of Significant Accounting Policies Basis of Accounting The accompanying financial statements are prepared using the accrual method of accounting. Fund Accounting The Association s governing documents provide certain guidelines for governing its financial activities. To ensure observance of limitations and restrictions on the use of financial resources, 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. Common Area Property 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 effectively owned by the individual unit owners in common and disposition of those assets is restricted. Assessments Association members are subject to monthly 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. The Association s policy is to retain legal counsel and place liens on the properties of homeowners whose assessments are delinquent. Monthly assessments charged vary based on the size of each unit as defined in the Declaration. 6
Notes to Financial Statements For The Year Ended December 31, 2014 Note 2 Summary of Significant Accounting Policies Working Capital Fund The Association required the first Owner of each unit to make a non-refundable contribution to the Association in an amount equal to one-fourth (1/4) of the annual Common Expense Assessment in effect at the time of sale to be used as a working capital fund. Use of 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 expenses during the reporting period. Actual results could differ from those estimates. Note 3 Income Taxes The Association elected to file its federal tax return as a homeowners association under Section 528 of the Internal Revenue Code for the year ended December 31, 2014. Under that section, the Association is not taxed on income and expenses related to its exempt purpose, which is the acquisition, construction, management, maintenance, and care of Association property. Net non-exempt function income, which includes interest earned and revenues received from nonmembers, is taxed at the federal and state levels at 30% and 4.63%, respectively. The Association s tax filings may be subject to examination by various taxing authorities. The Association s federal income tax returns for 2012, 2013, and 2014 remain open to potential examination by the Internal Revenue Service; state income returns for 2013 and 2014 are open to potential examination. Note 4 Future Major Repairs and Replacements The Association s governing documents require funds to be accumulated for future major repairs and replacements. Accumulated funds are held in separate accounts and are generally not available for operating purposes. In 2014, the Association engaged a third party to perform a study to estimate the remaining useful lives and the replacement costs of the common property components. The Association is funding for such major repairs and replacements over the estimated useful lives of the components based on the study s estimates of current replacement costs, 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 the right, subject to the governing documents, to increase regular assessments or levy special assessments, or it may delay major repairs and replacements until funds are available. 7
Notes to Financial Statements For The Year Ended December 31, 2014 Note 5 Special Assessments In May 2014, the Association levied a special assessment against all members in order to increase funding to the replacement fund. The assessment was due by December 31, 2014 and was $45,906 in total. Assessment amounts varied based on the size of each unit and ownership percentages as defined in the Declaration. Note 6 Contingencies The Association may be a party to various legal actions throughout the year that are normally associated with homeowners associations, including, but not limited to, the collection of delinquent assessments and covenant compliance matters, the aggregate of which, in the Board s opinion, would not be material to the future financial condition of the Association. Note 7 Subsequent Events In preparing the financial statements, the Association has evaluated events and transactions for potential recognition or disclosure through May 26, 2015, the date the financial statements were available to be issued. 8
Supplementary Information on Future Major Repairs and Replacements December 31, 2014 Unaudited In 2014, the Association engaged a third party to conduct a study to estimate the remaining useful lives and replacement costs of the components of common property. Replacement costs were based on the estimated costs to repair or replace the common property components at the date of the study. The information on the following pages was extracted from the study and presents significant information about the components of common property. See Independent Auditor's Report and Notes to Financial Statements 9
Significant Components For Park Rise at Summit Pointe Significance: Ave Curr (Curr Cost/UL) ID Asset Name UL RUL Cost As $ As % 105 Comp Shingle Roof - Replace (1) 20 14 $523,925 $26,196 23.9472% 106 Comp Shingle Roof - Replace (2) 20 15 $200,200 $10,010 9.1506% 120 Gutters/Downspouts - Replace (1) 20 14 $31,875 $1,594 1.4569% 121 Gutters/Downspouts - Replace (2) 20 15 $26,950 $1,348 1.2318% 204 Building Ext Surfaces - Repaint (1) 6 1 $59,063 $9,844 8.9986% 205 Building Ext Surfaces - Repaint (2) 6 0 $59,125 $9,854 9.0081% 207 Metal Fencing/Rails - Repaint 5 1 $4,213 $843 0.7702% 208 Stairs/Stringer/Railings - Repaint 3 1 $7,763 $2,588 2.3654% 301 Siding - Major Repairs (1) 6 1 $11,813 $1,969 1.7997% 302 Siding - Major Repairs (2) 6 0 $25,438 $4,240 3.8756% 306 Brick - Major Repairs 10 5 $8,950 $895 0.8182% 401 Asphalt - Major Overlay 25 6 $101,725 $4,069 3.7197% 402 Asphalt - Surface Application 5 1 $31,788 $6,358 5.8117% 403 Concrete - Repair/Replace 5 1 $12,425 $2,485 2.2717% 601 Concrete Sidewalks/Decks - Repair 5 1 $12,213 $2,443 2.2328% 604 Polyurethane Coating - Resurface 10 6 $11,400 $1,140 1.0421% 607 Wood Deck - Major Repairs 3 0 $5,588 $1,863 1.7026% 611 Stairs/Stringers/Landings - Major Repairs 12 7 $37,500 $3,125 2.8567% 801 Monument - Rebuild 20 3 $7,250 $363 0.3314% 803 Mailboxes - Replace 25 8 $19,350 $774 0.7075% 901 Fire Protection System - Replace 25 8 $11,300 $452 0.4132% 1002 Metal Fencing/Rails - Replace 30 13 $36,000 $1,200 1.0970% 1005 Block Wall - Replace 10 0 $13,625 $1,363 1.2455% 1009 Split Rail Fencing - Replace 17 16 $5,813 $342 0.3126% 1011 Wood Retaining Wall - Replace 6 5 $2,875 $479 0.4380% 1101 Pool/Coping/Tile - Replace 12 6 $14,950 $1,246 1.1389% 1105 Pool Heater - Replace 12 1 $3,250 $271 0.2476% 1108 Pool Filter - Replace 20 3 $1,650 $83 0.0754% 1113 Pool Cover - Replace 12 0 $3,263 $272 0.2485% 1126 Misc. Pool Equipment - Replace 6 5 $1,900 $317 0.2895% 1306 Picnic Tables - Replace 20 3 $2,750 $138 0.1257% 1602 Exterior Wall Mount - Replace 20 3 $58,850 $2,943 2.6899% 1604 Pole Lights - Replace 16 11 $1,438 $90 0.0821% 1606 Flood Lights - Replace 20 12 $6,188 $309 0.2828% 1701 Irrigation System - Major Repairs 3 2 $9,500 $3,167 2.8948% 1703 Irrigation Controllers - Replace 12 3 $4,050 $338 0.3085% 1704 Backflow Enclosures - Replace 20 15 $3,600 $180 0.1645% 1801 Landscaping - Refurbish 3 2 $12,625 $4,208 3.8470% 4 10