CANTERBURY HOMEOWNERS ASSOCIATION, INC. Financial Statements & Supplementary Information For the Year Ended December 31, 2013

Transcription

1 CANTERBURY HOMEOWNERS ASSOCIATION, INC. Financial Statements & Supplementary Information For the Year Ended December 31, 2013

2 INDEPENDENT AUDITORS' REPORT Board of Directors Canterbury Homeowners Association, Inc. Colorado Springs, Colorado We have audited the accompanying financial statements of Canterbury Homeowners Association, Inc., which comprise the balance sheet as of December 31, 2013, and the related statements of revenue, 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 Management 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. 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 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. Accordingly, we 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 Garden of the Gods Road, Suite 150 Colorado Springs, CO (719) Fax: (719)

3 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 financial position of Canterbury Homeowners Association, Inc. as of December 31, 2013, 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. Disclaimer of Opinion on 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 on the final page 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 the financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We 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 our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Waugh & Goodwin, LLP Colorado Springs, Colorado January 23, 2014

4 CANTERBURY HOMEOWNERS ASSOCIATION, INC. Balance Sheet December 31, 2013 ASSETS Replacement Operating Reserve Fund Fund Total CURRENT ASSETS: Cash and cash equivalents $ 14,881 $ 40,915 $ 55,796 Certificate of deposit 37,123 37,123 Prepaid expenses 3,822 3,822 Prepaid insurance 3,036 3,036 TOTAL ASSETS $ 21,739 $ 78,038 $ 99,777 LIABILITIES AND FUND BALANCES CURRENT LIABILITIES: Accounts payable $ 65 $ $ 65 Deferred contract revenue 4,099 4,099 Assessments received in advance 9,304 9,304 Total current liabilities 13,468 13,468 FUND BALANCES 8,271 78,038 86,309 TOTAL LIABILITIES AND FUND BALANCES $ 21,739 $ 78,038 $ 99,777 See Notes to Financial Statements

5 CANTERBURY HOMEOWNERS ASSOCIATION, INC. Statement of Revenue, Expenses, and Changes in Fund Balances For the Year Ended December 31, 2013 Replacement Operating Reserve Fund Fund Total REVENUE: Special assessments $ 158,503 $ $ 158,503 Homeowner assessments 109,992 13, ,000 Insurance claim proceeds 42,445 42,445 Miscellaneous income 2,390 2,390 Interest income Contract income Late charges Total revenue 314,115 13, ,674 EXPENSES: Roof repairs 196,950 10, ,440 Painting 26,409 26,409 Insurance 25,669 25,669 Management fees 12,608 12,608 Lawn contract 11,964 11,964 General maintenance & repair 10,232 10,232 Siding/stucco repair/replacement 10,200 10,200 Asphalt 7,456 7,456 Water 6,897 6,897 Pool operations and repair 3,833 3,833 Trash 3,001 3,001 Gas 2,919 2,919 Landscaping 2,500 2,500 Gutter repair 2,020 2,020 Light maintenance & repair 1,910 1,910 Accounting fees 1,350 1,350 Tree maintenance 1,269 1,269 Electric 1,184 1,184 Snow removal Administration costs Fence/wall repair Legal expense Pest control Clubhouse maintenance Total expenses 324,375 17, ,321 EXCESS OF EXPENSES OVER REVENUE (10,260) (4,387) (14,647) FUND BALANCES, beginning of year 18,531 82, ,956 FUND BALANCES, end of year $ 8,271 $ 78,038 $ 86,309 See Notes to Financial Statements

6 CANTERBURY HOMEOWNERS ASSOCIATION, INC. Statement of Cash Flows For the Year Ended December 31, 2013 Replacement Operating Reserve Fund Fund Total CASH FLOWS FROM OPERATING ACTIVITIES: Excess of expenses over revenue $ (10,260) $ (4,387) $ (14,647) Adjustments to reconcile excess of expenses over revenue to net cash used by operating activities: Changes in assets and liabilities: Decrease in assessments receivable 1,555 1,555 Increase in prepaid expenses (3,822) (3,822) Decrease in prepaid insurance 9,106 9,106 Decrease in accounts payable (5,943) (5,943) Decrease in deferred contract revenue (513) (513) Increase in assessments received in advance 2,084 2,084 Total adjustments 2,467 2,467 Net cash used by operating activities (7,793) (4,387) (12,180) CASH FLOWS FROM INVESTING ACTIVITIES: Certificate of deposit - net (37,123) (37,253) Net cash used by investing activities (37,123) (37,123) NET DECREASE IN CASH (7,793) (41,510) (49,303) CASH AND CASH EQUIVALENTS, beginning of year 22,674 82, ,099 CASH AND CASH EQUIVALENTS, end of year $ 14,881 $ 40,915 $ 55,796 See Notes to Financial Statements

7 CANTERBURY HOMEOWNERS ASSOCIATION, INC. Notes to Financial Statements For the Year Ended December 31, 2013 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Canterbury Homeowners Association, Inc. was incorporated September 11, 1979, as a Colorado nonprofit corporation for the purpose of maintenance, preservation and architectural control of the Lots and Common Area and to promote the health, safety, and welfare of the residents within the Association, pursuant to the restated Declaration of Covenants, Conditions and Restrictions of Canterbury Townhomes. Operations of the Association commenced subsequent to the conveyance of the Common Area on January 1, The project consists of 41 residential townhomes located in Colorado Springs. Basis of Accounting The accompanying financial statements are presented using the accrual basis of accounting. Financial resources are classified for accounting purposes into two funds. The operating fund is used to account for the general operations of the Association. The replacement reserve fund is used to accumulate monies designated for future major repairs and replacements. Valuation of Common Area Article II, Section 6 of the Restated Declaration provides that the Common Area shall at all times be owned by the Association or its successors. The title to the Common Area was conveyed to the Association by the Declarant on December 11, 1980 at no cost to the Association. The Association does not capitalize real property directly associated with the townhomes. At December 31, 2013, property not capitalized consists of sidewalks, access roads, parking areas, swimming pool, clubhouse and greenbelts. According to the Association's governing documents, the common area shall remain undivided and shall not be subject to partition.

8 Notes to Financial Statements A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Income Tax The Association has elected to be taxed as a homeowner association under Internal Revenue Code Section 528. 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 the Association property. Net nonexempt function income, which includes earned interest and revenues received from nonmembers, is taxed by the federal government and by the State of Colorado. The Association's tax filings are subject to audit by various taxing authorities. The Association's federal income tax returns for 2011 to 2013 remain open to examination by the Internal Revenue Service; Colorado income tax returns for 2010 to 2013 are open to examination. Management of the Association believes that it does not have any uncertain tax positions that are material to the financial statements. Assessments Receivable Assessments receivable are stated at the amount the Association expects to collect from balances outstanding at year-end. Based on the Association's experience with owners having outstanding balances, it has concluded that any losses on balances outstanding at year-end will not be material. Therefore, no allowance for doubtful accounts is considered necessary. 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, the disclosure of contingent liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Statements of Cash Flows For purposes of the statements of cash flows, cash and cash equivalents are defined as demand deposits and short-term investments with an initial maturity of three months or less. During the year ended December 31, 2013, the Association paid no interest or income taxes.

9 Notes to Financial Statements A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Date of Management's Review In preparing the financial statements, the Association has evaluated events and transactions for potential recognition or disclosure through January 23, 2014, the date that the financial statements were available to be issued. B. CERTIFICATE OF DEPOSIT Certificate of deposit at December 31, 2013 consists of the following: Maturity Interest Date Rate Principal 06/21/ % $ 37,123 The Association intends to hold this certificate until maturity. C. SPECIAL ASSESSMENTS A special assessment in the amount of $3,866 per owner was assessed during the year for roof replacement. D. DEFERRED CONTRACT REVENUE During the year ended December 31, 2012, the Association entered into an easement service agreement with a broadband communication service company to authorize the construction and operation of a cable communication system. In consideration for entering into the ten year service agreement, the Association received $5,125. The Association will recognize this income over the 10 year period of the service agreement. During the year ended December 31, 2013, the Association recorded $513 of revenue. The remaining portion of the contract being deferred at December 31, 2013 is $4,099. E. INSURANCE PROCEEDS AND EXPENSES In June 2012, the Association suffered major roof damage from a hail storm. As of December 31, 2013, the Association received $36,620 in insurance proceeds and paid $207,440 in roofing expenses. As of December 31, 2013, the roofing project was completed and all expenses had been paid.

10 Notes to Financial Statements E. INSURANCE PROCEEDS AND EXPENSES - Continued In November 2013, the Association filed an insurance claim for vandalism damages to the clubhouse. The Association received $5,825 in insurance proceeds and paid $8,325 in restoration repairs. As of December 31, 2013, all of the repairs had been completed and all expenses had been paid. F. REPLACEMENT RESERVE FUNDS Article IV, Section 3 of the Restated Declaration states that the annual assessment set by the Board of Directors shall include amounts for the creation of reasonable reserves for the repair, replacement and maintenance of those common elements that must be replaced periodically. The Association has allocated amounts from each owner's monthly assessment to the replacement reserve fund. The replacement reserve funds have been segregated from the Association's operating funds. G. FUTURE MAJOR REPAIRS AND REPLACEMENTS A reserve study was conducted by an independent engineering firm in August of 2011 to estimate the remaining useful lives and the replacement costs of the common property components. The table shown in the unaudited supplementary information on future major repairs and replacements is based on this analysis. The Association is funding for future major repairs and replacements over the remaining useful lives of the components. Actual expenditures may vary from estimated future expenditures, and the variations may be material. Therefore, amounts accumulated in the replacement reserve 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, subject to membership approval, to increase regular assessments or pass special assessments.

11 CANTERBURY HOMEOWNERS ASSOCIATION, INC. Supplementary Information on Future Major Repairs and Replacements December 31, 2013 (Unaudited) A reserve study was conducted by an independent engineering firm in August 2011 to estimate the remaining useful lives and the replacement costs of the common property components. Replacement costs were based on the estimated costs to repair or replace the common property components at the date of the study. Estimated replacement costs and estimated remaining lives have not been revised since that date but do take into account the effects of inflation at a rate of 3% between the date of the study and the date that the components will require repair or replacement. The following information is based on the study and presents significant information about the components of common property. Replacement Estimated Estimated Reserve Fund Remaining Replacement Balance at Components Life Cost 12/31/ Concrete 1-6 $ 13,016 $ Railroad ties 10 60,947 Wood stairs and deck 2-3 9,620 Asphalt ,909 Fence 22 90,631 Flooring 6-9 5,607 Siding ,569 Stucco and wood trim ,098 Building interior ,905 Paint siding 1 18,540 Pool ,153 Roof repair/replacement ,327 Water heater 9 1,435 Gas furnace 18 3,660 Rock riprap 7 2,460 Irrigation system 5 6,956 Signage 8 6,334 Pole lights 5 3,246 Exterior wall lights 10 14,514 Consolidated 78,038 TOTALS $ 1,719,927 $ 78,038