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Seagate Village Community Association c/o CHAMPS/The Kelly Group
5731 Palmer Way. Suite B Carlsbad, Cal ifornia 92010-7247
(760)603-050 I • FAX (760)603-0505
September 19, 2011
All Homeowners
The Board of Directors
In accordance with California Civil Code, enclosed please find a copy of the Association's audit for the twelve months ending June 30, 2011.
Please call CHAMPSlThe Kelly Group (760)603-0501 should you have any questions.
SEAGATE VILLAGE COMMUNITY ASSOCIATION
FINANCIAL STATEMENTS
TABLE OF CONTENTS
Independent Accountant's Report
Financial Statements
Balance Sheet
Statement of Revenues and Expenses
Statement of Changes in Fund Balances
Statement of Cash Flows
Notes to Financial Statements
Supplementary Information on Future Repairs and Replacements (not audited, not reviewed)
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6 - 8
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MICHAEL J. FERRARA Certified Pu blic Accounranr
2340 Tampa Avenue· Suite C • EI Cajon, CA 92020 • 619/ 698-429 1 • fax 619/69H-191 7
INDEPENDENT ACCOUNTANT'S REPORT
Seagate Village Community Association
Reviewed Financial Statements June 30, 20 II
Board of Directors and Members:
I have reviewed the accompanying balance sheet of Seagate Village Community Association as of June 30, 20 II, and the related statement of revenues and expenses, statement of changes in fund balances and statement of cash flows for the year then ended. A review includes primarily applying procedures to management's financial data and making inquiries of the Association's management and board of directors. 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, I do not express such an opinion .
Management and the board of directors are 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.
My 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 me to perform procedures to obtain limited assurance that there are no material modifications that shou ld be made to the financial statements. I believe that the results of my procedures provide a reasonable basis for my report.
Based on my review, I am not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.
My review was made for the purpose of expressing a conclusion that there are no material modifications that should be made to the financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America. The schedule entitled Supplementary Information on Future Repairs and Replacements (on page 9) is presented on ly for purposes of additional analysis. Such information has not been subjected to the inquiry and analytical procedures applied in the review of the basic financial statements but was compiled from infonnation that is the representation of management and the board of directors, without audit or review. Accordingly, I do not express an opinion or provide any assurance on such infoJ1nation .
•
August 4, 20 I I Michael 1. FelTara, c.P.A.
Member: Amcric .. n Institute of Cen ificd Puhlic Accounrams
Assets
Cash Investments Assessments Receivable Accrued Interest Receivable Prepaid Insurance Prepaid Income Taxes
Total Assets
Liabilities
Accounts Payable Prepaid Assessments
Total Liabilities
Fund Balance
Total Liabilities & Fund Balance
Seagate Village Community Association Balance Sheet June 30, 2011
Operating Replacement Fund Fund
$ 51 ,929 $ 138,700 365,827
4,181 536
541 1,269
$ 57,920 $ 505,063
$ 19,324 $ 523 9,080
28,404 523
29,516 504,540
$ 57,920 $ 505,063
See Accompanying Notes and Independent Accountant's Report
2
Total
$ 190,629 365,827
4,181 536 541
1,269
$ 562,983
$ 19,847 9,080
28,927
534,056
$ 562,983
Revenues: Regular Assessments Interest Other
Total Revenues
Expenses: Administrative-
Insurance Legal & Collection Management Contract Other Administrative Printing & Postage Reserve Study Review & Tax Preparation Taxes
Total Administrative
Maintenance-Janitorial Landscape - Contract Landscape - Other Pest Control Pool Repairs & Maintenance
- Patio Homes - Condominiums - Recreation
Refuse Disposal Tree Trimming
Total Maintenance
Utilities-Gas & Electricity Water & Sewer
Total Utilities
Total Expenses
Excess Revenues I (Expenses)
Seagate Village Community Association Statement of Revenues and Expenses
For the Year Ended June 30, 2011
Operating Replacement Fund Fund
$ 294 ,988 $ 115,832 3,579
1,470
296,458 119,411
14,512 3,352
28 ,800 3,104 150 8,499 1,230 1,980 1,122
62,599 150
3,089 87,780 16,837
7,861 5,199
10,848 24,390 46,565 12,526
14,404 18,135
164,153 83,481
20,249 38 ,462
58 ,711 a
285,463 83 ,631
$ 10,995 $ 35,780
See Accompanying Notes and Independent Accountant's Report
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Total
$ 410 ,820 3,579 1,470
415,869
14,512 3,352
28,800 3,254 8,499 1,230 1,980 1,122
62,749
3,089 87,780 16,837 7,861 5,199
10,848 24,390 46,565 12,526 14,404 18,135
247,634
20,249 38,462
58 ,711
369,094
$ 46,775
Fund Balance - Beginning of Year
Excess Revenues I (Expenses)
Fund Balance - End of Year
Seagate Village Community Association Statement of Changes in Fund Balances
For the Year Ended June 30, 2011
Operating Replacement Fund Fund
$ 18,521 $ 468,760
10,995 35,780
$ 29,516 $ 504,540
See Accompanying Notes and Independent Accountant's Report
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Total
$ 487,281
46,775
$ 534,056
Sea gate Village Community Association Statement of Cash Flows
For the Year Ended June 30, 2011
Operating Replacement Fund Fund
Cash Flows - Operating Activities : Regular Assessments $ 293,437 $ 115,832 Interest Received 3,212 Other 2,763 Administrative Disbursements (62 ,259) (150) Income Taxes Paid (700) Maintenance Disbursements (162,720) (83 ,523) Utility Disbursements (55,866)
• Net Increase in Cash From Operating Activities 14,655 35,371
Cash Flows - Investing Activities: Purchase of CDs (345,827) Maturity of CDs 320,000
Net Decrease in Cash From Investing Activities ° (25,827)
Total Net Increase in Cash 14,655 9,544
Total Cash - Beginning of Year 37 ,274 129,156
Total Cash - End of Year $ 51,929 $ 138,700
Reconciliation of Excess Revenues/(Expenses) to Net Increase in Cash from Operating Activities:
Excess Revenues / (Expenses) $ 10,995 $ 35,780
Adjustments to Reconcile Excess Revenues/(Expenses) to Net Increase in Cash from Operating Activities-
Decrease in Assessments Receivable 34 Increase in Accrued Interest Receivable (367) Decrease in Prepaid Insurance 415 Decrease in Prepaid Income Taxes 422 Inc/(Dec) in Accounts Payable 4,374 (42) Decrease in Prepaid Assessments (1 ,585)
• Net Increase in Cash From Operating Activities $ 14,655 $ 35,371
See Accompanying Notes and Independent Accountant's Report
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Total
$ 409,269 3,212 2,763
(62,409) (700)
(246,243) (55,866)
50,026
(345,827) 320 ,000
(25,827)
24,199
166,430
$ 190,629
$ 46,775
34 (367) 415 422
4,332 (1,585)
$ 50,026
Seagate Village Community Association (A Nonprofit Corporation)
Notes to Financial Statements June 30, 20 II
Note 1. Summary of Significant Accounting Policies Seagate Village Community Association is a statutory condominium type common interest realty association and was organized in California on September 10, 1982, as a nonprofit mutual benefit corporation. The purpose of the Association is primarily to maintain, preserve and control the common areas of the Association. The Association has 127 patio homes and 78 condominiums located in San Diego County, California.
The Association ' s financial statements are presented on the accrual basis of accounting. The accrual basis records assessments as revenues when due rather than when received and expenses when incurred rather than when paid.
The Association uses fund accounting, which requires that funds, such as operating funds and funds designated for future major repairs and replacements, be classified separately for accounting and reporting purposes. Disbursements from the operating fund are generally for on-going repairs and maintenance. Disbursements from the replacement fund generally may be made only for designated purposes.
Real property and replacements & improvements to common area real property are not capitalized nor depreciated because the common areas are considered owned by the unit owners and not the Association.
Per the provisions of Financial Accounting Standards Board of the American Institute of Certified Public Accountants, regarding "Statement of Cash Flows", cash equivalents consist primarily of certificates of deposits (CDs) and other securities with original maturities of 90 days or less. Certificates of deposit and other securities with original maturities over ninety days are considered investments. The Association's method of accounting is to consider all cash, cash equivalents and money market funds together as cash funds .
Certificates of deposits and other investments with original maturities over ninety days are considered "held to maturity" investments. Held to maturity investments are carried at cost.
The Board's policy is to allocate to the replacement fund interest earned on replacement fund cash and investment accounts. Taxes on all interest and other nonexempt income are paid from the operating fund.
Subsequent events have been evaluated through the date the financial statements were issued on August 4, 20 II.
The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and the disclosures. Accordingly, actual results could differ from those estimates.
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Seagate Village Community Association (A Nonprofit Corporation)
Notes to Financial Statements June 30, 20 I I
Note 2. Cash & Investments The Association ' s cash and investment balances at June 30, 201 I are as follows:
Depository
A. Operating Fund Cash-Pacific Western Bank
B. Replacement Fund CashUBS OneWest Bank
Total Replacement Fund Cash
C. Replacement Fund InvestmentsUBS One West Bank OneWest Bank One West Ban k
Accl. Type
Checking
Money Market Money Market
Various CDs CD CD CD
Total Replacement Fund Investments
Note 3. Income Tax Status
Balance
$ 51,929
$ 19,996 II 8,704
$ 138,700 :::;======:
$ 175,000 70,376 70,437 50,014
$ 365,827 ======
The Association is taxed as a homeowners association under Internal Revenue Service Code Section 528. Under this section, the Association is generally taxed only on nonexempt income, such as interest earnings. Tax expenses for the year ended June 30, 20 I I are $848 Federal and $274 State. At the year-end, $385 Federal taxes and $884 California taxes are prepaid. The Association's federal income tax returns are generally subject to examination by the Internal Revenue Serv ice for three years after they were filed; and for California tax returns by the Franchise Tax Board generall y for four years after they were filed.
Note 4. Assessments The annual budget and owners' assessments are determined by the Board of Directors and under ce11ain conditions, may be approved by the owners. The Association retains excess funds, if any, for expenses in future years. Regular assessments to patio homes owners were $89.00 per unit per month and assessments to condominium owners were $294.00 per unit per month for the year ended June 30, 2011. From these amounts, $9,652.66 per month was designated to the replacement fund.
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Note S. Assessments Receivable
Seagate Village Community Associat ion (A Nonprofit Corporation)
Notes to Financial Statements June 30, 20 II
The Assoc iation's policy is to place liens on the propelties of owners whose assessments are in arrears, and retain lega l counse l, if necessary, to collect delinquent assessments. As of June 30, 20 I I , there are $4,181 of assessments and charges rece ivable, and $9,080 of assessments paid in advance.
Note 6. Replacement Fund The Assoc iation has establ ished a policy of assessin g members monthly and accumulating funds for major repairs and replacements based on current estimated replacement costs. Accumulated fu nds are held in separate savings accounts and generally are not ava ilable for expenditures for norm al operations.
The Board of Directors commiss ioned an updated reserve study, to determine the adequacy of the Association 's major repair & replacement funding program as June 30, 2011. The estimates were originally obtained from spec ialists who inspected the propelty for a prior study. The table included in the supplementary information on page 9 regarding major repairs and replacements is based on the updated study.
Funds are being accumulated in the rep lacement fu nd based on budgets and estimates of future needs for repairs and rep lacements of common property components. Actual expenditures may vary from the estimated future expenditures, and the variations may be material. Therefore, amounts accumulated in the replacement fund may or may not be adequate to meet all future needs fo r major repairs and replacements. If addi tional funds are needed, the Association has the right to increase regular assessments, pass special assessments, or delay major repairs and replacements until fund s are ava ilable.
Note 7. Commitments The Association enters into contracts for management and/or maintenance services in the normal course of its business operations. These contracts are generally cance lable on thirty to ninety days' notice.
Note 8. Concentration of Credit Risk The Assoc iation maintains some of its cash in a money market account that is not federally insured and bank deposit accounts that, at times, may exceed federally insured li mits. The Association has not experienced any losses in such accounts. The Board of Di rectors believes the Association is not exposed to any significant risk re lated to money market funds and cash.
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Seagate Village Community Association
Supplementary Information on Future Repairs and Replacements
June 30, 20 II
(Not Audited, Not Reviewed)
The Board of Directors commissioned an updated reserve study, to determine the adequacy of the Association's major repair & replacement funding program as of June 30. 2011. The estimates were originally obtained from specialists who inspected the property for a prior study. The following table is based on the study and presents significant information about the components of common area property.
Estimated Current Actual Estimated Current Annual Replacement Remaini ng Replacement Reserve Fund Balance
Components LiveslYears Cost Requirement at 6/30111
Patio Homes -Paint ing I $ 16,860 $ 3,3 72 $ Asphalt & Concrete 3 - 23 193,350 12,5 18 Fencing I - 2 52,740 3,540 Unallocated 122,200
Subtotal 262,950 19,430 122,200 Recreation Facilities -Roofing 33 4,880 139 Painting & Repairs I - 8 7,520 1,425 Fencing & Gates I - 23 76,380 3,074 Pool & Spa I - 10 46,610 4,521 Tennis Ct Resurfacing I 7, 140 1,428 Lighting 5 15,910 796 Landscaping 3 - 7 30,330 3,084 Miscellaneous I - 4 30,770 2,037 Unallocated 115,0 12
Subtotal 219,540 16,504 11 5,012 Condominiums -Roofing I - 9 254,450 14,932 Painting & Repairs 2- 9 118,670 10,743 Asphalt & Concrete 4 - 20 138, I 00 8,648 Fencing I - 21 176,620 7,313 Lighting 6 5,090 255 Miscellaneous 2- 8 19,220 1,178 Unallocated 266,792
Subtotal 71 2, 150 43,069 266,792 Not Allocated 536
$ 1,194,640 $ 79,003 $ 504 ,540
The updated reserve study was prepared with the "straight line in years" method offunding assumption. It assumed an inflation rate of 3% for future replacement costs of component items. According to the updated study, the ideal replacement fund balance as of June 30, 2011 is $594,295 and the actual replacement fund balance is $504,540. The Association's budgeted allocation to the replacement fund for 2011 / 12 is $130,373.
See Independent Accountant's Review Report
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