seagate village community...

DATE:

TO:

FROM:

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

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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


$ 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


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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



$ 18,521 $ 468,760

10,995 35,780

$ 29,516 $ 504,540


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Total

$ 487,281

46,775

$ 534,056

Sea gate Village Community Association Statement of Cash Flows



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


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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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SUPPLEMENTAL

(Not Audited, Not Reviewed)

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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