burnt pine homeowners association, inc. · burnt pine homeowners association, inc. miramar beach,...

Burnt Pine Homeowners Association, Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

December 31, 2018

Burnt Pine Homeowners Association, Inc.Table of Contents

December 31, 2018

REPORT

Independent Auditors’ Report 1

FINANCIAL STATEMENTS

Balance Sheet 3

Statement of Revenues, Expenses and Changes in Fund Balance 4

Statement of Cash Flows 5

Notes to Financial Statements 7

SUPPLEMENTARY INFORMATION

Schedule of Operating Fund Revenues and Expenses – Budget and Actual 12

Schedule of Gate Fund Revenues and Expenses – Budget and Actual 13

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and MembersBurnt Pine Homeowners Association, Inc.Miramar Beach, Florida

Report on the Financial Statements

We have audited the accompanying financial statements of Burnt Pine Homeowners Association, Inc., which comprise the Balance Sheet as of December 31, 2018, and the related Statements of Revenues, Expenses and Changes in Fund Balance 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 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 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.

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 Burnt Pine Homeowners Association, Inc. as of December 31, 2018 , and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

- 2 -

Report on Summarized Comparative Information

We have previously audited the Burnt Pine Homeowners Association, Inc.’s 2017 financial statements, and our report dated April 27, 2018 expressed an unmodified opinion on those audited financial statements. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2017 is consistent, in all material respects, with the audited financial statements from which it has been derived.

Report on Supplementary Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information, contained in the Schedule of Operating Fund Revenues and Expenses – Budget and Actual and Schedule of Gate Fund Revenues and Expenses – Budget and Actual, is presented for purposes of additional analysis, and is not a required part of the financial statements. Such information is the responsibility of the Association’s management and, except for that portion marked “unaudited,” was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The information marked “unaudited” has not been subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we do not express an opinion or provide any assurance on it.

Omission of Required Supplementary Information about Future Major Repairs and Replacements

Management has omitted the required supplementary information on future major repairs and replacements that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by the missing information.

CARR, RIGGS & INGRAM, LLC

Miramar Beach, FloridaApril 22, 2019

Burnt Pine Homeowners Association, Inc.Balance Sheet

The accompanying notes are an integral part of these financial statements.- 3 -

December 31, 2017

Total (For

Operating Gate Comparative

Fund Fund Total Purposes)

Assets

Cash 172,792$ 20,879$ 193,671$ 160,949$

Accounts receivable, net 5,815 - 5,815 4,817

Prepaid expenses 2,736 - 2,736 2,912

Interfund balance 627 (627) - -

Total assets 181,970$ 20,252$ 202,222$ 168,678$

Liabilities and Fund Balance

Liabilities

Accounts payable 9,459$ 17,951$ 27,410$ 22,388$

Prepaid assessments 34,083 - 34,083 34,771

Total liabilities 43,542 17,951 61,493 57,159

Fund balance

Designated for contingencies 93,097 - 93,097 88,186

Undesignated 45,331 2,301 47,632 23,333

Total fund balance 138,428 2,301 140,729 111,519

Total liabilities and fund balance 181,970$ 20,252$ 202,222$ 168,678$

2018

Burnt Pine Homeowners Association, Inc.Statement of Revenues, Expenses and Changes in Fund Balance


Year ended December 31, 2018 2017

Total (For



Revenues

Regular assessments 484,938$ 125,130$ 610,068$ 597,951$

Owner parcel assessments 11,692 - 11,692 8,652

Shared use gate income - 57,236 57,236 61,986

Interest income 1,374 - 1,374 170

Other income 10,881 1,800 12,681 8,956

Total revenues 508,885 184,166 693,051 677,715

Expenses

Administrative 56,615 3,019 59,634 65,692

Bad debt provision 5,623 - 5,623 5,380

Gate operations - 175,631 175,631 177,574

Insurance 4,690 - 4,690 4,999

Landscaping 338,409 - 338,409 343,421

Legal 13,834 595 14,429 12,140

Maintenance and repairs 30,727 15,036 45,763 121,382

Owner parcel charges 11,692 - 11,692 8,652

Utilities 6,050 1,920 7,970 7,751

Total expenses 467,640 196,201 663,841 746,991

Excess (deficit) of revenues over expenses 41,245 (12,035) 29,210 (69,276)

Beginning fund balance 97,183 14,336 111,519 180,795

Ending fund balance 138,428$ 2,301$ 140,729$ 111,519$

Burnt Pine Homeowners Association, Inc.Statement of Cash Flows


Year ended December 31, 2017

Total (For



Operating activities

Regular assessments collected 477,629$ 125,130$ 602,759$ 504,344$

Owner parcel assessments collected 11,692 - 11,692 8,652

Shared used gate income collected - 57,236 57,236 61,986

Interest income received 1,374 - 1,374 170

Other income received 10,881 1,800 12,681 8,956

Cash paid for operating expenses (454,030) (198,990) (653,020) (732,388)


Net cash provided (used) by operating

activities 47,609 (14,887) 32,722 (148,280)

Net increase (decrease) in cash 47,609 (14,887) 32,722 (148,280)

Cash at beginning of year 125,183 35,766 160,949 309,229

Cash at end of year 172,792$ 20,879$ 193,671$ 160,949$

(continued)

2018

Burnt Pine Homeowners Association, Inc.Statement of Cash Flows (Continued)


Year ended December 31, 2017

Total (For



Reconciliation of excess (deficit) of revenues

over expenses to net cash provided (used)

by operating activities:

Excess (deficit) of revenues over expenses 41,245$ (12,035)$ 29,210$ (69,276)$

Adjustments to reconcile excess (deficit)

of revenues over expenses to net cash

provided (used) by operating activities:

Bad debt provision 5,623 - 5,623 5,380

Changes in operating assets

and liabilities:

Accounts receivable (6,621) - (6,621) 90

Prepaid expenses 176 - 176 23,051

Accounts payable 7,811 (2,789) 5,022 (13,828)

Prepaid assessments (688) - (688) (93,697)


Net cash provided (used) by operating activities 47,609$ (14,887)$ 32,722$ (148,280)$

2018

Burnt Pine Homeowners Association, Inc.Notes to Financial Statements

- 7 -

NOTE 1: ORGANIZATION

Burnt Pine Homeowners Association, Inc. (the "Association"), a Florida not-for-profit corporation, was formed on July 28, 1993. Each of the 258 members of the Burnt Pine Homeowners Association, Inc. has one vote in electing the Board members. The development is located on approximately 304 acres in the Sandestin resort area of south Walton County, Florida and consists of 48 homes/lots at Bay Estates, 23 homes/lots at Bay Villas, 178 homes/lots at Club Drive, and 9 homes/lots at the Oaks.

The Association was organized for the purpose of maintaining and protecting the elements owned by the unit owners in common, including landscaping and the access gate. Disposition of common area property requires consent of the members in accordance with the governing documents and Florida Statutes.

All policy decisions, including the annual budget and owners’ assessments, are formulated by the Board of Directors. Major decisions are referred to the general Association membership before action is taken.

Management and accounting services are provided to the Association by Virtuous Management Group.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the Association's significant accounting policies applied in the preparation of the accompanying financial statements is as follows:

Basis of Presentation

The accompanying financial statements include the assets, liabilities, fund balances, revenues, and expenses as determined using the accrual basis of accounting. The financial statements include certain prior year summarized comparative information in total but not by fund. Also, certain prior year disclosures have not been included. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Association’s financial statements for the year ended December 31, 2017, from which the summarized information was derived.

Funds

The Association is a not-for-profit organization which employs the fund method of accounting in order to properly account for restrictions on the expenditures resulting from actions of the Board of Directors or the Association's voting membership. The financial statements segregate the accounting for such funds as Operating or Gate Funds. At the end of the year, excess funds are retained by the fund generating such excess during the year. The Operating Fund is used to account for financial resources available for the general operation of the Association. Disbursements from the Operating Fund are generally at the discretion of the Board of Directors and the Association's Manager. A portion of the Operating Fund is designated for contingencies. The amount designated for contingencies represents Board's intentions to use these funds for unforeseen, unbudgeted expenses.


- 8 -

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Funds (Continued)

The Gate Fund is used to account for the financial resources available for the estimated maintenance and operation of the security gate. The fund accumulates funds from the Association and Burnt Pine East Homeowners Association, Inc., a separate independent Association, for gate operations.

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Revenue Recognition

Regular assessments to members are recognized as revenue during the period for which they are assessed. Assessments received in advance of this period are reported as prepaid assessments on the Balance Sheet. Owner parcel assessments are recognized as revenue when the corresponding expenses are incurred. Shared use gate revenue is recognized as revenue when earned. Investment income, late fees, owner interest, and other income is recognized by the Association when earned or assessed.

Accounts Receivable from Owners and Allowance for Doubtful Accounts

Accounts receivable from owners are reported at the outstanding balance due from owners, net of any allowance for doubtful accounts. The Association provides for doubtful accounts based on experience and analysis of individual accounts. When the collectibility of a receivable becomes questionable, an allowance for doubtful accounts is established. When specific accounts are determined to be uncollectible, they are written off by charging the allowance and crediting the receivable. At December 31, 2018, the allowance for doubtful accounts was $13,003.

Capitalization and Depreciation

Real property acquired by the Association is capitalized when it (a) is used to generate significant cash flows from members on the basis of usage or from nonmembers or (b) can be disposed of for cash with the Association retaining the proceeds. Real property acquired by the Association that does not meet these guidelines is not capitalized, and accordingly, replacements, major repairs, and improvements to this property are not capitalized; instead, they are reported as expenses in the fund making the expenditure. Real property that has not been capitalized includes landscaping and the access gate. There is no capitalized property and equipment on the Balance Sheet.


- 9 -

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Reclassifications

Certain items for the prior year have been reclassified in the financial statements in order to conform with the current year presentation. The Association reclassified prior year legal expense of $12,140 out of administrative expense to its own expense category in the accompanying financial statements.

Prepaid Expenses

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items on the Balance Sheet. These items will be expensed over the applicable usage period.

Cash Equivalents

For purposes of the statement of cash flows, the Association considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

Date of Management’s Review

In preparing the financial statements, the Association’s management has evaluated subsequent events and transactions for potential recognition or disclosure through April 22, 2019, which is the date the financial statements were available to be issued.

NOTE 3: OWNERS' ASSESSMENTS

Revenues and expenses are allocated to the unit owners, depending on the neighborhood, equally, and accordingly, assessment rates are established using this formula. The quarterly rates for all owners are as follows:

Homes Lots

Bay Estates 371$ 371$

Bay Villas 1,546 371

Club Drive 359 371

The Oaks 359 371

The Club Drive Neighborhood of the Association which consists of Burnt Pine Lane, Club Drive, Pine Valley, and Burnt Pine Cove levies an additional lot frontage amount on unimproved lots for maintenance in the amount of $75 per quarter.

In addition, Merion Neighborhood owners pay $77 per quarter for the maintenance of the Merion Park.

Regular assessments for the year ended December 31, 2018 totaled $610,068, of which $125,130 was allocated to the Gate Fund. The 2018 quarterly assessment for homeowners and lot owners was $121 to provide funding for the expense of the security gate.


- 10 -

NOTE 4: FUTURE MAJOR REPAIRS AND REPLACEMENTS

The Association, at its discretion, may accumulate funds for future major repairs and replacements; however, the general membership has elected not to fund for future major repairs and replacements as the Association does not believe there are any repairs and replacement components necessitating funding. Instead, the Association’s policy is to budget a contingency component as deemed necessary to cover unexpected expenses as approved by the Board of Directors. As of December 31, 2018, the Association has accumulated $93,097 for this purpose which is shown as Designated for contingencies on the accompanying Balance Sheet.

THE BUDGET OF THE ASSOCIATION DOES NOT PROVIDE FOR RESERVE ACCOUNTS FOR CAPITAL EXPENDITURES AND DEFERRED MAINTENANCE THAT MAY RESULT IN SPECIAL ASSESSMENTS. OWNERS MAY ELECT TO PROVIDE FOR RESERVE ACCOUNTS PURSUANT TO THE PROVISIONS OF SECTION 720.303(6), FLORIDA STATUTES, UPON OBTAINING THE APPROVAL OF A MAJORITY OF THE TOTAL VOTING INTEREST OF THE ASSOCIATION BY VOTE OF THE MEMBERS AT A MEETING OR BY WRITTEN CONSENT.

When future major repairs and replacements are needed, the Association has the right, subject to Association approval, to increase regular assessments, to levy special assessments, or it may delay major repairs and replacements until funds are available. The effect on not funding for future major repairs and replacements has not been determined.

NOTE 5: INCOME TAXES

The Association files its tax return as a regular corporation on Form 1120. As such, the Association must comply with Internal Revenue Code (IRC) Section 277, which applies to certain membership organizations. Under IRC Section 277, the Association is required to separate membership income and expenses from nonmembership income and expenses. Each component is taxed separately; however, net membership income is exempt from taxation if certain elections are made. For the year ended December 31, 2018, the Association had a net non-membership loss of $1,327. The Association also has net non-membership losses from prior years of $14,028 for total non-membership losses of $15,355available to offset future net nonmembership income and will begin to expire in the year 2029. Nofederal or state income taxes are due.

The Association is not aware of any uncertain tax positions that would require accrual or disclosure in the financial statements. The $15,355 net operating loss represents a deferred tax asset of approximately $3,225; however, since the Association does not expect to have significant membership income in the future and since it is more likely than not that this deferred tax asset will not be realized in the future, a valuation allowance of $3,225 was used to reduce this deferred tax asset.


- 11 -

NOTE 6: CREDIT RISK

The Association assesses regular and special assessments to its members. It is the Association's policy to turn over significantly past due accounts for collection and to file liens against the individual lots. Should the collection of any such liens be enforced by the sale of the lot, the collectibility of the receivable is dependent on the quick sale market value of the lot, and the amount of any other liens that have priority. Market value may be influenced by the real estate market in south Walton County, Florida.

NOTE 7: RELATED PARTY TRANSACTIONS

Sandestin Owners Association, Inc. - the master homeowners' association of the Sandestin Beach Resort. Members of Burnt Pine Homeowners Association, Inc. are also members of Sandestin Owners Association, Inc. During the year ended December 31, 2018, the Association incurred irrigation and gate operations expenses of $33,852 and $175,631, respectively, with this related party, which is recorded in landscaping and gate operations expenses on the accompanying Statement of Revenues, Expenses and Changes in Fund Balance. The Association incurs approximately 32% of all of its expenses for the year ended December 31, 2018 with this master homeowners’ association. At December 31, 2018, the Association owed $17,951 to Sandestin Owners Association, Inc., which is recorded in accounts payable on the accompanying Balance Sheet.

NOTE 8: COMMITMENT

The Association entered into a multi-year landscaping contract with GPL Landscaping, LLC to provide landscaping services to its Bay Villas subdivision from September 1, 2016 through December 31, 2019. The landscaping contract calls for an annual contract amount of $98,102. The agreement provides for annual increases during the term of this contract. But, the annual increases in the contract must be mutually agreed upon by GPL Landscaping, LLC and by the Association. The Association incurred $101,044 in landscaping expense under this contract for the year ended December 31, 2018.

NOTE 9: SHARED USE GATE INCOME

The Association currently shares a portion of the gate operations with Burnt Pine East Homeowner's Association through a shared use agreement. Burnt Pine East Homeowner's Association contributes 32% and the Association contributes 68%. Burnt Pine East Homeowner's Association, which is a separateentity, consists of the following subdivisions: Ravenwood, Preserve, Arrowhead, and Club Estates. Burnt Pine East Homeowner's Association contributed $57,236 to the Association, which represents approximately 8% of the Association’s total revenue, for the year ended December 31, 2018. The shared use gate fees range from $96 to $128 per quarter for each lot or homeowner in the Burnt Pine East Homeowner's Association.

Supplementary Information

Burnt Pine Homeowners Association, Inc.Schedule of Operating Fund Revenues and Expenses – Budget and Actual

- 12 -

Year ended December 31,

Variance -

Favorable

Budget (Unfavorable)

Actual (Unaudited) (Unaudited)

Revenues

Regular assessments 484,938$ 485,235$ (297)$

Owner parcel assessments 11,692 - 11,692

Interest income 1,374 - 1,374

Other income 10,881 4,145 6,736

Total revenues 508,885 489,380 19,505

Expenses

Administrative 56,615 75,366 18,751

Bad debt provision 5,623 5,000 (623)

Insurance 4,690 4,690 -

Landscaping 338,409 379,104 40,695

Legal 13,834 - (13,834)

Maintenance and repairs 30,727 19,720 (11,007)

Owner parcel charges 11,692 - (11,692)

Utilities 6,050 5,500 (550)

Total expenses 467,640 489,380 21,740

Excess of revenues over expenses 41,245$ -$ 41,245$

2018

Burnt Pine Homeowners Association, Inc.Schedule of Gate Fund Revenues and Expenses – Budget and Actual

- 13 -

Year ended December 31,

Variance -

Favorable

Budget (Unfavorable)

Actual (Unaudited) (Unaudited)

Revenues

Regular assessments 125,130$ 125,130$ -$

Shared use gate income 57,236 57,236 -

Other income 1,800 - 1,800

Total revenues 184,166 182,366 1,800

Expenses

Administrative 3,019 3,114 95

Gate operations 175,631 170,391 (5,240)

Legal 595 - (595)

Maintenance and repairs 15,036 15,800 764

Utilities 1,920 1,700 (220)

Total expenses 196,201 191,005 (5,196)

Excess (deficit) of revenues over expenses (12,035)$ (8,639)$ (3,396)$

2018

burnt pine homeowners association, inc. · burnt pine homeowners association, inc. miramar beach,...

Documents