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The Keystone Neighbourhood Company, Inc.

(A Colorado Non-Profit Corporation

Financial Statements

December 31, 2016

i

The Keystone Neighbourhood Company, Inc.(A Colorado Non-Profit Corporation)

December 31, 2016

Table of Contents

Page

INDEPENDENT AUDITOR'S REPORT 1 - 2

Basic Financial Statements:

Balance Sheets 3

Statements of Revenues, Expenses and Changes in Fund Balances 4

Statements of Cash Flows 5

Notes to the Financial Statements 6 - 12

Supplementary Schedules:

Schedule of Operating Revenues and Expenses - Budget and Actual 13 - 14

Supplementary Schedule of Community Capital Reserve Fund Future Repairs and Replacements 15 - 16

McMahan and Associates, l.l.c.Certified Public Accountants and Consultants

Web Site: www.mcmahancpa.comChapel Square, Bldg C Main Office: (970) 845-8800245 Chapel Place, Suite 300 Facsimile: (970) 845-8108P.O. Box 5850, Avon, CO 81620 E-mail: [email protected]

Member: American Institute of Certified Public Accountants

Paul J. Backes, CPA, CGMA Avon: (970) 845-8800

Michael N. Jenkins, CA, CPA, CGMA Aspen: (970) 544-3996

Daniel R. Cudahy, CPA, CGMA Frisco: (970) 668-3481

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M&A

INDEPENDENT AUDITOR’S REPORT

To the Board of DirectorsThe Keystone Neighbourhood Company, Inc.Keystone, Colorado

Report on the Financial Statements

We have audited the accompanying financial statements of The Keystone Neighbourhood Company, Inc.(the “Association”), a Colorado non-profit corporation, which comprise the balance sheets as of December 31, 2016, 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 Responsibilities

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.

Auditor’s 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 includes 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 purposes 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 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 The Keystone Neighbourhood Company, Inc. as of December 31, 2016, 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.

INDEPENDENT AUDITOR’S REPORTTo the Board of DirectorsThe Keystone Neighbourhood Company, Inc.Keystone, Colorado

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Report on Supplementary Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplemental schedules on pages 13 – 14 are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of the Association’s management and 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, except for that portion marked “unaudited”, on which we express no opinion, is fairly stated in all material respects in relation to the financial statements as a whole.

Disclaimer of Opinion on Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Schedule of Future Major Repairs and Replacements on pages 15 – 16 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. 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.

Report on Summarized Comparative Information

We have previously audited the Association’s December 31, 2015 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated May 31, 2016. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2015 is consistent, in all material respects, with the audited financial statements from which it has been derived.

McMahan and Associates, L.L.C.May 11, 2017

BASIC FINANCIAL STATEMENTS

2015Replacement Funds

CommunityCommunity Capital Community

Operating Facilities Reserve ImprovementsFund Fund Fund Fund Total Total

Assets:Current assets:

Cash and cash equivalents 143,708 16,096 162,004 5,712 327,520 1,426,202 Investments 2,283,823 858,147 3,045,301 1,802,728 7,989,999 6,248,020 Accounts receivable, net of

allowance for doubtful accounts 125,164 - - - 125,164 128,302 Prepaid expenses 51,294 - - - 51,294 49,009 Inventory 19,825 - - - 19,825 20,306 Due (to) from other fund (2,477,525) 421,208 1,418,106 638,211 - -

Total Current Assets 146,289 1,295,451 4,625,411 2,446,651 8,513,802 7,871,839 Fixed assets:

Equipment 422,326 - - - 422,326 350,963 Tenant improvements 187,607 - - - 187,607 187,607 Less: Accumulated depreciation (365,123) - - - (365,123) (339,990)

Net Fixed Assets 244,810 - - - 244,810 198,580

Total Assets 391,099 1,295,451 4,625,411 2,446,651 8,758,612 8,070,419

Liabilities and Fund Equity:Current liabilities:

Accounts payable 156,905 - - - 156,905 114,138 Other payable 93,803 - - - 93,803 75,302 Deposits 140,391 - - - 140,391 151,745

Total Liabilities 391,099 - - - 391,099 341,185 Fund equity:

Fund balances - 1,295,451 4,625,411 2,446,651 8,367,513 7,729,234 Total Fund Equity - 1,295,451 4,625,411 2,446,651 8,367,513 7,729,234

Total Liabilities and Fund Equity 391,099 1,295,451 4,625,411 2,446,651 8,758,612 8,070,419

2016


Balance SheetsDecember 31, 2016

With Comparative Totals For the Year Ended 2015

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

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Revenues:Real estate assessments 650,045 156,689 760,154 - 1,566,888 1,755,526Real estate transfer assessments 1,046,036 - - - 1,046,036 1,409,119Sales assessments 202,334 - - - 202,334 189,780 Recreation assessments 23,327 - - - 23,327 22,347 Event revenue and sponsorships 438,321 - - - 438,321 410,587 Warren Station 228,490 - - - 228,490 212,893 Interest income 5,109 4,479 10,350 9,728 29,666 1,169 Commercial trash 174,203 - - - 174,203 170,748 Other 34,837 - - 14,700 49,537 31,909

Total Revenues 2,802,702 161,168 770,504 24,428 3,758,802 4,204,078

Expenses: General and administrative 478,107 33 50 - 478,190 472,660 Depreciation 52,132 - - - 52,132 30,954 Security 98,144 - - - 98,144 98,459 Road snow removal and maintenance 177,952 - 36,901 - 214,853 206,443 Plaza snow and litter removal 656,345 - - - 656,345 635,536

Common area maintenance 298,042 - 172,163 5,141 475,346 414,948 Pool maintenance 58,418 - 24,696 - 83,114 89,089 Community events 960,013 - - - 960,013 952,218 Other capital projects - - 57,730 21,107 78,837 156,525 Other 23,549 - - - 23,549 26,560

Total Expenses 2,802,702 33 291,540 26,248 3,120,523 3,083,392

Excess (Deficiency) of Revenues Over Expenses - 161,135 478,964 (1,820) 638,279 1,120,686

Fund Balances - Beginning of Year - 1,134,316 4,146,447 2,448,471 7,729,234 6,608,548

Fund Balances - End of Year - 1,295,451 4,625,411 2,446,651 8,367,513 7,729,234

2016


Statements of Revenues, Expenses and Changes in Fund BalancesFor the Year Ended December 31, 2016

(With Comparative Totals For the Year Ended 2015)


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Cash Flows From Operating Activities:Cash received from members and others 1,913,524 156,689 760,154 - 2,830,367 3,328,140 Other cash received 875,851 - - 14,700 890,551 826,137 Interest received 733 4,885 9,492 9,836 24,946 468 Cash paid for goods and services (1,544,801) (33) (291,540) (26,248) (1,862,622) (1,949,583) Interest paid (670) - - - (670) - Cash paid for salaries and benefits (1,145,633) - - - (1,145,633) (1,098,832) Transfers 1,000,567 (774,248) (760,779) 534,460 - -

Net Cash Provided (Used) by Operating Activities 1,099,571 (612,707) (282,673) 532,748 736,939 1,106,330

Cash Flows From Investing Activities:Cash payments for purchase of fixed assets (98,363) - - - (98,363) (63,232) Sale of investments 2,545,172 281,000 2,460,000 825,000 6,111,172 5,383,148 Purchase of investments (3,565,041) (456,553) (2,249,000) (1,577,836) (7,848,430) (7,529,136)

Net Cash Provided (Used) by Investing Activities (1,118,232) (175,553) 211,000 (752,836) (1,835,621) (2,209,220)

Net Increase (Decrease) in Cash (18,661) (788,260) (71,673) (220,088) (1,098,683) (1,102,890)

Cash - Beginning of Year 162,369 804,356 233,677 225,800 1,426,202 2,529,092

Cash - End of Year 143,708 16,096 162,004 5,712 327,520 1,426,202

Reconciliation of Excess (Deficiency) of Revenues Over Expenses to Net Cash Provided (Used) by Operating Activities:

Excess (deficiency) of revenues over expenses - 161,135 478,964 (1,820) 638,279 1,120,686

Adjustments: Depreciation 52,132 - - - 52,132 30,954 Unrealized (gain) loss on investments (4,376) 406 (858) 108 (4,720) (703) Transfers to (from) other funds 740,443 - (740,443) - - - (Increase) decrease in accounts receivable 3,138 - - - 3,138 (31,271) (Increase) decrease in prepaid expenses (2,285) - - - (2,285) (4,401) (Increase) decrease in inventory 481 - - - 481 4,858 Increase (decrease) in accounts payable 42,769 - - - 42,769 (7,034) Increase (decrease) in other payable 18,501 - - - 18,501 10,601 Increase (decrease) in deposits (11,354) - - - (11,354) (17,360) Increase (decrease) in due to/from other funds 260,122 (774,248) (20,336) 534,460 (2) -

Total Adjustments 1,099,571 (773,842) (761,637) 534,568 98,660 (14,356)

Net Cash Provided (Used) by Operating Activities 1,099,571 (612,707) (282,673) 532,748 736,939 1,106,330

2016


Statements of Cash FlowsFor the Year Ended December 31, 2016

(With Comparative Totals For the Year Ended 2015)


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NOTES TO THE FINANCIAL STATEMENTS


Notes to the Financial StatementsDecember 31, 2016

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1. Organization

The Keystone Neighbourhood Company, Inc. (the “Company”), a Colorado non-profit corporation, is the owners’ association for a large planned community located in Summit County, Colorado. The Neighbourhoods at Keystone was created by Keystone/Intrawest, L.L.C., (the “Declarant”) pursuant to the Colorado Common Interest Ownership Act on November 30, 1995. During the year ended December 31, 2003, the Declarant changed to Vail Summit Resorts, Inc. Effective November 30, 2015 the Association’s control transferred to non-declarant property owners.

The Company’s purposes are (1) to acquire, own, lease and manage the common elements; (2) to provide facilities and services to owners, guests and general public; (3) administer and enforce the covenants, conditions, restrictions, reservations and easements created by the Declaration of Covenants, Conditions and Restrictions for The Neighbourhoods at Keystone (the “Declaration”); (4) to levy, collect and enforce the assessments imposed by the Declaration; (5) to promote the Neighbourhoods at Keystone as a four season destination resort community; (6) to maintain and enhance property values; (7) to take any action it deems necessary to protect the general welfare of owners, guests and general public; (8) to enter into agreements with respect to the foregoing; and (9) to regulate and manage the Neighbourhoods at Keystone.

The membership in the Company is comprised of every owner of property within the boundaries of The Neighbourhoods at Keystone. There are five classes of members; residential, commercial, lodges, resort parcels and undeveloped land. The operations of the Company are managed by an executive board of nine directors; this executive board is comprised of three residential directors, two commercial directors, one lodging director, one resort director and two at large directors.

2. Summary of Significant Accounting Policies

A. Fund Accounting

The Company uses the fund method of accounting, which requires funds, such as operating funds, funds for future major repairs, replacements and capital expenditures, and funds collected for specially designated purposes, be classified separately for accounting and reporting purposes.

B. Basis of Accounting

The financial statements have been prepared using the accrual method of accounting, which recognizes revenue when earned or assessed and expenses when incurred.

C. Cash Equivalents

Checking, money market savings, and money market fund accounts are considered cash equivalents by the Company for the purpose of the Statement of Cash Flows since these accounts have no stated maturities.

D. Investments

The Company invests certain excess funds in certificates of deposit. Because these securities are intended to fund future Replacement Fund expenditures and may provide a ready source of cash when so required, these investments are classified as trading. Accordingly, these securities are reported on the financial statements at fair value and all realized and unrealized gains and losses are included in current period earnings.



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2. Summary of Significant Accounting Policies (continued)

E. Recognition of Assets

Real and personal common property acquired by the original homeowners is not recognized on the financial statements of the Company because it is commonly owned by individual owners and its disposition by the Board is restricted.

The Company recognizes as assets on its financial statements only common real and personal property to which it has title and that it can dispose of for cash, while retaining the proceeds thereto. Such assets are recorded at cost.

Equipment owned by the Company is depreciation on the straight-line method over estimated useful lives ranging from five to seven years, while tenant improvements are depreciated over a twenty year useful life.

For the year ended December 31, 2016, fixed assets were comprised of the following:

Beginning Ending

Balance Additions Deletions Balance

Fixed assets:

Equipment 350,963$ 98,363 (27,000) 422,326

Tenant improvements 187,607 - - 187,607

Total fixed assets 538,570 98,363 (27,000) 609,933

Less:

Accumulated depreciation (339,990) (52,133) 27,000 (365,123)

Total fixed assets, net 198,580$ 46,230 - 244,810

F. Allowance or Uncollectible Accounts

The Company uses the allowance method for recognizing the future potential uncollectibility of accounts receivable. This reserve is generally calculated based on the estimated uncollectible accounts 90 or more days overdue. At December 31, 2016, the Company considered all amounts collectible, therefore, no allowance was established to estimate the uncollectible balances. The Company’s policy is to charge late fees to owner accounts that are 61 or more days overdue.

G. Due To/From Other Funds

The Company has chosen to record all accounts receivable and accounts payable in the Operating Fund. In accordance with generally accepted accounting principles, the differences in the individual funds caused by this accounting policy results in interfund assets and liability accounts on the financial statements.

H. Inventory

Inventory is stated at cost, which approximates market value, utilizing the first-in, first-out method.



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2. Summary of Significant Accounting Policies (continued)

I. Investment Income

Investment income is allocated among funds based on average fund balances.

J. 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 account differ from those estimates.

K. Comparative Information

The financial statements include certain prior year comparative information in total but not by fund. Such information does not include sufficient detail to constitute a presentation in conformity to generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Company’s financial statements for the year ended December 31, 2015, from which the comparative totals were derived.

Certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year’s presentation.

L. Subsequent Events

Management has evaluated subsequent events through May 11, 2017, the date these financial statements were available to be issued.

M. Income Taxes

While the Company has been organized under Colorado non-profit statues as a corporation without capital stock or shareholders, the Company is not a tax-exempt organization. Consequently, the Company is subject to Federal and state income taxes on net income derived from investments and other non-membership sources.

The income tax returns of the Company are subject to examination by the Internal Revenue Service and the Colorado Department of Revenue. The Company’s returns are no longer subject to examination for tax years prior to 2013 by the Internal Revenue Service and for tax years prior to 2012 by the Colorado Department of Revenue.



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3. Cash and Cash Equivalents

At December 31, 2016, the Company’s cash and cash equivalents consist of the following:

Cash and Cash Equivalents:

Cash on hand 7,500

Checking 125,621

Money funds - U.S. Treasuries 194,399

Total cash and cash equivalents 327,520$

The Federal Deposit Insurance Corporation (the “FDIC”) insures single depositors up to $250,000. At December 31, 2016, all balances were covered under FDIC.

4. Investments

The Company has the following investments at December 31, 2016:

Certificates of deposit:

Bearing interest at 0.450% - 1.250% per annum, maturing

within one year 6,262,376

Bearing interest at 0.850% - 1.400% per annum, maturing 1,727,623

in more than one year

Total investments 7,989,999$

5. Assessments and Common Expenses

The Board prepares an annual budget to estimate the annual expenses of maintaining the Company’s common elements.

Since the Company is signed only to operate as a conduit to collect assessments and pay operating expenses on behalf of members, any excess of deficiency of revenues over expenses is repaid to or recovered from the members in a subsequent year by reducing or increasing assessments, or, with the approval of the Company’s membership, transferred to the Replacement Funds

The Declaration empowers the Company to levy the following assessments to defray the costs of operations and to provide for future major repairs, replacements and improvements.

A. Annual Real Estate Assessment

Owners’ property is subject to an annual real estate assessment, of which 10 percent shall be deemed to be contributions of capital to be placed in a Community Facilities Fund for use to construct and/or finance community development projects. The Annual Real Estate Assessment is calculated by taking the assessed value of real property (determined by Summit County Colorado Assessor’s Office) and multiplying this by the 2016 rate of 40 mills.



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5. Assessments and Common Expenses (Continued)

B. Sales and Recreation Assessments

The Company also collects sales and recreational assessments on all local sales and operations of recreational activities at the rate of ½ of 1 percent.

C. Real Estate Transfer Assessments

The occurrence of any transfer of property within the boundaries of the Company is subject to a real estate transfer assessment at 2 percent of the sales price or transfer at fair market value.

D. Special Assessments

The Company has the right to assess special assessments in the event there is a budget deficit. No special assessments were levied in 2016.

6. Related Party

Effective January 1, 2011, the Company signed an agreement with Vail Summit Resorts, Inc. (Vail Resorts) to provide the Company with security. The initial term was for one year with renewal for subsequent one-year terms upon mutual written agreement.

Additionally, effective August 19, 2011 the Company has entered into an agreement with Vail Summit Resorts, Inc. in which the Company will not request conveyance of the Dercum Square Property for twenty years except under certain conditions after fifteen years. Such conveyance to the Company is allowed by the Keystone Resort Planned Unit Development (“PUD”) for conditions as noted in the PUD. The agreement has been entered into in order to facilitate the Vail Resorts construction and operation of an ice rink at the site which is agreed will be a benefit to both parties.

The Company paid the following expenses in 2016 for services provided from Vail Resorts and/or its related companies”

Security 98,144$

Common area maintenance 69,905

Plaza maintenance and utilities 12,825

Pool labor and maintenance 16,906

Office expense 13,952

Rent 44,325

Warren Station events 4,463

Total 260,520$

At December 31, 2016, the Company owed Vail Resorts $10,556.

The Company received assessments and other various revenues from Vail Resorts and/or its related companies in 2016 totaling $646,670, which comprised approximately 17% of the Company’s fiscal year 2016 revenues. At December 31, 2016, Vail Resorts and/or its relatedcompanies owed the Company $56,879.



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7. Replacement Funds

The Company has established replacement funds to comply with the Declaration and to provide funds for future capital projects and major repairs and replacements.

The following replacement funds have been established:

The Community Facilities Fund was established in accordance with the provisions of the Declaration which requires that 10 percent of the real estate assessments by put into the fund for the purpose of facilitating the construction and financing of community facilities.

The Capital Reserve Fund was established by the Company to repair and replace existing capital improvements and to support any other project that the Company decides is a capital project priority.

The Community Improvements Fund was established to fund improvements for the community that are not major facilities (i.e. buildings). These could include playgrounds, public furniture, fire pits, outdoor amphitheaters, information kiosks, lights/stage/sound systems, trails, signage, parks and other community improvements.

8. Future Major Repairs and Replacement Reserve

The Company’s governing documents allow for the accumulation of funds for future major repairs and replacements. Accumulated funds are held in separate accounts and generally are not available for expenditures for normal operations. For 2016, the Company did not levy any specific assessments to fund Replacement Fund expenses; rather, such expenses were funded from accumulated fund balances and from allocations of annual real estate assessments from the Operating Fund.

In accordance with industry guidelines, it is the Company’s primary duty to maintain and preserve the common property of the owners. Therefore, it is the Company’s responsibility to determine a method for funding the costs of future major repairs and maintenance by assessing owners when funds are needed or by anticipating costs over extended time periods, assessing owners for the anticipated costs, and accumulating funds in reserve to meet the future funding requirements. During the fiscal year ended December 31, 2014, the Company commissioned a study to estimate the remaining useful lives and the replacement costs of the components of common property. The study assumes a 3.00% rate of inflation, a 1.0% reserve fund allocation, and a 0.5% - 0.1% return on investments through 2039. The table included in the unaudited supplementary information on future major repairs and replacements is based on the study.

The Company is funding for major repairs and replacements over the remaining useful lives of the components based on the study’s estimates of current replacement costs and consideration of amounts previously accumulated in the reserve funds.

Funds are being accumulated in the reserve funds based on estimates of future needs for repairs, replacements and new additions to common property components. Actual expenditures may vary from the estimated future expenditures, and the variations may be material. Therefore, amounts accumulated in the reserve funds may not be adequate to meet all future needs for major repairs and replacements. If additional funds are needed, the Company has the right, subject to the Board’s approval, to increase regular assessments, pass special assessments, or delay major repairs and replacements until funds are available.



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9. Concentration

The Company’s revenues for real estate transfer assessments, sales assessments and recreation assessments are materially produced as a result of the sales of real estate and the leasing of commercial real estate units by Vail Resorts, or its related parties.

10. Retirement Plan

On January 1, 1998, the Company established a SIMPLE Retirement Plan for employees who have worked for the Company during any one prior year and received at least $5,000 in compensation during such prior year. The Company is required to make a matching contribution not in excess of 3% of an employee’s compensation and not to exceed $6,000. Each employee’s amount is 100% vested immediately and non-forfeitable at all times.

For the year ended December 31, 2016, the Company contributed $8,389 to employees who were eligible and participated in the plan.

11. Operating Lease – Office Space

The Company leases office space under an operating lease agreement with Vail Summit Resorts, Inc. The lease calls for monthly rentals through expiry in February 2020. In addition to base rent, the Company is responsible for its allocated share of taxes, common area charges, and other operating costs related to this space. The lease contains a five year renewal option. Rent for the year ended December 31, 2016 was $46,183.

Future minimum rental payments (base rent) due under terms of the Company’s operating lease at December 31, 2016 are as follows:

Minimum

Rental

Year Payments

2017 28,900

2018 28,900

2019 28,900

2020 4,817

Total 91,517$

12. Subsequent Event

During March 2017, Keystone Neighbourhood Company filed a form 1024 to apply to tax exempt status under IRS code 501(c)(4). As of May 11, 2017, the application is still pending.

SUPPLEMENTARY SCHEDULES

2015Variance

Budget Positive(Unaudited) Actual (Negative) Actual

Revenues:Real estate assessments 1,555,500 1,566,888 11,388 1,755,526 Less: Allocation to reserve funds - (916,843) (916,843) (1,512,389) Real estate transfer assessments 1,000,000 1,046,036 46,036 1,409,119 Sales assessments 162,000 202,334 40,334 189,780 Recreation assessments 20,500 23,327 2,827 22,347 Event revenue and sponsorships 370,500 438,321 67,821 410,587 Warren Station 207,990 228,490 20,500 212,893 Interest income 385 5,109 4,724 271 Commercial trash 160,000 174,203 14,203 170,748 Other 27,900 34,837 6,937 31,909

Total Revenues 3,504,775 2,802,702 (702,073) 2,690,791

Expenses: General and administrative:

Payroll and benefits 274,852 273,178 1,674 261,002 Audit and tax preparation 16,480 9,840 6,640 16,750 Legal 17,000 19,921 (2,921) 15,414 Insurance 58,430 51,091 7,339 55,662 Income taxes 2,849 - 2,849 - Bad debt expense 3,500 - 3,500 - Office expense 134,256 124,077 10,179 123,440

Total general and administrative 507,367 478,107 29,260 472,268

Security:Commercial & residential 100,428 98,144 2,284 98,459

Total security 100,428 98,144 2,284 98,459

Road snow removal and maintenance:Snow removal and hauling 77,000 100,265 (23,265) 38,921 Trail Head Drive utilities 102,000 77,687 24,313 79,657 Road repairs 1,400 - 1,400 -

Total road snow removal and maintenance 180,400 177,952 2,448 118,578

Plaza snow and litter removal:Commercial trash 42,425 55,279 (12,854) 51,761 Labor 569,836 564,323 5,513 532,885 Machine time/service 20,000 23,233 (3,233) 29,976 Snowmelt utilities 20,000 13,510 6,490 20,914

Total plaza snow and litter removal 652,261 656,345 (4,084) 635,536

Budget (Non-GAAP Basis) and Actual With Reconciliation to GAAP Basis

2016


Schedule of Operating Revenues and Expenses

For the Year Ended December 31, 2016

(With Comparative Actual Amounts For the Year Ended 2015)

(continued)The accompanying notes are an integral part of these financial statements.

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2015Variance

Budget Positive(Unaudited) Actual (Negative) Actual

Expenses (continued): Common area maintenance:

Plaza maintenance 84,721 86,662 (1,941) 67,751 Plaza utilities 55,340 40,528 14,812 39,575 Restroom cleaning 70,084 74,819 (4,735) 76,276 Signage 2,000 987 1,013 - Summer landscaping 102,170 95,046 7,124 95,479

Total common area maintenance 314,315 298,042 16,273 279,081

Pool maintenance:Restroom cleaning 5,500 9,300 (3,800) 4,637 Chemicals 21,860 4,367 17,493 21,057 Utilities 34,000 27,449 6,551 31,476 Maintenance and repair 20,685 17,302 3,383 19,967

Total pool maintenance 82,045 58,418 23,627 77,137

Community events:Community events 586,963 612,641 (25,678) 630,124 Weddings 23,100 24,828 (1,728) 21,338 Warren Station 328,543 322,544 5,999 300,756

Total community events 938,606 960,013 (21,407) 952,218

Design review, transit and other:Design review 27,763 23,549 4,214 26,560 Depreciation 31,000 52,132 (21,132) 30,954

Total Expenses 2,834,185 2,802,702 31,483 2,690,791

The Keystone Neighbourhood Company, Inc.

(A Colorado Non-Profit Corporation)

2016

Schedule of Operating Revenues and Expenses

Budget (Non-GAAP Basis) and Actual With Reconciliation to GAAP Basis

For the Year Ended December 31, 2016

(With Comparative Actual Amounts For the Year Ended 2015)

(Continued)


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The Association's Board of Directors commissioned a study by independent reserve study engineers to estimate the remaining useful lives and the replacement costs of components of common property. The final report was issued August 14, 2014. The study projected fund balance, but did not allocate fund balance between the individual reserve study items, nor has the Board elected to allocate fund balance between the components of common property.

The following table is based on the study and presents significant information about the components of the Association's common property.

Estimated EstimatedRemaining Current

Useful Lives ReplacementComponents (Years) Cost

River Run Village:Common Area Exterior - Asphalt 5 1,479,970 Common Area Exterior - Concrete 11 286,040 Common Area Exterior - Boardwalk 2 128,830 Common Area Exterior - Pavers 3 281,328 Common Area Mechanical - Pavers and snow melt tubing 3 290,415 Common Area Mechanical - Boilers 1 92,600 Pool and Spa Equipment Room 1 190,700 Pool and Spa Exterior Area and Bath 5 130,500 Playground 5 75,000 Amphitheatre 3 34,000 Information Center 15 195,000 Public Restrooms - Silver Mill 5 40,000 Public Restrooms - Buffalo 3 40,000 Pedestrian Bridges 5 40,000 Bear Pit Maintenance - Interior 3 220,545 Bear Pit Maintenance - Exterior 5 267,500 Bear Pit Maintenance - Equipment 3 220,000 Warren Station - Interior 9 497,700 Warren Station - Exterior 13 1,468,800 Management Office - Interior 4 152,325

Subtotal 6,131,253


Supplementary Schedule of Community Capital Reserve Fund Future Repairs and Replacements

December 31, 2016(Unaudited)

(continued)The accompanying notes are an integral part of these financial statements.

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Estimated EstimatedRemaining Current

Useful Lives ReplacementComponents (Years) Cost

Keystone Neighbourhood - EastCommon Area Exterior - Asphalt 11 2,930,275 Common Area Exterior - Concrete 15 104,288 Pedestrian Bridges 14 90,000 Vehicular Bridges (non-structural components) 15 300,000

Subtotal 3,424,563

Keystone Neighbourhood - Trailhead DriveCommon Area Exterior - Concrete and snowmelt tubing 15 752,235 Common Area Exterior - Pavers and snowmelt tubing 3 122,985 Timber Railing 1 75,000 Common Area Exterior - Stone 10 16,800 Common Area Exterior - Boilers 1 369,600

Subtotal 1,336,620

Total Current Replacement Cost 10,892,436

Projected Reserve Fund Balanceper the Reserve Study for the year ended 2016 7,782,421

Community Facilities Fund 1,295,451 Capital Reserve Fund 4,625,411 Community Improvements Fund 2,446,651

Total Reserve Funds at December 31, 2016 8,367,513

(Continued)


Supplementary Schedule of Community Capital Reserve Fund Future Repairs and Replacements

December 31, 2016(Unaudited)


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the keystone neighbourhood company, inc. (a … · applied in the audit of the financial statements...

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