2139-06 audit
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MILLSTONE POND HOMEOWNERS ASSOCIATION, INC. FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005 zAHLBERG & COMPANY, P.C. Certified Public Accountants 3959 Pender Drive, Suite 112 Fairfax, VA 22030 703/934-6650 FAX 703/934-6654 F. James Ahlberg, CPA email: cpa@ahlberg-cpa.com Mary E. Johnson, CPA website: www.ahlberg-cpa.com INDEPENDENT ACCOUNTANT’S REPORT Board of Directors Millstone Pond Homeowners Association, Inc. We have audited the accompanying balance sheets of Millstone Pond Homeowners Association, Inc. as of December 31, 2006 and 2005, and the related statements of revenue and expenses, members' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Association's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements ...
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MILLSTONE POND HOMEOWNERS ASSOCIATION, INC. FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005
AHLBERG & COMPANY, P.C. Certified Public Accountants 3959 Pender Drive, Suite 112 Fairfax, VA 22030 703/9346650z FAX 703/9346654 F. James Ahlberg, CPA email: cpa@ahlbergcpa.com Mary E. Johnson, CPA website: www.ahlbergcpa.com INDEPENDENT ACCOUNTANT’S REPORT Board of Directors Millstone Pond Homeowners Association, Inc. We have audited the accompanying balance sheets of Millstone Pond Homeowners Association, Inc. as of December 31, 2006 and 2005, and the related statements of revenue and expenses, members' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Association's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Millstone Pond Homeowners Association, Inc. as of December 31, 2006 and 2005 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The supplementary information on future major repairs and replacements is not a required part of the basic financial statements but is supplementary information required by the American Institute of Certified Public Accountants. We have applied certain limited procedures, which consisted principally of reading and summarizing the repair and replacement study. However, we did not audit the information and express no opinion on it. AHLBERG & COMPANY, P.C. Certified Public Accountants March 11, 2008
INDEPENDENT ACCOUNTANT’S REPORT Board of Directors Millstone Pond Homeowners Association, Inc. We have audited the accompanying balance sheets of Millstone Pond Homeowners Association, Inc. as of December 31, 2006 and 2005, and the related statements of revenue and expenses, members' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Association's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Millstone Pond Homeowners Association, Inc. as of December 31, 2006 and 2005 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The supplementary information on future major repairs and replacements is not a required part of the basic financial statements but is supplementary information required by the American Institute of Certified Public Accountants. We have applied certain limited procedures, which consisted principally of reading and summarizing the repair and replacement study. However, we did not audit the information and express no opinion on it.
MILLSTONE POND HOMEOWNERS ASSOCIATION, INC. BALANCE SHEETS DECEMBER 31, 2006 AND 2005
Cash operating Cash savings Total cash Investments (note 1) Prepaid insurance Prepaid expenses
TOTAL ASSETS
LIABILITIES:
Income tax payable Total liabilities
MEMBERS' EQUITY:
ASSETS
$
$
LIABILITIES AND MEMBERS' EQUITY
Capital reserve fund (note 2) Unappropriated members' equity Total members' equity
TOTAL LIABILITIES AND MEMBERS' EQUITY
$
$
2006
7,286 5,082 12,368 29,757 182 505
42,812
474 474
34,944 7,394 42,338
42,812
$
$
$
$
See accountant's report and notes to financial statements 1
2005
5,701 5,054 10,755 28,556 182 417
39,910
185 185
28,556 11,169 39,725
39,910
REVENUE:
MILLSTONE POND HOMEOWNERS ASSOCIATION, INC. STATEMENTS OF REVENUE AND EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
Gross assessments Less capital reserve fund assessments Operating assessments Interest revenue Less interest transfer to capital reserve fund Miscellaneous revenue Total operating revenue
EXPENSES:
Landscaping Snow removal Trash removal Electricity Post office box rental Insurance Legal fees Audit and tax return preparation Repairs and maintenance Miscellaneous administrative Provision for income taxes Total expenses
(DEFICIENCY) OF REVENUE OVER EXPENSES
$
$
2006
24,428 (5,000) 19,428 1,415
(1,388) 100 19,555
7,365 1,130 6,687 180 106 296 647 780 5,602 63 474 23,330
(3,775)
$
$
See accountant's report and notes to financial statements 2
2005
22,196 (5,000) 17,196 613
(589) 100 17,320
7,306 3,730 5,977 156 100 296 973 382 185 19,105
(1,785)
MILLSTONE POND HOMEOWNERS ASSOCIATION, INC. STATEMENTS OF MEMBERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 Capital Unappropriated Reserve Members' Fund Equity Balance at December 31, 2004 $ 22,968 $ 12,954 Additions: Capital reserve fund assessments 5,000 Interest transferred to capital reserve fund 588 Deduction: Deficiency of revenue over expenses (1,785) Balance at December 31, 2005 28,556 11,169 Additions: Capital reserve fund assessments 5,000 Interest transferred to capital reserve fund 1,388 Deduction: Deficiency of revenue over expenses (3,775) Balance at December 31, 2006 $ 34,944 $ 7,394 See accountant's report and notes to financial statements 3
MILLSTONE POND HOMEOWNERS ASSOCIATION, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
Cash flows from operating activities:
(Deficiency) of revenue over expenses
Adjustments needed to reconcile (deficiency) of revenue over expenses to net cash provided by operating activities: Capital reserve fund assessments Interest transferred to capital reserve fund (Increase) in prepaid expenses (Decrease) in accounts payable Increase in income taxes payable Net cash provided by operating activities
Cash flows from investing activities: Purchase of investments Redemption of investments Interest added to investments Net cash (used for) investing activities
Net increase (decrease) in cash
Cash at beginning of year Cash at end of year
Income taxes paid in cash during year
$
$
$
2006
(3,775)
5,000 1,388 (88) 289 2,814
(5,000) 5,000 (1,201) (1,201)
1,613
10,755 12,368
185
$
$
$
See accountant's report and notes to financial statements 4
2005
(1,785)
5,000 588 (417) (6) 3,380
(5,000) (588) (5,588)
(2,208)
12,963 10,755
126
MILLSTONE POND HOMEOWNERS ASSOCIATION, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005 ORGANIZATION: Millstone Pond Homeowners Association, Inc. was organized as a nonstock, nonprofit corporation in the Commonwealth of Virginia for the purpose of administering the maintenance, preservation and architectural control of the residence lots and common areas within the Association. The Association consists of 31 homes and is located in Burke, Virginia. SIGNIFICANT ACCOUNTING POLICIES: Method of Presentation The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of the accrual method of accounting whereby revenues are recognized when earned rather than received and expenses are recognized when incurred rather than paid. Investments Investments consist of certificates of deposit in which cost and fair value may differ due to market conditions. Unrealized Gains and Losses Statements of Financial Accounting Standards No. 115 sets certain requirements for accounting for certain investments in debt and equity securities. This standard segregates investments into three categories and sets standards for the treatment of unrealized gains and losses. The Association's investments fall into the held to maturity category. Held to maturity securities are securities that the Association has the positive intent and ability to hold to maturity which are reported at amortized cost and unrealized gains and losses are not recorded. Capital Reserve Fund – The Board of Directors conducted a study in 2006 to estimate the remaining useful lives and the replacement costs of the components of common property. These estimates were obtained from independent contractors and based on the Board's experience with the property. The table included in the unaudited supplementary information on future major repairs and replacements is based on the study. (Continued) 5
MILLSTONE POND HOMEOWNERS ASSOCIATION, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005 SIGNIFICANT ACCOUNTING POLICIES: (Continued) Capital Reserve Fund: (Continued) Actual expenditures may vary from the estimated future expenditures, and the variations may be material. Therefore, amounts accumulated in the capital reserve fund may not be adequate to meet all future needs for major repairs and replacements. If additional funds are needed, the Association has the right, subject to membership approval, to increase regular assessments, pass special assessments, or delay major repairs and replacements until funds are available. Income Taxes In 2006 and 2005, the Association filed its corporate income tax returns as a homeowners association recognizing the applicability of IRS Code Section 528, which exempts from taxation assessments, net of related expenses, used for the maintenance of the Association's common property and obtained from members as owners and not as payment for services rendered. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash Flows For purposes of the statements of cash flows, checking and money market accounts for operating purposes are considered to be cash. Certificates of deposit held as true investments or for capital reserve fund purposes are considered investments. (Continued) 6
MILLSTONE POND HOMEOWNERS ASSOCIATION, INC. NOTES TO FINANICAL STATEMENTS DECEMBER 31, 2006 AND 2005 (Continued) NOTE 1 INVESTMENTS: The investments are comprised of the following balances at December 31, 2006 and 2005: Account Maturity Aggregate Carrying Value Type Date 2006 2005 CD 2006 $ 5,358 $ 5,124 CD 2007 24,399 23,432 Total investments $ 29,757 $ 28,556 The interest rates range from 3.92% to 5.26% as of December 31, 2006. NOTE 2 – CAPITAL RESERVE FUND STATUS: The cash and investments available for the fund, after providing for liabilities, at each yearend, are: 2006 2005 Cash $ 12,368 $ 10,755 Investments 29,757 28,556 Total cash and investments 42,125 39,311 Less liabilities (474) (185) Cash and investments available for capital reserve fund 41,651 39,126 Less capital reserve fund (34,944) (28,556) Excess $ 6,707 $ 10,570 The above analysis is an assessment of liquidity and not an indication of the adequacy of the fund for its intended purpose. 7
MILLSTONE POND HOMEOWNERS ASSOCIATION, INC. SUPPLEMENTARY INFORMATION ON FUTURE MAJOR REPAIRS AND REPLACEMENTS DECEMBER 31, 2006 (Unaudited) The table below is based on a study performed by the Board of Directors in 2006 and presents significant information about the components of common property. Total Estimated Estimated Remaining Future Useful Replacement Components Lives(yrs) Costs Wood retaining wall Unknown $ 5,200 Stone retaining wall 40 40,000 Mail box structure 30 2,500 Cedar tree Unknown 2,500 Street 2025 54,730 Curb and gutter 30 9,500 Cluster mail and parcel boxes Unknown 2,360 Entrance stone wall Unknown 8,000 Entrance sign Unknown Maple trees Unknown 813 Fire lane signs Unknown 325 Total $ 125,928 Capital reserve fund balance at December 31, 2006 $ 34,944 The Association has not distributed its accumulated capital reserve fund among its components. 8
