KILLEARN LAKES
HOMEOWNERS ASSOCIATION, INC.
TALLAHASSEE, FLORIDA
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
KILLEARN LAKES HOMEOWNERS ASSOCIATION, INC.
Year Ended December 31, 2016
Table of Contents
INDEPENDENT AUDITORS’ REPORT 4
BALANCE SHEET 6
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCE 7
STATEMENT OF CASH FLOWS 8
NOTES TO FINANCIAL STATEMENTS 9
1606 N. Meridian Road
Tallahassee, Florida 32308
Phone (850) 509-5927
http://kayekendrick.com
Member - American Institute of CPAs, Florida Institute of CPAs
______
INDEPENDENT AUDITORS’ REPORT
To the Board of Directors of Killearn Lakes Homeowners Association, Inc.
We have audited the accompanying financial statement of Killearn Lakes Homeowners Association, Inc. (Association), which comprise the balance sheet as of December 31, 2016, and the related statements of revenues and expenses, 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.
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 from 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 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 that 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 the Association, 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.
The 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 is not available. Management is in the process of procuring a study to obtain information on the needed future major repairs and replacements. 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 necessary to present 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.
Kaye Kendrick Enterprises, LLC
Tallahassee, Florida
April 27, 2017
2KILLEARN HOMEOWNERS ASSOCIATION, INC.
BALANCE SHEET
DECEMBER 31, 2016
The accompanying notes are an integral part of these financial statements.
11KILLEARN HOMEOWNERS ASSOCIATION, INC.
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED DECEMBER 31, 2016
The accompanying notes are an integral part of these financial statements.
11KILLEARN HOMEOWNERS ASSOCIATION, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2016
11The accompanying notes are an integral part of these financial statements.
KILLEARN HOMEOWNERS ASSOCIATION, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
1. Nature of Activities and Significant Accounting Policies
Nature of Activities
Killearn Homeowners Association, Inc. (The Association) was formed as a Florida not-for-profit corporation on November 5, 1973. The Association was formed to provide for maintenance, preservation and architectural control of the residential lots, easements and common areas within the residential development known as Killearn Lakes Plantation located in Tallahassee, Florida. It must enforce covenants, conditions, restrictions, and other provisions, pursuant to Chapter 720 of the Florida Statutes.
The Association exists to own, acquire, build, operate, and maintain the common properties and facilities (lakes, recreation parks, playgrounds, swimming pools, boat docks, commons, streets, footways, including buildings, structures, and personal properties). This area is currently 442.37 acres. The Association has the following responsibilities for common properties and facilities: (1) exterior maintenance, (2) garbage and trash collection, (3) maintain un-kept lands or trees, (4) supplement municipal services, (5) fix assessments to be levied to properties, (5) enforce all covenants, restrictions, and agreements, (6) pay taxes, (7) promote social welfare, education, public safety, common benefit and enjoyment.
Basis of Presentation
The Association prepares its statements on the accrual basis of accounting whereby income and expenses are recognized when earned and incurred, pursuant to Chapter 720, Florida Statutes.
Common Property
Certain property of the Association, comprised of certain land, easements and common areas were received without cost to the Association and are not reflected in the accompanying financial statements. This is customary for homeowner associations since the properties may not be disposed of at the discretion of the Board of Directors and are used exclusively by homeowners.
The Association defines Common Property to mean and refer to parks, playgrounds, swimming pools, boat docks, commons, streets, footways, including buildings, structures, and other personal properties. The common property includes three private roads totaling .75 miles in length, park benches and docks, and five large Lakes with dams and spillways. Disposition of common properties require two-thirds vote of members, with specified prior written notice the vote will be taking place, and requires similar re-purposing of these assets.
KILLEARN HOMEOWNERS ASSOCIATION, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
Property and Equipment
Property and Equipment which have been purchased by the Association are reported at cost, with depreciation taken based upon the straight-line method of depreciation, over a useful life of 7 to 39 years.
Association Dues
Association dues are billed to members in advance of each year to provide funds for the Association’s budgeted operating and other expenses. Dues revenue is recognized in the year for which the dues are levied. Any dues sent prior to the year in which they are levied are recognized as Prepaid Dues as of December 31 each year. The dues are based upon a fee structure for residential, residential-lakefront and commercial properties. A discount is offered if paid by the end of February each year. If not paid by April 30, a $25 late fee is charged and interest accrues at 8%, on the balance due after which a lien can be placed on the property. As of December 31, 2016, the Association was responsible for serving over 4,200 lots.
Designation of Dues
The residential-lakefront properties pay a higher amount each year to be expended only for lake maintenance. This premium amount is required to be matched by the Association. The amount expended each year has always exceeded the premium and matched amounts assessed and designated for the lake.
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 could differ from those estimates.
2. Cash and Cash Equivalents
The cash and cash equivalents is cash in banks, comprised of checking and money market funds. The cash account balance is secured by the Federal Deposit Insurance Corporation (FDIC) up to the current limit of $250,000, per bank. All accounts are below the limit at December 31, 2016.
3. Accounts Receivable
The Member Dues receivable is $96,262, primarily for unpaid homeowner dues owed to the association by its members, less an allowance for doubtful accounts of $24,063, and is recorded at net realizable value in the amount of $72,199. The allowance is
KILLEARN HOMEOWNERS ASSOCIATION, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
based on prior years’ experience and management’s analysis of specific member accounts.
4. Leases
The Association has leased space in its administrative office building. The leases
commenced January 1, 2016, with one lease expiring March 31, 2016, and the other lease expiring June 30, 2016, with an option to continue month-to-month, both with $300 monthly lease rates.
5. Income Taxes
Homeowner Associations may elect to be taxed, either as a regular corporation or as a Homeowner Association. For the year ended December 31, 2016, the Association has elected to be taxed as a Homeowner Association in accordance with Internal Revenue Code Section 528. Under this section, the Association is taxed on its nonexempt function income, advertising and net investment earnings, at a flat rate of 30%. At December 31, 2016, there is no income tax liability.
Management is not aware of any activities that would jeopardize their tax-exempt status, and believes it has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements as of and for the year ended December 31, 2016. The Association is subject to routine audits by taxing jurisdictions. However, there are currently no audits in progress for any tax periods.
6. Future Major Repairs and Replacements
The Board is currently working to procure a Reserve Study to assist in assessing and budgeting for major repairs and replacements over the estimated useful lives of common property and current replacement costs. There are currently no funds accumulated for this purpose. The Association can increase regular assessments, pass special assessments, or delay major repairs and replacements until funds are available.
The budget of the Association does not provide for reserve accounts for capital expenditures and deferred maintenance AND THEREFORE, may result in special assessments. Owners may elect to provide for reserve accounts pursuant to section 720.303(6), Florida Statues, upon obtaining the approval of a majority of the total voting interests of the Association by vote of the members at a meeting or by written consent.
7. Contingencies
The Association has a pending arbitration proceeding. In the event the Association is not the prevailing party, the Association’s responsibility for attorney fees and costs is estimated by their attorney to be between $2,500 and $10,000.
8. Evaluation of Subsequent Events
The Association has evaluated subsequent events through April 27, 2017, the date the financial statements were available to be issued, and is not aware of any subsequent events that would require recognition or disclosure in the financial statements.
11