ABITARE HOMEOWNERS ASSOCIATION (A … · abitare homeowners association (a condominium) _____...

ABITARE HOMEOWNERS ASSOCIATION

(A CONDOMINIUM) ____________

FINANCIAL STATEMENTS AND

SUPPLEMENTARY INFORMATION

YEAR ENDED DECEMBER 31, 2016

Abitare Homeowners Association

Table of Contents

INDEPENDENT ACCOUNTANT’S REVIEW REPORT .................................................................................. 1 FINANCIAL STATEMENTS Balance Sheet ............................................................................................................................................. 2 Statement of Revenues and Expenses ....................................................................................................... 3 Statement of Changes in Fund Balance .................................................................................................... 4 Statement of Cash Flows ........................................................................................................................... 5 Notes to Financial Statements ............................................................................................................... 6-8 SUPPLEMENTARY INFORMATION Supplementary Information on Future Major Repairs and Replacements (Compiled) .................... 9-11

INDEPENDENT ACCOUNTANT’S REVIEW REPORT To the Board of Directors and Members Abitare Homeowners Association Portland, Oregon We have reviewed the accompanying financial statements of Abitare Homeowners 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. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of Association management. 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, we do not express such an opinion. 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. Accountant’s Responsibility Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion. Accountant’s Conclusion on the Financial Statements Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the information about future major repairs and replacements of common property on pages 9 through 11 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, which 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 compiled the supplementary information in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA; however, we have not audited or reviewed the required supplementary information and, accordingly, do not express an opinion, a conclusion, nor provide any form of assurance on it. Portland, Oregon April 25, 2017

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Schwindt & Co. stamp

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Review letterhead

Operating Replacement Capital Fund Fund Fund Total

ASSETS

Cash, including interest bearing deposits $ 73,380 $ 129,528 $ - $ 202,908 Assessments receivable 4,136 - - 4,136 Prepaid insurance 1,323 - - 1,323 Other prepaid expenses 90 - - 90 Property and equipment, net of accumulated

depreciation of $308 4,969 - - 4,969 Interfund balance 5,330 1,690 (7,020) -

Total assets $ 89,228 $ 131,218 $ (7,020) $ 213,426

LIABILITIES AND FUND BALANCE

Accounts payable $ 16,112 $ - $ - $ 16,112 Assessments received in advance 4,941 - - 4,941

Total liabilities 21,053 - - 21,053

Fund balance 68,175 131,218 (7,020) 192,373

Total liabilities and fund balance $ 89,228 $ 131,218 $ (7,020) $ 213,426

See accompanying notes and independent accountant's review report.

Abitare Homeowners AssociationStatement of Revenues and Expenses

December 31, 2016

- 2 -


REVENUESRegular assessments $ 168,956 $ 84,454 $ - $ 253,410 Special assessment - - 90,000 90,000 Interest - 123 - 123 Late fees 605 - 117 722 Move in fee 2,300 - - 2,300 Other income 10 - - 10

Total revenues 171,871 84,577 90,117 346,565

EXPENSESProperty maintenance 89,597 - - 89,597 Major repairs and replacements - 43,985 83,258 127,243 Utilities 36,776 - - 36,776 Landscaping 20,606 - - 20,606 Insurance 18,519 - - 18,519 Professional fees 10,720 - - 10,720 Office expense 114 - - 114 Licenses, permits and fees 50 - - 50 Depreciation 308 - - 308 Other expenses 474 - - 474 Total expenses 177,164 43,985 83,258 304,407

Excess of revenues over (under) expenses $ (5,293) $ 40,592 $ 6,859 $ 42,158


Abitare Homeowners AssociationStatement of Revenues and Expenses

For the Year Ended December 31, 2016

- 3 -


Fund balance, as of December 31, 2015 $ 73,468 $ 90,626 $ (13,879) $ 150,215

Excess of revenues over (under) expenses (5,293) 40,592 6,859 42,158

Fund balance, as of December 31, 2016 $ 68,175 $ 131,218 $ (7,020) $ 192,373


Statement of Changes in Fund BalanceFor the Year Ended December 31, 2016


- 4 -


CASH FLOWS FROM OPERATING ACTIVITIES

Excess of revenues over (under) expenses $ (5,293) $ 40,592 $ 6,859 $ 42,158

Adjustments to reconcile excess of revenues over (under) expenses to net cash provided by operating activities:

Depreciation expense 308 - - 308

Decrease (Increase) in assets:Assessments receivable 8,973 - - 8,973 Prepaid insurance (1,323) - - (1,323)

Increase (Decrease) in liabilities:

Accounts payable 5,021 - - 5,021 Assessments received in advance (4,312) - - (4,312)

Net cash provided by operating activities 3,374 40,592 6,859 50,825

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property and equipment (5,277) - - (5,277)

CASH FLOWS FROM FINANCING ACTIVITIES

Interfund balance 8,459 (1,600) (6,859) -

NET INCREASE IN CASH 6,556 38,992 - 45,548

CASH AND CASH EQUIVALENTS, BEGINNING 66,824 90,536 - 157,360

CASH AND CASH EQUIVALENTS, ENDING $ 73,380 $ 129,528 $ - $ 202,908


Statement of Cash Flows For the Year Ended December 31, 2016


- 5 -

Abitare Homeowners Association Notes to Financial Statements

December 31, 2016

Note 1 - Nature of Organization Abitare Homeowners Association was organized on October 25, 1978 under the provisions of the Oregon Unit Ownership Law. The Association is responsible for the operation and maintenance of the common property within the project including, but not limited to items detailed in the supplementary information. The project consists of 57 condominium units located in Portland, Oregon. Note 2 - Summary of Significant Accounting Policies Accounting Method The Association prepares its year-end financial statements on the accrual basis of accounting. Under this method of accounting, revenue is recognized when earned, and expenses are recognized when goods or services are received, whether paid or not. Fund Accounting The Association's governing documents provide certain guidelines for governing its financial activities. To ensure observance of limitations and restrictions on the use of financial resources, the Association maintains its accounts using fund accounting. Financial resources are classified for accounting and reporting purposes in the following funds established according to their nature and purpose:

Operating Fund - This fund is used to account for financial resources available for the general operations of the Association. Replacement Fund - This fund is used to accumulate financial resources designated for future major repairs and replacements. Capital Fund - This fund is used to accumulate financial resources designated for major repairs and replacements to the structure of the buildings.

Member Assessments Association members are subject to monthly assessments to provide funds for the Association's operating expenses, future capital acquisitions, and major repairs and replacements. The Association’s policy is to charge late fees of $10 against any owner whose maintenance fee or special assessment payment is not received by the tenth day of the month. Any delinquent amount, including assessed late and enforcement fees, is treated as a lien against the unit owner’s account until paid. Any excess assessments at year-end are retained by the Association for use in future years. The Association generally considers assessments receivable collectible until the unit has been foreclosed or the unit owner has filed for bankruptcy. Cash Equivalents For purposes of the statement of cash flows, the Association considers all highly liquid debt instruments purchased with an original maturity date of three months or less to be cash equivalents. 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. Capitalization and Depreciation The Association records capitalized assets at cost and depreciation on the straight-line basis over the estimated useful life of the asset.

See Independent Accountant’s Review Report - 6 -

Abitare Homeowners Association Notes to Financial Statements – Continued

December 31, 2016 Note 3 - Common Property Real property and common areas acquired by the original homeowners from the developer and related improvements to such property are not capitalized on the Association’s financial statements, as they are owned by the individual owners and not the Association. Common areas are restricted to use by the Association members, their tenants, and guests. The Association’s policy is to expense all personal property acquisitions of $5,000 or less. The Association holds title to scaffolding equipment. Depreciation is computed using the straight-line method over the estimated useful life of 5 years. Note 4 - Income Taxes Homeowner associations may be taxed either as homeowner associations or as nonexempt membership organizations. For the year ended December 31, 2016, the Association elected to be taxed as a homeowner association. Under that election, the Association generally is taxed only on non-exempt income, such as interest earnings, at applicable federal and state tax rates. The Association files returns in the U.S. federal jurisdiction as well as the state of Oregon jurisdiction. Tax filings are subject to federal and state examination for three years after they are filed. The returns filed for periods ended December 31, 2013 and prior are generally no longer subject to examination by tax authorities. Note 5 - Future Major Repairs and Replacements The Association’s governing documents require funds to be accumulated for future major repairs and replacements. Accumulated funds, which aggregated $131,218 at December 31, 2016, are generally not available for operating purposes. The Association engaged a consultant who conducted a study in March 2016 to estimate the remaining useful lives and the replacement costs of the common property components. The excerpt included in the compiled Supplementary Information on Future Major Repairs and Replacements is based on the study. The Association is funding for such major repairs and replacements over the estimated useful lives of the components based on the study’s estimates of current replacement costs, considering amounts previously accumulated in the replacement fund. Funds are being accumulated in the replacement fund based on estimates of future needs for repairs and replacements of common property components. Actual expenditures, investment income and provision for income taxes, however, may vary from the estimated amounts and the variations may be material. Therefore, amounts accumulated in the replacement fund may not be adequate to meet future needs. If additional funds are needed, however, the Association has the right to increase regular assessments or levy special assessments, or it may delay major repairs and replacements until funds are available. Note 6 - Interfund Balance As of December 31, 2016, the capital fund owed $5,330 to the operating fund and $1,690 to the replacement fund. Note 7 - Special Assessments Special Assessment #1 During 2015, the board of directors approved a special assessment of $90,000 to repair and replace capital structures specifically for the E and F balcony, H Tower, and X Tower. The special assessment was included in the 2016 budget and was payable in 12-monthly installments. Special Assessment #2 During 2016, the board of directors approved an additional special assessment of $130,817 to repair and replace capital structures specifically for the E and F balcony replacement and the Barbur Boulevard parking lot stair replacement. The special assessment is included in the 2017 budget and is payable in 12-monthly installments.



Notes to Financial Statements – Continued December 31, 2016

Note 8 - Date of Board of Directors’ Review In preparing the financial statements, the Association has evaluated events and transactions for potential recognition or disclosure through April 25, 2017, the date the financial statements were available to be issued.


SUPPLEMENTARY INFORMATION

Abitare Homeowners Association Supplementary Information on Future Major Repairs

And Replacements (Compiled) December 31, 2016

_________ The Association engaged a consultant who conducted a full on-site reserve study in March 2016 to estimate the remaining useful lives and the replacement costs of the components of common property. The estimates were based on construction pricing and scheduling manuals to determine useful lives and replacement costs. Replacement costs were based on the estimated costs to repair or replace the common property components on the date of the study assuming an annual inflation rate of 2.00% and a rate of return on investments of 0.90% without a provision for income taxes. The study used the threshold-funding method with a threshold of $80,788. The attached excerpt on pages 10 to 11 includes significant information about the components of common property. The reserve study should be read in its entirety. Replacement Funding Summary for the Year Ended December 31, 2016:

Current year’s assessments

Reserve assessments $ 84,454 Amount recommended by reserve study 84,454

Difference $ - Replacement fund balance at end of year $ 131 218


Abitare Homeowners Association Analysis Date - January 1, 2016

InHation:2.00% Investment:0.90% Contribution FactDr:0.00% calc:Future

Component List - Summary

Basis Replace Current Est Adj Rem Future Cost Quantity Date Cost Life Life Life Cost

Awning Olnvas $ 1,150.00 76.000 02/01/2023 $ 87,400 15:00 15:00 7:01 $ 100,560

Oltdl Basin 1,000.00 2.000 02/01/2020 2,000 10:00 10:00 4:01 2,168

03dar Slingles Paint 0.50 60,027.000 01/18-04/18 30,013 9:00 9:00 2:03 31,378

03dar Slingles Feplare 5.50 60,027.000 330,148 45:00 46:04 17:05 466,207

Cbnaete S:air Tres:15 55.00 456.000 02/01/2027 25,080 40:00 40:00 11:01 31,235

Cbnaete Walkways 1.00 3,972.000 02117-02/ 17 3,972 10:00 10:00 1:01 4,058

Iner - Utility Exterior Metal 3.0 350.00 2.000 02/01/2020 700 20:00 20:00 4:01 758

Driveway Cbnaete 1.00 5,300.000 02/01/2017 5,300 10:00 10:00 1:01 5,414

Dryer S:nable 950.00 2.000 02/01/2019 1,900 10:00 10:00 3:01 2,019

Rre Exting.1isher 90.00 6.000 02/01/2016 540 8:00 8:00 O:D1 540

G.rtters/ Cownspouts- Rlplare 8.00 677.000 02/32-02/38 5,416 25:00 25:00 16:07 7,520

Light lklit Rxtures 130.00 113.000 02/01/2028 14,690 20:00 20:00 12:01 18,661

Light Rxture R:>le 450.00 1.000 02/01/2027 450 20:00 20:00 11:01 560

Light L.ands::ape 130.00 38.000 02/01/2022 4,940 15:00 15:00 6:01 5,572

LDuvered 350.00 69.000 24,150 30:00 35:00 6:01 27,238

Mail Ebx 900.00 6.000 04/01/2020 5,400 30:00 30:00 4:03 5,874

Metal 11/2'' Pailings'Handrails 6.00 465.000 01 /30-02/30 2,790 30:00 30:00 14:00 3,681

Metal 2'' Pailings'Handrails 7.00 1,177.000 01 /30-02/30 8,239 30:00 30:00 14:00 10,871

Metal 3" Rulings Balcony 8.00 742.000 01 /30-02/30 5,936 30:00 30:00 14:00 7,833

Metal 4" Pailings'Handrails 9.00 203.000 01 /30-02/30 1,827 30:00 30:00 14:00 2,411

Metal G.Jards 12.00 45.000 02/01/2030 540 40:00 40:00 14:01 713

Metal Pailings'Handrails Paint 2.50 2,587.000 01 /23-02/23 6,467 10:00 10:00 7:00 7,429

Metal Rx>f 30.00 96.000 04/01/2030 2,880 40:00 40:00 14:03 3,818

Oterlay 1" 1.05 21,000.000 02/01/2030 22,050 30:00 30:00 14:01 29,142

Rltaining Walls 6.00 3,090.000 02/01/2027 18,540 25:00 25:00 11:01 23,090

Rlof - R.Jbber Membrane 2.50 20,776.000 02/01/2038 51,940 30:00 30:00 22:01 80,430

SurryS:lal 0.15 21,000.000 02/01/2016 3,150 8:00 8:00 0:01 3,155

TrexWalkway 5.00 1,046.000 02/01/2049 5,230 35:00 35:00 33:01 10,069

Wood Decks 3.00 9,532.000 02/01/2027 28,596 20:00 20:00 11:01 35,614

PRN:03/17/2016 FacilitiesMvisors, Inc. - Ucense# F701000 Page 25 of26

Percipient S:Jftware, Inc. QJpyright 2016 All Fights Reserved

See Independent Accountant's Review Report - 10 -

Wood Rlilings'Handrails

Wood Sair Treoos

Wood Walkways

PRN:03/17/2016

Basis Cost

$

Abitare Homeowners Association Analysis Date - January 1, 2016

InHation:2.00% Investment:0.90% Contribution FactDr:0.00% calc:Future

Component List - Summary

Replace Current

30.00

35.00

3.00

Quantity Date

56.000 02/01/2017 $

148.000 02/17-02/34

3,610.000 02/01/2017

$

FacilitiesMvisors, Inc. - Ucense# F701000

Percipient S:Jftware, Inc. QJpyright 2016 All Fights Reserved

Cost

1,680

5,180

10,830

717,975

Est Adj Rem Future Life Life Life Cost

30:00 30:00 1:01 $ 1,716

20:00 20:00 8:00 6,151

10:00 10:00 1:01 11,064

$ 946,966

Page 26 of26

See Independent Accountant's Review Report - 11 -

ABITARE HOMEOWNERS ASSOCIATION (A … · abitare homeowners association (a condominium) _____...

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