Audit of The Hampton Commons, 2000
HAMPTON COMMONS CONDOMINIUM ASSOCIATION, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2000
Berard & Donahue
CERTIFIED PUBLIC ACCOUNTANTS, PC
120 ROUTE 59
SUFFERN, NEW YORK 10901
32 BALL STREET
PORT JERVIS, NY 12771
DONALEE R. BERARD, C.P.A
JOHN T. DONAHUE, C.P.A.
Port Jervis: Tel: 845-856-5237
Suffern: Tel: 845-357-5668
fax: 845-357-5637
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Members
Hampton Commons Condominiums Association, Inc.
We have audited the accompanying balance sheet of Hampton Commons Condominiums
Association, Inc. as of December 31, 2000, and the related statements of revenues, expenses,
and changes in fund balance and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards. 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 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 statement presentation. We believe that
our audit provides 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 Hampton Commons Condominiums Association, Inc. as of December 31,
2000, and the results of its operations and its cash flows for the year then ended in conformity
with generally accepted accounting principles.
Berard & Donahue
Certified Public Accountants
August 27, 2001
HAMPTON COMMNS CONDOMINIUM ASSOCIATION, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
Note A. Organization
The Hampton Commons Condominium Association, Inc. (Hereafter known as the Association) is
a statutory condominium association organized as a not-for profit corporation in the State of New
Jersey for purposes of maintaining and preserving common property of the Condominium. The
Hampton Commons Condominium consists of 300 residential units in an area of approximately
66 acres. The Association began its operations in April 1986.
Note B. Summary of Significant Accounting Policies
Fund Accounting
The Association uses fund accounting, which requires that funds, such as operating funds and
funds designated for future major repairs and replacements, be classified separately for
accounting and reporting purposes. Disbursements from the operating fund are generally at the
discretion of the Board of Trustees and property manager. Disbursements from the replacement
fund may be made for their designated purposes or to cover a deficit position in the operating
fund. Disbursements from the deferred maintenance fund are primarily for maintenance services
that occur less frequently than annually.
Cash and Cash Equivalents
The Association considers all certificate of deposits and all short-term debt securities purchases
with a maturity of three months or less to be cash equivalents.
Property
Real property and common areas acquired from the developer and related improvements to such
property are not reflected on the Association's financial statements. Those properties are owned
by the individual unit owners in common and not by the Association. The Association capitalizes
personal property to which it has title at cost. (See Note D).
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.
Note C. 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.
Assessment receivable at the balance sheet date represent fees due from unit owners. The
Association's policy is to retain legal counsel and place liens on the properties of homeowners
whose assessments are thirty days or more delinquents. Any excess assessments at year-end
are retained by the Association for use in the succeeding year.
Note D. Equipment
The Association recognizes real and personal property assets at cost. Tangible property which is
not an integral part of the common areas is capitalized, all other costs of repair and replacements
are expensed as incurred or charged to the repair and replacement fund. The property recorded
by the Association is depreciated over its estimated useful life using the straight-line method of
depreciation. As of December 31, 2000 the association owns equipment having and original cost
of $2,766, which has been fully depreciated for 2000.
Note E. Future Major Repairs and Replacements
The Association's governing documents require funds to be accumulated for future major repairs
and replacements. Accumulated funds, which aggregate approximately $222,000 at December
31, 2000, are held in separate accounts and are generally not available for operating purposes.
The Association engaged an independent engineer who conducted a study in November 2000 to
estimate the remaining useful lives and the replacement costs of the common property
components. 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. Actual
expenditures, 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, subject to member
approval, to increase regular assessments or levy special assessments, or it may delay major
repairs and replacements until funds are available.
The November 2000 study significantly increased the reserve needs from the 1994 study, by
approximately 100% from $1,450,000 to $2,800,000. This obviously impacts the years funding
requirements necessary to fund the reserve schedule for the replacement costs. As a result the
current replacement reserve funds are significantly under funded.
Note F. Federal and State Taxes
Under the Internal Revenue Code, Associations may be taxed as a Condominium Management
Association or as a regular corporation based upon an election. The Association may elect either
method in any year. A method selected in one-year affects only that year and the Association is
free to select either method in future years. In 2000 the Association elected to be taxed as a
regular corporation. The Association has an operating loss, because its expenditures for the
maintenance of the common property exceeded its revenue from membership sources. Under
this method of filing, that loss may be carried over to future periods to offset future income from
membership sources. The Association's investment income and other nonexempt income are
subject to tax. The Association is incorporated pursuant to Title 15A:1 of the New Jersey
Statutes and therefore, is not liable for New Jersey Corporation business income tax.
Note G. Investments
Investments consist of United States Government securities, available for resale. In accordance
with FASB 115, these securities are presented at market value. Unrealized gain is recorded as
other comprehensive income in the fund balance.
Note H. Assessments Receivable
Association members are subject to monthly assessments to provide funds for the Association's
operating expenses, future capital acquisitions, and major repairs and replacements.
Assessment receivable at the balance sheet date represent fees due from unit owners. The
Association's policy is to retain legal counsel and place liens on the units of members whose
assessments are thirty days or more delinquent. Any excess assessments at year-end are
retained by the Association for use in future years.
Note I. Capital Contribution
The Association by laws call for each owner of a unit, upon purchase, new construction or resale
of f home, to be assessed a one-time non-refundable contribution of $500, this fee will be paid at
the time of closing as a contribution to the working capital of the Association.
Note J. Sewer Treatment Facility
Sewer treatment services for the Hampton Commons Condominium Association, Inc. are
provided by the Sussex County Municipal Utilities Authority (SCMUA). The cost of operating the
facility is assessed to the unit owners through the monthly maintenance fee. The cost to operate
the sewer treatment facility for the year ended 2000 was $99,000. The rates charged to the
Association are derived from the "certificate of estimated annual charges" executed by the
Chairman of the Sussex County Municipal Utilities Authority.
Note K. Filed Litigation Claims
Legal opinion has stated that as of December 31, 2000 there was no outstanding or pending
litigation against or from the Association except for the usual claims against unit holders for
unpaid assessments and related expenses. In July 2001 the Association filed a suit against a
contractor and manufacturer for faulty painting and failure to honor the warranty on the paint
product. That suit is pending but no answers have been filed on behalf of the defendants at this
time.
Note L. Other Receivables
The Association has a claim for FRT Roofing reimbursement for $73,349; these funds are to be
deposited in the replacement reserve. The Association has a claim with the Hampton Township
for reimbursement under the municipal services act, for two years of approximately $5,000 per
year.
Note M. Prior Period Adjustment
Several beginning balances on the balance sheet could not be documented or verified. The net
differences have been reflected on the income statement as a prior period adjustment.
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
To The Board of Directors
HAMPTON COMMONS CONDOMINIUM ASSOCIATION, INC.
Our examination was made for the purpose of forming an overall opinion on the basic
financial statements of Hampton Commons Condominium Association, Inc. at December
31, 2000, which are presented in the preceding section of this report.
The supplementary information on pages 8 & 9 is presented for the purposes of
additional analysis and is not a required part of the basic financial statements. Such
information has been summarized from Association records and has been subjected to
the audit procedures applied in the examination of the basic financial statements and, in
our opinion, is fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
The supplementary information on future major repairs and replacements on page 10 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 inquiries of management
regarding the methods of measurement and presentation of the supplementary
information. However, we did not audit the information and express no opinion on it.
Berard & Donahue
Certified Public Accountants
August 27, 2001
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