Download - OLIVARI ASSOCIATES - GeorgianInnBeachClub...OLIVARI & ASSOCIATES CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS INDEPENDENT AUDITORS' REPORT To The Board Of Directors And Unit Owners Georgian

GEORGIAN INN BEACH CLUB ASSOCIATION, INC.

Financial Statements And Independent Auditors' Report

December 31,2005 And 2004

OLIVARI & ASSOCIATES CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS

Georgian Inn Beach Club Association, Inc. December 31,2005 And 2004

Table Of Contents

Page

Independent Auditors I Report ... .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .. .. . . . . . . . . . . . . .. .. . .. . 1

Balance Sheets :..... . ... .. .. . . . . . . .. . . . . .. . . . . . . .. ..... . . . 2

Statements Of Revenues And Expenses And Changes In Fund Balances 3-4

Statements Of Cash Flows 5

Notes To Financial Statements . 6-15

Supplementary Information On Future Major Repairs And Replacements (Unaudited) .16

Independent Auditors' Report On Additional Information 17

Schedule Of Actual To Budget . 18

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QUVARI & ASSOCIATES CERT IFIED PUBLIC ACCOUNTANTS 6<CON SULTANTS


INDEPENDENT AUDITORS' REPORT

To The Board Of Directors And Unit Owners Georgian Inn Beach Club Association, Inc. Ormond Beach, Florida

We have audited the accompanying balance sheets of Georgian Inn Beach Club Association, Inc. (a nonprofit organization) as of December 31, 2005 and 2004, and the related statements of revenues and expenses and changes in fund balances, 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 fmancial 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 audit to obtain reasonable assurance about whether the fmancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fmancial 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 audits provide a reasonable basis for our opinion.

In our opinion , the fmancial statements referred to above present fairly, in all material respects , the fmancial position of Georgian Inn Beach Club Association, Inc. as of December 31, 2005 and 2004, 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 on page 16 is not a required part of the basic financial statements of Georgian Inn Beach Club Association, Inc. but is supplementary information required by the American Institute of Certified Public Accountants. We have applied certain Timited 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.

Olivari & Associates Certified Public Accountants and Consultants September 15, 2006

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141 SAG E BR US H T R AI L· SUIT E D' O RM OND B EACH . FL ORI DA 32 17 4

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the fmancial position of Georgian Inn Beach Club Association, Inc. as of December 31, 2005 and 2004, 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.

OUVAR I & ASSOCIATES ( :( I(T U1Ell l>U&. It: ....1U .JNT" NT~&.U~T"NTS

Georgian mts or Revenue!

For The Year.

2005 Replaceme

Fund (Restrlete Revenues

s 451 , Assessments from owners (Note 6)

9, Investment income (Note 4) Loss on disposal of fixed assets Insurance proceeds Lockout fees and interest - owners Recovery of bad debt Retail sales and vending machine income

z, Miscellaneous 463 , TOIaIRevenues

Expenses Administrative - accounting Administrative - legal Administrative - supplies and mailing Administrative - payroll Amortization expense Bad debts Building expense

139, Building expense - restricted Consulting Credit card and bankfees Depreciation Division fee Dues and subscriptions Guest activities Housekeeping expense

II, Hurricane repair expense - restricted (Note 14) Income tax expense Insurance expense Interest expense Labor expense - other Licenses and permits

Statements

Operating Fund

s 1,876,955 , 3,507

(6,888)

106,626 43,446 . - 4,203

, [7,545 , 2 ,045,394

14,800 59,508 36,144

383 ,475 13,190

710,078 2,668,232

20,000 13,000 50,840 10,608 1,461 1,392

14,019

2,460 162,160 54,019 74,719 2,179

Georgian I~n Beach Club Association, Inc. or Revenues And Expenses And Changes In Fund

For The Years Ended December 31,2005 And 2004

2005 Replacement

Fund (Restricted) Total

s 451 ,130 s 2,328,085 9,817 13,n4

(6 ,888)

106,626 43,446

4 ,203 2,269 19,814

463 ,216 2,508 ,610

14,800 I 59 ,508

36,144 383 ,475

13, 1so - 710 ,078

2,668 ,232 139,694 139,694

20 ,000 13,000 50 ,840 10,608

1,461 1,392

14,019 11,385 11,385

2,460 162,160 54,019 74 ,719

2,179

Balances

Operating Fund

s 1,628,296 8,178

110,765 170,607

11,044 31 ,359

1,960 ,249

11,000 124,518 25 ,127

469 ,877

574,670 24 ,237

48 ,000 6,155

37,183 10,608

786 5,106

28,483

15,793 200,812

41,008 1,214

2004 Replacement

Fund (Restricted) Total

$ 385 ,223 $ 2,013,519 25 ,034 33,212

755,043 755 ,043 110,765 170,607

11,044 31,359

1,165,300 3 ,125 ,549

11,000 124,518 25 ,127

469 ,877

574,670 24 ,237

134,181 134,181 48,000

6,155 37,183 10,608

786 5,106

28,483 1,100 ,073 1,100,073

15,793 200 ,812

41 ,008 1,214

ing auditors ' repq The accompanying auditors ' report and notes should be read with these financial statements , -3

OUVARI & A SSOCIATES CEIU IHF.lll '-'KlR : A,co ." INTANT~ 6r.CI.l NSULTANTS

Georg i Georgian Inn Beach Club Association, Inc . 5 Of Revenues A Statements Of Revenues And Expenses And Changes In Fund Balances (continued)

For The y , For The Years Ended December 31,2005 And 2004

200 2005 2004

Replacl Replacement Replacement

FUf Operating Fund Operating Fund (Restri Expenses (continued) Fund (Restricted) Total Fund (Restricted) Total

Meeting expense 12,511 12,511 8,649 8,649 Miscellaneous 27 ,777 27 ,777 9,581 9,581 Other building! grounds expense - restricted 225 ,248 225 ,248 18,743 18,743 Personal propeny expense - restricted 712 ,565 712 ,565 77 ,199 77 ,199 Pest control 3,100 3,100 3,142 3,142 Repairs and maintenance 95,093 95 ,093 65,487 65 ,487 Retail and vending expense 2,561 2,561 2,520 2,520 Roof expense - restricted , 15,096 15,096 · Tax expense - payroll ~> 30,212 30,212 37,651 37,651 Utilities 69,233 69 ,233 154,449 154.449

1,1 Total Expenses 4,532 ,771 1,103,988 5,636,759 1,906,056 1,330,196 3,236 ,252

« Excess (Deficit) Of Revenues Over Expenses (2,487,377) (640,772) (3,128,149) 54,193 (164 ,896) (110 ,703) ~ Fund Balances - Beginning Of Year 608,631 869 ,005 1,477,636 460 ,561 1,127 ,778 1,588 ,339

(I Net transfers 119,947 (119,947) 93,877 (93,877) $ J Fund Balances - End Of Year $ (1,758 ,799) $ 108,286 s (1,650,513) s 608 ,631 s 869,005 s 1,477,636

anying auditors ' J The accompanying auditors ' report and notes should be read with these financial statements . -4

OUYARI & ASS OCIATES ( :( ItTWIEU t'U tsl lC ....cxx..Jrn·....NT~ .s.l l.lN SUlT....NTS

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Georgia Georgian Inn Beach Club Associatiun, Inc. Statements Of Casb Flows

For The Yel For The Years Ended December 31, 200S And 2004

ng I

B.808 3.379 1.748 1,776) 5.351) 7.730)

0,922)

Rei

~

S Cash Flows From OperatingActivities:

Member assessmentscollected Interest received Other operating cash receipts Cash paid for expenses Property taxes paid Income taxes paid Interfund transfers

Net Cash Provided(Used) By OperatingAciivuies

Operating Fund

S 1,318.808 3.379

21.748 (3,741,776)

(265.351) (17.730)

(2.680,922)

200S Replacement

Fund (Restricted)

S 451,130 10,836

757.312 (1.899 .443)

(680,165)

S

Tutal

1,769,938 14,215

779.060 (5,641,219)

(265,351) (17.730)

(3.361.087)

Ope.....ting Fund

S 2.541,126 7,891

42.362 (1.797,120)

(268.475) (850)

(85,000) 439.934

2004 Replacement

Fund (Restricted)

S 385,223 27,791

(510.868)

85.000 (12,854)

S

Tutal

2.926,349 35.682 42.362

(2,307,988) (268,475)

(850)

427.080

4,872) 5,000 2.324) 2.196)

Cash Flows From InvestingActivities: Purchaseof investments Proceeds from investments Purchaseof fixed assets

Net Cash Provided(Used) By InvestingActivities

:' - ;

(64,872) 65,000

(52.324) (52.196)

636.044 (202.570) 433,474

(64,872) 701,044

(254.894) 381,278

116.826 (4.235)

112,591

(91,301)

(96.254) (187,555)

(91,301) 116,826

(100.489) (74,964)

2.487 6 .989) ,5.498

Cash Flows From FinancingActivities: Proceeds from debt Repaymentson Debt

Net Cash ProvidedBy FinancingActivities

2.442 .487 (86.989)

2.355.498

2.442 .487 (86,989)

2.355,498

7,620) 13.342 5.722 S

Net Increase (Decrease) In Cash And Cash Equivalents Cash And Cash Equivalents- BeginningOf Year Cash And Cash Equivalents- End Of Year S

(377,620) 793.342 415.722 S

(246,691) 409,350 162.659 S

(624,311) 1.202,692

578,381 S

552.525 240.817 793,342 S

(200.409) 609,759 409.350 S

352,116 850,576

1.202,692

:7,377)

4,030 6,888

(128) 11.144) 4.200 6.040)

19.480 1.247

(9,730) 10,352)

11.996)

10.922)

S

S

Reconciliation Of Excess (Deficit) Of RevenuesOver Expenses. To Net Cash Provided (Used) By OperatingActivities: Excess (deficit)of revenuesover expenses

Adjustmentsto reconcileexcess (deficit)of revenuesover expenses to net cash provided (used) by operating activities:

Depreciationand amortizationexpenses Realized losseson disposal of fixed assets Unrealized losses on investments Realized (gains)/Iosseson investments (Increase) decrease in accountsreceivable (Increase) decrease in other receivables (Increase) decrease in prepaid expenses (Increase) decrease in deposits paid Increase (decrease) in accountspayable Increase (decrease) in accrued payroll Increase (decrease) in incometax payable Increase (decrease) in unearnedmaintenancefees (Decrease) in other unearned revenue Increase (decrease) in unearned real estate lax assessernem Interfund transfers

Net Cash Provided (Used) By Operating Activities

S

S

(2.487,377)

64,030 6,888

(128) (41.144)

4.200 (16.040)

19.480 1.247

(9,730) (180,352)

(41.996)

(2.680.922)

S

S

(640.772)

620

755,043 1.000

211.291 (1.007,347)

(680.165)

S

S

(3.128.149)

64,030 6.888

492 (41,144) 759.243 (15,040) 211,291

(987,867) 1.247

(9.730) (180.352)

(41,996)

(3.361,087)

S

S

54,193

37,183

(199) 4.080

22,208 10,378

45.345 (16,758)

9 .730 323.131

(129) 35,772

(85.000) 439.934

S

S

(164.896)

2,756

(755,043) (1,000)

(211,921) 1,032,250

85.000 (12.854)

S

S

(110,703)

37,183

2,756 (199)

4,080 (732,835)

9 ,378 (211,921)

1.077.595 (16,758)

9,730 323,131

(129) 35,772

427,080

ianying auditors' rt The accompanyingauditors' report and notes shouldbe read with these financialstatements. -5

OUVARI & A SSOCIATES l:t::Il.T IFIL:ll l'lml IC ." l :U .'lUNTANTS .s. L\ IN::'UlT.....MT:'

Georgian Inn Beach Club Association, Inc. Notes To Financial Statements December 31,2005 And 2004

NOTE 1 - Organization And Summary Of Significant Accounting Policies

The Association was incorporated in 1980 to function as a time share homeowners' association which administers I operates and maintains the building, common grounds and recreational facilities of the resort for the benefit of the unit owners. Each unit week ownership includes an undivided fee simple time share ownership on their respective unit as well as the common grounds and recreational facilities of the condominium resort. The unit owner has the use and enjoyment of the furnishings (personal property) maintained in their respective unit, however the unit owner does not own the personal property. The personal property of the common grounds, recreational facilities and individual units are owned and maintained by the Association for the common use of the unit owners. The resort which is located in Ormond Beach, Florida consists of 102 efficiency units and two penthouse units which represent a total of 5,304 unit weeks owned by the numerous unit owners.

Basis Of Accounting The accompanying fmancial statements are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles, which recognizes revenue when earned and expenses as incurred.

Fund Accounting The Association uses fund accounting, which requires that funds, such as operating funds and replacement 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 Directors and Property Manager . Disbursements from the replacement fund generally may be made only for designated purposes .

Use Of Estimates The preparation of financial statements in conformity with U.S. 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.

Interest Earned On Restricted Replacement Fund, The Board I s policy is to allocate to the various components of the restricted replacement fund all interest earned on replacement funds in proportion to budgeted funding for each component.

Recognition Of Assets And Depreciation Policy The Association's policy complies with the AICPA Audit and Accounting Guide, "Common Interest Realty Associations" regarding the capitalization of fixed assets. This guide recommends that furniture and equipment (personal property) used in common areas will be capitalized as assets.

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QUVARI & ASSOCIATES CERT IFIED PUBLIC ACCOUNTA NTS & CON SULTANTS

replacement tuna generally may be mace oruytor oesignatecpurposes .

Use Of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting

Georgian Inn Beach Club Association, Inc. Notes To Financial Statements (continued)


NOTE 1 - Organization And Summary Of Significant Accounting Policies - continued

Accordingly, the Board of Directors has adopted this recommendation and its policy will be to record as an asset all personal property purchased by the Association for use in common areas if its unit cost is $500 or more or if a group of 10 or more like items are purchased at a unit cost of at least $50, for an aggregate cost of $500 or more. The personal property will be depreciated over its estimated useful life using the Straight Line method . The maintenance, disposition, and proceeds from sale at disposal of the personal property remains with the Association.

Effective January 1, 2002, the Board of Directors adopted an addendum to the current capitalization policy, which includes capitalizing unit furnishings, which meets the cost criteria outlined above .

The Association does not recognize as an asset common real property and related improvements in accordance with the Guide. Additionally, since the Association is responsible for preserving and maintaining the common property, it annually budgets for expenditures for major repairs and replacements (refer to Note 5) .

NOTE 2 - Cash Restricted - Operating Fund

The restricted cash in the operating fund represents escrow accounts for use in paying real property taxes . At December 31,2005 and 2004, these accounts had a balance of $0 and $445

, respectively .

NOTE 3 - Assessments Receivable

Assessments receivable at December 31, consist of the following :

2005 2004 2005 and prior year assessments $ 51,775 $ 10,631 Less allowance for bad debts o o

$ 51.775 $ 10,631

At December 31, 2,005, and 2004 all accounts deemed uncollectible were written off. Accordingly, an allowance for bad debts was not required.

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QUVARI & ASSOCIATES CERTI FIED PUBLIC A CCO~ANTS & CON SULTA NT S

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NOTE 3 - Assessments Receivable


December 31, 2005 And 2004

NOTE 4 - Investments

Investments consist of the following at December 31, 2005: Fair Unrealized

Cost Value Gain (Loss)

Total Investments $ 0 $ 0 $ 0

Investments consist of the following at December 31, 2004: Fair Unrealized

Cost Value Gain (Loss)

Certificates of Deposit $ 100,000 $ 99,609 $( 391) Investments - Current 100,000 99,609 ( 391)

Certificates of Deposit 203,385 203,385 0 Federal Agency Bonds 200,575 199,247 ( 1,328) Mortgage Backed Securities 137,803 133,793 ( 4,010)

Investments - Non Current 541,763 536,425 ( 5,338)

Total Investments $ 641.763 $ 636,034 $( 5.729)

Certificates of Deposit classified as current assets have maturity dates ranging from six to twelve months. All investments classified as non current assets have maturity dates greater than twelve months .

The following schedule summarizes the investment return for the years ended December 31, 2005 and 2004:

2005 2004 Interest Income (Net of Service Charges) $ 13,816 $ 35,683 Unrealized Loss on Investments ( 2,558) Realized Gain (Los's) on Investments (492)° 87

"" 13,324 $~$=~~k 33,212

Return of Principal Mortgage Backed Securities ~$===~ $ 15,535°

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OUVARI & ASSOCIATES CERTIAED PUBLIC ACCOUNTANTS 6<OONSULTANTS

The following schedule summarizes the investment return for the years ended December 31, 2005 and 2004:

2005 2004



NOTE 5 - Restricted Replacement Fund

The Association's replacement fund activity for 2005 and 2004 are as follows :

2005 Common Beginning Additions Charged Components

Area Fund To To Of Ending Component Balance Fund Transfers Fund Fund Balance

Paving $ 45,840 $ 0 $ 0 $ 0 $ 45,840

Painting/Water Proofmg 45,472 0 0 0 45 ,472

Building Components ( 96,645) 26,245 0 ( 85,246) ( 155,646)

Unit Interiors/ Personal Property 747,712 219,045 0 ( 734,526) 232,231

Roofing ( 11,238) 4,241 0 ( 15,095) ( 22,092)

Other Building & Grounds 256,480 0 0 ( 227,248) 29,232

Elevators 8,779 0 0 0 8,779

Mechanical & Electrical 145,063 120,270 0 (49,678) 215,655

Common Area/ Furniture, Fixtures & Equipment 72,572 29,754 0 ( 22,857) 79,469

Special Assessment o,-, 0 0 ( 50,000) ( 50,000)

Hurricane Damage ( 345,030) 63,661 0 ( 39,285) ( 320,654)

$ 869,005 $ 463,216 $ 0 $(1,223,935) $ 108,286

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QUVARI & ASSOCIATES CERT IFIED PUBLIC A=UN TA NTS 6<mN SULTANTS

Mechanical & Electrical 145,063 120,270 o (49,678) 215,655

Common Area/



NOTE 5 - Restricted Replacement Fund (continued) 2004

Common Area

Component Paving

Beginning Fund

Balance $ 43,137

Additions To

Fund $ 1,003

Transfers $ 1,700

Charged To

Fund $ 0

Components Of Ending

Fund Balance $ 45,840

PaintinglWater Proofmg 49,188 0 0 ( 3,716) 45,472

Building Components 11,556 42,135 6,800 ( 157,136) ( 96,645)

Unit Interiors/ Personal Property 647,335 238,132 42,925 ( 180,680) 747,712

Roofing ( 16,478) 4,815 425 0 ( 11,238)

Other Building & Grounds 246,553 9,120 19,550 ( 18,743) 256,480

Elevators 3,535 4,394 850 0 8,779

Mechanical & Electrical 83,969 82,811 7,650 ( 29,367) 145,063

Common Areal Furniture, Fixtures & Equipment 58,983 27,847 5,100 ( 19,358) 72,572

Hurricane Damage 0 755,043 0 (1,100,073) ( 345,030)

~ 1.127,778 $1.]65,300 s 85,()()() $(1,509,073) . s 869,005

The Association's governing documents and State Statutes require that funds be accumulated for future major repairs and replacements. Accumulated funds are held in a separate money market account, certificates ~ ' Qf deposits, and other securities, and are not available for expenditures for normal operations.

The Board of Directors conducted a study in August 1991 to estimate the remaining useful lives and the replacement costs of the components of common property. The estimates were obtained

. from licensed contractors when applicable, who inspected the property . On an annual basis, in conjunction with preparing the annual budget, the estimated costs and remaining lives are updated as necessary. During 2001, the Association hired an independent consultant to perform an updated reserve study. The table included in the unaudited supplementary information on future major repairs and replacements is based on the 200] study.

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OUVARI & ASSOCIATES CERTI FIED PUBLIC ACCOUNTA NTS &.CONSU LTANTS

Hurricane Damage 0 755,043 o (1,100,073) ( 345,030)

~ 1.]27,778 $1.]65,300 $ 85,()()() 869,005 $(1.509,073) ' &.$=~~'l!:



NOTE 5 - Restricted Replacement Fund (continued)

The Board 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 considering amounts previously accumulated in the replacement fund at the time the budget is prepared. The Association also established replacement fund components for the insurance deductible for hurricane damage and special assessment expenses. Accordingly, the funding requirement of $383,021 is included in the 2006 budget.

Funds are being accumulated in the replacement fund based on estimates of future costs for repairs and replacements of common property components. Actual expenditures may vary from the estimated future expenditures, and the variations may be material. Therefore, amounts accumulated in the replacement 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 to pass special assessments, or delay major repairs and replacements until funds are available.

For the years ended December 31, 2005 and 2004, the replacement fund was budgeted to receive cash appropriations of $451,130 and $385,223, respectively. Actual appropriations, insurance proceeds, and interest income less bank charges for the years ended December 31, 2005 and 2004 was $463,216 and $1, 165,300, respectively.

For the years ended December 31, 2005 and 2004, the Association transferred $119,947 and '.$178,877, respectively, in fixed assets and deposits on fixed assets from the replacement fund to the operating fund, which are to be maintained and depreciated in the operating fund. Additionally, for the years ended December 31, 2005 and 2004, the board authorized transferring $ 0 and $85,000, respectively, from the operating fund to the replacement fund.

NOTE 6 - Owners' Assessments

2005 2004 "\ Efficiency/ Penthouse/ Efficiency/ Penthouse/

Unit Week Unit Week Unit Week Unit Week

Operating $ 347.21 694.42 $ 301.20 $ 602.40 Reserves 83.45 166.90 71.26 142.52

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QLIVARI & ASSOCIATES CERT IFIED PUBLIC A = UNTANT S & CONSULTA NTS

me operatrng rune, wrncn are to be mamtamed ana oepreciateo rn me operating rune. Additionally, for the years ended December 31, 2005 and 2004, the board authorized transferring $ 0 and $85,000, respectively, from the operating fund to the replacement fund.



NOTE 7 - Concentration Of Credit Risk

At December 31, 2005 and 2004, the Association maintained cash balances at one financial institution, which exceeded FDIC insurance limits in the amount of $752,012 and $683,464, respectively. The Association does not have a policy requiring collateral on these non-insured amounts.

NOTE 8 - Supplemental Cash Flow Information

The Association considers all highly liquid, short-term investments with an original maturity date of three months or less to be cash equivalents.

During the years ended December 31, 2005 and 2004, the Association transferred $170,925 and $178,877, respectively, in fixed assets and deposits on fixed assets from the replacement fund to the operating fund.

Interest paid for the year ended December 31, 2005 was $33,665.

NOTE 9 - Income Taxes

For the years ended December 31, 2005 and 2004, the Association elected to file its tax returns as a tax-exempt homeowners I association, under Section 528 of the Internal Revenue Code as allowed by the Taxpayer Relief Act of 1997. Under such filing, membership source income is exempt from federal income tax; however, the tax on non-membership source income was $2,460 and $15,793, respectively.

For the years ended December 31, 2005 and 2004, the Association elected to claim a $500 general business tax credit for the cost of establishing and maintaining a qualified retirement plan. December 31, 2005 is the fmal year for the three-year tax credit.

't. "

NOTE 10 - Employee Retirement Plan

During the year ended December 31, 2003, the Association established a 401(k) retirement plan through Paychex, Inc. The Association, at its discretion, contributes an amount up to 3% of the eligible employee's compensation. Plan contribution expense for the years ended December 31, 2005 and 2004 was $1,967 and $1,629, respectively . Additionally, plan administration expenses were $1,960 and $2,190, respectively, for the years ended December 31,2005 and 2004.

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QUVARI & ASSOCIATES CERT IFlED PUBLIC ACCOUNTANTS &. CONSULTANTS

allowed by the Taxpayer Relief"Act of 1997. Under such filing, membership source income is exempt from federal income tax; however, the tax on non-membership source income was $2,460 and $15,793, respectively.



Note 11 - Long Term Debt

During the year ended December 31, 2005 , the Association entered into a note payable to Resort Funding, LLC for $3,500,000 payable in 60 variable monthly installments of principal and interest dependirig upon the amount of principal borrowed . As of December 31, 2005, the Association had received a total of $2,442,487 in proceeds.

2005 Note payable - Resort Funding , LLC

payable in monthly accrued interest and principal payments with a final principal and interest payment due September 2010. The variable interest rate is the prime rate plus 3.00 %. This note is collateralized by real estate. 2,355,497

Less current portion ( 397,868) $ 1,957.629

The aggregate principal payments of notes payable and long-term debt for the next 5 years are as follows:

Year Ending December 31,

2006 $ 397,868 2007 444,377 2008 497,663 2009 556,629 2010 458,960

S 2.355.497 Total interest expense as of December 31,2005 was $54,019 .

...... "\

Note 12 - Intangible Assets

Intangible assets include loan closing costs in the amount of $131,901 relating to the debt described in Note 11. The loan costs are being amortized over the five year life of the loan. As of December 31, 2005, the amortization expense is $13,190 and accumulated amortization is $13,190, with a net book value of $118,711.

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OUVARI & ASSOCIATES CERT IFIED PUBLI C ACCOUNT ANT S &.CONSU LTA NT S

~\.NI <t"t'T,J I I

2008 497,663 2009 556,629 2010 458,960



Note 12 - Intangible Assets (continued)

Amortization expense over the next 5 years is as follows:

Year Ending December 31,

2006 $ 26,380 2007 26,380 2008 26,380 2009 26,380 2010 13,191

$ 118.711

Note 13 - Significant Estimate

The principal payments calculated for the 5-year long term debt note disclosure identified in Note 11 were determined using significant estimates based on the current amount of debt proceeds and a prime rate of 8.25 % plus 3 %. This estimate assumes no changes in either of these events and it is likely that a change in the estimate could occur in the near term.

NOTE 14 - Other Contingencies

Hurricane Damage During the year ended December 31, 2004, the Association sustained significant hurricane damages to the building and its contents. Based upon preliminary estimates obtained by the Association, there was a range of loss (based on estimated repair and replacement costs) of between $800,000 and $1,025,000. As of December 31, 2005, the cumulative amount of hurricane damage repairs recorded was $1,111,458, including $75,504 for the public adjustor. As a result of the wind deductible buyback coverage, the Association's insurance deductible was $61,317. ., '

As of December 31, 2004, the Association recorded a receivable from their insurance carriers in the amount of $755,043 of which $749,548 was received during the year ended December 31, 2005. To provide additional funding to cover the insurance deductible, the Association included an additional $62,000 in their 2005 reserve funding. During the year ended December 31, 2005, the Association also secured debt financing as described in Note II to complete all hurricane damage repairs and extensive renovations.

-14

QUVARI & ASSOCIATES CERT IFIED PUBLIC ACCOUN TANT S & CONSULTANTS

Hurricane Damage During the year ended December 31, 2004, the Association sustained significant hurricane damages to the building and its contents. Based upon preliminary estimates obtained by the A ......._ .....:n+~__ +l-.o ....or. ''1,0'''\"" n 'l"'n_nr.or. _+ 1_ ....,.., Ihn ....rIIoA __ n, n+ ; ...-n +.a.rl "'0_"' ;"" n_A 1" ,..._...-.a._+ __ ..........\ _+



NOTE 14 - Other Contingencies (continued)

Additionally, as of December 31, 2004, the Association paid $89,713 in hurricane damages and had accrued $934,856 in estimated repair and replacement costs and $75,504 due to the public adjustor used to process the insurance claims, which were included in other payables.

NOTE 15 - Special Assessment

During the year ended December 31, 2005, the Association initiated and billed a special assessment to each unit week owner in the amount of $850 per efficiency unit week and $1,700 per penthouse unit week. The purpose of the special assessment is to repay the note payable described in Note 11 and Note 13, proceeds of which were used for the extensive renovations done in conjunction with the hurricane damage repair.

The unit week owners were given an option to pay the assessment in three equal annual installments with the first payment due March 2006. Therefore, all special assessment receipts have been recorded as unearned revenue.

<, "

-15

OUVARI & ASSOCIATES CERT IFIED PUBLIC ACCOU NTANT S 6<CO NSULTANTS

SUPPLEMENTAL INFORMATION

"'.,•

OUVARI & ASSOCIATES CERTIFIED PUBLIC A=uNTANT S 6<CONS ULTANTS

Georgian Inn Beach Club Association, Inc. Supplementary Information On Future Major Repairs And Replacements

December 31, 2005

(UNA UDITED)

The Board of Directors had a study performed in 2001 by an independent consultant to estimate the remaining useful lives and the replacement costs of the components of common property. On an annual basis , in conjunction with preparing the annual budget , the estimated costs and remaining lives are updated as necessary.

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

Components

Estimated Remaining

Useful Lives (Years)

Estimated Current

Replacement Costs

2006 Funding

Requirement

Components Of Fund

Balance At 12/31/05

Mechanical & Electrical 1 - 18 $ 371,563 $ 40,558 $ 215,655

Paving 1 - 5 16,349 3,962 45,840

Painting/Water Proofmg 1 136,586 22,667 45,472

Elevators 6 - 26 87,863 4,144 8,779

Common Area Furnishings 1 - 12 123,350 12,000 79,469

Building Components 1 - 25 803,467 25,560 ( 155,646)

Unit Interiors/ Personal Property 1 - 20 1,351,849 120,000 232,231

Roofing 5 ':'6 ... 25,500 4,130 ( 22,092)

Other Building & Grounds 1 15 224,973 150,000 29,232

Special Assessment ° o o ( 50,000)

Hurricane Damage ° o o ( 320,654)

$ 3,141.500 $ 383,021 $ 108,286

See accompanying auditors I report. -16

QLIVARI & ASSOCIATES CERTIAED PUBLIC ACCOUNTA NTS & m NSULTANTS

J. - J.4 J. s: ..J,.J-Jv J.4,VVV

Building Components 1 - 25 803,467 25,560 ( 155,646)

__


INDEPENDENT AUDITORS' REPORT On Additional Information

Board Of Directors And Unit Owners Georgian Inn Beach Club Association, Inc. Ormond Beach, Florida

Our report on our audits of the basic financial statements of Georgian Inn Beach Club Association, Inc. for the years 2005 And 2004 appears on page 1. Those audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The Schedule Of Actual To Budget for the years ended December 31, 2005 and 2004 on page 18 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for the portion marked "unaudited", on which we express no opinion, has been subjected to the auditing procedures applied in the audits of the basic financial statements, and, in our opinion, the information is fairly stated in

, all material respects in relation to the basic financial statements taken as a whole.

Olivari & Associates Certified Public Accountants And Consultants September 15, 2006

-17

141 SAGE BRUS H T R A IL· SU IT E D • O RMON D BE A CH , FLO RID A 3217 4

(386) 672-0775 • FA X (386) 677- 1024

'"'-,. ·0 .... ~_ ~_ ~ _ ...

Georgian Inn Beach Club Association, Inc. Schedule Of Actual To Budget

For The Years Ended December 31,2005 And 2004

2005 Budget

"Unaudited"

2005 Actual

2004 Budget

"Unaudited"

2004 Actual

Revenues 2005 Maintenance Fee Late Fees/Lockout Fees Other Income & Investment Income

Total Revenues

$ 1,876,955 20,000

198,000

$ 2,094,955

$

$

1,876,955 106,626 61,813

2,045,394

Revenues 2004 Maintenance Fee Late Fees Other Income & Interest

Total Revenues

$ 1,628,258 20,000

135,000

$ 1,783,258

$

$

1,628,296 1l0,765 221,188

1,960,249

Expenses Professional Services - Legal Accounting & Audit Fees Consulting Fee Expense Meeting Expenses Licenses and Permits Elevator Expense Pest Control Services Contracts - Other Housekeeping & Linen Miscellaneous General Repairs & Maintenance Building Components Insurance Interest Expense Cable TV Electricity Gas Water, Sewer, & Trash Telephone Division Fees Salaries, Wages & Casual Labor Contingency/Bad Debt Security Print & Admin Supplies Depreciation Income Taxes Taxes - Payroll Guest Activities Amenities Package

Total Operating Expenses

$ 30,500 16,000 48,000

6,000 1,000 6,000 2,800 5,710

33,000 36,300 75,500

265 ,000

22,500 70,000 22,000 37,000 12,000 10,608

669,735 629,582

9,200 28,000

11,500 39,520

3,500 ~ ,OOO ,

$ 2:094,955

$

$

59,508 14,800 20,000 12,511 2 ,179 5,363 3,100 5,123

14,019 44,799 95,093

2,657 ,746 162,160 54,019

37,910 2,598

16,444 12,281 10,608

458,194 710,078

36,144 64,030 2,460

30,212 1,392

4,532,771

Expenses Professional Services - Legal Accounting & Audit Fees Consulting Fee Expense Meeting Expenses Licenses and Permits Elevator Expense Pest Control Services Contracts - Other Housekeeping & Linen Miscellaneous General Repairs & Maintenance Building Components Insurance Interest Expense Cable TV Electricity Gas Water , Sewer, & Trash Telephone Division Fees Salaries, Wages & Casual Labor Contingency/Bad Debt Security Print & Admin Supplies Depreciation Income Taxes Taxes - Payroll Guest Activities Amenities Package

Total Operating Expenses

$ 30,500 11,500 48,000

6,000 1,000 6,000 2,800 5,710

33,000 36,300 75,500

265,000

22,500 67,800 20,000 37,000 12,000 10,608

649,840 348,000

9,200 28,000

11,500 38,000 3,500 4,000

$ 1,783,258

$

$

124,518 11,000 48,000

8,649 1,214 5,230 3,142 4,358

28,483 17,922 65,487

200,812

16,322 69,477 18,291 35,941 14,418 10,608

510,885 574,670

14,649 25,127 37,183 15,793 37,651 5,106 1,120

1,906,056

See accompanying Independent Auditors' Report on additional information . -18

OUVARI & ASSOCIATES CERT IA ED PUBLIC A=UNTANT S & m NSULTANTS

Salaries, Wages & Casual Labor 669,735 458,194 Salaries, Wages & Casual Labor 649,840 510,885 Contingency/Bad Debt 629,582 710,078 Contingency/Bad Debt 348,000 574,670 Security 9,200 Security 9,200 14,649 Print & Admin Supplies 28,000 36,144 Print & Admin Supplies 28,000 25,127 Depreciation 64,030 Depreciation 37,183