Gayle L. Cagianut, CPA Catherine L. Kuhn, CPA Independent ... · Independent Auditors' Report To the Board of Directors and Members Whaler's Cove Association of Apartment Owners

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Independent Auditors' Report To the Board of Directors and Members Whaler's Cove Association of Apartment Owners Bellevue, Washington Report on the Financial Statements We have audited the accompanying financial statements of Whaler's Cove Association of Apartment Owners, which comprise the Balance Sheet as of May 31, 2017, and the related Statement of Changes in Fund Balances, Statement of Revenues and Expenses and Statement of Cash Flows for the year then ended and the related notes to the financial statements. Association's Responsibility for the Financial Statements The Association 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 of 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 in order 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.

Gayle L. Cagianut, CPA

Catherine L. Kuhn, CPA

13510 SE 59th Street Bellevue, WA 98006 Tel 425.641.4808 [email protected] www.hoacpa.com

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We believe that the audit evidence 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 Whaler's Cove Association of Apartment Owners as of May 31, 2017, 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. Emphasis of Matter - Prior Period Adjustments As discussed in Note 5 to the financial statements, the 2015 financial statements have been restated to correct a misstatement. Our opinion is not modified with respect to this matter. Emphasis of Matter - Change in Accounting Principle As described in Note 6 to the financial statements, the Association changed from the nonfund presentation to the fund presentation for its financial statements. Our opinion is not modified with respect to this matter. Other Matter - Required Supplementary Information Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. We have not applied procedures to determine whether the funds designated for future repairs and replacements are adequate to meet such future costs because that determination is outside the scope of our audit. Accounting principles generally accepted in the United States of America [GAAP] require that the Supplementary Information on Future Major Repairs 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, who considers it to be an essential part of financial reporting and for placing the basic financial statements and related notes in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Bellevue, Washington December 1, 2017

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ASSETS

$ $ $

$ $ $

$ $ $

$ $ $

OPERATING REPLACEMENT

Whaler's Cove Association of Apartment OwnersBalance SheetMay 31, 2017

TOTALFUND FUND

Investments 412,883 412,883

Cash, including interest bearing deposits 16,558 26,905 43,463

Prepaid Insurance 14,479 14,479TOTAL ASSETS 31,037 439,788 470,825

LIABILITIESAccounts Payable 24,733 5,980 30,713

LIABILITIES AND FUND BALANCES

Assessments Received in Advance 2,798 2,798Income Taxes Payable 2,102 2,102TOTAL LIABILITIES 29,633 5,980 35,613

Replacement 433,808 433,808

FUND BALANCES Operating 1,405 1,405

FUND BALANCES 31,037 439,788 470,825

TOTAL FUND BALANCES 1,405 433,808 435,213TOTAL LIABILITIES AND

See Notes to the Financial Statements

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$ $ $

$ $ $

Whaler's Cove Association of Apartment OwnersStatement of Changes in Fund Balances

For the Year Ended May 31, 2017

Balance at the Beginning of the Year 491,900 0 491,900

Change in Accounting Principle (455,908) 455,908

OPERATING REPLACEMENTFUND FUND TOTAL

Transfer Between Funds 23,799 (23,799)

Prior Period Adjustment 8,778 8,778

Revenues over Expenses (67,164) 1,698 (65,466)Excess <Deficiency> of

Balance at the End of the Year 1,405 433,808 435,213


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REVENUESAssessments $ 204,333 $ $Rental Income 6,400Interest 8Insurance Claim 27,111TOTAL REVENUES 237,852

EXPENSESApartment Interior UpgradesCable 1,250Contingency 3,994Electricity 7,139 7,139Employee Health 5,590 5,590Federal Taxes 2,102Gas 10,956Insurance 38,326Insurance Claim 37,111Landing & Compost Bins 7,000Landscape 80,006Legal 2,003Life Safety Systems 2,518Management 7,563 7,563Miscellaneous 901Office Supplies 1,157Payroll Taxes 2,413Repairs & Maintenance 27,510 27,510Telephone 2,853 2,853Trash 4,934 4,934Wages 25,897 25,897Water & Sewer 33,796 33,796Replacement Fund Expenses

Apartment Interior Upgrades 5,980TOTAL EXPENSES 305,016

EXCESS <DEFICIENCY> OFREVENUES OVER EXPENSES $ (67,164) $ $

Whaler's Cove Association of Apartment OwnersStatement of Revenues and Expenses


FUND FUND TOTALOPERATING REPLACEMENT

6,400204,333

27,1117,678 7,686

7,678 245,530

2,10210,95638,326

1,2503,994

2,0032,518

37,1117,000

80,006

9011,1572,413

5,9805,980 310,996

1,698 (65,466)


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$ 203,562 $ $ 203,5628 7,686

33,511 33,511(485) (485)

(283,039) (283,039)

(46,443) (38,765)

(7,651)

23,799(22,644) (46,416)

Cash, including interest bearing deposits, at the Beginning of Year 39,201 50,678 89,879

$ 16,558 $ $ 43,463

Revenues over Expenses $ (67,164) $ 1,698 $ (65,466)Increased Prepaid Insurance (14,479) (14,479)Decreased Prepaid Expenses 1,453 1,453Increased Accounts Payable 23,638 5,980 29,619Decreased Prepaid Assessments (771) (771)Increased Taxes Payable 2,102 2,102

8,778 8,778$ (46,443) $ 7,678 $ (38,765)

Whaler's Cove Association of Apartment OwnersStatement of Cash Flows


FUND FUND TOTALCash Flows from Operating Activities:

OPERATING REPLACEMENT

Net Increase <Decrease> in Cash from7,678

Cash Flows from Investing Activities:(7,651)

7,678

0

Cash from AssessmentsInterest ReceivedMiscellaneous IncomeIncome Taxes PaidCash Paid for Services and Products

Operating Activities

Purchase of Investments

Net Increase <Decrease> in Cash (23,772)

Cash, including interest bearing deposits, at the End of Year 26,905

Cash Flows from Financing Activities:(23,799)Transfers Between Funds

Net Increase <Decrease> in Operating Cash


Reconciliation of Excess <Deficiency> of Revenues over Expenses to Net Cash Received by Operations:Excess <Deficiency> of

Prior Period Adjustment

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Whaler's Cove Association of Apartment OwnersNotes to the Financial Statements

May 31, 2017

General Whaler's Cove Association of Apartment Owners was incorporated October 29, 1979 in the state of Washington as a nonprofit corporation. The Association is responsible for the operation and maintenance of the common property. This is a 24-unit condominium development plus one manager's unit located in Bellevue, Washington. Accounting Method The Association prepares its statements on the accrual basis of accounting whereby income and expenses are recognized when earned and incurred. Fund accounting is employed to properly account for the monies. The Operating Fund is used to pay for all utility, insurance, general maintenance, landscaping, and administrative obligations of the Association. The Replacement Fund has been established to meet the replacement and major repair obligations of the Association with regard to the common area components. Capitalization Policy Replacements and improvements to the real property are not capitalized on the books of the Association as title is held by the members as a fractional interest as tenants in common. Property and equipment acquired by the Association are recorded at cost. The property is depreciated over its estimated useful lives using the straight line method of depreciation. There is no capitalized property at the end of the year. Assessments Receivable Association members are subject to assessments to provide funds for the Association's operating expenses, future capital acquisitions, and major repairs and replacements. Assessments receivable at the balance sheet date represent fees due from unit owners. The Association's Declaration provides for various collection remedies for delinquent assessments including the filing of liens, foreclosing on the unit owner, and obtaining judgment on the assets of the unit owner. The Association uses the allowance method to account for uncollectible assessments receivable. There is no allowance necessary at the end of the fiscal year. 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. Cash, including Interest Bearing Deposits For purposes of the statement of cash flows, Cash, including Interest Bearing Deposits, includes cash on hand, funds on deposit with financial institutions, and investments with original maturities of three months or less. Fair Value Measurements The three levels of the fair value hierarchy under ASC 820, Fair Value Measurements and Disclosures, are described below: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Association has the ability to access. Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Investments Investments include certificates of deposit with original maturities over 90 days. These are level one type investments. Date of Review In preparing the financial statements, the Association has evaluated events and transactions for potential recognition or disclosure through the date of the audit report, which is the date that the financial statements were issued or available to be issued.

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Utilities $ 4,062Payroll 1,155Taxes 485

Insurance (14,480)$ (8,778)

As a result of these misstatements, net income was understated by a net amount of $8,778 in previous periods.

Whaler's Cove Association of Apartment OwnersNotes to the Financial Statements

May 31, 2017

The Association is currently funding for the future major repair and replacement of Association common areas as disclosed in Note 1. Accumulated funds are held in separate accounts and are generally not available for operating purposes. The funding is based upon a professional reserve study approved by the Board of Directors. The most recent reserve study recommends a special assessment of $685,000 in 2018. That amount is preliminary in nature and, per the reserve professional, may vary with actual specifications, cost and timing of the fire panel and upgrades, and the new roof (including the steep slope roof, the low slope roof, and the skylights). Funds are being accumulated in the Replacement Fund based on estimates of future needs for repairs and replacements of common property components. Actual expenditures may vary from the estimated future expenditures, and variations may be material. Therefore, the 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, subject to certain legal limitations, to increase assessments, pass special assessments, or delay replacement if these funds are found to be inadequate for all future costs.

NOTE 3 - FEDERAL INCOME TAXES

Associations may be taxed either as homeowners associations or as regular corporations. For the current year the Association elected to file as a homeowners association using form 1120-H under Internal Revenue Code Section 528. Under that Section, the Association is not taxed on income and expenses related to its exempt purpose, which is the acquisition, construction, management, maintenance and care of Association property. Net nonexempt function income which includes interest, user fees and revenues from non-members is taxed at 30%. Certain expenses were allocated to offset a portion of the taxable income. The Association's federal tax return is subject to audit by the Internal Revenue Service. The tax returns for the current and prior two fiscal years remain open for examination by the IRS. In evaluating the Association's tax positions and accruals, the Association believes that its estimates are appropriate based on the current facts and circumstances.

Adjustments have been made to the prior year for the following misstatements:

NOTE 6 - CHANGE IN ACCOUNTING PRINCIPLE

The Association changed from the nonfund presentation to the fund presentation for its financial statements. Either is allowed under accounting principles generally accepted in the United States. Thus, a change in accounting principle has been recorded for the balance of the Replacement Fund as of the beginning of the year.

NOTE 5 - PRIOR PERIOD ADJUSTMENTS

NOTE 2 - REPLACEMENT FUNDING PROGRAM

NOTE 4 - OWNERS' ASSESSMENTS

Monthly assessments to owners varied by unit. Of this amount, a portion was designated to the Replacement Fund. The annual budget and owners' assessments are determined by the Board of Directors, within certain restrictions. The Association retains excess operating funds at the end of the year, if any, for use in future operating periods. Draf

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Estimated EstimatedRemaining Current Fund BalanceUseful Life Replacement atin Years Costs Year End

$5 400,000

10 21,0000 11,000

10 15,0000 25,0003 8,0003 4,000

13 3,500

0 340,0000 25,0000 20,000

20 26,50040 810,000

0 135,00040 710,000

0 38,00040 55,000

6 17,0006 5,0006 4,0002 4,0006 5,000

0 300,000

$ 433,808

and Replacements

Whaler's Cove Association of Apartment OwnersMay 31, 2017

Supplementary Information on Future Major Repairs

(Unaudited)

Site Rail & Fence - ReplaceSite Rail & fence - PaintPole Lights (Tall) - ReplacePole Lights (Short) - ReplaceLandscape - RefurbishIrrigation System - Repair/Replace

ComponentSite & GroundsConcrete Driveway - Replace

Gutters/Downspouts - Repair/ReplaceSiding: Wood & Fiber Cement - ReplaceExterior Surfaces - Paint/CaulkWindows & Sliding Doors - ReplaceDecks: Coated - Seal/RepairDeck Rail - Replace

Mailboxes - Replace

Building ExteriorRoof: Conc Tile - Replace w/ LaminateRoof: Low Slope - ReplaceSkylights - Replace

Bathroom - Refurbish

SystemsFire Alarm Syst - Replace

Building InteriorConference room - RefurbishConference Room Kitchen - RefurbishExercise Room - Carpet/PaintExercise Equip - Partial Replace

Percent Funded as of January 1, 2018 - 32.4%

TOTAL

A "full" reserve study was prepared on May 1, 2017 by Association Reserves for the period January 1, 2018 to December 31, 2018 to estimate the remaining useful lives and the replacement costs of the components of common property. The estimates were based on current estimated replacement costs. Funding requirements consider an annual inflation rate of 3.0% and interest of 1.0%, net of taxes, on amounts funded for future major repairs and replacements. The following table is based on the study and presents significant information about the components of common property.

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Report of Internal Control

December 1, 2017 To the Board of Directors and Management Whaler's Cove Association of Apartment Owners Bellevue, Washington Dear Board of Directors: In planning and performing our audit of the financial statements of Whaler's Cove Association of Apartment Owners as of and for the year ended May 31, 2017, in accordance with auditing standards generally accepted in the United States of America, we considered the Association’s internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Association’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Association’s internal control. The Standards of Field Work Our consideration of internal control was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control that we consider to be significant deficiencies and other deficiencies that we consider to be material weaknesses.

Gayle L. Cagianut, CPA

Catherine L. Kuhn, CPA

13510 SE 59th Street Bellevue, WA 98006 Tel 425.641.4808 [email protected] www.hoacpa.com

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A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or a combination of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected by the entity’s internal control. We consider the following deficiencies to be significant deficiencies in internal controls:

• The Board and management should ensure that the budget is incompliance with Washington RCW requirements, especially as related to reserves and their sufficiency. The RCW has deemed that this is important information for users of the budgets.

For condominiums - RCW 64.34.308 (4): http://apps.leg.wa.gov/RCW/default.aspx?cite=64.34.308

For HOAs – RCW 64.38.025 (4): http://apps.leg.wa.gov/rcw/default.aspx?cite=64.38.025

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity’s internal control. We believe that the following deficiencies constitute material weaknesses:

• Bank statements were not available to confirm the balance of $230,000in Cal First Bank at May 31, 2017. We did receive proof of the transfer of the monies in August 2017; thus, we were able to opine on the balance. Interest of over $5,000 had not been recorded since the purchase of the certificate of deposit. This information was not available at the time the tax extension was prepared; thus, the recommended amount to pay at the time of the tax extension was less than the tax owed. The IRS will bill the Association separately for penalties and interest for underpayment of tax.

• Replacement Fund activity should be clearly approved in the boardmeeting minutes. That includes cash transfers to/from operating cash and approval of all reserve expenses. In the current year, there was approximately $24,000 transferred from reserve cash for various projects. This was noted on the financial statements; thus, we assumed that there was Board approval for this transfer of cash from the Replacement Fund to the Operating Fund.

• The most recent reserve study recommends a special assessment of$685,000 in 2018. The Board should document their plans to fund this potential cash flow requirement.

This communication is intended solely for the information and use of the Board of Directors and management and is not intended to be and should not be used by anyone other than these specified parties.

Bellevue, Washington

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Cagianut & CompanyCertified Public Accountant

Summarized Adjusting Journal EntriesBook in Current Year

If printed, will show as gray cellsOn screen, will show as yellow

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Whaler's Cove Assn of Apt Owners WTB 05-31-17.xlsxWTB

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Auditor/Date:DJB 11/30/17_ Reviewer/Date:_glc 12/1/17

OE /Date:_ glc 12/1/17

WP Account Account 5/31/2017 AJE's 5/31/2017 Prior Year Bank Acct # Comments# Number Balance Adj. Balance

Assets GLC LLM JTZCash - Operating

10.1 1120 Umpqua Bank 16558.15 16558.15 39201.27 683 Checking

Investments

Total Operating Cash 16558.15 16558.15 39201.27Cash - ReservesUmpqua Bank 50677.62 5382 Reserves

10.2 1200 Umpqua Bank 26905.26 26905.26

Investments10.3 1220 Cal First Bank 230000.00 5522.78 235522.78 230000.00 56810.4 1215 Synchrony Bank 177359.91 177359.91 175231.31 9110

Total Reserve Cash 434265.17 5522.78 439787.95 455908.93Total Cash 450823.32 5522.78 456346.10 495110.20

12 Assessments Receivable12 Allowance for Bad Debt15 Prepaid Insurance 14479.31 14479.3122 Prepaid Tax

Undeposited Funds 1453.33

Due to/from OperatingDue to/from ReservesTotal Other 14479.31 14479.31 1453.33Total Assets 450823.32 20002.09 470825.41 496563.53Liabilities

20 2100 Accounts Payable (12986.89) (11745.97) (24732.86) (1094.48)20 Accounts Payable - Reserve (5980.29) (5980.29)12 2200 PPD Assmnts Receivable (2797.74) (2797.74) (3568.69)

22 Taxes Payable (2102.00) (2102.00)

29 2120 Payroll Taxes Payable (1122.01) 1122.01

Total Liabilities (16906.64) (18706.25) (35612.89) (4663.17)Fund Balance

30 2890 Reserves (434265.17) 457.51 (433807.66)

40 2900 Operating Fund (35991.89) (455908.47) (491900.36) (491900.36) (1753.35) Summarized AJEs30 Transfer between Funds (23798.74) (23798.74)40 Change in Accounting 455908.47 455908.4740 PPA (8777.81) (8777.81)

25417.98 1 Month Operating ExpenseGain/Loss 36340.38 67163.58 (1404.86) Year End Member's EquityTotal Fund Balance (433916.68) (435212.52) (491900.36) 0 Prior Year = 0

BB=0 0 Total Liab & Equity (450823.32) (470825.41) (496563.53) 0 Current Year = 0

Cagianut & CompanyCertified Public Accountant

Summarized Adjusting Journal EntriesBook in Current Year

If printed, will show as gray cellsOn screen, will show as yellow

WP 1

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Auditor/Date:DJB 11/30/17_ Reviewer/Date:_glc 12/1/17

OE /Date:_ glc 12/1/17

WP Account Account 5/31/2017 AJE's 5/31/2017 Prior Year Budget Comments# Number Balance Adj. Balance

Income Trivial

12 Assessments (204333.24) (204333.24) (204333.24) (204333.24)

30 Reserve Transfer (34398.72) 34398.7290L Legal Fees90 Rental Income (6400.00) (6400.00)

Interest - Operating (8.01) 0.02 (7.99) (3.70) (4.00)30 Interest - Reserves (2155.42) (5522.34) (7677.76) (2126.36) (1887.89)

90 Ins Insurance Claim (27110.91) (27110.91)

Other/MiscTotal Revenues (274406.30) 28876.40 (245529.90) (206463.30) (206225.13)

Audit & Tax Preparation 200.00 200.00 725.00 725.00 Tax only prep py

Board & Committee (12.57)

Management 7562.50 7562.5090L Legal 2003.00 2003.0015 Insurance 38325.72 38325.72 39147.71 41105.1012 Bad Debts

Reserve StudyOffice Supplies 1156.88 1156.88 1582.67 1000.00Tax & License 130.97 130.97 10.00 10.00

22 Federal Taxes 1381.97 720.03 2102.00Membership FeesBank Charges 69.96 69.96Payroll Update 382.16 400.00Donations 1500.00Other/Misc 100.00Employee Health 5589.76 5589.76 7284.36 7502.89

29 Wages 25896.83 25896.83 23456.24 25020.0029 Payroll Taxes 3923.88 (1511.01) 2412.87 3138.14 3138.1429 Bonuses 500.00 500.00 1563.7690Ins Insurance Claim 29130.07 7980.84 37110.91

Total Administration 115740.57 7320.83 123061.40 77277.47 80501.13Utilities

90 Electricity 7138.64 7138.64 6040.64 6100.00Water & Sewer 34092.37 (296.37) 33796.00 32643.29 32600.00 1,3

90 Gas 10955.85 10955.85 8381.86 8400.00Trash 4933.55 4933.55 4791.72 4800.00 1,3Telephone 2853.17 2853.17 2977.71 2977.00 1,3Cable 1249.95 1249.95 1348.83 1100.00 1,3

Total Utilities 61223.53 (296.37) 60927.16 56184.05 55977.00

Repairs & Maintenance 27509.67 27509.67 20417.42 44012.33 2Landscape 80005.78 80005.78 18324.70 18000.00 2 - see 30Landing & Compost Bins 7000.00 7000.00 2-concrete repairsApartment Interior UpgradesLife Safety Systems 2517.51 2517.51 1700.66 1734.67 2

Contingency 3994.20 3994.20 6000.00 2Reserve Expenses (63600.00)

30 Reserve Allocations 10600.00 (10600.00) 63600.00 TrivialNot material

30 Reserve Interest 2155.42 5522.34 7677.76 Related Party 1 = Appears reasonablewhen compared to P/Y

Total 133782.58 (5077.66) 128704.92 40442.78 69747.00 and/or Budget (+ or - 10%)Total Expenses 310746.68 1946.80 312693.48 173904.30 206225.13 2 = OK per GL

3 = x 12Operating Gain/(Loss) (36340.38) (67163.58) 32559.00 Explain variance

WP 2

Whaler's Cove Assn of Apt Owners WTB 05-31-17.xlsxAJE Desc Auditor/Date:_DJB 11/30/17

Reviewer/Date:_glc 12/1/17 Owner / Equivalent/Date:_glc 12/1/17

WP # AJE # DescriptionColor Code Key Type of AdjustmentOrangeBlueRed

(b) the error was caused by a lack of internal controlsPurpleBlack40.1 1 To record prior year AJE's not previously posted40 2 To record change in accounting15 3 PPD - To properly state PPD Insurance10.3 4 Interest - Reserve account20 5 Acc AP - Accrue unrecorded liabilities20 6 Acc AP-Reserves - Accrue unrecorded liabilities30 7 Reclass Reserve Transfer20 8 Record PY expenses paid in CY30 9 Reclass Landscaping Expenses to Reserves22 10 Tax - To properly state income taxes30 11 Reverser Res Allocations30 12 To record Due to/from29 13 Reclass trivial payroll taxes30 14 Reserve Adjustments

1516171819202122232425262728293031323334

* Note: It is C & C's policy to provide a copy of the WTB and adjusting journal entries to the accountant,the CFO/Lead Accountant and the manager.

** Note: It is C & C's policy to propose all AJEs, except those that are clearly trivial.*** Note: Signature on the representation letter includes agreement with proposed adjustments.

Reclassifications for C&C internal reporting purposes only.

Nonattest services as outlined in engagement letter; ex: cash to accrual, fund balances, etc. No IC Comment Needed.Misstatements/mistakes by accounting department and corrected on books in succeeding year. No IC Comment Needed.Misstatements/mistakes requiring Report of Internal Control as either (a) the Association did not find the error prior to audit or

Adjustments requiring Management Memo Point/Comment.

Acct # Account AJE 1 AJE 2 AJE 3 AJE 4 AJE 5 AJE 6 AJE 7 AJE 8 AJE 9 AJE 10 AJE 11 AJE 12 AJE 13 AJE 14 AJE 15 AJE 16 AJE 17 Total- . Beg Equity Change in Ac PPD Ins Interest Acc AP Acc AP-ResReclass Res PPA Reclass Res Tax Res Alloc Due to/from PR Taxes Reserve

AssetsCash - Operating

1120 Umpqua BankInvestmentsCash - ReservesUmpqua Bank

1200 Umpqua BankInvestments

1220 Cal First Bank 5522.78 5522.781215 Synchrony Bank

Other AssetsAssessments ReceivableAllowance for Bad DebtPrepaid Insurance 14479.31 14479.31Prepaid TaxUndeposited FundsDue to/from OperatingDue to/from Reserves


Liabilities2100 Accounts Payable (11745.97) (11745.97)

Accounts Payable - Reserve (5980.29) (5980.29)2200 PPD Assmnts Receivable

Taxes Payable (2102.00) (2102.00)2120 Payroll Taxes Payable 766.00 356.01 1122.01

Fund Balance2890 Reserves (5522.78) 5980.29 (34398.72) 10600.00 23798.72 457.512900 Operating Fund (455908.47) (455908.47)

Transfer between Funds (23798.74) (23798.74)Change in Accounting 455908.47 455908.47PPA (14479.31) 5216.50 485.00 (8777.81)IncomeAssessmentsReserve Transfer 34398.72 34398.72Legal FeesRental IncomeInterest - Operating 0.02 0.02Interest - Reserves (5522.78) 0.44 (5522.34)Insurance ClaimOther/Misc


Admin ExpensesAudit & Tax PreparationBoard & CommitteeManagementLegalInsuranceBad DebtsReserve StudyOffice SuppliesTax & License 130.97 130.97Federal Taxes 720.03 720.03Membership FeesBank ChargesPayroll UpdateDonationsOther/MiscEmployee HealthWages Payroll Taxes (1155.00) (356.01) (1511.01)BonusesInsurance Claim 7980.84 7980.84UtilitiesElectricityWater & Sewer 3765.13 (4061.50) (296.37)GasTrashTelephoneCableOther ExpensesRepairs & MaintenanceLandscapeLanding & Compost BinsApartment Interior UpgradesLife Safety Systems ContingencyReserve Allocations (10600.00) (10600.00)Reserve Interest 5522.78 (0.44) 5522.34Total 0 0 0 0 0 0 0 0 0 0 0 0 0 (0.00) 0 0 0 # (0.00)

WP 20Whaler's Cove Assn of Apt Owners WTB 05-31-17.xlsx

APAuditor/Date: DJB 11/30/17_ Reviewer/Date:glc 12/1/17_

Ref Operating Reserves 3rd Fund Total5/31/17 GL (12986.89) 0.00 0.00 (12986.89)40.1 AJE 1 0.00 0.00 0.00 0.00Reversal AJE 0.00 0.00Accrual AJE 5 (11745.97) (5980.29) (17726.26)

AJE 0.00AJE 0.00AJE 0.00AJE 0.00

20.1 (24732.86) 20.1 (5980.29) 20.1 0.00 (30713.15)1.1 1.1 1.1

OK WTB (24732.86) (5980.29) 0.00 (30713.15)OK AP Accrual (24732.86) (5980.29) 0.00 (30713.15)

Trivial = $500ISI = $650

REVERSAL ACCRUAL

0.00 0.00 AP 0.00 11745.97Insurance Claim 7980.84Water/Sewer 3765.13

To record CY Expense paid in 2017

0.00 0.00 11745.97 11745.97

PPA 5216.50Apartment Interior Upgrades/Res 5980.29 Water/Sewer 4061.50

AP-Reserves 5980.29 Payroll Taxes 1155.00To reverse 2015 expense paid in 2016

To record CY Reserve Expense paid in 2017

5980.29 5980.29 5216.50 5216.50

AJE 6 AJE 8

Agrees with prior year

AJE AJE 5

Based on the audit evidence obtained, AP, AP Acc and AP Acc 2 are fairly statedin all material aspects. DJB

Comments or Conclusions:

WP 20.1Whaler's Cove Assn of Apt Owners WTB 05-31-17.xlsx

AP AccAuditor/Date:DJB 11/29/17

Reviewer/Date:glc 12/1/17_

Date Ck # Vendor Acct # Acct Name Comments CY Amt NY AmtOPERATING: $650 Trivial = $50006/09/17 10095 Comcast 6150 Cable-Excersise 06/04/17-07/03/17 97.2506/14/177 1043 Fischer Restoration 5850 Insurance Repair02/28/17 50% down 4145.1006/09/17 10096 Kaleidoscope Inc 7000 Landscape May Landscaping 7462.3506/05/17 10092/1009Puget Sound Energy 6000/6050 Electric/Natural G04/20/17-05/22/17 1272.5306/08/17 10094 South Data 5200 Office Expense 05/25/17 9.66

06/19/17 10102 Artfex Construction 5850 Insurance Repair04/13/17 6426.18 90Ins06/20/17 1044 Haven Construction 5850 Insurance Repair04/28/17 1554.66 90Ins

0//03/17 10116 City of Bellevue 6300 Water/Sewer 04/17/17-06/22/17 5647.70

Indicates amounts included in client's AP Indicates amounts included in client's Accrued ExpensesAcct/Ref Date From Date To # Days Amount (linked)

0Electric 1/0/00 5/31/17 42886 Estimate 0.00

0Gas 1/0/00 5/31/17 42886 Estimate 0.00

4/17/17 6/22/17 66 5647.70W&S 4/17/17 5/31/17 44 Estimate 3765.13

01/0/00 5/31/17 42886 Estimate 0.00

01/0/00 5/31/17 42886 Estimate 0.00

Total Operating 24732.86 20

06/20/17 1044 Haven Construction 8025 Apt Interior Up G 04/28/17 5980.29

Indicates amounts included in client's Reserve AP Total Reserves 5980.29 20

Indicates amounts included in client's 3rd Fund AP Total 3rd Fund 0.00 20

Total AP 30713.15

Assertions Person Done N/AExistence AuditorComplete AuditorComplete Auditor

Auditor

Auditor

Valuation Reviewer

Accurate -Classified -Complete -Cutoff -Existence -Rights/Obligations -Valuation -

RISK ASSESSMENT/AUDITS low to high riskAssessed Risk at Assertion Level

3. Verify check register search is completed and saved electronically.2. Perform a search for unrecorded liabilities.

4. Document audit conclusion(s).

DISCLOSURES (Expressed clearly)/Presentation1. No disclosure of fair value required as carrying values approximate fair value.

EXTENDED PROCEDURES5.

Assessed Risk varies among clients. N/A Generally no disclosure or presentation issues. N/A

account balance. low to high riskUnless an extended procedure is indicated, the Basic Procedures low to high riskare adequate. low to high risk

A/P may or not be a significant audit area due to material N/A to low risk

BASIC PROCEDURES1. Obtain or prepare a listing of A/P at the end of the year.

Whaler's Cove Assn of Apt Owners WTB 05-31-17.xlsxPPD Ins Auditor/Date:_DJB 11/27/17

Reviewer/Date: glc 12/1/17_

(1) Insurance Company Trivial = $500Policy Number ISI = $650Type of CoverageTerm of Insurance From ToPremium Amount $Divided by # of Months in Policy

Monthly Expense $ 1616.67Multiplied by # of Months Remaining X

CALCULATED PREPAID PREMIUM $Less any unpaid premiums for the term < >

ACTUAL PREPAID INSURANCE $

(2) Insurance CompanyPolicy NumberType of CoverageTerm of Insurance From ToPremium Amount $Divided by # of Months in Policy
















$ 14479.31GL Variance (14479.31)

$

(1) Package (2) Umbrella

5 1578.67 1 1713.00Total Unpaid Premiums Total Unpaid Premiums

19400.0012

6.0

Prepaid InsurancePhiladelphia Insurance CompanyPHPK1580922Package

11/25/2016 11/25/2017

11/25/2016 11/25/20171713.00

12

9700.024736.114963.91

HUB International

Umbrella

HUB international

Earthquake11/25/2016 11/25/2017

15788.74

6.0856.50

0.00856.50

7894.38

7894.38

HUB International

D&O

12

6.0

6.0764.52

764.52

11/25/2016 11/25/20171529.00

12

12

Premium 19400.00 Premium 1713.00Finance Charge Finance Charge

0.00

0.00

TOTAL PREPAID INSURANCE PER CALCULATIONS Adjust Calc

TOTAL PREPAID INSURANCE PER GL, AFTER AJE 1 Do Not Adjust 0.00

4736.11 0.00

Less Payments # Pmts X Amount7893.35

Less Payments # Pmts X Amount1713.00

Total Premium 19400.00 Total Premium 1713.00Less Down Payment 6770.54 Less Down Payment

Documents

Gayle L. Cagianut, CPA Catherine L. Kuhn, CPA Independent ... · Independent Auditors' Report To the Board of Directors and Members Whaler's Cove Association of Apartment Owners