Sandyport 2013 Annual Report

ANNUAL REPORT 2013

S

www.sandyportmanagement.com Serving our community

CONTENTS 05

Chairman’s message

06

Board and organisational structure

08

Accomplishments

14

Future plans

16

Treasury report

19

2014 Budget

20

Financial statements

Those who govern, having much business on their hands, do not generally like to take the trouble of considering and carrying into execution new projects. The best public measures are therefore seldom adopted from previous wisdom, but forced by the occasion.

Benjamin Franklin

THIS REPORT, BY ITS VERY LENGTH, DEFENDS ITSELF AGAINST THE RISK OF BEING READ.

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CHAIRMAN’S MESSAGE I t gives me great pleasure to deliver the Chairman’s report to this fourth Annual General Meeting of the Sandyport Homeowners Association Ltd which is in respect to the period ended December 31, 2013.

We remain committed to rejuvenating, beautifying and further securing our community as our predecessors have done. Doing so has not been without its challenges however we were able to maintain a balanced budget and address the most important demands voiced by the Community. Given the current economic climate, we did not believe it appropriate to accelerate the improvements program which would have increased our budgeted expenses and, in turn, our Annual Assessment. Your Board resolved to continue with a steady program of improvements and for the 8th consecutive year the Annual Assessment has remained unchanged.

Considerable efforts have been devoted by your Board, management and staff towards continuing the transition to becoming an organisation that: • • • • •

observes and addresses the needs of the Community; works in the best interests of the common good; fosters a customer service attitude; practices equality, consistency and uniformity; and promotes a culture of transparency.

Sandyport is not without its issues, but I believe we succeeded in coming together as a Community in 2013 to understand them and collectively prioritize what we could afford to accomplish, whilst remaining financially stable. Five years ago, we ended the year with $56,000 on deposit - about a week’s worth of expenses. We concluded 2013 with a ten fold increase on deposit and in the interim period have enjoyed many, many improvements to our Community. I would like to thank those that have paid their dues in a timely manner. After all, we are a not-for-profit Association so all monies are committed long before they are received.

system. The system - identifiable by the large tanks located at the maintenance compound - had been in a state of decline for many years. Your Board was very mindful that there were various competing demands on the budget, but we knew that it was merely a matter of time before we suffered a major catastrophe if we didn’t act. The tanks had much corrosion and the critical mechanisms had mostly disintegrated. I am pleased to report that we completed all the essential work by the year end and I believe we have likely averted a disaster or, at the very least, an expensive emergency.

None of the work around Sandyport could be done without the support of our team and value added partners. We have evolved from an organization that relied almost exclusively on a larger workforce to one that combines our strengths with those of our partners. On behalf of the Board I would like to extend our thanks to the committee members, management team, staff and value added partners.

I also wish to thank those Board members that served before us, specifically the former Chairman, Karen Dagenais; Treasurer, Mark Holcombe and Secretary, Jane McLeod. I have served as Chairman since our third Annual General Meeting in December 2012 when I was joined by Steve Roberts as Treasurer and Director Monique Cartwright. Eddie Gardner was re-elected and has served as our Secretary for the period. Costa Berdanis, Kenny Cartwright and Tony Miaoulis have concluded the second year of their two year term and I would like to thank them, on behalf of the Community, for their commitment and service. Those that serve on the Board do so as volunteers with a passion to make Sandyport a continuously better home.

They are often faced with difficult and sometimes unpopular decisions, but their contribution has not gone unnoticed. At this Annual General Meeting you are being asked to elect three directors to continue the work ahead. Sandyport is a tremendous family friendly community and for many of us, it is our home. It has been a pleasure to have been of service to you.

On behalf of the Board of Directors

Because it is not something we necessarily see or understand well, I believe it’s worth mentioning that many significant improvements and repairs were performed on our wastewater

Robert Sands Chairman

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BOARD AND ORGANISATIONAL STRUCTURE COMMITTEES

Audit and Finance Homeowner Membership Landscaping and Architectural

Board of Directors

OFFICERS

DIRECTORS

Robert Sands Chairman

Costa Berdanis

Steve Roberts Treasurer

Kenny Cartwright

Eddie Gardner Secretary

Monique Cartwright Tony Miaoulis

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IMPROVING PRODUCTIVITY By collaborating with value added partners, we have been able to reduce our permanent workforce by 55% since 2009. In some instances our partners have employed former Association personnel.

VALUE ADDED PARTNERS

Maintenance

Paint Contractor

Orpheus Ingraham Manager Waste Disposal Contractor

Management Team

Simon Cooper General Manager

Security Services

Security Contractor

Sarah Barton Manager

Ronella Francis Assistant Manager

Gardening Contractor

Sherelyn Brown Accounts Manager Waynedell Butler Accounts Clerk

Water & Sewerage

Charles Cooper Manager

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ACCOMPLISHMENTS W e are pleased to report that many improvements were made during the course of the year. Some visible and others less conspicuous. The improvements were carried out without the need for a special assessment and ahead of budget.

Common areas Perhaps the most obvious improvement was the renovation of the tennis court adjacent to Sandyport Drive 43. We also renovated the neighboring pool and the deck was extended to utilize the unused space between the former fence and canal. The area was completed with a new landscaping theme and fencing. The total cost for the project was $124,458 and we anticipate that it will be about fifteen years before the area requires another overhaul.

Extra parking spaces were added near Sandyport Drive 118 to allow residents more off road parking. In 2013, we observed much greater parking compliance along Sandyport Drive helping to make the community safer. More speed limit signs were added throughout the property to further promote safety.

We continued with the carport maintenance scheme into 2014. The cost of maintaining the carports located on common property is met by a usage fee paid by those residents taking advantage of the undercover parking. During the year, we identified an unused parcel of land located between the Arches development and Sandyport Drive 155 with no owner on record.

The space was fenced off and marked as the private property of the Association. We plan to use it for everyday amenities at a future date, if no claim is successfully made on the land.

We continued the treatment program during the wet season to reduce the presence of sand flies and mosquitoes in the community.

The pool side furniture inventory that was installed during 2012 at a cost of over $30,000 was updated to deal with loss arising from damage. Additional furniture was also purchased to make sure that each pool area is equipped appropriately.

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15yrs The life expectancy of improvements before the next major renovation

125k +84

16% Of direct expenses invested in improvements

The amount invested in improving the tennis court and pool area along Sandyport Drive located between numbers 42 & 43

ACCOMPLISHMENTS CONTINUED Common areas continued The canal was cleared twice in 2013 and we have observed a steady increase in the frequency with which it requires dredging. We also experienced some changes with the permit application process which we understand is now processed through the Prime Minister’s office. They are presently taking over 6 months to issue. The method of dredging has also been changed to restrict the method to a suction based technique. We have engaged a firm of engineers to review the canal inlet to provide advice on the best way to decrease the build up of sand. The same firm has also been tasked to inspect and report on the sea wall / bulkheads throughout our waterway system.

Gardening Our current gardening contractor was appointed in December 2012 and we have seen a continued improvement in the overall appearance of our Community. Several areas have been landscaped, including the pool area already mentioned.

$18

The average cost to perform a complete garden service on each property. A further $130,000 is spent each year maintaining the gardens of the common areas.

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Landscaping improvements were carried out at the main entrance and foliage added around the garbage corrals. In addition, we added plants around the car parking spaces installed in late 2012 at the marina.

Security We engaged an external security consultancy firm to review our overall security systems and procedures. They reported positive leadership in the department and effective access control at all locations. Additional CCTV coverage and lighting in particular locations were recommended.

Security Services functions with about two thirds of the team from payroll staff and one third from a reputable security firm. This combination enables us the flexibility to choose from the best personnel available.

We introduced independent vetting of prospective employees to perform more thorough background checks such as arrest records (whether or not convicted). This is consistent with the background checks performed by the security firm on the personnel they provide on our behalf.

In addition to protecting persons and their property, Security Services is also charged with the task of enforcing the rules and regulations that maintain a sense of law and order within the Community. We have seen improvements in parking compliance, a near elimination of the improper use of vacant lots and a higher detection rate of unauthorized constructions.

IT’S ABOUT STANDARDS The Association offers a fixed garden maintenance service that ensures a certain standard is maintained even when the property is vacant. In 2013, a gardening specification was established to help Owners understand the scope of work undertaken so that expectations can be met.

Security continued Security Services is also the first responder in the event of fire emergencies. Drills have taken place regularly and an annual review conducted in conjunction with the local fire service. We upgraded the fire equipment to provide a longer and higher reach and published a fire emergency procedure on the website which we recommend all residents read.

Each of the entrances has been supplied with large format plans so that emergency services can be easily directed to the location of any incident.

Computer systems were added at the two entrances for the purposes of accessing real time information from the property database.

Sandyport is a large community and the integrity of the perimeter fence is critical to keep out unwanted visitors. Routine inspections are conducted and there were numerous repairs made during the course of the year. Signs indicating CCTV coverage have been fitted to the outside of the fence along areas visible to the public as a further deterrent to uninvited guests.

Historically the canal inlet was closed during the hours of darkness and the security booth unmanned. The barrier was in a state of disrepair and, with 24 hour security operations at the canal security booth, it was removed. Boat registration requirements were revised and an ID permit system set up to control access for permit holders.

The CCTV system is continuously needing to be improved upon and 2013 was no exception. There are 4 key areas with camera clusters, each with a DVR and a feed - via a broadband Internet connection - to the Security Services control room located at the main entrance. The clusters are located at the two entrances, canal inlet and guard house located near the school.

22+78+A Investment in Security Services has increased over the past 2 years.

12%

Security Services are the largest single direct expense of the Community.

22% 11

ACCOMPLISHMENTS CONTINUED

Water & sewerage We purchase our water from the Water & Sewerage Corporation (WSC) which is sold at a premium to meet the cost of non-revenue water, such as for pools and irrigation.

The pressure and availability of water are determined by the WSC except for occasions where we have good reason to disconnect the supply to perform emergency repairs.

In order to minimize line breaks we installed protective barriers around those water connections on vacant lots that are susceptible to high traffic or used as parking areas.

We understand that the WSC has been installing pressure regulators throughout the island which should improve the consistency of water pressure.

Tanks located at the maintenance compound are often confused with water storage tanks however they are part of our wastewater treatment plant which has been in need of some significant repairs. One of the tanks is heavily aerated and if a person fell inside they would almost certainly drown as it is impossible to float due to the amount of air in the system. Extra measures were established to assure that the tank farm is inaccessible, particularly to adventurous children.

The wastewater is collected from a network of seven lift stations throughout the property. Each station is fitted with dual heavy duty pumps and a control panel. The wastewater is pumped up through two risers then gravity fed to the next location in the system. Most of the risers were made of steel and had corroded resulting in wastewater leaking back into the lift station, resulting in unnecessary additional effort (and energy) by the pumping system. All the defective risers were replaced with PVC risers at a cost of approximately $5,000 each.

We were very concerned about our ability to continue processing wastewater in the event of a significant power outage. Without power, a lift station will overflow in less than a day and the plant will rapidly become septic. Given the publicly known challenges BEC faces, we invested $47,380 in two substantial generators that allow us to power the plant and also each lift station in the event of a major outage.

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During 2012, we commissioned a firm of civil engineers to review the plant and prepare a report advising us of the work that should be undertaken. The report was finished in early 2013 and the indispensable repairs to the plant were carried out by the year end. The work required that all tanks be withdrawn from service whilst the corroded bolts were replaced and the tank wall patched where there was evidence of leaks or erosion. The entire clarifier system and screen were also replaced. The entire cost of the project amounted to $173,961.

Other accomplishments Over the years, the painting of homes was carried out on an as needed basis. In 2011, we started our initial paint cycle which was scheduled over 3 years.

The cycle was closed on time by the end of 2013 and all homes (with a few exceptions at the Owner’s request) were painted having the same paint brand.

The License Agreement does not determine how often the homes should be painted specifically however the Board has set the ensuing cycle over 3 years, from 2014 through to 2016.

We developed our own enterprise class property database which contains all the material data the Association needs for each property in order to effectively manage it. The system was deployed to key locations so that updates are available to all departments in real time.

There are a number of documents that provide the foundation for how our Community is run including the Articles of Association, Memorandum of Association, License Agreement, Restrictive Covenants and Architectural Guidelines. We recognized that trying to digest the various rules and regulations can be unwieldy therefore we consolidated the most important information into a user friendly Guide that was made available in hard copy and online.

THE BEST TIME TO PLANT A TREE WAS 20 YEARS AGO. THE SECOND BEST TIME IS NOW.

FUTURE PLANS T

he cost of the improvements that we have identified far exceed our annual budget therefore the Board prioritizes based on necessity and Community feedback. Below are a number of improvements that are under consideration:

is due to a build up of solid matter over the years and the cost of a new well exceeds $100,000.

Wastewater treatment

The grey water system has not functioned for a number of years. The infrastructure requires a complete rebuild to allow grey water from the wastewater treatment plant to be recycled for irrigating common areas and private gardens.

With a surge tank, the existing plant is designed for a capacity of 100,000 gallons per day (gpd). We currently process between 70,000 and 80,000 gpd therefore we are close to the lower limit of the system capacity, which is 80,000 gpd, since no surge tanks are installed. At the time of the handover, the Developer was aware that the plant would require expansion and made provisions for it. At the current growth rate of about 5% per annum, we envisage that the work must be completed within 3 years.

The treated wastewater is despatched to a well which we understand originally had a depth of 400’. Engineers recommend that a second well should be drilled for redundancy. The existing well depth has reduced to 75’ which

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Water system

Main water line valves need adding and some existing valves replacing to permit the water supply to be disconnected at isolated locations in the event of a line break.

Roads To alleviate congestion and improve safety on West Bay Street, plans have been submitted to the Government to add an additional entrance to the east and modify the existing entrance to the west.

EVERYTHING HAS BEAUTY, BUT NOT EVERYONE CAN SEE.

The condition of the roads - and in particular near the main entrance - has deteriorated from wear and tear and should be resurfaced with some consideration given for new sidewalks.

the main entrance is scheduled for renovation in 2014 and lighting will be added.

There are a number of low lying areas that flood during the wet season where drains should be installed.

The pools at Governors Cay and Roberts Isle need renovating now, the Clipper Island pool will likely need renovating within 2 years.

Canal

Security

A replacement mechanised barrier system is planned for installation in 2014 which will enable us to keep the canal closed except to allow traffic through.

Our surveillance system requires additional expansion to provide coverage at all junctions and should be networked, rather than relying on an Internet feed to the control room.

The cost of dredging the canal averages over $60,000 per year so options to decrease the inflow of sand is being considered.

The only wall in Sandyport is located behind the shopping complex. Plans have been drawn up to add a wall and waiting area (for housekeepers) at the main entrance. A wall that replaces the chain link fence - particularly in highly visible areas such as along West Bay Street - will provide greater security and privacy making Sandyport a more appealing community.

Recreation areas All tennis courts, excluding one located adjacent to Sandyport Drive 43, are planned for resurfacing. The tennis court near

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TREASURY REPORT I n December 2012 when the present Board was elected, we established an Audit & Finance Committee to assist with audit, finance, accounting and budgeting matters. Despite a challenging economic climate, we are pleased to announce a surplus ahead of budget of $103,535 which will be transferred to our general reserve fund. Our surplus was greater than expected due in part to the absence of any significant hurricane damage and we also received a lower bid to perform critical repairs to the wastewater plant.

total receivables over 360 days past due. The bad debt provision is not attributable to a lack of confidence in our ability to collect outstanding debts, however we may not collect them within the current year.

We added the ability to pay online in January 2013 and as a result we have witnessed a ten fold increase in the number of payments made by debit or credit card. Many of these payments are made by Owners residing overseas who may have otherwise used the less convenient (and typically more expensive) method of paying by wire transfer.

When the Association was transferred to the Homeowners from the Developer, it was understood that we would continue to process wastewater output from Sandyport Olde Towne. A rate was established prior to the handover that would be charged by the Association however it did not reflect the actual cost of operating the wastewater treatment plant.

Following a review, the Association increased the rate and made it effective from October resulting in an almost fifteen fold increase, which is a more representative proportion of our overall plant operating costs.

Our receivables reduced by 25% to $264,316 (2012 = $351,038), allowing a bad debt provision of $102,511. The increase in bad debt provision is due to a change in how it is calculated, which has been amended to reflect the

We fortunately experienced no hurricane damage in 2013 which has typically cost over $30,000 per annum in recent years.

25% The reduction in overall receivables compared to 2012, allowing for a bad debt provision of $102K.

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In July we amended how the cost of water was distributed throughout the Community; the ‘premium’ charged on each gallon of water served to cover the cost of non-revenue water (such as for pools and irrigation) and was met only by those that purchased water. Instead, a flat fee of $20 per month was introduced to be paid by all property Owners, irrespective of water consumption, and the unit cost of water was reduced. The Association does not seek financial gain from water billing and the change did not materially impact on the aggregate revenue, which marginally exceeded the direct cost of water as intended.

The financial statements have been updated to identify improvements as a separate item to routine maintenance.

DELINQUENT ACCOUNTS A precedent was set in late 2012 whereby we satisfied the Supreme Court that the right to use the common property, which includes water lines, is subject to the payment of the License Fee. Our notices were amended accordingly to remind delinquent account holders of the Associations’ right to withdraw its’ services for non payment.

We also introduced late payment fees which became effective in September and about 140 accounts incur the penalty each month, although this number appears to be in decline.

IMPROVEMENTS

23+7+148543A

Pool renovation (located near SD 42)

43%

Wastewater system repairs & upgrades

Tennis court renovation (located near SD 43)

Amenity areas: roads, fencing, lighting

5%

Security & CCTV system upgrades

Common & amenity area gardens

23%

7%

14%

8%

MAKING SANDYPORT A POSITIVE PLACE TO LIVE AND TO WORK We have continued to make Sandyport a better place to work for those people that serve our Community by providing a positive and engaging environment for them. We have further made a difference to their payslip with an average increase of 6% for all security, maintenance and clerical personnel. For the first time in the history of the Association, it paid an annual bonus to all personnel without relying on gratuities from residents.

EVERYTHING STARTS WITH THE CUSTOMER.

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TREASURY REPORT CONTINUED Our overheads increased relative to 2012 largely due to the relocation of the management office to a more permanent home. Our original office following the handover was provided on an informal basis by the Developer, and we were unable to secure a longer lease of the subsequent office.

The 2014 budget that was approved by the Board is adjacent. It should be noted that we were unable to plan for the impact of VAT due to the uncertainty of the timing and our potential VAT registration status. Together with other gated communities we wrote to the Government requesting VAT exempt status, on the basis that we are non-profit service providers. At the time of writing we do not have a response nor do we have confirmation of the VAT implementation date. The response will determine whether we need to issue a revised budget. If the government introduces VAT and we are not exempted from registration, our fees may increase by the proposed 15%. If we are exempt from registration, we may be unable to recover the VAT paid on our purchases resulting in an increase of our maintenance assessments by an estimated 11%.

THERE IS NOTHING LIKE A VISION TO CREATE THE FUTURE.

2014 BUDGET REVENUE

2014

Maintenance assessments

2,410,339

Water & meters income

400,387

Indenture fees

186,714

Other income

50,568

Total revenue

3,048,008

DIRECT EXPENSES Security expenses

598,385

Gardening expenses

403,299

Water & meters

397,887

Improvements

367,501

Maintenance of common areas

349,152

Wastewater management

301,775

Painting expenses

164,580

Garbage removal

66,000

Total direct expenses

2,648,569

OPERATING EXPENSES Salaries, benefits & national insurance Office & computer supplies Rent & utilities

228,828 41,703 36,600

Professional fees

41,016

Finance charges

15,517

Telephone & communications

14,473

Insurance

9,595

Other expense

2,371

Property & other taxes

1,000

Total operating expenses

391,103

NET MAINTENANCE FUND

8,337

Assessment $2.75 per sq ft x 876,487 sq ft (as at November 30, 2013)

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FINANCIAL STATEMENTS Financial Statements For The Year Ended December 31, 2013 And Independent Auditors’ Report

W

e have audited the accompanying financial statements of Sandyport Homeowners Association Limited (“the Homeowners Association”), which comprise the statement of financial position as at December 31, 2013 and the related statements of maintenance fund, changes in shareholders’ equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards for Small and Medium-sized Entities, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall financial statement presentation.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Sandyport Homeowners Association Limited as at December 31, 2013 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards for Small and Medium-sized Entities.

HLB GALANIS & CO. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial

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March 18, 2014

SANDYPORT HOMEOWNERS ASSOCIATION LIMITED STATEMENT OF FINANCIAL POSITION At December 31, 2013 (Expressed in Bahamian dollars)

ASSETS

2013

2014 2012

Cash and cash equivalents

580,712

296,086

Accounts receivable (Note 4)

264.316

351,039

5,538

16,602

73,881

96,371

924,447

760,098

137,170

151,069

1,061,617

911,167

118,615

104,680

408,479

375,499

527,094

480,179

395

357

General reserve fund (Note 8)

430,593

424,826

Maintenance fund

103,535

5,805

534,523

430,988

1,061,617

911,167

Current Assets

Loan receivable (Note 5) Prepayments and deposits Total current assets Fixed assets, net (Note 6) TOTAL

LIABILITIES AND EQUITY LIABILITIES Current Liabilities Accounts payable and accrued expenses Prepaid maintenance fees and deposits (Note 7) Total current liabilities

SHAREHOLDERS’ EQUITY Share capital 5,000 ordinary shares authorized at $1.00 par value, 395 (2012: 357) shares issued and outstanding

Total shareholders’ equity TOTAL

The accompanying notes form an integral part of these financial statements.

These financial statements were approved by the board of directors and authorized for issue on March 18, 2014.

Director Director

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SANDYPORT HOMEOWNERS ASSOCIATION LIMITED STATEMENT OF MAINTENANCE FUND For the year ended December 31, 2013 (Expressed in Bahamian dollars)

REVENUE

2013

2014 2012

2,600,687

2,492,939

400,068

440,979

81,718

98,482

23,100

2,757

3,105,573

3,035,157

Security expenses (Note 10)

609,625

584,838

Improvements (Note 16)

406,834

474,707

Gardening expenses (Notes 11 and 16)

402,894

394,126

Water and meters

365,336

383,568

Maintenance of common areas (Notes 9 and 16)

325,710

349,155

Waste water management

271,891

234,781

Painting expenses (Note 12)

159,581

167,664

66,000

66,000

2,607,871

2,655,009

497,702

380,148

210,225

208,579

46,657

23,035

Rent & utilities (Note 13)

36,600

36,878

Provision for doubtful accounts (Note 4)

30,444

40,000

Professional fees

27,553

36,820

Finance charges

15,787

11,487

Telephone & communications

14,371

6,928

Insurance

9,722

7,588

Other expenses

1,808

2,028

Property & other taxes

1,000

1,000

Total operating expenses

394,167

374,343

NET MAINTENANCE FUND

103,535

5,805

Maintenance fees Water & meters income Other services Miscellaneous income Total revenue

DIRECT EXPENSES

Garbage removal Total direct expenses Gross Profit

OPERATING EXPENSES Salaries, benefits & national insurance Office & computer supplies

The accompanying notes form an integral part of these financial statements.

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SANDYPORT HOMEOWNERS ASSOCIATION LIMITED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY For the year ended December 31, 2013 (Expressed in Bahamian dollars) Share Capital

General Reserve Fund

Maintenance Fund

Total

357

269,207

155,619

425,183

Maintenance fund distribution

-

155,619

(155,619)

-

Net maintenance fund for the year

-

-

5,805

5,805

Balance at December 31, 2012

357

424,826

5,805

430,988

Shares issued during the year

38

(38)

-

-

Maintenance fund distribution

-

5,805

(5,805)

-

Net maintenance fund for the year

-

-

103,535

103,535

395

430,593

103,535

534,523

Balance at December 31, 2011

Balance at December 31, 2013

The accompanying notes form an integral part of these financial statements.

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SANDYPORT HOMEOWNERS ASSOCIATION LIMITED STATEMENT OF CASH FLOWS For the year ended December 31, 2013 (Expressed in Bahamian dollars)

CASH FLOWS FROM OPERATING ACTIVITIES:

2013

2012

103,535

5,805

90,438

69,710

44

-

30,444

40,000

224,461

115,515

Decrease (increase) in accounts receivable

56,279

(77,925)

Decrease (increase) in prepayments and deposits

22,490

(17,888)

Increase in accounts payable and accrued expenses

13,935

9,873

Increase in prepaid maintenance fees and deposits

32,980

189,976

350,145

219,551

(76,622)

(96,668)

39

-

11,064

11,064

(65,519)

(85,604)

Net increase in cash and cash equivalents

284,626

133,947

Cash and cash equivalents, beginning of year

296,086

162,139

580,712

296,086

Cash on hand

2,649

1,599

Cash at bank

557,813

274,487

Term deposit

20,250

20,000

580,712

296,086

Net maintenance fund Add non-cash transactions: Depreciation (Note 6) Loss from disposal of fixed assets Provision for doubtful accounts Operating income before working capital changes

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets (Note 6) Proceeds from disposal of fixed assets Repayment of loan receivable Net cash used in investing activities

Cash and cash equivalents, end of year

Cash and cash equivalents are comprised of the following:

The accompanying notes form an integral part of these financial statements.

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SANDYPORT HOMEOWNERS ASSOCIATION LIMITED NOTES TO FINANCIAL STATEMENTS For the year ended December 31, 2013

1. GENERAL Sandyport Management Company Limited was incorporated under the laws of The Commonwealth of the Bahamas on May 25, 1990 as a wholly owned subsidiary of Sandyport Development Company Limited (“Devco”). On September 14, 1998, the name of the Company was changed to Sandyport Homeowners Association Limited (“the Homeowners Association”) On May 21, 2008, ownership of the common areas and common infrastructure of the Sandyport residential community was transferred from Devco to the Homeowners Association.

The principal activity of the Homeowners Association is to manage the Sandyport residential community in accordance with the terms of the authority granted to Devco by licences issued to each property owner defining their rights and obligations in regard to the common areas. Devco assigned the said authority under these licences to the Homeowners Association on November 3, 2009.

On January 2, 2010, Devco transferred the ownership of the Homeowners Association to the property owners of the Sandyport residential community.

As at December 31, 2013 the Homeowners Association had 27 employees (2012: 28).

2. BASIS OF PREPARATION These financial statements have been prepared in accordance with International Financial Reporting Standards for Small and Medium-sized Entities. The preparation of financial statements in conformity with International Financial Reporting Standards for Small and Medium-sized Entities 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.

The Bahamian dollar is the Homeowners Association’s measurement and reporting currency because its capital and a majority of its transactions are denominated in that currency. Foreign currency transactions are translated into Bahamian dollars at the rates of exchange prevailing at the time of the transaction.

3. SUMMARY OF ACCOUNTING POLICIES a. Cash and cash equivalents - Cash and cash equivalents include cash on hand and at bank and short term deposit which have a maturity period of less than three months. b. Accounts receivable - Accounts receivable are stated at cost less provision for doubtful accounts and any impairment losses.

Management records provisions when in their opinion amounts are irrecoverable based on historical performance and solvency of the customer. c. Fixed assets - Fixed assets are stated at cost less accumulated depreciation and any impairment losses. Depreciation is calculated on the straight-line basis to write-off assets over their estimated useful lives as follows: Waste water system 3-5 years Maintenance equipment 3 years Computer and office equipment 3 years Vehicles 3 years

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SANDYPORT HOMEOWNERS ASSOCIATION LIMITED NOTES TO FINANCIAL STATEMENTS CONTINUED For the year ended December 31, 2013

d. Revenue recognition - Revenue is measured at the fair value of the consideration received or receivable and represents the monthly maintenance fee charged to the homeowners. This fee is based on square footage of the house on each property and owners of empty lots are charged a flat fee. e. Income and expense recognition - Income and expenses are recorded on an accrual basis of accounting. f. Impairment of assets - An assessment is made at each financial position date to determine whether there is any indication of impairment of any assets, or whether there is any indication that an impairment loss previously recognized on an asset in prior years may no longer exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is computed as the higher of the asset’s value in use or its net selling price.

An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to operations in the period in which it arises unless the asset is carried at a revalued amount in which case the impairment is charged to revaluation.

A previously recognized impairment is reversed only if there has been a change in the estimates used to determine the recoverable amount of the asset, however, not to an amount higher than the carrying amount that would have been determined (net of any depreciation), had no impairment loss been recognized for the asset in prior years.

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SANDYPORT HOMEOWNERS ASSOCIATION LIMITED NOTES TO FINANCIAL STATEMENTS CONTINUED For the year ended December 31, 2013

4. ACCOUNTS RECEIVABLE Accounts receivable is comprised as follows: 2013

2012

Accounts receivable

366,827

431,039

Less: provision for doubtful accounts

(102,511)

(80,000)

264,316

351,039

80,000

40,000

Add: provision made during the year

30,444

40,000

Less: amounts written off during the year

(7,933)

-

102,511

80,000

104,801

155,873

31 to 60 days

31,102

33,071

61 to 90 days

10,426

12,260

91 to 360 days

117,516

148,042

Over 360 days

102,982

81,793

366,827

431,039

Accounts receivable, net

The movement in the provision for doubtful accounts is as follows: Balance, beginning of year

Balance, end of year

The ageing of receivables are as follows:

Current

Balance, end of year

5. LOAN RECEIVABLE The Homeowners Association loaned $33,192 to Ismi Estasant on July 1, 2011 to purchase a 1998 Mack Truck for collection and disposal of garbage, refuse and yard waste. Payments of $922 are made monthly. No interest is charged on the loan unless payments are not received when due, then interest is charged at 10% per annum. The Truck is held as collateral along with a promissory note. The balance at December 31, 2013 was $5,538 (2012: 16,602).

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SANDYPORT HOMEOWNERS ASSOCIATION LIMITED NOTES TO FINANCIAL STATEMENTS CONTINUED For the year ended December 31, 2013

6. FIXED ASSETS The movement of fixed assets during the year is as follows:

Waste Water System

Maintenance Equipment

Computer & Office Equipment

Vehicles

Total

163,103

-

8,213

15,500

186,816

Additions

7,459

12,085

59,753

17,371

96,668

Disposals

-

-

-

-

-

170,562

12,085

67,966

32,871

283,484

Additions

70,841

-

2,388

3,393

76,622

Disposals

(27,727)

-

(500)

-

(28,227)

213,676

12,085

69,854

36,264

331,879

Balance at December 31, 2011

50,141

-

3,403

9,161

62,705

Depreciation

50,359

2,366

9,448

7,537

69,710

-

-

-

-

-

100,500

2,366

12,851

16,698

132,415

54,983

4,028

22,118

9,309

90,438

(27,727)

-

(417)

-

(28,144)

127,756

6,394

34,552

26,007

194,709

As at December 31, 2013

85,920

5,691

35,302

10,257

137,170

As at December 31, 2012

70,062

9,719

55,115

16,173

151,069

COST Balance at December 31, 2011

Balance at December 31, 2012

Balance at December 31, 2013

ACCUMULATED DEPRECIATION

Disposals Balance at December 31, 2012 Depreciation Disposals Balance at December 31, 2013

CARRYING VALUE

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SANDYPORT HOMEOWNERS ASSOCIATION LIMITED NOTES TO FINANCIAL STATEMENTS CONTINUED For the year ended December 31, 2013

7. PREPAID MAINTENANCE FEES AND DEPOSITS Prepaid maintenance fees and deposits are as follows: 2013

2012

Advance payments

311,728

273,269

Water deposits

96,751

91,500

-

10,730

408,479

375,499

2013

2012

Utilities

139,031

147,045

Wages

71,624

93,008

Dredging

62,610

55,773

Swimming pool

17,653

18,060

Supplies and tools

14,705

62,542

Roads and lights

7,749

74,644

Cleaning repairs

6,455

186,893

Depreciation of equipment (Note 6)

4,028

2,366

Contract service

1,600

30,006

255

296

-

(321,478)

325,710

349,155

Provisional maintenance fees Total

8. GENERAL RESERVE FUND This amount represents a reserve established to provide for future contingencies.

9. MAINTENANCE OF COMMON AREAS

Equipment rental and tools Reclassify improvements (Note 16) Total

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SANDYPORT HOMEOWNERS ASSOCIATION LIMITED NOTES TO FINANCIAL STATEMENTS CONTINUED For the year ended December 31, 2013

10. SECURITY EXPENSES 2013

2012

406,745

344,933

151,662

163,489

Security maintenance

22,716

53,222

Supplies

17,448

11,947

Depreciation (Note 6)

9,309

7,537

845

2,956

900

754

609,625

586,838

2013

2012

366,000

348,751

Extermination

36,459

30,927

Miscellaneous

435

-

Garden supplies

-

143,333

Other services

-

15,744

Wages

-

8,600

Reclassify improvements (Note 16)

-

(153,229)

402,894

396,126

2013

2012

Painting contractors

94,753

100,067

Paint and supplies

64,828

67,707

159,581

167,774

Wages Service contract

Uniforms Other Total

11. GARDENING EXPENSES Contract services

Total

12. PAINTING EXPENSES

Total

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SANDYPORT HOMEOWNERS ASSOCIATION LIMITED NOTES TO FINANCIAL STATEMENTS CONTINUED For the year ended December 31, 2013

13. RENT & UTILITIES The Homeowners Association rents office space from Artech Bahamas Ltd. at $36,600 per annum, inclusive of electricity and water.

The lease expires on August 31, 2015 with an option to renew for a further 2 years.

The amounts due based on the operating lease are as follows: For the year ending December 31, 2014 For the year ending December 31, 2015

$ 36,600 $ 24,400

14. CONTINGENT LIABILITIES Following an evaluation of the wastewater treatment system in 2012, Harris Civil Engineers recommended a series of improvements and repairs at an estimated cost of $700,000. Certain of the work was completed in 2013 and it is estimated that a further $450,000 will need to be expended to finalize the work. The Board believes that the recommended work can be completed out of budgeted income streams but will consider the need for a special assessment should this become necessary.

In addition, the wastewater system is nearing its operational capacity: the preliminary budget to expand the capacity to meet anticipated future requirements is $1 million. Under the terms of an Agreement dated November 3, 2009, the cost of such expansion will be borne by the developer, Sandyport Development Company Limited.

15. FINANCIAL RISK MANAGEMENT The Homeowners Association is exposed to a variety of risks including liquidity risk, credit risk, interest rate risk and capital risk management arising in the normal course of the Homeowners Association’s business activities.

The Homeowners Association does not have any written risk management policies and guidelines. Management monitors the financial risks of the Homeowners Association and takes such measures as considered necessary from time to time to minimize such financial risks.

Liquidity risk - Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value.

Prudent liquidity risk management implies maintaining sufficient cash. The Homeowners Association monitors and maintains a level of bank balances deemed adequate to finance its operations. The Homeowners Association deposits cash with financial institutions of good standing.

Credit risk – Credit risk arises from the possibility that customers may not be able to settle obligations within the normal terms of transactions. The Homeowners Association performs ongoing credit evaluation of the debtors’ financial condition and maintains an account for allowance for doubtful trade and other accounts receivable based upon the expected collectibles of all trade and other accounts receivable.

The Homeowners Association has no significant concentration of credit risks with any single counterparty or group counterparties.

Interest rate risk – Cash flow interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rate.

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SANDYPORT HOMEOWNERS ASSOCIATION LIMITED NOTES TO FINANCIAL STATEMENTS CONTINUED For the year ended December 31, 2013

Demand deposits and term deposits are the only significant interest bearing assets and liabilities. Accordingly, the Homeowners Association’s income and operating cash flow are substantially independent of changes in market interest rates.

Capital risk management – The Homeowners Association manages their capital to ensure that they will be able to continue as going concern while maximizing the return to homeowners through the optimization of the debts and equity balance. The Homeowners Association’s overall strategy remains unchanged from 2010.

The Capital structure of the Homeowners Association consists of debt, cash and equity attributable to equity holders comprising of share capital, general reserve fund and maintenance fund.

16. RECLASSIFICATION OF ACCOUNT BALANCES The prior year’s comparative figures for improvements expenses of $474,707 was reclassified from maintenance of common areas ($321,478) and gardening expenses ($153,229) to conform with current year’s presentation.

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