southpark homeowners' association number 2 ... - Southpark HOA II

SOUTHPARK HOMEOWNERS' ASSOCIATION NUMBER 2NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2008NOTE 4. FUTURE MAJOR REPAIRS AND REPLACEMENTS (continued)The Board conducted a study in December 2003, which has not been subsequentlyupdated, to estimate the remaining useful lives and the replacement costs of thecomponents of common property. The estimates were obtained from an independentengineering company which inspected the property. The table included in the unauditedsupplementary information on Future Major Repairs and Replacements is based on thestudy. The Board expects to update the study during 2009.The Board has been funding for major repairs and replacements over the remaininguseful lives of the components based on such study's estimates of current replacementcosts and considering amounts previously accumulated in the replacement fund, amongother factors.The determination of whether the Association has adequate funds to meet its needs forfuture major repairs and replacements is subject to several factors. The actual futureexpenditures and remaining useful lives may vary significantly from the estimates. Dueto operating fund needs and other factors, the Association may not be able to set asidefunds for future major repairs and replacements. Further, the rates of inflation andreturn on investments may significantly vary from expectations. Therefore, amountsaccumulated in the replacement fund may not be adequate to meet all future needs formajor repairs and replacements. If additional funds are needed, the Association has theright to increase regular assessments, pass special assessments, or delay major repairsand replacements until funds are available. The effect on future member assessmentsand the ability to fund future repairs and replacements is unknown at this time.During 2008, the Board authorized a loan of $35,000 from the Replacement Fund to theOperating Fund. By December 31, 2008, such loan had not been repaid.As of December 31, 2008, the cumulative budgeted Replacement Fund assessments,less expenditures, were more than the funds specifically allocated assets by $89,285.Subject to available cash balances, the Board intends to repay that amount to theReplacement Fund during 2009 and has, therefore, reflected it as an interfund receivableand payable.7