2020 Annual Audit

2020 Annual Audit

Audited Financial Statements

OUTDOOR. R.ESOR.TSIPALM SPR.INGS OWNER.S ASSOCIATION

JUNE 30, 2020 AND 2019

BRABO & CARLSEN, LLP Certified Public Accountants

MICHAEL J. BRABO, CPA WAYNEE.CARLSEN,CPA Member of the Private Companies Practice Sectio11 of the American In stitute of Certified Public Accountants

ARlSEN,LLP CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT

Board of Directors and Members Outdoor Resorts/Palm Springs Owners Association Cathedral City, California

Report on the Financial Statements

We have audited the accompanying financial statements of Outdoor Resorts/Palm Springs Owners Association , which comprise the balance sheets as of June 30 , 2020 and 2019 , and the related statements of revenues , expenses, and changes in fund balances , and cash flows for the years then ended , and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financia l 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 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 audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An aud it involves performing procedures to obtain aud it ev idence 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 cons iders internal control relevant to the entity 's preparation and fair presentation of the financial statements in order to design aud it 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. Accord ingly , we express no such opinion . An audit also includes evaluating the appropriateness of accounting policies used and the reasonab leness of significant accounting estimates made by management, as we ll as evaluating the overa ll presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion .

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1111 E. T AHQUITZ CANYON W AY, SUITE 203, PA LM SPRI NGS, CA 92262 ph: 760-320-0848 • Jax: 760-322-4626 • www.brabo-carlsen.com

Board of Directors and Members Outdoor Resorts/Palm Springs Owners Association Cathed ral City , California

(Continued)

Opinion

In ou r opinion , the financial statements referred to above present fa irly , in all material respects , the financial position of Outdoor Resorts/Palm Springs Association as of June 30, 2020 and 2019, 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 .

Disclaimer of Opinion on Required Supplementary Information

Account ing principles generally accepted in the United States of America requ ire that information on future major repairs and replacements on page 11 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 for placing the basic financial statements 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 cons isted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inqu iries, the basic financial statements, and other knowledge we obtained during our audit of the basic financia l 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. ~ r ~ , LL fJ

August 18, 2020

Palm Springs, California

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OUTDOOR RESORTS/PALM SPRINGS OWNERS ASSOCIATION

BALANCE SHEETS

JUNE 30, 2020 AND 2019

ASSETS

Operating

Replacement

Capital

TOTALS

Fund

Fund

Fund

2020

2019

ASSETS Cash

$ 139,524

1,366 ,272 2,491 ,041

$ 144,334 $ 1,650 ,130 $ 1,914 ,241 3,430,177 2,861,552

Certificates of deposit

939 ,136

Assessments receivable, less allowance of $0 in 2020 and 2019 for uncollectible accounts

17,866

17,866 7,596 4,156

7,368 3,300

Inventories

7,596 4,156

Prepaid expenses

20 ,968

Intercompany receivable(payable)

252,416

(28 ,754)

(223 ,662)

Other assets

6,667

6,667

6,667

Property and equipment , net of accumu lated depreciation of $1 ,562 ,868 in 2020 and $1 ,525 ,598 in 2019

347 ,235

347,235

237 ,340

$1 ,714 ,596 $ 3,828 ,559

$ (79,328) $ 5,463 ,827

$ 5,051,436

LIABILITIES AND FUND BALANCES

LIABILITIES Accounts payable and accrued expenses

$

$

62,734 $

10,072

$

$

72 ,806

48 ,324

200,631

Prepaid assessments

200 ,631 77 ,226 44,471

211 ,081

Accrued wages and salaries payable

77 ,226 44,471

57,881 36 ,934

Deposits and other liabilities

385 ,062

10,072

395 ,134

354 ,220

FUND BALANCES Operating fund

982,299 347,235

1,317,098

982,299 347 ,235

237,340

Property and equipment fund

3,818 ,487

3,264,781

3, 818,487

Replacement fund

Capital fund

(79 ,328) (79 ,328 }

(79,328)

(122,003}

4,697 ,216

1,329 ,534

3,818,487

5,068,693

$ 1,714,596 $ 3,828 ,559

$ (79 ,328 ) $ 5,463,827

$ 5,051,436

The accompanying notes are an integral part of these financial statements. 3

OUTDOOR RESORTS/PALM SPRINGS OWNERS ASSOCIATION

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCES

FOR THE YEAR ENDED JUNE 30, 2020

Operating

Capital Fund

Replacement

Fund

Fund

Totals

REVENUES

Member assessments

$4,352 ,244

$1 ,295 ,484

$ 5,735,064 76,036 305,660

$ 87 ,336 92

Interest income

8,636

67 ,308

Front office revenue

305 ,660 35 ,779 67 ,508 17,105

Late fees and misce ll aneous

35,779 67,508 17,105 1,251 94,409 110,445

Rental income

Golf

Convenience store

1,251

Laundry Activities

94,409 110,445

Bar

52 ,631

52,631 19,841 6,515,729

Other

19,841 5,065,509

1,362 ,792

87,428

EXPENSES

Administration

981 ,828 139,473 455 ,014 38 ,634 199,415 72 ,455 80,507 250 ,663

981 ,828 139,473 455 ,014 38 ,634 199,415

Front office expense

Security Mailroom Activities

Bar

72,455 80 ,507 250,663 1,399,468 669,544 70 ,164 7,100 872,043 20,572 828,030 6,084,910

Golf

Facilities Grounds

1,399 ,468

Maintenance

669 ,544

Vehicles Laundry Utilities

70,164

7,100

872 ,043

Income taxes

20,572 783 ,277

Replacement fund expenditures

44,753 44 ,753

5,236,308

803 ,849

Excess (deficiency) of revenues over expenses before depreciation

42 ,675

(170,799)

558 ,943

430,819

59 ,342

Depreciation expense

59 ,342 $ 371,477

Excess (deficiency) of revenues over expenses

$ 42 ,675

$ (230,141) $ 558 ,943

FUND BALANCES (DEFICIT) , beginning of the year

$ 4,697,216

$ (122,003)

$1 ,554,438

$ 3,264,781

Excess (deficiency) of revenues over expenses

42 ,675

(230,141)

558 ,943

371,477

Inter-fund transfers

5,237

(5 ,237~

FUND BALANCES (DEFICIT) , end of the year

$1 ,329,534

$ 3,818,487

$5,068,693

$ (79,328)

The accompanying notes are an integral part of these financial statements. 4

OUTDOOR RESORTS/PALM SPRINGS OWNERS ASSOCIATION

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCES

FOR THE YEAR ENDED JUNE 30, 2019

Operating

Replacement

Capital

Fund

Fund

Fund

Totals

REVENUES

Member assessments

$4 ,235 ,796

$1 ,295 ,484 $ 43,668

$5 ,574,948 59,131 346,265

Interest income

51 ,979

7,133

19

Front office revenue

346 ,265 46 ,987 56,446 10,491

Late fees and miscellaneous

46,987 56,446 10,491 1,645 101 ,735 123,185

Rental income

Golf

Convenience store

1,645

Laundry Activities

101 ,735 123,185 83 ,706

Bar

83 ,706 25,856 6,430,395

Other

25 ,856 5,039,245

1,347 ,463

43,687

EXPENSES

Admin istration

813,704 140,502 425,363

813,704 140,502 425 ,363 35 ,740 212 ,731

Front office expense

Security Mailroom Activities

35,740

212,731

Bar

64,787 10,849 2,300 325 29,782 238 ,774 1,348 ,333 643 ,824 62 ,687 9,776 835 ,754

64 ,787 10,849

Oracle expenses Convenience store

2,300

Restaurant

325

Golf

29,782 238,774

Facilities Grounds

1,348,333

Maintenance

643,824 62 ,687

Vehicles Laundry Utilities

9,776

835,754

Realized losses on investments

22 ,236 10,458

22 ,236 10,458

Income taxes

Replacement fund expenditures

1,203,083 6,111,008

1,014 ,159

188,924

1,046,853

188,924

4,875,231

Excess (deficiency) of revenues over expenses before depreciation

164,014

300 ,610

(145,237)

319,387

Depreciation expense

51,269

51 ,269 $ 268,118

$ 112,745

$ 300 ,610

Excess (deficiency) of revenues over expenses

$ p45,237)

FUND BALANCES, beginning of the year

$1 ,495 ,100 $2 ,910 ,764

$ 23,234

$4,429,098

Excess (deficiency) of revenues over expenses

(145,237)

268,118

112,745

300 ,610

53,407

Inter-fund transfers

(53,407)

$1 ,554 ,438

$3,264,781

$ (122 ,003)

$4,697,216

FUND BALANCES (DEFICIT) , end of the year

The accompanying notes are an integral part of these financial statements. 5

OUTDOOR RESORTS/PALM SPRINGS OWNERS ASSOCIATION

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 2020 AND 2019

Operating

Replacement

TOTALS

Capital Fund

Fund

Fund

2020

2019

NET CASH FLOW FROM OPERATING ACTIVITIES Excess (deficiency) of revenues over expenses

$ (230 ,141 ) $ 558,943

$ 42,675

$ 371,477 $ 268,118

Adjustments to reconcile net revenues over expenses to net cash flow from operating act ivities : Depreciation

59 ,342

59,342

51 ,269

(Increase) Decrease in:

Assessments receivable

(10,498) (4 ,296)

(10,498) (4,296)

277

Inventories

1,622

Prepaid expenses

14,592

2,220

16,812

254,870

Inter-fund receivable/payable

(59 ,087)

14,335

44,752

Other assets Increase (Decrease) in : Accounts payable and accrued expenses

19,888

4,594

24,482

(53,223) (3,879)

Prepaid assessments

(10,450)

(10,450)

Accrued wages and salaries payable

19,345

11 ,943

19,345

7,537

Deposits and other liabili ties

7,537

(13,157)

Net cash provided by operating activities

(193 ,768)

580,092

87,427

473,751

517,840

CASH FLOWS FROM INVESTING ACTIVITIES (Purchase) sale of certificates of deposit Sale of invesments (Purchase) sale of property and equ ipment

(568 ,625)

(568,625) (1 ,759,926) 2,000,799 (169,237}

(169 ,237)

240,873

Net cash provided (used) by investing activities

(568,625)

(737,862}

(169,237}

CASH FLOWS FROM FINANCING ACTIVITIES Payments on capital lease payable Inter-fund transfers

(2,359)

5,237

(5,237)

Net cash provided (used) by financing activities

5,237

(5,237)

(2 ,359}

Net increase (decrease) in cash

(264,111)

756,354

(357,768)

6,230

87,427

1,914,241

CASH, beginning of the year

497,292

1,360,042

56,907

1,157,887

CASH, end of the year

$ 139,524 $1 ,366,272

$ 144,334

$1 ,650,130 $1,914,241

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for : Income taxes

$

4,235

11 ,388 $

- $

$

80

Interest

The accompanying notes are an integral part of these financial statements. 6

OUTDOOR RESORTS/PALM SPRINGS OWNERS ASSOCIATION

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020 AND 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The Outdoor Resorts/Palm Springs Owners Association was organized as a not-for-profit corporation for purposes of maintaining and preserving common property within the development. The development consists of 1,213 recreational veh icle lots located in Cathedral City , California . The Association began its operations in October 1984.

Accounting Method

The Association's governing documents provide certain guidelines for governing its financial activities. To ensure observance of limitations and restrictions on the use of financial resources , the Association maintains its accounts using fund accounting . Financial resources are classified for accounting and reporting purposes in the following funds established according to their nature and purpose:

Operating Fund - This fund is used to account for financial resources available for the general operations of the Association .

Replacement Fund - This fund is used to accumulate financial resources designated for future major repa irs and replacements.

Capital Fund - Th is fund is used to accumulate financial resources designated for the purchase of capital improvements and development of the fitness center.

Cash Equivalents

The Association considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

Property and Equipment

Personal property and equipment acquired by the Association are recorded at cost and are depreciated over their estimated useful lives using the straight-line method of depreciation. Real property and common areas acquired from the developer and related improvements to such property are not capitalized in the Association's financial statements. Expenditures for major repairs and replacements are accounted for as replacement fund expenditures for purposes of financial reporting .

Inventory

Inventory consists of the bar inventory stated at the lower of cost or market.

Member Assessments

Association members are subject to monthly assessments to provide funds for the Association 's operating expenses, future capital acquisitions, and major repairs and replacements . Assessments receivable at the balance sheet date represent fees due from unit owners. The Association retains legal counsel and places liens on the properties of homeowners whose assessments are del inquent, pursuant to its stated policy . The Association uses the allowance method for estimating uncollectible assessments.

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OUTDOOR RESORTS/PALM SPRINGS OWNERS ASSOCIATION

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020 AND 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

Homeowners' associations may elect to be taxed as regular corporations or as homeowners' associations. The Association elected to be taxed as a regular corporation for the years ended June 30, 2020 and 2019. Under the elections, the Association is taxed on non-membership income, at regular federal and state corporate tax rates . The Association 's policy is to record income tax related interest and penalties in operating expenses. For the years ended June 30 , 2020 and 2019, there was no interest or penalties expense recorded and no accrued interest or penalt ies . Management has considered its tax positions and believes that all of the positions taken by the Association on its Federal and State tax returns are more likely than not to be sustained upon examination . The Association 's Forms 1120, US Corporation Tax Return are subject to examination by the IRS, generally for three years after they are filed . The Association 's Forms 100, Corporation Franchise or Income Tax Return and Forms 199, Californ ia Exempt Organization Annual Information Return , are subject to examination by the Franchise Tax Board , generally for four years after they are fi led .

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly , actual results could differ from those estimates.

Subsequent Events

Subsequent events have been evaluated through August 18, 2020 , which is the date the financial statements were available to be issued .

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OUTDOOR RESORTS/PALM SPRINGS OWNERS ASSOCIATION

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020 AND 2019

NOTE 1: OWNERS' ASSESSMENTS

Monthly assessments to owners were $394 for the year ended June 30 , 2020 and $383 for the year ended June 30, 2019. Of those amounts, $89 in 2020 and 2019 were designated to the replacement fund , and $6 in 2020 and $3 in 2019 were designated to the capital improvement fund . The annual budget and owner's assessments are determined by the Board of Directors. The Association retains excess operating funds at the end of the operating year, if any, for use in future operating periods.

NOTE 2: COMMON AREA PROPERTY

On June 30 , 2020 and 2019 the Association held title to common real property consisting of 137 acres of land , roads, clubhouses, golf course, tennis courts, maintenance bu ilding , pools, spas, and lakes. The Association is responsib le for preserving and maintaining the properties and may not dispose of them. In conformity with industry practice , the Association's common property is not recognized as assets.

NOTE 3: PROPERTY AND EQUIPMENT

Property and equipment consist of the following at June 30 , 2020 and 2019:

2020

2019

La Palma equipment and fixtures El Saguaro equipment and fixtures Pool , tennis and golf course equipment

$ 190,884

$ 190,884

154,920 131 ,690 140,372 97,766 729,613 464 858

156,389 131 ,690 140,372 97,766 565,080 480 757

Cafe improvements Security improvements Vehicles and golf carts

Other equipment and fixtures

1,910,103 (1 ,562,868)

1,762 ,938 (1 ,525 ,598)

Less: Accumulated depreciation

34Z235

23Z 340

$

$

NOTE 4: FUTURE MAJOR REPAIRS AND REPLACEMENTS

The Association's governing documents require that funds be accumulated for future major repairs and replacements . Accumulated funds are held in separate savings accounts and are generally not available for expenditures for norma l operations. The Board of Directors engaged an outside consultant to conduct a study in May 2020 to estimate the remain ing useful lives and the rep lacement costs of the components of common property . The study is based on current estimated rep lacement costs . Funding requirements consider an annual inflation rate of 3.0 percent and interest of 1.0 percent, before taxes , on amounts funded for future major repairs and replacements . The tab le included on page 12 in the unaudited supplementary information on future major repairs and rep lacements is based on the study .

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OUTDOOR RESORTS/PALM SPRINGS OWNERS ASSOCIATION

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020 AND 2019

NOTE 4: FUTURE MAJOR REPAIRS AND REPLACEMENTS (continued)

The Board is fund ing 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 . Accordingly, the funding requ irement of $75 per unit per month has been included in the 2020/2021 budget. Because actual expenditures may vary from the estimated future expenditures and the variations may be material , 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 increase regular assessments, pass special assessments, or delay major repairs and replacements until funds are available.

NOTE 5: PROFIT SHARING PLAN

The Association maintains a qualified 401 (k) plan . The Association 's fund ing policy is to match 100% of the employee 's pre-tax contribution up to 6% of the employee's salary . The Association 's contributions to this plan for the years ended June 30, 2020 and 2019 were $33,108 and $32 ,134, respectively .

NOTE 6: INTER-FUND TRANSFERS

During the year ended June 30, 2020 , inter-fund transfers consist of $164 ,000 of excess prior year earnings transferred from the operating fund to the replacement fund and $169 ,237 of personal property and equipment purchased by the replacement fund and capitalized in the operating fund .

During the year ended June 30, 2019, inter-fund transfers consist of $53,407 of excess prior year earnings transferred from the operating fund to the replacement fund.

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OUTDOOR RESORTS/PALM SPRINGS OWNERS ASSOCIATION

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

The Board of Directors engaged an outside consultant to conduct a study in May 2020, to estimate the remaining useful lives and the replacement costs of the components of common property. The study is based on current estimated replacement costs. Funding requ irements consider an annual inflation rate of 3.0 percent and interest of 1.0 percent, before 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 :

Estimated Current

Estimated Rema ining Useful Lives

2020/2021

Replacement

Funding

Requirement

Components

Costs

$ 136,693

$

0 - 15 0 - 3 0 - 29 0 - 26 0 - 22 2 - 5 0 - 14 0 - 14 1 - 4 0 - 19 0 - 18 0 - 14 0 - 18 0 - 19 0 - 20 7 1 - 21 0 - 26

18,282 106,463 105,217 183,204 174,736

Administration A - other

304,073

1,640,757 1,669 ,354 2,225 ,214

El Saguaro clubhouse La Palma clubhouse Golf course Golf shack Laundry Maintenance equipment Veh icle

9,013

1,266

10,581 42,359 16,489 22,619 25 ,932 24 ,957 25 ,481 22 ,761 23,687

77,360 447,662 211 ,540 210,859 203,51 7 201,494 204,128 206 ,623 212 ,987 45,060 67 ,21 7

Sat #1 (A) Sat #2 (B) Sat#3 (C) Sat #5 (D) Sat #6 (E) Sat #7 (F) Sat- all Guard shack Streets Taxes

2,753 7,869

242 ,121 231

2,345,067

$10 418 618

$1 057 008

$3 818 487

Replacement Fund Balance - June 30, 2020

The Association 's percentage of fund ing at June 30, 2020, which is based on the ending replacement fund balance divided by the reserve components ' fu lly funded amount, is 68.47%. The Association would be 100% funded if there were $5 ,633 ,668 in the replacement fund .

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