Finance Committee Mid-Year Report

NIGUEL SHORES MID-YEAR FINANCIAL UPDATE

As of June 30, 2013

The Niguel Shores Finance Committee is comprised of seven owners and meets on a monthly basis to review, monitor and make fiscal recommendations on topics such as budgets, expenses, investments and reserves. The current members of the Finance Committee are: Chair Jeannie Sticher, Art Staudenbauer, Martin Dedrick, Jim Eckstaedt, David Goldberg, Sue Kichline and Terry McLaughlin. The Committee wishes to thank Barry Banducci and Steve Barrett for their past membership and service as they will be missed! A continuing objective of the Committee is to provide owners a mid-year update on the 2013 budget, actuals to date and comments on expectations for year-end variances and ongoing projects. The mid-year update includes expenses and income incurred thru June 2013.

The Committee has organized the information from a top line perspective, with all budgeted line items included. Various committees within Niguel Shores recommend and monitor these expenses on a monthly and sometimes weekly basis and provide input to the Finance Committee on potential variances and monies needed in the upcoming year. The budget process for 2014 began in May 2013 with a review of the reserves and will continue thru October with committees recommending monies needed for 2014. The Finance Committee reviews these recommendations for clarity and provides a total budget recommendation to the Board in late October. The Committee could not function without transparency from the various committees, and wishes to thank all involved for their never ending hard work on all our behalf. The Finance Committee welcomes questions and feedback on this mid-year update and invites you to submit comments/ questions to the Niguel Shores Website (www.niguelshores.org).

 

NIGUEL SHORES INVESTMENTS

 

The Niguel Shores investment monies are monitored and reviewed on a monthly basis by the Controller, Niguel Shores CFO and an Investment Sub-Committee, led by Sue Kichline and several Finance Committee members. In addition to this committee and staff within Niguel Shores, an agent is utilized to optimize the overall quality of our laddered CD portfolio for optimum interest rates and protection of the principal.

The investments of Niguel Shores are required to be placed in financial instruments insured by the Federal Government under the Davis-Sterling Common Interest Development Act.

The budgeted yield for investments in fiscal year 2013 is $42,400 and the Committee expects to reach or exceed this target by year end 2013. The current investment portfolio is $3,236,479.

 

INCOME UPDATE

 

2013 Budget 2013 Actuals $ Remaining

$3,356,475 $1,685,842 $1,669,632

The major Income items include quarterly assessments, bank interest income, document response, architecture and gate access fees and newsletter commercial ads. The major items expected to exceed the budget are: document response fees, bank interest income and newsletter commercial ads. We are anticipating a shortfall in the assessment late charges and architecture and gate access fees. Overall, we anticipate the income to meet the budget for year-end 2013.

 

UPDATE MAINTENANCE BUDGET

 

2013 Budget 2013 Actuals $ Remaining

$504,896 $249,811 $255,085

Maintenance is one of the largest budgets for Niguel Shores and is closely monitored and managed to ensure community needs are met and expenditures are reasonable and within budget. The Maintenance Committee assists the Niguel Shores staff identifying maintenance issues, ensuring all work is completed within budget and adheres to proper code, workmanship and guarantees.

As a point of information, the Niguel Shores Maintenance staff consists of a Facility Manager and four full-time employees and one part-time. The daily maintenance and some special projects are performed by the Facility Manager and staff. In addition, the Facility Manager oversees outside contractors that complete various projects within Niguel Shores.

The year-to-date expenditures for maintenance needs are slightly under budget, although several unbudgeted projects have taken place that do not show as an expense at this time. Examples of these expenses are monument refurbishment, ClubHouse refrigerator repair and electrical maintenance. The Maintenance Committee is working very diligently to manage the operational expenses, but the operating budget is very tight and may run a small over budget variance by year end 2013. Niguel Shores is a community with an aging infrastructure that often brings unexpected maintenance issues. Some major projects are being researched for implementation in late 2013 or early 2014. Examples of projects being considered are pool decking and tennis court resurfacing that will be funded full or partially from the reserve accounts.

 

LANDSCAPE BUDGET UPDATE

 

2013 Budget 2013 Actuals $ Remaining

$901,040 $410,357 $490,683

The Landscaping Budget includes monies for expenses such as water, pest control, sprinklers, tree work and routine planting/slope maintenance. Our routine contract with Harvest Landscape is managed as part of the yearly operating budget. This budget does not include the Master Landscape Plan which has been focused on large scale slope renewals, turf reductions and the Mariner Gate refurbishment. The Landscape Committee is under the direction of the General Manager and feedback and updates are provided by Committee representatives from throughout Niguel Shores. To date, the landscape budget is on track and the expectation is to spend all remaining planting monies by year-end 2013. The water budget is currently showing a positive variance and we anticipate ending the year with a small savings.

 

TRAFFIC AND SAFETY BUDGET UPDATE

 

2013 Budget 2013 Actuals $ Remaining

$350,300 $137,090 $213,209

The Traffic and Safety budget includes funds for fobs, decals, and surveillance equipment at the gates, spa and in the office. In addition, this Committee monitors the contract for our guard services. To date, this budget is showing a slight positive variance, however this is due to timing of expenditures and we expect the Traffic and Safety spending to meet the budget by the end of 2013.

 

GENERAL AND ADMINISTRATIVE BUDGET UPDATE

 

2013 Budget 2013 Actuals $ Remaining

$1,603,900 $781,443 $818,796

The General and Administrative budget (G&A) includes operational costs such as printing, postage, computers and other services needed to manage the Association. In addition, this cost center includes payroll for the on-site staff and legal expenses. Although the overall budget is showing a slight positive variance for the year, legal services is over budget by 33%. Expectation is legal services will continue to remain over budget for 2013 due to the ongoing revetment dispute.

 

NIGUEL SHORES RESERVE AND STUDY UPDATE

 

A review of the Association’s reserves is required every three years by an independent contracted consultant. The independent consultant specializes in performing reserve analysis and provides recommendations. The Niguel Shores General Manager, Controller and representatives of the Finance and Maintenance Committees also provide input to the consultant during the analysis. During the interim years, a similar review is conducted by the in-house staff and committees.

The purpose of the reserve analysis is to identify certain assets in the common areas of Niguel Shores that will need to be repaired or replaced within a defined timeframe. Since the cost to repair or replace these assets may be expensive, the reserve analysis identifies and determines the cost to repair or replace and determines a financial plan to accumulate the needed funds.

A partial list of assets identified in the reserve analysis is: street resurfacing, fencing, lighting/electrical, pool, tennis courts, irrigation, slope repair and master landscape.

Reserve funds in 2013 have been used to resurface streets, repair the pool area, purchase furniture for the beach bluff area, slope repair and the on-going work in the master landscape plan. To date, $269,052 has been spent from the Niguel Shores reserve fund.

As of June 30, 2013, the balance in the reserve fund was $3,220,376 For the calendar year 2013, 24% of the estimated Association annual income is allocated to the reserve fund.

 

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