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| SUN LAKES LIFESTYLES | OCTOBER 2017 | 7 Treasurer's Report BOTTOM LINE: The summer pattern, of expenses exceeding revenue, continued into August. The budget for August anticipated an excess of expense of $85,659; the actual excess was $156,953. This reduces the surplus (relative to the budget) that had been accumulated through July by $71,293. The surplus as of August 31st is $112,842. NON-OPERATIONS: Home resales picked up in August with 23 recorded versus the plan's monthly average of 19. REVENUE: The HOA cost center benefited from increased home resales and increased interest income from the investment portfolio. Interest received was $3,348 above budget in August and above $4,948 (6 percent) for the year. Golf income was on budget. Guest green fees are more than double that budgeted partially offsetting the decline in annual dues. Food and Beverage was $1,634 shy of budget with significant increases in lunch and dinner activity offsetting declines in other areas including the Lounge. EXPENSE: Water for the golf courses was $45,460 over budget in August, however, it is still under budget for the eight months. Other over budget accounts include Legal (retaining tax attorney), the outside reserve analyst and increased maintenance work on the common area grounds and golf courses. August labor expense was on budget. BUDGET for 2018: As of this writing the projected monthly assessment for 2018 is $252. As mentioned in last month's more detailed discussion, there are still significant unknowns that must be resolved prior to finalizing the 2018 monthly assessment. The cost of improved community patrol service is one of these unknowns. FUNDS: General Manager Chris Mitchell, working with Associa and Mutual of Omaha (HOA investment banker), has completed the restructuring of the Association's accounts to parallel the various investment funds. During August, more than $1.1 million was transferred from checking and money market accounts into higher interest-bearing certificates of deposit. The Board has authorized the General Manager to convert an additional $1.2 million into CDs. It will require further analysis but it appears that there is the potential for converting even more from the remaining balance of funds ($1.7 million) in checking and money market accounts without jeopardizing the Association's financial strength. The Board established a reserve fund of $300,000 to provide for the possibility of an adverse outcome to the dispute between the Association and the State Bureau of Equalization regarding the sales tax audit. The $300,000 was transferred out of Unallocated HO Equity funds. The table, above, has been modified to show the new line item. Unallocated HO Equity, sometimes referred to as the Association's financial safety net, totals $129,768. This is less than the industry recommended standard (i.e., the equivalent of one to three month's expenses). The Board does not see this as an immediate concern and anticipates the fund to increase over time. DELINQUENCIES: The amount of monthly assessments owed by delinquent homeowners dropped significantly in August (from $139,049 to $86,875). Reasons include recognizing and writing off those debts deemed uncollectable (typically homeowners gone from Sun Lakes lacking attachable assets). Additionally, there are the increased efforts by administrative personnel to head off delinquencies by contacting delinquent homeowners early and working out payment recovery plans. Finally, there is the recently implemented policy whereby delinquent homeowners are denied access to all Association amenities, including gate transponders, until they are current or have established an approved repayment plan. FINALLY: Several definitions to upgrade your vocabulary: SUDAFED - Bring litigation against a government official; PRIMATE – To pull your spouse away from the television. Comments: To John Clark at jdclark@dc.rr.com

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