Treasurer’s Report

August, 2006

It’s time to have some fun with numbers. It’s been awhile and I haven’t put in writing our Board of Director’s continued progress with respect to our finances. So, here goes.

On the following pages are our Seminole Lakes Financial Statements "hot off the press" from Star Hospitality Management. Thank you Sherry Danko and Donna for pushing the right buttons and get them to me in time for the board meeting September 12^th.

The basic statements are as follows:

Balance Sheet Us accountants sometimes call this a "Statement of Financial Position"

Anyway, at a single point in time, OUR Balance Sheet tells us:

Phew! I hope you enjoyed that little bit of "patronizing education" in the art of bookkeeping. Anyway, you’re armed with that knowledge, now let’s apply it to the "real" numbers that appear on our August 2006 Financial Statements. Supplementing the following narrative, I’ve done some of my typical "hen scratching" right on the financial statements themselves. I think this direct approach "specifically identifies" the numbers I’m referring to so a reader doesn’t have to search for the number.

In addition to this "hen scratching", I’m going to take a FAQ (Frequently Asked Questions) approach toward analyzing these financial statements. In other words, I’m going to ask the questions I think you would ask me if I, like you, saw all these numbers for the first time. I’m going to use my pointing friend  you’ve perhaps seen before as my phantom inquisitor. So here goes:

1. Hi Al, I’ve got a few questions. How much ready cash ($) does the POA have in case we have an emergency?

Good question. Those numbers show on our Balance Sheet. We have $116,795.07 in our day-to-day Operating Account at AmSouth Bank. In addition, we have an additional $134,799.91 in a demand deposit money market account also at Am South Bank. So, at a moments notice the Board of Directors could tap into a total of $251,594.98 in case of emergency. Of course, this number changes from day-to-day because we use this cash to administer the daily activities of Seminole Lakes. However, generally speaking, we’ve been able to maintain roughly a quarter of a million dollars in what you’ve referred to as "ready cash". Incidentally, this level of ready cash is about double the amount we needed to clean up after hurricane Charley.

2. Is this all the cash we have available for the entire community?

No. In addition to the above "ready cash" we also have funds invested in CD’s (Certificates of Deposit), which earn interest at rates significantly higher than "ready cash". As of August 31^st, we have 3 CD’s. One at Countrywide Bank for $102,957.87 which matures on Sept 30^th; one at World Savings Bank for $90,211.72 which matures on Nov 30^th; and, one at SunTrust Bank for $100,000.00 which matures on June 3^rd, 2007. These 3 CD’s total $293,169.58 not including accrued interest.

3. Al, you have been talking about all the trouble we’re having in collecting monthly maintenance fees. After all these months, are we still having problems?

No. I’m happy to report that my comments at past board meetings have been heard. In addition to Star Management being more pro-active in their collection activities, our residents have responded favorably to our desire to have all monthly maintenance fees paid on time … the first of every month. This is another indication of what a fine community we live in when the vast majority of our friends and neighbors respond in this manner. The Board of Directors thanks everyone for making our job a little easier in this respect.

However, as happens in most communities, the Board of Directors has had the unfortunate responsibility of initiating Foreclosure Lawsuits on two persistently troublesome accounts that have not been paid in well over one year. Our association attorney’s have been retained to pursue every legal remedy defined in our governing documents to secure payment on not only monthly maintenance fees, but legal fees, recording fees, court costs, administrative costs, and interest at the highest legal rate. In addition, we have two borderline accounts that we are making efforts to contact to obtain voluntary compliance thereby providing a least costly opportunity for them to extinguish their overdue balance before legal action is taken.

4. Al, are you co-mingling Reserve Funds with Operating Funds, and how much reserve do we have?

Absolutely not! A portion of every homeowner’s monthly maintenance fee ($10.81) is a monthly contribution to the Reserve Fund, and that’s where it goes, period! Draws from the Reserve Fund can only happen through a vote of a majority of he Board of Directors, at a legally convened meeting containing the related agenda item. As of August 31^st, the Board of Directors has encumbered $410,742.05 of the cash identified above as being our Reserve Fund.

5. Wait a second Al! Are you saying you pooled all this $410,742.05 into one account to do with as you and the majority of the board wish?

Again, absolutely not! Our Reserve Funds consists of thirteen (13) separate and distinct line items, which are specifically identified on our Balance Sheet. Reserve Fund expenditures approved by the board must be for one of these specific line items. For example, at our August 14^th board meeting, we approved a small project for the resealing of our cul-de-sac roadways. This expenditure is will be charged to the Reserve Fund in the specific account #265 entitled "Seal Roads Reserve".

The Board of Directors does have the authority and responsibility to reallocate reserve components and adjust them accordingly, from time to time, to more accurately reflect the "real world". The potential reasons for changes like this are many and varied, and to explain each would be impossible and not within the scope of this report.

6. Have we charged anything to the Reserve Fund this year?

No, not yet. As I mentioned above, we are contemplating charging the cul-de-sac roadway resealing to the "Seal Roads Reserve". If we, in fact, charge this project to this line item in the Reserve Fund, it will be the first charge to our reserves in 2006.

Incidentally, it is important to note here that the operating philosophy of the Board of Directors is to try to live/operate within the funding limitations provided for in the Operating Budget and not depend upon reserve funds unless it is absolutely necessary. This is sometimes a challenge but it causes the board to think of ways to pay for some expenses without touching our reserves. Succeeding in this effort means that ALL of that reserve contribution we pay each month in our monthly maintenance fee goes 100% toward improving further our already solid financial position. It’s like money we consistently put aside for a rainy day. In short, the more we continue to do this the more secure we become financially as a privately owned gated community.

7. Ok Al, you got away with answering all our questions in connection with the Balance Sheet, let’s see how well you do with the Income/Expense Statement.

Ok my friendly phantom inquisitor shoot away! Actually, if you’re reasonably satisfied with the financial position quantified in our Balance Sheet, the Income/Expense Statement questions should be easy. After all, the operating performance occurring in the Income/Expense Statement is what ultimately makes our financial position in the Balance Sheet better or worse.

8. Tell me why on the very first expense item entitled "Accounting" we are $1500.00 over budget?

Well I’ve got to admit you picked a good one! (Ah Ha!) Now wait a second my phantom friend, hear me out! Back in July we paid our outside accountants for our annual audit. That bill was for $5500.00 and it is likely the only bill we’ll pay this year. Our budget for the year is $6000 (see the right hand column for that line item). By year-end, our budget will be $6000 and our actual will be $5500,and that will put us $500 UNDER budget NOT $1500 OVER budget.

This same situation exists also in the "Hurricane Damage Account" #444 where we will break-even by year-end. This kind of performance happens often from time to time. It’s impossible for the budget to predict a year in advance exactly in what month all expenses will be paid and for how much. For this reason, it’s been our practice to budget an annual amount and spread that amount evenly in each month. Effectively, at any point in time we may report favorable or unfavorable variances from budget but, by year-end, most every account should be on target.

9. Why is the "Legal" account over budget?

Frankly, Legal is over budget because we spent more money on getting attorney opinions on issues brought up at our meetings than we budgeted for back last November. No member of your Board of Directors is an attorney, which one would think could save us some money. But, even if we did have an attorney on the board, the prudent thing to do anyway, would be to seek an independent opinion from outside council. Oddly, most, if not all, legal expenses occur as a consequence of a resident issue or resident inquiry, and usually when an independent attorney opinion is received, the issue is amicably resolved. My personal feeling is, if the Board of Directors AND homeowners were more proficient in the art of "compromise", we could save a lot on legal fees each year. Until that happens, our budgets are likely going to provide for $10,000-$20,000 is legal expense each year.

10. Maybe we shouldn’t dwell on the past so much. We’d like to feel more comfortable about the future and the direction our Board of Directors is going financially for the rest of the year. Can you give us some insight into what is likely going to happen between September and December 31^st? Any surprises?

Well, the answer to that inquiry is Yes and No! Ok, ok, bear with me a minute! Yes, I can give you some insight into what will and will likely happen for the rest of the year. (Phew! Famous last words, huh?)

First, barring a hurricane or tornado rolling off the Gulf of Mexico and planking itself right over Seminole Lakes, we will have a successful year financially. Should such a calamity occur, God forbid, the physical and mental trauma will be worse than your association’s financial trauma. Our reserves will sustain us better than they did in 2004. Why? Because ALL your Boards of Directors since then organized our finances in a way that returned us to the excellent financial position we find ourselves in today. Now, I’m talking only fnances here.

Now, that said and projecting ahead, we are going to have a surplus again this year, and that surplus is going to be equal to or greater than the surplus we had last year. Our income is going to be over budget, and our expenses are going to be under budget. Well, maybe the cul-de-sac resealing may drag us unfavorable in expenses for one month, but we should be favorable at the bottom line anyway. Our Operating Budget will support the pool rental and our snowbirds will be returning to their Seminole Lakes winter home to improved landscaping at the front and back gates, renewed, repaired and refreshed road and street signs, resealed cul-de-sacs, and the Lake A headwall project complete. All this is behind us financially; we’re going to have a good year!

☼☼☼☼☼☼☼☼☼☼☼☼☼☼☼☼☼☼☼☼☼☼☼

I hope the approach I took to communicate our "numbers" achieves a greater degree of understanding compared to where we were before. Sifted into the above narrative are our most significant "bottom-line" numbers as of August 31^st. There is one significant number not mentioned above. I only alluded to it when I spoke about our probable surplus by year-end. As of August 31^st, our surplus is $66,959.92. A surplus means we’ve received more money than we’ve spent, and as Martha Stewart says … "That’s a good thing."

Thank you for staying with me and reading this far.

Respectfully,

Al DiSessa

Director Treasurer

Seminole Lakes Property Owners Association