HomeMy WebLinkAboutCF Realtors Audit Dec 2023
Cape Fear REALTORS and Affiliates
Consolidated Financial Statements
For the Years Ended
December 31, 2023 and 2022
Cape Fear REALTORS and Affiliates
CONTENTS PAGE
INDEPENDENT AUDITOR’S REPORT – CONSOLIDATED FINANCIAL
STATEMENTS 1-3
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Financial Position 4
Consolidated Statements of Activities and Changes in Net Assets 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7-22
SUPPLEMENTARY INFORMATION
Consolidating Statements of Financial Position 24
Consolidating Statements of Activities and Changes in Net Assets 25
Consolidating Statements of Cash Flows 26
Earney & Company, PLLC, 710 Military Cutoff Road, Suite 250 Wilmington, NC 28405
T: (910) 256 9995, F: (910) 256 2829, www.earney.com
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors of
Cape Fear REALTORS and Affiliates
Opinion
We have audited the accompanying consolidated financial statements of Cape Fear REALTORS
(a nonprofit corporation) and affiliates, which comprise the consolidated statement of financial
position as of December 31, 2023, and the related consolidated statements of activities and
changes in net assets and cash flows for the year then ended, and the related notes to the
consolidated financial statements.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Cape Fear REALTORS and affiliates as of December
31, 2023, and the changes in their net assets and their cash flows for the year then ended in
accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our
report. We are required to be independent of Cape Fear REALTORS and affiliates and to meet
our other ethical responsibilities in accordance with the relevant ethical requirements relating to
our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Responsibilities of Management for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated
financial statements in accordance with accounting principles generally accepted in the United
States of America, and for the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate
whether there are conditions or events, considered in the aggregate, that raise substantial
doubt about Cape Fear REALTORS and affiliates’ ability to continue as a going concern within
one year after the date that the consolidated financial statements are available to be issued.
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Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance but is not absolute assurance and therefore is not a guarantee that an audit
conducted in accordance with generally accepted auditing standards will always detect a
material misstatement when it exists. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
Misstatements are considered material if there is a substantial likelihood that, individually or in
the aggregate, they would influence the judgment made by a reasonable user based on the
consolidated financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
Exercise professional judgment and maintain professional skepticism throughout the
audit.
Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, and design and perform audit procedures
responsive to those risks. Such procedures include examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of Cape Fear REALTORS and affiliates’
internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluate the overall
presentation of the consolidated financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the
aggregate, that raise substantial doubt about Cape Fear REALTORS and affiliates’ ability
to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit, significant audit findings, and certain
internal control related matters that we identified during the audit.
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Report on Consolidated Comparative Information
We previously reviewed Cape Fear REALTORS and affiliates’ 2022 consolidated financial
statements and in our conclusion dated June 15, 2023, stated that based on our review, we
were not aware of any material modifications that should be made to the 2022 consolidated
financial statements in order for them to be in accordance with accounting principles generally
accepted in the United States of America. We are not aware of any material modifications that
should be made to the consolidated comparative information presented herein as of and for the
year ended December 31, 2022, for it to be consistent with the reviewed consolidated financial
statements from which it has been derived.
Report on Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the consolidated financial
statements as a whole. The consolidating supplementary information on pages 24 through 26 is
presented for purposes of additional analysis and is not a required part of the consolidated
financial statements. Such information is the responsibility of management and was derived
from and relates directly to the underlying accounting and other records used to prepare the
consolidated financial statements. The information has been subjected to the auditing
procedures applied in the audit of the consolidated financial statements and certain additional
procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the consolidated financial statements or to the
consolidated financial statements themselves, and other additional procedures in accordance
with auditing standards generally accepted in the United States of America. In our opinion, the
information is fairly stated in all material respects in relation to the consolidated financial
statements as a whole.
Wilmington, North Carolina
June 11, 2024
Cape Fear REALTORS and Affiliates
Consolidated Statements of Financial Position
As of December 31, 2023 (Audited) and 2022 (Reviewed)
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements
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2023 2022
ASSETS
Current Assets
Cash & cash equivalents 4,420,895$ 2,164,005$
Accounts receivable 31,266 1,164,892
Inventory 8,546 4,912
Prepaid expenses & other assets 170,786 371,338
Total Current Assets 4,631,493 3,705,147
Assets Whose Use is Limited (Note 5)
For property replacement 805,245 805,245
For operating purposes 293,635 293,635
Total Assets Whose Use is Limited 1,098,880 1,098,880
Property, net (Note 2) 6,160,774 6,247,954
Total Assets 11,891,147$ 11,051,981$
LIABILITIES & EQUITY
Current Liabilities
Accounts payable 327,058$ 287,075$
Dues collected in advance 740,997 668,102
Current maturities of long-term debt 806,506 265,743
Total Current Liabilities 1,874,561 1,220,920
Long-term debt, net (Note 6) 1,255,464 2,055,071
Total Liabilities 3,130,025 3,275,991
Equity
Net assets without donor restrictions 8,728,174 7,664,131
Net assets with donor restrictions 32,948 111,859
Total Equity 8,761,122 7,775,990
Total Liabilities & Equity 11,891,147$ 11,051,981$
Cape Fear REALTORS and Affiliates
Consolidated Statements of Activities and Changes in Net Assets
For the Years Ended December 31, 2023 (Audited) and 2022 (Reviewed)
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements
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2023 2022
OPERATING REVENUES
Membership 861,231$ 843,535$
MLS access & related 3,506,408 3,497,937
Commercial access 374,311 349,382
Continuing education 19,031 15,895
Sir Tyler terrace 171,429 124,133
Sir Tyler lease 179,154 87,887
Realtor service center, net 5,124 2,764
Contributions 4,545 5,824
Total Operating Revenues 5,121,233 4,927,357
LESS: DIRECT EXPENSES
MLS access & related 834,282 819,088
Sir Tyler terrace 29,203 24,814
Sir Tyler lease 9,827 24,428
Total Direct Expenses 873,312 868,330
Gross Margin 4,247,921 4,059,027
OPERATING EXPENSES
Salaries 1,039,674 958,848
Payroll taxes & benefits 244,006 211,826
Occupancy 190,971 204,114
Board & committee 55,477 53,717
Maintenance, net 82,365 (380,018)
Staff travel 188,446 142,507
Legal & accounting 109,838 207,777
Office & administrative 730,415 689,571
Key expense 207,298 217,473
Depreciation 310,194 318,592
Total Operating Expenses 3,158,684 2,624,407
Net Operating Profit (Loss)1,089,237 1,434,620
NON-OPERATING INCOME (EXPENSE)
Foundation income (loss) 26,011 (18,925)
Interest income 13,646 -
Interest expense (67,127) (76,780)
Investment income (loss) 133,985 (204,612)
Net Non-Operating Income (Expense) 106,515 (300,317)
Net Income (Loss) Before Income Taxes 1,195,752 1,134,303
Provision for income taxes (210,620) (141,815)
Net Income (Loss)985,132 992,488
Equity, Beginning 7,775,990 6,783,502
Equity, Ending 8,761,122$ 7,775,990$
Cape Fear REALTORS and Affiliates
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2023 (Audited) and 2022 (Reviewed)
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements
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2023 2022
Cash Flows From Operating Activities
Cash received from members & others 6,512,699$ 3,899,959$
Cash paid to suppliers & employees (3,875,419) (3,572,287)
Net Cash Provided (Used)
By Operating Activities 2,637,280 327,672
Cash Flows From Investing Activities
Cash received (paid) for property & equipment (224,372) (693,803)
Investment proceeds reinvested 15,723 -
(Funding) spending assets whose use is limited 87,102 (262,121)
Net Cash Provided (Used)
By Investing Activities (121,547) (955,924)
Cash Flows From Financing Activities
Debt proceeds - 535,000
Principal payments of debt (258,843) (394,666)
Net Cash Provided (Used)
By Financing Activities (258,843) 140,334
Net Increase (Decrease) in Cash 2,256,890 (487,918)
Cash & Cash Equivalents, Beginning 2,164,005 2,651,923
Cash & Cash Equivalents, Ending 4,420,895$ 2,164,005$
Reconciliation of Net Income (Loss)
to Cash Provided (Used)
By Operating Activities:
Net income (loss) 985,132$ 992,488$
Adjustments to Reconcile Net
Income (Loss) to Net Cash Provided
(Used) By Operating Activities:
Depreciation & amortization 311,551 322,088
Unrealized (gain) loss on investments (102,825) 262,121
(Increase) Decrease in:
Accounts receivable 1,133,626 (1,161,737)
Inventory (3,634) (7)
Prepaid expenses & other assets 200,552 (155,628)
Increase (Decrease) in:
Accounts payable 39,983 60,857
Dues collected in advance 72,895 7,490
Net Cash Provided (Used)
By Operating Activities 2,637,280$ 327,672$
Supplemental Disclosure
Interest paid 109,337$ 48,731$
Income taxes paid 210,620$ 141,815$
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
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1. ORGANIZATION AND BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include Cape Fear REALTORS (the
“Association”); Cape Fear REALTORS MLS, Inc. (“MLS”); Sir Tyler Development, LLC (“Sir
Tyler”); and Wilmington REALTORS Foundation (the “Foundation”), as well as the
commercial realtor division of MLS and the Association, Realtor Commercial Alliance of
Southeastern North Carolina (“RCA”), collectively referred to as the “Organization.” These
entities are related through ownership, control, and financial interdependence and are
required to be consolidated under generally accepted accounting principles. Accordingly,
intercompany transactions are eliminated upon consolidation.
The Association is a non-profit corporation organized in North Carolina, under Section
501(c)(6) of the Internal Revenue Code, to encourage cooperation among realtors and
improve business conditions in the real estate field in the Wilmington, North Carolina area.
Membership includes both residential and commercial realtors. Total membership was 3,526
for 2023 and 3,633 for 2022. The Association includes the results of operations for Duplin-
Sampson Association of REALTORS and Laurinburg Board of REALTORS Inc. (collectively
referred to as the “County Associations”), which were acquired in 2015 via a merger
transaction.
MLS is a wholly owned subsidiary of the Association and is a North Carolina for-profit
corporation organized in 1987 to provide monthly MLS services to agents and brokers in the
Wilmington, North Carolina area. Certain employees of MLS perform services for the
Association, which reimburses MLS based on time spent.
Sir Tyler is a real estate partnership owned jointly by MLS (75%) and the Association
(25%), which owns a 25,000-square-foot building occupied by both. The partnership
facilitates the repayment of the building debt (see Note 6). See also Note 11 regarding a
construction defects legal matter.
The Foundation is a 501(c)(3) organization with a mission of providing resources to create
housing opportunities for a better quality of life in the community. The Foundation is
considered a controlled corporate affiliate, as the Association’s Board of Directors appoints 7
of the 13 members of the Foundation’s Board of Directors.
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
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2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Organization prepares its consolidated financial statements in accordance with generally
accepted accounting principles promulgated in the United States of America (U.S. GAAP) for
not-for-profit organizations using the accrual basis of accounting. Accordingly, revenues are
recognized when earned and expenses are recorded when incurred.
Annual renewal membership dues are recognized as revenue in the calendar year when
applicable membership services are provided. Initial membership dues and initiation fees are
recognized as revenue in the membership year when applications are approved. MLS access
revenue is recorded monthly as billed.
The significant accounting policies followed are described below to enhance the usefulness
of the consolidated financial statements to the reader.
Use of Estimates
The preparation of consolidated financial statements requires management to make
estimates and assumptions that affect the reported amounts of revenues and expenses
during the reporting period and the reported amounts of assets and liabilities at the date of
the consolidated financial statements. On an ongoing basis, the Organization’s management
evaluates the estimates and assumptions based upon historical experience and various
other factors and circumstances. The Organization’s management believes that the
estimates and assumptions are reasonable in the circumstances; however, the actual results
could differ from those estimates.
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
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Net Assets
The consolidated financial statements report net assets and changes in net assets based
upon the existence or absence of restrictions on use that are placed by its members or
donors as follows:
Net Assets Without Donor Restrictions – Net assets available for use in general
operations and not subject to donor- (or certain grantor-) imposed restrictions. The
governing board has designated net assets for an operating reserve from net assets
without donor restrictions.
Net Assets With Donor Restrictions – Net assets subject to donor- (or certain
grantor-) imposed restrictions. Some donor-imposed restrictions are temporary in
nature, such as those that will be met by the passage of time or other events specified
by the donor. Other donor-imposed restrictions are perpetual in nature, where the donor
stipulates that resources be maintained in perpetuity. Temporary donor-imposed
restrictions are released when a restriction expires, which is when the stipulated time
has elapsed, when the stipulated purpose for which the resource was restricted has
been fulfilled, or both.
The following table is a summary of net assets with donor restrictions as of December 31.
All are restricted for the Association, including the County Associations, and for the
Foundation for the purpose of helping the community and will be released from restriction
as the funds are spent for the donor-imposed restrictions.
2023 2022
Collected but Not Released:
Laurinburg Board of REALTORS Inc. reserves -$ 78,461$
Community Action Fund 4,954 4,954
Feed ILM 3,228 3,228
Realtors Helping Realtors 24,766 25,216
Total Net Assets With Donor Restrictions 32,948$ 111,859$
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
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Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Organization considers all
highly liquid financial assets purchased with original maturities of three months or less to be
cash equivalents. This consisted of the following as of December 31:
2023 2022
Checking
Association 1,002,130$ 636,328$
MLS 979,873 137,600
Sir Tyler 920,346 25,065
RCA 101,480 76,252
Foundation 37,012 67,682
Total Checking 3,040,841 942,927
Money Market
Association 83,975 83,850
MLS 298,396 297,056
RCA 169,571 162,371
Foundation 10,388 10,373
Total Money Market 562,330 553,650
Mutual Funds
Association 1,724,444 1,593,840
MLS 29,953 28,442
Foundation 162,207 144,026
Total Mutual Funds 1,916,604 1,766,308
Total Highly Liquid Financial Assets 5,519,775 3,262,885
Less: Assets whose use is limited (1,098,880) (1,098,880)
Net Cash & Cash Equivalents 4,420,895$ 2,164,005$
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
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Fair Value Measurement
The Organization reports its fair value measures using a three-level hierarchy that prioritizes
the inputs used to measure fair value. This hierarchy, established by U.S. GAAP, requires
that entities maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. The three levels of inputs used to measure fair value are
as follows:
Level 1 – Quoted prices for identical assets or liabilities in active markets to which the
Organization has access at the measurement date.
Level 2 – Inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly or indirectly. Level 2 inputs include:
quoted prices for similar assets or liabilities in active markets,
quoted prices for identical or similar assets or liabilities in markets that
are not active,
observable inputs other than quoted prices for the asset or liability (for
example, interest rates and yield curves), and
inputs derived principally from or corroborated by observable market
data by correlation or by other means.
Level 3 – Unobservable inputs for the asset or liability. Unobservable inputs should
be used to measure the fair value to the extent that observable inputs are
not available.
The primary use of fair value measures in the Organization’s consolidated financial
statements is the recurring measurement of investments (Note 4).
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
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Accounts Receivable
Accounts receivable are shown at their net realizable value.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued guidance (FASB
ASC 326) which significantly changed how entities will measure credit losses for most
financial assets and certain other instruments that aren’t measured at fair value through net
income. The most significant change in this standard is a shift from the incurred loss model
to the expected loss model. Under the standard, disclosures are required to provide users of
the financial statements with useful information in analyzing an entity’s exposure to credit
risk and the measurement of credit losses.
The Organization adopted the standard effective January 1, 2023. The Organization’s
allowance estimate is derived from a review of its historical losses based on the aging of
receivables. The estimate is adjusted for the Organization’s assessment of current
conditions, reasonable and supportable forecasts regarding future events, and other factors
deemed relevant by the Organization. Based on experience, management has determined
that an allowance for credit losses of $0 is reasonable for December 31, 2023 and 2022.
The impact of the adoption of the standard was not considered material to the financial
statements.
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
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Property
Property is recorded in the consolidated statements of financial position at cost. Property is
capitalized if it has a cost of $2,500 or more and a remaining useful life when acquired of
more than one year. Repairs and maintenance that do not significantly increase the useful
life of the assets are expensed as incurred. Buildings and improvements are depreciated
using the straight-line method, while the 200% declining balance method is used for office
furniture, equipment, and technology. Depreciation is not provided for land. The following is
a summary of the estimated useful lives of the assets:
Buildings & improvements 20-40 years
Office furniture & equipment 7 years
Technology 5 years
Land, buildings, and equipment are reviewed for impairment when a significant change in
the asset’s use or another indicator of possible impairment is present. No impairment losses
were recognized in the consolidated financial statements in the periods presented. The
following is a summary of property accounts as of December 31:
Accumulated 12/31/2023 12/31/2022
Cost Depreciation Net Book Value Net Book Value
Land 1,800,780$ -$ 1,800,780$ 1,800,780$
Buildings & improvements 5,494,795 1,489,365 4,005,430 3,364,784
Office furniture & equipment 1,133,548 909,494 224,054 611,602
Technology (computers &
electronic equipment) 379,705 249,195 130,510 41,304
Net Subtotal 8,808,828 2,648,054 6,160,774 5,818,470
Other - - - 429,484
Total Property, Net 8,808,828$ 2,648,054$ 6,160,774$ 6,247,954$
Membership Revenue Recognition
Revenue is recorded as services are provided to members and participants. Accordingly,
collection of memberships for future month’s services or fees collected in advance are
shown as a liability (dues collected in advance) in the accompanying consolidated
statements of financial position.
Revenues are recognized when earned. Program service fees and payments under cost-
reimbursable contracts received in advance are deferred to the applicable period in which
the related services are performed or expenditures are incurred, respectively. Contributions
are recognized when cash, securities, or other assets; an unconditional promise to give; or a
notification of a beneficial interest is received. Conditional promises to give are not
recognized until the conditions on which they depend have been substantially met.
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
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Income Taxes
As organizations described in Sections 501(c)(6) and 501(c)(3) of the Internal Revenue
Code, the Association and the Foundation, respectively, are exempt from federal income
taxes on income from activities directly related to their exempt purpose.
All activities of MLS, including its net rental income, are subject to federal and North
Carolina income taxes and appropriate provisions have been made. Traditionally, no
deferred tax provisions have been required since timing differences are not significant.
Sir Tyler is a limited liability company which is taxed as a partnership. As a partnership, Sir
Tyler does not pay federal or North Carolina corporate income taxes on its taxable income
nor is it allowed a net operating loss carryover or carryback as a deduction. Instead, the
partners (the Association and MLS) include their respective shares of Sir Tyler’s net
operating loss or taxable income in their individual federal income tax returns.
Each Organization’s income tax returns are subject to examination and adjustment by taxing
authorities generally for three years after the extended due date. Management believes this
includes returns filed after 2020.
Reclassifications
Certain reclassifications of amounts previously reported have been made to the
accompanying consolidated financial statements to maintain consistency between periods
presented. The reclassifications had no impact on previously reported net assets.
Subsequent Events
Subsequent events have been evaluated through June 11, 2024, which is the date the
consolidated financial statements were available to be issued. Events occurring after that
date have not been evaluated to determine whether a change in the consolidated financial
statements would be required. No subsequent events were noted in the current year.
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
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3. LIQUIDITY AND AVAILABILITY OF RESERVES
Financial assets available to meet general expenditures over the next 12 months are as
follows as of December 31:
2023 2022
Financial Assets at Year End:
Cash & cash equivalents 4,420,895$ 2,164,005$
Accounts receivable 31,266 1,164,892
Total Financial Assets at Year End 4,452,161 3,328,897
Less: Net assets with purpose restrictions to be met in
less than a year 32,948 111,859
Financial Assets Available to Meet General
Expenditures Over the Next 12 Months 4,419,213$ 3,217,038$
The Organization operates with a balanced budget and anticipates collecting sufficient
revenue to cover general expenditures not covered by donor-restricted resources. The
accompanying consolidated statements of cash flows on page 6 identify the sources and
uses of cash and show positive cash generated by operations. The Organization regularly
monitors liquidity required to meet its operating needs and other contractual commitments,
while also striving to maximize the investment of its available funds.
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
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4. INVESTMENTS
The Organization’s investment policy divides investment strategies into two investment
categories, short-term and long-term. Allocation to each category is based on the liquidity
needs of the Organization. The intent of the short-term fund investment strategy, generally
the Organization’s operations, is to provide short-term liquidity and working capital for
operations and other strategic purposes, with the primary strategy to be preservation of
principal and income a secondary consideration. The intent of the long-term fund
investment strategy, generally the Organization’s foundation, is to generate current income
and maintain stability of principal. The Organization had the following investments,
concentrations, and maturities as of December 31:
2023 2022
Cash & cash equivalents 794,663$ 773,642$
Bond funds 568,284 726,480
Allocation funds 946,415 657,465
Total Investments 2,309,362$ 2,157,587$
As of December 31, 2023 and 2022, all investments were considered Level 1 investments.
Investment income (loss) is summarized as follows for the years ended December 31:
2023 2022
Interest & dividends 49,370$ 45,675$
Change in unrealized gains 102,825 (297,371)
Realized gains - 19,970
Total Investment Income (Loss), Net 152,195$ (231,726)$
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
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5. ASSETS WHOSE USE IS LIMITED
MLS and the Association’s Board of Directors have established various policies to reserve
investments for certain contingencies, such as property replacement and operating cash
flow needs.
The property replacement reserve policy provides for the replacement of building
components, equipment, and essential technology in accordance with an estimated
replacement plan. The replacement costs are based on the original cost of the property
being replaced. The following is a summary of the property replacement reserves as of
December 31:
2023 2022
Association:
Association equipment reserves 114,171$ 114,171$
Sir Tyler property reserve 538,624 538,624
Association Property Replacement Reserves 652,795 652,795
MLS:
MLS equipment reserves 51,000 51,000
Sir Tyler property reserve 101,450 101,450
MLS Property Replacement Reserves 152,450 152,450
Total Property Replacement Reserves 805,245$ 805,245$
The operating purposes reserve policy recommends funding a contingency reserve equal to
five months of cash expenditures. The following is a summary of the operating purposes
reserves as of December 31:
2023 2022
Association reserves 269,635$ 269,635$
MLS reserves 24,000 24,000
Total Operating Purposes Reserves 293,635$ 293,635$
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
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6. LONG-TERM DEBT
On September 16, 2010, New Hanover County Industrial Facilities and Pollution Control
Financing Authority (the “Authority”) issued Variable Rate Recovery Zone Facility Revenue
Bonds, Series 2010, with an original principal amount of $3,500,000. The Authority sold the
bond to Truist and loaned the proceeds from the sale to the Association. The Association
then used the funds to construct the 25,000-square-foot building now owned by Sir Tyler.
The bond is guaranteed by the Association, MLS, and Sir Tyler, as well as collateralized by a
deed of trust from the Association and Sir Tyler. In December 2015, the agreement was
amended, and the interest rate was fixed at 3.19% for the remaining principal of
$1,600,000. The general provisions of the bond indenture include maintenance of the
property, paying taxes, and insurance. The bank has verified that specific financial
covenants, which include the following, have been met:
1) Indebtedness to Tangible Net Worth Ratio. The Organization, on a consolidated
basis, shall maintain a maximum ratio of Indebtedness divided by Tangible Net
Worth of no greater than 1.50 to 1.00, to be measured annually. This ratio is
calculated as follows for 2023:
Indebtedness to Total Liabilities 2,591,858$
Tangible Net Worth Ratio Total Net Assets Without Donor Restrictions 8,478,963$ ===0.31
2) Debt Service Coverage Ratio. The Organization, on a consolidated basis, shall
maintain a minimum Debt Service Coverage Ratio of at least 1.20 to 1.00, to be
measured annually. This ratio is calculated as follows for 2023:
Net income (loss) 959,121$
Add Back:
Interest expense & amortization 67,545
Depreciation 310,194
1,336,860$
Debt Service:
Prior year current maturities of long-term debt 265,743$
Interest expense & amortization 67,545
333,288$
Debt Service Coverage Ratio 4.01
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
- 19 -
The Sir Tyler bond monthly payments of $11,329 include interest and principal with the final
payment due on September 28, 2030. The interest rate is fixed at 3.19%. Long-term debt
also includes two promissory notes. The Sir Tyler promissory note monthly payments of
$15,509 include interest and principal with a final balloon payment due in November 2027
for the full amount. The interest rate is fixed at 3.70%. The Foundation promissory note
monthly payments are of interest only. Principal payment plus interest is due October 2024
for the full amount. The interest rate is a variable interest rate and based on the U.S. Prime
Rate.
As of December 31, 2023, future minimum payments of principal are scheduled as follows:
Sir Tyler Sir Tyler Foundation
Bond Promissory Note Promissory Note Total
2024 110,874$ 164,552$ 531,080$ 806,506$
2025 114,586 170,745 - 285,331
2026 118,348 177,171 - 295,519
2027 122,233 144,995 - 267,228
2028 126,215 2,286 - 128,501
Thereafter 287,439 - - 287,439
Total 879,695 659,749 531,080 2,070,524
Less: Current maturities (110,874) (164,552) (531,080) (806,506)
Less: Unamortized debt
issuance costs - (8,554) - (8,554)
Long-Term Debt, Net 768,821$ 486,643$ -$ 1,255,464$
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
- 20 -
7. CLASSIFICATION OF EXPENSES
The cost of providing the Association and MLS’s program and other activities has been
summarized on a functional basis below. Total expenses for the year ended December 31,
2023 were $3,120,307. Expenses that can be identified with a specific program or support
service are charged directly to that program or support service. Costs common to multiple
functions have been allocated among the various functions benefited using objective bases,
such as time spent, salaries, square feet, and other bases.
General &
General MLS Administrative Total
Salaries 180,800$ 761,520$ 97,354$ 1,039,674$
Benefits 31,871 115,688 17,161 164,720
Payroll taxes 13,976 57,785 7,525 79,286
Total Salaries & Related 226,647 934,993 122,040 1,283,680
Occupancy 10,628 216,946 31,886 259,460
Board & committee 10,994 18,830 25,653 55,477
Maintenance - 47,423 - 47,423
Staff travel 37,462 113,522 37,462 188,446
Legal & accounting - 65,659 44,179 109,838
Office & administrative 151,799 557,947 65,799 775,545
Key expense - 207,298 - 207,298
Total Operations 437,530 2,162,618 327,019 2,927,167
Depreciation 21,233 171,907 - 193,140
Total Expenses 458,763$ 2,334,525$ 327,019$ 3,120,307$
2023
Program
General &
General MLS Administrative Total
Salaries 168,284$ 699,949$ 90,615$ 958,848$
Benefits 31,152 91,070 16,774 138,996
Payroll taxes 12,841 53,075 6,914 72,830
Total Salaries & Related 212,277 844,094 114,303 1,170,674
Occupancy 5,816 199,731 17,447 222,994
Board & committee 6,730 31,285 15,702 53,717
Maintenance, net - 42,187 - 42,187
Staff travel 24,541 93,425 24,541 142,507
Legal & accounting - 57,195 62,210 119,405
Office & administrative 141,640 526,377 67,064 735,081
Key expense - 217,473 - 217,473
Total Operations 391,004 2,011,767 301,267 2,704,038
Depreciation 4,891 196,646 - 201,537
Total Expenses 395,895$ 2,208,413$ 301,267$ 2,905,575$
2022
Program
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
- 21 -
General and administrative expenses include those costs that are not directly identifiable
with any specific program, but which provide for the overall support of the Association and
MLS. General and administrative activities include those that provide governance, oversight,
business management, financial recordkeeping, budgeting, legal services, human resource
management, and similar activities that ensure an adequate working environment and an
equitable employment program. Resources expended for fundraising from the general public
are not significant.
8. RETIREMENT PLAN
Effective January 1, 2016, the Organization switched from a SIMPLE IRA employer plan to a
401(k) plan. All employees at that time were grandfathered into the new plan. The plan has
an option of an employee contribution of 3%, 4%, or 5% with an employer match of 3%,
3.5%, or 4%, respectively. Employer contributions were $17,890 for the year ended
December 31, 2023 and $9,044 for the year ended December 31, 2022.
9. CONCENTRATIONS OF RISK
Amounts held in financial institutions are in excess of the Federal Deposit Insurance
Corporation and Securities Investor Protection Corporation limits. The Organization deposits
its cash with high quality institutions, and management believes the Organization is not
exposed to significant credit risk on those amounts.
The Organization’s revenues are almost entirely received from legal entities and individuals
located in the Wilmington, North Carolina area. As such, the Organization’s ability to
generate resources is dependent upon the economic health of that area and of the state of
North Carolina. An economic downturn could cause a decrease in membership that coincides
with an increase in demand for the Organization’s services.
Cape Fear REALTORS and Affiliates
Notes to Consolidated Financial Statements
December 31, 2023 (Audited) and 2022 (Reviewed)
- 22 -
10. RISK MANAGEMENT
From time to time, the Organization may be aware of various asserted and unasserted
claims. Management feels that these claims can be successfully defended and intends to
resist the allegations of these matters in every way and does not plan to seek out-of-court
settlements. In the event that judgments adverse to their interest were to be rendered,
management feels any liability will be fully covered by existing insurance or not be material
to the consolidated financial statements.
The Organization is exposed to various risks of loss in the ordinary course of business as a
result of torts, theft of, damage to, or destruction of assets, business interruption,
allegations of liability, natural disasters, employee and officer errors and omissions, and
employee workers’ compensation and medical claims.
The Organization purchases commercial insurance coverage against risk of loss due to
property damage and theft and various other insurable risks. The Organization carries
property insurance in the amount of $3,000,000 for the building and $500,000 for personal
property in 2023 with a deductible of $1,000 for all perils. The Organization carries wind and
hail insurance in the amount of $2,500,000 for the building and $500,000 for personal
property in 2023 with a deductible of $5,000 except for named storms, which have a 1%
deductible. Excess wind and hail insurance is carried on the building in the amount of
$675,000.
The Organization carries an umbrella liability policy of $1,000,000.
No claim payment has exceeded insurance coverage in the past three fiscal years where
insurance coverage applies, subject to the deductibles and retentions noted above.
11. CONSTRUCTION DEFECTS LEGAL MATTER
In 2020, Sir Tyler sued its building contractor for construction defects and resulting
damages. The lawsuit sought damages in excess of $25,000.
The Organization reached settlement and recognized final proceeds on November 22, 2022.
The proceeds were received in February 2023.
Supplementary Information
Cape Fear REALTORS and Affiliates
Consolidating Statements of Financial Position
As of December 31, 2023 (Audited) and 2022 (Reviewed)
- 24 -
2022
Eliminating Consolidated Consolidated
Operations RCA Operations RCA Sir Tyler Foundation Adjustments Total Total
ASSETS
Current Assets
Cash & cash equivalents 1,900,119$ 259,051$ 1,131,772$ -$ 920,346$ 209,607$ -$ 4,420,895$ 2,164,005$
Accounts receivable 10,020 295 20,951 - - - - 31,266 1,164,892
Inventory - - 8,546 - - - - 8,546 4,912
Prepaid expenses & other assets 18,189 - 148,225 323 4,049 - - 170,786 371,338
Total Current Assets 1,928,328 259,346 1,309,494 323 924,395 209,607 - 4,631,493 3,705,147
Assets Whose Use is Limited (Note 5)
For property replacement 640,795 12,000 152,450 - - - - 805,245 805,245
For operating purposes 269,635 - 24,000 - - - - 293,635 293,635
Total Assets Whose Use is Limited 910,430 12,000 176,450 - - - - 1,098,880 1,098,880
Property, net (Note 2) 16,463 - 948,958 - 4,584,634 610,719 - 6,160,774 6,247,954
Due from (due to) 2,607,860 (239,212) 3,383,755 231,988 (5,984,391) - - - -
Investment in RCA (8,276) - 231,725 - - - (223,449) - -
Investment in Sir Tyler 140,121 - (2,108,972) - - - 1,968,851 - -
Investment in MLS 3,642,300 - - - - - (3,642,300) - -
Total Assets 9,237,226$ 32,134$ 3,941,410$ 232,311$ (475,362)$ 820,326$ (1,896,898)$ 11,891,147$ 11,051,981$
LIABILITIES & EQUITY
Current Liabilities
Accounts payable 111,328$ 40,410$ 168,233$ -$ -$ 7,087$ -$ 327,058$ 287,075$
Dues collected in advance 610,337 - 130,074 586 - - - 740,997 668,102
Current maturities of long-term debt - - - - 275,426 531,080 - 806,506 265,743
Total Current Liabilities 721,665 40,410 298,307 586 275,426 538,167 - 1,874,561 1,220,920
Long-term debt, net (Note 6) - - - - 1,255,464 - - 1,255,464 2,055,071
Total Liabilities 721,665 40,410 298,307 586 1,530,890 538,167 - 3,130,025 3,275,991
Equity
Net assets without donor restrictions 8,515,561 (8,276) - - - 249,211 (28,322) 8,728,174 7,664,131
Net assets with donor restrictions - - - - - 32,948 - 32,948 111,859
Total Net Assets 8,515,561 (8,276) - - - 282,159 (28,322) 8,761,122 7,775,990
Retained earnings- - 3,643,103 231,725 - - (3,874,828) - -
Members' equity - - - - (2,006,252) - 2,006,252 - -
Total Equity 8,515,561 (8,276) 3,643,103 231,725 (2,006,252) 282,159 (1,896,898) 8,761,122 7,775,990
Total Liabilities & Equity 9,237,226$ 32,134$ 3,941,410$ 232,311$ (475,362)$ 820,326$ (1,896,898)$ 11,891,147$ 11,051,981$
2023
Association MLS
Cape Fear REALTORS and Affiliates
Consolidating Statements of Activities and Changes in Net Assets
For the Years Ended December 31, 2023 (Audited) and 2022 (Reviewed)
- 25 -
2022
Eliminating Consolidated Consolidated
Operations RCA Operations RCA Sir Tyler Foundation Adjustments Total Total
OPERATING REVENUES
Membership 861,231$ -$ -$ -$ -$ -$ -$ 861,231$ 843,535$
MLS access & related 6,600 - 3,546,808 - - - (47,000) 3,506,408 3,497,937
Commercial access - 61,584 - 312,727 - - - 374,311 349,382
Continuing education 19,031 - - - - - - 19,031 15,895
Sir Tyler terrace - - 171,429 - - - - 171,429 124,133
Sir Tyler lease - - 179,154 - - - - 179,154 87,887
Realtor service center, net - - 5,124 - - - - 5,124 2,764
Contributions 4,545 - - - - 121,511 - 126,056 75,164
Total Operating Revenues 891,407 61,584 3,902,515 312,727 - 121,511 (47,000) 5,242,744 4,996,697
LESS: DIRECT EXPENSES
MLS access & related - - 834,282 - - - - 834,282 819,088
Sir Tyler terrace - - 29,203 - - - - 29,203 24,814
Sir Tyler lease - - 9,827 - - - - 9,827 24,428
Total Direct Expenses - - 873,312 - - - - 873,312 868,330
Gross Margin 891,407 61,584 3,029,203 312,727 - 121,511 (47,000) 4,369,432 4,128,367
OPERATING EXPENSES
Salaries 278,154 - 761,520 - - - - 1,039,674 958,848
Payroll taxes & benefits 70,533 - 173,473 - - - - 244,006 211,826
Occupancy 42,514 - 216,946 - 847 4,213 (69,336) 195,184 206,238
Board & committee 35,703 944 16,627 2,203 - - - 55,477 53,717
Maintenance, net - - 47,423 - 34,942 - - 82,365 (380,018)
Staff travel 68,371 6,553 98,233 15,289 - - - 188,446 142,507
Legal & accounting 44,179 - 65,659 - - - - 109,838 207,777
Office & administrative 168,660 48,938 276,939 281,008 1,870 63,741 (47,000) 794,156 734,363
Key expense - - 207,298 - - - - 207,298 217,473
Depreciation 21,233 - 171,907 - 117,054 1,357 - 311,551 319,949
Total Operating Expenses 729,347 56,435 2,036,025 298,500 154,713 69,311 (116,336) 3,227,995 2,672,680
Net Operating Profit (Loss)162,060 5,149 993,178 14,227 (154,713) 52,200 69,336 1,141,437 1,455,687
NON-OPERATING INCOME (EXPENSE)
Building rent from MLS 69,336 - - - - - (69,336) - -
Interest income 418 - - - 13,646 - (418) 13,646 -
Interest expense - - (37,429) - (30,116) (44,399) 418 (111,526) (89,658)
Investment income (loss)131,126 - 2,859 - - 18,210 - 152,195 (231,726)
RCA income 5,149 - 14,227 - - - (19,376) - -
Sir Tyler income (42,796) - (128,387) - - - 171,183 - -
MLS income 633,828 - - - - - (633,828) - -
Net Non-Operating Income (Expense) 797,061 - (148,730) - (16,470) (26,189) (551,357) 54,315 (321,384)
Net Income (Loss) Before Income Taxes 959,121 5,149 844,448 14,227 (171,183) 26,011 (482,021) 1,195,752 1,134,303
Provision for income taxes - - (210,620) - - - - (210,620) (141,815)
Net Income (Loss)959,121 5,149 633,828 14,227 (171,183) 26,011 (482,021) 985,132 992,488
Equity, Beginning 7,556,440 (13,425) 3,009,275 217,498 (1,835,069) 256,148 (1,414,877) 7,775,990 6,783,502
Equity, Ending 8,515,561$ (8,276)$ 3,643,103$ 231,725$ (2,006,252)$ 282,159$ (1,896,898)$ 8,761,122$ 7,775,990$
2023
Association MLS
Cape Fear REALTORS and Affiliates
Consolidating Statements of Cash Flows
For the Years Ended December 31, 2023 (Audited) and 2022 (Reviewed)
- 26 -
2022
Eliminating Consolidated Consolidated
Operations RCA Operations RCA Sir Tyler Foundation Adjustments Total Total
Cash Flows From Operating Activities
Cash received from members & others 956,791$ 59,746$ 3,942,180$ 313,313$ 1,163,646$ 124,023$ (47,000)$ 6,512,699$ 3,899,959$
Cash paid to suppliers & employees 24,752 (41,808) (2,940,713) (298,823) (69,874) (113,932) (435,021) (3,875,419) (3,572,287)
Net Cash Provided (Used)
By Operating Activities 981,543 17,938 1,001,467 14,490 1,093,772 10,091 (482,021) 2,637,280 327,672
Due to/from & intercompany investments (550,294) 14,490 11,841 (14,490) 56,432 - 482,021 - -
Cash Flows From Investing Activities
Cash received (paid) for property & equipment (21,389) - (168,615) - - (34,368) - (224,372) (693,803)
Investment proceeds reinvested - - - - - 15,723 - 15,723 -
(Funding) spending assets whose use is limited 86,671 - 431 - - - - 87,102 (262,121)
Net Cash Provided (Used).. .. ..
By Investing Activities 65,282 - (168,184) - - (18,645) - (121,547) (955,924)
Cash Flows From Financing Activities
Debt proceeds - - - - - - - - 535,000
Principal payments of debt - - - - (254,923) (3,920) - (258,843) (394,666)
Net Cash Provided (Used)
By Financing Activities - - - - (254,923) (3,920) - (258,843) 140,334
Net Increase (Decrease) in Cash 496,531 32,428 845,124 - 895,281 (12,474) - 2,256,890 (487,918)
Cash & Cash Equivalents, Beginning 1,403,588 226,623 286,648 - 25,065 222,081 - 2,164,005 2,651,923
Cash & Cash Equivalents, Ending 1,900,119$ 259,051$ 1,131,772$ -$ 920,346$ 209,607$ -$ 4,420,895$ 2,164,005$
Reconciliation of Net Income (Loss)
to Cash Provided (Used)
By Operating Activities:
Net income (loss)959,121$ 5,149$ 633,828$ 14,227$ (171,183)$ 26,011$ (482,021)$ 985,132$ 992,488$
Adjustments to Reconcile Net
Income (Loss) to Net Cash Provided
(Used) By Operating Activities:
Depreciation & amortization 21,233 - 171,907 - 117,054 1,357 - 311,551 322,088
Unrealized (gain) loss on investments (86,671) - (431) - - (15,723) - (102,825) 262,121
(Increase) Decrease in:
Accounts receivable (8,939) 142 (7,602) - 1,150,000 25 - 1,133,626 (1,161,737)
Inventory - - (3,634) - - - - (3,634) (7)
Prepaid expenses & other assets 2,024 20,023 180,927 (323) (2,099) - - 200,552 (155,628)
Increase (Decrease) in:
Accounts payable 65,325 (5,396) (18,367) - - (1,579) - 39,983 60,857
Dues collected in advance 29,450 (1,980) 44,839 586 - - - 72,895 7,490
Net Cash Provided (Used)
By Operating Activities 981,543$ 17,938$ 1,001,467$ 14,490$ 1,093,772$ 10,091$ (482,021)$ 2,637,280$ 327,672$
Supplemental Disclosure
Interest paid 109,337$ 48,731$
Income taxes paid 210,620$ 141,815$
2023
MLSAssociation