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1 DCHFA Project Performance Review and Financial Reporting Update Sichao Bai DCHFA

2 Agenda 2010 Project Assessment Review Project Financial Characteristics Financial i Performance Trend Distressed Projects Financial Reporting Requirements

3 2010 Project Assessment Review Performance rating is based on REAC or other inspection i scores Occupancy and rent collection Debt service coverage ratio Operating expense level

4 2010 Project Assessment Review Performance rating is given on the following scale: 5 Superior 4 Above average 3 Average 2 Below average 1 Deficient

5 2010 Project Assessment Review Overall performance is assigned to one of the following categories: A Category: well performing B Category: normally performing (may and may not have deficient areas of performance) C Category: underperforming Watch list projects: All C Category and some B Category projects.

performing (may and may not have deficient areas of performance) C Category:

6 2010 Project Assessment Review 8 projects moved out of the Watch List: Walbraff Meridian Manor Trinity Towers Wesley House Rockburne Estate Congress Park ki Congress Park II Columbia Heights

7 2010 Project Assessment Review 6 projects have been newly placed on the Watch List

8 Project Financial Characteristics Median household income: Subsidized projects: below 10% AMI Non-subsidized bidi d projects: 4050% 40-50% AMI (Note: Subsidized projects: having project- based subsidy contracts; Non-subsidized projects: no project-based subsidy contracts)

4050% 40-50% AMI (Note: Subsidized projects: having project- based

9 Project Financial Characteristics Property Income (DCHFA Projects Average PUM) Subsidized Non-Subsidized Gross Potential Rent $1,200 $916 Vacancy and Concession (19) (60) Other Revenue Property Income 1,

10 Project Financial Characteristics Subsidized Non-Subsidized (2010 DCHFA Projects Average PUM) Property Expenses Administration $199 $200 Operating & Maintenance Utilities Taxes & Insurance Total Operating Exp Operating Income (b/f debts) $511 $323 Debts (P&I) Surplus 81 25

Maintenance 264 187 Utilities 110 94 Taxes & Insurance 118 82 Total Operating

11 Financial Performance Trend Vacancy and Collection Loss (Average of All DCHFA Projects) Inc./ (Decr.) Vacancy Loss/GPR 4.8% 4.1% (-0.7%) Collection Loss (Bad Debt)/GPR 2.4% 3.3% 0.9% Total Loss/GPR 7.1% 7.4% 0.3%

12 Financial Performance Trend Income (2010 DCHFA Projects Average PUM) % Change Gross Potential Revenue Vacancy and Concessions Financial Revenue Other Revenue TtlR Total Revenue 1,000 1,023 2% (52) (45) -14% % % 978 1,005 3%

Vacancy and Concessions Financial Revenue Other Revenue TtlR

13 Financial Performance Trend Expenses (2010 DCHFA Projects Average PUM) % change Administrative $195 $200 3% Utilities % Operating and Maintenance % Taxes and Insurance % Total Operating Expense % Operating Income b/f debt service %

Operating and Maintenance 230 216-6% Taxes and Insurance 86 95 11%

14 Financial Performance Trend DSCR % Change Median DSCR % Management Fee Median Management Fee (PUM) %

15 Distressed Projects Causes: Failed to achieve occupancy projections projects with vacancy 10% or more very likely to fail; never achieved at least 90% and so was never stabilized Failed to control expenditures Failed to change the tenant dynamics of a re-hab project

never achieved at least 90% and so was never stabilized Failed to

16 Distressed Projects Case A: Project failed to reduce vacancy and collection loss, which has been 15-30% for the past few years; Case B: operating expenses increased, but occupancy and revenue showed no improvements;

for the past few years; Case B: operating expenses

17 Distressed Projects Case C: Project funded personnel, security, water, or other expenses were well above the normal range; Distressed projects will be in default as soon as the Owners withdrawal their cash support.

the normal range; Distressed projects will be in

18 Financial Reporting Requirements Risk Sharing Projects Required to follow HUD audit procedures and the guidelines below in auditing: GAAP GAAS GAS HUD IG Audit Guide HUD Handbook Required to use HUD Chart of Accounts in budget submission and financial reporting

GAAP GAAS GAS HUD IG 2000.4 Audit Guide HUD Handbook 4370.

19 Financial Reporting Requirements Non-Risk Sharing Projects DCHFA does not have strict requirements for using HUD auditing procedures Required to use HUD Chart of Accounts in budget submission sb ss and financial reporting

using HUD auditing procedures Required to use HUD Chart

20 Financial Reporting Requirements All projects, regardless of project type, must submit the audited financial reports with the following information: Basic statements: balance sheet, income statement, cash flow statement, and changes in owner s equity. Supplemental data: providing details of specific accounts. For example, e, when reporting income, gross potential t rent and vacancy and concessions shall be provided. Simply providing net property revenue is not enough. Notes: providing detailed explanations of financial transactions, accounting procedures, and project operations. Auditor s certification and opinion. Owner s and Manager s certifications.

For example, e, when reporting income, gross potential t rent and vacancy and concessions shall be provided. Simply providing net property revenue is not enough.

21 Questions Now, Or contact ,

HUD Property Audits: A Property Manager s Perspective

HUD Property Audits: A Property Manager s Perspective How Best to Prepare / Common Findings in an Audit Objective This session will discuss HUD Property audits from a site manager s perspective covering: