A Guide for Oversight of Property Management
Prepared by: NCALL Research, Inc., August 1996

A.Roles

 1.Nonprofit Housing Corporation (Owners) The nonprofit housing corporation owns the multi-family housing development. As owners, the Corporation and Board of Directors are responsible for all aspects of the project: upkeep, fiscal management, tenant satisfaction, compliance with provisions established by funders, community relations, maintenance of reserves, and mortgage payment. Owners may employ a Property Management Firm who is responsible for part or many of these responsibilities. Even if the nonprofit contracts with such a firm, the ultimate responsibility still rests with the owners. Therefore, it is important to be kept fully aware of all aspects of property management and to perform those oversight functions to assure the project is being managed according to sound principles and is in compliance with all applicable laws, regulations, and statutes.

 2.Property Management Firm (Under Contract) The property management firm is hired on a contractual basis by the owner to perform certain property management functions. The property management firm therefore works at the pleasure of the nonprofit housing corporation. Responsibilities of the property management firm are set forth in a Property Management Agreement. One important role of the property management firm is to communicate regularly with the owner about project upkeep, maintenance, finances, reserves, audits, compliance reviews, budgets, problems, and needs. This communication should be both in writing and orally at meetings. It is important for property managers to keep their role in perspective and to recognize that the owners are ultimately responsible and therefore must be informed and must be party to virtually all major decisions.

B.When Approving The Annual Operating Budget -- some questions to ask

• Is the proposed operating budget sufficient to operate the project?
• Is it sufficient to handle unforeseen circumstances?
• Have we checked to see if taxes, insurances, audit costs, etc. will be increasing?
• Will this budget allow bills and obligations to be paid on time?
• Does this budget fall within Rural Development's parameters?
• What rents are necessary to support this budget?
• Are there changes in the proposed budget compared to last year's budget? Are explanations provided?
• Does the proposed budget contribute adequately to the Reserve Account?
• Does a review of all revenue sources (rents, annuities, Rental Assistance) show sufficient income to cover the proposed operating budget?

C.When Approving Rent Increases -- some questions to ask

• Why does a rent increase need to be considered?
• What operating budget line items increased over the previous year?
• What is the dollar figure and percent of rent increase by unit type?
• Is the rent increase within the allowable range according to RD, HUD, or State?
• How will the rent increase affect current tenants? Will they be rent-burdened?
• Will the rent increase provide sufficient revenue for the operating budget?
• How do the project's rents compare with those of other local projects?
• Maintain a history of rent increases to be able to show amount, percentage, and date of each increase.
• Review other forms of revenue such as Rental Assistance, Annuity Subsidies, for trends, changes, etc.

D.Annual Project Audit -- some questions to ask and information to receive

• Make sure all Board members receive a copy of each audit.
• Audits typically have a Management Letter to the owner listing any recommendations.
• Have auditor meet with the Board of Directors to summarize and interpret the audit.
• If there are recommendations, are remedies in place or being put in place?
• Ask auditors about project's fiscal health, sufficiency of property manager's accounting system, timeliness in bill paying, compliance with Rural Development's regulations, and for any fiscal trends they are seeing in the project?
• Are key indicators of financial health satisfactory? (fund balances, cash flow, reserves, etc.)

E.Annual Review of Property Management Agreement -- some questions to ask

• Set aside time to review Agreement annually at Board meeting or empower a special committee to undertake the task.
• Are terms of the agreement being fulfilled to owner's satisfaction?
• Does review of contract raise some questions that need answering?
• If dissatisfied for any reason, has owner shared that in writing and set forth clear expectations for improvement?
• Does the Board share their satisfaction with the property manager?
• Complete annual evaluation of property management firm.

F.Proof of Payment of Critical Obligations -- verifications to receive
Untimely payment of some obligations can cause results such as utility cut-offs, poor publicity, and potentially a negative reputation with the town, county, community, creditors. Just the opposite is necessary in order to maintain a businesslike, professional, and positive reputation for low-income housing.

• Is mortgage payment being paid on time?  Know due dates.
• Are property taxes paid on time?        Know due date.
• Are public utilities paid on time?         Know due dates.
• Are payroll taxes and employer obligations paid on time?
• Are other major creditors paid on time?
• Is the reserve account paid on time?
• Is the Board seeing documentation of timely bill paying?
• Have there been any penalties, interest, or late fees for untimely bill paying?
• Who is responsible for paying these penalties?
• If insufficient funds exist, is the Board being notified to help establish payment priorities?

G.Monthly Board Meetings -- review reports and some questions to ask

• Make sure fiscal reports are in the format the Board wants.
• NCALL recommends review of monthly fiscal reports which show expenditures by line item in comparison to the approved budget.
• Also review status of revenue for the month and the reserve account.
• Review Cash Disbursements for the month.
• Receive verbal or written report on project maintenance activities, vacancies, or problems.
• Be aware of demand for your housing and length of waiting list.
• Ask questions! No question is an inappropriate one!

H.Status of the Reserve Account -- some questions to ask.

• Know the amount your reserve account should be building to and then maintained at.
• How much is in the reserve account?
• Will this be sufficient to cover maintenance and repair for the foreseeable future?
• If reserves seem too low, how can they be increased?
• If the project has borrowed from reserves, what is the repayment plan to replenish?

I.Physical Upkeep and Maintenance -- some questions to ask.

• Join manager on inspections every six months or year (Board or Committee).
• Observe exterior upkeep and cleanliness regularly.
• Drive past property when property manager is not there (evenings and weekends).
• Report problems such as loitering, gatherings, noise, and nuisances to property manager.
• Are problems that have been reported resolved in a timely manner?
• Report safety issues to police or authorities.
• Compare physical appearance of project to other similar projects in the area.

J.Seek and Apply for Project Resources When Necessary
Stay aware of any fiscal, physical, and social needs your project has. This could include the need for more subsidy, playground equipment, rental assistance, security deposit and move-in assistance, community room, shrubbery, etc.

• If have a specific need that would make project undeniably better, make seeking resources for it a priority.
• Approach donors such as banks who have a Community Reinvestment Act responsibility, federal and state agencies, CDBG agencies, foundations, local businesses, churches, and civic organizations to help fund your need.
• Ask in writing, it is more difficult to be turned down.
• Do not be afraid to ask! It is your right and obligation/duty as a Board member!

K.Maintain Relationships With Local Government, Vendors, and the Community
Develop a mutual and positive working relationship with your local government by:

• Keeping local government informed about your project and successes.
• Letting local government know how they can help.
• Helping local government and the community to be proud of your project.
• Asking local government to participate in dedications, groundbreakings, and celebrations.
• Work hard at maintaining a positive reputation.
• Work hard at dispelling myths and stereotypes about low-income housing.
• Be a strong advocate for decent, affordable housing in your community.

L.Know Who Your Housing is Helping
Without names, it is important to know who your housing is helping. You must be able to articulate the demographics of who you are serving to the public and funders. For instance:

• Average income of tenants.
• Average family size of tenants.
• Number who moved from substandard and overcrowded housing.
• Number who move from your project to private rentals or homeownership.
• Average age of tenants.
• Particular "success" stories of public interest.
• Articulate positives to press and funders in annual reports, newsletters, annual meetings, press releases, and newspaper articles.

Copyright ©2001 NCALL Research, Inc.