presented by - mhdc - protect and serve.pdf“to protect and serve” mhdc edition 2014 © zeffert &...

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© 2014 Zeffert & Associates All Rights Reserved

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Where We Get Direction A key to references used in this manual

Tax Credit Format used in the references:_________ 1. Legal Authority

Section 42, Internal Revenue Code (IRC). § 42

Additional Formal IRS Guidance:

Treasury Regulations IRS1.42 ( -1 to -17)

Revenue Rulings Rev Rul (yr - #)

Revenue Procedures Rev Proc (yr - #)

IRS Notices IRS Notice (yr-#)

HUD 4350.3 4350.3 (paragraph/page#)

2. Additional interpretive resources:

8823 Guide (rev 10-09) 8823 Guide (chapter-page #) Additional minor revisions 3-2011

Now available online at www.IRS.gov

IRS Newsletters IRS Newsletter (#) (provide further guidance)

Private Letter Rulings PLR (#) (cannot be cited as precedent)

HUD ___ _____________________ Formal guidance:

HUD Handbook 4350.3 4350.3 (paragraph/page#) "Occupancy Requirements of Subsidized Multifamily Housing Programs"

Rural Development __ _ ___________________ Formal guidance:

HB-2-3560 HB-2-3560 (paragraph/page#) "Multi-Family Housing Asset Management Handbook"

HOME___________________ _ Formal guidance:

24 CFR Part 24 CFR Part 92 (section) "Compliance in HOME Rental Projects:

A Guide for Property Owners" HOME Guide HOME &the Low-Income Housing Tax Credit

Guidebook HOME/HTC Guide HOME Guide

BOND______________________________________________________________________________ Legal authority and formal guidance:

Section 142, Internal Revenue

Code (IRC). § 142 Various revenue rulings, procedures, See LIHTC Section above for reference key to IRS

IRS Notices and others. publications

“To Protect and Serve” MHDC Edition 2014

© Zeffert & Associates www.ze f fe r t .com Page 1

Certain key recurring major subjects are prominent in Change 4:

Social Security Number Disclosure Violence Against

Women Act (2005)

Enterprise Income Verification Lifetime Sex Offender

Registration:

Introduction The Goal of this Session The purpose of this training is to provide information for all interested personnel to successfully provide housing under various affordable housing programs. We will specifically assist owners as

well as key personnel in management companies to identify and implement the components of a good compliance system.

Retaining Affordable Housing There are different ways to develop real estate in such a way that it provides government-related

affordable housing. Sometimes a unit of government directly finances a deal (HUD, RD and HOME, for instance). For other programs, investors supply equity in exchange for tax credits or

other incentives provided under law (the Low Income Housing Tax Credit). Fundamentally all of them share

some basic concepts and similar underlying requirements

in order to retain the financing.

To retain affordable housing financing an owner/agent must:

1. 2. 3.

Change 4 Issues In 2013, the HUD Handbook 4350.3 had a major revision, referred to as Change 4. Since other housing programs, such as Rural Development, the LIHTC/tax exempt bonds and HOME draw on

HUD regulations, Change 4 impacts these to some degree. Most of the below apply to HUD only.

Workshop: Retention of Housing

Program Compliance Monitors… Each program has a federal regulatory agency that monitor for compliance, but they may be

assisted by state or other agencies. Each may impose their own rules and interpretations on the program that they are responsible for. In order to successfully conduct compliance for a

property, it is important to develop a relationship with the monitoring agencies and understand

their requirements. Program: Federal Agency: Assisted by: .

HUD HUD (multi-family) Performance-based Contract Administrators (CA) Rural Development RD (RHS/USDA) N/A

HOME HUD (CPD) Participating Jurisdictions (PJs) LIHTC IRS State Housing Finance Agencies (HFAs) Bonds IRS Bond issuers



Compliance Systems A Juggling Act Under the best of conditions, property management is a juggling act, with management companies and owners having to balance the many needs of the property, residents and staff.

Affordable housing presents unique challenges. Compliance with program requirements can be as important to a property’s survival as collecting rent and paying the mortgage. Tighter financial

restraints than conventional properties have to deal with only increases the challenge. The good news is that it CAN be done, as attested to by thousands of well-run affordable properties.

In this session we will discuss common factors that we have noticed at compliant properties across the nation.

Quiz: How to Best Assess the State of Compliance at a Property?

What do you think?

Training certificates on office wall

Designations after name of staff

8823s

A good quality assurance program

Overview: Main Components of a Compliance System

1. Training 2. Organization

3. File Reviews/QA

Compliance System Element #1 Training There are three main components of a complete education program:

1. Program Knowledge

We need to convey new knowledge both to new and established employees. There are several very good trainer options:

Internal trainer. An-in house trainer allows for customized training as well as specific training in company policy and forms.

Contracted trainer. A contracted trainer may bring the benefits that come with a professional speaker. Depending on the trainer, a degree of customization may be built into the presentations. Because

the client generally provides the location and other “overhead” items, these sessions may

often be held at a savings compared to public sessions, where the trainer must pay the expenses. This is especially true as trainee travel costs may be reduced by holding the

session in a location convenient to staff. Public sessions. Most professional LIHTC trainers offer some public sessions. If these are

held in a location convenient to your company, this may be a good option. Be sure to ask

if any discounts exist if you want to send multiple attendees. Sponsored sessions. State agencies and trade organizations often offer sponsored

sessions for the benefit of their partners or members. These are often a very affordable way of getting training for your staff.

Online. It remains to be seen if online learning will ever replace live sessions. It appears at this point that a mixture seems to work well for many companies. There are a few online LIHTC training options available. Zeffert & Associates has found that many of their

clients use the Zeffert online training system to “fill the gaps” between live session and to ensure that new personnel get vital training immediately. Quality online systems are



interactive and ensure that participants pass knowledge checks or “quizzes” before they

move on or pass a course. Management should also be able to track the progress of trainees.

Unfortunately, many companies think that training is done once the above is provided to their staff. In order to truly train, a further step is necessary.

2. Practical Application

Once the knowledge is imparted, on-the-job training must be

undertaken. A couple of the methods that successful companies use are:

Mentoring. Either a compliance trainer, or experienced staff can be paired with trainees. They will focus on practical application of compliance knowledge. Note: not

everyone who is good at their job is qualified to instruct others. Be sure to get feedback from both mentor and trainee as to how the

relationship is working. “Fake Files”. Allowing staff to do file reviews on non-live files can be a

very effective way of assessing how well they “get” compliance principles. These files can have specific issues placed within them to

identify an individual’s strengths and weaknesses.

Some companies do a fine job of getting knowledge to their staff, as well as enforcing the practical application. However, there is one final step to a truly great training program. 3. Assessment In classroom settings, we have quizzes to help us assess whether someone is “getting it”. We

need to have ways to measure weather a trainee is “getting” the practical application part of their training. Their work must be reviewed. If “fake files” are used (see above), their progress

can be measured in a safe environment where mistakes will not cost money. Peer review and bonuses are some ways that assessment can be conducted and incentivized.

Benchmarks and goals must be set so the trainee knows what is expected. Do not take too much time with personnel that simply are not showing steady improvement. Not everyone has the

temperament and skills necessary to be successful in this field.

Once they have passed the training phase of their career, however, they must still be assessed regularly as part of the overall company quality assurance program. We will discuss this below.

Besides producing well educated personnel, if done right, the training and quality assurance

components of a good compliance system help to identify issues for further training as well as

identifying “grey” areas where policy must be set or where further compliance research is necessary.

Compliance System Element #2 Organization Offices Over 20 years of auditing experience tells us:

Disorganized Offices = Noncompliance Disorganized Offices = Lack of Confidentiality

Company enforced file order and office organization protocols may be very helpful. If they are

important enough to have, they are important enough to enforce.



Compliance System Element #3 File Reviews/QA The need to at least “spot check” the files produced by staff is very clear. Without testing, a company truly never knows where they are relating to compliance. The IRS’ 8823 Guide refers to ”due diligence” as an important gauge of a properties compliance. Even when compliance problems arise, due diligence can lower the severity level. Among evidence of what the IRS

considers to be due diligence is: “adequate supervision of employees, management oversight and

review (internal audits), third party verifications of tenant income, independent audits”. A good file review audit system speaks to all of these concerns.

Centralized or Decentralized Compliance? There are two primary ways to organize a file review/quality assurance system. One can be

referred to as “centralized” and the other is “decentralized”. Centralized systems see all properties plugging into one central person or department. The compliance staff reviews all of

the files, usually granting approvals or listing corrections needed. These members are highly specialized and very thoroughly trained. Good decentralized systems provide thorough training to the site staff, and they approve their own work after proving that they are qualified to do so. The compliance staff primarily focuses on training, quality assurance reviews and dealing with

compliance issues that arise. We have seen several examples of both centralized and

decentralized systems working very well. In order to design a successful system around either concept, however, it is important to understand the strengths and weaknesses of both. The

following chart helps us with this.

Decentralized Systems

Strengths Challenges

Fosters greater “promotability” from within a

company. More persons receive specialized

training.

More “educators” are needed to train more

people. Even people who are very good at their

jobs are not necessarily good trainers. Thought must be given to how to “train people to train”.

Staff often feels more empowered. These organizations may be slower to change, as word of program changes or state

interpretation changes has to filter through

more people. A communication networks is vital.

Short-term staffing gaps are often less

problematic, as more personnel are qualified to ensure compliance while hiring is underway.

A file review/quality assurance system is vital.

A broader sampling will be necessary.

Centralized Systems

Strengths Challenges

These organizations may be quicker to change, as word of program changes or state

interpretation changes must be disseminated to

less people before it is applied.

Gaps in staffing hurt more! Loss of one or two key personnel can seriously injure a company’s

compliance.

Greater consistency across reviews may be

more easily attained.

An “us against them” mentality may develop

between leasing and compliance staff. The

danger of this to morale and potential time loss establishing who is “at fault” should not be

underestimated.

A key person’s drop in quality could have a far-reaching affect. Quality assurance reviews of

the reviewers is still necessary.

Site staff may be more likely to take their compliance work less seriously. Someone else

will take care of that if I don’t dot my i’s and cross my t’s.



Takeovers We have noted a disturbing trend of problem properties getting worse even when a new, compliance savvy, management company takes over. We have identified one of the possible

causes leading to this. In their zeal to gather work, sometimes a property management company’s sales staff will promise that all compliance issues will be “fixed”. Owners may conclude

that past and current noncompliant issues will be retroactively addressed. Experienced

compliance staff knows that this is difficult, and sometimes impossible. At the very least, it is likely to be very costly in term of specialized compliance manpower. Wise companies identify this

possible disconnect and ensure that sales and management staff communicate expectations, and discuss these with the owners at the outset of the relationship.

If possible a due diligence review of the files prior to engagement will help the company assess

the state of compliance for a property and likely cost associated with addressing any issues

discovered.

With existing or past compliance issues, there are several possible “fixes”. They boil down to two main approaches:

1. Retroactive fixes to files

2. Conducting correct tenant certifications at time of engagement and forward.

The agreed upon approach should be spelled out in writing as part of the management

agreement. Many companies consider option 2 to be the default, with option 1 resulting in pre-determined specific additional charges.



A Few Words of Encouragement… We Do this Job Well… Most recent GAO reviews for LIHTC were positive. Congress also clearly felt the program was

valuable, developing the TCAP and 1602 exchange programs to keep it going during difficult times. Other programs have been receiving improving reviews.

It is a challenge to learn this program well, and to implement good compliance systems.

However, the more effort something takes, the more gain is realized. Affordable housing

programs are active in all states, and qualified personnel are in demand. Not all jobs provide a certain amount of personal security and are also beneficial to Society. We strongly feel that

affordable housing-related jobs are.

SAFE, ACCESSIBLE, AND

AFFORDABLE HOUSING IS A

CRITICAL COMPONENT IN

GROWING HEALTHY

COMMUNITIES

ZEFFERT & ASSOCIATES IS A CONSULTING FIRM specializing

in the delivery of asset management and various related

services nation-wide in support of the housing industry. Since

1994, Zeffert leverages efficiencies created by existing

expertise, information management, and logistical systems to

provide high-value services at optimal cost.

www.zeffert.com 2321 Weldon Parkway St. Louis, MO 63146 P: 866-760-6000 E: [email protected]

Trust Us To Handle Your

Compliance Needs With

Quality & Reliable Service

PROVIDERS OF THE FOLLOWING

SERVICES

Asset Management

Training

File Reviews

Utility Allowance Calculations

Utility Consumption Baselines

Accessibility Reviews &

Inspections

Capital Needs Assessments

Energy Audits

Accessibility Package

Packaged Programs

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presented by - mhdc - protect and serve.pdf“to protect and serve” mhdc edition 2014 © zeffert &...

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