Cost Controls Mission: Controlling the Bottom Line 1 Year Later Our Agency Mission: New Directions Housing Corporation (NDHC) develops and maintains affordable housing and vital communities in partnership with neighborhoods and other stakeholders. Our Agency Vision: Caring neighbors building community. 1

Identified Cost Control Opportunities Had no focused group to study and recommend cost controls and methods – Started a focused Cost Committee in February 2014 – Members are the CFO, Controller, Director of Housing Management and Director of IT. Had no form of incentive compensation to employees to increase profits by lowering costs – Started an incentive based compensation plan in 2014 Had no centralized purchasing – Began Centralized Purchasing for our Properties in June 2014 – Focus on Price Reduction and Control – Hired full time Procurement Specialist Purchase Orders/Systems were not used – Started using a Purchase Order System in June

Cost Control Opportunities, Continued Did not use vendor co-ops – Still have not identified any vendor co-ops in our region – still trying Did not consistently negotiate pricing except on large purchases – Negotiate pricing on everything Had no managed supply inventory of frequently used items (making use of unutilized warehouse space to lower costs; reducing number of orders and trips to buy items) – Our next major focus – plan to begin a supply inventory in 2015 – We have the warehouse space – We have the software module Managers did not target specific areas of expenses to control – The cost committee has focused on Supplies-Property Maintenance (Green Initiative), Mobil Device Contracts, Utility Conservation (Green Initiative), Office Supplies (Green Initiative), Security Contracts, Long term IT costs 3

Results Initial Targeted Areas to Reduce Costs – Utilities In Louisville, we cannot negotiate utility rates. We started tracking the water costs, our biggest drain and control problem, but it only verified there were problems and the information was too late to resolve anything (water company is 2 months behind on billing). Solution is to put water monitoring systems which we have started with two apartment communities since January – installation just completed on one and is in process on the other. (More details later) – Cell Phones We went to the two main players in the cell phone business, which are very competitive with each other. The result is that we lowered our costs by $11, over the last 12 months, which is 38.86%. – Safety & Security Expenses We are currently in the process of renegotiating and in some cases replacing old equipment. No results to report yet. – Maintenance Supplies – Properties By the use of our new Purchase Order System and Procurement Specialist, we were able to reduce these costs by $104, over the last 12 months, which is 21.51%. – IT Costs This is in process. New Directions has invested over $150,000 in a complete overhaul from a Windows environment to a MAC/Apple environment. Installation is about 90% complete and is expected to be done within days now. We will monitor the cost comparison over time. As stated previously, the less frequent replacement of equipment and reduced costs on firewalls and protection should save us approximately $248,000 over time. So, we will be monitoring the savings closely over time because savings in this area will be long term. – Incentive Based Compensation Pilot Program This was started last year based on operational cash flow and resulted in a net savings of over $75,000. 4

Current Targets & Focus Property Maintenance & Supplies – Although we saved a whopping 21.51% the first year, several of our properties, including the 3 largest ones, barely broke even with our largest property, falling behind the previous year. We estimate that if we focus heavily on these properties and start our bulk purchasing inventory system, we can expect to increase our savings next year. Office Supplies – We approached our long time local office supply provider and gave them an opportunity to get all of our business. Prior to this, we used online big box office supply sources mainly. We spent a lot of time explaining all the wonderful programs we provide to the community. They sincerely wanted to help, and went to their suppliers and the result is that they negotiated very deep discounts – averaging 52% from the suppliers. In addition to savings, they developed just for us an online ordering system where our employees can order online and their supervisor gets the order and can approve it or not. We asked our employees to no longer use their credit cards or supermarkets to buy office supplies and to only order using this system. Now, supervisors know what is being ordered and the pricing is way better than before. An additional unmeasured benefit is the increase in efficiency by the reduction of employee time and mileage spent procuring supplies. Coffee Service – This is an area where a lot of money was wasted. The same office supply company also had a service and went to their supplier and negotiated very low costs for us and reduced them to approximately ½ of what we spent earlier. Both the office supplies and coffee service have just been changed within the last 2 months. Buying in Bulk – Inventory System – Preparing now to roll this out later this year Water Monitoring Systems – These are expensive and take time – we are doing this one property at a time – one has just been completed and one is almost complete. Cost Committee – Still meets regularly and will identify more areas to target as we go forward 5

Water Monitoring Systems & Green Initiatives Water Monitoring Systems – Last year HUD installed Smart Water Metering systems in over 100 of their properties – the result was a savings of over 50% – Systems offer immediate reporting of leaks and water usage – The systems usually pay for themselves in less than 18 months – Average savings are 50% without billing back to the tenant – The second property we installed, we will begin billing back to the tenant and expect a very large reduction in our water costs – Right now, NDHC spends $887,276 per year on water and sewer, which equates to $883/year per unit. The savings after all the water monitoring systems are installed could reach up to $443,638 per year at current prices, or $441/year per unit. This is without billing back to the tenant. – This conserves energy and supports our Cost Control Initiative and our Green Initiative Last year New Directions was recognized as a Green Organization by NeighborWorks America. – New Directions used the $15,000 green grant to partially pay for the installation low flow water gaskets in all of our owned property unit faucets. This should reduce the flow and water waste by as much as 30% – New Directions has started a comprehensive company wide Green Initiative – buying & using recycled and environmentally safe products whenever possible. Our initiative is appropriately named “Green is the New Black” as we seek to become more green and to increase our bottom line. 6

Impact NDHC turns away opportunities every year because of the lack of funding. The impact of the savings we have experienced so far is large and meaningful enough to increase or enhance any one or more of the following services we provide: Transitional Housing – Transitioning low income families to self sustainability. This program includes providing housing for families in the program for up to 2 years and is very costly. Repair Affair – Repairing homes for the low income elderly and disabled citizens in our area. Last year we repaired 183 homes and recruited over 1,813 volunteers. Every year, we have to turn away many requests for lack of funding. In 2014 we increased our services by 23 homes and 213 volunteers over the prior year, largely in part to the costs savings we were able to realize. Client Counseling – Helping our low income tenants and the homeless obtain jobs, places to live, health care, and help meet other needs. We could increase staffing to be able to help more people. In December of 2014 we added 1 staff member to work at the homeless shelter. So far this has resulted in the successful housing of 8 homeless families. Learning Centers - Increase funding for our 8 learning centers; after school programs for helping children succeed in their education, programs for the elderly and disabled, and programs for our tenant families and members of the neighborhoods. Raised Gardens - Create more gardens for our senior citizen communities. Expanding our Portfolio – Purchase and develop more low-income housing communities in our portfolio. Last year we purchased and renovated two 4-plex apartment buildings called “Market Street Properties.” We partnered with another agency to house 8 low income refugee families in these 8 units. Increasing any of the above would help us achieve our agency vision of being caring neighbors and building our community. 7