Spectrum Enterprises & CHFA Welcome to the Compliance Conference November 4, 2005

SPECTRUM Compliance Monitoring Our Compliance Reports to CHFA are based on review of:  Annual Record Keeping Submissions – This includes the electronic Unit History Report (a.k.a. Status Report), Owner’s Certification, and utility allowance documentation.  On Site File Review – 20% of in-place households (minimum of 3) will be chosen at random for compliance review.  On Site Physical Inspection – all buildings, common areas, grounds and 20% of LIHTC units (minimum of 3). These units will correspond to the random units selected for file review.

Annual Record Keeping Submissions:  Please be sure that CHFA & Spectrum have accurate and complete information for contacting the owner/agent of each property with LIHTC funding. Update this information in the Unit History Report at least annually. Contact CHFA & SPECTRUM immediately if there is any change.  Owners will receive written instructions along with applicable deadlines for completing this report.  The software is posted on our website for download.  The electronic Unit History Report tracks development data along with unit history statistics for all units and buildings.  This report is also used to review your initial qualified basis. SPECTRUM Compliance Monitoring

Annual Record Keeping Submissions:  The annual Owner’s Certification of Continuing LIHTC Program Compliance will be reviewed for consistency from year to year and accuracy of answers.  The Unit History Report will also be reviewed for a number of items, including the following:  Consistency of the tenant files and Schedule A reporting to the IRS  Late/missing annual certifications  Rent-restriction and over-income households  Initial qualifying basis and Minimum Set-Aside compliance  Vacant Unit and Next Available Unit (140%) Rules  Compliance with the Extended Low-Income Housing Commitment

SPECTRUM Compliance Monitoring Tenant File Review:  We will schedule a visit to your project. You will be notified in advance of the site visit.  20% of all current LIHTC households (minimum of 3) will be randomly selected for review.  Be sure to use all required & recommended forms, found in Section 6 of the Connecticut LIHTC Compliance Manual and also posted on our website ( ). Failure to do so can result in reports of noncompliance.  Be sure that everyone involved in the Tenant Certification process is familiar with the Connecticut LIHTC Compliance Manual and HUD REV-1. All staff personnel involved in the tenant certification process should be familiar with these handbooks.  These two manuals can answer most questions that arise in respect to compliance in tenant files.

SPECTRUM Compliance Monitoring Tenant File Review - Make sure your on-site staff can answer the following questions:  What is the property’s year of allocation?  How many buildings are in the project?  What is the Placed In Service date for all buildings?  What is the Minimum Set-Aside? Is it across the entire project or building-by- building?  Are there any areas of the building/project excluded from the eligible basis?  What percentage of the project is LIHTC? Which units are LIHTC?  In what year will credits be first claimed? Alternatively – what was the first year credits were claimed for existing projects?  What utilities are paid by tenant? What is the utility allowance?  Are there set-aside units (designated handicapped, deep income targeting, etc.)? If so, these must be identified.

SPECTRUM Compliance Monitoring Tenant File Review:  This program can be very confusing for people who are unfamiliar with its requirements.  CHFA now requires continual industry-recognized training & certification of all staff personnel involved in the Tenant Certification process. There are a number of skilled and qualified instructors who make this training available in all areas of the US on a regular basis.  We also strongly suggest that all tenant files are approved prior to move in. This could be a third party LIHTC specialist or by another manager with LIHTC experience within the same company.  Reports of noncompliance most often stem from a lack of training, lack of sufficient documentation, and confusion with the rules of other programs in place at the same property.

SPECTRUM Compliance Monitoring Tenant File Review:  Please feel comfortable contacting our monitoring staff with any questions about compliance requirements.  If you are working on a file and are unsure about a circumstance which could be a compliance issue – please ask someone (us!) before occupying the unit. Some noncompliance is not correctable; some noncompliance is not easily correctable; and some noncompliance can be very costly; but all noncompliance is avoidable!  (207) – call anytime!

SPECTRUM Compliance Monitoring Tenant File Review:  It is generally a good practice to obtain as much documentation as possible. We do not encourage owner/agents to simply meet bare minimum requirements.  For example, we would suggest recent tax returns, pay stubs, and/or bank account statements (showing all deposits) be obtained to support the 3 rd party verification of income. All income data should be consistent. If it is not – you will need to investigate further.  One caveat to this would be to maintain a sense of structure, consistency, and organization in your files.

SPECTRUM Compliance Monitoring Physical Inspections – All buildings (exterior & interior), grounds, common areas, and 20% of LIHTC units will be inspected.  HUD Uniform Physical Condition Standards as well as State Building Code laws apply.  Fair Housing and ADA construction requirements also apply.  An individual familiar to the tenants must accompany our inspector while we inspect common areas and units.  If your property is located in a dangerous area, please identify this to our staff when we contact you to schedule the inspection. For the safety of all involved, arrangements should be made to meet our inspector at a safe location.  Inspection certificates for boilers, elevators, fire extinguishers, etc., must be available for review.

SPECTRUM Compliance Monitoring Physical Inspections – Two types of noncompliance can result from our physical inspection: 1) Violations of UPCS or local inspection standards. This would include both major (structural and roof detriments, blocked egresses, expired inspection certificates, non-functional or missing smoke detectors, pest infestation, mold, serious electrical, heating or plumbing inadequacies, common area safety lighting problems) and minor (routine maintenance) issues.  There is a 24-hour window to correct any major physical inspection items.  Major physical inspection findings in common areas can put all LIHTC units in the building into noncompliance.  In some cases, isolated major physical issues that are corrected during the inspection may not always be reported as noncompliance.  You have 30-days from the date of the initial report to repair minor items. 2) Project not available for use by the general public. This is reported if there are violations of Fair Housing/ADA design requirements.  Not meeting mandatory accessibility requirements can result in loss of credits.

SPECTRUM Compliance Monitoring Four steps to avoid noncompliance during the inspection: 1) Do your own inspection before we get there. 2) Keep a log of when your inspection certificates expire. 3) Keep up on your routine maintenance. 4) Bring smoke detectors, batteries, screwgun, etc., with you during the inspection.

SPECTRUM Compliance Monitoring After we review your property we will issue a report to CHFA and the project owner.  Please note that management agents will not be provided a copy of the report. It is the owner’s responsibility to do so (if they wish). According to the IRS Code and Regulations, compliance is the owner’s responsibility, not management’s.  There is a 30-day response period to this report.  If we note findings of potential noncompliance, please work closely with us to resolve all issues before 8823’s are issued.

SPECTRUM Compliance Monitoring After the 30 day response period has concluded, we will issue the second – and final – report.  This will list any findings of noncompliance associated with the review. We are required by federal law to report any findings of noncompliance (corrected or not).  At this time, Form 8823 will be generated, if needed.  Corrected noncompliance is much better than continuing noncompliance.  Part of our job is to help properties say in compliance. If you are unsure of something, feel free to call us.

SPECTRUM Compliance Monitoring In Summary:  Make sure the information in your Unit History Report and the tenant files is consistent.  Make sure that you and your on-site staff are familiar with the Connecticut LIHTC Compliance Manual and the HUD REV-1.  It is often helpful to perform your own physical inspection and make any necessary repairs prior to our arrival.  Reports are provided only to owners. It is the owner’s responsibility to notify management of any potential findings of noncompliance. Compliance is the owner’s responsibility.  If any potential findings are cited in the initial report, please respond to them promptly.  We are available to answer LIHTC compliance questions: (207)