Inform Owner of Site's Fiscal Health with Periodic Management Reports

As manager of an assisted site, one of your most important jobs is to keep the owner updated on how well you're managing the site. The owner wants to know on a monthly or quarterly basis how well the site is doing financially and that there's no major occupancy or other problems affecting the site. To convey this information most effectively, you should prepare a written management report giving the owner the kind of information that he or she needs to make informed decisions about the site.

Unfortunately, many management reports are inadequate—they may be only a few paragraphs long, and include insufficient information for the owner to understand what's going on at the site, says management expert Roxie Munn. Others may contain too much detail about particular residents or day-to-day operations, which may annoy and frustrate some owners.

We'll tell you what to put in the management report so that the owner can be sure the site is in good shape and that your management company knows what it's doing. We'll give you a Model Form: Site Management Report, which you can compare with the management report that you use now. If there's something missing from your current management report, you might want to add it to your next one.

When to Send Report

Our Model Form can be used on a monthly or quarterly basis. The frequency depends on the reporting demands of the owner. Generally, you can keep the owner sufficiently apprised of how well you're managing the site by reporting on a quarterly basis. Some owners may want more frequent updates, especially during initial lease-up or if the property is in trouble.

But even if the owner doesn't ask for periodic reports on how you're managing the site, it's important to be proactive about reporting, recommends Munn. Periodic reporting can make you stand out as a top-notch management company and protect you in the future if problems do arise. Owners may not always realize that they need certain information about the site. If you give them what they need to know ahead of time, they won't come to you later when there are problems, asking why they weren't notified.

WHAT REPORT SHOULD INCLUDE

Here's a rundown of the basic information you should give the owner:

1. Financial Report

The financial statement is the most important part of the management report. “Owners need to know the bottom line—the net operating income,” says Munn. You arrive at the net operating income by subtracting the site's total operating expenses from its total gross income.

When determining gross income, include only the money actually collected during the reporting period. The management report should break down the site's income into line items that include:

• Rental receipts, including assistance payments (but excluding utility allowances);

• Late charges and other penalty charges; and

• Ancillary income from laundry, cable television, or other optional services that the site provides.

Expenses should include the money actually paid out of the site's bank account during the period. You can break down expenses as follows:

• Payroll, including salaries, commissions, and bonuses for all employees;

• Rental expenses, including advertising and turnover costs;

• Repairs and maintenance, both routine work and major items;

• Services—for example, utilities paid by the site, trash collection, and pest control; and

• Administrative expenses, including compliance monitoring expenses, auditing and legal fees, telephone and Internet charges, insurance, and taxes.

The financial section of the report can be very general or very detailed, depending on how much information the owner wants. Our report breaks down each expense category into specific outlays—for example, we've subdivided the repairs and maintenance category into plumbing, electrical, HVAC repairs, and the like. But you may choose to include only general categories, without subdivisions.

Some owners will want you to include certain items in the report every period, even if the site doesn't collect or spend money on them. For example, an owner might require you to include the subcategory “Plumbing repairs” on the report, even if the site didn't spend any money on plumbing. In this case, you would simply report plumbing expenses as zero. Other owners will want to see only the categories that had activity. For these owners, if there are no plumbing repairs in a given month, you should omit “Plumbing repairs” from that period's report. What your report ultimately includes will depend on how much information the owner requests.

2. Occupancy Report

The second part of the report details the site's leasing activity and the status of move-ins and move-outs. You should report the number of leases signed during the period, and give the owner a breakdown of the waiting list by each unit type.

The occupancy report should also tell the owner the number of vacancies, the number of rent delinquencies and evictions, and the “economic vacancy rate” for the reporting period.

A typical market vacancy rate is strictly a measure of performance regarding filling available units. On the other hand, an economic vacancy rate is a measure of dollar loss against ideal financial performance, comparing actual performance to an ideal performance in which all existing, as opposed to available, units are generating the maximum income all the time.

For example, due to normal turnover, some units may be rented but not occupied. If your site takes one week to prepare a unit for occupancy, every unit turned over cannot collect rent for a week, even if a tenant is waiting for that unit. Slower turnover is reflected in a higher economic vacancy rate.

You can calculate the economic vacancy rate by dividing the site's actual income by its potential income. This formula is more useful in determining the vacancy rate than is dividing the number of occupied units by the number of total units at the site.

This information paints a clearer picture of how well your site is doing in attracting and screening eligible households than the financial information alone does, notes Munn.

3. Marketing Report

The financial and occupancy sections of the report show the owner how much money the site is making—but that's only part of the picture. The owner also needs to see how effective the site's marketing efforts have been in attracting eligible applicants and, at newer sites, reaching initial lease-up goals, Munn explains. That information is included in the third section of the report.

The marketing report should include a full traffic summary report. The traffic summary is a separate attachment telling the owner the number of telephone calls, emails, and visits; the telephone, email, and walk-in conversion ratios; and the advertising sources that produced those calls, emails, and visits. This information shows the owner that your company's leasing agents are doing all they can to fill vacant units with eligible households.

Also, to show whether these efforts are attracting the right people, tell the owner what percentage of applicants to your site is eligible for its assisted housing program.

4. Narrative Report

The narrative section of the management report is your opportunity to explain any changes in income and expenses or any other aspects of the site and its operation that don't fit into the other three sections. For example, you may have reported in the financial section that net operating income is down because of a decrease in rental income. The narrative is the place to describe what caused the decrease. For instance, the site may have been assessed with higher property taxes this period, resulting in lower net operating income.

The narrative section has other uses, too. You can use it to tell the owner the status of HAP contract expirations and renewals. For instance, you could tell the owner that you're discussing renewal options with HUD for a contract that expires in six months. You can also report the results of any audits or inspections by HUD or any other local authority in this section.

This is also the place to address other subjects that the owner should know about, such as market changes and any continuing or anticipated capital improvements and repairs, suggests Munn. And use this section to explain any unusual incidents, such as a fire or an act of vandalism, and to provide any other information that the owner demands.

Insider Source

Roxie Munn, CPM, NAHPe, HCCP: President, Roxie Munn, Inc., 117 Kingsland Way, Piedmont, SC 29673; www.roxiemunn.com.