If you have a housing property covered by a project-based Section 8 contract, you’re subject to a Management and Occupancy Review (MOR) every year. Negative MOR findings and a low score can devastate your property. So what can you do to ensure that you ace your next MOR?
Strategy: The key to achieving a great MOR score is having good information and putting that information into proactive practice, says assisted housing expert Paul Flogstad in his webinar, “Don’t Let Low Scores Sink Your Property: Master Your MOR Preparation and LIHTC Review.” You need to understand the MOR process and how to prepare for the review, including the documentation you need to have on-hand.
Understand the 3-Step MOR Process
Step 1: Before an MOR field visit, your Performance Based Contract Administrator (PBCA) will conduct a “Desk Review,” writes Scott Bates, CPA of Cornwell Jackson. The Desk Review involves looking at your previous MOR findings, any issues with the physical property, timely financial reporting, audit findings, and history of operating expenses.
Cheat sheet: Wondering what reviewers will be looking for? Take a peek at the document reviewers themselves use for the MOR process: the U.S. Department of Housing and Urban Development’s (HUD’s) Form 9834, advises Lisa Vercauteren of the National Center for Housing Management. This 47-page document contains the entirety of what aspects of your property will be scrutinized.
Step 2: After the Desk Review comes the “On-Site Review,” where the reviewer will examine property-relevant materials, according to Christian Church Homes (CCH). Such materials include maintenance-related documentation, Real Estate Assessment Center (REAC) or physical property inspections, recent audits, preventive maintenance plans, capital improvement plans, your resident application, and other resident-related documentation and occupancy materials.
Step 3: The final step in the MOR process is the “Close-Out/Summary Report,” which the HUD reviewer will provide to you. The report will rate each of seven categories as either “A” (acceptable) or “C” (corrective action required), and then will detail any conditions that require corrective action and the timeline for meeting them. Your overall MOR rating will be:
- Unsatisfactory/Below Average,
- Satisfactory,
- Above Average, or
- Superior.
Watch Out for 10 Problem Areas
Beware: Before the reviewer even steps on site, the Desk Review can raise red flags regarding your property.
HUD points to the following top 10 risks that the MOR Desk Review will emphasize:
- Physical Assessment Subsystem (PASS) score;
- Financial Assessment Subsystem (FASS) score;
- Loan payment status (late payments);
- Management Review score (tenant complaints, staffing practices);
- Sexual Offender Audit (SOA) issues;
- Overdue Audit of Financial Statements (AFS);
- Office of Affordable Housing Preservation (OHAP) watch list;
- FASS referrals;
- Exigent Health & Safety (EH&S) violations; and
- Management Condition (discrimination, falsification).
Best bet: Before another MOR, you should have resolved—or documented as in the process of resolving—any previous red flags, notifications, or issues, Bates warns. If the reviewer finds that you have failed to fix earlier issues, your future funding may be at risk.
Also, be sure to plan as far in advance as possible for your next MOR. When you learn the MOR appointment date, start collecting documents a little at a time, CCH recommends. Divide your tasks into manageable pieces to reduce your anxiety and ensure that you’re prepared when the inspection day arrives.
You can compile your MOR-related documents into two binders (one for the HUD reviewer and one for your organization). Or you might set up a separate paper filing system and an online file for your MOR information, including a complete HUD 9834 form, your most recent REAC filing, your AFS and disclosures, and so on.
Don’t Get Caught Unprepared
Tip: Simplify your MOR preparation groundwork by using a document checklist and/or an overall MOR process checklist.
Bottom line: The most fundamental way to prepare for an MOR is to understand the process. Make sure your maintenance and operating procedures are up to par, your leasing and occupancy information is in order, and your tenant files and data security are up to snuff, Flogstad advises. When it comes to MORs, preparation is a must!
