Instructions for RD Form 3560-7

MULTI-FAMILY HOUSING PROJECT BUDGET/UTILITY ALLOWANCE

Borrowers, or their authorized representative, are required to complete this form and submit it to plan and report the financial activity of their MFH project, within the timeframes established in 7 CFR Part 3560. Use this form to establish initial budgets and rents, for monthly, quarterly or annual reports, to request rent changes, or to describe special servicing budgets (7 CFR 3560.303 and 3560.454).

The data contained on this form is transmitted to Rural Development through the Management Interactive Network Connection (MINC) and uploaded into the Multifamily Housing Information System (MFIS). The MINC system can be accessed at https://usdaminc.sc.egov.usda.gov/. If you are not required to use the MINC system, submit the original of the completed form in hard copy or facsimile to the appropriate Rural Development servicing office.

Borrowers, or their representative, must complete all of the items specified in the following table.

Fld Name / Item No.	Instruction
1 Project Name	Enter the project name.
2 Borrower Name	Enter the name of the borrower.
3 Borrower ID and Project No	Enter borrower’s ID and the project number.
4 Loan/Transfer Amount $	Enter original Loan/Transfer amount.
5 Note Rate Payment $	Enter Note Rate Payment amount.
6. IC Payment $	Enter Interest Credit Payment amount.
7 Reporting Period	Check the most appropriate box.
8 Budget Type	Check the most appropriate box.
9 Project Rental Type	Check the most appropriate box.
10 Profit Type	Check the most appropriate box.
11 Utility Information	Check the most appropriate box.
12 RA Request	Check box and enter appropriate number of RA needed and currently available, if additional RA is needed.
13 Borrower Accounting Method	Check the most appropriate box.
14 Current Budget	Enter the beginning and ending dates of the project’s most recently approved budget.
15 Actual	Enter the beginning and ending dates of the project’s current fiscal year in which actuals are being reported.
16 Proposed Budget	Enter the beginning and ending dates of the next year’s planned activity.
17 Comments or (YTD)	Enter any comments.

PART I – CASH FLOW STATEMENT

OPERATIONAL CASH SOURCES

Fld Name / Item No.	Instruction
1 Rental Income	For proposed columns, the appropriate “TOTAL” from PART IV. The actual column includes rental payments actually received from tenants. Also included are any non-RHS rental subsidies received from other governmental sources such as Section 8 housing assistance payments.
2 RHS Rental Assistance Received	For the actual column only, all RHS rental assistance received by the project either as cash or netted from the RHS payment.
3 Application Fees Received	When application fees are required from applicants for occupancy, enter income received.
4 Laundry and Vending	Income from laundry or vending at the project. Use net income if under a contract, or gross income if not.
5 Interest Income	Interest from all project accounts, including the Reserve Account. Interest on tenant security deposits is excluded, unless transferred to the General Operating Account when permitted by state laws.
6 Tenant Charges	Income from non-sufficient fund and late charges, damage and cleaning fees, forfeited tenant security or damage deposits, and other tenant charges.
7 Other - Project Sources	Income from all other project sources. Notate.
8 Less (Vacancy and Contingency Allowance)	For proposed columns only, the estimated loss to rental income for either vacancy or contingencies.
9 Less (Agency Approved Incentive Allowance)	For proposed columns only, the Rural Development approved project funded rental incentives.
10 Sub-total [(1 thru 7) – (8 & 9)]	Add 1 thru 7 and subtract 8 and 9.

NON-OPERATIONAL CASH SOURCES

Fld Name / Item No.	Instruction
11 Cash – Non Project	Income from all non-project sources not in the form of a loan such as insurance claims. Include borrower provided tenant subsidy and cash contributions. Also include funds to pay RHS late fees and owner contributions due to tax credit rent limitations. On the initial operating budget include 2% deposit.
12 Authorized Loan (Non-RHS)	Any non-RHS loan to the project which must be authorized by the Agency according to 7 CFR 3560.66.
13 Transfer From Reserve	Total of all withdrawals from the reserve account (from PART III, line 7). All withdrawals must be authorized according to 7 CFR 3560.306.
14 Sub-Total (11 thru 13)	Add 11, 12 and 13.
15 Total Cash Sources (10+14)	Add 10 and 14.

OPERATIONAL CASH USES

Fld Name / Item No.	Instruction
16 Total O&M Expenses (From Part II)	From PART II, line 41.
17 RHS Debt Payment	The interest credit reduced payment (or full note rate payment when a loan has no interest credit) for all RHS project loans, recoverable cost items, and audit receivables. When an SNR is in effect, the amount of the mortgage payment under SNR should be inserted in column 4.
18 RHS Payment (Overage)	For the actual column only, the amount of overage or surcharge paid to the Agency.
19 RHS Payment (Late Fee)	For the actual column only, the amount of late fees paid to the Agency.
20 Reduction in Prior Year Payables	Expenses paid during current fiscal year for previous year’s expenses. This line should be used primarily in conjunction with a workout plan that in part is implemented to reduce overdue payables.
21 Tenant Utility Payments	For the actual column only, the amount of RHS rental assistance (RA) paid to tenants for utilities.
22 Transfer to Reserve	The amount transferred to the reserve account. This equals PART III, line 2.
23 Return to Owner/NP Asset Management Fee	On the proposed columns, enter the amount authorized by RHS unless you have mutually agreed with the Agency to waive all or part of it. For the actual column, return to owner may only be taken in accordance with 7 CFR 3560.305. For NP Asset Management Fee, refer to 7 CFR 3560.303(b)(1)(vii).
24 Sub-total (16 thru 23)	Add 16 thru 23.

NON-OPERATIONAL CASH USES

Fld Name / Item No.	Instruction
25 Authorized Debt Payment (Non-RHS)	Repayment of Non-RHS loans must be approved by the Agency in accordance with 7 CFR 3560.66.
26 Annual Capital Budget (From Part III, lines 4-6)	Amount authorized by the Agency for capital expenditures to be paid from the reserve account. Amount must match Part III, lines (4-6).
27 Miscellaneous	Amount authorized by the Agency.
28 Sub-Total (25 thru 27)	Add 25, 26 and 27.
29 Total Cash Uses (24+28)	Add 24 and 28.
30 Net Cash (Deficit)	Subtract 29 from 15.

CASH BALANCE

Fld Name / Item No.	Instruction
31 Beginning Cash Balance	All project operating funds in the General Operating Account including any 2% initial operating capital, and any funds in a Real Estate Tax and Insurance Escrow Account. (On the initial project budget, enter the 2% initial operating capital contribution on line 31.) This balance does not include funds in the Reserve Account or Tenant Security Deposits.
32 Accrual to Cash Adjustment	Enter “Zero” when the cash accounting method is used. When the accrual accounting method is used, the borrower may, with assistance of the project accountant, use this line to reconcile the accrual accounting records with the Beginning and Ending CASH Balances.
33 Ending Cash Balance (30 + 31 + 32)	Add lines 31 and 32. Enter the ACTUAL COLUMN amount on line 31 of the FUTURE PROPOSED column unless it is a negative balance, then enter zero. The PROPOSED BUDGET column ENDING BALANCE must be a positive balance and not cause an unwarranted rent increase. It should not exceed the total of: (1) approximately twenty percent of line 16, Part I; (2) amount held for taxes and insurance; (3) any 2% initial operating capital (during the first 7 years or until it is withdrawn, whichever comes first) For additional guidance, refer to HB-2-3560, “Asset Management Handbook”, Chapter 4.

PART II – OPERATING AND MAINTENANCE EXPENSE SCHEDULE

Fld Name / Item No.	Instruction
NOTES:	(1) Enter the expense for the following items on the most appropriate line. Break down costs as requested. (For example: separate HEALTH INS. & OTHER EMP. BENEFITS from “SITE MANAGEMENT PAYROLL” costs.) (2) The practice to prorate or not to prorate the cost of one person who performs multiple tasks should be consistent from one year to the next for cost comparison purposes. (3) When this form is used for monthly or quarterly reports, SUB-TOTAL lines are the only lines required to be completed.
1 Maintenance and Repairs Payroll	Payroll salary or hourly wages for project maintenance and janitorial or custodial staff who maintain a project’s buildings and related facilities.
2 Maintenance and Repairs Supply	Includes buildings and equipment repair parts and items such as light bulbs, carpet cleaner and similar items not included in maintenance contracts.
3 Maintenance and Repairs Contract	Contracts or lump sum invoices for project building and system (heating, cooling, electrical, plumbing) maintenance and janitorial or custodial service.
4 Painting	Includes exterior and interior painting or covering and labor, materials and supplies, not covered by a maintenance and repair contract and not considered major capital expenditures.
5 Snow Removal	Contract, job service, or equipment amortization and maintenance expense.
6 Elevator Maintenance/ Contract	For contract maintenance service or specific repair and maintenance of project elevators.
7 Grounds	Grounds maintenance contracts or supplies such as seed, fertilizer and additional shrubs or trees not covered by maintenance & repair contract.
8 Services	Includes pest control, security, window washing, laundry and vending.
9 Annual Capital Budget (From Part V – Operating)	Amount must match totals from Part V, columns titled “Proposed from Operating” or “Actual from Operating”.
10 Other Operating Expenses (Itemize)	Notate others not listed above.
11 Sub-Total Maint. & Operating (1 thru 10)	Add lines 1 thru 10.
12 Electricity	Self explanatory. Report only expenses paid by the project. Do not include utility costs paid by tenants on this form.
13 Water	Self explanatory. Report only expenses paid by the project. Do not include utility costs paid by tenants on this form.
14 Sewer	Self explanatory. Report only expenses paid by the project. Do not include utility costs paid by tenants on this form.
15 Fuel (Oil/Coal/Gas)	Self explanatory. Report only expenses paid by the project. Do not include utility costs paid by tenants on this form.
16 Garbage & Trash Removal	Self explanatory. Report only expenses paid by the project. Do not include utility costs paid by tenants on this form.
17 Other Utilities	Notate other utilities not listed above.
18 Sub-total Utilities (12 thru 17)	Add lines 12 thru 17.
NOTES FOR ADMINIS- TRATIVE EXPENSES:	(1) For projects operating with a zero or reduced rent “manager’s apartment,” be sure to designate the appropriate UNIT TYPE in PART IV – RENT SCHEDULE. (2) Expenses below reflect project expenses only. Expenses that a management firm incurs are included in the MANAGEMENT FEE, which is defined in the management agreement/management certification according to the management plan.
19 Site Management Payroll	Salary or wage expense for site management personnel.
20 Management Fee	The management fee is compensation for performance of duties and responsibilities described in the management plan and shall not exceed the amount specified in the management agreement/management certification. The management fee is based on the Agency’s prescribed “bundle of services.” For proposed budgets, the fee should not exceed 100 percent occupancy of revenue producing units. For actual budgets, fee should be based on the maximum per revenue producing unit occupancy achieved during the fiscal year.
21 Project Auditing Expense	Fees paid for engagement, auditing expenses or verification of accounts when required by 7 CFR 3560.308.
22 Project Bookkeeping/Accounting	To the extent not included in the management fee as specified in the management agreement/management certification, project bookkeeping and accounting.
23 Legal Expenses	Expense for legal items for project operation.
24 Advertising	Project advertising.
25 Telephone & Answering Service	For appropriate project related service not covered by the management fee.
26 Office Supplies	Include paper, forms, computer software, floppy disks used exclusively by the project not covered by the management fee.
27 Office Furniture & Equipment	Includes approved computer hardware, fax machines, copiers, desks, chairs and file cabinets used exclusively by the project.
28 Training Expense	Includes approved costs associated with site staff training. Does not include training of management agent central office staff.
29 Health Ins. & Other Emp. Benefits	Health insurance and other project employee benefits.
30 Payroll Taxes	Payroll taxes for all project employees.
31 Workman’s Compensation	Worker’s compensation insurance paid for project employees.
32 Other Administrative Expenses (Itemize)	Notate others not listed above.
33 Sub-Total Administrative (19 thru 32)	Add lines 19 thru 32.
34 Real Estate Taxes	Includes all general real estate taxes for project property.
35 Special Assessments	Special assessments directly charged to the project.
36 Other Taxes, Licenses & Permits	Includes personal and other property taxes, special licenses or permits required to operate the project.
37 Property & Liability Insurance	Includes all hazard and extended coverage, flood, liability and other project insurance required for one year. Notate and prorate the cost of multi-year insurance policies.
38 Fidelity Coverage Insurance	Fidelity coverage for one year, not covered by the management fee.
39 Other Insurance	Notate other project insurance not listed above.
40 Sub-Total Taxes 7 Insurance (34 thru 39)	Add lines 34 thru 39.
41 Total O&M Expenses (11 + 18 + 33 + 40)	Add 11, 18, 33, and 40.

PART III – ACCOUNT BUDGETING/STATUS

RESERVE ACCOUNT:

Fld Name / Item No.	Instruction
1 Beginning Balance	Record Beginning Reserve Balance for reporting period.
2 Transfer to Reserve	Must equal PART 1, line 22.

TRANSFER FROM RESERVE. Reserve account use is restricted by 7 CFR 3560.306. All withdrawals require prior Agency approval. The use of reserve funds is also reflected on Part I, CASH FLOW STATEMENT, line 13.

Fld Name / Item No.	Instruction
3 Operating Deficit	For deficit operating expenses.
4 Annual Capital Budget (Part V – Reserve)	For annual capital budget item. Must match totals from Part V, columns titled “Proposed from Reserve” or “Actual from Reserve”.
5 Building & Equipment Repair	For major building equipment repair or replacement (Not included in PART V).
6 Other Non-Operating Expenses	Notate others not listed above. This line may be used for-profit or limited profit borrowers for the 25% of interest earned on the reserve account.
7 Total (3 thru 6)	Add lines 3, 4, 5 and 6.
8 Ending Balance	Add 1 and 2 and subtract 7.

GENERAL OPERATING ACCOUNT: *

REAL ESTATE TAX AND INSURANCE ESCROW ACCOUNT:*, **

TENANT SECURITY DEPOSIT ACCOUNT: *

*The BEGINNING and ENDING BALANCE for each account is shown when actual expenses are submitted.

** Complete when not included in the GENERAL OPERATING ACCOUNT.

PART IV – RENT SCHEDULE AND UTILITY ALLOWANCE

Fld Name / Item No.	Instruction
NOTES:	(1) The rent schedule documents the rent and utility allowance structure and establishes the RENTAL INCOME entered in PART I, Line 1. (2) The BASIC rent is the level required to cover all uses of cash and the repayment of the Rural Development loan at the interest credit reduced payment, the NOTE RATE rent is the level required to cover all uses of cash and the repayment of the Rural Development loan at the unsubsidized or promissory note rate. Consequently, the difference in the total revenue generated at the BASIC rent and the NOTE RATE rent is the project’s total potential Rural Development interest credit available, or overage that could be charged. (3) When establishing rental rates, need for cash is established first. (4) For each of the columns in PART IV, enter the required information for each unit size.
A. CURRENT APPROVED RENTS/ UTILITY ALLOWANCE	The current project rental rates, approved by the Agency according to 7 CFR Part 3560.205.
UNIT DESCRIPTION	BR SIZE. The UNIT SIZE is: 0 for efficiencies; 1 for 1 bedroom units; 2 for 2 bedroom units, etc.. UNIT TYPE. This is used only to distinguish different rental rates for one UNIT SIZE. Example, “S” – small, “M” – medium, “L” – large. Leave blank where there is only one rental rate per UNIT SIZE. The valid UNIT TYPE codes are any letter. The only codes with specific references are: R – Manager/Caretaker unit, Reduced Rent: Z = Manager/Caretaker Unit, Zero Rent NUMBER, NUMBER OF UNITS.
RENTAL RATES	BASIC, BASIC RENT, (Described in Note No. 2 above) NOTE RATE, NOTE RATE RENT. (Described in Note No. 2 above) HUD. The HUD approved contract rent. NOTE: When HUD grants a rent change, but Rural Development does not approve all or part of the same change, use the rent columns as follows: BASIC RENT – Rural Development approved rent level at the interest credit reduced rate, NOTE RATE RENT – Rural Development approved rent level at the note rate, HUD RENT – HUD approved rent
POTENTIAL INCOME FROM EACH RATE	BASIC. Multiply the NUMBER OF UNITS times the BASIC RENT, and multiply the result by 12 [(NUMBER X BASIC) x 12] NOTE RATE. Multiply the NUMBER OF UNITS times the NOTE RATE RENT, and multiply the result by 12 [(NUMBER X NOTE RATE) x 12] HUD. Multiply the NUMBER OF UNITS times the HUD RENT, and multiply the result by 12 [(NUMBER X HUD) x 12] UTILITY ALLOWANCE. Enter the current utility allowance. CURRENT RENT TOTALS – BASIC. Add all entries in the INCOME-BASIC column. CURRENT RENT TOTALS – NOTE RATE. Add all entries in the INCOME-NOTE RATE column. CURRENT RENT TOTALS – HUD. Add all entries in the INCOME-HUD column.
B. PROPOSED RENTS	Use this area when establishing the initial rent schedule or proposing a change to current rents. EFFECTIVE DATE OF RENT. Enter the projected effective date for proposed rent change.
C. PROPOSED UTILITY ALLOWANCE	Enter monthly dollar allowance detail. EFFECIVE DATE OF UTILITY ALLOWANCE CHANGE. Enter the projected effective date for proposed utility allowance change.
NOTE 1	Enter RENT TOTALS on PART I, line 1, according to NOTE #2 (below), and the following: For budgets with annual reporting periods: (1) Enter RENT TOTALS on the PROPOSED BUDGET column. (2) Enter PROPOSED RENT TOTALS on the PROPOSED BUDGET COLUMN. (3) When there is no proposed change to current rents, enter CURRENT RENT TOTALS on both CURRENT BUDGET and PROPOSED BUDGET column. (4) Actual rental income will be entered on the ACTUAL column. For budgets with less than annual (monthly, quarterly) reporting periods: (1) Enter CURRENT RENT TOTALS on the CURRENT BUDGET column. (2) Actual rental income will be entered on the ACTUAL column.
NOTE 2	Follow this process to establish new rent rates: Enter operational use of cash (From Part I – Lines 16, 17, 22 & 23) Enter non-rent income (From part I – lines 4, 5, 6 & 7) Rental Income Needed – Subtract Line 2 from Line 1 Projected occupancy level factor (.__) (For example, enter “.95” for 95% expected occupancy) Total income needed from rent (Divide line 2 by Line 4) Calculate BASIC and NOTE RATE rents for each size unit. (Refer to 7 CFR part 3560.205)

PART V – ANNUAL CAPITAL BUDGET

Fld Name / Item No.

Instruction

General Instructions

Prepare Part V of this form when the proposed budget or the annual report of actual expenditures include capital items funded from the Reserve Account or the General Operating Account (GOA). Entries included in Part V are considered major capital expenditures and should not be duplicated expenses entered on Part II. Part II should only be used for minor routine repair and/or replacement. This distinction is necessary to assume comparability of costs during the budget approval process. Recording the proposed capital use on Part V does not constitute a reserve account withdrawal request; however, it does constitute Agency pre-approval. Follow the request authorization process of Form RD 3560-12. With Agency approval, capital expenditures may be paid from the GOA when funds are available, as long as the financial integrity of the project is not affected. In most cases, the reserve account should be used as the primary source for capital expense. This form provides several general descriptions of typical items. You should attempt to categorize your capital expenses on the most appropriate line. This form is separated into seven columns: Proposed Number of Units/Items, Proposed from Reserve, Actual from Reserve, Proposed from Operating, Actual from Operating, Actual total Cost, and Total Actual Units/Items. Proposed Number of Units/Items: Use when entering quantity being replaced or repaired; however, there are some circumstances when a unit/item figure will not be entered such as roofing and siding. Proposed from Reserve: Use when entering the proposed cost of each unit/item to be funded from the reserve account. Total must match Part III, line 4 of the Actual column. Proposed from Operating: Use when entering the proposed cost of each unit/item to be funded from the operating account. Total must match Part II, line 9 of the Proposed column. Actual from Operating: Use when entering the actual cost of each unit/item funded from the operating account. Total must match Part II, line 9 of the Actual column. Actual Total Cost: Use to show the sum of the actual amount funded from the reserve account and the actual amount funded from the operating account. Total Actual Units/Items: Use when entering quantity of actual units/items funded from both the reserve account and the operating account.

PART VI – SIGNATURES, DATES AND COMMENTS

Fld Name / Item No.

Instruction

Borrower signature is required. Rural Development’s approval may be by letter submitted electronically or by signing and returning this form. Use the comment area if additional disclosures or analyses are necessary. Comments are encouraged to better explain the contents of the submitted budget. Rural Development Servicing Official should document additional relevant information or record issues or concerns noted during Rural Development’s review.