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Definition of surplus cash

Mar 28, 2017 12:06PM MDT

The definition of Surplus Cash under HUD-92466M (Rev. 04/11)includes "all other obligations of the Project (accounts payable and accrued, unescrowed expenses)." Can "all other obligations" include a deferred development fee and a partner capital contribution?

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Les Sparks AHACPA Mar 28, 2017

No, those items are only payable from surplus cash. Therefore, including them here will only result in reducing the surplus cash available to pay those amounts. They are not included in the computation.

Les

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Les Sparks AHACPA Mar 28, 2017

I am not sure there is any language in the regulatory agreements that make this very clear. Perhaps the clearest explanation comes from the most recent Regulatory Agreement. Please see no vii below. Remember, this definition includes the next month’s mortgage principal, escrows and R4R. Most agreements do not have that. However, the definition of liabilities is unchanged.

13.Surplus Cash.
a. Borrower must calculate Surplus Cash as of the last day of its fiscal year.
Borrower may also, at its election, and if permitted pursuant to Program
Obligations, calculate Surplus Cash as of the last day of the sixth month of
its fiscal year. Borrower shall submit a report of its Surplus Cash
calculations to HUD with its required annual financial reports, pursuant to
Program Obligations.
b. Surplus Cash shall equal the sum of:

(i) Project cash and cash equivalents (excluding the Reserve for
Replacement account and other HUD-required reserves);

(ii) short-term investments;

(iii) project-based Section 8 Housing Assistance Payments earned but
not yet received by Borrower; and

(iv) any amounts approved for withdrawal but not yet withdrawn from
the Reserve for Replacements or any other reserves or escrow
accounts;
after deducting:

(v) all sums due or required to be paid within the calendar month
following the date as of which Surplus Cash is calculated under the
terms of the Note and Security Instrument (including without
limitation principal, interest, mortgage insurance premium deposits,
deposits to the Reserve for Replacements and other reserves as
may be required by HUD, and tax and insurance escrow deposits);

(vi) all special funds required to be segregated by this Agreement, the
Note, the Security Instrument, or Program Obligations, including
tenant security deposits and any other amounts held in trust for
tenants; and

(vii) all other obligations of the Project payable within the next thirty
days, unless the obligation is paid subject to available Surplus
Cash or subject funds for payment of the obligation are set aside or
HUD has approved deferment of payment.

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