This document discusses various reports and insurance considerations for property managers. It covers operating reports, financial reports including budget comparisons, income/expense reports and operating budgets. It also discusses cash flow statements, determining profitability through break-even analysis and rates of return. The document outlines important tax records and considerations for property managers. Finally, it discusses risk management, the property manager's role in claims, and common types of insurance policies.

1. MANAGING REPORTS
AND INSURANCE
Siti Hasniza Binti Rosman
Universiti Teknologi MARA (UiTM)

2. Table of Content
1. Operating Reports
2. Financial Reports
3. Cash Flow Statement For Tax Purposes
4. Determining Profitability
5. Tax Records
6. Risk Management And Insurance
7. Types Of Insurance

3. Operating Reports
 The manager must set up a method of
accounting for funds received and disbursed,
keeping in mind the needs of the owner.
 The manager should never rely on memory to
verify expenses.
 Written order should be issued for all
purchases and purchase orders should be
matched to incoming invoices before payment
is made.

4. Financial Reports
 The manager needs to be familiar with three
(3) different reports:
1. Budget comparison statement
2. Income and expense report
3. Operating budget

5. Budget comparison statement
 The budget comparison for the property
compares the actual results with the original
budget drawn up either at the beginning of that
period or at the time the manager assumed
responsibility for the property.

6. Income and expense report
 The report tells the owner the sources of
income and expenses, net operating income
and net cash flow.
 The manager’s monthly report on income and
expenses is the single most important report
and is usually accompanied by a note from the
manager explaining any abnormal items.

7. Income and expense report
 Income
 Vacant rental units
 Support space (for example: the manager’s office
or residence and maintenance or storage areas)
 Vacant space under major repair
 Expenses
 Wages paid to building personnel
 General operating expenses (such as utilities)
 Maintenance expenses
 Administrative costs

8. Income and expense report
 Gross Rental Income + Income From Other
Sources – Losses Incurred = Total Income
 Total Income – Operating Expenses = Net
Operating Income Before Debt Service
 Net Operating Income Before Debt Service –
Debt Service – Reserves = Cash Flow

9. Income and expense report
 Profit and loss statement
 Gross Receipts – Operating Expenses – Total
Mortgage Payment + Mortgage Loan Principal
= Net Profit

10. Operating budget
 The budget gives the owner an idea of the
cash yield to expect from the property during a
fixed period, traditionally a year.
 The budget serves the manager as a guide for
future operation of the property and as a
measure of past performance.

11. Operating budget
 Estimate conservatively
 A sound general rule for the manager when
preparing a budget forecast is to be
conservative.
 It is preferable to use present rental rates for
the estimates, rather than on anticipated
increases in revenue.

12. Operating budget
 Prepare explanations
 If there is a decrease in the expected revenue,
the manager should be prepared to explain
why.
 The budget forecast should make allowances
for vacancies and delinquent payments during
the period to be covered.
 Occupancy rate 95%.

13. Operating budget
 Examine discrepancies
 When forecasting expenses for the new
budget term, the manager should examine all
discrepancies between anticipated costs as
projected in the budget for the preceding year,
and actual expenses incurred as shown on the
income and expense reports from the same
period.

14. Cash Flow Statement For Tax
Purposes
 Depreciation
 For tax purposes, only depreciation from
physical deterioration is deductible from the
property’s income.
 After-Tax Cash Flow
 Once the appropriate rate of depreciation has
been determined and the allowable deduction
computed, the depreciation allowance is
subtracted from the total net income from the
property for the year.

15. Determining Profitability
1. Break-even analysis
2. Return on investment
3. Capitalization rate

16. Break-even analysis
 The primary method of calculating the
profitability of a building is to determine its
break-even point, the percentage of
occupancy at which gross income is equal to
fixed expenses.
 When gross income exceeds the break-even
point, the project will begin to be profitable.

17. Break-even analysis
 The formula for calculating a property’s break-
even point is as follow:
BE = FC
100 - VCR
BE = Break-even point
FC = Fixed costs (including mortgage payments)
VCR = Variable costs ratio

18. Return on investment
 Return on investment (ROI), another measure
of profitability, is the ratio of the property’s net
income after taxes to the money invested in
the property (equity).
 The formula for calculating ROI is as follow:
ROI = ATCF ÷ E × 100%
ATCF = After-tax cash flow
EQUITY = Equity
ROI = Return on investment

19. Capitalization rate
 The capitalization rate is another index of the
profit on a particular property. An astute
investor buys an investment property that has a
projected net operating income (NOI).
 The formula for calculating ROI is as follow:
R = I + V × 100
R = Capitalization
I = Net operating income before debt
service
V = Value of property

20. Tax Records
 Property managers should obtain the latest
circulars and copies of state and local tax
regulations and consult with competent tax
counsel before filing any tax returns.
 The property manager does not need to be an
expert in tax law, he or she should be familiar
with the purpose of the various forms.

21. Tax Records
 Employee documentation
 Employer identification number
 Employee’s withholding allowance certificate
 Employment Eligibility Verification
 State obligations
 Free rent
 Disability and workers’ compensation
 Statement of miscellaneous income
 Unemployment taxes

22. Risk Management & Insurance
 The property manager should have a working
knowledge of casualty, liability & special lines
of insurance and an understanding of the
whole insurance field its theories, principle and
practices.

23. Risk Management & Insurance
RiskManagement Theories
1)Identifying the risk & measuring its frequency and
financial severity
2)Avoiding the risk or discounting the loss-causing activity
3)Controlling the risk with safety programs, loss reduction
plans and emergency preparedness
4)Retaining the risk & internally funding loss consequences
5)Transferring the risk to insurers or to third parties
6)Monitoring the results and ongoing fit of the risk
management strategies implemented.

24. Property Manager As A Claim
Adjuster
 The property manager will be responsible for
arranging preservation of the property & later
negotiating with insurance company
representations.

25. Types of Insurance
1) Standard fire insurance
2) Replacement cost insurance
3) Machinery and equipment insurance
4) Loss of income insurance
5) Pollution liabilities insurance
6) Workers compensation insurance
7) Employer liability insurance

26. Policy Content
1) The insurance agreement
2) Policy exclusions, limitation & reduction
3) Policy condition & warranties
4) Policy territory & reduction

27. THE END