In an effort to summarize the highlights of the LEAN E-mail Blasts that we receive, and rarely have time to review in a timely fashion, we at Pepper are providing this quick synopsis of the latest LEAN update. Our aim is to succinctly provide pertinent information as a roadmap to the LEAN E-mail Blasts, not to replace the LEAN E-mail Blasts. We hope you find these summaries helpful. Here are links to the complete September 22, 2014 LEAN Blast and to the October 6, 2014 LEAN Blast.

Information Provided in the September 22, 2014 LEAN Blast

1. Operator Financial Statements
   The Interim Rule entitled “Federal Housing Administration (FHA): Section 232 Healthcare Facility Insurance Program – Aligning Operator Financial Reports with HUD’s Uniform Financial Reporting Standards” published September 16, 2014, becomes effective October 16, 2014. The Interim Rule provides operators an additional 30 calendar days to comply with the financial statement reporting requirements. Operators now have 60 calendar days following the end of a fiscal quarter and 90 calendar days following the end of the fiscal year to comply with HUD’s financial statement reporting requirements.
   
   Guidance is now available to operators regarding submission of their financial statements to HUD under the “Operator Financial Statements” header on the Section 232 Program website.
    
2. Section 232 Program Fee Pay.gov Training
   Mortgagee Letter 2014–20 announced that Section 232 Program Fees must now be paid to HUD through Pay.gov.

Information Provided in the October 6, 2014 LEAN Blast

1. Commencement of Operator Reporting of Financial Statement
   On October 3, 2014, HUD issued Federal Notice No. FR--5794-N-02 -Submission of Operator Financial Reports in Accordance with HUD’s Uniform Financial Reporting Standards: Commencement of Compliance. Accordingly, operators must submit their operator financial reports to the loan servicer for the project for fiscal years commencing on or after December 2, 2014. The time frame that operators have to submit their financial reports were set forth in the Interim Rule discussed above.
    
2. Changes to Regulatory Agreements to Reflect Extended Reporting Periods
   As previously noted, HUD published Interim Rule “Federal Housing Administration (FHA): Section 232 Healthcare Facility Insurance Program – Aligning Operator Financial Reports with HUD’s Uniform Financial Reporting Standards” on September 16, 2014, with an effective date of October 16, 2014. The rule extends the timeframe for providing quarterly and annual financial statements.
   
   As a result of this change, for projects that close on or after October 16, 2014, the regulatory agreement language should be revised to reflect the more favorable reporting timeframes. The required changes (which are not yet included in the documents posted on HUDClips) are as follows:
   
   HUD Form 92466A-ORCF Healthcare Regulatory Agreement - Operator:
   Section 20(c), Page 13
   
   Unless otherwise specified by HUD, Operator shall submit to HUD and Lender, on a quarterly and year-to-date basis (or more frequently if specified by HUD), prepared and certified by an authorized representative or agent of Operator, such financial reports relating to the operation of the Healthcare Facility (including, but not limited to, financial statements, accounts receivable/payable aging reports and occupancy reports) in the formats and at such times as may be approved by HUD in accordance with Program Obligations. Such reports must be submitted no later than sixty (60) days after the period covered by the reports, except for reports relating to the final quarter of each year, which shall be submitted no later than ninety (90) days after end of the fiscal year. Such reports are subject to the sanctions contained in 18 U.S.C. Sections 1001, 1010, and 1012.
   
   HUD Form 92337-ORCF Healthcare Regulatory Agreement – Master Tenant:
   Section 14(c), Page 10-11
   
   Master Tenant shall submit, or cause to be submitted, to HUD and Lender, on a quarterly and year-to-date basis (or more frequently if specified by HUD), prepared and certified by an authorized representative or agent of Master Tenant, such financial reports relating to the Healthcare Facility (including, but not limited to, financial statements, accounts receivable, aging reports and occupancy reports) in the formats and at such times as may be required by HUD, including without limitation any consolidated statements if required by HUD. Such reports must be submitted no later than sixty (60) days after the period covered by the reports, except for reports relating to the final quarter of each year, which shall be submitted no later than ninety (90) days after end of the fiscal year.

Phase I Environmental Site Assessment Update

Although not discussed in any of ORCF’s LEAN Blasts, we thought it would be beneficial to inform everyone about a significant change in the rules relating to conducting “all appropriate inquiries” (AAI) for Phase I environmental site assessments in order to qualify for certain owner and lender liability protections under CERLA. The relevant ASTM standards are periodically updated – the last two most recent updates occurred in 2013 and 2005. Previously, EPA indicated that performance of a Phase I under either standard, “05” or “13” would suffice to establish AAI. However, as of earlier this week, EPA has now clarified that only the 2013 standard will qualify. Therefore, make sure that your consultants are using the 2013 standards for maximum protection under CERLA. If interested in more information, feel free to contact either author.