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include processing financial statements, handling of receivables and payables, tenant selection, and compliance with the terms and conditions of the Regulatory Agreement. City hereby approves Developer as the property manager. This approval shall be conditioned upon the effective management of the Property pursuant to the conditions set forth in this Section 9. If Developer fails to perform pursuant to this Section 9, the City may require Developer to hire the services of a different professional property manager. SECTION 10. OPERATING BUDGET a. The Developer shall submit to the City a proposed annual operating budget for the Project not less than ninety (90) days prior to the beginning of each fiscal year of the Project following the Date of Initial Occupancy. The proposed operating budget shall set forth the anticipated gross income of the Project and a detailed estimate of all operating costs thereof, which shall include an itemization of administrative expenses, management fees, maintenance expenses, cost of utilities, hazard insurance, taxes and assessments, and deposits to all funds, reserves or accounts required by the City and/or established by the Developer. Upon approval by the City, such proposed operating budget shall be the operating budget for the next fiscal year of the Project. b. If the operating budget exceeds the actual operating costs, any such surplus shall be placed in a reserve fund to be used only for Project-related expenses. The expenditure of reserve funds for non-routine operating and maintenance expenses must have prior written approval from the City, approval not be unreasonably withheld. SECTION 11. REPORTING Developer shall submit to the City quarterly Project status report for the first two years of Project operation no later than sixty (60) days after the end of each quarter. Thereafter Developer shall submit annual reports in a form approved by the City, no later than ninety (90) days (or 120?) after the end of Developer's fiscal years. The reports shall contain such information as the City may then require, including, but not limited to, the following: a• A statement of the fiscal condition of the Project, including a financial statement indicating surpluses or deficits in operating accounts, a detailed itemized listing of income and expenses, and the amounts of any fiscal reserves. The report due after the end of each fiscal year shall contain and audited version of this statement. Such audit shall be prepared in accordance with the requirements of the City and certified at the Project's expense by an independent Certified Public Accountant licensed by the State of California. b. The substantial physical defects in the Project, if any, including a description of any major repair or maintenance work undertaken in the reporting period. c. The occupancy of the Project indicating; 1 • The number of HOME Units available to and/or actually occupied by Very Low Income Tenants and Low Income Tenants; ~~~ 4