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Community Development Financial Institutions Program
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[Federal Register: August 14, 2000 (Volume 65, Number 157)]
[Rules and Regulations]
[Page 49641-49656]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14au00-20]
[[Page 49641]]
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Part II
Department of the Treasury
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Community Development Financial Institutions Fund
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12 CFR Part 1805
Community Development Financial Institutions Program; Interim Rule
Funds Availability Inviting Applications for the Community Development
Financial Institutions Program-Core and Intermediary Component; Notices
[[Page 49642]]
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DEPARTMENT OF THE TREASURY
Community Development Financial Institutions Fund
12 CFR Part 1805
RIN 1505-AA71
Community Development Financial Institutions Program
AGENCY: Community Development Financial Institutions Fund, Department
of the Treasury.
ACTION: Revised interim rule with request for comment.
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SUMMARY: The Department of the Treasury is issuing a revised interim
rule implementing the Community Development Financial Institutions
Program (CDFI Program) administered by the Community Development
Financial Institutions Fund (Fund). The purpose of the CDFI Program is
to promote economic revitalization and community development through
investment in and assistance to Community Development Financial
Institutions (CDFIs). Under the CDFI Program, the Fund provides
financial and technical assistance in the form of grants, loans, equity
investments and deposits to competitively selected CDFIs. The Fund
provides such assistance to CDFIs to enhance their ability to make
loans and investments, and to provide services for the benefit of
designated investment areas, targeted populations, or both (target
markets). In order for an organization to qualify as a CDFI, the
organization must meet specific eligibility criteria. Two such criteria
are that the organization shall have a primary mission of promoting
community development and its total activities must be principally
directed toward serving a target market. This revised interim rule
makes three changes. First, it clarifies the primary mission
eligibility test. Second, the revised interim rule provides that an
organization can establish that its target market has either
significant unmet needs for or lacks adequate access to loans or equity
investments by demonstrating a lack of adequate access to financial
services. Third, this revised interim rule reduces the burden for an
organization to demonstrate that it serves a targeted population
comprised of an identifiable group of individuals lacking access to
loans, equity investments, or financial services. In order to
facilitate implementation of the CDFI Program by participating CDFIs,
the complete text of the regulations, as amended, is published by this
revised interim rule.
DATES: Revised interim rule effective August 14, 2000.
Comments must be received in the offices of the Fund on or before
October 13, 2000.
ADDRESSES: All comments concerning this interim rule should be
addressed to the Deputy Director for Policy and Programs, Community
Development Financial Institutions Fund, Department of the Treasury,
601 13th Street, NW., Suite 200 South, Washington, DC 20005. Comments
may be inspected at the above address weekdays between 9:30 a.m. and
4:30 p.m. Other information regarding the Fund and its programs may be
obtained through the Fund's web site at http://www.treas.gov/cdfi.
FOR FURTHER INFORMATION CONTACT: Maurice A. Jones, Deputy Director for
Policy and Programs, Community Development Financial Institutions Fund,
at (202) 622-8662. (This is not a toll free number.)
SUPPLEMENTARY INFORMATION:
I. Background
The Community Development Financial Institutions Fund (Fund) was
established as a wholly owned government corporation by the Community
Development Banking and Financial Institutions Act of 1994 (the Act).
Subsequent legislation placed the Fund within the Department of the
Treasury and gave the Secretary of the Treasury all powers and rights
of the Administrator of the Fund as set forth in the authorizing
statute.
The Fund's programs are designed to facilitate the flow of lending
and investment capital to distressed communities and to individuals who
have been unable to take full advantage of the financial services
industry. The initiative is an important step in rebuilding poverty-
stricken and transitional communities and creating economic opportunity
for people often left out of the economic mainstream.
Access to credit, investment capital, and financial services are
essential ingredients for creating and retaining jobs, developing
affordable housing, revitalizing neighborhoods, unleashing the economic
potential of small businesses, and empowering people. Over the past
several decades, community-based financial institutions have proven
that strategic lending and investment activities tailored to the unique
characteristics of underserved markets are highly effective in
improving the economic well being of communities and the people who
live in them.
The Fund was established to promote economic revitalization and
community development through, among other things, investment in and
assistance to community development financial institutions (CDFIs),
which specialize in serving underserved markets and the people who live
there. CDFIs--while highly effective--are typically small in scale and
often have difficulty raising the capital needed to meet the demands
for their products and services. Under the CDFI Program, the Fund
provides CDFIs with financial and technical assistance in the form of
grants, loans, equity investments, and deposits in order to enhance
their ability to make loans and investments, and provide services for
the benefit of designated investment areas, targeted populations or
both. Applicants participate in the CDFI Program through a competitive
application and selection process in which the Fund makes funding
decisions based on pre-established evaluation criteria. Program
participants generally receive monies from the Fund only after being
certified as a CDFI and entering into an assistance agreement with the
Fund. These assistance agreements include performance goals, matching
funds requirements and reporting requirements.
This issue of the Federal Register contains two separate Notices of
Funds Availability (NOFAs) for the CDFI Program, one for the sixth
round of the Core Component of the CDFI Program and another for the
fifth round of the Intermediary Component of the CDFI Program. Under
the Core Component, the Fund provides financial and technical
assistance to CDFIs that directly serve their Target Markets through
loans, investments and other activities, rather than primarily through
the financing of other CDFIs. Under the Intermediary Component, the
Fund provides financial and technical assistance to CDFIs that
primarily provide assistance to other CDFIs and/or support the
formation of CDFIs. In January 2001, the Fund expects to issue a NOFA
for the first round of the Small and Emerging CDFI Assistance (SECA)
Component, which will replace the Technical Assistance Component of the
CDFI Program. Under the SECA Component, the Fund will provide small and
emerging CDFIs with financial assistance and/or technical assistance.
On November 1, 1999, the Fund published in the Federal Register a
revised interim rule (64 FR 59076) implementing the CDFI Program (the
current rule). The deadline for the submission of comments was January
14, 2000.
[[Page 49643]]
II. Comments on the November 1, 1999 Interim Rule
By the close of the January 14, 2000 comment period, the Fund
received comments on the November 1, 1999 interim rule from six
organizations. The following includes a discussion of the significant
and most heavily commented upon issues:
Financing Entity Eligibility Test
Section 1805.201(b)(2) of the current rule provides that in order
for an organization to qualify as a CDFI, such organization shall be an
entity whose predominant business activity is the provision, in arms-
length transactions, of Financial Products, Development Services, and/
or other similar financing. Three commenters were concerned that
requiring an organization's predominant business activity to be a
combination of Financial Products and Development Services would have a
dilutive effect on the Financing entity eligibility test. The
commenters expressed concern that the Fund's consideration of the
combination of Development Services and Financial Products could result
in the certification of organizations whose predominant business
activity is the provision of technical assistance. One commenter also
advised that the current rule is in direct violation of the Act.
The Fund shares the view that a CDFI should not pass the Financing
entity eligibility test if its predominant business activity is the
provision of technical assistance. However, the Fund disagrees that the
current rule would have a dilutive effect that could result in the
certification of organizations whose predominant business activity is
the provision of technical assistance. Specifically, Sec. 1805.104(q)
of the current rule defines Development Services as activities that are
integral to the provision of Financial Products in that such services
must prepare or assist an organization's borrowers or investees to
utilize its Financial Products. As a result, in order for an
organization that provides Development Services to meet the Financing
entity eligibility test, it must provide such services in conjunction
with, and in support of, its Financial Products. The current rule also
is wholly consistent with the Act, which expressly provides that a CDFI
``means a person (other than an individual) that--provides development
services in conjunction with equity investments or loans, directly or
through a subsidiary or affiliate * * *'' See 12 U.S.C.
4702(5)(A)(iii). Congress thus clearly contemplated that the Fund
combine Financial Products and Development Services without any fixed
percentage threshold. As a result, Sec. 1805.201(b)(2) remains
substantively unchanged.
Four commenters also suggested that the Fund include the provision
of Financial Services in determining whether an organization meets the
Financing entity eligibility test. The commenters noted that for
community development credit unions and community development banks,
the provision of Financial Services is the primary way in which they
serve their Target Markets. The Fund agrees with the commenters' point
that provision of Financial Services should be considered when
evaluating whether a regulated financial institution meets the
Financing entity eligibility test, and believes that the current rule
effectively accomplishes the commenters' objectives. Specifically,
Secs. 1805.201(b)(2)(i)(B) and (C) provide, respectively, that
community development credit unions and community development banks
automatically meet the Financing entity eligibility test by virtue of
their status as insured depository institutions and insured credit
unions.
Section 1805.201(b)(2)(ii)(C) requires organizations to submit a
copy of their most recent year-end financial statements documenting
their assets dedicated to Financial Products, Development Services and/
or other similar financing. One commenter suggested that the Fund
require three years of year-end financial statements instead of one. In
an effort to minimize reporting burdens on Applicants, the Fund intends
to continue to request only the most recent year-end financial
statements for the purpose of reviewing an Applicant's assets dedicated
to Financial Products, Development Services, and/or other similar
financing activities. Thus, Sec. 1805.201(b)(2)(ii)(C) remains
substantively unchanged. However, in the preamble to the current rule,
the Fund expressly reserved its right, consistent with Sec. 1805.600 of
the current rule, to require the submission of additional years of
year-end financial statements if the Fund deems it appropriate.
Section 1805.201(b)(2)(ii)(C) also requires organizations to submit
information on the percentage of staff time dedicated to the provision
of Financial Products, Development Services, and/or other similar
financing. One commenter suggested that this level of information was
insufficient for purposes of accurately reflecting the qualifications
of an organization as a CDFI. The commenter suggested that the Fund
consider additional factors such as the business plan and alternative
sources of committed capital/investment. While the Fund believes that
considering the additional factors suggested by the commenter is
appropriate as a part of the qualitative evaluation of an
organization's application for assistance pursuant to Sec. 1805.701(b),
the Fund believes that such factors need not be considered for purposes
of determining whether an organization meets the Financing entity
eligibility test. As a result, Sec. 1805.201(b)(2)(ii)(C) remains
substantively unchanged.
Primary Mission Eligibility Test
Section 1805.201(b)(1) provides that in order for an organization
to qualify as a CDFI, such organization's and its Affiliates' primary
mission, when viewed collectively (as a whole), must be purposefully
directed toward improving the social and/or economic conditions of
underserved people and/or residents of distressed communities. Three
commenters expressed concern that an organization that does not
individually meet the Primary Mission eligibility test could meet such
test based on it being an Affiliate of a larger organization, which
individually meets such test. The commenters were concerned that if the
Primary Mission eligibility test were to be applied this way, the end
result would be a dilution of such test. The Fund recognizes the merits
of these comments, and has revised the regulation accordingly. Section
1805.201(b)(1) of the revised interim rule provides that the Fund will
consider whether the activities of the Applicant individually and the
Applicant and its Affiliates, when viewed collectively (as a whole),
are purposefully directed toward improving the social and/or economic
conditions of underserved people (which may include Low-Income persons
and persons who lack adequate access to capital and/or Financial
Services) and/or residents of distressed communities (which may include
Investment Areas).
Definition of Equity Investment
Section 1805.104(r) of the current rule provides that Equity
Investments comprise a stock purchase, a purchase of a partnership
interest, a purchase of a limited liability company membership
interest, a loan made on such terms that it has sufficient
characteristics of equity, or any other investment deemed to be an
Equity Investment by the Fund. In the preamble to the current rule, the
Fund stated that it considers Equity Investments also to include
secondary capital accounts established with low-income designated
credit unions. One commenter supported the inclusion of
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secondary capital accounts within the meaning of Equity Investment, and
encouraged the Fund to consider alternative sources of capital for
credit unions as falling within the meaning of Equity Investment. The
Fund agrees with the comment and will consider, on a case-by-case
basis, under Sec. 1805.104(q), whether other sources of capital for
credit unions qualify as Equity Investments.
Investment Area Eligibility
Section 1805.201(b)(3)(ii)(A)(2) of the current rule provides that
in order for a geographic area to qualify as an Investment Area,
generally it must have, among other things, significant unmet needs for
loans or Equity Investments. Two commenters suggested that in addition
to loans or Equity Investments, the Fund also should consider whether a
geographic area has significant unmet needs for Financial Services. The
Fund shares the view that access to Financial Services is critical to
underserved communities and, in addition, believes that a lack of
access to Financial Services is indicative of, or a proxy for, a lack
of access to loans and Equity Investments. Moreover, the Fund believes
that utilizing a lack of adequate access to Financial Services, as a
proxy for lack of adequate access to loans or Equity Investments is
consistent with Congressional intent. Specifically, the Conference
Report underlying the Act expressly provides that the Fund is required
to develop objective criteria for determining unmet needs for loans and
Equity Investments. Thus, Sec. 1805.201(b)(3)(ii)(A)(2) has been
modified in the manner suggested by the two commenters.
Targeted Population Eligibility
Section 1805.201(b)(3)(iii) of the current rule provides that a
Targeted Population shall mean individuals, or an identificable group
of individuals, who are Low-Income people or lack adequate access to
loans or Equity Investments in an organization's service area. One
commenter suggested that a Targeted Population also should include
individuals or an identifiable group of individuals who lack adequate
access to Financial Services. The Fund shares the commenter's view that
access to Financial Services is critical to underserved populations,
and, in addition, believes that a lack of access to Financial Services
is indicative of, or a proxy for, a lcak of access to loans and Equity
Investments. Moreover, the Fund believes that utilizing a lack of
adequate access to Financial Services, as a proxy for lack of access to
loans or Equity Investments is consistent with Congressional intent.
Specifically, the Conference Report underlying the Act expressly
provides that in determining which groups or individuals qualify as a
Targeted Population, the Fund should focus on Low-Income persons and
those who are otherwise underserved by financial institutions
(including those historically denied access to Financial Services based
on their race, gender, ethnicity or national origin). Thus,
Sec. 1805.201(b)(3)(iii) has been modified in the manner suggested by
the commenter.
Target Market Eligibility Test
Section 1805.201(b)(3) of the current rule provides that in order
for an organization to meet the Target Market eligibility test, such
organization must demonstrate that its total activities are principally
directed to serving an Investment Area(s), Targeted Population(s) or
both. One commenter suggested that the Fund deem insured credit unions
that have received a low-income designation from the National Credit
Union Administration (NCUA) to have met the Target Market eligibility
test. While the Fund utilizes NCUA's low-income designation as an
indicator that such designated credit unions have a primary mission of
community development, the Fund must reject this comment because NCUA's
low-income designation criteria are not wholly consistent with the
Target Market criteria of the Fund. For example, in order to receive a
low-income designation from NCUA, the credit union must predominantly
serve (i.e., more than 50 percent) low-income members; whereas, in
order for the same credit union to meet the Fund's Target Market
eligibility test, 60 percent of the credit union's activities must be
directed to serving low-income members. In addition, NCUA includes in
its definition of low-income credit union members, individuals who are
full or part-time students. Accordingly, if an insured credit union's
membership predominantly comprises full or part-time students, such
insured credit union would be eligible for designation by NCUA as a
low-income credit union. The Fund does not deem full or part-time
students, or any other group, to be low-income without regard to actual
incomes. As a result, Sec. 1805.201(b)(3) of the current rule remains
substantively unchanged.
Eligibility of Credit Unions as CDFIs
Section 1805.201(b)(6) of the current rule provides that in order
for an organization to be certified as a CDFI, the organization shall
not be an agency or instrumentality of the United States. One commenter
sought clarification on whether insured credit unions could be
certified as CDFIs in light of certain case law holding that insured
credit unions are instrumentalities of the United States. The Fund's
review of such case law indicates that it does not address whether
insured credit unions are Federal instrumentalities under the Act and,
additionally, the Fund believes that such cases are of limited
relevance in light of the plain language of the Act. Specifically,
several sections of the Act expressly provide that insured credit
unions can be CDFIs, and as such can receive assistance from the Fund.
For example, the Act defines the term ``insured community development
financial institution'' as including insured credit unions. See 12
U.S.C. 4702(13). The Act also expressly provides that the Fund may
provide financial assistance to credit unions in the form of ``credit
union shares.'' See 12 U.S.C. 4707(a)(1)(A). Accordingly, the Fund
believes that there is no case law barring insured credit unions from
qualifying as CDFIs under the Act.
Application Format
In the preamble to the current rule, the Fund advised that it was
deleting a provision from the regulations that allowed Applicants to
present their applications for assistance in an order and format that
they believed to be the most appropriate. The Fund advised that
affording applicants such flexibility made it considerably more
difficult for the Fund to evaluate applications. One commenter
disagreed with this deletion claiming that it requires applicants to
rework business plans to conform to a prescribed format. Another
commenter supported a more structured application format, provided that
the Fund set forth the specific requirements in the application and
provide applicants the flexibility to present their own circumstances
within that format. The Fund agrees with the latter comment, and
believes that the current application format allows applicants
sufficient flexibility to present their best case for funding.
Moreover, the Fund has found that a prescribed format is necessary for
a fair and orderly application evaluation process.
Annual Report Due Date
Section 1805.803(e)(3) of the current rule provides that an awardee
shall submit an annual report to the Fund within 60 days after the end
of its fiscal year, or by such alternative deadline as may be agreed to
by the awardee and the Fund. One commenter suggested that, in order to
ensure that any references to an awardee's financial condition be
[[Page 49645]]
accurately reflected, this time frame should be increased to 120 days
to conform to the general deadline set forth in Sec. 1805.803(e)(4) for
submission of audited financial statements. The Fund is committed to
ensuring that awardees have sufficient time to meet Fund reporting
requirements. For example, Sec. 1805.803(e)(3) of the current rule
allows the Fund and awardees to agree to a deadline greater than 60
days for the submission of an annual report. For this reason and
because the annual report does not require the submission of
information on the financial condition of an awardee, Sec. 1805.803(e)
remains substantively unchanged.
III. Summary of Additional Change
Target Market Eligibility Test--Targeted Population
Section 1805.201(b)(3)(iii) of the current rule provides that an
organization may meet the Target Market eligibility test by serving a
Targeted Population. A Targeted Population, under the current rule,
means individuals, or an identifiable group of individuals, who are
either Low-Income persons or lack adequate access to loans or Equity
Investments. Section 1805.201(b)(3)(iii)(B)(2) of the current rule
provides that in order for an Applicant to demonstrate that it serves a
Targeted Population comprising individuals who lack adequate access to
loans or Equity Investments, the Applicant must provide: (1) A
description of the service area from which the Targeted Population is
drawn; (2) studies, analyses or other information demonstrating that
the identifiable group of individuals, either on a national basis or on
a localized basis in the Applicant's service area, lacks adequate
access to loans or Equity Investments; and (3) studies, analyses or
other information demonstrating that the Applicant's clients who
comprise the identifiable group of individuals, lack adequate access to
loans or Equity Investments. The Fund believes that this three-part
test imposes undue burdens on Applicants. Specifically, it would be
unduly burdensome to require Applicants to submit studies demonstrating
that an identifiable group of individuals, on a national basis or
within the Applicant's service area, has traditionally been denied
access to loans or Equity Investments, and then demonstrate that the
Applicant's clients who comprise the identifiable group of individuals
lack adequate access to loans or Equity Investments. As a result, the
Fund is modifying what an Applicant must provide. In lieu of studies,
an Applicant must provide, under Sec. 1805.201(b)(3)(iii) of the
revised interim rule, a brief analytical narrative with information
demonstrating that the members of the identifiable group in the
Applicant's service area lack adequate access to loans, Equity
Investments, or Financial Services. An Applicant may not have to
provide the aforementioned analytical narrative if its Targeted
Population is one listed by the Fund in the applicable NOFA and/or
application for certification as one with respect to which the Fund
believes that credible evidence exists demonstrating that such Targeted
Population lacks adequate access to loans, Equity Investments or
Financial Services in the Applicant's service area.
IV. Rulemaking Analysis
Executive Order (E.O.) 12866
It has been determined that this regulation is not a significant
regulatory action as defined in Executive Order 12866. Therefore, a
Regulatory Assessment is not required.
Regulatory Flexibility Act
Because no notice of proposed rule making is required for this
revised interim rule, the provisions of the Regulatory Flexibility Act
(5 U.S.C. 601 et seq.) do not apply.
Paperwork Reduction Act
The collections of information contained in this interim rule have
been previously reviewed and approved by the Office of Management and
Budget (OMB) in accordance with the Paperwork Reduction Act of 1995 and
assigned OMB Control Number 1505-0154. An agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless it displays a valid control number assigned by OMB.
This document restates the collections of information without
substantive change.
Comments concerning suggestions for reducing the burden of
collections of information should be directed to the Deputy Director
for Policy and Programs, Community Development Financial Institutions
Fund, 601 13th Street, NW., Suite 200 South, Washington, DC 20005.
National Environmental Policy Act
Pursuant to Treasury Directive 75-02 (Department of the Treasury
Environmental Quality Program), the Department has determined that
these interim regulations are categorically excluded from the National
Environmental Policy Act and do not require an environmental review.
Administrative Procedure Act
Because the revisions to this interim rule relate to loans and
grants, notice and public procedure and a delayed effective date are
not required pursuant to the Administrative Procedure Act found at 5
U.S.C. 553(a)(2).
Comment
Public comment is solicited on all aspects of this interim
regulation. The Fund will consider all comments made on the substance
of this interim regulation, but does not intend to hold hearings.
Catalog of Federal Domestic Assistance Number
Community Development Financial Institutions Program--21.020.
List of Subjects in 12 CFR Part 1805
Community development, Grant programs--housing and community
development, Loan programs--housing and community development,
Reporting and recordkeeping requirements, Small businesses.
For the reasons set forth in the preamble, 12 CFR part 1805 is
revised to read as follows:
PART 1805--COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS PROGRAM
Subpart A--General Provisions
Sec.
1805.100 Purpose.
1805.101 Summary.
1805.102 Relationship to other Fund programs.
1805.103 Awardee not instrumentality.
1805.104 Definitions.
1805.105 Waiver authority.
1805.106 OMB control number.
Subpart B--Eligibility
1805.200 Applicant eligibility.
1805.201 Certification as a Community Development Financial
Institution.
Subpart C--Use of Funds/Eligible Activities
1805.300 Purposes of financial assistance.
1805.301 Eligible activities.
1805.302 Restrictions on use of assistance.
1805.303 Technical assistance.
Subpart D--Investment Instruments
1805.400 Investment instruments--general.
1805.401 Forms of investment instruments.
1805.402 Assistance limits.
1805.403 Authority to sell.
Subpart E--Matching Funds Requirements
1805.500 Matching funds--general.
1805.501 Comparability of form and value.
1805.502 Severe constraints waiver.
1805.503 Time frame for raising match.
1805.504 Retained earnings.
Subpart F--Applications for Assistance
1805.600 Notice of Funds Availability.
[[Page 49646]]
1805.601 Application contents.
Subpart G--Evaluation and Selection of Applications
1805.700 Evaluation and selection--general.
1805.701 Evaluation of applications.
Subpart H--Terms and Conditions of Assistance
1805.800 Safety and soundness.
1805.801 Assistance Agreement; sanctions.
1805.802 Disbursement of funds.
1805.803 Data collection and reporting.
1805.804 Information.
1805.805 Compliance with government requirements.
1805.806 Conflict of interest requirements.
1805.807 Lobbying restrictions.
1805.808 Criminal provisions.
1805.809 Fund deemed not to control.
1805.810 Limitation on liability.
1805.811 Fraud, waste and abuse.
Authority: 12 U.S.C. 4703, 4703 note, 4717; and 31 U.S.C. 321.
Subpart A--General Provisions
Sec. 1805.100 Purpose.
The purpose of the Community Development Financial Institutions
Program is to facilitate the creation of a national network of
financial institutions that is dedicated to community development.
Sec. 1805.101 Summary.
Under the Community Development Financial Institutions Program, the
Fund will provide financial and technical assistance to Applicants
selected by the Fund in order to enhance their ability to make loans
and investments and provide services. An Awardee must serve an
Investment Area(s), Targeted Population(s), or both. The Fund will
select Awardees to receive financial and technical assistance through a
competitive application process. Each Awardee will enter into an
Assistance Agreement which will require it to achieve performance goals
negotiated between the Fund and the Awardee and abide by other terms
and conditions pertinent to any assistance received under this part.
Sec. 1805.102 Relationship to other Fund programs.
(a) Bank Enterprise Award Program. (1) No Community Development
Financial Institution may receive a Bank Enterprise Award under the
Bank Enterprise Award Program (part 1806 of this chapter) if it has:
(i) An application pending for assistance under the Community
Development Financial Institutions Program;
(ii) Directly received assistance in the form of a disbursement
under the Community Development Financial Institutions Program within
the preceding 12-month period; or
(iii) Ever directly received assistance under the Community
Development Financial Institutions Program for the same activities for
which it is seeking a Bank Enterprise Award.
(2) An equity investment (as defined in part 1806 of this chapter)
in, or a loan to, a Community Development Financial Institution, or
deposits in an Insured Community Development Financial Institution,
made by a Bank Enterprise Award Program Awardee may be used to meet the
matching funds requirements described in subpart E of this part.
Receipt of such equity investment, loan, or deposit does not disqualify
a Community Development Financial Institution from receiving assistance
under this part.
(b) Liquidity enhancement program. No entity that receives
assistance through the liquidity enhancement program authorized under
section 113 (12 U.S.C. 4712) of the Act may receive assistance under
the Community Development Financial Institutions Program.
Sec. 1805.103 Awardee not instrumentality.
No Awardee (or its Community Partner) shall be deemed to be an
agency, department, or instrumentality of the United States.
Sec. 1805.104 Definitions.
For the purpose of this part:
(a) Act means the Community Development Banking and Financial
Institutions Act of 1994, as amended (12 U.S.C. 4701 et seq.);
(b) Affiliate means any company or entity that controls, is
controlled by, or is under common control with another company;
(c) Applicant means any entity submitting an application for
assistance under this part;
(d) Appropriate Federal Banking Agency has the same meaning as in
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)), and
also includes the National Credit Union Administration with respect to
Insured Credit Unions;
(e) Assistance Agreement means a formal agreement between the Fund
and an Awardee which specifies the terms and conditions of assistance
under this part;
(f) Awardee means an Applicant selected by the Fund to receive
assistance pursuant to this part;
(g) Community Development Financial Institution (or CDFI) means an
entity currently meeting the eligibility requirements described in
Sec. 1805.200;
(h) Community Development Financial Institution Intermediary (or
CDFI Intermediary) means an entity that meets the CDFI Program
eligibility requirements described in Sec. 1805.200 and whose primary
business activity is the provision of Financial Products to CDFIs and/
or emerging CDFIs;
(i) Community Development Financial Institutions Program (or CDFI
Program) means the program authorized by sections 105-108 of the Act
(12 U.S.C. 4704-4707) and implemented under this part;
(j) Community Facility means a facility where health care,
childcare, educational, cultural, or social services are provided;
(k) Community-Governed means an entity in which the residents of an
Investment Area(s) or members of a Targeted Population(s) represent
greater than 50 percent of the governing body;
(l) Community-Owned means an entity in which the residents of an
Investment Area(s) or members of a Targeted Population(s) have an
ownership interest of greater than 50 percent;
(m) Community Partner means a person (other than an individual)
that provides loans, Equity Investments, or Development Services and
enters into a Community Partnership with an Applicant. A Community
Partner may include a Depository Institution Holding Company, an
Insured Depository Institution, an Insured Credit Union, a not-for-
profit or for-profit organization, a State or local government entity,
a quasi-government entity, or an investment company authorized pursuant
to the Small Business Investment Act of 1958 (15 U.S.C. 661 et seq.);
(n) Community Partnership means an agreement between an Applicant
and a Community Partner to collaboratively provide loans, Equity
Investments, or Development Services to an Investment Area(s) or a
Targeted Population(s);
(o) Comprehensive Business Plan means a document covering not less
than the next five years which meets the requirements described under
Sec. 1805.601(d);
(p) Depository Institution Holding Company means a bank holding
company or a savings and loan holding company as defined in section 3
of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(1));
(q) Development Services means activities that promote community
development and are integral to the Applicant's provision of Financial
Products. Such services shall prepare or assist current or potential
borrowers or investees to utilize the Financial Products of the
Applicant. Such services include, for example: financial or credit
[[Page 49647]]
counseling to individuals for the purpose of facilitating home
ownership, promoting self-employment, or enhancing consumer financial
management skills; or technical assistance to borrowers or investees
for the purpose of enhancing business planning, marketing, management,
and financial management skills;
(r) Equity Investment means an investment made by an Applicant
which, in the judgment of the Fund, directly supports or enhances
activities that serve an Investment Area(s) or a Targeted
Population(s). Such investments must be made through an arms-length
transaction with a third party that does not have a relationship with
the Applicant as an Affiliate. Equity Investments comprise a stock
purchase, a purchase of a partnership interest, a purchase of a limited
liability company membership interest, a loan made on such terms that
it has sufficient characteristics of equity (and is considered as such
by the Fund), or any other investment deemed to be an Equity Investment
by the Fund;
(s) Financial Products means loans, Equity Investments and, in the
case of CDFI Intermediaries, grants to CDFIs and/or emerging CDFIs and
deposits in insured credit union CDFIs and/or emerging insured credit
union CDFIs;
(t) Financial Services means checking, savings accounts, check
cashing, money orders, certified checks, automated teller machines,
deposit taking, and safe deposit box services;
(u) Fund means the Community Development Financial Institutions
Fund established under section 104(a) (12 U.S.C. 4703(a)) of the Act;
(v) Indian Reservation means any geographic area that meets the
requirements of section 4(10) of the Indian Child Welfare Act of 1978
(25 U.S.C. 1903(10)), and shall include land held by incorporated
Native groups, regional corporations, and village corporations, as
defined in and pursuant to the Alaska Native Claims Settlement Act (43
U.S.C. 1602), public domain Indian allotments, and former Indian
reservations in the State of Oklahoma;
(w) Indian Tribe means any Indian Tribe, band, pueblo, nation, or
other organized group or community, including any Alaska Native village
or regional or village corporation, as defined in or established
pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et
seq.,) which is recognized as eligible for special programs and
services provided by the United States to Indians because of their
status as Indians;
(x) Insider means any director, officer, employee, principal
shareholder (owning, individually or in combination with family
members, five percent or more of any class of stock), or agent (or any
family member or business partner of any of the above) of any
Applicant, Affiliate or Community Partner;
(y) Insured CDFI means a CDFI that is an Insured Depository
Institution or an Insured Credit Union;
(z) Insured Credit Union means any credit union, the member
accounts of which are insured by the National Credit Union Share
Insurance Fund;
(aa) Insured Depository Institution means any bank or thrift, the
deposits of which are insured by the Federal Deposit Insurance
Corporation;
(bb) Investment Area means a geographic area meeting the
requirements of Sec. 1805.201(b)(3);
(cc) Low-Income means an income, adjusted for family size, of not
more than:
(1) For Metropolitan Areas, 80 percent of the area median family
income; and
(2) For non-Metropolitan Areas, the greater of:
(i) 80 percent of the area median family income; or
(ii) 80 percent of the statewide non-Metropolitan Area median
family income;
(dd) Metropolitan Area means an area designated as such by the
Office of Management and Budget pursuant to 44 U.S.C. 3504(e) and 31
U.S.C. 1104(d) and Executive Order 10253 (3 CFR, 1949-1953 Comp., p.
758), as amended;
(ee) Non-Regulated CDFI means any entity meeting the eligibility
requirements described in Sec. 1805.200 which is not a Depository
Institution Holding Company, Insured Depository Institution, or Insured
Credit Union;
(ff) State means any State of the United States, the District of
Columbia or any territory of the United States, Puerto Rico, Guam,
American Samoa, the Trust Territories of the Pacific Islands, the
Virgin Islands, and the Northern Mariana Islands;
(gg) Subsidiary means any company which is owned or controlled
directly or indirectly by another company and includes any service
corporation owned in whole or part by an Insured Depository Institution
or any Subsidiary of such a service corporation, except as provided in
Sec. 1805.200(b)(4);
(hh) Targeted Population means individuals or an identifiable group
meeting the requirements of Sec. 1805.201(b)(3); and
(ii) Target Market means an Investment Area(s) and/or a Targeted
Population(s).
Sec. 1805.105 Waiver authority.
The Fund may waive any requirement of this part that is not
required by law upon a determination of good cause. Each such waiver
shall be in writing and supported by a statement of the facts and the
grounds forming the basis of the waiver. For a waiver in an individual
case, the Fund must determine that application of the requirement to be
waived would adversely affect the achievement of the purposes of the
Act. For waivers of general applicability, the Fund will publish
notification of granted waivers in the Federal Register.
Sec. 1805.106 OMB control number.
The collection of information requirements in this part have been
approved by the Office of Management and Budget and assigned OMB
control number 1505-0154.
Subpart B--Eligibility
Sec. 1805.200 Applicant eligibility.
(a) General requirements. (1) An entity that meets the requirements
described in Sec. 1805.201(b) and paragraph (b) of this section will be
considered a CDFI and, subject to paragraph (a)(3) of this section,
will be eligible to apply for assistance under this part.
(2) An entity that proposes to become a CDFI is eligible to apply
for assistance under this part if the Fund determines that such
entity's application materials provide a realistic course of action to
ensure that it will meet the requirements described in Sec. 1805.201(b)
and paragraph (b) of this section within 24 months from September 30 of
the calendar year in which the applicable application deadline falls or
such other period as may be set forth in an applicable NOFA. The Fund
will not, however, disburse any financial assistance to such an entity
before it meets the requirements described in this section.
(3) The Fund shall require an entity to meet any additional
eligibility requirements that the Fund deems appropriate.
(4) The Fund, in its sole discretion, shall determine whether an
Applicant fulfills the requirements set forth in this section and
Sec. 1805.201(b).
(b) Provisions applicable to Depository Institution Holding
Companies and Insured Depository Institutions. (1) A Depository
Institution Holding Company may qualify as a CDFI only if it and its
Affiliates collectively satisfy the requirements described in this
section.
(2) No Affiliate of a Depository Institution Holding Company may
qualify as a CDFI unless the holding company and all of its Affiliates
[[Page 49648]]
collectively meet the requirements described in this section.
(3) No Subsidiary of an Insured Depository Institution may qualify
as a CDFI if the Insured Depository Institution and its Subsidiaries do
not collectively meet the requirements described in this section.
(4) For the purposes of paragraphs (b)(1), (2) and (3) of this
section, an Applicant will be considered to be a Subsidiary of any
Insured Depository Institution or Depository Institution Holding
Company that controls 25 percent or more of any class of the
Applicant's voting shares, or otherwise controls, in any manner, the
election of a majority of directors of the Applicant.
Sec. 1805.201 Certification as a Community Development Financial
Institution.
(a) General. An entity may apply to the Fund for certification that
it meets the CDFI eligibility requirements regardless of whether it is
seeking financial or technical assistance from the Fund. Entities
seeking such certification shall provide the information set forth in
paragraph (b) of this section. Certification by the Fund will verify
that the entity meets the CDFI eligibility requirements. However, such
certification shall not constitute an opinion by the Fund as to the
financial viability of the CDFI or that the CDFI will be selected to
receive an award from the Fund. The Fund, in its sole discretion, shall
have the right to decertify a certified entity after a determination
that the eligibility requirements of paragraph (b) of this section,
Sec. 1805.200(b) or (a)(3) (if applicable) are no longer met.
(b) Eligibility verification. An Applicant shall provide
information necessary to establish that it is, or will be, a CDFI. An
Applicant shall demonstrate whether it meets the eligibility
requirements described in this paragraph (b) and Sec. 1805.200 by
providing the information requested in paragraphs (b)(1) through (b)(7)
of this section. The Fund, in its sole discretion, shall determine
whether an Applicant has satisfied the requirements of this paragraph
(b) and Sec. 1805.200.
(1) Primary mission. A CDFI shall have a primary mission of
promoting community development. In determining whether an Applicant
has such a primary mission, the Fund will consider whether the
activities of the Applicant individually and the Applicant and its
Affiliates, when viewed collectively (as a whole), are purposefully
directed toward improving the social and/or economic conditions of
underserved people (which may include Low-Income persons and persons
who lack adequate access to capital and/or Financial Services) and/or
residents of distressed communities (which may include Investment
Areas).
(2) Financing entity. (i) A CDFI shall be an entity whose
predominant business activity is the provision, in arms-length
transactions, of Financial Products, Development Services, and/or other
similar financing. An Applicant may demonstrate that it is such an
entity if it is a(n):
(A) Depository Institution Holding Company;
(B) Insured Depository Institution or Insured Credit Union; or
(C) Organization that is deemed by the Fund to have such a
predominant business activity as a result of analysis of its financial
statements, organizing documents, and any other information required to
be submitted as part of its application. In conducting such analysis,
the Fund may take into consideration an Applicant's total assets and
its use of personnel.
(ii) An Applicant described under:
(A) Paragraph (b)(2)(i)(A) of this section shall submit a copy of
its organizing documents that indicate that it is a Depository
Institution Holding Company;
(B) Paragraph (b)(2)(i)(B) of this section shall submit a copy of
its current certificate of insurance issued by the Federal Deposit
Insurance Corporation or the National Credit Union Administration; and
(C) Paragraph (b)(2)(i)(C) of this section shall submit a copy of
its most recent year-end financial statements (and any notes or other
supplemental information to its financial statements) documenting its
assets dedicated to Financial Products, Development Services and/or
other similar financing, and an explanation of how such assets support
these activities. An Applicant also shall provide qualitative and
quantitative information on the percentage of Applicant staff time
dedicated to the provision of Financial Products, Development Services,
and/or other similar financing.
(3) Target Market--(i) General. An Applicant shall provide a
description of one or more Investment Areas and/or Targeted Populations
that it serves, and shall demonstrate that its total activities are
principally directed to serving the Investment Areas, Targeted
Populations, or both. An Investment Area shall meet specific geographic
and other criteria described in paragraph (b)(3)(ii) of this section,
and a Targeted Population shall meet the criteria described in
paragraph (b)(3)(iii) in this section.
(ii) Investment Area. (A) General. A geographic area will be
considered eligible for designation as an Investment Area if it:
(1) Is entirely located within the geographic boundaries of the
United States (which shall encompass any State of the United States,
the District of Columbia or any territory of the United States, Puerto
Rico, Guam, American Samoa, the Trust Territories of the Pacific
Islands, the Virgin Islands, and the Northern Mariana Islands); and
either
(2) Meets at least one of the objective criteria of economic
distress as set forth in paragraph (b)(3)(ii)(D) of this section and
has significant unmet needs for loans, Equity Investments, or Financial
Services as described in paragraph (b)(3)(ii)(E) of this section; or
(3) Encompasses or is located in an Empowerment Zone or Enterprise
Community designated under section 1391 of the Internal Revenue Code of
1986 (26 U.S.C. 1391).
(B) Geographic units. Subject to the remainder of this paragraph
(b)(3)(ii)(B), an Investment Area shall consist of a geographic unit(s)
that is a county (or equivalent area), minor civil division that is a
unit of local government, incorporated place, census tract, block
numbering area, block group, or American Indian or Alaska Native area
(as such units are defined or reported by the U.S. Bureau of the
Census). However, geographic units in Metropolitan Areas that are used
to comprise an Investment Area shall be limited to census tracts, block
groups and American Indian or Alaskan Native areas. An Applicant may
designate one or more Investment Areas as part of a single application.
(C) Designation. An Applicant may designate an Investment Area by
selecting:
(1) A geographic unit(s) which individually meets one of the
criteria in paragraph (b)(3)(ii)(D) of this section; or
(2) A group of contiguous geographic units which together meet one
of the criteria in paragraph (b)(3)(ii)(D) of this section, provided
that the combined population residing within individual geographic
units not meeting any such criteria does not exceed 15 percent of the
total population of the entire Investment Area.
(D) Distress criteria. An Investment Area (or the units that
comprise an area) must meet at least one of the following objective
criteria of economic distress (as reported in the most recently
completed decennial census published by the U.S. Bureau of the Census):
(1) The percentage of the population living in poverty is at least
20 percent;
(2) In the case of an Investment Area located:
[[Page 49649]]
(i) Within a Metropolitan Area, the median family income shall be
at or below 80 percent of the Metropolitan Area median family income or
the national Metropolitan Area median family income, whichever is
greater; or
(ii) Outside of a Metropolitan Area, the median family income shall
be at or below 80 percent of the statewide non-Metropolitan Area median
family income or the national non-Metropolitan Area median family
income, whichever is greater;
(3) The unemployment rate is at least 1.5 times the national
average;
(4) The percentage of occupied distressed housing (as indicated by
lack of complete plumbing and occupancy of more than one person per
room) is at least 20 percent; or
(5) In areas located outside of a Metropolitan Area:
(i) The county population loss in the period between the most
recent decennial census and the previous decennial census is at least
10 percent; or
(ii) The county net migration loss (outmigration minus immigration)
over the five year period preceding the most recent decennial census is
at least 5 percent.
(E) Unmet needs. An Investment Area will be deemed to have
significant unmet needs for loans or Equity Investments if studies or
other analyses provided by the Applicant adequately demonstrate a
pattern of unmet needs for loans, Equity Investments, or Financial
Services within such area(s).
(F) Serving Investment Areas. An Applicant may serve an Investment
Area directly or through borrowers or investees that serve the
Investment Area or provide significant benefits to its residents. To
demonstrate that it is serving an Investment Area, an Applicant shall
submit:
(1) A completed Investment Area Designation worksheet referenced in
the application packet;
(2) A map of the designated area(s); and
(3) Studies or other analyses as described in paragraph
(b)(3)(ii)(E) of this section.
(iii) Targeted Population--(A) General. Targeted Population shall
mean individuals, or an identifiable group of individuals, who are Low-
Income persons or lack adequate access to loans, Equity Investments, or
Financial Services in the Applicant's service area. The members of a
Targeted Population shall reside within the boundaries of the United
States (which shall encompass any State of the United States, the
District of Columbia or any territory of the United States, Puerto
Rico, Guam, American Samoa, the Trust Territories of the Pacific
Islands, the Virgin Islands, and the Northern Mariana Islands).
(B) Serving A Targeted Population. An Applicant may serve the
members of a Targeted Population directly or indirectly or through
borrowers or investees that directly serve or provide significant
benefits to such members. To demonstrate that it is serving a Targeted
Population, an Applicant shall submit:
(1) In the case of a Low-Income Targeted Population, a description
of the service area from which the Low-Income Targeted Population is
drawn (which could be, for example, a local, regional or national
service area); or
(2) In the case of a Targeted Population defined other than on the
basis of Low-Income--
(i) A description of the service area from which the Targeted
Population is drawn; and
(ii) A brief analytical narrative with information demonstrating
that the identifiable group of individuals in the Applicant's service
area, lacks adequate access to loans, Equity Investments, or Financial
Services.
(4) Development Services. A CDFI directly, through an Affiliate, or
through a contract with another provider, shall provide Development
Services in conjunction with its Financial Products. An Applicant shall
submit a description of the Development Services to be offered, the
expected provider of such services, and information on the persons
expected to use such services.
(5) Accountability. A CDFI must maintain accountability to
residents of its Investment Area(s) or Targeted Population(s) through
representation on its governing board or otherwise. An Applicant shall
describe how it has and will maintain accountability to the residents
of the Investment Area(s) or Targeted Population(s) it serves.
(6) Non-government. A CDFI shall not be an agency or
instrumentality of the United States, or any State or political
subdivision thereof. An entity that is created by, or that receives
substantial assistance from, one or more government entities may be a
CDFI provided it is not controlled by such entities and maintains
independent decision-making power over its activities. An Applicant
shall submit copies of its articles of incorporation (or comparable
organizing documents), charter, bylaws, or other legal documentation or
opinions sufficient to verify that it is not a government entity.
(7) Ownership. An Applicant shall submit information indicating the
portion of shares of all classes of voting stock that are held by each
Insured Depository Institution or Depository Institution Holding
Company investor (if any).
Subpart C--Use of Funds/Eligible Activities
Sec. 1805.300 Purposes of financial assistance.
The Fund may provide financial assistance through investment
instruments described under subpart D of this part. Such financial
assistance is intended to strengthen the capital position and enhance
the ability of an Awardee to provide Financial Products and Financial
Services.
Sec. 1805.301 Eligible activities.
Financial assistance provided under this part may be used by an
Awardee to serve Investment Area(s) or Targeted Population(s) by
developing or supporting:
(a) Commercial facilities that promote revitalization, community
stability or job creation or retention;
(b) Businesses that:
(1) Provide jobs for Low-Income persons;
(2) Are owned by Low-Income persons; or
(3) Enhance the availability of products and services to Low-Income
persons;
(c) Community Facilities;
(d) The provision of Financial Services;
(e) Housing that is principally affordable to Low-Income persons,
except that assistance used to facilitate home ownership shall only be
used for services and lending products that serve Low-Income persons
and that:
(1) Are not provided by other lenders in the area; or
(2) Complement the services and lending products provided by other
lenders that serve the Investment Area(s) or Targeted Population(s);
(f) The provision of Consumer Loans (a loan to one or more
individuals for household, family, or other personal expenditures); or
(g) Other businesses or activities as requested by the Applicant
and deemed appropriate by the Fund.
Sec. 1805.302 Restrictions on use of assistance.
(a) An Awardee shall use assistance provided by the Fund and its
corresponding matching funds only for the eligible activities approved
by the Fund and described in the Assistance Agreement.
(b) An Awardee may not distribute assistance to an Affiliate
without the Fund's consent.
(c) Assistance provided upon approval of an application involving a
[[Page 49650]]
Community Partnership shall only be distributed to the Awardee and
shall not be used to fund any activities carried out by a Community
Partner or an Affiliate of a Community Partner.
Sec. 1805.303 Technical assistance.
(a) General. The Fund may provide technical assistance to build the
capacity of a CDFI or an entity that proposes to become a CDFI. Such
technical assistance may include training for management and other
personnel; development of programs, products and services; improving
financial management and internal operations; enhancing a CDFI's
community impact; or other activities deemed appropriate by the Fund.
The Fund, in its sole discretion, may provide technical assistance in
amounts, or under terms and conditions that are different from those
requested by an Applicant. The Fund may not provide any technical
assistance to an Applicant for the purpose of assisting in the
preparation of an application. The Fund may provide technical
assistance to a CDFI directly, through grants, or by contracting with
organizations that possess the appropriate expertise.
(b) The Fund may provide technical assistance regardless of whether
the recipient also receives financial assistance under this part.
Technical assistance provided pursuant to this part is subject to the
assistance limits described in Sec. 1805.402.
(c) An Applicant seeking technical assistance must meet the
eligibility requirements described in Sec. 1805.200 and submit an
application as described in Sec. 1805.601.
(d) Applicants for technical assistance pursuant to this part will
be evaluated pursuant to the competitive review criteria in subpart G
of this part, except as otherwise may be provided in the applicable
NOFA. In addition, the requirements for matching funds are not
applicable to technical assistance requests.
Subpart D--Investment Instruments
Sec. 1805.400 Investment instruments--general.
The Fund's primary objective in awarding financial assistance is to
enhance the stability, performance and capacity of an Awardee. The Fund
will provide financial assistance to an Awardee through one or more of
the investment instruments described in Sec. 1805.401, and under such
terms and conditions as described in this subpart D. The Fund, in its
sole discretion, may provide financial assistance in amounts, through
investment instruments, or under rates, terms and conditions that are
different from those requested by an Applicant.
Sec. 1805.401 Forms of investment instruments.
(a) Equity. The Fund may make nonvoting equity investments in an
Awardee, including, without limitation, the purchase of nonvoting
stock. Such stock shall be transferable and, in the discretion of the
Fund, may provide for convertibility to voting stock upon transfer. The
Fund shall not own more than 50 percent of the equity of an Awardee and
shall not control its operations.
(b) Capital grants. The Fund may award grants.
(c) Loans. The Fund may make loans, if permitted by applicable law.
(d) Deposits and credit union shares. The Fund may make deposits
(which shall include credit union shares) in Insured CDFIs. Deposits in
an Insured CDFI shall not be subject to any requirement for collateral
or security.
Sec. 1805.402 Assistance limits.
(a) General. Except as provided in paragraph (b) of this section,
the Fund may not provide, pursuant to this part, more than $5 million,
in the aggregate, in financial and technical assistance to an Awardee
and its Affiliates during any three-year period.
(b) Additional amounts. If an Awardee proposes to establish a new
Affiliate to serve an Investment Area(s) or Targeted Population(s)
outside of any State, and outside of any Metropolitan Area, currently
served by the Awardee or its Affiliates, the Awardee may receive
additional assistance pursuant to this part up to a maximum of $3.75
million during the same three-year period. Such additional assistance:
(1) Shall be used only to finance activities in the new or expanded
Investment Area(s) or Targeted Population(s); and
(2) Must be distributed to a new Affiliate that meets the
eligibility requirements described in Sec. 1805.200 and is selected for
assistance pursuant to subpart G of this part.
(c) An Awardee may receive the assistance described in paragraph
(b) of this section only if no other application to serve substantially
the same Investment Area(s) or Targeted Population(s) that meets the
requirements of Sec. 1805.701(a) was submitted to the Fund prior to the
receipt of the application of said Awardee and within the current
funding round.
Sec. 1805.403 Authority to sell.
The Fund may, at any time, sell its equity investments and loans,
provided the Fund shall retain the authority to enforce the provisions
of the Assistance Agreement until the performance goals specified
therein have been met.
Subpart E--Matching Funds Requirements
Sec. 1805.500 Matching funds--general.
All financial assistance awarded under this part shall be matched
with funds from sources other than the Federal government. Except as
provided in Sec. 1805.502, such matching funds shall be provided on the
basis of not less than one dollar for each dollar provided by the Fund.
Funds that have been used to satisfy a legal requirement for obtaining
funds under either the CDFI Program or another Federal grant or award
program may not be used to satisfy the matching requirements described
in this section. Community Development Block Grant Program and other
funds provided pursuant to the Housing and Community Development Act of
1974, as amended (42 U.S.C. 5301 et seq.), shall be considered Federal
government funds and shall not be used to meet the matching
requirements. Matching funds shall be used as provided in the
Assistance Agreement. Funds that are used prior to the execution of the
Assistance Agreement may nevertheless qualify as matching funds
provided the Fund determines in its reasonable discretion that such use
promoted the purpose of the Comprehensive Business Plan that the Fund
is supporting through its assistance.
Sec. 1805.501 Comparability of form and value.
(a) Matching funds shall be at least comparable in form (e.g.,
equity investments, deposits, credit union shares, loans and grants)
and value to financial assistance provided by the Fund (except as
provided in Sec. 1805.502). The Fund shall have the discretion to
determine whether matching funds pledged are comparable in form and
value to the financial assistance requested.
(b) In the case of an Awardee that raises matching funds from more
than one source, through different investment instruments, or under
varying terms and conditions, the Fund may provide financial assistance
in a manner that represents the combined characteristics of such
instruments.
(c) An Awardee may meet all or part of its matching requirements by
[[Page 49651]]
committing available earnings retained from its operations.
Sec. 1805.502 Severe constraints waiver.
(a) In the case of an Applicant with severe constraints on
available sources of matching funds, the Fund, in its sole discretion,
may permit such Applicant to comply with the matching requirements by:
(1) Reducing such requirements by up to 50 percent; or
(2) Permitting an Applicant to provide matching funds in a form to
be determined at the discretion of the Fund, if such an Applicant:
(i) Has total assets of less than $100,000;
(ii) Serves an area that is not a Metropolitan Area; and
(iii) Is not requesting more than $25,000 in assistance.
(b) Not more than 25 percent of the total funds available for
obligation under this part in any fiscal year may be matched as
described in paragraph (a) of this section. Additionally, not more than
25 percent of the total funds disbursed under this part in any fiscal
year may be matched as described in paragraph (a) of this section.
(c) An Applicant may request a ``severe constraints waiver'' as
part of its application for assistance. An Applicant shall provide a
narrative justification for its request, indicating:
(1) The cause and extent of the constraints on raising matching
funds;
(2) Efforts to date, results, and projections for raising matching
funds;
(3) A description of the matching funds expected to be raised; and
(4) Any additional information requested by the Fund.
(d) The Fund will grant a ``severe constraints waiver'' only in
exceptional circumstances when it has been demonstrated, to the
satisfaction of the Fund, that an Investment Area(s) or Targeted
Population(s) would not be adequately served without the waiver.
Sec. 1805.503 Time frame for raising match.
Applicants shall satisfy matching funds requirements within the
period set forth in the applicable NOFA.
Sec. 1805.504 Retained earnings.
(a) An Applicant that proposes to meet all or a portion of its
matching funds requirements as set forth in this part by committing
available earnings retained from its operations pursuant to
Sec. 1805.501(c) shall be subject to the restrictions described in this
section.
(b)(1) In the case of a for-profit Applicant, retained earnings
that may be used for matching funds purposes shall consist of:
(i) The increase in retained earnings (excluding the after-tax
value to an Applicant of any grants and other donated assets) that has
occurred over the Applicant's most recent fiscal year (e.g., retained
earnings at the end of fiscal year 1999 less retained earnings at the
end of fiscal year 1998); or
(ii) The annual average of such increases that have occurred over
the Applicant's three most recent fiscal years.
(2) Such retained earnings may be used to match a request for an
equity investment. The terms and conditions of financial assistance
will be determined by the Fund.
(c)(1) In the case of a non-profit Applicant (other than a Credit
Union), retained earnings that may be used for matching funds purposes
shall consist of:
(i) The increase in an Applicant's net assets (excluding the amount
of any grants and value of other donated assets) that has occurred over
the Applicant's most recent fiscal year; or
(ii) The annual average of such increases that has occurred over
the Applicant's three most recent fiscal years.
(2) Such retained earnings may be used to match a request for a
capital grant. The terms and conditions of financial assistance will be
determined by the Fund.
(d)(1) In the case of an insured credit union Applicant, retained
earnings that may be used for matching funds purposes shall consist of:
(i) The increase in retained earnings that have occurred over the
Applicant's most recent fiscal year;
(ii) The annual average of such increases that has occurred over
the Applicant's three most recent fiscal years; or
(iii) The entire retained earnings that have been accumulated since
the inception of the Applicant provided that the conditions described
in paragraph (d)(4) of this section are satisfied.
(2) For the purpose of paragraph (d)(4) of this section, retained
earnings shall be comprised of ``Regular Reserves'', ``Other Reserves''
(excluding reserves specifically dedicated for losses), and ``Undivided
Earnings'' as such terms are used in the National Credit Union
Administration's accounting manual.
(3) Such retained earnings may be used to match a request for a
capital grant. The terms and conditions of financial assistance will be
determined by the Fund.
(4) If the option described in paragraph (d)(1)(iii) of this
section is used:
(i) The Assistance Agreement shall require that:
(A) An Awardee increase its member and/or non-member shares by an
amount that is at least equal to four times the amount of retained
earnings that is committed as matching funds; and
(B) Such increase be achieved within 24 months from September 30 of
the calendar year in which the applicable application deadline falls;
(ii) The Applicant's Comprehensive Business Plan shall discuss its
strategy for raising the required shares and the activities associated
with such increased shares;
(iii) The level from which the increases in shares described in
paragraph (d)(4)(i) of this section will be measured will be as of
September 30 of the calendar year in which the applicable application
deadline falls; and
(iv) Financial assistance shall be disbursed by the Fund only as
the amount of increased shares described in paragraph (d)(4)(i)(A) of
this section is achieved.
(5) The Fund will allow an Applicant to utilize the option
described in paragraph (d)(1)(iii) of this section for matching funds
only if it determines, in its sole discretion, that the Applicant will
have a high probability of success in increasing its shares to the
specified amounts.
(e) Retained earnings accumulated after the end of the Applicant's
most recent fiscal year ending prior to the appropriate application
deadline may not be used as matching funds.
Subpart F--Applications for Assistance
Sec. 1805.600 Notice of Funds Availability.
Each Applicant shall submit an application for financial or
technical assistance under this part in accordance with the regulations
in this subpart and the applicable NOFA published in the Federal
Register. The NOFA will advise potential Applicants on how to obtain an
application packet and will establish deadlines and other requirements.
The NOFA may specify any limitations, special rules, procedures, and
restrictions for a particular funding round. After receipt of an
application, the Fund may request clarifying or technical information
on the materials submitted as part of such application.
Sec. 1805.601 Application contents.
An Applicant shall provide information necessary to establish that
it is, or will be, a CDFI. Unless otherwise specified in an applicable
NOFA, each
[[Page 49652]]
application must contain the information specified in the application
packet including the items specified in this section.
(a) Award request. An Applicant shall indicate:
(1) The dollar amount, form, rates, terms and conditions of
financial assistance requested; and
(2) Any technical assistance needs for which it is requesting
assistance.
(b) Previous Awardees. In the case of an Applicant that has
previously received assistance under this part, the Applicant shall
demonstrate that it:
(1) Has substantially met its performance goals and other
requirements described in its previous Assistance Agreement(s); and
(2) Will expand its operations into a new Investment Area(s), serve
a new Targeted Population(s), offer more products or services, or
increase the volume of its activities.
(c) Time of operation. At the time of submission of an application,
an Applicant that has been in operation for:
(1) Three years or more shall submit information on its activities
(as described in Sec. 1805.201 (b)(1) and (2) and paragraphs (d)(2) and
(d)(9)(v) of this section) and financial statements (as described in
paragraph (d)(4) of this section) for the three most recent fiscal
years;
(2) For more than one year, but less than three years, shall submit
information on its activities (as described in Sec. 1805.201 (b)(1) and
(2) and paragraphs (d)(2) and (d)(9)(vi) of this section) and financial
statements (as described in paragraph (d)(4) of this section) for each
full fiscal year since its inception; or
(3) For less than one year, shall submit information on its
activities and financial statements as described in paragraph (d) of
this section.
(d) Comprehensive Business Plan. An Applicant shall submit a five-
year Comprehensive Business Plan that addresses the items described in
this paragraph (d). The Comprehensive Business Plan shall demonstrate
that the Applicant shall have the capacity to operate as a CDFI upon
receiving financial assistance from the Fund pursuant to this part.
(1) Executive summary. The executive summary shall include a
description of the institution, products and services, markets served
or to be served, accomplishments to date and key points of the
Applicant's five year strategy, and other pertinent information.
(2) Community development track record. The Applicant shall
describe its community development impact over the past three years, or
for its period of operation if less than three years. In addition, an
Applicant with a prior history of serving Investment Area(s) or
Targeted Population(s) shall describe its activities, operations and
community benefits created for residents of the Investment Area(s) or
Targeted Population(s) for such periods as described in paragraph (c)
of this section.
(3) Operational capacity and risk mitigation strategies. An
Applicant shall submit information on its policies and procedures for
underwriting and approving loans and investments, monitoring its
portfolio and internal controls and operations. An Applicant shall also
submit a copy of its conflict of interest policies that are consistent
with the requirements of Sec. 1805.806.
(4) Financial track record and strength. An Applicant shall submit
historic financial statements for such periods as specified in
paragraph (c) of this section. An Applicant shall submit:
(i) Audited financial statements;
(ii) Financial statements that have been reviewed by a certified
public accountant; or
(iii) Financial statements that have been reviewed by the
Applicant's Appropriate Federal Banking Agency. Such statements should
include balance sheets or statements of financial position, income and
expense statements or statements of activities, and cash flow
statements. The Applicant shall also provide information necessary to
assess trends in financial and operating performance.
(5) Capacity, skills and experience of the management team. An
Applicant shall provide information on the background and capacity of
its management team, including key personnel and governing board
members. The Applicant shall also provide information on any training
or technical assistance needed to enhance the capacity of the
organization to successfully carry out its Comprehensive Business Plan.
(6) Market analysis. An Applicant shall provide an analysis of its
Target Market, including a description of the Target Market, and the
extent of economic distress, an analysis of the needs of the Target
Market for Financial Products, Financial Services and Development
Services, and an analysis of the extent of demand within such Target
Market for the Applicant's products and services. The Applicant also
shall provide an assessment of any factors or trends that may affect
the Applicant's ability to deliver its products and services within its
Target Market.
(7) Program design and implementation plan. An Applicant shall:
(i) Describe the products and services it proposes to provide and
analyze the competitiveness of such products and services in the Target
Market;
(ii) Describe its strategy for delivering its products and services
to its Target Market;
(iii) Describe how its proposed activities are consistent with
existing economic, community and housing development plans adopted for
an Investment Area(s) or Targeted Population(s);
(iv) Describe its plan to coordinate use of assistance from the
Fund with existing government assistance programs and private sector
resources;
(v) Describe how it will coordinate with community organizations,
financial institutions, and Community Partners (if applicable) which
will provide Equity Investments, loans, secondary markets, or other
services in the Target Market; and
(vi) Discuss the extent of community support (if any) within the
Target Market for its activities.
(8) Financial projections and resources. An Applicant shall
provide:
(i) Financial projections. (A) Projections for each of the next
five years which include pro forma balance sheets or statements of
financial position, income and expense statements or statements of
activities, and a description of any assumptions that underlie its
projections; and
(B) Information to demonstrate that it has a plan for achieving or
maintaining sustainability within the five-year period;
(ii) Matching funds. (A) A detailed description of its plans for
raising matching funds, including funds previously obtained or legally
committed to match the amount of financial assistance requested from
the Fund; and
(B) An indication of the extent to which such matching funds will
be derived from private, nongovernment sources. Such description shall
include the name of the source, total amount of such match, the date
the matching funds were obtained or legally committed, if applicable,
the extent to which, and for what purpose, such matching funds have
been used to date, and terms and restrictions on use for each matching
source, including any restriction that might reasonably be construed as
a limitation on the ability of the Applicant to use the funds for
matching purposes; and
(iii) Severe constraints waiver. If the Applicant is requesting a
``severe
[[Page 49653]]
constraints waiver'' of any matching requirements, it shall submit the
information requested in Sec. 1805.502.
(9) Projected community impact. An Applicant shall provide:
(i) Estimates of the volume of new activity to be achieved within
its Target Market assuming that assistance is provided by the Fund;
(ii) A description of the anticipated incremental increases in
activity to be achieved with assistance provided by the Fund and
matching funds within the Target Market;
(iii) An estimate of the benefits expected to be created within its
Target Market over the next five years;
(iv) The extent to which the Applicant will concentrate its
activities within its Target Market;
(v) A description of how the Applicant will measure the benefits
created as a result of its activities within its Target Market; and
(vi) In the case of an Applicant with a prior history of serving a
Target Market, an explanation of how the Applicant will expand its
operations into a new Investment Area(s), serve a new Targeted
Population(s), offer more products or services, or increase the volume
of its activities.
(10) Risks and assumptions. An Applicant shall identify and discuss
critical risks (including strategies to mitigate risk) and assumptions
contained in its Comprehensive Business Plan, and any significant
impediments to the Plan's implementation.
(11) Schedule. An Applicant shall provide a schedule indicating the
timing of major events necessary to realize the objectives of its
Comprehensive Business Plan.
(12) Community Partnership. In the case of an Applicant submitting
an application with a Community Partner, the Applicant shall:
(i) Describe how the Applicant and the Community Partner will
participate in carrying out the Community Partnership and how the
partnership will enhance activities serving the Investment Area(s) or
Targeted Population(s);
(ii) Demonstrate that the Community Partnership activities are
consistent with the Comprehensive Business Plan;
(iii) Provide information necessary to evaluate such an application
as described under Sec. 1805.701(b)(6);
(iv) Include a copy of any written agreement between the Applicant
and the Community Partner related to the Community Partnership; and
(v) Provide information to demonstrate that the Applicant meets the
eligibility requirements described in Sec. 1805.200 and satisfies the
selection criteria described in subpart G of this part. (A Community
Partner shall not be required to meet the eligibility requirements
described in Sec. 1805.200.)
(13) Effective use of Fund resources. An Applicant shall describe
the extent of need for the Fund's assistance, as demonstrated by the
extent of economic distress in the Applicant's Target Market and the
extent to which the Applicant needs the Fund's assistance to carry out
its Comprehensive Business Plan.
(e) Community ownership and governance. An Applicant shall provide
information to demonstrate the extent to which the Applicant is, or
will be, Community-Owned or Community-Governed.
(f) Environmental information. The Applicant shall provide
sufficient information regarding the potential environmental impact of
its proposed activities in order for the Fund to complete its
environmental review requirements pursuant to part 1815 of this
chapter.
(g) Applicant certification. The Applicant and Community Partner
(if applicable) shall certify that:
(1) It possesses the legal authority to apply for assistance from
the Fund;
(2) The application has been duly authorized by its governing body
and duly executed;
(3) It will not use any Fund resources for lobbying activities as
set forth in Sec. 1805.807; and
(4) It will comply with all relevant provisions of this chapter and
all applicable Federal, State, and local laws, ordinances, regulations,
policies, guidelines, and requirements.
Subpart G--Evaluation and Selection of Applications
Sec. 1805.700 Evaluation and selection--general.
Applicants will be evaluated and selected, at the sole discretion
of the Fund, to receive assistance based on a review process, that
could include an interview(s) and/or site visit(s), that is intended
to:
(a) Ensure that Applicants are evaluated on a competitive basis in
a fair and consistent manner;
(b) Take into consideration the unique characteristics of
Applicants that vary by institution type, total asset size, stage of
organizational development, markets served, products and services
provided, and location;
(c) Ensure that each Awardee can successfully meet the goals of its
Comprehensive Business Plan and achieve community development impact;
and
(d) Ensure that Awardees represent a geographically diverse group
of Applicants serving Metropolitan Areas, non-Metropolitan Areas, and
Indian Reservations from different regions of the United States.
Sec. 1805.701 Evaluation of applications.
(a) Eligibility and completeness. An Applicant will not be eligible
to receive assistance pursuant to this part if it fails to meet the
eligibility requirements described in Sec. 1805.200 or if it has not
submitted complete application materials. For the purposes of this
paragraph (a), the Fund reserves the right to request additional
information from the Applicant, if the Fund deems it appropriate.
(b) Substantive review. In evaluating and selecting applications to
receive assistance, the Fund will evaluate the Applicant's likelihood
of success in meeting the goals of the Comprehensive Business Plan and
achieving community development impact, by considering factors such as:
(1) Community development track record (e.g., in the case of an
Applicant with a prior history of serving a Target Market, the extent
of success in serving such Target Market);
(2) Operational capacity and risk mitigation strategies;
(3) Financial track record and strength;
(4) Capacity, skills and experience of the management team;
(5) Solid understanding of its market context, including its
analysis of current and prospective customers, the extent of economic
distress within the designated Investment Area(s) or the extent of need
within the designated Targeted Population(s), as those factors are
measured by objective criteria, the extent of need for Equity
Investments, loans, Development Services, and Financial Services within
the designated Target Market, and the extent of demand within the
Target Market for the Applicant's products and services;
(6) Quality program design and implementation plan, including an
assessment of its products and services, marketing and outreach
efforts, delivery strategy, and coordination with other institutions
and/or a Community Partner, or participation in a secondary market for
purposes of increasing the Applicant's resources. In the case of an
applicant submitting an application with a Community Partner, the Fund
will evaluate the extent to which the Community Partner will
participate in carrying out the activities of the Community
Partnership; the extent to which the Community Partner will
[[Page 49654]]
enhance the likelihood of success of the Comprehensive Business Plan;
and the extent to which service to the designated Target Market will be
better performed by a Community Partnership than by the Applicant
alone;
(7) Projections for financial performance, capitalization and
raising needed external resources, including the amount of firm
commitments and matching funds in hand to meet or exceed the matching
funds requirements and, if applicable, the likely success of the plan
for raising the balance of the matching funds in a timely manner, the
extent to which the matching funds are, or will be, derived from
private sources, and whether an Applicant is, or will become, an
Insured CDFI;
(8) Projections for community development impact, including the
extent to which an Applicant will concentrate its activities on serving
its Target Market(s), the extent of support from the designated Target
Market, the extent to which an Applicant is, or will be, Community-
Owned or Community-Governed, and the extent to which the activities
proposed in the Comprehensive Business Plan will expand economic
opportunities or promote community development within the designated
Target Market;
(9) The extent of need for the Fund's assistance, as demonstrated
by the extent of economic distress in the Applicant's Target Market and
the extent to which the Applicant needs the Fund's assistance to carry
out its Comprehensive Business Plan. In the case of an Applicant that
has previously received assistance under the CDFI Program, the Fund
also will consider the Applicant's level of success in meeting its
performance goals, financial soundness covenants (if applicable), and
other requirements contained in the previously negotiated and executed
Assistance Agreement(s) with the Fund, and whether the Applicant will,
with additional assistance from the Fund, expand its operations into a
new Target Market, offer more products or services, and/or increase the
volume of its activities;
(10) The Fund may consider any other factors, as it deems
appropriate, in reviewing an application.
(c) Consultation with Appropriate Federal Banking Agencies. The
Fund will consult with, and consider the views of, the Appropriate
Federal Banking Agency prior to providing assistance to:
(1) An Insured CDFI;
(2) A CDFI that is examined by or subject to the reporting
requirements of an Appropriate Federal Banking Agency; or
(3) A CDFI that has as its Community Partner an institution that is
examined by, or subject to, the reporting requirements of an
Appropriate Federal Banking Agency.
(d) Awardee selection. The Fund will select Awardees based on the
criteria described in paragraph (b) of this section and any other
criteria set forth in this part or the applicable NOFA.
Subpart H--Terms and Conditions of Assistance
Sec. 1805.800 Safety and soundness.
(a) Regulated institutions. Nothing in this part, or in an
Assistance Agreement, shall affect any authority of an Appropriate
Federal Banking Agency to supervise and regulate any institution or
company.
(b) Non-Regulated CDFIs. The Fund will, to the maximum extent
practicable, ensure that Awardees that are Non-Regulated CDFIs are
financially and managerially sound and maintain appropriate internal
controls.
Sec. 1805.801 Assistance Agreement; sanctions.
(a) Prior to providing any assistance, the Fund and an Awardee
shall execute an Assistance Agreement that requires an Awardee to
comply with performance goals and abide by other terms and conditions
of assistance. Such performance goals may be modified at any time by
mutual consent of the Fund and an Awardee or as provided in paragraph
(c) of this section. If a Community Partner is part of an application
that is selected for assistance, such partner must be a party to the
Assistance Agreement if deemed appropriate by the Fund.
(b) An Awardee shall comply with performance goals that have been
negotiated with the Fund and which are based upon the Comprehensive
Business Plan submitted as part of the Awardees application.
Performance goals for Insured CDFIs shall be determined in consultation
with the Appropriate Federal Banking Agency. Such goals shall be
incorporated in, and enforced under, the Awardee's Assistance
Agreement.
(c) The Assistance Agreement shall provide that, in the event of
fraud, mismanagement, noncompliance with the Fund's regulations or
noncompliance with the terms and conditions of the Assistance Agreement
on the part of the Awardee (or the Community Partner, if applicable),
the Fund, in its discretion, may:
(1) Require changes in the performance goals set forth in the
Assistance Agreement;
(2) Require changes in the Awardee's Comprehensive Business Plan;
(3) Revoke approval of the Awardee's application;
(4) Reduce or terminate the Awardee's assistance;
(5) Require repayment of any assistance that has been distributed
to the Awardee;
(6) Bar the Awardee (and the Community Partner, if applicable) from
reapplying for any assistance from the Fund; or
(7) Take any other action as permitted by the terms of the
Assistance Agreement.
(d) In the case of an Insured Depository Institution, the
Assistance Agreement shall provide that the provisions of the Act, this
part, and the Assistance Agreement shall be enforceable under 12 U.S.C.
1818 of the Federal Deposit Insurance Act by the Appropriate Federal
Banking Agency and that any violation of such provisions shall be
treated as a violation of the Federal Deposit Insurance Act. Nothing in
this paragraph (d) precludes the Fund from directly enforcing the
Assistance Agreement as provided for under the terms of the Act.
(e) The Fund shall notify the Appropriate Federal Banking Agency
before imposing any sanctions on an Insured CDFI or other institution
that is examined by or subject to the reporting requirements of that
agency. The Fund shall not impose a sanction described in paragraph (c)
of this section if the Appropriate Federal Banking Agency, in writing,
not later than 30 calendar days after receiving notice from the Fund:
(1) Objects to the proposed sanction;
(2) Determines that the sanction would:
(i) Have a material adverse effect on the safety and soundness of
the institution; or
(ii) Impede or interfere with an enforcement action against that
institution by that agency;
(3) Proposes a comparable alternative action; and
(4) Specifically explains:
(i) The basis for the determination under paragraph (e)(2) of this
section and, if appropriate, provides documentation to support the
determination; and
(ii) How the alternative action suggested pursuant to paragraph
(e)(3) of this section would be as effective as the sanction proposed
by the Fund in securing compliance and deterring future noncompliance.
(f) In reviewing the performance of an Awardee in which its
Investment Area(s) includes an Indian Reservation or Targeted
Population(s) includes an
[[Page 49655]]
Indian Tribe, the Fund shall consult with, and seek input from, the
appropriate tribal government.
(g) Prior to imposing any sanctions pursuant to this section or an
Assistance Agreement, the Fund shall, to the maximum extent
practicable, provide the Awardee (or the Community Partner, if
applicable) with written notice of the proposed sanction and an
opportunity to comment. Nothing in this section, however, shall provide
an Awardee or Community Partner with the right to any formal or
informal hearing or comparable proceeding not otherwise required by
law.
Sec. 1805.802 Disbursement of funds.
Assistance provided pursuant to this part may be provided in a lump
sum or over a period of time, as determined appropriate by the Fund.
The Fund shall not provide any assistance (other than technical
assistance) under this part until an Awardee has satisfied any
conditions set forth in its Assistance Agreement and has secured firm
commitments for the matching funds required for such assistance. At a
minimum, a firm commitment must consist of a binding written agreement
between an Awardee and the source of the matching funds that is
conditioned only upon the availability of the Fund's assistance and
such other conditions as the Fund, in its sole discretion, may deem
appropriate. Such agreement must provide for disbursal of the matching
funds to an Awardee prior to, or simultaneously with, receipt by an
Awardee of the Federal funds.
Sec. 1805.803 Data collection and reporting.
(a) Data--general. An Awardee (and a Community Partner, if
appropriate) shall maintain such records as may be prescribed by the
Fund which are necessary to:
(1) Disclose the manner in which Fund assistance is used;
(2) Demonstrate compliance with the requirements of this part and
an Assistance Agreement; and
(3) Evaluate the impact of the CDFI Program.
(b) Customer profiles. An Awardee (and a Community Partner, if
appropriate) shall compile such data on the gender, race, ethnicity,
national origin, or other information on individuals that utilize its
products and services as the Fund shall prescribe in an Assistance
Agreement. Such data will be used to determine whether residents of
Investment Area(s) or members of Targeted Population(s) are adequately
served and to evaluate the impact of the CDFI Program.
(c) Access to records. An Awardee (and a Community Partner, if
appropriate) must submit such financial and activity reports, records,
statements, and documents at such times, in such forms, and accompanied
by such reporting data, as required by the Fund or the U.S. Department
of Treasury to ensure compliance with the requirements of this part and
to evaluate the impact of the CDFI Program. The United States
Government, including the U.S. Department of Treasury, the Comptroller
General, and their duly authorized representatives, shall have full and
free access to the Awardee's offices and facilities and all books,
documents, records, and financial statements relating to use of Federal
funds and may copy such documents as they deem appropriate. The Fund,
if it deems appropriate, may prescribe access to record requirements
for entities that are borrowers of, or that receive investments from,
an Awardee.
(d) Retention of records. An Awardee shall comply with all record
retention requirements as set forth in OMB Circular A-110 (as
applicable).
(e) Review. (1) At least annually, the Fund will review the
progress of an Awardee (and a Community Partner, if appropriate) in
implementing its Comprehensive Business Plan and satisfying the terms
and conditions of its Assistance Agreement.
(2) An Awardee shall submit within 60 days after the end of each
semi-annual period, or within some other period as may be agreed to in
the Assistance Agreement, internal financial statements covering the
semi-annual reporting period (i.e., two periods per year) and
information on its compliance with its financial soundness covenants.
(3) An Awardee shall submit a report within 60 days after the end
of its fiscal year, or by such alternative deadline as may be agreed to
in the Assistance Agreement containing, unless otherwise determined by
mutual agreement between the Awardee and the Fund, the following:
(i) A narrative description of an Awardee's activities in support
of its Comprehensive Business Plan;
(ii) Qualitative and quantitative information on an Awardee's
compliance with its performance goals and (if appropriate) an analysis
of factors contributing to any failure to meet such goals;
(iii) Information describing the manner in which Fund assistance
and any corresponding matching funds were used. The Fund will use such
information to verify that assistance was used in a manner consistent
with the Assistance Agreement; and certification that an Awardee
continues to meet the eligibility requirements described in
Sec. 1805.200.
(4) An Awardee shall submit within 120 days after the end of its
fiscal year, or within some other period as may be agreed to in the
Assistance Agreement, fiscal year end statements of financial condition
audited by an independent certified public accountant. The audit shall
be conducted in accordance with generally accepted Government Auditing
Standards set forth in the General Accounting Offices Government
Auditing Standards (1994 Revision) issued by the Comptroller General
and OMB Circular A-133 (Audits of States, Local Governments, and Non-
Profit Organizations), as applicable.
(5) An Awardee shall submit a report within 120 days after the end
of its fiscal year, or by such alternative deadline as may be agreed to
in the Assistance Agreement containing, unless otherwise determined by
mutual agreement between the Awardee and the Fund, the following
information:
(i) The Awardee's customer profile;
(ii) Awardee activities including Financial Products and
Development Services;
(iii) Awardee portfolio quality;
(iv) The Awardee's financial condition; and
(v) The Awardee's community development impact.
(6) The Fund shall make reports described in paragraph (e)(2) and
(e)(3) of this section available for public inspection after deleting
any materials necessary to protect privacy or proprietary interests.
(f) Exchange of information with Appropriate Federal Banking
Agencies. (1) Except as provided in paragraph (f)(4) of this section,
prior to directly requesting information from or imposing reporting or
record keeping requirements on an Insured CDFI or other institution
that is examined by or subject to the reporting requirements of an
Appropriate Federal Banking Agency, the Fund shall consult with the
Appropriate Federal Banking Agency to determine if the information
requested is available from or may be obtained by such agency in the
form, format, and detail required by the Fund.
(2) If the information, reports, or records requested by the Fund
pursuant to paragraph (f)(1) of this section are not provided by the
Appropriate Federal Banking Agency within 15 calendar days after the
date on which the material is requested, the Fund may request the
information from or impose the record keeping or reporting requirements
directly on such
[[Page 49656]]
institutions with notice to the Appropriate Federal Banking Agency.
(3) The Fund shall use any information provided by the Appropriate
Federal Banking Agency under this section to the extent practicable to
eliminate duplicative requests for information and reports from, and
record keeping by, an Insured CDFI or other institution that is
examined by or subject to the reporting requirements of an Appropriate
Federal Banking Agency.
(4) Notwithstanding paragraphs (f)(1) and (2) of this section, the
Fund may require an Insured CDFI or other institution that is examined
by or subject to the reporting requirements of an Appropriate Federal
Banking Agency to provide information with respect to the institutions
implementation of its Comprehensive Business Plan or compliance with
the terms of its Assistance Agreement, after providing notice to the
Appropriate Federal Banking Agency.
(5) Nothing in this part shall be construed to permit the Fund to
require an Insured CDFI or other institution that is examined by or
subject to the reporting requirements of an Appropriate Federal Banking
Agency to obtain, maintain, or furnish an examination report of any
Appropriate Federal Banking Agency or records contained in or related
to such report.
(6) The Fund and the Appropriate Federal Banking Agency shall
promptly notify each other of material concerns about an Awardee that
is an Insured CDFI or that is examined by or subject to the reporting
requirements of an Appropriate Federal Banking Agency, and share
appropriate information relating to such concerns.
(7) Neither the Fund nor the Appropriate Federal Banking Agency
shall disclose confidential information obtained pursuant to this
section from any party without the written consent of that party.
(8) The Fund, the Appropriate Federal Banking Agency, and any other
party providing information under this paragraph (f) shall not be
deemed to have waived any privilege applicable to the any information
or data, or any portion thereof, by providing such information or data
to the other party or by permitting such data or information, or any
copies or portions thereof, to be used by the other party.
(g) Availability of referenced publications. The publications
referenced in this section are available as follows:
(1) OMB Circulars may be obtained from the Office of
Administration, Publications Office, 725 17th Street, NW., Room 2200,
New Executive Office Building, Washington, DC 20503 or on the Internet
(http://www.whitehouse.gov/OMB/grants/index.html); and
(2) General Accounting Office materials may be obtained from GAO
Distribution, 700 4th Street, NW., Suite 1100, Washington, DC 20548.
Sec. 1805.804 Information.
The Fund and each Appropriate Federal Banking Agency shall
cooperate and respond to requests from each other and from other
Appropriate Federal Banking Agencies in a manner that ensures the
safety and soundness of the Insured CDFIs or other institution that is
examined by or subject to the reporting requirements of an Appropriate
Federal Banking Agency.
Sec. 1805.805 Compliance with government requirements.
In carrying out its responsibilities pursuant to an Assistance
Agreement, the Awardee shall comply with all applicable Federal, State,
and local laws, regulations, and ordinances, OMB Circulars, and
Executive Orders.
Sec. 1805.806 Conflict of interest requirements.
(a) Provision of credit to Insiders. (1) An Awardee that is a Non-
Regulated CDFI may not use any monies provided to it by the Fund to
make any credit (including loans and Equity Investments) available to
an Insider unless it meets the following restrictions:
(i) The credit must be provided pursuant to standard underwriting
procedures, terms and conditions;
(ii) The Insider receiving the credit, and any family member or
business partner thereof, shall not participate in any way in the
decision making regarding such credit;
(iii) The Board of Directors or other governing body of the Awardee
shall approve the extension of the credit; and
(iv) The credit must be provided in accordance with a policy
regarding credit to Insiders that has been approved in advance by the
Fund.
(2) An Awardee that is an Insured CDFI or a Depository Institution
Holding Company shall comply with the restrictions on Insider
activities and any comparable restrictions established by its
Appropriate Federal Banking Agency.
(b) Awardee standards of conduct. An Awardee that is a Non-
Regulated CDFI shall maintain a code or standards of conduct acceptable
to the Fund that shall govern the performance of its Insiders engaged
in the awarding and administration of any credit (including loans and
Equity Investments) and contracts using monies from the Fund. No
Insider of an Awardee shall solicit or accept gratuities, favors or
anything of monetary value from any actual or potential borrowers,
owners or contractors for such credit or contracts. Such policies shall
provide for disciplinary actions to be applied for violation of the
standards by the Awardee's Insiders.
Sec. 1805.807 Lobbying restrictions.
No assistance made available under this part may be expended by an
Awardee to pay any person to influence or attempt to influence any
agency, elected official, officer or employee of a State or local
government in connection with the making, award, extension,
continuation, renewal, amendment, or modification of any State or local
government contract, grant, loan or cooperative agreement as such terms
are defined in 31 U.S.C. 1352.
Sec. 1805.808 Criminal provisions.
The criminal provisions of 18 U.S.C. 657 regarding embezzlement or
misappropriation of funds is applicable to all Awardees and Insiders.
Sec. 1805.809 Fund deemed not to control.
The Fund shall not be deemed to control an Awardee by reason of any
assistance provided under the Act for the purpose of any applicable
law.
Sec. 1805.810 Limitation on liability.
The liability of the Fund and the United States Government arising
out of any assistance to a CDFI in accordance with this part shall be
limited to the amount of the investment in the CDFI. The Fund shall be
exempt from any assessments and other liabilities that may be imposed
on controlling or principal shareholders by any Federal law or the law
of any State. Nothing in this section shall affect the application of
any Federal tax law.
Sec. 1805.811 Fraud, waste and abuse.
Any person who becomes aware of the existence or apparent existence
of fraud, waste or abuse of assistance provided under this part should
report such incidences to the Office of Inspector General of the U.S.
Department of the Treasury.
Dated: August 7, 2000.
Maurice A. Jones,
Deputy Director for Policy and Programs, Community Development
Financial Institutions Fund.
[FR Doc. 00-20267 Filed 8-11-00; 8:45 am]
BILLING CODE 4810-70-P