[Federal Register Volume 80, Number 168 (Monday, August 31, 2015)]
[Rules and Regulations]
[Pages 52379-52392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-21227]
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DEPARTMENT OF THE TREASURY
Community Development Financial Institutions Fund
12 CFR Part 1805
RIN 1505-AA92
Community Development Financial Institutions Program
AGENCY: Community Development Financial Institutions Fund, Department
of the Treasury.
ACTION: Interim rule with request for comment.
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SUMMARY: The Department of the Treasury is issuing an interim rule
implementing the Community Development Financial Institutions Program
(CDFI Program), administered by the Community Development Financial
Institutions Fund (CDFI Fund). This interim rule includes revisions
necessary to implement the Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards published by the
Department of the Treasury on December 19, 2014, as well as to make
technical corrections and other updates to the current rule.
DATES: Effective date: August 31, 2015; all comments must be written
and must be received in the offices of the CDFI Fund on or before
October 30, 2015.
[[Page 52380]]
ADDRESSES: You may submit comments concerning this interim rule via the
Federal e-Rulemaking Portal at http://www.regulations.gov (please
follow the instructions for submitting comments). All submissions
received must include the agency name and Regulatory Information Number
(RIN) for this rulemaking. Other information regarding the CDFI Fund
and its programs may be obtained through the CDFI Fund's Web site at
http://www.cdfifund.gov.
FOR FURTHER INFORMATION CONTACT: Amber Kuchar, CDFI Program Manager,
Community Development Financial Institutions Fund, at
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
The CDFI Fund, Department of the Treasury, was authorized by the
Community Development Banking and Financial Institutions Act of 1994,
as amended (12 U.S.C. 4701 et seq.) (the Act). The purpose of the CDFI
Fund is to promote economic revitalization and community development
through investment in and assistance to Community Development Financial
Institutions (CDFIs). The mission of the CDFI Fund is to increase
economic opportunity and promote community development investments for
underserved populations and in distressed communities in the United
States. Its long-term vision is an America in which all people have
access to affordable credit, capital, and financial services. The
purpose of the CDFI Fund is to promote economic revitalization and
community development through investment in and assistance to Community
Development Financial Institutions (CDFIs). Through the CDFI Program,
the CDFI Fund directly invests in, supports, and trains CDFIs that
provide loans, investments, financial services, and technical
assistance to underserved populations and communities by providing (i)
financial assistance in the form of grants, loans, equity investments,
and deposits to CDFIs and (ii) technical assistance grants to CDFIs and
entities that propose to become CDFIs, for the purpose of increasing
their capacity to serve their Target Markets. The CDFI Fund provides
such financial assistance to CDFIs to enhance their ability to make
loans and investments, and to provide related services for the benefit
of designated Investment Areas, Targeted Populations, or both. Awards
are made through a competitive, merit-based application process.
Through the CDFI Program, the CDFI Fund uses Federal resources to
invest in CDFIs and to build their capacity to serve low-income people
and communities that lack access to affordable financial products and
services. Through the CDFI Program, the CDFI Fund provides two types of
monetary awards to CDFIs: financial assistance awards and technical
assistance awards. Applicants participate in the CDFI Program through a
competitive, merit-based quantitative and qualitative application and
selection process in which the CDFI Fund makes funding decisions based
on pre-established evaluation criteria. An entity may receive a CDFI
Program award only after entering into an Assistance Agreement with the
CDFI Fund that includes performance goals, matching funds requirements
(if applicable), and reporting requirements.
On December 19, 2014, the Department of the Treasury published a
final rule, Uniform Administrative Requirements, Cost Principles, and
Audit Requirements for Federal Awards (2 CFR part 1000), which adopted
the government-wide framework for grants management codified by the
Office of Management and Budget (OMB) at 2 CFR 200 (the Uniform
Requirements). The Uniform Requirements combine grant-related OMB
guidance circulars--reducing the administrative burden for award
Recipients and reducing the risk of waste, fraud, and abuse of Federal
financial assistance--and establish financial, administrative,
procurement, and program management standards for Federal award-making
agencies, including the CDFI Fund and its award Recipients.
On April 10, 2015, the CDFI Fund published in the Federal Register
an amendment to the interim rule (80 FR 19195) modifying the
certification requirements for CDFI Bond Guarantee Program participants
seeking to meet the ``financing entity'' criterion of the CDFI
certification requirements. The deadline for the submission of comments
on the current rule was June 9, 2015.
II. Comments on the April 10, 2015 Interim Rule
As of the close of the June 9, 2015 comment period, the CDFI Fund
received no comments on the current rule.
III. Summary of Changes
Throughout the rule, the defined term ``Awardee'' has been replaced
by ``Recipient.'' Further, award funds being transmitted from the CDFI
Fund to Recipients are referred to as payments, rather than
disbursements. These changes were made to align the terminology in the
CDFI Program regulations with the terms used in the Uniform
Requirements. Other changes to the rule are specified below:
A. Section 1805.102, Relationship to Other CDFI Fund Programs
This section has been revised to clarify that the restrictions on
entities applying for, receiving, and using CDFI Program awards, as
well as awards through other CDFI Fund programs during the same annual
award application cycle, will be described in the corresponding funding
notices for those programs.
B. Section 1805.104, Definitions
As indicated above, the defined term ``Awardee'' has been removed
and replaced with the defined term ``Recipient''. The defined term
``Fund'' has been removed and replaced with the defined term
``Community Development Financial Institutions Fund'' so as to provide
clear delineation between the CDFI Fund and the Capital Magnet Fund,
another CDFI Fund program. The definition of ``Comprehensive Business
Plan'' has been modified to better reflect the Act's requirements for
Comprehensive Business Plans submitted with funding applications. The
definition of Development Services has been modified for clarity. The
definition of ``Financial Product'' has been modified to eliminate
grants by CDFI Intermediaries to CDFIs and/or emerging CDFIs from the
definition. The CDFI Fund believes that this change is necessary to
ensure that Recipients apply their financial assistance award funding
directly to eligible activities rather than passing their financial
assistance awards on to other CDFIs. ``Uniform Requirements'' has been
added as a defined term. In addition, the paragraph numbering has been
removed to allow for future modifications to the Definitions section
without the need for re-numbering the entire section.
C. Section 1805.105, Uniform Requirements; Waiver Authority
Section 1805.105(a), Uniform Requirements, has been added to affirm
that the Uniform Requirements will be applied to all awards made
pursuant to this part, as applicable.
D. Section 1805.201, Certification as a Community Development Financial
Institution
Section 1805.201(b)(3)(ii)(B), Geographic Units, has been revised
to better conform the description of eligible Investment Areas to the
[[Page 52381]]
language of the Act. References to ``American Indian or Alaska Native
area'' have been replaced with ``Indian Reservation.''
Section 1805.201(b)(4), Development Services, has been revised to
permit Development Services to be offered in conjunction with Financial
Services in order to meet the certification requirement that CDFIs must
provide Development Services. Previously, only Development Services in
conjunction with Financial Products met this requirement.
Section 1805.201(b)(5), Accountability, has been revised to require
that a CDFI must demonstrate accountability to residents of its Target
Market through representation on either its governing board or advisory
board. Previously, other means of demonstrating accountability were
permitted.
Section 1805.201(c), Records and Review, has been added to clarify
that each certified CDFI is subject to periodic review by the CDFI Fund
to ensure continued compliance with the CDFI certification requirements
in this part, as well as to review the certified CDFI's organizational
capacity, lending activity, community impacts, and such other
information that the CDFI Fund deems appropriate. CDFIs will be
required to provide, upon request, additional information and
documentation to the CDFI Fund to facilitate this review.
E. Section 1805.502, Severe Constraints Waiver
Section 1805.502(c) has been revised to indicate that the terms of
the severe constraints waiver will be set forth in the affected
Recipient's Assistance Agreement.
F. Section 1805.504, Retained Earnings
Section 1805.504(a) has been revised to eliminate the restriction
on Applicants submitting as matching funds those retained earnings that
have been accumulated by the Applicant after the end of the Applicant's
most recent fiscal year end prior to the application deadline. The CDFI
Fund believes that this change will allow Applicants additional
flexibility in attracting and obtaining matching funds.
Section 1805.504(c) has been revised to permit Insured Depository
Institutions to use retained earnings that have been accumulated since
the inception of the organization as matching funds for financial
assistance awards. Previously, this option was only available to
Insured Credit Unions and State-Insured Credit Unions.
Section 1805.504(c)(1)(iii)(D) has been revised to eliminate the
July 31 date as a specified deadline for the measurement of required
increases in member shares, non-member shares, outstanding loans, and
other measurable activity. Under the current rule, Insured Credit Union
and State-Insured Credit Union Applicants may use the increase in
retained earnings since the inception of the organization as matching
funds so long as they also demonstrate a required amount of increase in
shares, loans, and other activity as described in the applicable Notice
of Funds Availability. Due to fluctuations in the timing of the funding
rounds, the July 31 date being fixed in the regulations made
administration of this requirement challenging. With this revision, the
CDFI Fund will have greater flexibility to schedule deadlines in the
applicable Notice of Funds Availability relative to the application
deadline therein.
G. Section 1805.701, Evaluation of Applications
Section 1805.701(b) has been revised to more accurately reflect the
application and selection requirements of the Act as indicated at 12
U.S.C. 4704, 4705, and 4706.
H. Section 1805.801, Notice of Award
This section was removed as the CDFI Fund no longer uses Notices of
Award (NOAs) that are separate from the Assistance Agreements.
I. Section 1805.803, Data Collection and Reporting
This section has been revised to accommodate the audit requirements
of the Uniform Requirements.
Section 1805.803(e)(1)(i) has been revised to conform to the
Uniform Requirements. Per the Uniform Requirements and the interim
rule, all non-profit organizations that are required to have their
financial statements audited pursuant to the Uniform Requirements, must
submit their single-audits to the Federal Audit Clearinghouse no later
than nine months after the end of the Recipient's fiscal year. Under
this rule, as indicated in the applicable Notice of Funds Availability
and Assistance Agreement, non-profit organizations that are not
required to have their financial statements audited pursuant to the
Uniform Requirements may still be subject to additional audit
requirements.
Section 1805.803(e)(2)(A) has been revised and simplified to
eliminate some outdated report form references in favor of a
description of the report types to be collected from Recipients on an
annual basis. Specific reporting requirements using OMB Paperwork
Reduction Act (PRA) approved information collections will be described
in the applicable Notices of Funds Availability and Assistance
Agreements.
IV. Rulemaking Analysis
A. 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.
B. Regulatory Flexibility Act
Because no notice of proposed rulemaking is required under the
Administrative Procedure Act (5 U.S.C. 553) or any other law, the
Regulatory Flexibility Act does not apply.
C. 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 the applicable, approved OMB Control Numbers associated with
the CDFI Fund under 1559. 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.
D. National Environmental Policy Act
This interim rule has been reviewed in accordance with the CDFI
Fund's Environmental Quality regulations (12 CFR part 1815),
promulgated pursuant to the National Environmental Protection Act of
1969 (NEPA), which requires that the CDFI Fund adequately consider the
cumulative impact proposed activities have upon the human environment.
It is the determination of the CDFI Fund that the interim rule does not
constitute a major federal action significantly affecting the quality
of the human environment and, in accordance with the NEPA and the CDFI
Fund's Environmental Quality regulations (12 CFR 1815), neither an
Environmental Assessment nor an Environmental Impact Statement is
required.
E. 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).
[[Page 52382]]
F. Comment
Public comment is solicited on all aspects of this interim rule.
The CDFI Fund will consider all comments made on the substance of this
interim rule, but it does not intend to hold hearings.
G. 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
Sec.
Subpart A--General Provisions
1805.100 Purpose.
1805.101 Summary.
1805.102 Relationship to other CDFI Fund programs.
1805.103 Recipient not instrumentality.
1805.104 Definitions.
1805.105 Uniform Requirements; 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.
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 Payment 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 CDFI Fund deemed not to control.
1805.810 Limitation on liability.
1805.811 Fraud, waste and abuse.
Authority: 12 U.S.C. 4703, 4703 note, 4710, 4717; and 31 U.S.C.
321.
Subpart A--General Provisions
Sec. 1805.100 Purpose.
The purpose of the Community Development Financial Institutions
(CDFI) Program is to promote economic revitalization and community
development through investment in and assistance to Community
Development Financial Institutions.
Sec. 1805.101 Summary.
Through the Community Development Financial Institutions Program,
the CDFI Fund provides financial and technical assistance to Recipients
selected by the CDFI Fund in order to enhance their ability to provide
Financial Products, Financial Services and Development Services to and
in their Target Markets. Each Recipient must serve an Investment
Area(s), a Targeted Population(s), or both. The CDFI Fund will select
Recipients to receive financial or technical assistance through a
merit-based, qualitative application process. Each Recipient must enter
into an Assistance Agreement that requires it to achieve specific
performance goals and abide by other terms and conditions pertinent to
any assistance received under this part, as well as the Uniform
Requirements, as applicable. All CDFI Program awards shall be made
subject to funding availability.
Sec. 1805.102 Relationship to other CDFI Fund programs.
Restrictions on applying for, receiving, and using CDFI Program
awards in conjunction with awards under other programs administered by
the CDFI Fund (including, but not limited to, the Bank Enterprise Award
Program, the Capital Magnet Fund, the CDFI Bond Guarantee Program, the
Native American CDFI Assistance (NACA) Program, and the New Markets Tax
Credit Program) are as set forth in the applicable Notice of Funds
Availability, Notice of Guarantee Availability, or Notice of Allocation
Availability.
Sec. 1805.103 Recipient not instrumentality.
No Recipient (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, the following terms shall have the
following definitions:
Act means the Community Development Banking and Financial
Institutions Act of 1994, as amended (12 U.S.C. 4701 et se.);
Affiliate means any company or entity that Controls, is Controlled
by, or is under common Control with another company;
Applicant means any entity submitting an application for CDFI
Program assistance or funding under this part;
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
includes, with respect to Insured Credit Unions, the National Credit
Union Administration;
Appropriate State Agency means an agency or instrumentality of a
State that regulates and/or insures the member accounts of a State-
Insured Credit Union;
Assistance Agreement means a formal agreement between the CDFI Fund
and a Recipient, which agreement specifies the terms and conditions of
assistance under this part;
Community Development Financial Institution (or CDFI) means an
entity currently meeting the requirements described in Sec. 1805.201;
Community Development Financial Institutions Fund (or CDFI Fund)
means the Community Development Financial Institutions Fund established
pursuant to section 104(a) (12 U.S.C. 4703(a)) of the Act;
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;
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;
Community Facility means a facility where health care, childcare,
educational, cultural, or social services are provided;
[[Page 52383]]
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;
Community-Owned means an entity in which the residents of an
Investment Area(s) or members of a Targeted Population(s) have an
aggregate ownership interest of greater than 50 percent;
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 or a Recipient. A
Community Partner may include a Depository Institution Holding Company,
an Insured Depository Institution, an Insured Credit Union, a State-
Insured Credit Union, a non-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 se.);
Community Partnership means an agreement between an Applicant or
Recipient and a Community Partner to provide collaboratively Financial
Products and/or Financial Services or Development Services to an
Investment Area(s) or a Targeted Population(s);
Comprehensive Business Plan means a document, covering not less
than the next five years, that demonstrates that the Applicant will be
properly managed and will have the capacity to operate as a CDFI that
will not be dependent upon assistance from the CDFI Fund for continued
viability, and that meets the requirements described in an applicable
Notice of Funds Availability;
Control or Controlling means:
(1) Ownership, control, or power to vote 25 percent or more of the
outstanding shares of any class of Voting Securities of any company,
directly or indirectly or acting through one or more other persons;
(2) Control in any manner over the election of a majority of the
directors, trustees, or general partners (or individuals exercising
similar functions) of any company; or
(3) Power to exercise, directly or indirectly, a controlling
influence over the management, credit or investment decisions, or
policies of any company.
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));
Development Services means activities undertaken by a CDFI, its
Affiliate or contractor that promote community development and shall
prepare or assist current or potential borrowers or investees to use
the CDFI's Financial Products or Financial Services. For example, such
activities include, financial or credit counseling; homeownership
counseling; and business planning and management assistance;
Equity Investment means an investment made by a CDFI that, in the
judgment of the CDFI Fund, supports or enhances activities serving the
CDFI's 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 CDFI as an Affiliate. Equity
Investments may 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 CDFI Fund);
a purchase of secondary capital, or any other investment deemed by the
CDFI Fund to be an Equity Investment;
Financial Products means loans, Equity Investments and similar
financing activities (as determined by the CDFI Fund) including the
purchase of loans originated by certified CDFIs and the provision of
loan guarantees; in the case of CDFI Intermediaries, Financial Products
may also include loans to CDFIs and/or emerging CDFIs and deposits in
Insured Credit Union CDFIs, emerging Insured Credit Union CDFIs, and/or
State-Insured Credit Union CDFIs;
Financial Services means providing checking, savings accounts,
check cashing, money orders, certified checks, automated teller
machines, deposit taking, safe deposit box services, and other similar
services;
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 or established 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;
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 se.).
Each such Indian Tribe must be recognized as eligible for special
programs and services provided by the United States to Indians because
of their status as Indians;
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, Subsidiary, Affiliate, or Community Partner;
Insured CDFI means a CDFI that is an Insured Depository Institution
or an Insured Credit Union;
Insured Credit Union means any credit union, the member accounts of
which are insured by the National Credit Union Share Insurance Fund;
Insured Depository Institution means any bank or thrift, the
deposits of which are insured by the Federal Deposit Insurance
Corporation;
Investment Area means a geographic area meeting the requirements of
Sec. 1805.201(b)(3);
Low-Income means 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;
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;
Non-Regulated CDFI means any entity meeting the eligibility
requirements described in Sec. 1805.200 and that is not a Depository
Institution Holding Company, Insured Depository Institution, Insured
Credit Union, or State-Insured Credit Union;
Nonvoting Securities or Nonvoting Shares. Preferred shares, limited
partnership shares or interests, or similar interests are Nonvoting
Securities if:
(1) Any voting rights associated with the shares or interest are
limited solely to the type customarily provided by statute with regard
to matters that would significantly and adversely affect the rights or
preferences of the security or other interest, such as the issuance of
additional amounts or classes of senior securities, the modification of
the terms of the security or interest, the dissolution of the issuing
company, or the payment of dividends by the issuing
[[Page 52384]]
company when preferred dividends are in arrears:
(2) The shares or interest represent an essentially passive
investment or financing device and do not otherwise provide the holder
with control over the issuing company; and
(3) The shares or interest do not entitle the holder, by statute,
charter, or in any manner, to select or to vote for the selection of
directors, trustees, or partners (or persons exercising similar
functions) of the issuing company.
Recipient means an Applicant selected by the CDFI Fund to receive
assistance pursuant to this part;
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 Virgin Islands, and the Northern Mariana Islands;
State-Insured Credit Union means any credit union that is regulated
by, and/or the member accounts of which are insured by, a State agency
or instrumentality;
Subsidiary means any company that 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);
Targeted Population means individuals or an identifiable group of
individuals meeting the requirements of Sec. 1805.201(b)(3);
Target Market means an Investment Area(s) and/or a Targeted
Population(s);
Uniform Requirements means the Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards (2 CFR part
1000), which is the Department of the Treasury's codification of the
Office of Management and Budget (OMB) government-wide framework for
grants management at 2 CFR part 200;
Voting Securities means shares of common or preferred stock,
general or limited partnership shares or interests, or similar
interests if the shares or interest, by statute, charter, or in any
manner, entitle the holder:
(1) To vote for or select directors, trustees, or partners (or
persons exercising similar functions of the issuing company); or
(2) To vote on or to direct the conduct of the operations or other
significant policies of the issuing company.
Sec. 1805.105 Uniform Requirements; Waiver authority.
(a) Uniform Requirements. The Uniform Requirements will be applied
to all awards made pursuant to this part, as applicable.
(b) Waiver authority. The CDFI 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 CDFI 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 CDFI 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
applicable, approved OMB Control Numbers associated with the CDFI Fund
under 1559.
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)(i) An entity that proposes to become a CDFI is eligible to
apply for assistance under this part if the CDFI Fund:
(A) Receives a complete application for certification from the
entity within the time period set forth in an applicable Notice of
Funds Availability; and
(B) 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
the period set forth in an applicable Notice of Funds Availability.
(ii) The CDFI Fund will not, however, make a payment of any
financial assistance to such an entity before or unless it meets the
requirements described in this section. Moreover, notwithstanding
paragraphs (a)(1) and (a)(2)(i)(B) of this section, the CDFI Fund
reserves the right to require an entity to have been certified as
described in Sec. 1805.201(a) prior to its submission of an
application for assistance, as set forth in an applicable Notice of
Funds Availability.
(3) The CDFI Fund shall require an entity to meet any additional
eligibility requirements that the CDFI Fund deems appropriate.
(4) The CDFI Fund, in its sole discretion, shall determine whether
an entity 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
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) through (3) of this
section, an entity 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 entity's voting shares,
or otherwise controls, in any manner, the election of a majority of
directors of the entity.
Sec. 1805.201 Certification as a Community Development Financial
Institution.
(a) General. An entity may apply to the CDFI Fund for certification
that it meets the CDFI eligibility requirements regardless of whether
it is seeking financial or technical assistance from the CDFI Fund.
Entities seeking such certification shall provide the information set
forth in the application for certification. Certification by the CDFI
Fund will verify that the entity meets the CDFI eligibility
requirements. However, such certification shall not constitute an
opinion by the CDFI Fund as to the financial viability of the CDFI or
that the CDFI will be selected to receive an award from the CDFI Fund.
The CDFI 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 or Sec. 1805.200(b) are
no longer met.
(b) Eligibility verification. An entity shall demonstrate whether
it meets the eligibility requirements described in this paragraph (b)
by providing the information described in the application for
certification demonstrating that the entity meets the eligibility
requirements described in paragraphs (b)(1) through
[[Page 52385]]
(6) of this section. The CDFI Fund, in its sole discretion, shall
determine whether an entity has satisfied the requirements of this
paragraph.
(1) Primary mission. A CDFI must have a primary mission of
promoting community development. In determining whether an entity has
such a primary mission, the CDFI Fund will consider whether the
activities of the entity are purposefully directed toward improving the
social and/or economic conditions of underserved people (which may
include Low-Income persons or persons who lack adequate access to
capital and/or Financial Services) and/or residents of economically
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 and/or Financial Services. An
entity may demonstrate that it meets this requirement if it is a(n):
(A) Depository Institution Holding Company;
(B) Insured Depository Institution, Insured Credit Union, or State-
Insured Credit Union; or
(C) Organization that is deemed by the CDFI 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 certification application. In conducting
such analysis, the CDFI Fund may take into consideration an entity's
total assets and its use of personnel.
(ii) For the sole purpose of participating as an Eligible CDFI in
the CDFI Bond Guarantee Program (see 12 CFR1808), an Affiliate of a
Controlling CDFI may be deemed to meet the financing entity requirement
of this section by relying on the CDFI Fund's determination that the
Controlling CDFI has met said requirement; provided, however, that the
CDFI Fund reserves the right, in its sole discretion, to set additional
parameters and restrictions on such, which parameters and restrictions
shall be set forth in the applicable Notice of Guarantee Availability
for a CDFI Bond Guarantee Program application round.
(iii) Further, for the sole purpose of participating as an Eligible
CDFI in the CDFI Bond Guarantee Program, the provision of Financial
Products, Development Services, and/or other similar financing by an
Affiliate of a Controlling CDFI need not be arms-length if such
transaction is by and between the Affiliate and the Controlling CDFI,
pursuant to an operating agreement that includes management and
ownership provisions and is in form and substance acceptable to the
CDFI Fund.
(3) Target Market--(i) General. A CDFI must serve a Target Market
by virtue of serving one or more Investment Areas and/or Targeted
Populations. An entity may demonstrate that it meets this requirement
by demonstrating that it provides Financial Products and/or Financial
Services in an Investment Areas and/or Targeted Populations as
described in this section. 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) of 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 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, Financial
Products or Financial Services as described in paragraph (b)(3)(ii)(E)
of this section; or
(3) Encompasses (i.e., wholly consists of) or is wholly located
within 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), an Investment Area shall consist of a geographic unit that is a
county (or equivalent area), minor civil division that is a unit of
local government, incorporated place, census tract, or Indian
Reservation. However, geographic units in Metropolitan Areas that are
used to comprise an Investment Area shall be limited to census tracts,
and Indian Reservations. An entity may designate one or more Investment
Areas as part of a single certification application.
(C) Designation. An entity may designate an Investment Area by
selecting:
(1) A geographic unit(s) that individually meets one of the
criteria in paragraph (b)(3)(ii)(D) of this section; or
(2) A group of contiguous geographic units that 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:
(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) In counties located outside of a Metropolitan Area, the county
population loss during the period between the most recent decennial
census and the previous decennial census is at least 10 percent; or
(5) In counties located outside of a Metropolitan Area, the county
net migration loss during the five-year period preceding the most
recent decennial census is at least five percent.
(E) Unmet needs. An Investment Area will be deemed to have
significant unmet needs for loans or Equity Investments if a narrative
analysis provided by the entity demonstrates a pattern of unmet needs
for Financial Products or Financial Services within such area.
(F) Serving Investment Areas. An entity may serve an Investment
Area directly or through borrowers or investees that serve the
Investment Area.
(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 Financial Products or
Financial Services in the entity's Target Market. 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,
[[Page 52386]]
American Samoa, the Virgin Islands, and the Northern Mariana Islands).
(B) Serving Targeted Populations. An entity may serve the members
of a Targeted Population directly or indirectly or through borrowers or
investees that directly serve such members.
(4) Development Services. A CDFI directly, through an Affiliate, or
through a contract with another provider, must have a track record of
providing Development Services in conjunction with its Financial
Products and/or Financial Services. An entity applying for CDFI
certification must demonstrate that it meets this requirement.
(5) Accountability. A CDFI must maintain accountability to
residents of its Investment Area(s) or Targeted Population(s) through
representation on its governing board and/or advisory board(s). An
entity applying for CDFI certification must demonstrate that it meets
this requirement.
(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 applying for CDFI certification must
demonstrate that it meets this requirement. 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.
(c) Records and Review. The CDFI Fund will review a CDFI's
certification status from time to time, as deemed appropriate by the
CDFI Fund, to ensure that it meets the certification requirements of
this section, as well as review its organizational capacity, lending
activity, community impacts, and such other information that the CDFI
Fund deems appropriate. Upon request, a CDFI shall provide such
information and documentation to the CDFI Fund as is necessary to
undertake such review.
Subpart C--Use of Funds/Eligible Activities
Sec. 1805.300 Purposes of financial assistance.
The CDFI Fund may provide financial assistance through investment
instruments described under subpart D of this part. Such financial
assistance is intended to increase available capital and enhance the
ability of a Recipient to provide Financial Products, Financial
Services, and Development Services.
Sec. 1805.301 Eligible activities.
Recipients may use financial assistance provided under this part to
serve Investment Area(s) or Targeted Population(s) by developing or
supporting, through lending, investing, enhancing liquidity, or other
means of finance:
(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) Increase 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 homeownership 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 CDFI Fund.
Sec. 1805.302 Restrictions on use of assistance.
(a) A Recipient shall use assistance provided by the CDFI Fund and
its corresponding matching funds only for the eligible activities
approved by the CDFI Fund and described in the Assistance Agreement.
(b) A Recipient may not distribute assistance to an Affiliate
without the CDFI Fund's consent.
(c) Assistance provided upon approval of an application involving a
Community Partnership shall only be distributed to the Recipient 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 CDFI 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
CDFI Fund. The CDFI 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 or Recipient. The CDFI Fund may
not provide any technical assistance funding to an Applicant for the
purpose of assisting in the preparation of an application for federal
assistance. The CDFI Fund may provide technical assistance to a CDFI
directly, through grants, or by contracting with organizations that
possess the appropriate expertise.
(b) The CDFI 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. 1805.600.
(d) Applicants for technical assistance pursuant to this part will
be evaluated pursuant to the merit-based qualitative review criteria in
subpart G of this part, except as otherwise may be provided in the
applicable Notice of Funds Availability. 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 CDFI Fund will provide financial assistance to a Recipient
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 CDFI 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 CDFI Fund may make non-voting equity investments in
a Recipient, including, without limitation, the purchase of non-voting
stock. Such stock shall be transferable and, in the discretion of the
CDFI Fund, may provide for convertibility to voting stock upon
transfer. The CDFI Fund shall not own more than 50 percent of the
equity of a Recipient and shall not control its operations.
(b) Grants. The CDFI Fund may award grants.
[[Page 52387]]
(c) Loans. The CDFI Fund may make loans, if and as permitted by
applicable law and regulation.
(d) Deposits and credit union shares. The CDFI Fund may make
deposits (which shall include credit union shares) in Insured CDFIs and
State-Insured Credit Unions. Deposits in an Insured CDFI or a State-
Insured Credit Union 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 a Recipient
and its Subsidiaries and Affiliates during any three-year period.
(b) Additional amounts. If a Recipient proposes to establish a new
Subsidiary or 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 Recipient or its Subsidiaries or
Affiliates, the Recipient 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 Subsidiary or Affiliate that meets
the eligibility requirements described in Sec. 1805.200 and is
selected for assistance pursuant to subpart G of this part.
(c) A Recipient 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 CDFI Fund prior
to the receipt of the application of said Recipient and within the
current funding round.
Sec. 1805.403 Authority to sell.
The CDFI Fund may, at any time, sell its equity investments and
loans, provided the CDFI 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
CDFI 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
applicable Notice of Funds Availability and/or the corresponding
Assistance Agreement. Funds that are used prior to the execution of the
Assistance Agreement may nevertheless qualify as matching funds
provided they were used as provided in the applicable Notice of Funds
Availability and/or Assistance Agreement.
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 CDFI Fund (except as
provided in Sec. 1805.502). The CDFI 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 a Recipient that raises matching funds from more
than one source, through different investment instruments, or under
varying terms and conditions, the CDFI Fund may provide financial
assistance in a manner that represents the combined characteristics of
such instruments.
(c) A Recipient may meet all or part of its matching requirements
by 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 CDFI 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 CDFI 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.
(c) The terms of the severe constraints waiver shall be provided in
the applicable Notice of Funds Availability and Assistance Agreement.
Sec. 1805.503 Time frame for raising match.
Applicants and Recipients shall satisfy matching funds requirements
within the period set forth in the applicable Notice of Funds
Availability and/or the corresponding Assistance Agreement.
Sec. 1805.504 Retained earnings.
(a) General. An Applicant or Recipient may use its retained
earnings to match a request for a financial assistance grant from the
CDFI Fund. An Applicant or Recipient that proposes to meet all or a
portion of its matching funds requirements by committing available
retained earnings from its operations shall be subject to the
restrictions described in this section. Retained earnings shall be
calculated as directed by the CDFI Fund in the applicable Notice of
Funds Availability, the financial assistance application, and/or
related guidance materials. The CDFI Fund shall make the final
determination of the eligible amount of retained earnings that an
Applicant or Recipient has available as matching funds.
(b) Applicants other than Insured Credit Unions, State-Insured
Credit Unions and Insured Depository Institutions. In the case of an
Applicant or Recipient that is not an Insured Credit Union, State-
Insured Credit Union or Insured Depository Institution, retained
earnings that may be used for matching funds purposes shall consist of:
(1) The increase in retained earnings (meaning, for purposes of
Sec. 1805.504(b), revenue minus expenses less any dividend payments)
that has occurred over the Applicant's or Recipient's fiscal year as
set forth in the applicable Notice of Funds Availability; or
(2) The annual average of such increases that occurred over the
Applicant's or Recipient's three consecutive fiscal years as set forth
in
[[Page 52388]]
the applicable Notice of Funds Availability.
(c) Insured Credit Unions, State-Insured Credit Unions, and Insured
Depository Institutions. (1) In the case of an Applicant or Recipient
that is an Insured Credit Union, State-Insured Credit Union or Insured
Depository Institution, retained earnings that may be used for matching
funds purposes shall consist of:
(i) The increase in retained earnings that has occurred over the
Applicant's or Recipient's fiscal year as set forth in the applicable
Notice of Funds Availability;
(ii) The annual average of such increases that has occurred over
the Applicant's or Recipient's three consecutive fiscal years as set
forth in the applicable Notice of Funds Availability; or
(iii) The entire retained earnings that have been accumulated since
the inception of the Applicant or Recipient, provided that the
Assistance Agreement shall require that:
(A) The Recipient shall increase its member shares, non-member
shares, outstanding loans and/or other measurable activity as defined
in and by an amount that is set forth in an applicable Notice of Funds
Availability;
(B) Such increase must be achieved by a date certain set forth in
the applicable Notice of Funds Availability;
(C) The level from which the achievement of said increases will be
measured will be as of the date set forth in the applicable Notice of
Funds Availability; and
(D) Financial assistance shall be paid by the CDFI Fund only as the
amount of increases described in paragraph (c)(1)(iii)(A) of this
section is achieved.
(2) The CDFI Fund will allow an Applicant or Recipient to utilize
the option described in paragraph (c)(1)(iii) of this section for
matching funds only if it determines, in its sole discretion, that the
Applicant or Recipient will have a high probability of success in
achieving said increases to the specified amounts.
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 applicable
Notice of Funds Availability published in the Federal Register. The
Notice of Funds Availability will advise prospective Applicants on how
to obtain an application packet and will establish deadlines and other
requirements. The Notice of Funds Availability may specify the
application scoring criteria and any limitations, special rules,
procedures, and restrictions for a particular funding round. After
receipt of an application, the CDFI Fund may request clarifying or
technical information on the materials submitted as part of such
application.
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 CDFI Fund, to receive assistance based on a review process that
may include an interview(s) and/or site visit(s) and that is intended
to:
(a) Ensure that Applicants are evaluated on a merit basis and in a
fair and consistent manner;
(b) Consider 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 Recipient can successfully meet the goals of
its Comprehensive Business Plan and achieve community development
impact;
(d) Ensure that Recipients represent a geographically diverse group
of Recipients serving Metropolitan Areas, non-Metropolitan Areas, and
Indian Reservations from different regions of the United States; and
(e) Consider other factors as described in the applicable Notice of
Funds Availability.
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 CDFI Fund reserves the right to request additional
information from the Applicant, if the CDFI Fund deems it appropriate.
(b) Substantive review. In evaluating and selecting applications to
receive assistance, the CDFI Fund will evaluate the feasibility of the
Applicant's Comprehensive Business Plan goals, the likelihood of the
Applicant meeting such goals, and the likelihood of the Applicant
achieving its proposed community development impacts, by considering
factors such as:
(1) Community development track record, including, in the case of
an Applicant with a prior history of serving a Target Market, the
extent of success in serving such Target Market and whether it will
expand its operations into a new Investment Area or serve a new
Targeted Population, offer more Development Services, Financial
Products and/or Financial Services, or increase the volume of its
current business;
(2) Operational capacity and risk mitigation strategies;
(3) Financial track record and strength;
(4) Capacity, skills, experience and background of the management
team;
(5) Understanding of its market context, including an analysis of
the needs of the Investment Area or Targeted Population and a strategy
for how the Applicant will attempt to meet those needs; such analysis
of current and prospective customers will include 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
Loans, Equity Investments, Financial Products, Financial Services and
Development Services within the designated Target Market, and the
extent of demand within the Target Market for the Applicant's products
and services;
(6) Program design and implementation plan, including: A plan to
coordinate use of a financial assistance award with existing Federal
State, local and Tribal government assistance programs, and private
sector financial services; A description of how the Applicant will
coordinate with community organizations and financial institutions
which will provide equity investments, loans, secondary markets, or
other services to the Investment Area or Targeted Population; 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 CDFI
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 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;
[[Page 52389]]
(7) Projections for financial performance, capitalization and the
raising of needed external resources, including a detailed description
of the Applicant's plans and likely sources of funds to match the
amount of financial assistance requested from the CDFI Fund, 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 or a State-Insured Credit Union;
(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 are consistent with
existing economic, community, and housing development plans adopted by
or applicable to the Investment Area or Targeted Population and will
expand economic opportunities or promote community development within
the designated Target Market;
(9) The extent of need for the CDFI 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 CDFI
Fund's assistance to carry out its Comprehensive Business Plan;
(10) In the case of an Applicant that has previously received
assistance under the CDFI Program, the CDFI 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 CDFI Fund, the unexpended balance of assistance,
and whether the Applicant will, with additional assistance from the
CDFI Fund, expand its operations into a new Target Market, offer more
products or services, and/or increase the volume of its activities; and
(11) The CDFI Fund may consider any other factors, as it deems
appropriate, in reviewing an application as set forth in an applicable
Notice of Funds Availability.
(c) Consultation with Appropriate Federal Banking Agencies. The
CDFI 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) Consultation with Appropriate State Agencies. Prior to
providing assistance to a State-Insured Credit Union, the CDFI Fund may
consult with, and consider the views of, the Appropriate State Agency.
(e) Recipient selection. The CDFI Fund will select Recipients based
on the criteria described in paragraph (b) of this section and any
other criteria set forth in this part or the applicable Notice of Funds
Availability.
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 or Appropriate State Agency to supervise and
regulate any institution or company.
(b) Non-Regulated CDFIs. The CDFI Fund will, to the maximum extent
practicable, ensure that Recipients 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 Financial or Technical Assistance, the
CDFI Fund and a Recipient shall execute an Assistance Agreement that
requires a Recipient 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 CDFI Fund and a Recipient
or as provided in paragraph (c) of this section. If a Community Partner
or an Affiliate 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 CDFI Fund.
(b) A Recipient shall comply with performance goals that have been
established or negotiated with the CDFI Fund and which are based upon
the Comprehensive Business Plan submitted as part of the Recipient's
application. Such performance goals may include measures that require a
Recipient to:
(1) Be financially sound;
(2) Be managerially sound;
(3) Maintain appropriate internal controls; and/or
(4) Achieve specific lending, investment, and development service
objectives.
Performance goals for Insured CDFIs shall be determined in consultation
with the Appropriate Federal Banking Agency, as applicable. Such goals
shall be incorporated in, and enforced under, the Recipient's
Assistance Agreement. Performance goals for State-Insured Credit Unions
may be determined in consultation with the Appropriate State Agency, if
deemed appropriate by the CDFI Fund.
(c) The Assistance Agreement shall provide that, in the event of
fraud, mismanagement, noncompliance with the Act and the CDFI Fund's
regulations, or noncompliance with the terms and conditions of the
Assistance Agreement on the part of the Recipient (or the Community
Partner, if applicable), the CDFI Fund, in its discretion, may:
(1) Require changes in the performance goals set forth in the
Assistance Agreement;
(2) Require changes in the Recipient's Comprehensive Business Plan;
(3) Revoke approval of the Recipient's application;
(4) Reduce or terminate the Recipient's assistance;
(5) Require repayment of any assistance that has been distributed
to the Recipient;
(6) Bar the Recipient from reapplying for any assistance from the
CDFI Fund; or
(7) Take such other actions as the CDFI Fund deems appropriate.
(d) In the case of an Insured CDFI, 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, as
applicable, 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 CDFI Fund from directly enforcing the
Assistance Agreement as provided for under the terms of the Act.
(e) The CDFI 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 CDFI Fund shall not impose a sanction
described in paragraph (c) of this
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section if the Appropriate Federal Banking Agency, in writing, and to
the satisfaction of the CDFI Fund, not later than 30 calendar days
after receiving notice from the CDFI 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 CDFI Fund in securing compliance and deterring future
noncompliance.
(f) In reviewing the performance of a Recipient in which its
Investment Area(s) includes an Indian Reservation or Targeted
Population(s) includes an Indian Tribe, the CDFI 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 CDFI Fund shall, to the maximum extent
practicable, provide the Recipient (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
a Recipient or Community Partner with the right to any formal or
informal hearing or comparable proceeding not otherwise required by
law.
Sec. 1805.802 Payment 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 CDFI
Fund. The CDFI Fund shall not provide any assistance under this part
until a Recipient has satisfied any required conditions set forth in
its Assistance Agreement and, if the Recipient is to receive financial
assistance, the Recipient has secured in-hand and/or firm commitments
for the matching funds required for such assistance pursuant to the
applicable Notice of Funds Availability.
Sec. 1805.803 Data collection and reporting.
(a) Data--General. A Recipient shall maintain such records as may
be prescribed by the CDFI Fund that are necessary to:
(1) Disclose the manner in which CDFI 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. A Recipient (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 CDFI 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. A Recipient (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 CDFI Fund or the Department
of the 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 Department of the Treasury, the Comptroller
General, and their duly authorized representatives, shall have full and
free access to the Recipient'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 CDFI
Fund, if it deems appropriate, may prescribe access to record
requirements for entities that are borrowers of, or that receive
investments from a Recipient.
(d) Retention of records. A Recipient shall comply with all record
retention requirements as set forth in the Uniform Requirements (as
applicable).
(e) Data collection and reporting. Each Recipient shall submit to
the CDFI Fund information and documentation that will permit the CDFI
Fund to review the Recipient's progress (and the progress of its
Affiliates, Subsidiaries, and/or Community Partners, if appropriate) in
implementing its Comprehensive Business Plan and satisfying the terms
and conditions of its Assistance Agreement. The information and
documentation shall include, but not be limited to, an audit and an
annual report, which shall comprise the following components:
(1) Audits and Audited Financial Statements. (i) All non-profit
organizations that are required to have their financial statements
audited pursuant to the Uniform Requirements, must submit their single-
audits no later than nine months after the end of the Recipient's
fiscal year. Non-profit organizations (excluding Insured CDFIs and
State-Insured Credit Unions) that are not required to have financial
statements audited pursuant to the Uniform Requirements, must submit to
the CDFI Fund a statement signed by the Recipient's Authorized
Representative or certified public accountant, asserting that the
Recipient is not required to have a single audit pursuant to the
Uniform Requirements as indicated in the Assistance Agreement. In such
instances, the CDFI Fund may require additional audits to be performed
as stated in the applicable Notice of Funds Availability.
(ii) For-profit organizations (excluding Insured CDFIs and State-
Insured Credit Unions) must submit to the CDFI Fund financial
statements audited in conformity with generally accepted auditing
standards as promulgated by the American Institute of Certified Public
Accountants, no later than six months after the end of the Recipient's
fiscal year.
(iii) Insured CDFIs are not required to submit financial statements
to the CDFI Fund. The CDFI Fund will obtain the necessary information
from publicly available sources. State-Insured Credit Unions must
submit to the CDFI Fund copies of the financial statements that they
submit to the Appropriate State Agency.
(iv) If multiple for-profit organizations sign the Assistance
Agreement: The Recipient may submit combined financial statements and
footnotes for the Recipient and other entities that signed the
Assistance Agreement as long as the financial statements of each
signatory are shown separately (for example, in combining financial
statements).
(2) Annual Report. (i) Each Recipient shall submit to the CDFI Fund
a performance and financial report at the times that shall be specified
in the Assistance Agreement (Annual Report). The Annual Report consists
of several components which may include, but are not limited to, an
institution level report, transaction level report, use of financial or
technical assistance report, explanation of any Recipient
noncompliance, and shareholder report. The Annual Report components
shall be specified and described in the Assistance Agreement.
(ii) The CDFI Fund will use the Annual Report to collect data to
assess the Recipient's compliance with its
[[Page 52391]]
Performance Goals and the impact of the CDFI Program and the CDFI
industry.
(iii) Recipients are responsible for the timely and complete
submission of the Annual Report, even if all or a portion of the
documents actually are completed by another entity or signatory to the
Assistance Agreement. If such other entities or signatories are
required to provide Annual Reports, or other documentation that the
CDFI Fund may require, the Recipient is responsible for ensuring that
the information is submitted timely and complete. The CDFI Fund
reserves the right to contact such additional signatories to the
Assistance Agreement and require that additional information and
documentation be provided.
(3) The CDFI Fund's review of the progress of an Insured CDFI, a
Depository Institution Holding Company or a State-Insured Credit Union
in implementing its Comprehensive Business Plan and satisfying the
terms and conditions of its Assistance Agreement may also include
information from the Appropriate Federal Banking Agency or Appropriate
State Agency, as the case may be.
(4) Public Access. The CDFI Fund shall make reports described in
this section available for public inspection after deleting or
redacting any materials necessary to protect privacy or proprietary
interests.
(f) Exchange of information with Appropriate Federal Banking
Agencies and Appropriate State 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 CDFI 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
CDFI Fund.
(2) If the information, reports, or records requested by the CDFI
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 CDFI Fund may request
the information from or impose the record keeping or reporting
requirements directly on such institutions with notice to the
Appropriate Federal Banking Agency.
(3) The CDFI Fund shall use any information provided by an
Appropriate Federal Banking Agency or Appropriate State Agency under
this section to the extent practicable to eliminate duplicative
requests for information and reports from, and record keeping by, an
Insured CDFI, State-Insured Credit Union or other institution that is
examined by or subject to the reporting requirements of an Appropriate
Federal Banking Agency or Appropriate State Agency.
(4) Notwithstanding paragraphs (f)(1) and (2) of this section, the
CDFI Fund may require an Insured CDFI, State-Insured Credit Union, or
other institution that is examined by or subject to the reporting
requirements of an Appropriate Federal Banking Agency or Appropriate
State Agency to provide information with respect to the institution's
implementation of its Comprehensive Business Plan or compliance with
the terms of its Assistance Agreement, after providing notice to the
Appropriate Federal Banking Agency or Appropriate State Agency, as the
case may be.
(5) Nothing in this part shall be construed to permit the CDFI Fund
to require an Insured CDFI, State-Insured Credit Union, or other
institution that is examined by or subject to the reporting
requirements of an Appropriate Federal Banking Agency or Appropriate
State Agency to obtain, maintain, or furnish an examination report of
any Appropriate Federal Banking Agency or Appropriate State Agency, or
records contained in or related to such report.
(6) The CDFI Fund and the Appropriate Federal Banking Agency shall
promptly notify each other of material concerns about a Recipient 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 CDFI Fund nor the Appropriate Federal Banking
Agency (or Appropriate State Agency, as the case may be) shall disclose
confidential information obtained pursuant to this section from any
party without the written consent of that party.
(8) The CDFI Fund, the Appropriate Federal Banking Agency (or
Appropriate State Agency, as the case may be), 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.
Sec. 1805.804 Information.
The CDFI 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 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 Recipient shall comply with all applicable Federal,
State, and local laws, regulations, and ordinances, OMB Circulars, and
Executive Orders. Furthermore, Recipients must comply with the CDFI
Fund's Environmental Quality Regulations (12 CFR part 1815) as well as
all other federal environmental requirements applicable to federal
awards.
Sec. 1805.806 Conflict of interest requirements.
(a) Provision of credit to Insiders. (1) A Recipient that is a Non-
Regulated CDFI may not use any monies provided to it by the CDFI 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
Recipient 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
CDFI Fund.
(2) A Recipient that is an Insured CDFI, a Depository Institution
Holding Company or a State-Insured Credit Union shall comply with the
restrictions on Insider activities and any comparable restrictions
established by its Appropriate Federal Banking Agency or Appropriate
State Agency, as applicable.
(b) Recipient standards of conduct. A Recipient that is a Non-
Regulated CDFI shall maintain a code or standards of conduct acceptable
to the CDFI Fund that shall govern the performance of its Insiders
engaged in the awarding and administration of any credit (including
loans and Equity Investments) and
[[Page 52392]]
contracts using monies from the CDFI Fund. No Insider of a Recipient
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 Recipient's Insiders.
Sec. 1805.807 Lobbying restrictions.
No assistance made available under this part may be expended by a
Recipient 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 are applicable to all Recipients and
Insiders.
Sec. 1805.809 CDFI Fund deemed not to control.
The CDFI Fund shall not be deemed to Control a Recipient 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 CDFI 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 CDFI
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.
Mary Ann Donovan,
Director, Community Development Financial Institutions Fund.
[FR Doc. 2015-21227 Filed 8-28-15; 8:45 am]
BILLING CODE 4810-70-P