[Federal Register: February 4, 2003 (Volume 68, Number 23)]
[Rules and Regulations]
[Page 5703-5717]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04fe03-14]
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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 Parts 1805 and 1806
Community Development Financial Institutions and Bank Enterprise Award
Programs and Notice of Funds Availability (NOFA) Inviting Applications
for the Bank Enterprise Program and for the Community Development
Financial Institutions Program; Interim Rules and Notices
[[Page 5704]]
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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: 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 mission of the CDFI Fund is to
increase the capacity of financial institutions to provide capital,
credit and financial services in underserved markets. 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 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 CDFIs selected through a merit-based
application process. The Fund provides such 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. In order for an organization to qualify
as a CDFI, the organization must meet specific eligibility criteria.
One such criterion is that the organization shall have a primary
mission of promoting community development. This revised interim rule:
Revises the primary mission eligibility test to comply with the plain
meaning of the Community Development Banking and Financial Institutions
Act of 1994 (the Act); reduces the frequency of previously approved
collections of information by replacing semi-annual reporting
requirements with annual reporting requirements; clarifies the terms
and conditions underlying an award of assistance prior to the execution
of an assistance agreement; achieves regulatory economy and efficiency
by deleting references to application content requirements and other
matters that have been and will continue to be thoroughly addressed in
the various applications and in the Notices of Funds Availability
(NOFA); and makes other technical and clarifying changes that the Fund
believes will generally inure to the benefit of CDFIs and entities
proposing to become CDFIs.
DATES: Revised interim rule effective February 4, 2003; comments must
be received in the offices of the Fund on or before April 7, 2003.
ADDRESSES: You may send hard copy comments concerning this interim rule
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. You may also send
us comments by e-mail at reg_comments@cdfi.treas.gov. When sending
comments by e-mail, please use an ASCII file format and provide your
full name and mailing address. 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.cdfifund.gov.
FOR FURTHER INFORMATION CONTACT: Fredric C. Cooper, Deputy Director for
Policy and Programs, Community Development Financial Institutions Fund,
at (202) 622-6355. (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 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 mission of the Fund is to increase the capacity of financial
institutions to provide capital, credit and financial services in
underserved markets. Its long-term vision is an America in which all
people have access to affordable credit, capital and financial
services. 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. 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.
The Fund was established to promote economic revitalization and
community development through, among other things, investment in and
assistance to 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. Additionally, CDFIs are
in formation or in the early stages of development in many markets
underserved by traditional financial institutions, including rural and
Native American communities. The CDFI Program assists such entities in
acquiring technical assistance to build their capacity to serve such
markets. Applicants participate in the CDFI Program through a merit-
based qualitative 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.
On August 14, 2000, the Fund published in the Federal Register a
revised interim rule (65 FR 49642) implementing the CDFI Program (the
current rule). The deadline for the submission of comments was October
13, 2000.
II. Comments on the August 14, 2000 Interim Rule
By the close of the October 13, 2000 comment period, the Fund
received no comments on the August 14, 2000 interim rule.
III. Summary of Changes
Purpose
Section 1805.100 of the current rule contains a description of the
purpose of the CDFI Program. This interim rule revises such purpose to
conform to the purpose set forth in Section 102 of the Act (12 U.S.C.
4701(b)).
[[Page 5705]]
Summary
Section 1805.101 of the current rule provides that the Fund will
select Awardees to receive financial and technical assistance through a
competitive application process. The Fund is considering evaluating
applications, particularly those for technical assistance, through a
merit-based qualitative application process in which the Fund may
evaluate applications on a stand-alone basis in lieu of a larger
competitive process in order to expedite funding decisions.
Accordingly, Sec. 1805.101 of this interim rule provides that the Fund
will select Awardees to receive financial and technical assistance
through a merit-based qualitative application process. This interim
rule contains similar conforming changes to Sec. Sec. 1805.303(d) and
1805.700(a).
Definitions
Section 1805.104 of the current rule contains a list of
definitions. This interim rule revises Sec. 1805.104 by adding
definitions of the following two terms: ``Control'' and ``Voting
Securities.'' The two new definitions are intended to clarify the
meaning of the term ``Affiliate,'' which is defined in Sec.
1805.104(b) of the current rule. Section 1805.104(b) of the current
rule defines ``Affiliate'' as any company or entity that controls, is
controlled by, or is under common control with another company. The
definition of ``Affiliate'' is derived from Section 103 of the Act (12
U.S.C. 4702(3)), which incorporates the definition of ``Affiliate''
contained in the Bank Holding Company Act (BHCA) (12 U.S.C. 1841(k)).
Because the definition of ``Affiliate'' is derived from the BHCA, the
Fund's definition of ``Control'' in this interim rule is likewise
derived from the BHCA (12 U.S.C. 1841(a)(2)) and the BHCA implementing
regulations (12 CFR 225.2(e)(1)). The definition of ``Voting
Securities,'' which is referenced in the definition of ``Control,'' is
derived from the definition contained in the BHCA implementing
regulations (12 CFR 225.2(q)). The addition of these two definitions in
this interim rule does not reflect a change in Fund policy or
procedure, because the Fund has consistently looked to such BHCA
definitions to guide it in determining whether one company is an
Affiliate of another company.
Applicant Eligibility
Section 1805.200(a)(2) of the current rule provides that an entity
that proposes to become a CDFI is eligible to apply for assistance if
its application materials provide a realistic course of action to
ensure that it will meet the CDFI eligibility tests 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 current interim rule reflects the Fund's
practice of allowing entities to apply for certification and funding at
the same time. The Fund intends to change such practice by requiring
the submission of an application for certification in advance of the
submission of an application for funding for some CDFI Program
components. The policy goal of this bifurcated process is to facilitate
the allocation of Fund staff resources for purposes of making
eligibility and award decisions on a timelier basis. In furtherance of
this same policy goal, the Fund also seeks the ability to require an
entity to be certified as a CDFI prior to such entity's submission of
an application for funding under some CDFI Program components.
Accordingly, Sec. 1805.200(a)(2) of this interim rule provides that an
entity that proposes to become a CDFI is eligible to apply for
assistance if the Fund receives an application for certification from
the entity within the time period set forth in an applicable NOFA, and
the Fund determines that such application materials provide a realistic
course of action to ensure that it will meet the CDFI eligibility tests
within the period set forth in an applicable NOFA. Section
1805.200(a)(2) of this interim rule also provides that the Fund
reserves the right to require an entity to have been certified as a
CDFI prior to its submission of an application for assistance under the
CDFI Program, as set forth in an applicable NOFA.
Primary Mission Eligibility Test
Section 1805.201(b)(1) of the current rule provides that in order
for an entity to qualify as a CDFI, such entity shall have a primary
mission of promoting community development. Section 1805.201(b)(1) of
the current rule also provides that in determining whether an entity
has such a primary mission, the Fund will consider whether the
activities of such entity individually and such entity and its
Affiliates, when viewed collectively (as a whole), are purposefully
directed toward improving the social and/or economic conditions of
underserved people and/or residents of distressed communities. The Fund
believes that the primary mission eligibility test in the current rule
does not comply with the plain meaning of the definition of ``CDFI''
contained in Section 103 of the Act. Section 103 of the Act (12 U.S.C.
4702(5)(A)(i)) provides, in pertinent part, that the term ``CDFI''
means a person (other than an individual) that has a primary mission of
promoting community development. The Fund believes that if Congress had
intended that the primary mission eligibility test to apply to an
entity on a collective basis with the entity's Affiliates, Congress
would have so specified as it did elsewhere in Section 103 of the Act
(12 U.S.C. 4702(5)(B) and (C)) with regard to entities that are
Depository Institution Holding Companies, Subsidiaries or Affiliates of
Depository Institution Holding Companies, and Subsidiaries of Insured
Depository Institutions. Moreover, the Fund believes that this interim
rule reflects a sound policy approach in that it will facilitate the
ability of venture capital companies to qualify as CDFIs. Under the
current rule, venture capital companies, which might meet all of the
other CDFI eligibility tests, might not meet the primary mission
eligibility test if their Affiliate portfolio companies do not have a
primary mission of promoting community development. Accordingly, under
Sec. 1805.201(b)(1) of this interim rule, in determining whether an
entity has a primary mission of promoting community development, the
Fund will only consider the activities of the entity individually, and
no longer take into account, except where required by the Act, the
activities of an entity's Affiliates.
Certification As A CDFI
Section 1805.201 of the current rule describes, among other things,
the application content requirements for an entity to be certified by
the Fund as a CDFI. This interim rule deletes such application content
requirements for purposes of regulatory economy and efficiency, because
they are already contained in and will continue to be contained in the
certification application.
Target Market--Investment Area
Section 1805.201(b)(3)(ii)(A)(3) of the current rule provides that
a geographic area will be considered an eligible Investment Area if it
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). The Fund has decided to clarify this Investment
Area eligibility requirement for purposes of accurately reflecting the
Fund's longstanding interpretation of such requirement. Accordingly,
Sec. 1805.201(b)(3)(ii)(A)(3) of this interim rule clarifies that a
geographic area will be considered an eligible Investment
[[Page 5706]]
Area if it wholly consists of or is wholly located within an
Empowerment Zone or Enterprise Community.
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, it
must generally meet one of the objective criteria of economic distress
set forth in Sec. 1805.201(b)(3)(ii)(D) of the current rule. Section
1805.201(b)(3)(ii)(D) of the current rule contains a list of five
economic distress criteria. In Sec. 1805.201(b)(3)(ii)(D)(4) of the
current rule, one criterion is that the percentage of occupied
distressed housing (as indicated by lack of complete plumbing and
occupancy of more than one person per room) in the geographic area is
at least 20 percent. The Fund has determined that such criterion is no
longer necessary, because the Fund has found that geographic areas that
meet the occupied distressed housing criterion also meet one or more of
the other economic distress criteria. The Fund thus believes that the
deletion of the occupied distressed housing criterion will have no
substantive adverse effect on a geographic area qualifying as an
Investment Area. Accordingly, this interim rule deletes the occupied
distressed housing criterion for purposes of regulatory economy and
efficiency.
Section 1805.201(b)(3)(ii)(D)(5)(i) of the current rule contains an
Investment Area distress criterion that for areas located outside of a
Metropolitan Area, the county population loss in the period between the
most recent decennial census and the previous decennial census is at
least 10 percent. The Fund has determined that this 10 percent
threshold figure is no longer applicable in light of the fact that the
most recent decennial census indicates that only a small fraction of
such counties experienced such a loss between 1990 and 2000.
In addition, Sec. 1805.201(b)(3)(ii)(D)(5)(ii) of the current rule
contains an Investment Area distress criterion that for areas located
outside of a Metropolitan Area, the county net migration loss over the
five year period preceding the most recent decennial census is at least
five percent. In light of the most recent decennial census data, the
Fund believes that this distressed criterion is no longer an accurate
measure of an area's economic distress. Accordingly, this interim rule
deletes the county population loss and county net migration loss
distress criteria for purposes of regulatory economy and efficiency.
Matching Funds--Retained Earnings
Section 1805.504(d)(4)(i)(A) of the current rule provides that an
Assistance Agreement with insured credit union Awardees that seek to
use as matching funds retained earnings in the form of their net
capital accumulated since inception shall require that such Awardees
increase their member and/or nonmember shares by an amount that is at
least equal to four times the amount of retained earnings that is
committed as matching funds. The Fund believes that this four-fold
increase is excessive and unduly burdensome for many small insured
credit union Awardees that face incremental, rather than large-scale
growth. In previous NOFAs under the Small and Emerging CDFI Assistance
Component, the Fund waived the four-fold requirement and in its place
held ``small and emerging'' insured credit union Awardees to a two-fold
requirement. However, the Fund believes that the flexibility to vary
the amount of such increases should be codified in this interim rule.
Accordingly, Sec. 1805.504(d)(4)(i)(A) of this interim rule is revised
to require insured credit union Awardees, which seek to use net capital
accumulated since their inception as matching funds, to increase their
member and/or nonmember shares by an amount set forth in an applicable
NOFA.
Section 1805.504(d)(4)(i)(B) of the current rule requires the
increase in member and/or nonmember shares to be achieved within 24
months from September 30 of the calendar year in which the applicable
application deadline falls. The Fund believes that this time frame
needs to be shortened by three months so that if an Awardee fails to
timely achieve the increase, the Fund can make a corresponding
reduction in the award amount and then utilize the freed up funds to
make additional awards on or before September 30, which is the last
date that such funds will generally be available to make awards.
Accordingly, Sec. 1805.504(d)(4)(i)(B) of this interim rule is revised
to require insured credit union awardees, which seek to use net capital
accumulated since inception, to increase their member and/or nonmember
shares within 24 months from June 30 of the calendar year in which the
applicable application deadline falls.
Application Contents
Section 1805.601 of the current rule describes the Application
content requirements for entities seeking financial and/or technical
assistance. This interim rule deletes Sec. 1805.601 for purposes of
regulatory economy and efficiency, because such requirements are
already contained in and will continue to be contained in the
applicable applications.
Evaluation of Applications
Section 1805.701(b) of the current rule describes the criteria that
the Fund will consider in evaluating applications for assistance.
Section 1805.701(b)(9) of the current rule provides that the Fund will
consider on the one hand the extent of need for the Fund's assistance,
and on the other hand, in the case of an Applicant that has previously
received assistance under the CDFI Program, the Applicant's level of
success in meeting, among other things, its performance goals and
whether it will expand its activities. The latter is derived from
Section 105 of the Act (12 U.S.C. 4704(b)(4)). The Fund has decided to
bifurcate these two criteria for purposes of clarity. Accordingly,
Sec. 1805.701(b)(10) of this interim rule contains the criterion by
which the Fund will evaluate, in the case of an Applicant that has
previously received assistance under the CDFI Program, its level of
success and whether it will expand its activities.
Notice of Award--Terms and Conditions of Assistance
Section 1805.801 of the current rule provides that prior to
providing any assistance, the Fund and an Awardee shall enter into an
Assistance Agreement. Section 1805.801 of the current rule also
describes the terms and conditions of an Assistance Agreement. However,
there is a gap in the current rule between the evaluation and selection
of an Applicant and the Applicant's entering into an Assistance
Agreement with the Fund. To fill this gap, the Fund is adding a new
section to this interim rule that essentially codifies the terms and
conditions contained in the Notices of Award executed by the Fund and
each Awardee under the CDFI Program. Specifically, Sec. 1805.801 of
this interim rule provides that once an Applicant has been selected to
receive assistance, the Fund and the Awardee will generally execute a
Notice of Award. Section 1805.801 of this interim rule also provides
that the Notice of Award will contain the general terms and conditions
underlying the Fund's provision of assistance, and that the Fund may
terminate the Notice of Award or take other actions in the event of,
among other things, Awardee fraud, Awardee mismanagement, or Awardee
noncompliance with the terms of any
[[Page 5707]]
previous Assistance Agreement entered into with the Fund.
Assistance Agreement; Sanctions
Section 1805.801(b) of the current rule provides that an Awardee
shall comply with mutually negotiated performance goals. However, Sec.
1805.801(b) does not describe the types of performance goals to which
an Awardee and the Fund may mutually agree. Accordingly, Sec.
1805.802(b) of this interim rule adds an illustrative list of the types
of performance goals that may be mutually agreed to.
Section 1805.801(c) of the current rule states that an Assistance
Agreement shall provide that, in the event of fraud, mismanagement,
noncompliance with the Fund's regulations, or noncompliance with the
Assistance Agreement on the part of an Awardee, the Fund, in its
discretion, may impose one or more sanctions. Section 1805.801(c)(7) of
the current rule contains a catch-all sanction in that it authorizes
the Fund to take any other action as permitted by the terms of the
Assistance Agreement. The enumerated sanctions in Sec. 1805.801(c) of
the current rule are derived from Section 109 of the Act (12 U.S.C.
4707(f)(2)(C)), which commits to the Fund's discretion the ability to
impose sanctions on an Awardee in the case of fraud, mismanagement or
noncompliance. Section 109 of the Act (12 U.S.C. 4707(f)(2)(C)(vii))
also contains a catch-all sanction in that it confers upon the Fund the
discretion to ``take such other actions as the Fund deems
appropriate.'' The Fund has decided to revise the catch-all sanction
contained in the current rule to conform to the plain language of the
Act. Accordingly, Sec. 1805.802(c)(7) of this interim rule is revised
to authorize the Fund to take such other actions, as the Fund deems
appropriate.
Section 1805.801(d) of the current rule provides that in the case
of an Insured Depository Institution, the Assistance Agreement shall
provide that the Act, the implementing regulations and the Assistance
Agreement shall be enforceable under 12 U.S.C. 1818 by the Appropriate
Federal Banking Agency. Section 1805.801(d) of the current rule is
derived from Section 119 of the Act (12 U.S.C. 4717(b)), which provides
that the Act, the implementing regulations, and agreements entered into
under the Act are enforceable by the Appropriate Federal Banking Agency
in the case of an Insured CDFI. The Fund seeks to revise Sec.
1805.801(d) of the current rule to conform to the plain meaning of the
Act. Accordingly, Sec. 1805.802(d) of this interim rule is revised by
replacing ``Insured Depository Institution'' with ``Insured CDFI.''
Reporting
Section 1805.803(e)(2) of the current rule requires each Awardee to
submit semi-annual reports consisting of internal financial statements
and information on its compliance with its financial soundness
covenants. The Fund believes that these semi-annual reporting
requirements are unduly burdensome, and has decided to reduce the
frequency of such reporting from semi-annually to annually.
Accordingly, Sec. 1805.804(e)(2) of this interim rule requires each
Awardee to submit to the Fund its fiscal year end unaudited statements
of financial condition on an annual basis.
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 1559-0006. 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 and
to the Office of Management and Budget, Attention: Desk Officer for the
Department of the Treasury, Office of Information and Regulatory
Affairs, Washington, DC 20503.
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.
[[Page 5708]]
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 Notice of Award
1805.802 Assistance Agreement; sanctions.
1805.803 Disbursement of funds.
1805.804 Data collection and reporting.
1805.805 Information.
1805.806 Compliance with government requirements.
1805.807 Conflict of interest requirements.
1805.808 Lobbying restrictions.
1805.809 Criminal provisions.
1805.810 Fund deemed not to control.
1805.811 Limitation on liability.
1805.812 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
Program is to promote economic revitalization and community development
through investment in and assistance to Community Development Financial
Institutions.
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
merit-based qualitative 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 in an
applicable Notice of Funds Availability (NOFA);
(p) Control 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)
[[Page 5709]]
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) The power to exercise, directly or
indirectly, a controlling influence over the management, credit or
investment decisions, or policies of any company.
(q) 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));
(r) 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
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;
(s) Equity Investment means an investment made by an Applicant
that, 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;
(t) Financial Products means: loans, Equity Investments and similar
financing activities (as determined by the Fund) including the purchase
of loans originated by certified CDFIs and the provision of loan
guarantees; 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.
(u) Financial Services means checking, savings accounts, check
cashing, money orders, certified checks, automated teller machines,
deposit taking, and safe deposit box services;
(v) Fund means the Community Development Financial Institutions
Fund established under section 104(a) (12 U.S.C. 4703(a)) of the Act;
(w) 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;
(x) 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;
(y) 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;
(z) Insured CDFI means a CDFI that is an Insured Depository
Institution or an Insured Credit Union;
(aa) Insured Credit Union means any credit union, the member
accounts of which are insured by the National Credit Union Share
Insurance Fund;
(bb) Insured Depository Institution means any bank or thrift, the
deposits of which are insured by the Federal Deposit Insurance
Corporation;
(cc) Investment Area means a geographic area meeting the
requirements of Sec. 1805.201(b)(3);
(dd) 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;
(ee) 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;
(ff) 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;
(gg) 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;
(hh) 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);
(ii) Targeted Population means individuals or an identifiable group
meeting the requirements of Sec. 1805.201(b)(3); and
(jj) Target Market means an Investment Area(s) and/or a Targeted
Population(s).
(kk)(1) 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:
(i) To vote for or select directors, trustees, or partners (or
persons exercising similar functions of the issuing company); or
(ii) To vote on or to direct the conduct of the operations or other
significant policies of the issuing company.
(2) Nonvoting shares. Preferred shares, limited partnership shares
or interests, or similar interests are not Voting Securities if:
(i) 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
preference 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 company when
preferred dividends are in arrears;
(ii) 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
(iii) 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
[[Page 5710]]
partners (or persons exercising similar functions) of the issuing
company.
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 1559-0006.
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:
(i) Receives a complete application for certification from the
entity within the time period set forth in an applicable NOFA; and
(ii) 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 NOFA. The Fund will not, however,
disburse any financial assistance to such an entity before it meets the
requirements described in this section. Moreover, notwithstanding
paragraphs (a)(1) and (a)(2)(ii) of this section, the 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 NOFA.
(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
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
the application for certification. 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 demonstrate
whether it meets the eligibility requirements described in this
paragraph (b) of this section and Sec. 1805.200 by providing the
information described in the application for certification
demonstrating that the Applicant meets the eligibility requirements
described in paragraphs (b)(1) through (b)(6) 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 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. 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):
(i) Depository Institution Holding Company;
(ii) Insured Depository Institution or Insured Credit Union; or
(iii) 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.
(3) Target Market. (i) General. An Applicant may be found to serve
a Target Market by virtue of serving one or more Investment Areas and/
or Targeted Populations. 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
[[Page 5711]]
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(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:
(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; or
(3) The unemployment rate is at least 1.5 times the national
average.
(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 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.
(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.
(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.
(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.
(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.
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, 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) 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
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
[[Page 5712]]
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. 1805.600.
(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 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 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) 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
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:
[[Page 5713]]
(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 2001 less retained earnings at the
end of fiscal year 2000); 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
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
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 set forth in an applicable NOFA; and
(B) Such increase be achieved within 24 months from June 30 of the
calendar year in which the applicable application deadline falls (or
such other date as set forth in the applicable NOFA);
(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 June
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 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.
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 merit basis and 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;
[[Page 5714]]
(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; and
(e) Take into consideration other factors as described in the
applicable NOFA.
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) 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) 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 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;
(10) 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, the undisbursed balance of assistance, 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; and
(11) The Fund may consider any other factors, as it deems
appropriate, in reviewing an application as set forth in an applicable
NOFA.
(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 Notice of award.
(a) The Fund will generally signify its selection of an Applicant
as an Awardee by delivering a signed notice of award to the Applicant.
The notice of award will contain the general terms and conditions
underlying the Fund's provision of assistance to an Awardee including,
but not limited to, the requirement that an Awardee and the Fund enter
into an Assistance Agreement.
(b) To become an Awardee under paragraph (a) of this section, an
Applicant shall execute the notice of award and return it to the Fund.
(c) By executing a notice of award, an Awardee agrees that, if
prior to entering into an Assistance Agreement with the Fund,
information comes to the attention of the Fund that either adversely
affects the Awardee's eligibility for funding, or adversely affects the
Fund's evaluation of the Awardee's application, or indicates fraud or
mismanagement on the part of the Awardee, the Fund may, in its
discretion and without advance notice to the Awardee, terminate the
notice of award or take such other actions as it deems appropriate.
Moreover, by executing a notice of award, an Awardee also agrees that,
if prior to entering into an Assistance Agreement with the Fund, the
Fund determines that the Awardee is not in compliance with the terms of
[[Page 5715]]
any previous Assistance Agreement entered into with the Fund, the Fund
may, in its discretion and without advance notice to the Awardee,
either terminate the notice of award or take such other actions as it
deems appropriate. An Awardee shall notify the Fund of information that
an Awardee may reasonably believe may affect its eligibility or ability
to achieve the objectives of its Comprehensive Business Plan as
submitted to the Fund (such as changes in management).
(d) The Fund will notify an Awardee of either the Fund's
termination of a notice of award or such other action(s) taken by the
Fund under paragraph (c) of this section.
Sec. 1805.802 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 Awardee's application. Such
performance goals may include measures that require an Awardee 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. 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 Act and 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 such other actions as the 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 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 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. 1805.803 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 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. 1805.804 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,
[[Page 5716]]
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) General. 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. The Fund's review will
generally be based on the following:
(i) The annual report described in paragraph (e)(2) of this
section;
(ii) The audited statements of financial condition described in
paragraph (e)(3) of this section; and
(iii) The annual survey described in paragraph (e)(4) of this
section.
(2) Annual Report. 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 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; and
(iii) Information describing the manner in which Fund assistance
and any corresponding matching funds were used;
(iv) A certification that an Awardee continues to meet the
eligibility requirements described in Sec. 1805.200; and
(v) Fiscal year end unaudited statements of financial condition.
(3) Audited Financial Statements. 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.
(4) Annual Survey. 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 (which may include
loan-level data).
(5) The Fund shall make reports described in paragraph (e)(2) 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 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 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
[[Page 5717]]
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. 1805.805 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. 1805.806 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. 1805.807 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. 1805.808 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. 1805.809 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. 1805.810 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. 1805.811 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. 1805.812 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: January 27, 2003.
Tony T. Brown,
Director, Community Development Financial Institutions Fund.
[FR Doc. 03-2335 Filed 2-3-03; 8:45 am]
BILLING CODE 4810-70-P