CDFI Recertification
In the spirit of collaboration, FUND Consulting welcomed the opportunity to provide some insight into the recent CDFI recertification application and process, in a letter to the CDFI Fund:
Mr. Robert Mulderig
Program Manager
Certification, Compliance, Monitoring and Evaluation Office
Community Development Financial Institutions Fund
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 202200
Dear Mr. Mulderig:
FUND Consulting is a women-owned business founded in 2000 that provides quality service to mission driven organizations nationwide. FUND approaches all projects using data to achieve results for organizations seeking to realize goals around business practices, funding opportunities, and public policy issues.
Since 2000, FUND has delivered both strategic and operational services to approximately 174 CDFIs nationwide. FUND provides support to CDFIs through market analyses, capitalization planning, strategic and business planning, and by preparing funding applications, including applications for CDFI Fund programs. Since its inception, applications prepared by FUND have resulted in a total of $290,944,174 in awards from the CDFI Fund. This includes $44,609,873 in CDFI program funding, $500,000 in HFFI awards, $10,718,350 in NACA awards, $175,892,778 in NMTC allocations, $3,820,478 in CMF funding, and $55,402,695 in BEA awards. Three of FUND’s staff members have served as CDFI Fund application readers, including the firm’s Founding Partner who served as a reader from the program’s inception through 2005. Over the past twelve years, FUND has assisted clients with the preparation of 340 CDFI Fund applications for the CORE and NACA Financial and Technical Assistance award and BEA program.
FUND also has extensive experience writing Certification and Recertification Applications and has done so for 84 clients, including 30 during the 2013 recertification round. This has afforded the firm a unique insight into the program and application process.
In the spirit of collaboration, FUND respectfully submits the following comments regarding this year’s recertification program:
Progressive Changes to the Application
FUND strongly supports the CDFI Fund for making a variety of changes to the certification and recertification applications over the last several years. These changes have resulted in an application that is significantly more intuitive ensuring that its time burden is kept to a minimum. To this end FUND would like to acknowledge the following:
- The “workbook” application allows applicants to upload information directly instead of copying tables into the narrative resulting in time savings for the applicant.
- The documents required for the application, and the order of attachments, are similar to that of the FATA application affording a level of familiarity for the applicant.
- The elimination of the “No Change” checkbox in the application ensures that applicants are held accountable and are required to demonstrate they continue to meet each of the requirements set forth by the CDFI Fund for certification.
- The CDFI Fund may even wish to take this enhancement one step further by requiring data on rates and terms in addition to descriptions of financial products to ensure alignment with the CDFI Fund’s definition of Primary Mission.
- The online submission process is considerably more convenient and less time consuming than the previous system of mailing paper copies of the application to the CDFI Fund.
Fostering a Collaborative Process
FUND recognizes the CDFI Fund for its leadership in helping to establish and grow the CDFI industry, and recognizes the essential role that the CDFI Fund plays in the industry’s continued development and diversification. As a direct result of the CDFI Fund’s efforts, the industry has developed into a vast network of organizations that represent diverse constituencies, geographies, and missions. The industry is ever-changing as CDFIs develop new structures and innovative solutions to the problems facing underserved communities across the country. Over the past several years, FUND has increasingly seen new CDFI structures including non-profit holding companies, CDE parent companies, foundations, etc. In addition, CDFIs are expanding their product offerings to include innovative types of loan guarantees, credit builder loans, and individual development accounts (IDAs) that contribute to more complex portfolios. Furthermore, as CDFIs grow to scale, there are an increasing number of organizations that serve large investment areas and must manage accountability in new and different ways.
Given this evolution in complexity and innovation, it is sometimes the case that the CDFI model is not always a perfect fit for the Certification Application. As a result, FUND sincerely hopes that the CDFI Fund will continue its historically collaborative approach in reviewing CDFI Certification Applications.
The FUND team has found the Certification staff to be extremely knowledgeable and helpful over the years. In the past year alone, on three occasions the FUND team has called the CDFI Fund Certification staff on behalf of clients who received Certification denial letters and with a very brief conversation was able to provide information sufficient to reverse these denials. This collaboration has always been a hallmark of the Certification process and FUND supports its continuation. A process characterized by discourse, collaboration, and partnership will ensure the highest level of fairness possible and will give certified and certifiable CDFIs the direction necessary to correctly provide the information in the acceptable format criteria set forth by the CDFI Fund, thus maximizing the CDFI Fund’s impact and strengthening the industry as a whole.
FUND also would encourage the CDFI Fund to provide a higher level of detail to those applicants whose certification or recertification is denied. Under the current system, when an applicant is denied certification, the denial letter provided by the CDFI Fund does not provide the applicant with a clear explanation of the basis for denial. While applicants can call the CDFI Fund for further guidance, it would make for a more efficient and informative process if applicants were given a detailed explanation of the rationale for refusal in the actual denial letter. Providing applicants with the justification for their denial will allow applicants to take the steps necessary to align their organization with the requirements set forth by the CDFI Fund.
Addressing Acknowledged Challenges with the myCDFI Fund Mapping Tool
The myCDFI Fund site and mapping tool used by applicants to create Target Market maps was subject to a variety of malfunctions and glitches throughout the application process. The glitches were primarily associated with the addition of 2010 US Census data and the creation of contiguous maps. Malfunctions resulted in a duplication of the effort necessary to complete the application and greatly increased the chances for error and confusion on the part of the applicant. Examples include:
- Following the addition of 2010 US Census data, the myCDFI Fund Geocoder and mapping system consistently provided outdated (2000) census tract numbers. FUND found this to be the case in Alaska, Arizona, Delaware, Georgia, Illinois, New Jersey, New York, Maryland, Oklahoma, Pennsylvania, Washington, and Wisconsin. This was documented by several emails to the CDFI Fund IT Help Desk between February 8th and 22nd.
- Once the myCDFI Fund Geocoder was updated with the current (2010) US Census data, the mapping system consistently reported that census tracts that appeared to be contiguous (and were later found to be so) were not contiguous. FUND found this to be the case in California, Illinois, New Jersey, and Wisconsin. There was no way for the end-user to resolve contiguity errors, requiring users to email a list of census tract combinations that were falsely registering as “non-contiguous” to the IT Help Desk and often wait over a week for remediation. This was documented by several emails to the CDFI Fund IT Help Desk between February 5th and March 14th.
- There were changes made during the application period to Investment Areas at the county level. For example, the mapping tool reported that Lewis County, Washington was qualified as an Investment Area throughout early and mid-March. On March 22nd, the mapping tool reported that the county was no longer qualified as an Investment Area. FUND sent four separate emails to the IT Help Desk regarding Lewis County’s qualification, none of which received a response.
- There were several system outages during the application process, locking users out of myCDFI Fund for extended periods of times.
FUND respectfully provides this information as it may be helpful in anticipating and assessing potential errors in submitted applications.
Issues with Guidance and Assistance
FUND appreciates the highly detailed instructions provided by the CDFI Fund as part of the application as well as the supporting instruction provided during the regularly held recertification conference calls and through supplemental guidance and FAQs. As can be expected from a complex application however, there were a significant number of questions posed, and clarification requested, throughout the application process. While key points of guidance were often addressed during the recertification conference calls and through individual correspondences with the CDFI Fund, such guidance was not put into writing and/or made available for the entire pool of applicants. For example, guidance regarding the minimum accountability requirements for governing/advisory boards was provided during the March 6th conference call (after the call’s scheduled end time) but was never made available in writing to applicants that were not on the call. In order to guarantee as fair and transparent an application process as possible, it is vital that the CDFI Fund make all essential additional guidance publicly available in writing to the entire pool of applicants through official supplemental guidelines and/or FAQs.
There was also a lack of written guidance related specifically to CDFI Intermediaries. In past years, FUND found it helpful that the CDFI Fund made instructions for CDFI Intermediaries available in a separate set of guidelines. This however was not the case this year and there was no clear indication in the application that a separate set of guidelines would not be made available. This presented a significant challenge given that CDFI Intermediaries have unique challenges especially as it relates to identifying Target Markets and establishing accountability to those Target Markets. FUND made a direct inquiry regarding CDFI Intermediary Target Markets to the CDFI Fund on March 6th; no answer was provided until March 26th.
Given the introduction of a new application and the large volume of applicants in the pool, FUND is sympathetic to the fact that the CDFI Fund has a limited capacity to respond to each question and request submitted by each applicant. However, CDFI Fund staff were so overwhelmed during the eight week open period that requests routinely took more than one week for a response (and in many cases three weeks). Understandably, it is critical that answers to individual inquiries are provided in as timely a manner as possible so that applicants’ timely and accurate completion of the application is not compromised. One potential suggestion from our perspective would be for CDFI Fund staff to hold open sessions each week during the open period where individuals could call-in and ask specific questions as they progress through their applications (rather than just having them at the opening of the period).
FUND strongly supports the CDFI Fund and the recertification process and commends the work that is being done on behalf of underserved communities across this country. We respectfully provide this input in the spirit of continuous improvement.
We would like to extend our thanks for the opportunity to provide comments on this valuable program. The CDFI program is a vital tool to help CDFIs build capacity and leverage additional resources to continue providing credit, capital, and financial services in our nation’s most distressed and underserved communities. Please feel free to contact us at 773-281-8845 should you wish to further discuss any of the above comments.
Sincerely,
Ruth Barber, Partner
Lolita Sereleas, Founding Partner