[Federal Register Volume 69, Number 91 (Tuesday, May 11, 2004)]
[Rules and Regulations]
[Pages 26260-26273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-10646]



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Part IV





Department of the Treasury





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Community Development Financial Institutions Fund



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12 CFR Part 1805



Community Development Financial Institutions Program; Interim Rule

  Federal Register / Vol. 69, No. 91 / Tuesday, May 11, 2004 / Rules 
and Regulations  

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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 assistance in the form of grants, loans, equity investments 
and deposits to CDFIs selected through a merit-based application 
process. The Fund provides financial assistance to CDFIs to enhance 
their ability to make loans and investments, and to provide related 
services for the benefit of designated investment areas, targeted 
populations, or both. In addition, under the CDFI Program, the Fund 
provides technical assistance grants to CDFIs and entities that propose 
to become CDFIs, for the purpose of increasing their capacity to serve 
their target markets.
    This revised interim rule includes several revisions that the Fund 
believes will inure to the benefit of CDFIs, CDFI Program applicants, 
and CDFI Program awardees. This revised interim rule: (i) Includes new 
definitions of the terms, ``State-Insured Credit Union'' and 
``Appropriate State Agency'; (ii) includes county population loss as an 
Investment Area distress criterion for areas located outside of 
Metropolitan Areas; (iii) includes county net migration loss as an 
Investment Area distress criterion for areas located outside of 
Metropolitan Areas; (iv) permits the Fund to establish additional 
activity measures (such as loans outstanding) and the associated 
measurement time periods for Insured Credit Unions and State-Insured 
Credit Unions to meet the retained earnings since inception option for 
meeting the matching funds requirements; (v) in the case of State-
Insured Credit Unions, permits the Fund to contact and consider the 
views of the Appropriate State Agency; and (vi) revises certain 
reporting requirements and deadlines to ensure consistency and decrease 
reporting burden. In addition, the revised interim rule revises the 
definition of State by deleting reference to Trust Territories of the 
Pacific Islands.

DATES: This revised interim rule is effective May 11, 2004; comments 
must be received in the offices of the Fund on or before July 12, 2004.

ADDRESSES: You may submit comments concerning this interim rule by any 
of the following methods: (i) via the Federal e-Rulemaking Portal at 
http://www.regulations.gov (please follow the instructions for 
submitting comments); (ii) via e-mail to the Fund at [email protected] (please use an ASCII file format and provide 
your full name and mailing address); (iii) via mail or hand delivery 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; or (iv) via fax to 
(202) 622-8244. All submissions received must include the agency name 
and Regulatory Information Number (RIN) for this rulemaking. All 
comments received will be posted without change to the Fund's Web site 
at http://www.cdfifund.gov, including any personal information 
provided. 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: Linda Davenport, Deputy Director for 
Policy and Programs, Community Development Financial Institutions Fund, 
at (202) 622-8662. (This is not a toll free number.)

SUPPLEMENTARY INFORMATION:

I. Background

    The Fund was established as a wholly owned government corporation 
by the Community Development Banking and Financial Institutions Act of 
1994, as amended (12 U.S.C. 4701 et seq.) (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 Act.
    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 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, many 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--as well as 
established CDFIs--by providing grants through which they may acquire 
technical assistance to build their capacity to serve their target 
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. 
An entity generally receives financial assistance 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 February 4, 2003, the Fund published in the Federal Register a 
revised interim rule (68 FR 5704) implementing the CDFI Program (the

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current rule). The deadline for the submission of comments on the 
current rule was April 7, 2003.

II. Comments on the February 4, 2003 Interim Rule

    By the close of the April 7, 2003 comment period, the Fund received 
comments on the current rule from three organizations. The following 
includes a discussion of the significant issues raised by those 
commentors.

Investment Area/Distress Criteria

    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 three objective criteria of economic 
distress set forth in Sec.  1805.201(b)(3)(ii)(D). The current rule 
eliminated the section of the interim rule published on August 14, 2000 
(65 Federal Register 49642) (the prior rule) that set forth two 
additional criteria of economic distress for areas located outside of 
Metropolitan Areas: The first was related to county population loss and 
the second was related to net migration loss. Two commentors on the 
current rule recommended that those two economic distress criteria be 
restored to the interim rule. Based on an analysis of the 2000 Census, 
the Fund has determined that those two criteria are appropriate 
indicators of declining economic conditions, particularly in rural 
areas. Accordingly, Sec. Sec.  1805.201(b)(3)(ii)(D)(4) and (D)(5) of 
this revised interim rule restore those two criteria as measures of 
economic distress in Investment Areas.

Primary Mission Eligibility Test

    Under Sec.  1805.201(b)(1) of the current rule, the Fund, in 
determining whether an entity has a primary mission of promoting 
community development, only considers the activities of the entity 
individually and does not take into account, except where required by 
the Act, the activities of an entity's Affiliates. One commentor stated 
that the Fund should not eliminate the requirement that an entity and 
all of its Affiliates have a primary mission of community development. 
The Fund believes that: (i) The revised primary mission eligibility 
test complies with the plain meaning of the definition of ``CDFI'' 
contained in section 103 of the Act; (ii) if Congress had intended the 
primary mission 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 the Act with regard to entities that are Depository 
Institution Holding Companies, Subsidiaries or Affiliates of Depository 
Institution Holding Companies, and Subsidiaries of Insured Depository 
Institutions; and (iii) the revised primary mission eligibility test 
reflects a sound policy approach in that it will facilitate the ability 
of venture capital companies to qualify as CDFIs. Accordingly, Sec.  
1805.201(b)(1) of the current rule is not changed.

Application Contents

    Section 1805.601 of the prior rule described the general 
application content requirements for entities seeking financial and/or 
technical assistance. The current rule deletes the section of the prior 
rule that described application content requirements in detail. Two 
commentors recommended that the interim rule contain detailed 
application content requirements. The Fund reaffirms its determination 
that, for purposes of regulatory economy and efficiency, and for 
optimal policy flexibility, the detailed application content 
requirements contained in the prior rule should not be included in the 
current rule. Accordingly, the current rule does not contain specific 
application content requirements.

Reporting Requirements

    Section 1805.804(e)(4) of the current rule sets forth the Fund's 
annual survey requirements, which may include, among other items, the 
collection and submittal of transaction-level data. One commentor 
objected to the collection and submission of transaction-level data on 
the basis that it is unduly burdensome to awardees. In accordance with 
the requirements of the Paperwork Reduction Act (PRA), the Fund has 
made its proposed annual survey (including the proposed transaction-
level data) available for public comment and has collected such 
comments. The Fund will review and consider all comments that were 
received. In addition, the comments and the revised annual survey will 
be submitted to the Office of Management and Budget pursuant to the 
PRA.

III. Summary of Changes

Definitions: State-Insured Credit Union; Appropriate StateAgency; State

    Section 1805.104 of the current rule contains a list of 
definitions. This interim rule revises Sec.  1805.104 by including the 
definition of two new terms: ``State-Insured Credit Union'' and 
``Appropriate State Agency.'' This revision is made for the purpose of 
ensuring that State-Insured Credit Unions and Insured Credit Unions are 
treated similarly. The Fund has determined that State-Insured Credit 
Unions generally are not distinct in business structure or activities 
from NCUA-insured credit unions, and thus a State-Insured Credit Union 
should be treated the same for the purpose of determining whether it 
may be qualified as a CDFI, and in other evaluation and reporting 
criteria that pertain to such entities. Accordingly, (i) Sec.  
1805.104(hh) of the current rule is revised to include the definition 
of ``State-Insured Credit Union'' and (ii) Sec.  1805.104(e) of the 
current rule is revised to include the definition of ``Appropriate 
State Agency.''
    The definition of ``State'' is revised to delete the term, the 
Trust Territories of the Pacific Islands. This definition is revised 
because the Trust Territories of the Pacific Islands no longer exist as 
a legal entity. Accordingly, the Trust Territories of the Pacific 
Islands are deleted from Sec. Sec.  1805.104(gg), 
1805.201(b)(3)(ii)(A)(1) and 1805.201(b)(3)(iii)(A).

Investment Area Distress Criteria: County Population Loss; County Net 
Migration Loss

    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, among other things, meet one of the three 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)(4) of this rule is added to include 
as an Investment Area distress criterion for areas (counties only) 
located outside of a Metropolitan Area, a county population loss in the 
period between the most recent decennial census and the previous 
decennial census of at least 10 percent. The Fund has determined that 
this 10 percent threshold figure is appropriate because such a 
population loss is an indicator of declining economic conditions in a 
community. While the 2000 Census shows that there is a significant 
reduction in the number of such counties, the Fund concludes that those 
counties that continue to show a significant population decline 
represent communities in need of community development investment.
    Section 1805.201(b)(3)(ii)(D)(5) of this rule is added to include 
as an Investment Area distress criterion for areas (counties only) 
located outside of a Metropolitan Area, a county net migration loss 
over the five year period preceding the most recent decennial census of 
at least five percent. In light of the most recent decennial census 
data, the Fund believes that the net migration loss criterion is an 
accurate measure of an area's economic distress.

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Similar to areas with county population loss, described above, the Fund 
believes that communities that show population decline due to net 
migration loss are areas in need of community development investment.

Matching Funds: Other Activity Measures for Insured Credit Unions and 
State-Insured Credit Unions

    Section 1805.504(d)(1) of the current rule sets forth the options 
available to Insured Credit Unions that elect to use retained earnings 
for matching funds. Section 1805.504(d)(4)(i)(A) of the current rule 
requires that such an Insured Credit Union Awardee increase its member 
shares and/or non-member shares by an amount that is set forth in the 
applicable Notice of Funds Availability. Section 1805.504(d)(4)(i)(A) 
of this rule permits the Fund to establish other measures of activity 
(such as loans outstanding) to measure increase in retained earnings. 
Section 1805.504(d)(4)(i)(B) of the current rule requires that such 
increased retained earnings must be achieved within 24 months of June 
30 of the calendar year in which the applicable application deadline 
falls. Section 1805.504(d)(4)(i)(B) of this rule permits the Fund to 
establish the date for the achievement of such increased retained 
earnings or other measure of activity and publish the date in the 
applicable Notice of Funds Availability. The Fund believes that these 
revisions will offer greater flexibility to Insured Credit Unions and 
State-Insured Credit Unions.

State-Insured Credit Unions: Consultation With the Appropriate State 
Agency

    Section 1805.701(d) of this rule is added to permit the Fund, prior 
to providing assistance to a State-Insured Credit Union, to consult 
with, and consider the views of, the Appropriate State Agency.

Reporting

    Section 1805.804(e)(2) of the current rule requires each Awardee to 
submit: (i) Annual reports 60 days following the end of the Awardee's 
fiscal year; (ii) audited financial statements 120 days following the 
end of the Awardee's fiscal year; and (iii) annual surveys 120 days 
after the end of the Awardee's fiscal year, unless some other period is 
specified in the Assistance Agreement. The Fund believes that these 
reporting deadline requirements are unduly burdensome and lack clarity.
    Accordingly, this rule is revised to state that the Annual Report 
generally comprises the following components: (i) Financial Report; 
(ii) Performance Goals Report/Annual Survey; (iii) Financial Status 
Report (for awardees that receive technical assistance grants); (iv) 
Uses of Financial Assistance and Matching Funds Report; and (v) 
Explanation of Noncompliance (as applicable). All Awardees must submit 
all components of the Annual Report, including the Financial Report, to 
the Fund no later than 180 days after the end of the Awardee's fiscal 
year. Non-profit organizations (excluding regulated financial 
institutions) are to provide reviewed financial statements and the 
related accountant's review report (audited financial statements can be 
used in lieu of reviewed financial statements, if available). For-
profit organizations (excluding regulated financial institutions) are 
to provide audited financial statements and the related auditor's 
report. Non-profit awardees subject to the audit requirements of OMB 
Circular A-133 must also submit their separate A-133 financial 
statements and auditor's reports, no later than 270 days after the end 
of the Awardee's fiscal year.

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 Numbers 1559-0006, 1559-0021, and 1559-0022. 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.

0
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.

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1805.303 Technical assistance.
Subpart D--Investment Instruments
1805.400 Investment instruments--general.
1805.401 Forms of investment instruments.
1805.402 Assistance limits.
1805.403 Authority to sell.
Subpart E--Matching Funds Requirements
1805.500 Matching funds--general.
1805.501 Comparability of form and value.
1805.502 Severe constraints waiver.
1805.503 Time frame for raising match.
1805.504 Retained earnings.
Subpart F--Applications for Assistance
1805.600 Notice of Funds Availability.
Subpart G--Evaluation and Selection of Applications
1805.700 Evaluation and selection--general.
1805.701 Evaluation of applications.
Subpart H--Terms and Conditions of Assistance
1805.800 Safety and soundness.
1805.801 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 (BEA) 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 prior to the date the Fund selected the 
CDFI to receive a Bank Enterprise Award (meaning, the date of the 
Fund's BEA Program notice of award); 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 BEA 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 CDFI 
Program assistance or funding 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 
includes, with respect to Insured Credit Unions, the National Credit 
Union Administration;
    (e) Appropriate State Agency means an agency or instrumentality of 
a State that regulates and/or insures the member accounts of a State-
Insured Credit Union;
    (f) Assistance Agreement means a formal agreement between the Fund 
and an Awardee which specifies the terms and conditions of assistance 
under this part;
    (g) Awardee means an Applicant selected by the Fund to receive 
assistance pursuant to this part;
    (h) Community Development Financial Institution (or CDFI) means an 
entity currently meeting the eligibility requirements described in 
Sec.  1805.200;
    (i) 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;
    (j) 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;
    (k) Community Facility means a facility where health care, 
childcare, educational, cultural, or social services are provided;
    (l) 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;
    (m) 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;
    (n) 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 State-
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

[[Page 26264]]

Small Business Investment Act of 1958 (15 U.S.C. 661 et seq.);
    (o) Community Partnership means an agreement between an Applicant 
and a Community Partner to collaboratively provide Financial Products 
or Development Services to an Investment Area(s) or a Targeted 
Population(s);
    (p) 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 (NOTICE OF FUNDS AVAILBILITY);
    (q) 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) 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.
    (r) 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));
    (s) Development Services means activities that promote community 
development and are integral to the Applicant's provision of Financial 
Products and Financial Services. Such services shall prepare or assist 
current or potential borrowers or investees to utilize the Financial 
Products or Financial Services 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;
    (t) Equity Investment means an investment made by an Applicant 
that, in the judgment of the Fund, 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 may comprise a stock purchase, a purchase 
of a partnership interest, a purchase of a limited liability company 
membership interest, a loan made on such terms that it has sufficient 
characteristics of equity (and is considered as such by the Fund), a 
purchase of secondary capital, or any other investment deemed to be an 
Equity Investment by the Fund;
    (u) 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, emerging 
Insured Credit Union CDFIs, and/or State-Insured Credit Union CDFIs.
    (v) Financial Services means checking, savings accounts, check 
cashing, money orders, certified checks, automated teller machines, 
deposit taking, safe deposit box services, and other similar services;
    (w) Fund means the Community Development Financial Institutions 
Fund established under section 104(a) (12 U.S.C. 4703(a)) of the Act;
    (x) 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;
    (y) 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;
    (z) 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;
    (aa) Insured CDFI means a CDFI that is an Insured Depository 
Institution or an Insured Credit Union;
    (bb) Insured Credit Union means any credit union, the member 
accounts of which are insured by the National Credit Union Share 
Insurance Fund;
    (cc) Insured Depository Institution means any bank or thrift, the 
deposits of which are insured by the Federal Deposit Insurance 
Corporation;
    (dd) Investment Area means a geographic area meeting the 
requirements of Sec.  1805.201(b)(3);
    (ee) 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;
    (ff) 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;
    (gg) 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, Insured 
Credit Union, or State-Insured Credit Union;
    (hh) State means any State of the United States, the District of 
Columbia or any territory of the United States, Puerto Rico, Guam, 
American Samoa, the Virgin Islands, and the Northern Mariana Islands;
    (ii) State-Insured Credit Union means any credit union that is 
regulated by, and/or the member accounts of which are insured by, a 
State agency or instrumentality;
    (jj) 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);
    (kk) Targeted Population means individuals or an identifiable group 
of individuals meeting the requirements of Sec.  1805.201(b)(3); and
    (ll) Target Market means an Investment Area(s) and/or a Targeted 
Population(s).
    (mm)(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.

[[Page 26265]]

    (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 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 numbers 1559-0006, 1559-0021 and 1559-0022.

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 Notice of 
Funds Availability; 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 Notice of Funds Availability. 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 Notice of 
Funds Availability.
    (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 economically 
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, Insured Credit Union, or 
State-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.

[[Page 26266]]

    (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 Virgin Islands, and the Northern 
Mariana Islands); and either
    (2) Meets at least one of the objective criteria of economic 
distress as set forth in paragraph (b)(3)(ii)(D) of this section and 
has significant unmet needs for loans, Equity Investments, or Financial 
Services as described in paragraph (b)(3)(ii)(E) of this section; or
    (3) Encompasses (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;
    (3) The unemployment rate is at least 1.5 times the national 
average;
    (4) In counties located outside of a Metropolitan Area, the county 
population loss during the period between the most recent decennial 
census and the previous decennial census is at least 10 percent; or
    (5) In counties located outside of a Metropolitan Area, the county 
net migration loss during the five-year period preceding the most 
recent decennial census is at least five percent.
    (E) Unmet needs. An Investment Area will be deemed to have 
significant unmet needs for loans or Equity Investments if a narrative 
analysis provided by the Applicant adequately demonstrate a pattern of 
unmet needs for Financial Products 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 Financial Products 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 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:

[[Page 26267]]

    (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 
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 Notice of Funds Availability. In addition, the requirements 
for matching funds are not applicable to technical assistance requests.

Subpart D--Investment Instruments


Sec.  1805.400  Investment instruments--general.

    The 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 and State-
Insured Credit Unions. Deposits in an Insured CDFI or a State-Insured 
Credit Union shall not be subject to any requirement for collateral or 
security.


Sec.  1805.402  Assistance limits.

    (a) General. Except as provided in paragraph (b) of this section, 
the Fund may not provide, pursuant to this part, more than $5 million, 
in the aggregate, in financial and technical assistance to 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.

[[Page 26268]]

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:
    (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 Notice of Funds Availability.


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 2003 less retained earnings at the 
end of fiscal year 2002); 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 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 an Insured 
Credit Union or a State-Insured 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 Applicant that is an Insured Credit Union 
or a State-Insured Credit Union, retained earnings that may be used for 
matching funds purposes shall consist of:
    (i) The increase in retained earnings that has occurred over the 
Applicant's 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 or 
other measurable activity (e.g., loans outstanding) as defined in and 
by an amount that is set forth in an applicable Notice of Funds 
Availability; and
    (B) Such increase must be achieved by a date certain set forth in 
the applicable Notice of Funds Availability;
    (ii) The Applicant's Comprehensive Business Plan shall discuss its 
strategy for raising the required shares (or other measurable activity) 
and the activities associated with such increased shares (or other 
measurable activity);
    (iii) The level from which the increases in shares (or other 
measurable activity) 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 (or such other date as set 
forth in the applicable Notice of Funds Availability); and
    (iv) Financial assistance shall be disbursed by the Fund only as 
the amount of increased shares (or other measurable activity) 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 (or other 
measurable activity) to the specified amounts.
    (e) Retained earnings accumulated after the end of the Applicant's 
most recent fiscal year ending prior to the

[[Page 26269]]

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 
Notice of Funds Availability published in the Federal Register. The 
Notice of Funds Availability will advise potential Applicants on how to 
obtain an application packet and will establish deadlines and other 
requirements. The Notice of Funds Availability 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;
    (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 Notice of Funds Availability.


Sec.  1805.701  Evaluation of applications.

    (a) Eligibility and completeness. An Applicant will not be eligible 
to receive assistance pursuant to this part if it fails to meet the 
eligibility requirements described in Sec.  1805.200 or if it has not 
submitted complete application materials. For the purposes of this 
paragraph (a), the 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 or a State-Insured Credit Union;
    (8) Projections for community development impact, including the 
extent to which an Applicant will concentrate its activities on serving 
its Target Market(s), the extent of support from the designated Target 
Market, the extent to which an Applicant is, or will be, Community-
Owned or Community-Governed, and the extent to which the activities 
proposed in the Comprehensive Business Plan 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 
Notice of Funds Availability.
    (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) Consultation with Appropriate State Agencies. Prior to 
providing assistance to a State-Insured Credit Union, the Fund may 
consult with, and consider the views of, the Appropriate State Agency.

[[Page 26270]]

    (e) 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 Notice of Funds 
Availability.

Subpart H--Terms and Conditions of Assistance


Sec.  1805.800  Safety and soundness.

    (a) Regulated institutions. Nothing in this part, or in an 
Assistance Agreement, shall affect any authority of an Appropriate 
Federal Banking Agency or Appropriate State Agency to supervise and 
regulate any institution or company.
    (b) Non-Regulated CDFIs. The 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 
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 or an Affiliate is part of 
an application that is selected for assistance, such partner must be a 
party to the Assistance Agreement, if deemed appropriate by the 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, as 
applicable. Such goals shall be incorporated in, and enforced under, 
the Awardee's Assistance Agreement. Performance goals for State-Insured 
Credit Unions may be determined in consultation with the Appropriate 
State Agency, if deemed appropriate by the Fund.
    (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, as 
applicable, and that any violation of such provisions shall be treated 
as a violation of the Federal Deposit Insurance Act. Nothing in this 
paragraph (d) precludes the 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

[[Page 26271]]

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 in-
hand and/or firm commitments for the matching funds required for such 
assistance pursuant to the applicable Notice of Funds Availability. 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 that are necessary to:
    (1) Disclose the manner in which Fund assistance is used;
    (2) Demonstrate compliance with the requirements of this part and 
an Assistance Agreement; and
    (3) Evaluate the impact of the CDFI Program.
    (b) Customer profiles. An Awardee (and a Community Partner, if 
appropriate) shall compile such data on the gender, race, ethnicity, 
national origin, or other information on individuals that utilize its 
products and services as the Fund shall prescribe in an Assistance 
Agreement. Such data will be used to determine whether residents of 
Investment Area(s) or members of Targeted Population(s) are adequately 
served and to evaluate the impact of the CDFI Program.
    (c) Access to records. An Awardee (and a Community Partner, if 
appropriate) must submit such financial and activity reports, records, 
statements, and documents at such times, in such forms, and accompanied 
by such reporting data, as required by the Fund or the U.S. Department 
of Treasury to ensure compliance with the requirements of this part and 
to evaluate the impact of the CDFI Program. The United States 
Government, including the U.S. Department of Treasury, the Comptroller 
General, and their duly authorized representatives, shall have full and 
free access to the Awardee's offices and facilities and all books, 
documents, records, and financial statements relating to use of Federal 
funds and may copy such documents as they deem appropriate. The Fund, 
if it deems appropriate, may prescribe access to record requirements 
for entities that are borrowers of, or that receive investments from, 
an Awardee.
    (d) Retention of records. An Awardee shall comply with all record 
retention requirements as set forth in OMB Circular A-110 (as 
applicable).
    (e) Data collection and reporting. Each Awardee shall submit to the 
Fund, at least annually and within 180 days after the end of the 
Awardee's fiscal year, such information and documentation that will 
permit the Fund to review the Awardee's progress (and the progress of 
its Affiliates, Subsidiaries, and/or Community Partners, if 
appropriate) in implementing its Comprehensive Business Plan and 
satisfying the terms and conditions of its Assistance Agreement. The 
information and documentation shall include, but not be limited to, an 
Annual Report, which shall comprise the following components:
    (1) Financial Report:
    (i) All non-profit organizations (excluding Insured CDFIs and 
State-Insured Credit Unions) must submit to the Fund financial 
statements that have been reviewed by an independent certified public 
accountant in accordance with Statements on Standards for Accounting 
and Review Services, issued by the American Institute of Certified 
Public Accountants, no later than 180 days after the end of the 
Awardee's fiscal year (audited financial statements can be provided by 
the due date in lieu of reviewed statements, if available). Non-profit 
organizations (excluding Insured CDFIs and State-Insured Credit Unions) 
that are required to have their financial statements audited pursuant 
to OMB Circular A-133 Audits of States, Local Governments and Non-
Profit Organizations, must also submit their A-133 audited financial 
statements to the Fund no later than 270 days after the end of the 
Awardee's fiscal year. Non-profit organizations (excluding Insured 
CDFIs and State-Insured Credit Unions) that are not required to have 
financial statements audited pursuant to OMB Circular A-133, Audits of 
States, Local Governments and Non-Profit Organizations, must submit to 
the Fund a statement signed by the Awardee's Authorized Representative 
or certified public accountant, asserting that the Awardee is not 
required to have a single audit pursuant OMB Circular A-133.
    (ii) For-profit organizations (excluding Insured CDFIs and State-
Insured Credit Unions) must submit to the Fund financial statements 
audited in conformity with generally accepted auditing standards as 
promulgated by the American Institute of Certified Public Accountants, 
no later than 180 days after the end of the Awardee's fiscal year.
    (iii) Insured CDFIs are not required to submit financial statements 
to the Fund. The Fund will obtain the necessary information from 
publicly available sources. State-Insured Credit Unions must submit to 
the Fund copies of the financial statements that they submit to the 
Appropriate State Agency.
    (iv) If multiple organizations sign the Assistance Agreement: The 
Awardee may submit combined financial statements and footnotes for the 
Awardee and other entities that signed the Assistance Agreement as long 
as the financial statements of each signatory are shown separately (for 
example, in combining financial statements).
    (v) If the Assistance is in the form of a loan or a deposit: The 
Awardee must provide the Fund with financial statements annually 
throughout the term of the loan or deposit.
    (vi) If the Assistance is in the form of an equity investment 
(common or preferred stock, secondary capital, certificate of deposit, 
partnership interest, or debentures): The Awardee must provide the Fund 
with financial statements annually for each year in which the Fund 
holds the equity investment.
    (2) Performance Goals Report/Annual Survey: Performance Goals 
include performance goals and measures that are specific to the 
Awardee's application for funding.
    (i) Performance Goals Report: The Awardee will submit to the Fund 
information through the Annual Survey that will inform the Fund of its 
compliance toward meeting the Performance Goals set forth in the 
Performance Goals Report.
    (ii) Annual Survey: The Fund will use the Annual Survey to collect 
data by which to assess the Awardee's compliance toward meeting its

[[Page 26272]]

Performance Goals and the impact of the CDFI Program and the CDFI 
industry. The Annual Survey is comprised of two components, the 
Institution-Level Report and the Transaction-Level Report.
    (A) Institution-Level Report. The Institution-Level Report 
includes, but is not limited to, organizational, financial, portfolio 
and community development impact information and any other information 
that the Fund deems appropriate.
    (B) Transaction-Level Report. The Transaction-Level Report 
includes, but is not limited to, specific data elements on each of the 
Awardee's loans and investments including, but not limited to, borrower 
location, loan/investment type, loan/investment amount, and terms. The 
Awardee must submit the Transaction-Level Report to the Fund at least 
annually but no more frequently than quarterly. If the Fund requires 
the Awardee to submit the Transaction-Level Report on a semi-annual or 
quarterly basis, the Fund will notify the Awardee of the due date for 
the submission of said report at least 60 days prior to the due date. 
Only Awardees that receive financial assistance awards are required to 
submit Transaction-Level Reports.
    (3) Financial Status Report: The Financial Status Report is 
applicable only to Awardees that receive technical assistance awards 
and must be signed by the Awardee's authorized representative, and 
submitted to the Fund with the Annual Report. This form is only 
applicable to the technical assistance portion of the award.
    (4) Uses of Financial Assistance and Matching Funds Report: This 
report describes the Awardee's use of its financial assistance award 
and its matching funds during its preceding fiscal year.
    (5) Explanation of Noncompliance: Any Awardee that fails to meet a 
performance goal in its Performance Goals Report must submit to the 
Fund a narrative explanation.
    (6) Awardees are responsible for the timely and complete submission 
of the Annual Report, even if all or a portion of the documents 
actually are completed by another entity or signatory to the Assistance 
Agreement. If such other entities or signatories are required to 
provide Annual Surveys or Financial Reports, or other documentation 
that the Fund may require, the Awardee is responsible for ensuring that 
the information is submitted timely and complete. The Fund reserves the 
right to contact such additional signatories to the Assistance 
Agreement and require that additional information and documentation be 
provided.
    (7) The Fund's review of the progress of an Insured CDFI, a 
Depository Institution Holding Company or a State-Insured Credit Union 
in implementing its Comprehensive Business Plan and satisfying the 
terms and conditions of its Assistance Agreement may also include 
information from the Appropriate Federal Banking Agency or Appropriate 
State Agency, as the case may be.
    (8) The Fund shall make reports described in 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 and Appropriate State Agencies. (1) Except as provided in 
paragraph (f)(4) of this section, prior to directly requesting 
information from or imposing reporting or record keeping requirements 
on an Insured CDFI or other institution that is examined by or subject 
to the reporting requirements of an Appropriate Federal Banking Agency, 
the 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 an Appropriate 
Federal Banking Agency or Appropriate State Agency under this section 
to the extent practicable to eliminate duplicative requests for 
information and reports from, and record keeping by, an Insured CDFI, 
State-Insured Credit Union or other institution that is examined by or 
subject to the reporting requirements of an Appropriate Federal Banking 
Agency or Appropriate State Agency.
    (4) Notwithstanding paragraphs (f)(1) and (2) of this section, the 
Fund may require an Insured CDFI, State-Insured Credit Union, or other 
institution that is examined by or subject to the reporting 
requirements of an Appropriate Federal Banking Agency or Appropriate 
State Agency to provide information with respect to the institution's 
implementation of its Comprehensive Business Plan or compliance with 
the terms of its Assistance Agreement, after providing notice to the 
Appropriate Federal Banking Agency or Appropriate State Agency, as the 
case may be.
    (5) Nothing in this part shall be construed to permit the Fund to 
require an Insured CDFI, State-Insured Credit Union, or other 
institution that is examined by or subject to the reporting 
requirements of an Appropriate Federal Banking Agency or Appropriate 
State Agency to obtain, maintain, or furnish an examination report of 
any Appropriate Federal Banking Agency or Appropriate State Agency, or 
records contained in or related to such report.
    (6) The 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 (or 
Appropriate State Agency, as the case may be) shall disclose 
confidential information obtained pursuant to this section from any 
party without the written consent of that party.
    (8) The Fund, the Appropriate Federal Banking Agency (or 
Appropriate State Agency, as the case may be), and any other party 
providing information under this paragraph (f) shall not be deemed to 
have waived any privilege applicable to the any information or data, or 
any portion thereof, by providing such information or data to the other 
party or by permitting such data or information, or any copies or 
portions thereof, to be used by the other party.
    (g) Availability of referenced publications. The publications 
referenced in this section are available as follows:
    (1) OMB Circulars may be obtained from the Office of 
Administration, Publications Office, 725 17th Street, NW., Room 2200, 
New Executive Office Building, Washington, DC 20503 or on the Internet 
(http://www.whitehouse.gov/OMB/grants/index.html); and
    (2) General Accounting Office materials may be obtained from GAO 
Distribution, 700 4th Street, NW., Suite 1100, Washington, DC 20548.


Sec.  1805.805  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 Insured CDFIs or other institution that

[[Page 26273]]

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, a Depository Institution 
Holding Company or a State-Insured Credit Union shall comply with the 
restrictions on Insider activities and any comparable restrictions 
established by its Appropriate Federal Banking Agency or Appropriate 
State Agency, as applicable.
    (b) 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: May 5, 2004.
Owen Jones,
Acting Director, Community Development Financial Institutions Fund.
[FR Doc. 04-10646 Filed 5-10-04; 8:45 am]
BILLING CODE 4810-70-P