Community Development: Early Results of the Community Development
Financial Institutions Fund's Programs (Testimony, 06/17/98,
GAO/T-RCED-98-229).
GAO discussed the preliminary results of its ongoing review of the
administration of the Community Development Financial Institutions
(CDFI) Fund, focusing on: (1) the first year's performance of the CDFI
and Bank Enterprise Award (BEA) programs and opportunities for improving
their effectiveness; (2) the Fund's progress in developing performance
measures for awardees and systems to monitor and evaluate their
progress; (3) the impact of the BEA program on banks' investments in
CDFIs and distressed communities; and (4) CDFI's progress in meeting the
strategic planning requirements of the Government Performance and
Results Act of 1993.
GAO noted that: (1) as of January 1998, the Fund had entered into
assistance agreements with 26 of the 31 CDFIs that received awards in
1996; (2) these agreements include performance goals and measures that
were based on the business plans submitted by awardees in their
application packages and negotiated between the Fund and the awardees,
as the CDFI Act requires; (3) these agreements are consistent with the
program's objectives; (4) using the Results Act for guidance, GAO found
that the performance measures in the assistance agreements generally
assess activities rather than accomplishments reflecting the results of
activities; (5) GAO further found that although the performance measures
in the assistance agreements are generally related to specific goals,
they do not always address all key aspects of the goals, and most
assistance agreements lack baseline data that would facilitate tracking
progress over time; (6) the Fund has developed reporting requirements
for awardees to collect information for monitoring their performance and
is developing post-award monitoring procedures for assessing their
compliance with their assistance agreements; (7) the Fund currently does
not have a system for evaluating the impact of awardees' activities; (8)
although the Fund has disbursed about 80 percent of the fiscal year 1996
BEA awards funds, it is difficult to determine the extent to which the
program has encouraged the 38 awardees to increase their investments in
distressed communities; (9) in addition, some banks do not collect all
of the data on their activities needed to guarantee that increases in
investments under the BEA program are not being offset by decreases in
other investments in these distressed areas; (10) furthermore, the Fund
cannot be assured that banks' increased investments remain in place
because it does not require banks to report any material changes in the
status of these investments; (11) the CDFI Fund's strategic plan
contains all of the elements required by the Results Act and the Office
of Management and Budget's associated guidance, but these elements
generally lack the clarity, specificity, and linkage with one another
that the act envisioned; (12) although the plan identifies key external
factors that could affect the Fund's mission, it does not relate these
factors to the Fund's strategic goals and objectives and does not
indicate how the Fund will take the factors into account when assessing
awardees' progress toward goals; and (13) in addition, the plan does not
describe the relationship of its activities to similar activities in
other government agencies.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-RCED-98-229
TITLE: Community Development: Early Results of the Community
Development Financial Institutions Fund's Programs
DATE: 06/17/98
SUBJECT: Strategic planning
Reporting requirements
Economic development
Economically depressed areas
Community development
Program evaluation
Lending institutions
IDENTIFIER: Community Development Financial Institutions Fund
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Cover
================================================================ COVER
Before the Subcommittee on Financial Institutions and Consumer
Credit, Committee on Banking and Financial Services, House of
Representatives
For Release
on Delivery
Expected at
2:30 p.m. EDT
Wednesday
June 17, 1998
COMMUNITY DEVELOPMENT - EARLY
RESULTS OF THE COMMUNITY
DEVELOPMENT FINANCIAL INSTITUTIONS
FUND'S PROGRAMS
Statement of Judy A. England-Joseph,
Director, Housing and Community Development Issues,
Resources, Community, and Economic
Development Division
GAO/T-RCED-98-229
GAO/RCED-98-229T
(385762)
Abbreviations
=============================================================== ABBREV
BEA -
CDFI -
OMB -
============================================================ Chapter 0
Madam Chair and Members of the Committee:
We are pleased to be here today to discuss the preliminary results of
our ongoing review of the administration of the Community Development
Financial Institutions (CDFI) Fund. As you know, access to credit
and investment capital is essential for creating and retaining jobs,
developing affordable housing, revitalizing neighborhoods, and
promoting the development and growth of small businesses.
Community-based financial institutions have improved the economic
well-being of economically distressed communities and their residents
through lending and investments tailored to these communities. In
1994, recognizing that such community-based institutions were
relatively few in number and small in size and often had difficulty
meeting the demand for their services, the Congress created the CDFI
Fund.\1 To date, the Fund has sought to expand access to credit and
other financial services in distressed communities primarily through
two programs--the CDFI and the Bank Enterprise Award (BEA) programs.
The CDFI program provides financial and technical assistance to a
wide range of for-profit and nonprofit financial institutions to
support their activities in distressed communities and monitors their
performance over a period of at least 5 years.\2 The BEA program
rewards banks for increased lending and investments in CDFIs or in
distressed communities. To receive their awards, banks must prove
that they have made eligible loans or investments, but the Fund has
no long-term monitoring role in this program.
Our testimony today focuses on the first year's performance of the
CDFI and BEA programs and identifies opportunities for improving
their effectiveness. Because participants in the CDFI program are
just beginning to report preliminary results, our discussion of this
program will focus on the Fund's progress in developing performance
measures for awardees and systems to monitor and evaluate their
progress. In contrast, participants in the BEA program have largely
completed the activities for which they are rewarded; therefore, we
will discuss the impact of the program on banks' investments in CDFIs
and distressed communities. Finally, our testimony will review the
Fund's progress in meeting the strategic planning requirements of the
Government Performance and Results Act of 1993 (Results Act).
Our testimony is based on the experience of the institutions that
received fiscal year 1996 awards. In the CDFI program, the Fund
selected 31 of 268 applicants, largely on the basis of the business
plans in which they laid out their proposals for economic
revitalization and community development. In the BEA program, over
50 banks applied for awards and the Fund chose 38, basing its
selection on the increased investments in CDFIs and distressed
communities that the banks projected. The Fund reserved about $37
million for awardees in the CDFI program and $13.1 million for banks
selected to participate in the BEA program. To obtain in-depth
information about the two programs, we visited six CDFIs and five
participating banks.
In summary, our preliminary analysis shows the following:
As of January 1998, the Fund had entered into assistance agreements
with 26 of the 31 CDFIs that received awards in 1996. These
agreements include performance goals and measures that were based on
the business plans submitted by awardees in their application
packages and negotiated between the Fund and the awardees, as the
CDFI Act requires. These agreements are consistent with the
program's objectives. Because the CDFI Act provides no specific
guidance for evaluating performance measures, we used Results Act
guidance. We found that the performance measures in the assistance
agreements generally assess activities (such as the number of loans
made) rather than accomplishments reflecting the results of
activities (such as the number of new low-income homeowners).
According to Fund officials and CDFIs in our case studies, this
emphasis on activity measures is due, in part, to difficulties in
isolating and assessing the results of community development
initiatives, which may not be observable for many years and may be
subject to factors outside the awardees' control. We further found
that although the performance measures in the assistance agreements
are generally related to specific goals, they do not always address
all key aspects of the goals, and most assistance agreements lack
baseline data that would facilitate tracking progress over time. The
Fund has developed reporting requirements for awardees to collect
information for monitoring their performance and is developing
postaward monitoring procedures for assessing their compliance with
their assistance agreements. The Fund currently does not have a
system for evaluating the impact of awardees' activities.
Although the Fund has disbursed about 80 percent of the fiscal year
1996 BEA award funds, it is difficult to determine the extent to
which the program has encouraged the 38 awardees to increase their
investments in distressed communities. Our case studies of five
awardees and interviews with Fund officials indicate that although
the prospect of receiving a BEA award prompted some banks to increase
their investments, regulatory or economic incentives motivated other
banks. In addition, some banks do not collect all of the data on
their activities needed to guarantee that increases in investments
under the BEA program are not being offset by decreases in other
investments in these distressed areas. Furthermore, the Fund cannot
be assured that banks' increased investments remain in place because
it does not require banks to report any material changes in the
status of these investments. Although banks have statutory
discretion to use their BEA awards as they choose, most have told the
Fund that they are furthering the BEA program's objectives by
investing a portion or all of their awards in loans or investments
supporting community development.
The CDFI Fund's strategic plan contains all of the elements required
by the Results Act and OMB's associated guidance, but these elements
generally lack the clarity, specificity, and linkage with one another
that the act envisioned. Although the plan identifies key external
factors that could affect the Fund's mission, it does not relate
these factors to the Fund's strategic goals and objectives and does
not indicate how the Fund will take the factors into account when
assessing awardees' progress toward goals. In addition, the plan
does not describe the relationship of its activities to similar
activities in other government agencies, and it does not indicate
whether or how the Fund coordinated with other agencies in developing
its strategic plan. These shortcomings are similar to those in other
federal agencies' initial efforts to comply with the Results Act and
OMB's associated guidance.
--------------------
\1 Riegle Community Development and Regulatory Improvement Act of
1994 (P.L.103-325, Sept. 23, 1994).
\2 The principal types of institutions the CDFI program supports are
community development banks and bank holding companies, community
development credit unions, business loan funds, housing loan funds,
and community development venture capital funds.
BACKGROUND
---------------------------------------------------------- Chapter 0:1
Currently located within the Department of the Treasury, the CDFI
Fund was authorized in 1994 and has received appropriations totaling
$225 million through fiscal year 1998. The 1995 Rescissions Act
limited the Fund to 10 full-time-equivalent staff for fiscal years
1995 and 1996, but for fiscal year 1998, the Fund has a ceiling of 35
full-time staff. As of May 1998, the Fund had 27 full-time and 2
part-time staff.
The Fund's overall performance is subject to the general guidance set
forth in the Community Development Banking and Financial Institutions
Act of 1994 (CDFI Act),\3
which established the Fund. In addition, the Fund's overall
performance is subject to the Results Act and the Office of
Management and Budget's (OMB) implementing guidance. The latter act
seeks to improve the management of federal programs and their
effectiveness and efficiency by establishing a system for agencies to
set goals for performance and measure the results. Under the act,
federal agencies must develop a strategic plan that covers a period
of at least 5 years and includes a mission statement, long-term
general goals, and strategies for reaching those goals. Agencies
must report annually on the extent to which they are meeting their
annual performance goals and identify the actions needed to reach or
modify the goals they have not met. The Fund completed its final
plan in September 1997 and is currently considering revisions to that
plan.
--------------------
\3 This legislation is title I of the Riegle Community Development
and Regulatory Improvement Act of 1994.
STRONGER PERFORMANCE MEASURES
WOULD PROVIDE A BETTER BASIS
FOR MONITORING AND EVALUATING
THE CDFI PROGRAM'S
ACCOMPLISHMENTS
---------------------------------------------------------- Chapter 0:2
While the assistance agreements that the Fund negotiated with
awardees in the CDFI program satisfy the CDFI Act's requirements for
performance measurement, they include more measures of activity (what
the awardees will do) than of accomplishment (how the awardees'
activities will affect distressed communities) and do not always
include measures for key aspects of goals. In addition, baseline
information that was available to the Fund seldom appears in the
Fund's performance measurement schedule. A more comprehensive
performance measurement system would provide better indicators for
monitoring and evaluating the program's results.
PROGRESS IN DEVELOPING
PERFORMANCE MEASURES IS
MIXED
-------------------------------------------------------- Chapter 0:2.1
The CDFI Fund's progress in developing performance goals and measures
for awardees in the CDFI program is mixed. On the one hand, the Fund
has entered into assistance agreements with most of the 1996
awardees. As the CDFI Act requires, these assistance agreements
include performance measures that (1) the Fund negotiated with the
awardees and (2) are generally based on the awardees' business plans.
On the other hand, the Fund's performance goals and measures fall
somewhat short of the standards for performance measures established
in the Results Act. Although awardees' assistance agreements are not
subject to the Results Act, the act establishes performance
measurement standards for the federal government, including the CDFI
Fund. In the absence of specific guidance on performance measures in
the CDFI Act, we drew on Results Act guidance for discussion
purposes.\4
The assistance agreements called for under the CDFI Act require
awardees to comply with multiple provisions, including the
accomplishment of agreed-upon levels of performance by the final
evaluation date, typically 5 years in the future. As of January
1998, the Fund had entered into assistance agreements with 26 of the
31 awardees for 1996. We found, on the basis of our six case
studies, that the Fund had negotiated performance goals that met the
statutory requirements and established goals for awardees that match
the Fund's intended purpose, extensively involved the awardees in
crafting their planned performance, and produced a flexible schedule
for designing goals and measures.
According to Results Act guidance, both activity measures, such as
the number of loans made, and accomplishment measures, such as the
number of new low-income homeowners, are useful measures. However,
the act regards accomplishment measures as more effective indicators
of a program's results because such measures identify the outcome of
the activities performed. Our survey of CDFIs nationwide, including
the 1996 awardees, and our review of six case study awardees'
business plans showed that CDFIs use both types of measures to assess
their progress toward meeting their goals. Yet our review of the
1996 awardees' assistance agreements revealed a far greater use of
activity measures. As a result, the assistance agreements focus
primarily on what the awardees will do, rather than on how their
activities will affect the distressed communities. According to most
of the case study awardees, their use of accomplishment measures was
limited by concerns about isolating and measuring the results of
community development efforts, as well as concerns about the Fund's
possible imposition of sanctions for not meeting performance
benchmarks subject to factors outside their control.
According to Results Act guidance, goals and measures should be
clear. We found that the goals and measures had varying degrees of
clarity. For instance, most goals and measures were related;
however, in some agreements, the measures did not address all key
aspects of the goals. Finally, under Results Act guidance, clarity
in performance measurement is also best achieved through the use of
specific units, well-defined terms, and baseline and target values
and dates. While the measures in the agreements included most of
these elements, they generally lacked baseline values and dates.
Fund officials told us that they used baseline values and dates in
negotiating the performance measures, but this information did not
appear in the assistance agreements themselves. Therefore, without
information contained in awardees' files, it is difficult to
determine the level of increase or contribution the investment is
intended to achieve.
Refining the awardees' goals and measures to meet Results Act
guidance will facilitate the Fund's assessment of the awardees'
progress over time. The Fund is taking steps to avoid some of the
initial shortcomings in future agreements and is seeking to enhance
its expertise and staffing.
--------------------
\4 The Results Act, supplemented by Circular A-11, the Office of
Management and Budget's (OMB) implementing guidance, and the GAO
document entitled The Results Act: An Evaluator's Guide to Assessing
Agency Annual Performance Plans (GAO/GGD-10.1.20, April 1998)
provides more explicit guidance for developing performance goals and
measures than the CDFI legislation. These three documents combined
account for the Results Act guidance referred to in the balance of
this statement.
MANDATED MONITORING AND
EVALUATION SYSTEMS ARE NOT
YET IN PLACE
-------------------------------------------------------- Chapter 0:2.2
Although the Fund has developed reporting requirements for awardees
to collect information for monitoring their performance, it lacks
documented postaward monitoring procedures for assessing their
compliance with their assistance agreements, determining the need for
corrective actions, and verifying the accuracy of the information
collected. In addition, the Fund has not yet established procedures
for evaluating the impact of awardees' activities. The effectiveness
of the Fund's monitoring and evaluation systems will depend, in large
part, on the quality of the information being collected through the
required reports and the Fund's assessment of awardees' compliance
and the impact of awardees' activities. Primarily because of
statutorily imposed staffing restrictions in fiscal years 1995 and
1996 and subsequent departmental hiring restrictions, the Fund has
had a limited number of staff to develop and implement its monitoring
and evaluation systems. In fiscal year 1998, it began to hire
management and professional staff to develop monitoring and
evaluation policies and procedures.
The Fund has established quarterly and annual reporting requirements
for awardees in their assistance agreements. Each awardee is to
describe its progress toward its performance goals, demonstrate its
financial soundness, and maintain appropriate financial information.
However, according to an independent audit recently completed by KPMG
Peat Marwick, the Fund lacks formal, documented postaward monitoring
procedures to guide Fund staff in their oversight of awardees'
activities. In addition, Fund officials indicated that they had not
yet established a system to verify information submitted by awardees
through the reporting processes.
Fund staff told us that they had not developed postaward monitoring
procedures because of the CDFI program's initial staffing limits.
Now that additional staff are in place, they have begun to focus
their attention on monitoring issues, including those identified by
KPMG Peat Marwick.
The CDFI statute also specifies that the Fund is to annually evaluate
and report on the activities carried out by the Fund and the
awardees. According to the Conference Report for the statute, the
annual reports are to analyze the leveraging of private assistance
with federal funds and determine the impact of spending resources on
the program's investment areas, targeted populations, and qualified
distressed communities. To date, the Fund has published two annual
reports, the second of which contains an estimate of the private
funding leveraged by the CDFI funding. This estimate is based on
discussions with CDFIs and CDFI trade association representatives,
not on financial data collected from the awardees.
In part because it has been only 16 months since the Fund made its
first investment in a CDFI, information on performance in the CDFI
program is not yet available for a comprehensive evaluation of the
program's impact, such as the Conference Report envisions. The two
annual reports include anecdotes about individuals served by awardees
and general descriptions of awardees' financial services and
initiatives, but they do not evaluate the impact of the program on
its investment areas, targeted populations, and qualified distressed
communities. Satisfying this requirement will entail substantial
research and analysis, as well as expertise in evaluation and time
for the program's results to unfold.
Fund officials have acknowledged that their evaluation efforts must
be enhanced, and they have planned or taken actions toward
improvement. For instance, the Fund has developed preliminary
program evaluation options, begun hiring staff to conduct or
supervise the research and evaluations, and revised the assistance
agreements for the 1997 awardees to require that they annually submit
a report to assist the Fund in evaluating the program's impact.
However, because the Fund has not yet finished hiring its research
and evaluation staff, it has not yet reached a final decision on what
information it will require from the awardees to evaluate the
program's impact. The Fund also has to determine how it will
integrate the results of awardees' reported performance measurement
or recent findings from related research into its evaluation plans.
PRELIMINARY REPORTS DESCRIBE
EARLY POSTAWARD ACTIVITY
-------------------------------------------------------- Chapter 0:2.3
As to be expected, reports of accomplishments in the CDFI program are
limited and preliminary. Because most CDFIs signed their assistance
agreements from March 1997 through October 1997, the Fund has just
begun to receive the required quarterly reports, and neither the Fund
nor we have verified the information in them. Through February 1998,
the Fund had received 41 quarterly reports from 19 CDFIs, including
community development banks, community development credit unions,
nonprofit loan funds, microenterprise loan funds, and community
development venture capital funds. The different types of CDFIs
support a variety of activities, whose results will be measured
against different types of performance measures.
Given the variety of performance measures for the different types of
CDFIs, it is difficult to summarize the performance reported by the
19 CDFIs. To illustrate cumulative activity in the program to date,
we compiled the data reported for the two most common measures--the
total number of loans for both general and specific purposes and the
total dollar value of these loans. According to these data, the 19
CDFIs made over 1,300 loans totaling about $52 million. In addition,
the CDFIs reported providing consumer counseling and technical
training to 480 individuals or businesses.
IMPACT OF BEA AWARDS ON BANKS'
INVESTMENT ACTIVITIES IS
DIFFICULT TO ASSESS
---------------------------------------------------------- Chapter 0:3
In the BEA program, as of January 1998, about 58 percent of the banks
had completed the activities for which they received the awards and
the Fund had disbursed almost 80 percent of the $13.1 million awarded
in fiscal year 1996. Despite this level of activity, the impact of
the program on banks' investments in distressed communities is
difficult to assess. Our case studies of five awardees and
interviews with Fund officials indicate that although the BEA awards
encouraged some banks to increase their investments, other regulatory
or economic incentives were equally or more important for other
banks. In addition, more complete data on some banks' investments
are needed to guarantee that the increases in investments in
distressed areas rewarded by the BEA program are not being offset by
decreases in other investments in these distressed areas.
Furthermore, the Fund cannot be assured that the banks' increased
investments remain in place because it does not require banks to
report any material changes in these investments. Although the CDFI
statute does not require awardees to reinvest their awards in
community development, most banks that got BEA awards in 1996 have
told the Fund that they have done so, thereby furthering the BEA
program's objectives, according to the Fund.
REGULATORY AND ECONOMIC
INCENTIVES ALSO MOTIVATE
INCREASED INVESTMENT IN
CDFIS AND DISTRESSED AREAS
-------------------------------------------------------- Chapter 0:3.1
Our analysis indicated that the impact of the BEA award varied at our
five case study banks. One bank reported that it would not have made
an investment in a CDFI without the prospect of receiving an award
from the Fund. In addition, a CDFI Fund official told us that some
CDFIs marketed the prospect of receiving a BEA award as an incentive
for banks to invest in them. We found, however, that the prospect of
an award did not influence other banks' investment activity. For
example, two banks received awards totaling over $324,000 for
increased investments they had made or agreed to make before the
fiscal year 1996 awards were made.
Banks have multiple incentives for investing in CDFIs and distressed
areas. Therefore, it is difficult to isolate the impact of the BEA
award from the effects of other incentives. According to our five
case study banks, regulatory incentives, such as the need to comply
with the Community Reinvestment Act (CRA),\5 often motivated the
banks' investments in CDFIs and distressed communities, as did
economic considerations. One bank said that such investments lay the
groundwork for developing new markets, while other banks said that
the investments help them maintain market share in areas targeted by
the BEA program and compete with other banks in these areas. Two
banks cited improved community relations as reasons for their
investments. Some banks indicated that the BEA award provides a
limited incentive, especially since it is relatively small and comes
after a bank has already made at least an initial investment.
--------------------
\5 Under CRA, federal banking agencies encourage banks to meet the
credit needs of their communities.
SOME BANKS DO NOT MAINTAIN
DATA NEEDED TO MEASURE NET
INCREASES IN INVESTMENT
-------------------------------------------------------- Chapter 0:3.2
According to Fund officials, a small portion of the 1996 awardees do
not maintain the geographic data needed to determine whether any new
investments in distressed areas are coming at the expense of other
investments--particularly agricultural, consumer, and small business
loans--in such areas. Concerned about the validity of the net
increases in investments in distressed areas reported by awardees,
the Fund required the 1996 awardees that did not maintain such data
to certify that, to the best of their knowledge, they had not
decreased investments in distressed areas that were not linked to
their BEA award. While most banks maintain the data needed to track
their investments by census tract and can thus link their investments
with distressed areas, a few do not do so for all types of
investments.\6
--------------------
\6 According to bank regulators, about 16 percent of the banks in the
United States are geocoding (tracking by census tract) small business
and small farm investments, and the remaining 84 percent are probably
not geocoding such investments unless they are reporting loan
activity under the Home Mortgage Disclosure Act. Compared with rural
banks, nonrural banks are more likely to be geocoding their small
business and farm loans, in part because it is easier for them to
identify census tracts using specific addresses. Rural banks face
difficulties associating census tracts with rural addresses. As a
result, some banks are likely to continue to experience problems
reporting on these types of activities.
FUND DOES NOT RECEIVE
INFORMATION ON MATERIAL
CHANGES IN REWARDED
INVESTMENTS
-------------------------------------------------------- Chapter 0:3.3
The Fund does not require awardees to notify the Fund of material
changes in their investments after awards have been made. Therefore,
it does not know how long investments made under the program remain
in place. We found, for example, that a CDFI in which one of our
case study banks had invested was dissolved several months after the
bank received a BEA award. The CDFI later repaid a portion of the
bank's total investment. Because the Fund does not require banks to
report their postaward activity, the Fund was not aware of this
situation until we brought it to the attention of Fund officials.
After hearing of the situation, a Fund official contacted the awardee
and learned that the awardee plans to reinvest the funds in another
CDFI. Even though this case has been resolved, Fund officials do not
have a mechanism for determining whether investments made under the
program remain in place.
The CDFI statute does not require awardees to reinvest their awards
in community development; however, most of the 1996 awardees have
told the Fund, and we found through our case studies, that many of
them are reinvesting at least a portion of their awards in community
development. Reinvestment in community development is consistent
with the goals of the BEA program.
OPPORTUNITIES EXIST FOR
IMPROVING THE FUND'S STRATEGIC
PLAN
---------------------------------------------------------- Chapter 0:4
The CDFI Fund has more work to do before its strategic plan can
fulfill the requirements of the Results Act. Though the plan covers
the six basic elements required by the Results Act, these elements
are generally not as specific, clear, and well linked as the act
prescribes. However, the Fund is not unique in struggling to develop
its strategic plan. We have found that federal agencies generally
require sustained effort to develop the dynamic strategic planning
processes envisioned by the Results Act. Difficulties that the Fund
has encountered--in setting clear and specific strategic and
performance goals, coordinating cross-cutting programs, and ensuring
the capacity to gather and use performance and cost data--have faced
many other federal agencies.
Under the Results Act, an agency's strategic plan must contain (1) a
comprehensive mission statement; (2) agencywide strategic goals and
objectives for all major functions and operations; (3) strategies,
skill, and technologies and the various resources needed to achieve
the goals and objectives; (4) a relationship between the strategic
goals and objectives and the annual performance goals; (5) an
identification of key factors, external to the agency and beyond its
control, that could significantly affect the achievement of the
strategic goals and objectives; and (6) a description of how program
evaluations were used to establish or revise strategic goals and
objectives and a schedule for future program evaluations. OMB has
provided agencies with additional guidance on developing their
strategic plans.\7
The Results Act anticipates that agencies may need several planning
cycles to perfect their strategic plans, refining the plans from
cycle to cycle. The Fund will, therefore, have opportunities for
improving its strategic plan in each of the following areas:
--------------------
\7 See OMB Circular A-11.
MISSION
-------------------------------------------------------- Chapter 0:4.1
In its strategic plan, the Fund states that its mission is "to
promote economic revitalization and community development through
investment in and assistance to community development financial
institutions (CDFIs) and through encouraging insured depository
institutions to increase lending, financial services and technical
assistance within distressed communities and to invest in CDFIs."
Overall, the Fund's mission statement generally meets the
requirements established in the Results Act by explicitly referring
to the Fund's statutory objectives and indicating how these
objectives are to be achieved through two core programs.
STRATEGIC GOALS AND
OBJECTIVES
-------------------------------------------------------- Chapter 0:4.2
Each agency's strategic plan is to set out strategic goals and
objectives that delineate the agency's approach to carrying out its
mission. The Fund's strategic plan contains 5 goals and 13
objectives, with each objective clearly related to a specific goal.
However, OMB's guidance suggests that strategic goals and objectives
be stated in a manner that allows a future assessment to determine
whether they were or are being achieved. Because none of the 5 goals
(for example, to strengthen and expand the national network of CDFIs)
and 13 objectives (for example, increase the number of organizations
in training programs) in the strategic plan include baseline dates
and values, deadlines, and targets, the Fund's goals and objectives
do not meet this criterion.
STRATEGIES TO ACHIEVE GOALS
AND OBJECTIVES
-------------------------------------------------------- Chapter 0:4.3
The act also requires that an agency's strategic plan describe how
the agency's goals and objectives are to be achieved. Results Act
guidance suggests that this description address the skills and
technologies, as well as the human, capital, information, and other
resources, needed to achieve strategic goals and objectives. The
Fund's plan shows mixed results in meeting these requirements. On
the positive side, it clearly lists strategies for accomplishing each
goal and objective--establishing better linkages than the strategic
plans of agencies that simply listed objectives and strategies in
groups. On the other hand, the strategies themselves consist
entirely of one-line statements. Because they generally lack detail,
most are too vague or general to permit an assessment of whether
their accomplishment will help achieve the plan's strategic goals and
objectives. For example, it is unclear how the strategy of
"emphasizing high quality standards in implementing the CDFI program"
will specifically address the objective of "strengthening and
expanding the national network of CDFIs."
RELATIONSHIP BETWEEN
STRATEGIC AND ANNUAL
PERFORMANCE GOALS
-------------------------------------------------------- Chapter 0:4.4
The Fund's strategic plan lists 22 performance goals, which are
clearly linked to specific strategic goals. However, the performance
goals, like the Fund's strategic goals and objectives, generally lack
sufficient specificity, as well as baseline and end values. These
details would make the performance goals more tangible and
measurable. For example, one performance goal is to "increase the
number of applicants in the BEA program." This goal would be more
useful if it specified the baseline number of applicants and
projected an increase over a specified period of time. Also, some
performance goals are stated more as strategies than as desired
results. For example, it is not readily apparent how the performance
goal of proposing legislative improvements to the BEA program will
support the related strategic goal of encouraging investments in
CDFIs by insured depository institutions.
KEY EXTERNAL FACTORS
-------------------------------------------------------- Chapter 0:4.5
The Fund's strategic plan only partially meets the requirement of the
Results Act and of OMB's guidance that it describe key factors
external to the Fund and beyond its control that could significantly
affect the achievement of its objectives. While the plan briefly
discusses external factors that could materially affect the Fund's
performance, such as "national and regional economic trends," these
factors are not linked to specific strategic goals or objectives.
PROGRAM EVALUATIONS
-------------------------------------------------------- Chapter 0:4.6
The Results Act defines program evaluations as assessments, through
objective measurement and objective analysis, of the manner and
extent to which federal programs achieve intended objectives.
Although the Fund's plan does discuss various evaluation options, it
does not discuss the role of program evaluations in either setting or
measuring progress against all strategic goals. Also, the list of
evaluation options does not describe the general scope or methodology
for the evaluations, identify the key issues to be addressed, or
indicate when the evaluations will occur.
OTHER MATTERS
-------------------------------------------------------- Chapter 0:4.7
Our review of the Fund's strategic plan also identified other areas
that could be improved. For instance, OMB's guidance on the Results
Act directs that federal programs contributing to the same or similar
outcomes should be coordinated to ensure that their goals are
consistent and their efforts mutually reinforcing. The Fund's
strategic plan does not explicitly address the relationship of the
Fund's activities to similar activities in other agencies or indicate
whether or how the Fund coordinated with other agencies in developing
its strategic plan. Also, the capacity of the Fund to provide
reliable information on the achievement of its strategic objectives
at this point is somewhat unclear. Specifically, the Fund has not
developed its strategic plan sufficiently to identify the types and
the sources of data needed to evaluate its progress in achieving its
strategic objectives. Moreover, according to a study prepared by
KPMG Peat Marwick, the Fund has yet to set up a formal system,
including procedures, to evaluate, continuously monitor, and improve
the effectiveness of the management controls associated with the
Fund's programs.
As is consistent with the Results Act, the Fund is refining its plan
by taking steps that, according to a key Fund official in charge of
revising the plan, will address the shortcomings that we and the
Department of the Treasury have identified. According to this
official, the revised strategic plan, which the Fund expects to
complete by August 1998, proposes to incorporate changes to the
plan's strategic goals, including the elimination of the two that are
organizational rather than strategic; a new format for presenting
goals and objectives that links benchmarks and planned evaluations to
each goal, along with key external factors that could affect the
Fund's progress toward that goal; a budget structure that aligns the
program's activities with sources and uses of funds to better track
the resources required to implement the program's goals and
objectives; a performance goal that measures the ability of the Fund
to leverage its resources with those of the private sector; and an
identification and description of crosscutting organizations and
programs that duplicate or compliment the CDFI Fund's programs.
In closing, Madam Chair, our preliminary review has identified
several opportunities for the Fund to improve the effectiveness of
the CDFI and BEA programs and of its strategic planning effort. In
our view, these opportunities exist, in part, because the Fund is new
and is experiencing the typical growing pains associated with setting
up an agency--particularly one that has the relatively complex and
long-term mission of promoting economic revitalization and community
development in low-income communities. In addition, staffing
limitations have delayed the development of monitoring and
evaluations systems. Recently, however, the Fund has hired several
senior staff--including a director; two deputy directors, one of whom
also serves as the chief financial officer; an awards manager; a
financial manager; and program managers--and is reportedly close to
hiring an evaluations director. While it is too early to assess the
impact of filling these positions, the new managers have initiated
actions to improve the programs and the strategic plan. In our final
report, we expect to make recommendations to further improve the
operations of the CDFI Fund and its programs.
-------------------------------------------------------- Chapter 0:4.8
Madam Chair, this concludes our testimony. We would be pleased to
respond to any questions that you or Members of the Committee may
have at this time.
*** End of document. ***