IDAs and CAAs: A Natural Partnership

A Technical Assistance Document for Community Action Agencies Operating Individual Development Account Programs

3.	Planning
		Building Coalitions
		Partnerships With Financial Institutions
		Fund Raising
		Designing Your Program

As any good Program Operator knows, the amount of time put into planning before you start a program usually has a positive correlation to its future success. This is certainly true of IDA Programs.

IDA Programs are long-term programs, typically lasting up to 3 - 5 years.
This amount of time is needed for Participants to save enough to purchase their asset, and for Participants to benefit from the financial education and asset specific training. Behavioral change around habits of spending and saving takes time as well.

Thoughtful planning will take into account building coalitions and partnerships, both with financial partners and others; fund raising to sustain the program over time; and a program design that is tailored to your community and your target population.

Building Coalitions

CAAs typically are affiliated with a variety of associations, coalitions, and partnerships, both nationally and locally. These existing relationships can be helpful when planning and operating an IDA Program.

CAA Affiliations

Among the national associations with a focus on asset-building, financial matters or community economic development that CAA agencies are members of include:

• The Association for Enterprise Opportunity (AEO)
• The Association of Small Business Development Centers (ASBDC)
• The Enterprise Foundation
• The Coalition of Community Development Financial Institutions (CDFIs)
• The National Congress for Community Economic Development (NCCED)
• National Community Capital Association (NCCA)
• National Community Reinvestment Coalition (NCRC)
• Credit Union National Association (CUNA)
• National Federation of Community Development Credit Unions (NFCDCU)
• National Association of Development Organizations (NADO)
• National Credit Union Foundation (NCUF)
• First Nations Development Institute

Most CAAs who responded to our survey are members of the Community Action Partnership and their state CAA association. Many belong to either the United Way of America or to a local United Way. 51 respondents said that they belong to a local, statewide or regional economic development coalition whose focus is on furthering the field of asset building for low-income people. 89 said that they are part of a formal IDA collaborative and 19 agencies said that they are members of a local or state Earned Income Tax Coalition.

Here is one example of how an organization built a coalition to benefit their IDA Program.

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Partnerships With Financial Institutions

One of the most important relationships for your IDA Program is with your partnering financial institution (bank or credit union). Agencies usually enter into a written agreement with the local partnering financial institution for the services that the institution will provide. Financial institution partners hold the Reserve Fund(s)—the account where the matching funds are held—as well as each Participant's IDA. The following Table provides a list of the possible roles that your partnering financial institution can play.

Support from Financial Partners

136 agencies responded to the survey question: "In what ways do your financial partners work to support your IDA Program." The following Table lists the answers we received. Some respondents gave multiple answers.

Other support from financial partners:

• Mailing monthly statements
• Referrals
• Promotions/incentives
• Convenient check pick-up
• Assistance with account monitoring
• Member Advisory Council/Review Committee
• One-on-one assistance
• Assistance with recruitment
  

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Fund Raising

Raising money to support the IDA Program—for match, operating and administrative funds—was mentioned in our survey as the issue of most concern to IDA Program operators. Most IDA Programs have to raise some combination of matching and operating funds. Most CAA IDA Programs operating today are funded by the U.S. Department of Health and Human Services Assets for Independence Program (AFI). AFI requires a non-federal cash match and currently allows 15% to be used for non-match purposes. So programs have to raise money for match, and for operations and administration to supplement the grant funds.

Raising money is part of a process of developing community interest in your program, marketing your program and publicizing its successes. You don't necessarily need to spend money to do these things. There are ways to publicize your program using free media—like Public Service Announcements on the local radio, articles in the local paper about your program, and interviews on the public access TV station. Once people know about your program it will be easier to raise funds.

Fund Raising Strategies

We asked the question: "What strategies have been useful to you in raising money for your IDA Program?" Programs answered: "Anything and everything." Here are some of the successful approaches.

Funding Sources - Key Findings From the Survey

We asked survey respondents: "Tell us ALL sources of funding that have supported your IDA activities during your entire program history." We asked them to indicate whether the funding was for operating expenses or match dollars. Following are the three top funding sources in the Federal, State/Local Government and Philanthropic categories. A complete list of funding sources can be found in the Appendix.

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Designing Your Program

There are many issues to consider when designing your IDA Program. Who will be your target population? What will be your eligibility requirements? How about permissible uses? How much will you match and by what match rate? How long will Participants be permitted to save? Will you require a minimum or maximum savings amount? There is a wealth of valuable information about how to design your IDA Program available from the Corporation for Enterprise Development (CFED). (Please see the list of Resources in the Appendix, page 122.)

It is important to keep in mind that IDA Programs should be designed with your particular location and your population in mind. A program in Delaware might look completely different from a program in Kansas. Costs of assets and income levels differ greatly from one state to another, and even differ within a state. The important thing to remember is that the promise you make to your IDA Participants that an asset purchase will be within their reach at the end of the program must be kept.

Therefore: The amount a Participant saves each month X the number of months they are in the Program X the match rate must = a sufficient sum that will allow an asset purchase.

Program Design

Following are some of the survey questions pertaining to program design issues and responses showing the most common ways that CAA IDA Program operators are addressing these issues. Since most CAAs are operating Assets for Independence Programs, many of the answers reflect the requirements specific to AFI.

Income Eligibility Requirements

We asked the survey question: "What income-based guidelines do you use to determine eligibility for your IDA Program?" The responses reflect the large number of AFI Programs, which allow one of three eligibility standards: TANF-eligible, EITC-eligible or 200% of the Federal Poverty Level. Many respondents gave multiple answers.

Net Worth Test

85 responded "Yes" in answer to the survey question: "Do you use a net worth test to determine eligibility?" Of those who specified what their net worth test was, 57 indicated $10,000, excluding a primary residence and one car (the AFI net worth test), 1 indicated $20,000 and several respondents said that their net worth limits are those defined by their state.

Minimum Savings Period

We asked the following survey question: "What is the minimum savings period that Account Holders in this program must save before accessing approved matched withdrawals?" Most programs have a minimum to ensure that Participants stay in the program long enough to complete their Financial Education training, attend some Asset-Specific classes and have time to develop a pattern of regular savings deposits.

Maximum Savings Period

We asked the question: "What is the maximum amount of time Account Holders in your program can save in their IDAs?" Two to five years is the maximum amount of time that most agencies allow for Participants to save and purchase an asset.

Minimum Monthly Savings Requirement

Following are the answers to the survey question: "What is your IDA Program's target minimum monthly savings requirement for each Account Holder in this program?"

Maximum Savings Limit

Tables 21, 22 and 23 show the maximum amount of money that Participants can put into their IDAs to be matched. The survey question asked is shown before each Table.

Survey question: "If your program limits PER MONTH the amount of personal savings that can be matched, then what is that maximum monthly limit?"

Survey question: "If your program limits PER YEAR the amount of personal savings that can be matched, then what is that maximum annual limit?"

Survey question: "If your program limits the overall LIFETIME amount of personal savings that can be matched, then what is that maximum lifetime limit?"

Lump Sum Deposits

Most agencies allow Participants to put lump sum deposits into their IDAs. (137 of programs allow it; 29 do not). However, 91 programs restrict the source that the money comes from. This reflects the fact that AFI allows EITC funds to be counted as "earned income" and deposited in IDAs as a lump sum. The thinking behind this is that it will enable Participants to reach their goals sooner and/or to catch up if they have fallen behind on their deposit schedules. 49 agencies restrict the amount of the lump sum deposit.

Permissible Assets

All IDA Programs specify certain assets that IDA Participants are allowed to purchase with their savings plus match. Most programs allow the "Big Three" -- home purchase, post-secondary education and small business start-up or expansion. Other programs allow additional or different assets to be purchased. The needs of the target population help determine what assets will be permitted. For instance, CAAs in rural areas with no public transportation might allow a vehicle as a permissible asset so that Participants have a way to get to work.

We asked the Survey question: "What permissible uses does your IDA Program allow?" Here are the responses.

Match Rates

Match rates range from $1: $1 to $6: $1. The most common match rate for all assets is $2: $1. Occasionally, programs offer a different match rate depending on the asset the Participant is saving for. A few programs offer an additional match for those receiving Section 8 housing assistance and one program offers an additional match for Participants on TANF.

In the following Tables you will see the match rates for the major allowable assets and the number of CAA IDA Programs that use that particular match rate.

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