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Keynote Address of CDFI Fund Director Donna Gambrell at the 2008 CDFI Coalition Institute
March 14, 2008
Washington, DC -- Fred, thank you for that kind introduction. It is a pleasure to be with you all here today at CDFI Coalition’s 2008 Institute. I have already met with many of you as I have been meeting with various groups and individuals in the field of community and economic development to gather a broad understanding of the CDFI industry. I also know many of you from days at the FDIC. So I find myself in company I know well. It has been a little over three months since I was appointed as Director of the CDFI Fund.
As you all may be aware, I was appointed as Director for a three-year term appointment to bring stability between changes of Administration, as well as the stability to tackle strategic issues that require multi-year implementations. My goal as Director is to position the CDFI Fund and its programs for the long term, working with our staff to continue to build upon the infrastructure that will enable us to most effectively administer our existing programs due to increased demand, as well as put us in a position to be a knowledge leader on issues of importance to CDFIs and the community oriented efforts undertaken by participants in the BEA and NMTC Programs.
Positioning the CDFI Fund for future growth is a theme that I would like to discuss today. Many of you CDFIs can appreciate the work needed to move from the start-up phase of an organization to a more mature entity that is structured for the long term.
It is the right time to focus on and improve upon how we achieve our primary mission of promoting community and economic development and building the capacity of CDFIs to serve low-income and underserved communities across the nation. I want to ensure that the CDFI Fund has the strongest platform possible for future growth.
In recognition of these needs, in late 2007 we contracted with Booz Allen Hamilton to assist us in a review of grant making process improvements to advance the Fund’s grant making efficiencies and effectiveness and to improve upon the structure of our compliance capabilities. Booz Allen brings a wealth of experience and knowledge to this task.
We have many expectations from this effort. One that will be more visible to you will be the implementation of recommendations that will shorten the time period between when an application is submitted and the disbursement of the award, a goal I know many of you support. We will start this effort with our flagship CDFI Program, and over time adopt similar process improvements in the BEA and NMTC Programs.
I should also say that the CDFI Fund staff has identified other less publicly visible potential process improvements, and Booz Allen will help us craft and implement many of those changes. In the end, we hope to free up time for staff to take on other priorities that will benefit CDFIs and advance the Fund’s role in community and economic development efforts. I appreciate the staff’s commitment to review and implement these process improvements.
In addition to our focus on the awards making process, we are also looking to ensure that our compliance efforts are strengthened through a systematic approach. This approach is not intended to increase the burden on our awardees, but to have a system of risk assessment in our compliance efforts.
In addition to improving the overall operations of the Fund’s grant making, we have been working to bring the process of certifying new CDFIs and recertifying existing CDFIs into the 21st century. We recognize that the CDFI certification designation is a valuable “brand”, and we appreciate your willingness to comment so extensively on the questions we recently posed in the Federal Register Notice on the CDFI Fund’s certification process.
The request for public comment was not indicative of or meant to signal what we are thinking as to any potential changes to the purpose or process of CDFI certification. Our objective in examining the CDFI certification was to strengthen and to continue to maintain the integrity of the CDFI certification brand.
It was also a way for us to get your best thinking in order to provide clear and consistent guidance on CDFI certification, and protecting the value that is in that designation. Now that the comment period for this solicitation has closed, we plan to review the comments that we received.
Thank you to those of you who provided comments, and I can assure you that they will be used to develop a new application and updated policies and procedures for future CDFI certification applicants.
This year the CDFI Fund had a significant response from organizations requesting funding under the CDFI Program. Under the Fiscal Year 2008 round we received 225 applications for the program. This is 122 percent increase over last year’s round when we received 186 applications.
Applicants have requested over $205.5 million in assistance, which also increased from last year’s round by 149.5 percent. In Fiscal Year 07, approximately $141 million was requested.
- 52, or 23.1 percent of applicants applied for Financial Assistance through the SECA category, requesting an aggregate total of $24.7 million.
- 118, or 52.4 percent of applicants applied for Financial Assistance applicants through the Core applicant category, requesting an aggregate total of $175.6 million.
- And 55, or 24.4 percent of applicants applied exclusively for Technical Assistance, requesting an aggregate total of $5.2 million.
The CDFI Fund recently completed analysis of the awards we made between Fiscal Year 2005 and Fiscal Year 2007. One of the factors we looked at was how many times applicants received awards in those three years. We learned that almost 80 percent of the awards, given in those 3 years, went to awardees who received only one award; 20 percent went to awardees that received more than one annual award in that time period.
I am pleased to see the increased level of interest in the requests for funding in the CDFI Program, and I look forward to seeing this trend continue in Fiscal Year 2009.
To give you an update on where we are in the application review process, the first phase of readers have completed their review of the applications under this round. This year we had 70 community development professionals reading for us. The pool of readers for this year’s application had significant experience in the understanding of CDFIs and the CDFI industry.
This year we reviewed and ranked the resumes of 175 community development finance professionals in selecting readers, an increase from 125 applications last year. We have to thank you all with assisting us in soliciting this year’s readers, which helped with both the experience and expertise of the pool of applicants.
As the readers complete their scoring, the process will move to an assessment of their recommendations, including required compliance and other checks. While we have a significant increase in our appropriations, roughly double the amount the CDFI Fund had last year, and we hope to make more awards and larger awards while meeting geographic diversity --but it is too soon to predict this with much certainty.
There is a balance to ensuring that entities receive higher awards and ensuring that we also are serving communities across the U.S. that are currently not being served. As you know, in the CDFI Fund’s authorizing statute, we are expected to seek to achieve geographic and institution type diversity as we make our awards in the CDFI Program.
When we complete our internal review and scoring of the applications, we expect to announce the successful applicants to the Fiscal Year 2008 CDFI Program round this summer.
The CDFI Fund has now completed five NMTC allocation rounds to date, making 294 awards to CDEs totaling $16 billion in tax credit allocation authority. The NMTC Program is a very competitive program as you are all aware, and awards are based on the strength and quality of the applications received.
In a typical NMTC application round, CDEs request 8 to 9 times more allocation authority than is available, and fewer than 1 in 4 CDEs is selected to receive an allocation award. Nonetheless, CDFIs have fared very well under the competitive application procedures.
To date, 73 NMTC allocation awards totaling $3.23 billion – or over twenty percent of the $16 billion of awards allocated to date – have been provided to certified CDFIs or subsidiaries of certified CDFIs. Over the past three allocation rounds, 31.5 percent of the CDFIs that applied for allocations were successful – which is significantly higher than the 21.5 percent success rate for non-CDFI applicants.
In each of these three rounds, CDFIs on average received higher reviewer scores than non-CDFIs. As with all the programs administered by the CDFI Fund, awards are not based on any outside influences. All applications are scored competitively and ranked by score in a thorough review process, and political support of an applicant at any governmental level, local, state or federal, has no part whatsoever in the underwriting or scoring.
Letters of recommendation from any elected official, including Members of Congress, or letters of support from any outside entities are not seen by the reviewers nor are they included at any point in the review process. In fact, I am not even told who is successful in winning an award or an allocation until the determinations are concluded.
We take these steps to make sure that the program’s goals are achieved and to ensure the validity and integrity of the process.
As you are aware, the application period for the sixth round of the NMTC Program has closed. The CDFI Fund has accepted 239 applications, requesting $21.3 billion under the 2008 round.
The CDFI Fund has $3.5 billion in allocation authority to award to successful applicants, and under this round, there was no set-aside for investment in the GO Zone. As in all the prior rounds, the demand far outstrips the availability of tax credits.
There were a few changes to the sixth round application and NOAA. The major changes that were in the NOAA and application are in response to the Congressional mandate to include rural proportionality.
Under this round, the CDFI Fund will make an effort to ensure that no less than 20 percent of Qualified Low Income Community Investments (QLICIs), as measured by dollar amount, are invested in non-metropolitan counties. The CDFI Fund will also make an effort to ensure that the proportion of NMTC awards made to CDEs that principally serve non-metropolitan counties (“Rural CDEs”) is at a minimum equivalent to the proportion of those CDEs that meet all minimum scoring thresholds that are "Rural CDEs."
We look forward to the results of these investments in rural communities and we expect that it will achieve the intent of Congress and we expect to announce the sixth round awards in October of 2008.
This year is the last year that the NMTC Program has been authorized: the President has included reauthorization of the NMTC Program as part of his 2009 budget request, and we are hopeful that Congress will follow the President’s lead in extending this vital program.
The NMTC Program has been shown to be a successful program in encouraging private capital investment in low-income communities, and we hope that this trend will continue under future rounds of allocations.
In addition to administering our programs, I think it is important to position the CDFI Fund as a knowledge leader on matters important to CDFIs and those who are strengthening low- income communities through NMTC investments.
The CDFI Fund began collecting data on both CDFIs as institutions, as well as the transactions that CDFIs and New Markets allocatees are funding, beginning in 2004. The Fund does not yet believe it is fully utilizing CIIS, nor that it has become as transparent a source of data for the research community and other stakeholders as we would like. However, we are making progress.
In the conference folder you received when you checked in for this Institute, you received a CD that includes the Fund’s most recent research report, a trend analysis based on the compilation of 3 years of data on CDFIs. The CD not only includes our report, but it also includes the codebooks and all the data files used for the report. I hope that you will not only review the report but that you will pass the CD on to those in your organization or other organizations responsible for researching our industry.
I am also expecting to release later this spring a similar companion report and CD based on CIIS data relating to the NMTC Program.
As you may know, last Fall the Fund commissioned 12 research papers, covering a variety of subjects of interest to CDFIs, some of which will also be relying on CIIS data in their analysis.
Currently, we are working to create a public forum to discuss the findings from these papers. We will notify the industry when a date and location for this discussion of the research papers is finalized. We anticipate that it will be in the Washington, D.C. area in late June.
In another effort to serve you better, I'm also pleased to announce that the CDFI Fund launched today a new, free e-mail subscription service called CDFI Updates. CDFI Updates was designed to keep you informed of the news you are most interested in from the CDFI Fund. This new service enables you to receive e-mail updates related to the topics to which you have subscribed.
Subscription items include a range from new press releases, to updates regarding any of our programs such as the opening of a new round or an update to a Frequently Ask Questions document, to publications like our research on CIIS data, or an upcoming event like the research meeting I mention a minute ago, or even our current career opportunities for those of you interested in joining our team!
This morning we sent an e-mail announcing this new service to every e-mail address the CDFI Fund has ever collected. I’m now asking a favor. When you return home after this Institute, please take a few short minutes to click the link in this e-mail, or just go to the Fund’s homepage, and subscribe to this valuable new communications tool.
We intend for this service to provide you with the most current information regarding the CDFI Fund when it happens.
I am also pleased to report that the White House has just announced the names of four new members to the CDFI Fund Advisory Board.
They include:
Ms. Darlene Bramon who is a member of the Board of Commissioners of the Idaho Housing and Finance Association;
Mr. Edwin Rodriquez who is a member of the Board of Directors for both the Florida State Hispanic Chamber of Commerce and the Florida Black Chamber of Commerce;
Mr. Neal McCaleb who is a member of the Chickasaw Nation in Oklahoma and the former Assistant Secretary for Indian Affairs at the U.S. Department of the Interior;
and last but not least, a name I know you are familiar with,
Ms. Terri Ludwig who is the President of the Merrill Lynch Community Development Company and the former President and CEO of ACCION New York!
I look forward to working with all the members of the Community Development Advisory Board as we take the CDFI Fund to a place positioned for future growth.
In closing I would like to touch upon an issue that you all know to well. I recently testified before the House Appropriations Subcommittee on Financial Services on the current foreclosure crisis. The focus of my testimony was on the HOPE NOW Alliance, the Treasury Department’s efforts to address preventable foreclosure, and Treasury’s main financial literacy and education initiatives.
This hearing helped us to continue to identify what CDFIs are currently doing to address the mortgage crisis. We believe CDFIs have and can continue to play a significant role in helping to address these issues. We may be small in relative size to the problem, but that does not mean we cannot have a significant impact in our own communities addressing these issues.
Several of our CDFIs are Neighborhood Housing Services – or NHSs and are a part of the NeighborWorks® America family. A few months ago Congress authorized NeighborWorks to develop and implement a new program to minimize the impact on homeowners who face or are at-risk of foreclosure. Recently, they awarded $130 million to applicants who plan to provide 89 percent of their services in areas of greatest need.
I was recently asked to serve on a NeighborWorks's advisory committee to assist the organization in implementing there new foreclosure mitigation program. I have been impressed with their efforts thus far, and I know we all look forward to the results of the $130 million that was awarded. The efforts of both Neighborworks and CDFIs such as yours should not go unrecognized.
I would appreciate you all letting us know what you all are doing to help in your own communities, please contact Linda Davenport or Bill Luecht on my staff to let them know what you are doing to help in foreclosure prevention or counseling.
Your input and best practices will help us to be better informed on strategies and current practices when we are called to either testify before Congress or to simply have a sit at the table when big problems need solutions from organizations such as yourselves.
I sincerely hope that our current research efforts and our efforts to improve the CDFI Fund’s efficiency, effectiveness and compliance capabilities will benefit you all as you look to find ways in which to address the needs of the people you serve in low-income communities across the nation. Thank you all for everything that you do to support us each and everyday. We sincerely appreciate your efforts and support.
Thank you.
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[Gambrell-2008-02]
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