Detailed Information on the
Bank Enterprise Award Assessment

Changing the award program so that funds are required to be used by recipients for activities that would be eligible for award. On June 4, 2008, the Fund published a Request for Public Comment to solicit opinions/ideas for the modification and/or changes to the BEA program. The modifications will require that BEA awards be used for future CDFI support and community development activities, as defined under the BEA Program. Areas for modification include program regulations, applications, award agreement, and the creation of a compliance and monitoring system for the program. Comments received will help the Fund shape and realign the program to better serve its customers. The Fund will review submitted comments and determine appropriateness of implementation of action. Estimated time period is TBD pending FY09 funding decision. Add a compliance requirement to the current award program which requires award recipients to use the BEA awards for qualified activities eligible under the BEA program. This would take affect in the FY 2009 round. The modifications will require that BEA awards be used for CDFI support and community development activities, as defined under the BEA Program. Areas for modification include program regulations, applications, award agreement, and the creation of a compliance and monitoring system for the program.

Conduct an independent evaluation of the program.

Measure progress in meeting long-term outcome goals and annual performance goals.

Measure: Jobs in underserved communities created or maintained by businesses financed by BEA Program applicants.

Explanation:

Measure: Commercial real-estate properties financed by BEA Program applicants that provide access to essential community products and services in underserved communities.

Explanation:

Measure: Number of affordable housing units in underserved communities whose development or rehabilitation is financed by BEA Program applicants.

Explanation:

Measure: Adminstrative cost per BEA application processed.

Explanation:

Measure: Number of small businesses located in underserved communities financed by BEA Program applicants.

Explanation:Tracks the number of loans provided to small businesses financed by BEA Program applicants.

Is the program purpose clear?

Explanation: The BEA Program seeks to build the capacity of FDIC-insured depository institutions to: (1) expand their community development lending and investments within severely underserved areas, and (2) increase their investment in Community Development Financial Institutions (CDFIs) in order to build self-sufficiency and capacity. BEA encourages insured depository institutions to increase their level of activities in the form of loans, investments, services, and technical assistance within distressed communities and provides financial assistance to CDFIs through grants, stock purchases, loans, deposits, and other forms of financial and technical assistance.

Evidence: CDFI Performance plan, Authorizing legislation and the BEA Program regulations.

Does the program address a specific interest, problem or need?

Explanation: The program addresses the lack of a private-sector financial infrastructure to address unemployment, poverty, and other problems associated with distressed communities.

Evidence: Authorizing legislation - PL 103-325, BEA Program regulations.

Is the program designed to have a significant impact in addressing the interest, problem or need?

Explanation: Under the program, awardees are under no obligation to reinvest BEA program award funds in community development initiatives. While program surveys indicate that 87-percent of awardees have used program grants to reinvest in community development initiatives, these surveys are not verified. Under the Community Reinvestment Act (CRA) banks are required by law to make similar types of investments. While the Fund asserts that awards are used by banks to engage in less profitable investments (such as below market rate or riskier loans) in distressed communities then they otherwise would have under the CRA, it cannot be determined how the banks would have behaved in absence of the award. The Fund has proposed restructuring the program in order to achieve a greater impact by amending the law to allow the Fund to select awardees based on a qualitative evaluation of proposals to engage in high priority activities.

Evidence: Authorizing legislation - PL 103-325, BEA Program regulations, BEA Program Annual Survey, and Documents submitted to OMB during the PART review.

Is the program designed to make a unique contribution in addressing the interest, problem or need (i.e., not needlessly redundant of any other Federal, state, local or private efforts)?

Explanation: CRA requires that banks engage in many of the activities promoted by the BEA. BEA uses a different incentive structure than the CRA. BEA offers awards based on past investment activity in distressed communities. BEA is also more targeted toward the most distressed communities than CRA, which is wider in its demographic scope. Because the CRA and BEA complement each other, BEA is not unique in encouraging investments in distressed communities. BEA may also duplicate certain aspects of other Federal programs including the Small Business Administration's (SBA )microloan program.

Evidence: BEA Program Annual Survey, various research on the CRA, CRA regulations and examiner guidance

Is the program optimally designed to address the interest, problem or need?

Explanation: BEA uses an indirect incentive structure to promote investment. The current statute calls for BEA awards to be based on community development activities that have already occurred with no requirements to reinvest award funds in community development initiatives. The Fund has acknowledged this weakness in the statute and has proposed increasing the impact of the program by amending the law to allow it to make awards based on prospective commitments to engage in innovative investment activities. Another option that could acheive similar goals to the BEA without outlaying Federal dollars would be to increase enforcement of CRA. Currently, enforcement of the CRA is through the application process and thus is a significant factor for only a small portion of banks (i.e., those institutions that are active in mergers and acquisitions). The majority of BEA awardees are small to mid-sized community banks that are not actively growing. As BEA awards are based on prior community investment activities, the BEA givesincentives to small and mid-size community banks where limited enforcement of the CRA does not.

Evidence: BEA Program Annual Survey, various research on the CRA, CRA regulations and examiner guidance

Does the program have a limited number of specific, ambitious long-term performance goals that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: For FY 2004, the Fund changed its performance plan from focusing on outputs (e.g., number and dollar amount of awards) to the benefits that will be produced in underserved communities: job creation, homeownership, affordable housing creation, and critical consumer financial services. BEA performance goals are to: (1) expand the community development lending, services, and investments of banks within severely underserved areas, and (2) increase bank investment in CDFIs in order to build their self-sufficiency and capacity.

Evidence: CDFI 2000-2005 Strategic Plan, CDFI Fund 2003 Strategic Plan

Does the program have a limited number of annual performance goals that demonstrate progress toward achieving the long-term goals?

Explanation: The Fund recently adopted outcome based performance goals and measures for the entire agency, including the BEA Program. These new annual performance goals show movement toward achievement of the Fund's strategic goal (a corollary to a long-term goal).

Evidence: CDFI Annual Performance Plan - FY 2003 Performance Plan

Do all partners (grantees, sub-grantees, contractors, etc.) support program planning efforts by committing to the annual and/or long-term goals of the program?

Explanation: Because the award is retrospective, there are no prospective performance requirements. The Final Reports submitted by applicants are used to determine award amounts. Award amounts are directly related to the performance of the applicant: the greater the past performance (i.e., the increase in activities), the greater the award and the greater the probability of receiving an award. Applicants must also submit an annual survey.

Evidence: Annual Survey of BEA Program Recipients, CDFI Annual Report.

Does the program collaborate and coordinate effectively with related programs that share similar goals and objectives?

Explanation: BEA staff routinely communicate with the regulatory agencies regarding the CRA. The regulatory agencies also regularly communicate with BEA staff regarding the Program. Fund staff has presented training to examiners on the BEA and CDFIs. In addition, the Fund engages in regular coordination with the regulatory agencies for marketing purposes. The regulators' field staff attend the sessions as well.

Evidence: Documents submitted to OMB during PART review process.

Are independent and quality evaluations of sufficient scope conducted on a regular basis or as needed to fill gaps in performance information to support program improvements and evaluate effectiveness?

Explanation: There have been no recent independent evaluations of the program.

Evidence:  

Is the program budget aligned with the program goals in such a way that the impact of funding, policy, and legislative changes on performance is readily known?

Explanation: In its FY 2004 budget submission, the Fund took steps to closely link funding with performance goals.

Evidence: FY 2004 Budget Submission to OMB.

Has the program taken meaningful steps to address its strategic planning deficiencies?

Explanation: The program has recently adopted more outcome based performance measures and has matched its budget activities with performance goals in their FY2004 budget submission.

Evidence: FY 2004 Budget Submission to OMB. Documents submitted to OMB during PART review process.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: The Fund collects performance information which it uses to make the award decisions. This data is verified as part of the application review process. The Fund has also surveyed applicants since 1998, however, this information is not audited nor verifiable. The Fund used this survey data along with the results of focus groups conducted across the county to inform its management decisions.

Evidence: CDFI Annual Report, BEA Applications, BEA Survey data, Memo on Focus Group Findings.

Are Federal managers and program partners (grantees, subgrantees, contractors, etc.) held accountable for cost, schedule and performance results?

Explanation: The program manager is directly accountable for ensuring that the program is implemented in a timely and cost effective manner.

Evidence: Manager's current performance plan on

Are all funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: Annual carryover balances are minimal

Evidence: The Fund has not had carryover for the BEA Program since 1998.

Does the program have incentives and procedures (e.g., competitive sourcing/cost comparisons, IT improvements) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: Salary and expenses relative to resources appear to be reasonable

Evidence: FY 2004 OMB Budget Submission

Does the agency estimate and budget for the full annual costs of operating the program (including all administrative costs and allocated overhead) so that program performance changes are identified with changes in funding levels?

Explanation: Recent budget submission reflects full annual costs of operating the program.

Evidence: FY 2004 Budget Submission to OMB

Does the program use strong financial management practices?

Explanation: The Fund is independently audited. In the FY 2001 report, the Fund received an unqualified opinion on its FY 2001 financial statements. In addition, the auditors did not identify any material weaknesses, reportable conditions , nor any areas of non-compliance.

Evidence: Audited Financial Statements of CDFI - January 2002.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: The Fund has recently streamlined the program operation and review. It has also improved the program database in order to reduce errors and increase efficiency.

Evidence: BEA Program Regulations, Policies and Procedures, Application (Parts I and II).

Does the program have oversight practices that provide sufficient knowledge of grantee activities?

Explanation: While program awards are based on prior investments in low income areas and the promise to increase that investment, the Fund cannot determine whether the additional investment would have taken place in the absence of a government program.

Evidence: BEA Program Regulations, Policies and Procedures, Application (Parts I and II).

Does the program collect grantee performance data on an annual basis and make it available to the public in a transparent and meaningful manner?

Explanation: The Fund publishes on its website a list of awardees, short descriptions of their activities, as well as an overall description of the funding round. The Fund has surveyed applicants since 1998 and has made the analysis of the results available as well.

Evidence: FY 2002 Performance Plan and BEA Annual Survey.

Are grant applications independently reviewed based on clear criteria (rather than earmarked) and are awards made based on results of the peer review process?

Explanation:  

Evidence:  

Does the grant competition encourage the participation of new/first-time grantees through a fair and open application process?

Explanation:  

Evidence:  

Does the program have oversight practices that provide sufficient knowledge of grantee activities?

Explanation:  

Evidence:  

Does the program collect performance data on an annual basis and make it available to the public in a transparent and meaningful manner?

Explanation:  

Evidence:  

Has the program demonstrated adequate progress in achieving its long-term outcome goal(s)?

Explanation: Refer to goals listed below. Program goals are outcome-oriented, but goals are new and data on progress toward meeting goals will be collected in FY 2003. FY 2002 goals were output-oriented.

Evidence: FY2004 Budget Submission to OMB

Does the program (including program partners) achieve its annual performance goals?

Explanation: Refer to goals listed below. Program goals are outcome-oriented, but goals are new and data on progress toward meeting goals will be collected in FY 2003. FY 2002 goals were output-oriented.

Evidence: FY2004 Budget Submission to OMB

Does the program demonstrate improved efficiencies and cost effectiveness in achieving program goals each year?

Explanation: In the last year, program management decreased from 1 manager, 1 advisor, and 3 analysts to 1 manager and 1 analyst. The review process moved online in the FY 2002 round, which reduced staff time involved. Several new forms were completed to facilitate the application process for applicants.

Evidence: BEA Program Regulations, Policies and Procedures, Application (Parts I and II).

Does the performance of this program compare favorably to other programs with similar purpose and goals?

Explanation: The BEA program may subsidize lending required under the Community Reinvestment Act. However, the program also appears to be more cost-effective than SBA's microloan program, which yields about $30 million in investment at a cost of $30 million. The BEA Program focuses on investing and service activities as well as lending. The types of lending encouraged include housing, small business, commercial real estate, multifamily. It also encourages applicants to engage in activities not specifically required or incentives by the CRA.

Evidence: 2000 Annual Survey of BEA Program Recipients, CRA Regulations, Agency Questions and Answers

Do independent and quality evaluations of this program indicate that the program is effective and achieving results?

Explanation: There have been no recent independent evaluations of BEA. The last independent evaluation of the agency was performed by GAO in 1998, who found that the impact of the BEA program is difficult to assess because of incomplete data and lack of monitoring over the banks. This finding was based on one year of experience and the program has since issued new regulations and has collected additional data. The Fund has performed surveys of previous awardees to obtain feedback on the program design and implementation. Also, the Fund conducted focus groups through out the country regarding program performance and potential changes. Finally, the Fund hired a private consultant to conduct an evaluation of training needs of CDFIs, which included CDFI banks. There have been no independent evaluations of the program since the implementation of these program changes.

Evidence: Hearing before the House Subcommittee on Financial Institutions and Consumer Credit. June17, 1998. GAO testimony.