Tips for Protecting Your Credit Union’s CDFI Funds

Although CU Strategic Planning did not write the grants in question, it is aware of details surrounding the case involving US Treasury’s move to recall $12 million in CDFI grant funds from OnPath FCU as reported in CU Times. CU Strategic Planning is currently managing grant reporting compliance for 43 credit unions related to 55 grants. As the leading provider of CDFI certification, grant writing and compliance services for the credit union industry, CU Strategic Planning’s ownership team feels compelled to speak out on behalf of our firm and in support of our clients.

CU Strategic Planning views this as an isolated case. Not-for-profit credit unions are motivated by values of social responsibility, placing people and community over profit. This case is not representative of the breadth of credit unions tirelessly working in community development.

Credit unions do seek the counsel of CU Strategic Planning when they are in trouble at times, even some that did not start as our clients. Based on our experience, we have some cautionary tips for the industry.

Tips to Protect Your CDFI Funds

1. Maintain accurate records: According to CU Times, the CDFI Fund found that OnPath submitted invalid information in its CDFI certification for fiscal years 2006 to 2009, 2011 and 2012. Records for certifications written in-house or by independent consultants should be retained by the credit union. Legacy records are critical should the CDFI Fund seek to validate data. CEOs that do not have these records should make efforts to locate and retain them; you are ultimately responsible to your members. Credit unions with staff turnover in community development positions should conduct an audit to ensure records have been retained.

2. Review grants critically to validate claims: The CU Times article highlighted that an audit by the Office of the Inspector General (OIG) claimed OnPath’s former executives allegedly submitted invalid information when they applied for federal funds. Credit union executive teams must carefully read the entirety of a CDFI Fund grant application prepared by any individual staff member or independent contractor. CEOs must hold in-house grant writers accountable for retaining documents proving the validity of claims made in a CDFI Fund grant application. This matches CU Strategic Planning’s record retention and staff accountability practices.

3. Understand your certification: The CU Times article said that the OIG report cited OnPath’s failure to deploy CDFI grant funds. Grant compliance begins with certification and annual certification reporting. To be certified, an applicant must serve a qualified Target Market, and once certified, a CDFI must deploy grant funds to an Eligible Market. A CDFI certification application defines a credit union’s Target Market. Some Target Markets take less work to document than others. Certification is complex and should be established strategically from the beginning. A credit union that’s submitted an overly simplified certification application may find it difficult to illustrate the deployment of loans to that market during its annual reporting. Conversely, paying for consulting, or retaining an on-staff expert who understands how certification impacts annual (and grant) reporting, prevents compliance issues down the road. That’s why CU Strategic Planning advises clients to carefully choose the right market to certify, which is not always the easiest.

4. Communicate with the CDFI Fund: The CDFI grants are business plans with funding deployed through an Assistance Agreement. As with any business plan, it should include achievable goals. When faced with difficulty reaching these goals, award recipients should transparently communicate with the CDFI Fund to request an Assistance Agreement modification. In CU Strategic Planning’s work managing more than $120 million in CDFI grants, all Assistance Agreement modification requests have been approved.

Credit unions that submit accurate data to the CDFI Fund, maintain accurate record keeping, implement grant funding in line with stated grant objectives and follow their Assistance Agreements to remain in compliance should not experience the seizure of grant funds.

Stacy Augustine is President/CEO of CU Strategic Planning in Tacoma, Wash.