In Response to GAO Report CDFI Fund to Ask for NMTC Compliance Data Once Shutdown Ends

Published by Bob Ibanez on Wednesday, January 16, 2019 - 12:00am

Since the expiration of the continuing resolution to fund portions of the federal government, including the Treasury Department, on Dec. 21, the Community Development Financial Institutions (CDFI) Fund has suspended its services, including access to the CDFI Fund help desks and the CDFI Fund Awards Management Information System (AMIS). Because non-essential CDFI Fund staff, including New Markets Tax Credit (NMTC) program office staff, have been furloughed the partial U.S. government shutdown will have an impact on the timing of the calendar year (CY) 2018 NMTC awards announcement that had been planned for late February.  According to then CDFI Fund Director Annie Donovan in remarks to the NMTC Coalition, for each day the CDFI Fund is subject to the shutdown the awards announcement is expected to be delayed by a day.  Because the current director, Jodie Harris, assumed her role during the shutdown, she has been unavailable for comment about the timing of the awards announcement.

While there has been no indication of when CDFI Fund staff and services will be restored to full capacity, community development entities (CDEs) should be on the lookout for a NMTC Paperwork Reduction Act (PRA) notification once it does. The PRA requires federal agencies to obtain Office of Management and Budget (OMB) approval before requesting or collecting most types of information from 10 or more people or, this case, CDEs, in an effort to minimize the paperwork burden with federally sponsored data collections.

In October 2018, Greg Bischak, program manager for financial strategies and research at the CDFI Fund, indicated the CDFI Fund would be looking to get feedback from CDEs under the PRA during a a CEI Capital Management LLC NMTC roundtable call. He said the PRA is in response to recommendations contained in a Government Accountability Office (GAO) report entitled “Better Controls and Data Are Needed to Ensure Effectiveness,” released in July 2014, as well as the Compliance Review of New Markets Tax Credit Program report published by Summit Inc. in August 2017.

Through the PRA, the CDFI Fund is expected to seek comments on:

● Additional data points on fees and expenses to provide comprehensive reporting;

● Additional data points for measuring financing gaps, implied capitalization rates, and the depth of public subsidy in NMTC transactions (see section 3 of Summit Report for more details);

● Data points for conducting and reporting a “but for” analysis (see section 2 of Summit Report for more details); and

● Guidance on outcome reporting including jobs, community outcomes and more options to report on other types of project outcomes as requested in the last NMTC Community Investment Impact System (CIIS) reporting request for public comment.

The new data points for performance and compliance reporting to the CDFI Fund are expected to be collected principally in the transaction level report (TLR) NMTC allocatees submit to the CDFI Fund on an annual basis. In collecting additional data points on fees and expenses, the CDFI Fund is seeking to align the data collections reported for the different stakeholders (e.g., investor, qualified active low-income community business (QALICB), CDE) to the CDFI Fund with the QALICB disclosure statement provided to the QALICB at closing and retained by the CDE. CDEs should be aware that it is quite possible the CDFI Fund will start to collect QALICB disclosure statements in the future.

While the initial indication was that the CDFI Fund would be publishing a notice in the Federal Register this month, that timeline may get pushed back given the shutdown. In the meantime, CDEs that have not familiarized themselves with the GAO and Summit reports should take this opportunity to do so as information contained in both reports could be helpful in making the case for NMTC permanence.