10668 Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Rules and Regulations

DEPARTMENT OF THE TREASURY

Community Development Financial

Institutions Fund

12 CFR Part 1806

RIN 1505–AA71

Bank Enterprise Award Program

AGENCY: Community Development

Financial Institutions Fund, Department

of the Treasury.

ACTION: Revised interim rule with

request for comment.

SUMMARY: The Department of the

Treasury is issuing a revised interim

rule implementing the Bank Enterprise

Award Program administered by the

Community Development Financial

Institutions Fund. The program was

authorized by the Community

Development and Financial Institutions

Act of 1994. The programs of the CDFI

Fund are intended to facilitate the flow

of lending and investment capital into

distressed communities and to

individuals who have been unable to

take full advantage of the financial

services industry.

DATES: Interim rule effective March 7,

1997; comments must be received on or

before July 7, 1997.

ADDRESSES: All comments concerning

this interim rule should be addressed to

the Director, Community Development

Financial Institutions Fund, Department

of the Treasury, 1500 Pennsylvania

Avenue, NW, Washington, DC 20220.

Comments may be inspected at the

above address between 9:30 a.m. and

4:30 p.m.

FOR FURTHER INFORMATION CONTACT:

Kirsten S. Moy, Director, the

Community Development Financial

Institutions Fund at (202) 622–8662.

(This is not a toll free number.)

SUPPLEMENTARY INFORMATION:

I. General

Executive Order (E.O.) 12866

It has been determined that this

regulation is not a significant regulatory

action as defined in E.O. 12866. Because

no substantive changes were made to

this regulation subsequent to

submission to the Office of Management

and Budget (OMB), the provisions of

section 6(a)(3)(E) of the E.O. do not

apply.

Regulatory Flexibility Act

Because no notice of proposed

rulemaking is required for this revised

interim rule, the provisions of the

Regulatory Flexibility Act (5 U.S.C. 601

et seq.) do not apply. Moreover, the

Department of the Treasury finds that

any economic or other consequence of

this revised interim rule is a direct

result of the implementation of statutory

provisions.

Paperwork Reduction Act

The Department of the Treasury is

issuing these revised interim regulations

without notice and public comment

pursuant to the Administrative

Procedures Act (5 U.S.C. 553). For this

reason, the collections of information

contained in these revised regulations

have been reviewed and pending receipt

and evaluation of public comments,

approved by the Office of Management

and Budget under control number 1505–

0153 (expires 08/31/97). Comments

concerning the collections of

information, the accuracy of the

estimated average annual burden, and

the reduction of such burden should be

directed to the Office of Management

and Budget, Paperwork Reduction

Projection (OMB Paperwork control

number 1505–0153), Washington, DC

20503, with copies to the Community

Development Financial Institutions

Fund, Department of the Treasury, 1500

Pennsylvania Avenue NW., Washington,

DC 20220. Any such comments should

be submitted not later than July 7, 1997.

Provisions requiring the collection of

information can be found in

§§ 1806.206, 1806.301, 1806.304, and

1806.305 of these regulations. The

information requested in such

provisions is necessary to evaluate

applications, monitor the performance

of entities receiving assistance, and

ensure compliance with statutory and

program requirements. The anticipated

respondents and recordkeepers are

financial institutions that may apply for

and receive assistance.

Estimated total annual reporting and/

or recordkeeping burden: 750 hours.

Estimated average annual burden

hours per respondent and/or

recordkeeper: 10 hours.

Estimated number of respondents

and/or recordkeepers: 75.

Estimated annual frequency of

responses: 1–2.

National Environmental Policy Act

Pursuant to Treasury Directive 75–02

(Department of the Treasury

Environmental Quality Program), the

Department has determined that these

revised interim regulations are

categorically excluded from the

National Environmental Policy Act and

do not require an environmental review.

Administrative Procedures Act

Pursuant to the provisions of 5 U.S.C.

553(a)(2), these revised regulations are

exempt from the proposed rule-making

requirements of 5 U.S.C. 553(b) and are

being issued as revised interim

regulations without opportunity for

notice and public comment prior to

their effective date. Furthermore, the

Department for good cause finds that

notice and public comment prior to

effect are impracticable and contrary to

the public interest. Congress

appropriated funds for the CDFI Fund in

FY 1996 and required such funds to be

obligated by September 30, 1997. The

Fund is required by statute to make onethird of each fiscal year’s appropriated

program funds available in order to

implement the Bank Enterprise Award

(BEA) Program. Such actions clearly

indicate Congress’ intent that the BEA

Program be implemented in an

expeditious manner. The amendments

to the interim rule originally issued on

October 19, 1995, and subsequently

amended on January 23, 1996, February

29, 1996, and November 25, 1996,

herein are intended to make the

program easier for Applicants to

participate and reduce regulatory

burden. If the Department does not issue

these regulations for effect, it will not be

feasible to implement the program, as

amended prior to September 30, 1997,

in a manner that better achieves the

results intended by Congress.

Catalog of Federal Financial Assistance

Numbers

Bank Enterprise Award Program—

21.021.

II. Background

The CDFI Fund was established as a

wholly owned government corporation

by the Community Development

Banking and Financial Institutions Act

of 1994 (the CDFI Act). Subsequent

legislation placed the Fund within the

Department of the Treasury and gave the

Secretary of the Treasury all powers and

rights of the Administrator of the Fund

as set forth in the authorizing statute.

Consistent with the placement and

administration of the Fund within the

Department’s organizational structure,

the Department of the Treasury’s

Inspector General will serve as the

Inspector General for the Fund. Any

individual who becomes aware of the

existence or apparent existence of fraud,

waste, or abuse of assistance provided

by the Fund is encouraged to report it

to the Department of the Treasury’s

Office of Inspector General in writing or

on the Inspector General’s Hotline (toll

free 1–800–359–3898). All telephone

calls will be handled confidentially.

Written complaints should be addressed

to the U.S. Department of the Treasury,

Office of Inspector General, Room 2412,
Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Rules and Regulations 10669

1500 Pennsylvania Avenue NW.,

Washington, DC 20220.

All records and materials pertaining

to the selection and awarding of

assistance by the Fund shall be fully

subject to the Freedom of Information

Act. Interested parties should contact

the U.S. Department of the Treasury,

Office of the Assistant Secretary for

Management, Disclosure Services at

(202) 622–1500.

The CDFI Fund’s programs are

designed to facilitate the flow of lending

and investment capital into distressed

communities and to individuals who

have been unable to take full advantage

of the financial services industry. This

initiative is an important step in

rebuilding poverty-stricken and

transitional communities and creating

economic opportunity for people often

left behind by the economic

mainstream.

Access to credit and investment

capital is an essential ingredient for

creating and retaining jobs, revitalizing

neighborhoods, developing affordable

housing, and unleashing the economic

potential of small businesses. The CDFI

Fund recognizes the important role

traditional financial institutions have

played, and should continue to play, in

serving the credit needs of distressed

communities and their residents. As a

means of facilitating increased activity

and innovation among traditional

financial institutions, these revised

regulations will implement the BEA

Program. The BEA Program has its roots

in the Federal Deposit Insurance

Corporation Improvement Act of 1991.

The Program was significantly modified

as part of the CDFI Act to enable it to

function as a companion to the CDFI

Program. Together, the CDFI Program

and BEA Program will promote activity

among the spectrum of financial

institutions that serve distressed

communities.

The following revised interim

regulations amend the BEA Program.

Elsewhere in this issue of the Federal

Register is a separate Notice of Funds

Availability (NOFA) for this program.

Final regulations will be published after

receipt and consideration of public

comments. Such public comments are

extremely important to the development

of the final regulations. The remainder

of this background section provides a

summary of the revised interim rule and

the major amendments to the interim

regulations that were originally

published on October 19, 1995, and

subsequently amended on January 23,

1996, February 29, 1996, and November

25, 1996.

III. Bank Enterprise Award Program

Subpart A—Overview

Section 114 of the CDFI Act is based

on the Bank Enterprise Act of 1991 and

gives the Fund authority to implement,

with some modifications, its provisions.

The Bank Enterprise Act of 1991,

though enacted in 1991, had not

previously received appropriated funds

for implementation.

The purpose of the BEA Program (12

CFR Part 1806) is to encourage insured

depository institutions to increase loans,

services, and technical assistance within

distressed communities and to make

Equity Investments or engage in CDFI

Support Activities. The BEA Program

rewards participating insured

depository institutions for increasing

their activities in economically

distressed communities and investing in

CDFIs. Applicants are selected to

participate in the Program through a

competitive process which evaluates

applications based on the value of

proposed increases in their specified

activities. Program participants receive

monies only after successful completion

of the specified activities.

Subpart B—Public Comments on

Previous Interim Rule

The Fund received a modest number

(3) of formal comments on the interim

rule to this part published in the

Federal Register on October 19, 1995,

and amended on January 23, 1996,

February 29, 1996, and November 25,

1996. The Fund also sought input on

Program improvements from the

approximately 50 Applicants to the

Program during the first round and held

a focus group in Chicago with several

Program participants in October 1996 to

solicit additional input. The Fund also

solicited input at meetings and

conferences of national community

development trade organizations, as

well as regional workshops hosted by

the Federal Reserve System. Most of the

revisions to the interim rule are based

on comments received through these

avenues.

Most of the issues raised by the formal

comments involved elements of the

Program which cannot be changed

without statutory amendments. For

example, all commenters expressed

concerns that the ‘‘Distressed

Community’’ (as defined in § 1806.200)

designation requirements were difficult

for both urban and rural communities to

meet. Several suggestions were made to

amend these requirements to

correspond to the standards established

by other Federal programs or agencies

(i.e. Community Reinvestment Act,

Home Mortgage Disclosure Act, HUD

affordable housing goal standards

established for housing-related

government-sponsored enterprises).

Suggestions for technical amendments

to the Program’s statutory provisions to

make it more compatible with the

statutory provisions dealing with the

CDFI Program were also put forth. In

addition, commenters expressed a

desire for a reduction in the

information-tracking and reporting

burden associated with the BEA

Program.

The BEA statute requires the use of

both U.S. Bureau of the Census and the

U.S. Bureau of Labor Statistics (BLS).

Furthermore, the BLS data specified in

the statute is not available on a census

tract basis. Thus, it was difficult for

many Applicants to satisfy the Program

requirements. Furthermore, although

the BEA Program and the Community

Development Financial Institutions

Program (12 CFR part 1805) are

intended to be companion programs, the

criteria for designating communities is

different.

One commenter expressed concern

that small banks in rural communities

may experience greater difficulty in

meeting the application requirements

due to limitations on resources of

smaller institutions. The Fund has

responded by simplifying some of the

Application and Program requirements

in this revised rule. One commenter

suggested that for the purpose of

calculating BEA award amounts, grants

to CDFIs used for operating purposes

should be given the same consideration

as grants used for building the capital of

a CDFI. The Fund responded by

removing this distinction. All

commenters expressed a desire to

simplify and streamline the Program

requirements. The Fund has attempted

to address these concerns with the

changes discussed below.

The Fund informally solicited

comments from Applicants participating

in the Program. Participants cited

several elements of the Program that

they considered favorable. For example,

the Program provides a new vehicle of

opportunity for getting recognition for

community development activities.

Many Awardees indicated that they

engaged in activities that support CDFIs

for the first time or significantly

increased the level of support provided

to CDFIs over their historical support

levels. Some Awardees reported that

they intend to use their BEA funding to

support future community development

activities. However, the Fund received

mixed feedback on the application

process. Many Applicants expressed the

opinion that the requirements for

applying for assistance or reporting their
10670 Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Rules and Regulations

activities was simple and

straightforward; others found it

burdensome.

Some Applicants had difficulty with

the eligibility requirements (as did

many institutions that considered

applying for assistance but did not

submit an application because they

could not meet the eligibility

requirements). Specifically, the

authorizing statute permits only insured

depository institutions to apply. Insured

depository institution Applicants can

only report their Qualified Activities

and the activities of their subsidiaries

(not holding companies or non-insured

depository institution subsidiaries of

holding companies). However, many

banks and thrifts carry out their

community development activities

through subsidiaries of their holding

companies that are not insured

depository institutions. Other Program

participants expressed a desire to make

the Program structure more flexible.

Several suggestions were made to

provide grants on a prospective basis

(rather than retrospectively) so the

Program could be used to catalyze

different types of activity. Participants

suggested that rather than looking at

only one aspect of community

development lending—increases in

activity—the Program could be

amended to give greater consideration to

innovation, impact, or other qualitative

aspects of an institution’s activities.

Implementation of many of the

suggestions discussed above will require

a statutory change and therefore are not

reflected in the revised interim rule that

follows.

In this revised interim rule, the Fund

has sought to address difficulties

experienced by Program participants

during the first funding round that may

be addressed without any statutory

changes. First, the revised rule includes

numerous changes that seek to

streamline and simplify the Program

and Application requirements. The

revised rule clarifies the requirements

for reporting and documenting eligible

activities. The Fund will provide a BEA

Help Desk that will be available to

provide data and assistance to

Applicants in designating their

Distressed Communities and will

provide a list of certified CDFIs as part

of the application packet.

Subpart C—Findings From the First

Funding Round

In the first funding round of the BEA

Program, the Fund set aside $15.5

million to distribute in awards to

qualifying institutions. Approximately

50 institutions applied for assistance

totaling $13.5 million in requests at the

time the applications were submitted.

The Fund received applications from

institutions located in 18 states and the

District of Columbia. Of these

Applicants, 38 institutions received

awards totaling $13.1 million. Since the

Program was undersubscribed, all

Applicants that met the Program’s basic

statutory and regulatory requirements

received an award. Applicants did not

need to be competitively rated and

ranked. Twelve institutions that applied

for assistance did not receive awards

because they did not meet the program

requirements.

The awards ranged from $3,750 to

$2.7 million; the median award received

was approximately $100,000. With

respect to the types of institutions that

received awards, 39% were national

banks, 34% were state chartered

commercial banks, 24% were Federal

savings banks or thrifts, and 3% (1

Awardee) was a state chartered mutual

savings bank. Awardees ranged in asset

size from more than $21 million to $320

billion, as of the time that awards were

obligated (16% under $250 million in

total assets; 14% between $250 million

and $1 billion in total assets; 74% over

$1 billion in total assets).

Awardees engaged in a variety of

activities. With regard to Equity

Investments or other activities that

support CDFIs, the Fund found that

nearly two-thirds (63%) of all Awardees

engaged in activities that support CDFIs.

These Awardees provided support to 49

community based financial

intermediaries through their BEA

activities which generated nearly $66

million in support for CDFIs. Of the

support provided to CDFIs: 78% of all

support was provided in the form of

equity investments or capital grants;

21% was provided in the form of loans;

and approximately 1% was provided in

the form of operating grants,

nonmember deposits in credit unions,

and technical assistance. Thirty-seven

percent of the Awardees engaged in the

provision of direct lending or services

within distressed neighborhoods.

Through the Program, these Awardees

reported a total of $60.1 million in

lending and service activities during the

Assessment Period.

Subpart D—General Provisions

Section 1806.102 describes the

Program’s relationship to the CDFI

Program (part 1805). To prevent

Applicants from receiving more than

one Federal award for a single activity,

no CDFI may receive an award under

the BEA Program if it: (1) Has an

application pending under the CDFI

Program; (2) has received assistance

from the CDFI Program within the

preceding 12 months; or (3) has ever

received assistance under the CDFI

Program for the same activities

proposed in a BEA Program application.

Assistance provided to a CDFI by a BEA

Program participant may be used by the

CDFI as matching funds for the CDFI

Program.

Section 1806.103(m) is amended to

provide that any organization that is

certified as a CDFI as of the end of the

Assessment Period, and is a CDFI at the

time of the Qualified Activity, shall be

considered a CDFI for the purposes of

the BEA Program. If an Applicant is

proposing to make an Equity Investment

in or engage in CDFI Support Activities

with respect to an entity that has not

been certified as a CDFI, such

uncertified CDFI shall submit the

information described in § 1805.701(b)

of this chapter. Such information shall

be submitted to the Fund as specified in

the applicable NOFA published in the

Federal Register. Certification must be

completed by the end of the applicable

Assessment Period as specified in the

applicable NOFA. A list of organizations

with current certifications may be

obtained at the offices of the Fund. An

Applicant should be aware that if it

closes on an Equity Investment or CDFI

Support Activity transaction prior to an

uncertified CDFI’s certification, such

transaction may not be considered a

Qualified Activity. The uncertified CDFI

must qualify as a CDFI at the time of the

transaction and must be certified as a

CDFI by no later than the end of the

applicable Assessment Period in order

for the transaction to be deemed a

Qualified Activity.

This revised interim rule makes

technical amendments and clarifications

to several terms. The term Eligible

Development Activity is changed to

Development and Services Activity. The

term Commercial Real Estate Loan is

modified to clarify the distinction

between Business Loan and Agriculture

Loans. The term Community Service is

added as a new Development and

Service Activity and includes the

provision of technical assistance,

counseling, and other services. These

activities were described as Qualified

Activities in Section 1806.201(x)

through (xiii) of the interim rule

published on October 19, 1995, as

heretofore amended on January 23,

1996, February 29, 1996, and November

25, 1996, and must take place within a

Distressed Community. The term CDFI

Support Activity is added and includes

loans, certain deposits, and technical

assistance provided to CDFIs integrally

involved with a Distressed Community.

The term Equity Investment is amended

to include all types of grants regardless
Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Rules and Regulations 10671

of use by recipients and the purchase of

a partnership or limited liability

company membership interest. The term

Equity Investment is further clarified to

describe various instruments that will

be considered to be an Equity

Investment including grants made to

CDFIs. The Fund finds that grants are

commonly used like equity (and often is

more favorable) by a recipient CDFI to

support its lending, investment, or other

activities. Since the large majority of

CDFIs are non-profit organizations and

the Fund’s authorizing statute intended

that non-profit CDFIs benefit from its

programs, the Fund has determined that

it is consistent with the purposes of this

Program to consider a grant to be a form

of Equity Investment.

Subpart E—Awards

Distressed Community

Section 1806.200 describes the

community eligibility and designation

process. In the previous rule, an

Applicant proposing to make Equity

Investments in a CDFI in a Distressed

Community was required to designate a

Distressed Community (or

Communities) at the time of application.

In the revised rule, an insured

depository institution applying for an

award is required to designate a

Distressed Community (or

Communities) if it proposes to carry out

Development and Services Activities

and CDFI Support Activities. As a

means of reducing the paperwork

burden for Applicants, the Fund has

eliminated the requirement that an

Applicant that proposes to make an

Equity Investment designate a

Distressed Community at the time of

application. In the event that the Fund’s

resources are oversubscribed, the Fund

reserves the right to request that such

Applicants provide this information.

The statute mandates that each

designated Distressed Community meet

certain geographic requirements and

distress criteria. Under the geographic

requirements, the community must be

located within certain boundaries, its

boundaries must be contiguous, and its

population must meet certain

requirements or must be located entirely

within an Indian Reservation (as

defined in the regulations). The distress

criteria require that at least 30 percent

of the residents have incomes which are

less than the national poverty level and

the unemployment rate for the area

must be at least 1.5 times the national

average (as determined by the Bureau of

Labor Statistics’’ most recent figures).

Such criteria are intended to ensure that

BEA Program resources are targeted to

some of the most Distressed

Communities in the nation.

Qualified Activities

In § 1806.201 the activities that

Program participants may engage in are

categorized as CDFI Related Activities

and Development and Service

Activities. Development and Service

Activities include certain consumer,

commercial real estate, single family,

multi-family, business and agricultural

loans, and Project Investments.

Additional Development and Service

Activities are deposit taking activities,

Financial Service provision, and

Community Services. Each of these

activities is defined and must serve a

Distressed Community. Each

Development and Service Activity is

assigned a priority factor based on the

Fund’s assessment of its degree of

difficulty, the extent of innovation

involved, and the extent of benefits

provided to a Distressed Community by

the activity. In developing the categories

of Development and Service Activities,

the Fund sought to minimize

recordkeeping and reporting burdens.

The CDFI Related Activities include

Equity Investments and CDFI Support

Activities.

The rule is amended to prohibit an

Applicant from receiving an award for

activities for which the Applicant may

receive a benefit through the Low

Income Housing Tax Credit. In no case

shall such activities be considered an

Equity Investment, Project Investment,

or other Qualified Activity for the

purpose of calculating an award. The

Department of the Treasury is fully

supportive of the Low Income Housing

Tax Credit (LIHTC) as a critical tool for

promoting investment in affordable

housing. However, for the purposes of

the BEA Program, investments made by

an Applicant for which such Applicant

receives a benefit through the LIHTC

shall not be considered a Qualified

Activity for several reasons. First, a well

established market already exists for the

LIHTC among investors, and the LIHTC

provides sufficient returns to such

investors that additional Federal

subsidy is not necessary to prompt

banks or thrifts to become investors in

such an instrument. Second, generally

in recent years, the LIHTC program has

reached its statutorially-imposed limit.

Thus, it is not clear that providing

additional Federal subsidy through the

BEA Program will result in affordable

housing in addition to what would

occur without such incentive. In the

interests of using scarce Federal

resources in a more effective manner,

the Fund has determined that it is

prudent to prohibit activities involving

the LIHTC from being counted as

Qualified Activities for the purposes of

this Program.

Measuring Activities

Section 1806.202 describes the

methodology used to measure activities

for the purpose of ranking Applications

and determining award amounts. All

Qualified Activities will be measured by

the increases in value of the activities

between a retroactive Baseline Period

(for which the Applicant will provide

historical data) and a prospective

Assessment Period (for which the

Applicant must project future activity

levels). Dates for the Baseline and

Assessment Periods will be published in

the NOFA for each funding round.

Section 1806.202(d) clarifies that, for

the purpose of reporting Qualified

Activities occurring during the Baseline

Period or the Assessment Period, an

Applicant may only report activities on

the basis of the date a final ‘‘closing’’

transaction occurred. The rule specifies

that the evidence of such a transaction

must constitute a legally binding

agreement between the Applicant and a

borrower or investee which, among

other things, specifies the final terms

and conditions of the agreement. The

rule establishes some limitations on the

amount of a transaction that an

Applicant may claim of the purpose of

calculating an award in the event of a

multi-year disbursement. The rule

excludes from consideration for an

award loan transactions involving a

renewal, rollover, or refinancing of a

loan made by an Applicant or an

affiliate of the Applicant in amounts

that are equal to or less than the

principal outstanding of such loan at the

time of refinancing.

Estimated Award Amounts

In § 1806.203, procedures are

established for calculating estimated

award amounts. In general, the

estimated award amount for Equity

Investments, CDFI Support Activities

carried out by an Applicant that is not

a CDFI, and CDFI Support Activities

carried out by an Applicant that is a

CDFI will be equal to 15, 11 and 33

percent, respectively, of an Applicant’s

anticipated increase in such activities.

For Development and Service Activities,

a seven step procedure is established

under which a total score is calculated.

Generally, if the Applicant is a CDFI,

the total score is multiplied by 15

percent to determine the estimated

award. If the Applicant is not a CDFI,

the total score is multiplied by five

percent.
10672 Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Rules and Regulations

Selection Process

A selection process is established in

§ 1806.204 which reflects the funding

priorities discussed in the statute. In the

event that the amount of funding

requests exceeds the amount of funds

available, first priority in selection will

go to Applications that propose to

engage in CDFI Related Activities. Of

such Applicants, funding consideration

will be given to Applicants in the

following order: (1) Applicants

proposing to make Equity Investments

in CDFIs in Distressed Communities; (2)

Applicants proposing to make Equity

Investments in CDFIs not in Distressed

Communities; and (3) Applicants

proposing to engage in CDFI Support

Activities. Applicants proposing to

make Equity Investments in CDFIs may

be ranked based on the extent to which

an Applicant proposes to reduce its

award below 15 percent, but in no case

shall an Applicant reduce its award to

less than 12 percent. Ties will be broken

using the ratio of proposed Equity

Investments to the asset size of the

institution. Applicants proposing to

engage in CDFI Support Activities will

be ranked based on the ratio of the

proposed CDFI Support Activity to the

asset size of the Applicant. The second

priority in selection will go to

Applicants proposing to engage in

Development and Service Activities.

Applications in the last category of

funding priorities may be ranked

according to the ratio of an Applicant’s

total score to its asset size. Any ties

between such Applicants will be broken

using the poverty rates of the Distressed

Communities.

Actual Award Amounts

Section 1806.205 establishes the

award calculation process. In general,

awards will be calculated on a pro-rata

basis with respect to the increase in

activities actually carried out. In the

event that the amount of funds available

for a specific funding round are

insufficient to cover all estimated award

amounts, the Fund, at its sole

discretion, may limit the amount of or

deny an award to an Applicant that has

achieved less than 75 percent of its

projected activities. This provision is

intended to prevent Applicants from

over-estimating projected activities to

enhance their competitiveness in the

selection process.

Application Process

Section 1806.206 describes the

Application process for Bank Enterprise

Awards. Each funding round will be

preceded by a NOFA published in the

Federal Register. The NOFA will

contain specific information on

requirements or restrictions applicable

to such round. As indicated above, the

Fund has sought to minimize its

application and reporting requirements

and seeks comment on how these

requirements might be improved.

Subpart F—Terms and Conditions of

Assistance

Section 1806.300 requires that each

Awardee execute an award agreement

with the Fund. The agreement will

establish requirements for receiving

funds and appropriate sanctions for

failure to comply with Program

requirements. Section 1806.301

specifies that, at the end of the

Assessment Period, each Awardee will

submit evidence of its completed

activities. The rule clarifies the

Program’s documentation requirements.

Upon receipt of final reports and

documentation, the Fund will make the

appropriate disbursement of funds to

the Awardee.

List of Subjects in 12 CFR Part 1806

Banks, banking, Community

development, Grant programs—housing

and community development, Reporting

and recordkeeping requirements,

Savings associations.

Dated: March 4, 1997.

Kirsten S. Moy,

Director, Community Development Financial

Institutions Fund.

For the reasons set forth in the

preamble, chapter XVIII of title 12 of the

Code of Federal Regulations is amended

by revising part 1806 to read as follows:

PART 1806—BANK ENTERPRISE

AWARD PROGRAM

Subpart A—General Provisions

Sec.

1806.100 Purpose.

1806.101 Summary.

1806.102 Relationship to the Community

Development Financial Institutions

Program.

1806.103 Definitions.

1806.104 Waiver authority.

1806.105 OMB control number.

Subpart B—Awards

1806.200 Community eligibility and

designation.

1806.201 Qualified Activities.

1806.202 Measuring activities.

1806.203 Estimated award amounts.

1806.204 Selection process.

1806.205 Actual award amounts.

1806.206 Applications for Bank Enterprise

Awards.

Subpart C—Terms and Conditions of

Assistance

1806.300 Award Agreement; sanctions.

1806.301 Records, reports and audits of

Awardees.

1806.302 Compliance with government

requirements.

1806.303 Fraud, waste and abuse.

1806.304 Books of account, records and

government access.

1806.305 Retention of records.

Authority: 12 U.S.C. 4703, 4717; chapter X,

Pub. L. 104–19, 108 Stat. 237 (12 U.S.C. 4703

note).

Subpart A—General Provisions

§ 1806.100 Purpose.

The purpose of the Bank Enterprise

Award Program is to encourage insured

depository institutions to make Equity

Investments and carry out CDFI Support

Activities and Development and Service

Activities to revitalize distressed urban

and rural communities.

§ 1806.101 Summary.

(a) Under the Bank Enterprise Awards

Program, the Fund makes awards to

selected Applicants that:

(1) Invest in or otherwise support

Community Development Financial

Institutions;

(2) Increase lending and investment

activities within Distressed

Communities; or

(3) Increase the provision of certain

services and assistance.

(b) Distressed Communities must

meet minimum poverty and

unemployment criteria. Applicants are

selected to participate in the program

through a competitive application

process. Awards are based on increases

in Qualified Activities that are carried

out by the Applicant during an

Assessment Period. Bank Enterprise

Awards are distributed after successful

completion of projected Qualified

Activities. All awards shall be made

subject to the availability of funding.

§ 1806.102 Relationship to the Community

Development Financial Institutions

Program.

(a) Prohibition against double

funding. No CDFI may receive a Bank

Enterprise Award if it has:

(1) An application pending for

assistance under the Community

Development Financial Institutions

Program (part 1805 of this chapter);

(2) Received assistance from the

Community Development Financial

Institutions Program within the

preceding 12-month period; or

(3) Ever received assistance under the

Community Development Financial

Institutions Program for the same

activities for which it is seeking a Bank

Enterprise Award.
Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Rules and Regulations 10673

(b) Matching funds. Equity

Investments and CDFI Support

Activities (except technical assistance)

provided to a CDFI under this part can

be used by the CDFI to meet the

matching funds requirements of the

Community Development Financial

Institutions Program.

§ 1806.103 Definitions.

For the purpose of this part:

(a) Act means the Community

Development Banking and Financial

Institutions Act of 1994, as amended (12

U.S.C. 4701 et seq.);

(b) Agricultural Loan means an

origination of a loan secured by farm

land (including farm residential and

other improvements), a loan to finance

agricultural production, or a loan to a

farmer (other than a Single Family Loan

or Consumer Loan);

(c) Applicant means any insured

depository institution (as defined in

section 3(c)(2) of the Federal Deposit

Insurance Act (12 U.S.C. 1813)) that is

applying for a Bank Enterprise Award;

(d) Appropriate Federal Banking

Agency has the same meaning as in

section 3 of the Federal Deposit

Insurance Act (12 U.S.C. 1813);

(e) Assessment Period means an

annual or semi-annual period specified

in the applicable Notice of Funds

Availability (NOFA) in which an

Applicant will carry out Qualified

Activities;

(f) Award Agreement means a formal

agreement between the Fund and an

Awardee pursuant to § 1806.300;

(g) Awardee means an Applicant

selected by the Fund to receive a Bank

Enterprise Award;

(h) Bank Enterprise Award means an

award made to an Applicant pursuant to

this part;

(i) Bank Enterprise Award Program

means the program authorized by

section 114 of the Act and implemented

under this part;

(j) Baseline Period means an annual or

semi-annual period specified in the

applicable NOFA in which an Applicant

has previously carried out Qualified

Activities;

(k) Business Loan means an

origination of a loan used for

commercial or industrial activities

(other than an Agricultural Loan,

Commercial Real Estate Loan, MultiFamily Loan or Single Family Loan);

(l) Commercial Real Estate Loan

means an origination of a loan (other

than a Multi-Family Loan or a Single

Family Loan) used for commercial

purposes to finance construction and

land development or an origination of a

loan that is secured by real estate and

used to finance the acquisition or

rehabilitation of a building used for

commercial purposes;

(m) Community Development

Financial Institution (or CDFI) means an

entity whose certification as a CDFI

under § 1805.201 of this chapter is in

effect as of the end of the applicable

Assessment Period (the Assessment

Period in which the Qualified Activity

takes place) and that meets the

requirements of § 1805.200 (b) through

(h) of this chapter at the time of the

Qualified Activity, subject to the rest of

this paragraph (m). If an Applicant is

proposing to make an Equity Investment

or engage in CDFI Support Activities

with an uncertified CDFI, the

uncertified CDFI may apply for

certification by submitting the

information described in § 1805.701(b)

of this chapter. In order for the

Applicant to be eligible to receive an

award for its activity, the required

information with respect to the

uncertified CDFI shall be submitted to

the Fund as specified in the applicable

NOFA published in the Federal

Register, and certification must be

completed by the end of the applicable

Assessment Period as specified in the

applicable NOFA. Notwithstanding

anything in this paragraph (m) to the

contrary, an Applicant may receive an

award pursuant to this part for

assistance provided to an uncertified

CDFI that, at the time of the Qualified

Activity, does not meet the

requirements of § 1805.200 (b) through

(h) of this chapter if:

(1) The Applicant requires the

uncertified CDFI to refrain from using

the assistance provided until the entity

is certified;

(2) The uncertified CDFI is certified

by the end of the applicable Assessment

Period; and

(3) The Applicant retains the option

of recapturing said assistance in the

event that the uncertified CDFI is not

certified by the end of the applicable

Assessment Period;

(n) CDFI Related Activities means

Equity Investments and CDFI Support

Activities;

(o) CDFI Support Activity means

assistance provided by an Applicant or

its Subsidiary to a CDFI that is integrally

involved in a Distressed Community in

the form of the origination of a loan,

technical assistance, or deposits if such

deposits are:

(1) Uninsured and committed for a

term of at least three years; or

(2) Insured, committed for a term of

at least three years, and provided at an

interest rate that is materially (in the

determination of the Fund) below

market rates;

(p) Community Services means the

following forms of assistance:

(1) Provision of technical assistance to

Residents in managing their personal

finances through consumer education

programs (either sponsored or offered by

the Applicant);

(2) Provision of technical assistance

and consulting services to newly formed

small businesses located in the

Distressed Community;

(3) Provision of technical assistance

to, or servicing the loans of, Low-or

Moderate-Income homeowners and

homeowners located in the Distressed

Community; and

(4) Other services provided for Lowand Moderate-Income persons in a

Distressed Community or enterprises

integrally involved in a Distressed

Community deemed appropriate by the

Fund;

(q) Consumer Loan means an

origination of a loan to one or more

individuals for household, family, or

other personal expenditures;

(r) Distressed Community means a

geographic community which meets the

minimum area eligibility requirements

specified in § 1806.200;

(s) Development and Service

Activities means activities described in

§ 1806.201(b)(4) that are carried out by

the Applicant or its Subsidiary;

(t) Equity Investment means financial

assistance provided by an Applicant or

its Subsidiary to a CDFI in the form of

a grant, a stock purchase, a purchase of

a partnership interest, a purchase of a

limited liability company membership

interest, a loan made on such terms that

it has characteristics of equity (and is

considered as such by the Fund and is

consistent with requirements of the

Applicant’s Appropriate Federal

Banking Agency), or any other

investment deemed to be an Equity

Investment by the Fund;

(u) Financial Services means checkcashing, providing money orders and

certified checks, automated teller

machines, safe deposit boxes, and other

comparable services as may be specified

by the Fund that are provided to Lowand Moderate-Income persons in the

Distressed Community or enterprises

integrally involved with the Distressed

Community;

(v) Fund means the Community

Development Financial Institutions

Fund established under section 104(a)

of the Act (12 U.S.C. 4703(a));

(w) Geographic Units means counties

(or equivalent areas), incorporated

places, minor civil divisions that are

units of local government, census tracts,

block numbering areas, block groups,

and American Indian or Alaska Native

areas (as each is defined by the U.S.
10674 Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Rules and Regulations

Bureau of the Census) or other areas

deemed appropriate by the Fund;

(x) Indian Reservation means a

geographic area that meets the

requirements of section 4(10) of the

Indian Child Welfare Act of 1978 (25

U.S.C. 1903(10)), and shall include land

held by incorporated Native groups,

regional corporations, and village

corporations, as defined in and pursuant

to the Alaska Native Claims Settlement

Act (43 U.S.C. 1601 et seq.), public

domain Indian allotments, and former

Indian Reservations in the State of

Oklahoma;

(y) Low-and Moderate-Income means

income that does not exceed 80 percent

of the median income of the area

involved, as determined by the

Secretary of Housing and Urban

Development with adjustments for

smaller and larger families pursuant to

section 102(a)(20) of the Housing and

Community Development Act of 1974

(42 U.S.C. 5302(a)(20));

(z) Metropolitan Area means an area

designated as such (as of the date of the

application) by the Office of

Management and Budget pursuant to 44

U.S.C. 3504(d)(3), 31 U.S.C. 1104(d),

and Executive Order 10253 (3 CFR,

1949–1953 Comp., p. 758), as amended;

(aa) Multi-Family Loan means an

origination of a loan secured by a fiveor more family residential property;

(bb) Project Investment means

providing financial assistance in the

form of a purchase of stock, limited

partnership interest, other ownership

instrument, or a grant to an entity that

is integrally involved with a Distressed

Community and formed for the sole

purpose of engaging in a project or

activity, approved by the Fund, related

to commercial real estate, single family

housing, multi-family housing, business

or agriculture (as defined in this part);

(cc) Qualified Activities means CDFI

Related Activities and Development and

Service Activities;

(dd) Resident means an individual

domiciled in a Distressed Community;

(ee) Single Family Loan means an

origination of a loan secured by a oneto-four family residential property;

(ff) Subsidiary has the same meaning

as in section 3 of the Federal Deposit

Insurance Act, except that a CDFI shall

not be considered a subsidiary of any

insured depository institution or any

depository institution holding company

that controls less than 25 percent of any

class of the voting shares of such

corporation and does not otherwise

control, in any manner, the election of

a majority of directors of the

corporation; and

(gg) Unit of General Local Government

means any city, county, town,

township, parish, village, or other

general purpose political subdivision of

a State or Commonwealth of the United

States, or general purpose subdivision

thereof, and the District of Columbia.

§ 1806.104 Waiver authority.

The Fund may waive any requirement

of this part that is not required by law,

upon a determination of good cause.

Each such waiver shall be in writing

and supported by a statement of the

facts and grounds forming the basis of

the waiver. For a waiver in any

individual case, the Fund must

determine that application of the

requirement to be waived would

adversely affect the achievement of the

purposes of the Act. For waivers of

general applicability, the Fund will

publish notification of granted waivers

in the Federal Register.

§ 1806.105 OMB control number.

The collection of information

requirements in this part have been

approved by the Office of Management

and Budget and assigned OMB control

number 1505–0153 (expires September

30, 1998).

Subpart B—Awards

§ 1806.200 Community eligibility and

designation.

(a) General. If an Applicant proposes

to carry out CDFI Support Activities or

Development and Service Activities, the

Applicant shall designate one or more

Distressed Communities in which it

proposes to carry out those activities. If

an Applicant proposes to carry out CDFI

Support Activities, the Applicant shall

provide evidence that the CDFI it is

proposing to support is integrally

involved with such a Distressed

Community. In the case of an Applicant

proposing to make an Equity

Investment, the Fund reserves the right

to request information on Distressed

Communities served by such a CDFI

should such information be deemed

necessary by the Fund to complete the

selection process described in

§ 1806.204. In the case of an Applicant

that proposes to carry out both CDFI

Support Activities and Development

and Service Activities it may designate

different Distressed Communities for

these two categories of activity.

(b) Minimum area eligibility

requirements. A Distressed Community

must meet the minimum area eligibility

requirements contained in this

paragraph (b).

(1) Geographic requirements. A

Distressed Community must be a

geographic area:

(i) That is located within the

boundaries of a Unit of General Local

Government;

(ii) The boundaries of which are

contiguous; and

(iii) (A) The population of which must

be at least 4,000 if any portion of the

area is located within a Metropolitan

Area with a population of 50,000 or

greater;

(B) The population must be at least

1,000 if no portion of the area is located

within such a Metropolitan Area; or

(C) The area is located entirely within

an Indian Reservation.

(2) Distress requirements. A

Distressed Community must be a

geographic area where:

(i) At least 30 percent of the Residents

have incomes which are less than the

national poverty level, as published by

the U.S. Bureau of the Census in the

1990 decennial census; and

(ii) The unemployment rate is at least

1.5 times greater than the national

average, as determined by the U.S.

Bureau of Labor Statistics’ most recent

data including estimates of

unemployment developed using the

U.S. Bureau of Labor Statistics’ Census

Share calculation method. U.S. Bureau

of Labor Statistics data and information

necessary for Census Share calculations

may be obtained from the Fund.

(c) Area designation. An Applicant

shall designate an area as a Distressed

Community by:

(1) Selecting Geographic Units which

individually meet the minimum area

eligibility requirements; or

(2) Selecting two or more Geographic

Units which, in the aggregate, meet the

minimum area eligibility requirements

set forth in paragraph (b) of this section

provided that no Geographic Unit

selected by the Applicant within the

area has a poverty rate of less than 20

percent.

(d) Designation and notification

process. Upon request, the Fund will

provide a prospective Applicant with

data and other information to help it

identify areas eligible to be a Distressed

Community. A prospective Applicant is

encouraged to contact the Fund prior to

filing an application to determine if an

area meets the minimum area eligibility

requirements.

§ 1806.201 Qualified Activities.

(a) CDFI Related Activities. An

Applicant may receive a Bank

Enterprise Award for making an Equity

Investment or carrying out CDFI

Support Activities during an

Assessment Period.

(b) Development and Service

Activities. (1) General. An Applicant

may receive a Bank Enterprise Award
Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Rules and Regulations 10675

for carrying out Development and

Service Activities during an Assessment

Period.

(2) Area served. The Development and

Service Activities listed in paragraphs

(b)(4) (i) through (x) of this section must

serve a Distressed Community. An

activity is considered to serve a

Distressed Community if it is:

(i) Undertaken in the Distressed

Community; or

(ii) Provided to Low- and ModerateIncome Residents or enterprises

integrally involved in the Distressed

Community.

(3) Priority factors. Each Development

and Service Activity is assigned a

priority factor. A priority factor

represents the Fund’s assessment of the

degree of difficulty, the extent of

innovation, and the extent of benefits

accruing to the Distressed Community

for each type of activity.

(4) Development and Service

Activities. Development and Service

Activities are listed in this paragraph

with their corresponding priority

factors:

(i) Deposit liabilities in the form of

savings or other demand or time

accounts accepted from Residents at

offices located within the Distressed

Community (priority factor = 1.0);

(ii) Financial Services (priority factor

= 1.2);

(iii) Community Services (priority

factor = 1.4);

(iv) Consumer Loans (priority factor =

1.2);

(v) Single Family Loans and related

Project Investments (priority factor =

1.4);

(vi) Multi-Family Loans and related

Project Investments (priority factor =

1.6);

(vii) Commercial Real Estate Loans

and related Project Investments (priority

factor = 1.6);

(viii) Business Loans, Agricultural

Loans, and related Project Investments

of $100,000 or less (priority factor =

1.9);

(ix) Business Loans, Agricultural

Loans, and related Project Investments

of more than $100,000 through $250,000

(priority factor = 1.8);

(x) Business Loans and related Project

Investments of more than $250,000

through $1,000,000 and Agricultural

Loans and related Project Investments of

more than $250,000 through $500,000

(priority factor = 1.7).

(c) Limitation. Financial assistance

provided by an Applicant for which the

Applicant receives benefits through the

Low Income Housing Tax Credit

authorized pursuant to Section 42 of the

Internal Revenue Code of 1986, as

amended (26 U.S.C. 42), shall not

constitute an Equity Investment, Project

Investment, or other Qualified Activity,

as defined in this part, for the purposes

of calculating or receiving an award.

§ 1806.202 Measuring activities.

(a) General. Qualified Activities shall

be measured by comparing the Qualified

Activities carried out during the

Baseline Period with the Qualified

Activities projected to be carried out

during the Assessment Period. Increases

in the values of Qualified Activities

between the Baseline Period and

Assessment Period will be used in

determining award amounts. If an

Applicant is seeking assistance only for

CDFI Related Activities, it should only

report its activities for CDFI Related

Activities categories. If an Applicant is

seeking assistance only for Development

and Service Activities, it should only

report its activities for Development and

Service Activities categories. If An

Applicant is seeking assistance for both

CDFI Related Activities and

Development and Service Activities, it

should report its activities for both types

of categories. If an applicant is unable

to report its activities in the

aforementioned manner, the Applicant

shall provide an explanation satisfactory

to the Fund as to why it cannot report

required information and

simultaneously submit to the Fund a

certification that during the Assessment

Period the Applicant did not reduce its

total activity in any unreported

categories. The form and content of any

certification shall be determined by the

Fund. The dates of the Baseline Period

and Assessment Period will be

published in a Notice for each funding

round.

(b) Exception. An Applicant may

select not to report its deposit liabilities

as described in § 1806.201(b)(4)(i). In

such a case, an Applicant’s deposit

liabilities will not be considered in

calculating the service score pursuant to

§ 1806.203(c).

(c) Value. The Fund will assess the

value of:

(1) Equity Investments, loans

(excluding any renewal, roll over, or

refinancing of a loan made by the

Applicant or an affiliate of the

Applicant in an amount equal to or less

than the principal outstanding of such

loan at the time of refinancing), grants

and deposits described in § 1806.103 at

the original amount of such

investments, loans, grants or deposits;

(2) Deposit liabilities at the face dollar

amount of monies deposited as

measured by comparing the net change

in the amount of applicable funds (as

described in § 1806.201(b)(4)(i)) on

deposit at the Applicant institution

during the period described in this

paragraph (c)(2). An Applicant shall

measure the net changes in deposit

liabilities during:

(i) The Baseline Period, by comparing

the amount of applicable funds on

deposit at the close of business the day

before the beginning of the Baseline

Period and at the close of business on

the last day of the Baseline Period; and

(ii) The Assessment Period, by

comparing the amount of applicable

funds on deposit at the close of business

the day before the beginning of the

Assessment Period and at the close of

business on the last day of the

Assessment Period;

(3) Financial Services, Community

Services, and CDFI Support Activities

consisting of technical assistance based

on the administrative costs of providing

such services; and

(4) Project Investments at the original

amount of the purchase of stock, limited

partnership interest, other ownership

interest, or grant.

(d) Closed Transactions. A transaction

shall be considered to have been carried

out during the Baseline Period or the

Assessment Period if:

(1) The documentation evidencing the

transaction:

(i) Is executed on a date within the

applicable Baseline Period or

Assessment Period, respectively, as

specified in the applicable NOFA; and

(ii) Constitutes a legally binding

agreement between the Applicant and a

borrower or investee which specifies the

final terms and conditions of the

transaction, except that any

contingencies included in the final

agreement must be typical of such

transaction and acceptable (both in the

judgment of the Fund); and

(2) An initial disbursement of loan or

investment proceeds has occurred in a

manner that is consistent with

customary business practices and is

reasonable given the nature of the

transaction, (both as determined by the

Fund).

(e) Reporting. An Applicant shall

report Qualified Activities on the basis

of transactions that were:

(1) Completed during the Baseline

Period; and

(2) Are expected to be completed

during the Assessment Period and

disbursed by the Applicant to a

borrower or investee within the period

described in § 1806.205(a).

§ 1806.203 Estimated award amounts.

Award amounts will be determined at

the sole discretion of the Fund and

estimated as described in this section.

(a) Equity Investments. The estimated

award amount for an Equity Investment
10676 Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Rules and Regulations

will be equal to 15 percent (or such

lower percentage as may be requested

by the Applicant) of the anticipated

increase in the value of such investment

between the Baseline Period and

Assessment Period.

(b) CDFI Support Activities. If an

Applicant is not a CDFI, the estimated

award amount for CDFI Support

Activities will be equal to 11 percent of

the anticipated increase in the dollar

amount of such support between the

Baseline Period and Assessment Period.

If Applicant is a CDFI, the estimated

award amount for CDFI Support

Activities will be equal to 33 percent of

the anticipated increase in the dollar

amount of such support between the

Baseline Period and Assessment Period.

(c) Development and Service

Activities. The estimated award amount

for Development and Service Activities

will be calculated as follows:

(1) Step 1. For each type of

Development and Service Activity,

subtract the value in the Baseline Period

from the estimated value for the

Assessment Period to yield a remainder;

(2) Step 2. Multiply the remainder for

each Development and Service Activity

by the assigned priority factor to yield

a weighted value for each activity;

(3) Step 3. Add the weighted values

for deposit liabilities and Financial

Services to yield a service score;

(4) Step 4. Add the weighted values

for all other categories of Development

and Service Activities to yield a

development score. If the development

score is negative, an Applicant will be

ineligible to receive a Bank Enterprise

Award. If the development score is

positive, go to Step 5;

(5) Step 5. If the service score is

greater than the development score,

reduce the service score to equal the

same amount as the development score

to yield an adjusted service score. (The

Act prohibits an Applicant from

receiving more assistance for its deposit

taking activities than for other Qualified

Activities.);

(6) Step 6. Add the service score (or

adjusted service score if applicable) and

the development score to yield a total

score; and

(7) Step 7. If the Applicant is:

(i) A CDFI, multiply the total score by

15 percent to yield an estimated award

amount; or

(ii) Not a CDFI, multiply the total

score by 5 percent to yield an estimated

award amount.

§ 1806.204 Selection process.

(a) Availability of funds. All awards

are subject to the availability of funds.

If the amount of funds available during

a funding round is sufficient for all

estimated award amounts, an Awardee

that meets all of the program

requirements specified in this part shall

receive an award that is calculated in

the manner specified in § 1806.205. If

the amount of funds available during a

funding round is insufficient for all

estimated award amounts, Awardees

will be selected based on the process

described in this section.

(b) Priority of categories.—(1) General.

The Fund will rank an Applicant’s

estimated award amount for Qualified

Activities according to the priority

categories described in this paragraph.

All Applicants in the first priority

category will be selected as Awardees

before Applicants in the second priority

category. Selections within each priority

category will be based on the relative

rankings within each such category,

subject to the availability of funds.

(2) First priority. (i) If the amount of

funds available during a funding round

is insufficient for all estimated award

amounts, first priority will be given to

Applicants that propose to engage in

CDFI Related Activities in the following

order:

(A) Equity Investments in CDFIs

serving Distressed Communities;

(B) Equity Investments in CDFIs not

serving Distressed Communities; and

(C) CDFI Support Activities.

(ii) Ranking Equity Investments.

Estimated awards for Equity

Investments may be ranked within each

applicable priority subcategory based on

the extent to which an Applicant

proposes to reduce the percentage used

to calculate its award amount (e.g., an

Applicant that chooses to reduce its

award to 13 percent will be ranked

higher than an Applicant that reduces

its award to 14 percent). The Applicant,

however, may not reduce its award

percentage below 12 percent. For

Applicants that propose the same

percentage, estimated awards will be

ranked by the ratio of the proposed

Equity Investment to the asset size of

the Applicant (as reported in the

Applicant’s most recent Report of

Condition or Thrift Financial Report) at

the time of submission of an

application.

(iii) Ranking CDFI Support Activities.

Estimated awards for CDFI Support

Activities may be ranked based on the

ratio of the proposed CDFI Support

Activity to the asset size of the

Applicant (as reported in the

Applicant’s most recent Report of

Condition or Thrift Financial Report) at

the time of submission of an

application.

(3) Second priority. (i) If the amount

of funds available during a funding

round is sufficient for all CDFI Related

Activities but insufficient for all

estimated award amounts, second

priority will go to Applicants that

propose to engage in Development and

Service Activities.

(ii) Ranking Development and Service

Activities. Estimated awards for

Development and Service Activities

may be ranked by the ratio of the total

score to the asset size of the Applicant

(as reported in the Applicant’s most

recent Report of Condition or Thrift

Financial Report) at the time of the

submission of an application. If the

ratios of two Applicants are the same,

the estimated awards will be ranked

based on the degree of the poverty of

each Applicant’s Distressed

Community.

(4) Combined awards. If an Applicant

receives an award for more than one

priority category described in this

section, the award amounts will be

combined into a single Bank Enterprise

Award.

§ 1806.205 Actual award amounts.

(a) General. The Fund will assess an

Applicant’s success in achieving the

Qualified Activities projected in its

application. The extent of such success

will be measured based on the activities

that were actually carried out during the

Assessment Period and expected to be

disbursed to an investee, borrower, or

other recipient within three years of the

end of the applicable Assessment

Period. The Fund reserves the right to

extend this period on a case-by-case

basis where it has a high degree of

confidence that disbursement will occur

and the activity will promote the

purposes of the Act. Subject to

§ 1806.204 and any recapture sanction

for failure to perform pursuant to this

part, the actual award amount that an

Awardee shall receive will be equal to

the estimated award previously

calculated and (if necessary) adjusted

pursuant to this section.

(b) Achievement. If an Awardee

carries out all or a portion of its

projected Qualified Activities and

satisfies all program requirements

described in this part, its award amount

will be calculated on a pro-rata basis to

reflect the increase in activities actually

carried out except that if:

(1) The amount of funds available is

insufficient for all estimated award

amounts; and

(2) An Applicant carries out less than

75 percent of its projected Qualified

Activities, the Fund in its sole

discretion, may limit the amount or

deny an award.

(c) Unobligated or deobligated funds.

The Fund, in its sole discretion, may
Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Rules and Regulations 10677

use any deobligated funds or funds not

obligated during a funding round:

(1) Using the calculation and selection

process contained in this part:

(i) To increase an award amount of an

Awardee for achievement in excess of

the projected Qualified Activities; or

(ii) To select Applicants not

previously selected;

(2) To make additional monies

available for a subsequent funding

round; or

(3) As otherwise authorized by the

Act.

(d) Limitation. The Fund, in its sole

discretion, may deny or limit the

amount of an award for any reason,

including if an Awardee submits an

application based on unrealistic

Assessment Period projections.

§ 1806.206 Applications for Bank

Enterprise Awards.

(a) Notice of Funds Availability. An

Applicant shall submit an application

for a Bank Enterprise Award in

accordance with this section and the

applicable NOFA published by the

Fund in the Federal Register. The

NOFA will advise potential Applicants

with respect to obtaining an application

packet and will establish submission

deadlines. The NOFA also will establish

any other requirements or restrictions

applicable for the funding round

including any restrictions on award

amounts. After receipt of an application,

the Fund may request clarifying or

technical information on materials

submitted as part of such application.

(b) Application contents. Each

application must contain the

information required in the application

packet, which includes:

(1) A copy of the Applicant’s

certificate of insurance issued by the

Federal Deposit Insurance Corporation

and a copy of the Applicant’s

incorporation, charter, organizing,

formation, or otherwise establishing

documents to be used to establish

eligibility for an award;

(2) A completed Bank Enterprise

Award Rating and Calculations

worksheet (If an Applicant intends to

complete a merger with another

institution during the Assessment

Period, it shall submit a separate

Baseline Period worksheet for each

subject institution and one Assessment

Period worksheet that represents the

projected activities of the merged

institutions. If such a merger is

unexpectedly delayed beyond the

Assessment Period, the Fund reserves

the right to withhold distribution of an

award until the merger has been

completed.);

(3) A narrative summary of each

Qualified Activity expected to be

performed in the Assessment Period;

(4) The asset size of the Applicant, as

reported in its most recent Report of

Condition or Thrift Financial Report, to

its Appropriate Federal Banking

Agency;

(5) Information necessary for the Fund

to complete its environmental review

requirements pursuant to part 1815 of

this chapter;

(6) Certifications that the Applicant

will comply with all relevant provisions

of this chapter and all applicable

Federal, State, and local laws,

ordinances, regulations, policies,

guidelines, and requirements;

(7) A copy of the Applicant’s most

recent annual report;

(8) In the case of an Applicant

proposing to engage in Development

and Service Activities, a completed

Distressed Community Designation

worksheet and a map and narrative

description of the Distressed

Community;

(9) In the case of an Applicant

proposing to engage in CDFI Related

Activities:

(i) Equity Investment. An Applicant

shall submit:

(A) A narrative description of each

CDFI in which the Applicant proposes

to make an Equity Investment and a

description of the amount, terms and

conditions of any Equity Investment to

be provided; or

(B) A list of potential CDFIs to which

assistance may be provided and a

description of the Applicant’s

investment criteria.

(ii) CDFI Support Activities. An

Applicant shall submit:

(A) A narrative description of each

CDFI to which the Applicant proposes

to provide CDFI Support Activities and

a description of the amount, terms and

conditions of the assistance to be

provided; or

(B) A list of potential CDFIs to which

assistance may be provided and a

description of the Applicant’s lending

or selection criteria; and

(C) Information that indicates that

each CDFI to which a Applicant

proposes to provide CDFI Support

Activities is integrally involved with a

Distressed Community and a map and

narrative description of the Distressed

Community.

Subpart C—Terms and Conditions of

Assistance

§ 1806.300 Award Agreement; sanctions.

(a) General. After the Fund selects an

Awardee, the Fund and the Awardee

will enter into an Award Agreement.

The Award Agreement shall provide

that an Awardee shall:

(1) Carry out its Qualified Activities

in accordance with applicable law, the

approved application, and all other

applicable requirements;

(2) Comply with such other terms and

conditions (including record keeping

and reporting requirements) that the

Fund may establish; and

(3) Not receive any monies until the

Fund has determined that the Awardee

has fulfilled all applicable requirements.

(b) Sanctions. In the event of any

fraud, misrepresentation, or

noncompliance with the terms of the

Award Agreement by the Awardee, the

Fund may terminate, reduce, or

recapture the Award and pursue any

other available legal remedies.

(c) Notice. Prior to imposing any

sanctions pursuant to this section or an

Award Agreement, the Fund shall, to

the maximum extent practicable,

provide the Awardee with written

notice of the proposed sanction and an

opportunity to comment. Nothing in

this section, however, shall provide an

Awardee with the right to any formal or

informal hearing or comparable

proceeding not otherwise required by

law.

§ 1806.301 Records, reports and audits of

Awardees.

(a) At the end of an Assessment

Period, each Awardee shall submit to

the Fund:

(1) Worksheet. A Bank Enterprise

Award worksheet that reports the

Qualified Activities actually carried out

during the Assessment Period;

(2) Certification. A certification that

the information provided to the Fund is

true and accurately reflects the

Qualified Activities carried out during

an Assessment Period; and

(3) Documentation. The Applicant

shall make available the following:

(i) With respect to Equity Investments

and CDFI Support Activities, the

Applicant shall submit documentation

that meets the conditions described in

§ 1806.202(d);

(ii) With respect to Development and

Services Activities where the original

amount of the value of the activity is

$250,000 or greater, the Applicant shall

submit documentation that meets the

conditions described in § 1806.202(d);

(iii) With respect to Development and

Services Activities where the original

amount of the value of the activity is

less than $250,000, the Applicant shall

submit a schedule that describes the

original amount, census tract served,

and the dates of execution, initial

disbursement, and final disbursement of

the instrument; and
10678 Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Rules and Regulations

(iv) Any other information reasonably

requested by the Fund in order to

document or otherwise assess the

validity of information provided by the

Applicant to the Fund.

§ 1806.302 Compliance with government

requirements.

In carrying out its responsibilities

pursuant to an Award Agreement, the

Awardee shall comply with all

applicable Federal, State, and local

laws, regulations and ordinances, OMB

Circulars, and Executive Orders.

§ 1806.303 Fraud, waste and abuse.

Any person who becomes aware of

the existence or apparent existence of

fraud, waste, or abuse of assistance

provided under this part should report

such incidences to the Office of

Inspector General of the U.S.

Department of the Treasury.

§ 1806.304 Books of account, records and

government access.

An Awardee shall submit such

financial and activity reports, records,

statements, and documents at such

times, in such forms, and accompanied

by such supporting data, as required by

the Fund and the U.S. Department of the

Treasury to ensure compliance with the

requirements of this part. The United

States Government, including the U.S.

Department of the Treasury, the

Comptroller General, and its duly

authorized representatives, shall have

full and free access to the Awardee’s

offices and facilities, and all books,

documents, records, and financial

statements relevant to the award of the

Federal funds and may copy such

documents as they deem appropriate.

§ 1806.305 Retention of records.

An Awardee shall comply with all

record retention requirements as set

forth in OMB Circular A–110 (as

applicable). This circular may be

obtained from Office of Administration,

Publications Office, 725 17th Street,

NW., Room 2200, New Executive Office

Building, Washington, DC 20503.

[FR Doc. 97–5678 Filed 3–6–97; 8:45 am]

BILLING CODE 4810–70–P