Community Development:

Early Results of the Community Development Financial Institutions Fund's Programs

T-RCED-98-198: Published: May 13, 1998. Publicly Released: May 13, 1998.

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Judy A. England Joseph
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GAO discussed the results of its ongoing review of the administration of the Community Development Financial Institutions (CDFI) Fund, focusing on the first year's performance of the CDFI and the Bank Enterprise Award (BEA) programs and opportunities for improving their effectiveness.

GAO noted that: (1) as of January 1998, the Fund had entered into assistance agreements with 26 of the 31 CDFIs that received awards in 1996; (2) these agreements include performance goals and measures that were based on the business plans submitted by awardees in their application packages and negotiated between the Fund and the awardees, as the CDFI Act requires; (3) GAO found that the performance measures in the assistance agreements generally assess activities rather than the accomplishments reflecting the activities' results; (4) according to Fund officials and CDFIs in GAO's case studies, this emphasis on activity measures is due, in part, to difficulties in isolating and assessing the results of community development initiatives, which may not be observable for many years and may be subject to factors outside the awardees' control; (5) GAO further found that although the performance measures in the assistance agreements are generally related to specific goals, they do not always address the key aspects of the goals, and most assistance agreements lack baseline data that would facilitate tracking progress over time; (6) although the Fund has disbursed about 80 percent of the fiscal year 1996 BEA award funds, it is difficult to determine the extent to which the program has encouraged the 38 awardees to increase their investments in distressed communities; (7) GAO's case studies have five awardees and interviews with Fund officials indicate that although the prospect of receiving a BEA award prompted some banks to increase their investments, it had little or no effect on other banks; (8) GAO found that, in general, other regulatory or economic incentives exerted a stronger influence on banks' investments than the BEA award; (9) in addition, some banks do not collect all of the data on their activities needed to guarantee that increases in investments under the BEA program are not being offset by decreases in other investments in these distressed areas; (10) the CDFI Fund's strategic plan contains all of the elements required by the Government Performance and Results Act and the Office of Management and Budget's (OMB) associated guidance, but these elements generally lack the clarity, specificity, and linkage with one another that the act envisioned; and (11) although the plan identifies key external factors that could affect the Fund's mission, it does not relate these factors to the Fund's strategic goals and objectives and does not indicate how the Fund will take the factors into account when assessing awardee's progress toward goals.

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