The CDFI Coalition sent a letter to the CDFI Fund regarding the certification/recertification process on March 21, 2013. The Coalition requested that the CDFI Fund take steps to ensure that no CDFI was de-certified without notice of potential deficiencies in their recertification applications and an opportunity to cure deficiencies. As stated in our letter, which can be found here, there could be serious and potentially irreparable harm in de-certifying a group, such as putting the group in default of Financial Assistance, Technical Assistance or New Markets award agreements, or in default of other agreements that require the entity to be a certified CDFI.
In response to the Coalitionâ€™s concerns, the Fund published a Frequently Asked Questions document yesterday. The key element of that document is the Fundâ€™s commitment to contact any applicant for recertification at least once during the review process if there are documents or materials that are deemed necessary to complete the review. The Fund has set a 90- day timeframe for the 2013 recertification process – during such time a CDFI could cure whatever the deficiency might be. However, the Fund has indicated that, in its discretion, it may not allow a cure period for certain deficiencies, such as inability to demonstrate legal status at time of application; inability to demonstrate primary mission of community development, and/or evidence of government affiliation or control.
The recertification timeframe could have a negative effect on individual CDFIs with pending Financial or Technical Assistance applications in the FY 2013 funding round. The Fund cannot make awards to groups that do not meet the certification requirements at the time of the award. Accordingly, any deficiencies identified by the Fund must be handled in sufficient time for the Fund to complete the certification process before the Financial and Technical Assistance awards are completed. If the issues cannot be resolved by that time, the organization will not be eligible to receive a financial award.
Many CDFIs participating in the New Markets Tax Credit (NMTC) program, took advantage of a provision in the NMTC statute that permits CDFIs to create CDEs automatically. Loss of CDFI certification could mean that the CDEâ€™s certification is also at risk. Loss of certification as a CDE is an event of recapture of the tax credits under the NMTC statute, an extremely serious matter. The Fund has indicated in the FAQ that there will be an opportunity, if it is not possible to recertify the CDFI, to submit an application to separately certify the CDE. Please review the Frequently Asked Questions document for details.