The High-Risk Case Against Free



It happens every year: each Community Development Financial Institution must complete and submit an Annual Certification Report (ACR) to the CDFI Fund by March 30th to preserve its status as a CDFI. But don’t be lulled into thinking that it’s just a routine task to check off.


The old adage “you get what you pay for” is true, and in the case of the ACRs it can be even worse than that: trusting the results to a free or low-cost provider, or to one using a strictly automated process, can lose your credit union your next million-dollar CDFI grant.


The free way is the fast way. In order to complete an ACR at no or low cost, a provider needs to work efficiently and rely heavily on technology. CU Strategic Planning processes many ACR resubmissions annually due to these no cost solutions causing significant harm to credit unions. In four cases in 2020 alone, future grants were at risk due to declining ACR numbers. The alternative provider’s fast service didn’t consider the implications. In another two cases, the ACRs were rejected for low numbers. In order to even write these credit unions’ grants, we had to ask the CDFI Fund for a special exception to resubmit their entire ACRs. Without this, those credit unions would have lost the grants.


What’s the Harm?

The ACR sets how the CDFI Fund perceives your credit union is lending to its Target Market. If the percentage of your loans to the Target Market go down, which is often the case with a low-cost ACR or an automated technology-only approach, it looks to the CDFI Fund as if your credit union’s commitment to lending to your Target Market has decreased. And of course, the CDFI Fund provides taxpayer-funded grant investment to increase the lending of CDFIs into their communities of need, not decrease. This is taken into consideration when evaluating grant applications.


Compliance. Compliance. Compliance.

Why is it essential to keep your Annual Certification Reporting with your grant reporting and grant applications? In a word, compliance. The Target Market established in the ACR represents the people and communities your CDFI grants (comprehensive business plans) are designed to serve.


If the “easy, free” method shows a dramatic shift in who you serve as a Target Market it not only undermines your grant, it sets your compliance up to fail. When credit unions complete their own ACRs, we’ve seen their numbers skyrocket, creating a compliance nightmare of unachievable goals for future grants. The opposite is often true for those using the low- or no-cost option; because the free way is the fast way with no analysis, we see ACR numbers dip to a threshold that puts their certification at risk. When this happens during the time a pending grant application is being evaluated, or worse, while a credit union is holding CDFI funds the certification goes into a cure period. A credit union cannot receive or hold grant funds if it does not have a CDFI certification. A cure period is the first step in the CDFI Fund’s removal of the designation from a certified CDFI. It is the window of time a CDFI has to correct or amend the ACR.


CU Strategic Planning has had to come to the aid of several credit unions stuck in this cure period due to relying on a free or low-cost provider. It was a relief to the credit unions that we saved them from a compliance nightmare.


Stick With Us

CU Strategic Planning’s Annual Certification Report services are comprehensive. We collect, organize and submit all information to the Department of the Treasury CDFI Fund on your behalf, so that you can continue to focus on what makes you a CDFI in the first place—serving your members and empowering your community.


Our Annual Certification Report Services include:

  • Review of any changes to your credit union that could affect CDFI qualification requirements;

  • Review/recalculation of changed service delivery to your Target Market;

  • Review of accountability to your Target Market;

  • Description of Development Services provided to the Target Market;

  • Calculation of Financial Products and Development Services provided to the Target Market;

  • Compilation of financial reporting data showing credit union’s health; and

  • Entering all information in the CDFI Fund’s proprietary Information System.

We know being a CDFI is not easy. We also know it's a significant investment. For your ACR, it will be the best $3500 you’ll ever spend. We protect your CDFI and set it up to win future grants. Friends don’t let friends choose free.


Get in touch to discuss our ACR services and ensure your ACR stays with your grant at CU Strategic Planning.