In addition, because this report focuses on the Fund’s performance, it reviews the strategic plan developed under the Government Performance and Results Act of 1993 (Results Act) to guide the Fund’s other activities. Better Performance Measures Are Needed to Monitor and Evaluate the CDFI Program’s Accomplishments

In entering into assistance agreements with the 1996 awardees in the CDFI program, the Fund complied with the CDFI Act’s requirements for negotiating performance measures based on the awardees’ business plans. However, opportunities exist for the Fund to improve the nature, completeness, and specificity of the performance measures that it negotiates with future awardees. Our evaluation of the 1996 assistance agreements revealed (1) an emphasis on measures of activity, such as the number of loans made, rather than on measures of accomplishment, such as the net number of jobs created or retained; (2) the occasional omission of measures for key aspects of goals; and (3) the widespread omission of baseline data and information on target markets, needed to track progress over time. The Fund is just beginning to develop mandated monitoring and evaluation systems. Most CDFIs only recently signed their assistance agreements. These goals and measures were consistent with the CDFI program’s mission of promoting economic revitalization and community development and were generally based on the awardees’ business plans. As a result, the assistance agreements focus primarily on what the awardees will do, rather than on how their activities will affect the distressed communities. In large part because of staffing limitations, the Fund has not yet completed postaward monitoring and evaluation systems. Nevertheless, most banks have reported that they have voluntarily reinvested their awards in lending and investments related to community development. As a result, it is difficult to isolate the impact of the BEA award from the effects of other incentives. Finally, because the Fund did not require banks receiving 1996 awards to report any material changes in rewarded investments, it did not know whether rewarded investments remained long-term increases in the capital available to CDFIs or distressed communities. The Fund’s Strategic Plan Does Not Yet Fulfill the Requirements of the Results Act

The Fund’s current strategic plan contains the six basic elements required by the Results Act, but these elements generally lack the clarity, specificity, and linkage with one another that the act envisioned. Strategic Plan Could Better Address Crosscutting Activities

In its strategic plan, the Fund states that it will “coordinate its strategies with other Treasury bureaus and agencies with similar missions.” The Fund’s strategic plan does not specifically address the relationship of the Fund’s activities to similar activities in other agencies and does not indicate whether or how the Fund coordinated with other agencies in developing the strategic plan. This report discusses (1) the progress of the Community Development Financial Institutions (CDFI) Fund in developing performance measures for awardees in the CDFI program and systems to monitor and evaluate their progress in meeting their performance goals, as well as the accomplishments they have reported to date; (2) the performance of banks under the Bank Enterprise Award (BEA) program, the impact of the program on banks’ activities and on distressed communities, and the uses to which banks have put their award funds; and (3) the Fund’s progress in meeting the Results Act’s requirements for strategic planning and the steps the Fund could take to improve its management.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the performance of the Community Development Financial Institutions (CDFI) Fund, focusing on: (1) the first round of awards in the CDFI and Bank Enterprise Award (BEA) programs and the strategic plan that the Fund developed under the Government Performance and Results Act of 1993; (2) the Fund's development of systems to measure, monitor, and evaluate the awardees' performance; and (3) BEA's impact on banks' lending and investment in CDFIs and distressed communities.

What GAO Found

GAO noted that: (1) for fiscal year 1996, the Fund complied with the CDFI Act's requirements for negotiating performance goals and measures based on the awardees' business plans; (2) moreover, these goals and measures are consistent with the CDFI program's mission of promoting economic revitalization and community development; (3) however, because the CDFI Act provides no specific guidance for evaluating performance measures, GAO applied the Results Act's standards to the goals and measures that the Fund negotiated in assistance agreements with the 1996 awardees; (4) GAO found that the Fund could improve the nature, completeness, and specificity of these goals and measures; (5) GAO's evaluation of the awardees' assistance agreements revealed an emphasis on measures of activity, rather than on measures of accomplishment; (6) as a result, the assistance agreements focus primarily on what the awardees will do, rather than on how their activities will affect the distressed communities; (7) GAO's evaluation also revealed occasional omissions of measures for key aspects of goals and widespread omissions of baseline data and information on target markets; (8) primarily because of staffing limits, the Fund has just begun to develop mandated monitoring and evaluation systems; (9) given that most awardees have just recently signed their assistance agreements, it is still too early to assess their progress; (10) the impact of the BEA program on banks' lending and investment in CDFIs and distressed communities is difficult to isolate from the impact of regulatory and other economic incentives; (11) moreover, because the Fund did not require banks to report material changes in rewarded investments, it did not have a systematic way of learning about any such changes; (12) the Fund is not authorized to address what banks do with their award funds; however, most awardees have reported that they have reinvested at least a portion of their awards in community development activities; (13) the Fund's current strategic plan contains all of the elements required by the Results Act and suggested by the Office of Management and Budget's implementing guidance; (14) however, these elements generally lack the clarity, specificity, and linkage with one another that the act envisioned; (15) in addition, the plan does not describe the relationship of its activities to similar ones in other government agencies, and it does not indicate whether or how the Fund coordinated with other agencies in developing the plan; and (16) these difficulties are similar to those experienced by other federal agencies in implementing the Results Act's requirements.