ABA warns against increasing administrative burden for CDFI Fund awards

While the American Bankers Association supports the responsible management of federal financial aid, any changes to how that aid is distributed should preserve the operational effectiveness of the Financial Institutions Community Development Fund for financial institutions, the ABA said in letter to the Office of Management and Budget.

OMB seeks to revise guidelines for how federal agencies award financial aid because that aid was used to promote a “woke” political agenda that deliberately favored certain identity groups over others, according to the proposed rulebook. In its letter, the ABA said many CDFIs rely on programs managed by the CDFI Fund to expand access to capital and financial services in underserved communities.

“CDFIs operate within a comprehensive prudential oversight framework and often have limited staff dedicated to grant administration,” the ABA said. “As a result, changes that increase administrative complexity or create uncertainty in program administration may reduce participation in CDFI Fund programs and delay the deployment of capital in the communities those programs are intended to serve.”

Among other things, the ABA said OMB’s plan to eliminate the availability of fixed-amount awards could significantly increase the administrative burden on participating banks. The association also urged OMB to provide clear guidance regarding any circumstances under which awards may be modified or terminated.

“Greater predictability will allow participating institutions to make long-term commitments while continuing to meet CDFI Fund program goals,” the ABA said.