CDFI Certification Application FAQs

Applicants must demonstrate individual and, if required, collective accountability to their proposed Target Market(s) through one of the following options:

Option 1: Governing Board Only

• At least one governing board member is accountable to each proposed Target Market type, and
• At least 33% of the governing board is accountable to the overall proposed Target Market(s);

Option 2: Governing Board Supplemented by Advisory Board

• At least 20% of the governing board members are accountable to the overall proposed Target Market;
• At least one advisory board member is accountable to each proposed Target Market type;
• At least 60% of the advisory board is accountable to the overall proposed Target Market(s);
• At least one governing board member is also a member of the advisory board; and
• The Applicant has adopted an advisory board policy.

Option 3: Advisory Board Supplemented by Credit Union Membership (Credit Union
Applicant Only)

• At least 33% of the credit union’s members are determined to be members of at least
  one Target Market type in the overall proposed Target Market, using a CDFI Fundapproved
  Target Market assessment methodology;
• At least one advisory board member is accountable to each proposed Target Market
  type;
• At least 60% of the advisory board is accountable to the overall proposed Target
  Market(s);
• At least one governing board member is also a member of the advisory board; and
• The Applicant has adopted an advisory board policy.

Option 4: Advisory Board Only (DIHCs and IDIs, and entities without a formal
governing board only)

• At least one advisory board member is accountable to each proposed Target Market
  type;
• At least 80% of the advisory board is accountable to the overall proposed Target
  Market(s);
• At least one governing board member or partner/owner of the Applicant entity is also
  a member of the advisory board; and
• The Applicant has adopted an advisory board policy.

Individual accountability to a Target Market may be demonstrated through any of the following means:

¹¹Family members include those related by blood (including half-siblings), adoption, or marriage.

No, for the purposes of CDFI Certification the CDFI Fund does not consider status as a board member of a third-party, mission-driven organization by itself to demonstrate a sufficient level of accountability to a Target Market. However, such an individual still may be treated as accountable to a Target Market if it meets one of the other accepted means of accountability, for example, as resident of a qualified Investment Area census tract or as a member of a Targeted Population.

A community development, mission-driven entity is an organization that focuses on improving the quality of life of underserved people and/or distressed geographies. Examples of promoting community development include:

• the provision of responsible Financial Products and Financial Services to Low-Income borrowers, Other Targeted Populations, and/or residents of and businesses located in economically distressed communities;
• efforts to promote affordable housing, community-serving facilities, and economic development in economically distressed communities; and/or
• supporting the provision of community services such as child care, education, health care, social services, or workforce development.

Yes. For example, an African American resident of an Investment Area may serve as a board member of an Applicant that has a Target Market of Pre-qualified Investment Areas and OTP-African American and meet the accountability criteria for both Target Markets. However, the Applicant still must meet other minimum accountability requirements, e.g., that at least 33% of the governing board is accountable to the overall proposed Target Market(s) when using a governing board to meet the Accountability test. See Question 67 for additional discussion.

To meet the Accountability test through an Applicant's governing board, an Applicant must demonstrate that at least one governing board member is accountable to each proposed Target Market, and at least 33% of the governing board is accountable to the overall proposed Target Market(s).

For example, a CDFI with a Target Market of Pre-qualified Investment Areas, LITP, and OTP-Hispanic, and a governing board consisting of fifteen members would have to have:

• at least five board members (i.e., 33% of the board) who meet at least one of the
  accountability criteria for each of the three different Target Markets – one accountable to an Investment Area, one accountable to an LITP, one accountable to an OTP-Hispanic; and
• two additional members accountable to any of the Target Markets.

If one of the board members meets the accountability criteria for more than one Target Market, the board would still need at least five members who meet the accountability criteria—such as a board member accountable to both an Investment Area and an LITP, another member accountable to an OTP-Hispanic, and three additional members accountable to any of the Target Markets.

If the Applicant has a governing board but seeks to meet the Accountability test in combination with an advisory board, the Applicant must demonstrate that at least one advisory board member is accountable to each proposed Target Market; at least 60% of the advisory board is accountable to the overall proposed Target Market(s); at least 20% of the governing board members are accountable to at least one proposed Target Market; and at least one governing board member has a seat on the advisory board.

For example, the same CDFI with a Target Market of Pre-qualified Investment Areas, LITP, and OTP-Hispanic, and a governing board consisting of fifteen members and an advisory board consisting of ten members would have to have:

• at least six advisory board members (i.e., 60% of the advisory board) who meet at least one of the accountability criteria for each of the three different Target Markets – one accountable to an Investment Area, one accountable to an LITP, and one accountable to an OTP-Hispanic;
• three additional advisory board members accountable to any of the Target Markets;
• at least one advisory board member who was also a member of the governing board; and
• at least three governing board members (i.e., 20% of the governing board) who meet at least one of the accountability criteria for any of the three different Target Markets.

An organizational advisory board policy can be a stand-alone document or can be incorporated into an Applicant’s governance or organizing document. At minimum, an advisory board policy must include a description of all of the following:

• the purpose of the advisory board and the scope of topics or strategic policy matters on which the advisory board provides input or advice to the governing board or owners;
• how the input that the advisory board provides to the governing board is documented (for example: regular meetings with the governing leadership, the inclusion of advisory board meeting minutes in governing leadership meeting packets, written reports providing feedback on decisions related to strategic policy matters, etc.);
• the process by which individuals are selected and approved as members of the advisory board; and
• how the advisory board seeks input from, and/or reviews data on the financial needs and opportunities in, the Target Market(s) for which it provides accountability

Yes, board members who have active loan products or are compensated for their board service are eligible to meet the individual accountability requirements. However, to avoid a financial conflict of interest, if an Applicant’s board member, the board member’s employer, or any covered member of the board member’s family has an active Financial Product(s) from the Applicant, the Applicant should have policies requiring such board members to recuse themselves from any decision that may affect, directly or indirectly their Financial Product or relationship.