Updated RLF Regulations Implementation of RLF Risk Analysis System - PowerPoint PPT Presentation

Updated RLF Regulations Implementation of RLF Risk Analysis System Decem ber 14, 2017 1

Webinar Agenda REVOLVING LOAN FUND PROGRAM CHANGES RISK ANALYSIS SYSTEM AND PROPOSED MEASURES PUBLIC COMMENT PROCESS AND REPORTING TRANSITION

EDA Revolving Loan Funds EDA RLFs established for lending – Economic Adjustment Assistance Grants to capitalize or recapitalize RLFs most commonly fund business lending, but also may fund public infrastructure or other authorized lending activities. [ see 13 CFR § 307.7] • About 520 EDA-funded RLFs nationwide • EDA investment of $538 million • Combined capital base of about $824 million • 37,500 loans made and 662,000 jobs created/ retained • $3 billion lent and $16 billion leveraged

Updated RLF Regulations REVOLVING LOAN FUND PROGRAM CHANGES  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

RLF Program Changes Partnership RLF  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

RLF Reporting Fiscal Year Reporting: • ED-209, revised • ED-209I, eliminated Income/ Expense Reporting: • 12-month fiscal year • Required audit

Risk Analysis System C – Capital A – Assets M – Managem ent E – Earnings L – Liquidity S – Strategic Results

Allowable Cash Percentage Seattle Chicago Philadelphia Denver Atlanta Austin  Allo w able Cas h Pe rce n tage Cap ital U tilizatio n Th re s h o ld “75 % Ru le ” Re gio n al Ave rage Se qu e s te re d Exce s s Cas h 1 o f 15 m e as u re s

ACP Example Cash RLF Nam e Capital Base Cash Available Percentage RLF-1 $4,500,000 $1,200,000 27% RLF-2 $7,600,000 $2,800,000 37% RLF-3 $1,670,000 $630,000 38% RLF-4 $13,872,930 $2,974,025 21% RLF-5 $5,423,000 $900,000 17% Regional $33,0 65,930 $8 ,50 4,0 25 26% Total Total RLF Cash Available for Lending = $8,504,025 Total of All RLF Capital Base Amounts = $33,065,930 $8,504,025 ÷ $33,065,930 = 26% Allowable Cash Percentage

Updates and Reorganization Terms Sections Definitions  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

What Does Not Change?  OU R COMMITMEN T TO YOU  FED ERAL CH ARACTER OF RLF FU N D S PERPETUTITY

Risk Analysis System RISK ANALYSIS SYSTEM AND PROPOSED MEASURES  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

RAS Summary  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Capital Measure: Determ ined by: 3 2 1 Capital Base Index RLF Capital Base Greater From 1.0 Less than divided by the than 1.5 to 1.5 1.0 original RLF Capital Base at the time the RLF was established  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Assets Measure: Determ ined by: 3 2 1 Default Rate RLF Principal Less From Greater Outstanding for than 10% to than 20% Loans in Default 10% 20% divided by RLF Principal Outstanding for Total Active Loans  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Assets Measure: Determ ined by: 3 2 1 Default Rate Over Number of Less From 12 More Time consecutive months than 12 to 24 than 24 where default rate months months months is over 20%  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Assets Measure: Determ ined by: 3 2 1 Loan Write-Off The ratio of the Less From 1 Greater Ratio number of loans than 1 out of than 1 out written-off to the out of every 6 to of every 4 number of “inactive every 6 1 out of loans” (calculated every 4 as number of total loans minus number of active loans).  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Assets Measure: Determ ined by: 3 2 1 Dollars Written-Off Loan Losses divided Less From Greater by the difference than 10% to than 20% between Total RLF 10% 20% Dollars Loaned and Total RLF Principal Outstanding.  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Management Measure: Determ ined by: 3 2 1 Financial Control Number and No Minor Material magnitude of audit findings findings findings* findings * Material findings pertaining to Organization, Questioned Costs, Solvency, Interrelated party transactions  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Management Measure: Determ ined by: 3 2 1 Tenure Shortest tenure of Greater From 2 to Vacancy Executive Director, than 3 3 years or less Lending Director, years than 2 Finance Director, years and Reporting Official  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Management Measure: Determ ined by: 3 2 1 RLF Plan Updated RLF Plan RLF Plan Updated RLF Plan where EDA has not up to RLF Plan expired granted a time date, received and not extension updates more than updated submitte 5 years within the d at least since its last 6 every 5 last years years update but within 6 years  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Management Measure: Determ ined by: 3 2 1 Financial Reporting Date RLF On time Up to 60 More than Financial Report, with no days late 60 days ED-209 corrections and/ or late; or submitted to EDA needed returned to sent back RLF for major Recipient revision for minor corrections  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Management Measure: Determ ined by: 3 2 1 Timely and Date audit and/ or On time Up to 30 Up to 30 Complete Reporting additional reports days late days late (such as SF-425 or Corrective Action Plan) submitted to EDA  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Earnings Measure: Determ ined by: 3 2 1 Net RLF Income Portion of RLF Less From More Income Used for than 50% to than Administrative 50% 100% 100% Expenses divided by Total RLF Income  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Liquidity Measure: Determ ined by: 3 2 1 Cash Percentage RLF Cash Available Less From More for Lending divided than 90% to than by RLF Capital Base 90% of 110% of 110% of the ACP the ACP the ACP  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Liquidity Measure: Determ ined by: 3 2 1 Cash Percentage Length of time Less From 12 More Over Time where the Cash than 12 to 24 than 24 Percentage exceeds months months months the Region's ACP  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Strategic Results Measure: Determ ined by: 3 2 1 Cost Per Job RLF Dollars Loaned Less 90% to Greater divided by Total than 110% of than Jobs compared to 90% of RLF Plan 110% of RLF Plan Target RLF target RLF Plan Plan target target  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Strategic Results Measure: Determ ined by: 3 2 1 Leverage Ratio Total Dollars Meets or N/ A Less than Leveraged divided exceeds 2:1 by RLF Dollars required Loaned. leverage of 2:1  Ple a s e u s e t h e w e b in a r ch a t fe a t u r e t o s u b m it q u e s t io n s o r co m m e n t s a t a n y p o in t d u r in g t h e w e b in a r .

Risk Analysis Scoring

Reporting, Rating & Remedy A = An n u a l R e p o r t in g B = S e m i-An n u a l R e p o r t in g C = S e m i-An n u a l R e p o r t in g & Co r r e ct iv e Act io n