Many Community Development Financial Institutions (CDFIs) operate at the intersection of not-for-profit governance and financial institution-style lending. These organizations manage complex balance sheets and administer revolving loan funds while complying with extensive federal, state and local program requirements. PKF O’Connor Davies provides the audit, tax and advisory support CDFIs need to meet those financial, regulatory and mission objectives.
Why CDFIs Work With PKF O’Connor Davies
PKF O’Connor Davies has served not-for-profit and tax-exempt organizations since 1891 and today works with more than 4,000 not-for-profit organizations. Within that practice, we maintain a dedicated focus on CDFIs, with experience spanning mission-driven lenders that deploy capital to organizations and projects supporting affordable housing, small business, health care, services for people with disabilities and broader community development initiatives.
Our advisors understand the risks inherent in this highly regulated environment and help CDFI management operate under heightened scrutiny from boards, funders, regulators and oversight agencies. Partners are directly involved in every engagement and maintain proactive, year-round communication.
Meet Our Professionals
Stephen Machinski
Ryan Coolahan
Jonathan Runfola
Melissa Modelson
Accounting and Assurance Services for CDFIs
Financial Statement Audits
We perform financial statement audits for CDFIs whose financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), with an audit strategy aligned to a CDFI’s core lending activities:
- Loan portfolio accounting, including allowance methodologies (Current Expected Credit Losses), risk ratings, nonaccrual loans, charge-offs and unfunded loan commitments
- Program awards, grants and pass-through funding compliance
- Covenant monitoring, restricted cash and donor and funder restrictions
- Internal controls over lending operations, cash management and financial reporting
- Funder and program compliance reviews and reporting coordination
Single Audit and Uniform Guidance Compliance
For CDFIs subject to Single Audit and Uniform Guidance requirements, our guidance and supporting documentation help demonstrate strong internal controls, sound compliance management and transparent financial reporting to the CDFI Fund, pass-through entities and other federal funders.
Loan Portfolio Disclosure and Covenant Support
We assist with loan portfolio disclosures and the review of restricted funds, reserve requirements and lender and grantor covenants so financial statements accurately reflect the layered capital structures common to CDFIs.
Tax Services for CDFIs
Tax-Exempt Compliance, Including Form 990
Our tax professionals handle compliance for tax-exempt organizations, including Form 990 and other federal and state regulatory filings, with attention to the lending activities, related entities and funding arrangements that make CDFI returns more complex than those of a typical charity.
Advisory Services for CDFIs
Internal Controls and Operational Assessments
We help CDFIs implement and strengthen internal controls and financial reporting systems through operational assessments of controls over lending, cash management and financial reporting.
Technology, Cybersecurity and Accounting Staff Support
For CDFIs with broader needs, we advise on IT and cybersecurity, provide outsourced accounting support and assist with sourcing internal accounting personnel.
Lending Programs and Funding Structures We Understand
CDFIs are active lenders and fiscal intermediaries with significant loan receivable portfolios. We help our clients manage fluctuating interest rates, restricted cash, loan loss reserves and equity equivalent investments while deploying layered financial products, receiving program-related investments and carrying out technical assistance programs. Our professionals work with CDFIs involved in:
- Small Business Administration (SBA) Microloan, 7(a) (including Community Advantage) and 504 programs
- CDFI Fund awards
- Treasury, U.S. Department of Housing and Urban Development (HUD) and state or county lending initiatives
- Fiscal intermediary and pass-through funding arrangements
- Loan participations and secondary market transactions, including sales of whole or partial interests in loans and retained servicing arrangements
- Lending products spanning predevelopment, acquisition, bridge, construction and permanent financing
- Revolving loan funds, including government-funded and other revolving lending programs
- New Markets Tax Credit (NMTC) financing and other specialized or layered financing structures
Connect With Our CDFI Team
To explore how PKF O’Connor Davies can help your organization maximize effectiveness, mitigate risk and continue delivering sustainable, measurable community impact, contact our CDFI team.
FAQs
Does a CDFI need a Single Audit?
A CDFI that expends federal awards above the Uniform Guidance threshold in a fiscal year is generally required to have a Single Audit. CDFI Fund awards and federal funds received through pass-through entities may count toward that threshold. We help CDFIs determine applicability, identify major programs and prepare the supporting documentation.
How does Current Expected Credit Losses (CECL) affect a CDFI loan fund?
CDFIs that hold loans receivable apply the Current Expected Credit Losses (CECL) model when estimating their allowance for loan losses. Our audit approach focuses on the allowance methodology, supporting data and charge-off policies so the estimate is well documented and defensible to boards, funders and regulators.
What types of CDFIs does PKF O'Connor Davies serve?
Our clients are mission-driven not-for-profit lenders that deploy capital to organizations and projects supporting affordable housing, small business, health care, services for people with disabilities and broader community development initiatives, including organizations that administer revolving loan funds and act as fiscal intermediaries.