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05/04/2021
EDA revolving loan fund de-federalization: What it means for your organization
The disruption to capital markets caused by the coronavirus pandemic left many small businesses with very few avenues to access working capital in order to keep their doors open. While community development organizations have been creative in providing relief to small businesses, the extent to which they can provide this relief is often limited due to burdensome compliance requirements with pre-existing federal grant programs that are being administered by these community development organizations. The federal government has pulled many levers to alleviate these burdens, and one of those levers was the Reinvigorating Lending for the Future Act, an amendment to the Public Works and Economic Development Act (PWEDA) of 1965.
Enacted on Oct. 30, 2020, the amendment to the PWEDA provides for the release of federal interests in certain revolving loan funds (RLFs). The amendment allows the Economic Development Administration (EDA) to authorize the release of RLF funds in response to a written request to the EDA that includes a description of how the funds will be used to carry out economic development activities. In accordance with the amendment, the EDA shall authorize the release if the request is made seven years after the final disbursement of the grant; the recipient “has complied with the terms and conditions of the grant”; and the EDA is satisfied with recipient’s plans for continued use of the funds.
Prior to the passage of this legislation, recipients of RLF funds granted by the EDA were required to comply with certain requirements in perpetuity. According to the EDA, if approved for release, the recipient will be relieved of its obligation to comply with Title 2 U.S. Code of Federal Regulation (CFR) Part 200, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” (Uniform Guidance) and Title 13 CFR Chapter III, “Economic Development Administration, Department of Commerce,” as well as any terms and conditions attached to the award (i.e. Department of Commerce’s Terms and Conditions, EDA RLF Standard Terms and Conditions) and the EDA-approved RLF plan.
Organizations that are recipients of RLF funds and believe that they meet the criteria as defined in the amendment should develop a plan for how they will continue to use the funds in order to carry out economic development activities, and then contact their local EDA office for information on how to proceed with the request. The law gives the EDA 180 days from the date of receipt and acceptance to grant the release, with an option for an additional 180 days if deemed necessary.
After its funds are released, an organization will no longer be required to submit Form ED-209, “RLF Financial Report,” to the EDA, or to include the funds on its Schedule of Expenditures of Federal Awards.
Organizations should continue to use those funds in accordance with the plan submitted in the request for release, and should assess the impact to previously reported restrictions on net assets on the organization’s financial statements.
The Reinvigorating Lending for the Future Act has made it possible for eligible organizations to have the flexibility to be more dynamic and responsive in their efforts to support communities in need. Eligible organizations should take advantage of this opportunity to be true difference-makers in the ongoing fight against coronavirus pandemic.
Subject matter expertise
John Alfonso
CPA, CGMA, Partner - Not-for-Profit & Education Industry Leader
Christopher Griffin
CPA, Partner & CDFI Sector Leader
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This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.