General Session V Governance Concerns: How Does Your Organization Stack Up? Grand Ballroom Salons 1-4 2:15 pm 3:15 pm

Transcription

1 General Session V Governance Concerns: How Does Your Organization Stack Up? Grand Ballroom Salons 1-4 2:15 pm 3:15 pm

2 Thank you to our Alliance Partners

3 Speakers Linda Rusche, Director, Office of Financial Assistance U.S. Small Business Administration Linda Reilly, Chief 504 Program Branch U.S. Small Business Administration Paul Kirwin, Supervisory Financial Analyst U.S. Small Business Administration Sally Robertson, President Business Finance Group, Inc. Randy Griffin, President CSRA Business Lending Rhonda Pointon, Vice President of Regulatory Affairs National Association of Development Companies

4 Office of Capital Access SOP (H) CDC Corporate Governance Updates National Association of Development Companies Washington, DC May

5 SOP (H) 504/CDCs 1. Establishes CDC insurance sliding scale guidelines 2. Aligns OCRM reviews with current protocols OCRM reviews no longer specify onsite/offsite OCRM reviews CDC annual reports, bylaws and insurance OCRM reviews ALP renewals OFA reviews new CDC applications, ALP applications, LEA and multi-state applications and reviews CDC contracts 3. Aligns CDC governance requirements with Final Rule CDC affiliation/board overlap clarifications Membership eliminated Board, Executive Committee, Loan Committee Updates Updates to CDC reporting, Investments and Bylaws 5

6 Subpart A - Establishes CDC insurance sliding scale guidelines Only ALP CDCs required to have insurance SOP (H) requires CDC insurance effective May 1, 2015 and SBA Information Notice is effective May 5, 2015 Minimum amounts of D&O and E&O insurance coverage required by SBA based on the CDC s annual revenues As reported in the CDC s Annual Report for their most recent fiscal year Minimum D&O and E&O Insurance Requirements - 13 CFR (e) Annual Revenues D&O Minimum per of CDC occurrence and in the E&O Minimum per occurrence and in the aggregate aggregate >$8.5 million $ 5,000,000 $ 5,000,000 >$4.5M - $8.5 M $ 3,000,000 $ 3,000,000 >$2 M - $4.5 M $ 2,000,000 $ 2,000,000 $2 M or less $ 1,000,000 $ 1,000,000 At SBA s discretion, higher levels of D&O and E&O insurance or reduced deductible levels may be required due to risk issues Subpart A, Chapter 3, Paragraph II.B.8) 6

7 Subpart A - Revises OCRM Review language Referenced on-site and off-site reviews OFA reviewed annual reports and renewed ALP status Removes references to on-site/off-site 504 CDCs: Stay tuned for separate notice OCRM now reviews annual reports, insurance, bylaws and ALP renewals 7(a): Synchronizes language with new 7(a) review protocols PARRiS for 7(a) Lenders 7(a): See Notice published December 29, CDCs: Subpart A, Chapter 3.,Paragraph IV.B. 7(a): Subpart A, Chapter 1., Paragraph III.C. 7

8 Subpart A CDC Affiliation CDC affiliation with other entities unclear in the Final Rule. Clarification provided in SOP (H): A CDC may be affiliated with: an entity (other than a 7(a) Lender; or another CDC) whose function is economic development in the same Area of Operations and that is either: -- a non-profit entity or -- a State or local government -- or political subdivision (e.g., council of governments). Subpart A, Chapter 3, Paragraph II.B.3(b) 8

9 Subpart A - Aligns CDC governance requirements with Final Rule (requirements effective ) CDC membership required Board size 5 is minimum requirement Commercial lender required on board Quorum requires attendance in person CDCs could contract with other CDCs on long-term basis for CDC functions CDC membership no longer required, it is now optional Board size increased from 5 to commercial lenders required on board Quorums not less than 50% voting members with attendance in any format allowed by state law Prescribed loan approval delegation authority to Exec Committee and Loan Committee CDC affiliation with other CDCs prohibited with limits on CDCs contracting with other CDCs 9

10 Subpart A - Aligns CDC governance requirements with Final Rule (requirements effective ) Retirees were classified under the community category. Vacancies on the board must be filled from the Membership by the Members. Commercial lender required on board Written internal control policies still required by CDCs could contract with other CDCs on long-term basis for CDC functions Board Directors may be either currently employed or retired. Retirees may represent the field from which they retired. CDC boards are self-perpetuating as membership is no longer required. Independent Loan Reviews now also required. See also new guide. Any CDC with a Professional Services Contract must have a transition plan for wind down and exit of the contractor Subpart A, Chapter 3. 10

11 Subpart A - Aligns CDC governance requirements with Final Rule (requirements effective ) CDCs Board not the Executive Committee must ratify all Loan Committee decisions. CDC Bylaws must authorize executive committee in its bylaws. Delegation of authority to an Executive Committee does not relieve a Board of its responsibilities. Executive Committee must be chosen by and from the Board of Directors from the Board Only the Board or Executive Committee, if authorized by the Board, may provide credit approval for loans greater than $2,000,000. Subpart A, Chapter 3. 11

12 Subpart A - Aligns CDC governance requirements with Final Rule (requirements effective ) The Board may establish a Loan Committee of non-board Members that reports to Board. Loan Committee members must include at least one members with commercial lending experience. The CDC s Board must ratify the actions of any Loan Committee. Loan Committee quorum requirement in Bylaws with attendance in person required. Loan policy manuals were not required to be referenced in the CDC s bylaws. The Board may establish a loan committee, must include delegation in bylaws as per (d)(4)(ii). Loan Committee must be chosen by the Board of Directors and have 2 members with commercial lending experience. Loan Committee, if established may be delegated the authority to provide credit approvals for loans up to $2,000,000. For loan of $1,000,000 to $2,000,000 the Loan Committee s action must be ratified by the Board of Executive Committee prior to Debenture closing. Loan Committee must have a quorum of at least five (5) committee members authorized to vote, with attendance allowed in any method allowed by state law. CDC must include Loan Committee and delegation authority in its credit approval process and bylaws. 12 Subpart A, Chapter 3.

13 Subpart A - Aligns CDC governance requirements with Final Rule (requirements effective ) No board certification of understanding SBA regulations required with annual report Economic development investment of surplus encouraged Limited reporting on Executive Compensation required OCRM onsite and offsite reviews and CDC management report benchmarks Expansion of board oversight in expenditure review and approval and reporting and board certification required with annual report Investments of revenue surplus in economic development is required Executive Compensation reporting through IRS 990 or equivalent is required OCRM reviews terms revised and OCRM portal benchmarks are current standard Subpart A, Chapter 3. 13

14 SBA Contacts Linda Rusche Director of Office of Financial Assistance Linda Reilly Chief, 504 Loan Program Paul Kirwin Supervisory Financial Analyst, OCRM

15 What s Up Next? 3:30 PM 5:00 PM General Session VI SMART Review Process and Potential Loss: What Else Do You Need to Know? Grand Ballroom Salons 1-4 5:30 PM 7:00 PM PAC Reception Representative Steve Chabot (R-OH) Sonoma Restaurant & Wine Bar