Qualified Service?

Good morning,

We have a commercial lender who is on the BOD for a local housing corporation. We send out questionnaires to the organizations that our employees say they serve with. In the questionnaire, we ask the organization to describe the services provided by our employee, and specifically emphasizing an financial services.

This particular response said that no financial assistance is provided, but that he assists with the management of major renovation to homes or complexes.

Even though there isn't any financial expertise being provided, he does serve on the board and he provides his expertise in real estate market.

Would this service be considered a qualified service for CRA purposes in anyone's experience?

Thanks!

Sounds like it fits to me. We have received credit for similar situations. The Supplemental Interagency Q&A lays out some examples.

Examples of technical assistance activities that are related to the provision of financial services and that might be provided to community development organizations include:
ï‚· Serving on the board of directors;
ï‚· Serving on a loan review committee;
ï‚· Developing loan application and underwriting standards;
ï‚· Developing loan-processing systems;
ï‚· Developing secondary market vehicles or programs;
ï‚· Assisting in marketing financial services, including development of advertising and promotions, publications, workshops and conferences;
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ï‚· Furnishing financial services training for staff and management;
ï‚· Contributing accounting/bookkeeping services;
ï‚· Assisting in fund raising, including soliciting or arranging investments; and
 Providing services reflecting financial institution employees’ areas of expertise at the institution, such as human resources, information technology, and legal services.

I'd be surprised if you didn't receive pushback on that one from your examiners, especially since both you and the organization state he's not providing financial expertise in his role.

Compliowa: Did you receive credit for it solely because it meets the technical assistance definition from the Q&As, or was there more to it?

justsayjulie: That's why I wondered because the Q&As state :

A community development service is a service that:
1. Has as its primary purpose community development;
2. Is related to the provision of financial service; and
3. Has not been considered in the evaluation of the bank's retail banking services under paragraph 24(d) - Service Test Performance Criteria

The operative word here being "AND". But, is providing expertise in the real estate market as a commercial lender for a bank considered primarily a financial service?

From our experience, and my understanding of the Q&As, serving on the Board meets the provision of financial service checkbox. Then you have to determine if the organization you're on the board of has its primary purpose community development.

IV. Service on the Board of Directors of
an Organization Engaged in Community
Development Activities
Existing Q&A §l.12(i)–3 stated that
providing technical assistance to
organizations that engage in community
development activities (as defined by
the regulation) is considered a
community development service. The
Agencies proposed to modify Q&A
§l.12(i)–3 to clarify that service on the
board of directors of a community
development organization is an explicit
example of a technical assistance
activity that could be provided to
community development organizations
that would receive consideration as a
community development service.
Most commenters supported the
proposed revision. A few commenters
raised concerns that mere attendance at
a board of directors meeting was not
sufficient to merit CRA consideration.
These commenters wanted to ensure
that CRA consideration would be
provided only in recognition of active
participation.
In addition, several commenters
suggested expanding the list of technical
assistance activities to include other
professional skills offered by institution
personnel, such as information
technology support, legal assistance,
and human resources, because these
technical assistance activities are crucial
to the provision of financial services by
community development organizations.
The Agencies are adopting the
revision to Q&A §l.12(i)–3 addressing
service on the board of directors of a
community development organization
as proposed. Although the Q&A does
not expressly address commenters’
concerns that financial institutions’
representatives actively participate
when serving on community
development organizations’ boards of
directors, the Agencies note that all
community development services are
expected to provide genuine benefit to
financial institutions’ communities for
consideration in a CRA evaluation.
Further, the Agencies consider the
responsiveness of community
development services. Consideration of
the qualitative aspects of performance
recognizes that community
development activities sometimes
require special expertise or effort on the
part of the institution or provide a
benefit to the community that would not
otherwise be made available.
In addition, in response to
commenters’ suggestions, the Agencies
are adding the following example of a
technical assistance activity that might
be provided to community development
organizations: providing services
reflecting financial institution
employees’ areas of expertise at the
institution, such as human resources,
information technology, and legal
services.

Most board members review annual budgets or financials, if that is part of his role then I would argue that financial expertise is being provided. As well as his RE expertise.

Great, that helps a whole lot! I appreciate everyone's thoughts!

I recently attended a meeting or webinar and examiners said they would give credit for BOD service when the person provided expertise in that particular person's wheelhouse. The example given was an HR person from the bank serving on the board advising on HR issues would receive credit if the non-profit fits the rest of the test. Unfortunately I can't remember who or where I heard this to site the source. My point is it sounds like some examiners are broadening the credit in this area.

The updated Q and As actually incorporated this in 2013.

Any employee, not just staff members, can provide services that are within their banking expertise. This recognizes that there are many skill sets within a bank. A manager in any department who writes job descriptions, for example, can assist a non profit in developing job descriptions. IT can provide IT help, and so on.

The Q and As are at:

https://www.gpo.gov/fdsys/pkg/FR-2013-11-20/pdf/2013-27738.pdf

That should say not just board members. Not going to go through the contortions to edit.