AFI Manual AFI Grantee Handbook - Intro to Project Administration
4. AFI Project Administration
4.1 Introduction to AFI Project Administration
4.2 AFI Participant Eligibility: Questions and Answers
4.3 Eligibility: Earned Income Tax Credit and Federal Poverty Lines Information
4.4 Tools for Gathering Data About AFI Project Communities
4.5 Marketing, Recruiting, and Retaining AFI Project Participants
4.6 Designing the AFI Project Reserve Account and Participant Individual
4.7 Savings Plan Agreements
4.8 Why Financial Institutions Want to Partner with AFI Projects
4.9 Financial Institution Partner Agreements
4.10 Continuous Program Improvement for Strong Project Administration
4.11 Strategies for Homeownership
4.12 Strategies for Postsecondary Education and Training
4.13 Strategies for Microenterprise And Small Business Development
Use this section of the AFI Handbook for keeping program administration tip sheets, articles, best practice examples, and other guidance issued from the AFI Resource Center and other sources.
This section includes the following pieces, all jam-packed with helpful information and guidance.
- AFI Participant Eligibility: Questions and Answers
- Eligibility: Earned Income Tax Credit and Federal Poverty Lines
- Tools for Gathering Data About AFI Project Communities
- Marketing, Recruiting, and Retaining AFI Project Participants
- Designing the AFI Project Reserve Account and Participant Individual Development Accounts
- Savings Plan Agreements
- Sample Savings Plan Agreement
- Why Financial Institutions Want to Partner with AFI Projects
- Financial Institution Partner Agreements
- Sample Financial Institution Partner Agreement
- Continuous Program Improvement for Strong Project Administration
- Strategies for Homeownership
- Strategies for Postsecondary Education and Training
- Strategies for Microenterprise and Small Business Development
The AFI Project Builder: Guide for Planning an Assets for Independence Project is another source of advice and guidance on basic program administration issues and techniques. You can download it from the AFI Asset-Building Web site.
Which individuals and families are eligible to participate in an AFI Project?
Individuals and families within either of the following two groups are eligible to participate:
- Members of households eligible for the Temporary Assistance for Needy Families (TANF) program when they apply for enrollment in an AFI Project; or
Persons who meet both of the following criteria:
- Their household adjusted gross income is either less than twice the Federal poverty line or within Federal Earned Income Tax Credit (EITC) limits when they apply for enrollment in an AFI Project; and
- Their household net worth is less than $10,000 at the end of the calendar year (that preceded the day they applied for enrollment in an AFI Project).
OCS has imposed no restrictions on the age of people who may participate in an AFI Project. Young people may participate, as may the elderly. Keep in mind, however, that all participants must be able to make their asset purchase within the five-year time frame of the AFI grant.
Tip: People who are eligible for TANF assistance in your state are automatically eligible to participate in an AFI Project
How do we know whether an applicant is eligible for the TANF program?
The Temporary Assistance for Needy Families (TANF) program is a Federal-State block grant. The Federal government allows States to establish most eligibility standards. Look to the agency that manages the TANF program in your State for income and other eligibility standards.
How is a household defined for AFI purposes?
According to the AFI statute, the term "household" refers to all individuals who share use of a dwelling unit as primary quarters for living and eating, separate from other individuals. If you can answer "yes" to all the following questions about a group of people, those people are considered a household for AFI purposes:
- Do they share a dwelling unit (a home, an apartment, or other living space)?
- Do they consider the dwelling unit their primary dwelling place? (Do they live there all the time? Are they planning to stay for the time being?)
- Do they consider themselves a household unit that is separate from all others? (Do they identify as a household?)
What is 200 percent of the Federal poverty line?
This is an amount of household income that is twice the Federal poverty line for a given family size. The poverty line data are adjusted annually. See Doc 4-3 for current information or check the AFI Asset-Building Web site. New figures are posted in February of each year. Grantees should use the figures current at the time of an individual's application to participate in an AFI Project.
What are the Federal Earned Income Tax Credit limits?
The EITC program, managed by the Department of the Treasury and the Internal Revenue Service, offers tax refunds to families with low levels of earned income. The Department of Treasury announces the income eligibility thresholds for this assistance annually. Eligibility is on a sliding scale that takes into account household income and family size. See Doc 4-3 for a listing of current EITC eligibility thresholds.
Tip: You can link to the current Federal poverty lines on the AFI Asset-Building Web site . From that site, you can also link to the IRS calculator for EITC eligibility and to information on free tax filing services and other favorable tax options for low-income families and individuals.
What is adjusted gross income?
A person's adjusted gross income is the calculation of a person's income (e.g., from wages, salaries, tips, dividends, business income) less deductions and expenses allowed by the IRS (e.g., student loan deductions, moving expenses, self-employment tax, self-employment health insurance).
Adjusted gross income is the amount shown on the following IRS forms: line 4 of IRS Form 1040EZ, line 22 of Form 1040A, or line 35 of Form 1040.
What is the best way to determine a person's adjusted gross income?
As noted above, a person's adjusted gross income is the amount listed on the person's Federal income tax forms. Ask applicants for copies of their most recent Federal tax forms. If an applicant has not filed a tax form, ask them for details about their financial situation and develop a best estimate for their adjusted gross income, basing the estimate on the most current information applicants can provide. In such situations, it is important to ask applicants to sign documents certifying that the income and asset information they provide is as accurate as possible.
What is the best way to calculate a self-employed applicant's adjusted gross income?
Tax returns can be the best documentation. Many agencies use the information on the past year's tax return to determine eligibility. You may want to work with applicants (or assign a microenterprise adviser) to help them prepare cash-flow statements or file quarterly tax filings to document earned income.
What is an applicant's household adjusted gross income?
The household adjusted gross income is the sum of the household members' individual adjusted gross incomes. For example, if the applicant has a one-person household, his or her household adjusted income is the adjusted gross income as shown on his or her Federal tax forms.
If the applicant is a married person whose household only includes the applicant and his spouse, their household adjusted income is either a) the sum of the adjusted gross incomes that appear on their Federal tax forms if they file separately or b) the adjusted gross income on their form if they file jointly.
If the applicant is a person whose household includes other people, the household adjusted gross income is the sum of the adjusted gross incomes that appear on each household member's Federal tax forms. Remember that AFI eligibility uses household , not individual, income to determine eligibility.
Tip: The AFI 2 Program Management Tool features an input form for gathering information from applicants. The tool can then automatically calculate whether the applicants are eligible to participate in an AFI Project.
What is net worth?
Net worth is the difference between the sum of the value of all of a person's assets (e.g., a house or condominium, an automobile, bank accounts) and the sum of all of his or her debts (e.g., store and credit card debt, student loan debt, home mortgage, automobile loans, small business loans).
A person's net worth is a positive number if the assets are more valuable than the amount of debt owed. Conversely, net worth is negative if total debts are larger than total assets.
How do we calculate an applicant's household net worth?
Like the household income, the household net worth is the sum of the net worth of all members of the household. Determine the household net worth by following this three-step formula:
- Determine the net worth (positive or negative) of each member of the household and add them together, including the value of jointly held debts or assets.
- Next, subtract the market value of the household's dwelling unit, if the group owns one.
- Finally, subtract the market value of one motor vehicle owned by any household member. (We recommend that you subtract the most valuable automobile.)
Tip: Be sure to look carefully at the household's records to identify all financial assets. Look at each member's Federal tax forms and their W-2 forms to determine if they earned interest income on bank account savings, stocks and the like.
Will an enrolled participant become ineligible to continue in the AFI Project if household income increases after enrollment?
AFI Projects are not required to track income changes for eligibility purposes after a person enrolls as a participant. OCS only requires AFI Projects to consider a participant's income and net worth when determining whether the person is initially eligible to participate in the project.
Therefore, if participants' incomes increase after enrollment, celebrate that fact! With higher incomes, they may be better able to complete their savings goals and purchase their long-term assets within the project period.
Tip: Many AFI Projects track increases in participant income as a measure of their success in the program and as a measure of the impact of IDAs.
Tip: As participants' household earned incomes increase, work with them to rebudget so they can save more quickly in their IDAs.
What if a participant becomes unemployed and has no earned income?
AFI Projects should allow participants who experience a temporary reduction in income to continue in the project as long as they can generally abide by AFI guidelines and save according to their savings plan agreements. It may be that a participant will miss several months' savings while seeking new sources of household earned income. Projects should prepare for these contingencies by establishing policies and procedures for how long participants may take a leave of absence from saving.
The Earned Income Tax Credit (EITC) eligibility and Federal poverty lines are both useful in determining whether a person is eligible to participate in an AFI Project. As indicated in Doc 4-2, eligibility for AFI may be calculated, in part, either using applicants' eligibility for TANF, or one of two other measures: their eligibility for the Earned Income Tax Credit program or their annual income in relation to the Federal poverty line. The following tables provide income eligibility figures for the EITC program and the Federal Poverty line.
Click here for EITC Income Guidelines.
Click here for Federal Poverty Lines.
National data, such as U.S. Census Bureau statistics, can help Assets for Independence (AFI) Projects document local population characteristics. Project managers have used various other tools and strategies, described below, to provide additional insights into their target communities.
Needs Assessments. AFI encourages prospective grantees to do a needs assessment to understand local conditions. One grantee used an existing area-wide needs assessment with demographic information on who receives assistance, who has children, and divorce rates. The data indicate, for example, the number of families that could qualify to participate under the AFI guidelines.
For more ideas on designing an AFI Project, see the AFI Project Builder: Guide for Planning an Assets for Independence Project.
Focus Groups. Some agencies host focus groups of providers or community members to learn about the target population and people's interest in IDAs. Several current AFI Projects have convened people already using their agency's services to learn about their ability to save, readiness to take time needed for training, comfort level with financial institutions, and interest in IDAs. One AFI Project held five focus groups distinguished by common group characteristics (e.g., former welfare recipients, youth over 18), and followed traditional focus group methodology. The groups went through 30 questions on financial readiness topics: Have you maxed out your credit cards? Ever read your credit report? Ever been denied credit? "We found that the credit history of many clients was not bad credit, but rather no credit," said the IDA manager for this Project.
Key Informant Interviews. Another form of qualitative information is often gathered from contacts with agencies serving low-income populations. For AFI application purposes, these interviews are best done formally through standard interview protocols. However, any information will be useful. For example, one applicant looked inside its agency and did informal interviews with staff working on related programs.
Networking. Another strategy is to talk to other groups locally or even around the country to find out how they assessed the resources, opportunities, and challenges their AFI Projects would face. For example, one grantee looked at lessons learned from the earlier, privately funded American Dream Demonstration-a precursor to AFI in the late 1990s. "We did some significant listening and sharing on what works and doesn't work," said one AFI Project staff person.
Many AFI project managers have found that the initial time required to do the marketing, attract attendees to orientations, and actually enroll participants is longer than they anticipated. AFI Project staff sometimes struggle with explaining IDAs and AFI guidelines to the public, including to potential participants. When marketing an AFI Project, the rule is to keep things simple and clear so that people will be attracted to the project, and potential participants will fully understand their roles and responsibilities from the very start.
For more ideas on designing an AFI Project, see the AFI Project Builder: Guide for Planning on Assets for Independence Project.
Some Projects expect to tap into their current client base. Do not assume that all your current service population is ready and interested in an IDA, even though they may meet basic eligibility guidelines. A family in crisis or without stable employment may need to address those matters before taking up the long-term IDA commitment.
Most AFI Projects find that they lose participants between initial recruitment (an orientation session or phone inquiry) and the time for account opening. Attrition may happen because marketing activities may not reach the intended audience. Public service announcements on local radio stations may be useless, for example, if the people they draw to orientation sessions are ineligible for the program. To anticipate recruitment challenges, make sure the initial assessment of your project's target population-the needs assessment-is as complete as possible.
Following are helpful questions to consider when planning your project's marketing and recruitment strategies. The answers to these questions will inform your marketing, recruiting, and retention strategies, highlighting where you may need to develop your approach further.
- What will your target population likely wonder about the IDA concept when they first hear of it? (If you are unsure of this answer, talk to program staff at your organization or a partnering agency or speak to members of the target population directly in focus groups or even informal, ad hoc conversations.)
- Are the operation procedures and policies for your AFI Project established and clearly communicated so staff and participants have a clear understanding of how to navigate the elements of the project?
- Are written documents describing the Project's policies and procedures clear and simple? Try testing them with a variety of folks of different ages and reading levels.
- After you have described the AFI Project to a potential participant, can he or she easily describe back to you the benefits of the IDA? Can he tell you the process for applying to be a participant in your AFI Project?
- Do the organizations that your agency is partnering with for the AFI Project clearly understand their roles and responsibilities? Are those partners in good standing with the target population? Are they ready to launch this project with you?
- Has your organization assessed the market conditions in your community-to determine whether it would be feasible for participants to purchase any of the three allowed AFI Project assets (first home, higher education, small business)? Does your organization have a plan for tapping other resources for additional support for participants if needed as they navigate the purchase process?
- To limit attrition, will your agency sponsor financial education and asset-specific training at various times of the day and often enough to keep your project participants on track with the savings and training time line? Are you or your agency concerned that workshop sessions may begin late in the program period, become overbooked, or be offered too few times to meet participant needs?
- Has your organization developed contingency plans for delays in recruitment, attrition during the savings period, and participant delays in securing a successful asset purchase?
AFI has a few requirements regarding how the Project Reserve Account and participant IDAs are structured. Knowing these requirements and including them in any agreement with your financial institution partner(s) and in Participant Savings Plans are the keys to a successful AFI Project. Below are some important tips in designing and managing these accounts. Additional information is included in the discussion of grant management and reporting in Documents 5-4 and 5-5 of this Handbook.
Keep accounts in federally insured financial institutions. Project agencies must maintain the Project Reserve Account at a Federally insured financial institution, such as a bank or credit union. If no Federally insured bank or credit union is available, accounts may be maintained in a State-insured financial institution.
For more ideas on designing an AFI Project, see the AFI Project Builder: Guide for Planning on Assets for Independence Project.
Don't mingle the AFI Project Reserve Account or participant IDAs with other resources. The Project Reserve Account and the IDAs must be separate and distinct from other accounts held by your organization or by the participants. Project Reserve Accounts for different AFI grants should also be separate and distinct.
Draw Federal funds when nonfederal funds are available and deposited into the Project Reserve Account. Organizations that are managing AFI Projects may draw down their Federal grant funds as soon as the nonfederal contribution is available. It is best to have access to the nonfederal contribution as early as possible and to draw the total of the Federal grant amount as soon as the nonfederal funds are deposited into the Project Reserve Account. All nonfederal contributions and the Federal grant amount deposited into the Project Reserve Account may earn interest income. Any interest income may be used to augment the total resources available for the program. Once an amount in the Project Reserve Account is allocated to a participant IDA, however, the interest income earned on that amount is also allocated to the participant's IDA on a prorated basis (see below).
Tip: A great added-value marketing tool for both participants and potential funders is offering interest on top of the match itself. First, many AFI Project staff report that this offers more incentive to participants. Second, interest earned on the fund in the Project Reserve Account is available to the grantee organization for other uses (e.g., administrative costs)-as long as it is not already dedicated to specific participant IDAs.
Before a new IDA is opened, the participant and the AFI Project must commit to a set of rules and responsibilities outlined in a Savings Plan Agreement. The following are some elements to include in Savings Plan Agreements between AFI Project organizations and their participants. These are just suggestions. Grantees should tailor agreements to their needs, within the requirements of the AFI statute.
For more ideas on designing an AFI Project, see the AFI Project Builder: Guide for Planning on Assets for Independence Project.
- A savings goal, including a proposed schedule of savings deposits by the participant from earned income, which must be for a period of more than six months.
- The proposed qualified expense (first home, education, microbusiness) for which the IDA is maintained.
- The length of time to achieve the participant's savings and asset acquisition goals.
- The rate at which participant savings will be matched (from $1 to $8 of the Federal and nonfederal match for each dollar in earnings the participant deposits). (Note that the Federal grant funds portion of the match may not exceed $2,000 per individual and $4,000 per household during the five-year project period.)
- The schedule of match deposits and interest allocation to be followed by the AFI Project.
- Financial education plan, in which the AFI Project agrees to provide training and the participant agrees to attend.
- Any additional training or education related to the qualified expense that the AFI Project agrees to provide (or may require) and that the participant agrees to take.
- Process for notification of participant in the event that the participant exceeds or fails to meet projected savings goals. The process will include schedules and contingency plans.
- Any agreement as to investments of assets maintained in the Project Reserve Account.
- An explanation of withdrawal procedures and limitations, including the consequences of unauthorized withdrawals.
- An explanation of the conditions under which the project may ask a participant to withdraw personal savings and leave the program, such as failure to attend or complete trainings or a pattern of missed deposits. Include the AFI Project's responsibility for working with the participant to avoid the need to withdraw.
- Provision for disposition of the funds in the IDA in the event of the participant's death.
- Provision for amendment of the agreement with the concurrence of both AFI Project and participant.
Where match rates and maximum savings amount differ for the different asset goals, it may be clearer for the AFI Project to use separate documents rather than including alternatives in a single form.
Following is an example of a Savings Plan Agreement that incorporates many of the suggested elements.
Sample Savings Plan Agreement
- My savings goal for the Individual Development Account is ___________ per year over the course of two years. I understand that a maximum of $1,000 will be matched by THE AFI PROJECT annually, at a rate of 2:1 (THE AFI PROJECT will contribute two dollars for every dollar of earned income that I save toward one of the designated assets).
- My monthly savings goal will be ________. I understand that I am required to make monthly deposits from earned income, with a minimum monthly deposit of $__, to NAME OF BANK in the form of _______________, and that I may miss a maximum of three monthly deposits over the course of one year. I will be notified and warned of termination after three missed deposits. If I must miss one deposit, I will contact the program coordinator immediately to discuss the reason and to plan to be consistent in the future. [Note: Some programs lack the staff to do this level of personal follow-up with clients-the time to visit and counsel-so take this into consideration.]
- My asset goal is the following: ________________________.
- I understand that I have up to ___ months to achieve my savings goal and up to ___ months after that to make my purchase.
- In order to be a part of this project and to receive the savings match, I must attend the nine-session personal money management course. If I miss a class, I will call the program coordinator immediately to discuss the situation, and will make arrangements to make up the missed session. In addition, I agree to complete all session summary activities as required. Upon completion of the nine-session class, I have the option to participate in further training on starting a business, buying my first home, or going back to school through either THE AFI PROJECT or a community partner.
- I will not withdraw money from this IDA savings account under any circumstances without consulting the program coordinator. Unauthorized withdrawals may force me to be dropped from the AFI Project and to forfeit my rights to any match monies accrued. If at any time I am not able to meet my monthly savings goal, I will call the project coordinator and discuss the situation immediately.
- I will review my savings and asset goals and my performance in meeting or exceeding these goals regularly. If a revision is in order, I will make an appointment to revise this Agreement with the Program Coordinator.
- In the event of my death, I understand that if I designate another eligible individual as the beneficiary, that person will receive both my savings and earned match, provided he or she satisfies all project requirements. If I designate someone who is not eligible for an account, the beneficiary will receive only my savings, and my earned match will be used to match other account holders. Accordingly, I designate the following beneficiary: ________ ________________________.
- Withdrawing money: With this special matched savings account, I can withdraw money only after I have made monthly deposits for at least six months for one of the three purposes listed below:
- Starting or expanding a small business, with an approved business plan-equipment, inventory, and marketing material can be purchased.
- Purchasing my first home-upfront costs (e.g., earnest money, appraisal, and home inspection costs).
- Going to school-tuition, books, entrance fees, registration costs, and lab fees can be paid with savings match. The purchase of necessary equipment or supplies, including a computer, is also allowable.
10. All checks will be made payable to a third-party as allowed by AFI requirements.
11. Withdrawals after any first draw can be made only quarterly, with the exception of
first-time home purchase.
12. In special circumstances, I will be able to withdraw money (without matched dollars) for
emergency purposes. I am allowed 12 months to replace that money to continue to be a
part of the project. I must meet with the project coordinator and fill out and sign the
emergency withdrawal agreement.
13. In order to withdraw any money, I must obtain a signature from the AFI Project
coordinator before going to the bank. This requirement ensures that I have thought
carefully about my purchase and that I am using it for one of the three assets listed
above. All account withdrawals require dual signatures-one from the AFI Project
coordinator and one from me. ________ [Initials] I agree to the terms and
conditions as stated above.
NAME OF AFI PROJECT Coordinator
The Corporation for Enterprise Development, in The Individual Development Account Program Design Handbook: A Step-by-Step Guide to Designing an IDA Program, offers the following selling points to underscore when recruiting a financial institution partner:
Publicity and public relations. Banks and credit unions are in business with the public. A good reputation and strong name recognition are important assets. Participating in a well-publicized and well-run IDA program can generate both.
Deposit of matching funds. AFI matching funds are attractive deposits for financial institutions because they are generally large sums of money that involve little account activity (until program participants make qualified withdrawals) and are deposited for long periods.
New customers. AFI Project participants are a source of new customers for financial institutions. Although IDA accounts themselves may not generate profits for a financial institution, successful IDA participants are likely to conduct more profitable business in the future at the financial institution with which they have already established a relationship through their involvement with an AFI Project.
Community commitment. Many financial institutions have a stated mission to serve and respond to the needs of their communities. IDAs are an ideal way for financial institutions to do this while operating within their own industry.
Additional business . Participating in an AFI Project can lead to other forms of new business for financial institutions, whether from friends or relatives of an IDA participant or from the finance department of a sponsoring organization or program partner.
Community Reinvestment Act credit. Under the Community Reinvestment Act, banks are required by law to invest in their communities. AFI Project involvement can count toward CRA credit. For more information on the Community Reinvestment Act and how it works, visit the Web site for the National Community Reinvestment Coalition.
The following are suggested elements to include in agreements between AFI Projects and financial institution partners:
- Statement that the AFI Project Reserve Account will be maintained on deposit in the financial institution.
- Details about how the IDA accounts will be established in the financial institution through written governing instruments, including the requirements for deposits (by cash, check, money order, or electronic transfer) and withdrawals (signature of the account holder and of a responsible official of the grantee required).
- Specific information on how, when, and where participant deposits will be made.
- Details on how and when matching contributions will be allocated and tracked in the Project Reserve Account.
- The rate(s) of interest to be paid on amounts in the Project Reserve Account and on the amounts in participant IDAs.
- The frequency of interest payments on accounts, including interest on the matching funds from the reserve account.
- Statement that the accounting procedures to be followed will conform to the guidelines established by Office of Community Services.
- Details on the data and reports that will be furnished to the AFI Project concerning the Project Reserve Account and IDA accounts, such as monthly balances and distribution of interest.
- Discussion of the nonfederal share contribution or other financial commitment, if any, being made by the financial institution for deposit in the Project Reserve Account or elsewhere, and the schedule of deposits of such contribution(s).
- Details on other services to be provided by the financial institution(s) specific to the project, such as financial education, waiver of customary fees, favorable pricing on fees, location of services or financial institution personnel in community facilities, or assistance in the recruitment and support of AFI Project participants in the pursuit of project goals.
Following is one example of a financial institution partner agreement that incorporates many of these suggested elements.
Sample Financial Institution Partner Agreement
Keep in mind that this is just a sample. The financial institution (bank or credit union) may be willing to accept all of these provisions, but some will not. Be ready to modify this to make it work. Don't let lack of cooperation from a bank become a barrier to your project design.
NAME OF BANK is making a nonfederal cash contribution as well as an in-kind contribution to the AFI PROJECT AGENCY. The details of this commitment are as follows:
- NAME OF BANK shall hold a Project Reserve Account, in the name of AFI PROJECT, which shall include both the NAME OF AFI PROJECT's nonfederal contribution and the Federal grant funds.
- NAME OF BANK agrees to deposit, as soon after receipt as is practicable, into the Project Reserve Account all funds provided to our bank from public or private sources in connection with the AFI Project and any investment proceeds from the Project Reserve Account.
- The Project Reserve Account shall accrue interest on a monthly basis at a rate of ___%.
- Each IDA savings account shall be opened when an approved AFI participant comes to a designated location (street address of NAME OF BANK) and presents an account form, signed by the applicant and the AFI Project coordinator, and an initial deposit of at least $__ to a teller or bank manager. The account form shall include the participant's name, address, telephone numbers, Social Security number, asset goal, total savings goal, monthly savings goal, and method of payment (cash, check, money order, or electronic transfer).
- The IDA savings accounts shall be regular interest-bearing savings accounts, held in the name of the participant, and shall accrue interest on a monthly basis at ___% (subject to change due to periodic rate adjustments made by the bank at its discretion).
- After the IDA account is opened, a participant who makes deposits by check or money order may make deposits at any NAME OF BANK location by coming in or mailing the deposit. Cash deposits can be made at any location but may not be mailed. Deposits must be made before 4 p.m. on the last working day of the month; otherwise, the deposit shall be reflected on the next month's statement.
- A participant must present an AFI PROJECT authorized withdrawal form, signed by the participant and AFI Project coordinator, before the participant's share and match share will be issued toward an authorized withdrawal. This form shall include the name of the vendor to whom the cashier's checks will be written and the accurate amounts of the participant's share and the match share plus interest earned.
- AFI PROJECT shall be responsible for tracking all monthly matches and interest accrued to each participant. Since all matching funds are held in the Project Reserve Account, the matching funds plus interest accrued will be issued from the bank only when a participant supplies a completed authorized withdrawal form to the bank and only for the amount stated on that form.
- NAME OF BANK shall supply AFI PROJECT AGENCY, free of charge, with a monthly statement or spreadsheet reflecting the deposits, withdrawals, and interest accrued in both the Project Reserve Account and participants' IDA accounts. Each participant shall receive, free of charge, a monthly or quarterly statement, which shall include their deposits, withdrawals, and interest accrued.
- NAME OF BANK is making a commitment to AFI PROJECT, contingent upon award of an AFI grant, of $80,000.00 nonfederal cash contribution to match the Federal AFI grant funds. The funds shall be contributed as follows: $20,000 in 200_, $20,000 first quarter 200_, $20,000 first quarter 200_, and $20,000 first quarter 200_.
- In addition to the donated funds, NAME OF BANK shall also provide trained bank employees to assist with financial education, which is an estimated in-kind value of $20.00 per hour per employee. NAME OF BANK shall implement staff training and policy and procedure development for IDA accounts at an estimated in-kind value of $5,000. The bank will allow AFI PROJECT AGENCY to use the conference rooms during or after business hours at an estimated rate of $50 an hour as an in-kind contribution. NAME OF BANK also commits to waive fees customarily associated with opening and monthly service fees of an interest-bearing savings account for the Reserve Account and the IDAs, which is an estimated in-kind value of $5,000 for approximately 40 participants.
- In addition to the nonfederal cash match commitment, the total in-kind estimates are valued at $26,000 over the course of the five year project.
- NAME OF BANK complies with FDIC accounting regulations, reporting quarterly and annually. AFI PROJECT AGENCY follows government auditing standards: OMB circular A-110 (Uniform Administrative Requirements for Grants and Agreements for Non-Profit Organizations) and A-122 (Cost Principles for Non-Profit Organizations).
- This agreement shall be effective from the beginning date of PROJECT AGENCY'S AFI award through the closing date of the project period specified in the award, unless modified by consent of NAME OF BANK and AFI PROJECT AGENCY.
- Other terms of this agreement may be modified by consent of both NAME OF BANK and AFI PROJECT AGENCY.
- All terms shall be consistent with the laws applicable in this State and with AFI policies as described in the Assets for Independence Act or other guidance issued by the Office of Community Services, Administration for Children and Families.
Signature: Authorized Financial Institution
Signature: AFI Project Agency
This document presents ideas and suggestions for AFI Projects at all stages of implementation to consider in order to close out their grants successfully. Successful closeout means that AFI Projects have met their project goals-and the goals of their IDA participants-during their five-year AFI Project grant period. Most of the suggestions offered here are drawn from the experience of AFI Projects in recent years.
Consider Changes to Project Design
AFI Projects have much flexibility in adjusting the design of their projects as they develop expertise and knowledge about how best to serve their participants. When projects identify changes that will improve their ability to meet their overall goals, they may take steps to make those changes. The Office of Community Services (OCS) is interested in ensuring that AFI Projects remain focused on their overall outcomes. AFI Program staff understand that may mean making adjustments to their project design during the implementation period.
AFI Projects sometimes begin with multiyear project designs that are simply not feasible. After a new grantee has begun the real work in the community, it may become clear that the proposed design will not achieve the stated outcomes within the project period. If that happens to you, realize that there is no need to be stuck with an unproductive program design. Make it better. Modify it!
If you propose to make changes to your AFI Project, be sure to consult with OCS first. You will need written approval for major changes. For programmatic changes, such as reallocating the number of slots for each asset goal, OCS will provide the approval. For more significant adjustments, such as budget or staff changes, OCS will coordinate with the Office of Grants Management to provide approval. Of course, official written requests for major changes must be addressed to OGM. Please do not hesitate to communicate with OCS whenever you have identified ways to improve your AFI Project design and implementation.
Following are brief discussions of a few areas in which grantees may wish to make adjustments and the general guidelines they need to remember. Again, please consult with OCS and OGM before finalizing changes in project design.
Examine Deposit and Savings Requirements
There are very few restrictions on participant savings and deposits in their IDAs. The program requires that participants open and maintain IDA accounts and make regular deposits in keeping with their Savings Plan Agreement. AFI also stipulates that participants may not withdraw savings from their account in the first six months following their initial deposit.
Your agency may impose additional deposit and savings rules beyond those required by the AFI Program. Take the time to assess any additional policies imposed by your agency. Consider the degree to which they enable participants to complete their savings on time and with sufficient total funds to purchase their targeted asset. Are they helpful to the participant? Are they necessary for meeting your program goals? Research and review other options. Talk with other AFI Project managers. Check to see that any additional policies reflect best practice with regard to the behavior, experience, and needs of your particular target market. For example, agencies that work with diverse or changing target markets often find that having less restrictive policies and customizing IDA savings timelines to each applicant as part of case management can have successful results.
Encourage Lump-Sum Deposits: EITC, Child Credit, and More
AFI Projects are encouraged to help participants redeem and deposit refundable tax credits, including the Federal, State and local Earned Income Tax Credit; the Child Tax Credit; and other income tax returns. If your agency does not currently help participants learn about and use these refundable tax credits, partner with organizations that do.
Consider Participants' Credit Histories
Many agencies report that they wish they had known participants' credit histories early in their savings period, especially for homeownership savers. Access to capital depends not only on having savings for a down payment, but also on having a history of timely repayment of debt and a low debt-to-income ratio. It also requires a good "credit score" and stable employment. AFI Projects have also found that many participants have, in effect, no credit history. Creating a credit history or repairing a poor credit history takes time-something AFI Projects can often accommodate if they have the information early.
Help participants get credit reports right away as part of enrollment and use information from the reports to help the participants set their savings goals, establish budgets, and address debt reduction or credit repair if necessary.
Target and Time Recruitment
AFI Projects are better suited for some individuals and families than others. As your agency designs and starts up its project, it should develop an outreach strategy that will target people who will be ready and able to benefit from it.
Throughout implementation, but particularly in later stages, keep closeout in mind when recruiting participants. After a year or so of implementation, or even earlier if warranted, step back and review your progress. Assess what has worked and what has not. Identify which community partners have been most effective at referring successful participants. Reflect on strategies that bring in participants with a high capacity to save (e.g., working with real estate agents or high school guidance counselors) or with access to lump-sum deposits such as EITC (e.g., partnering with tax preparation clinics). Also, concentrate on community partners whose programs provide case management assistance. Consider whether some kind of preenrollment preparation (e.g., resolving family issues, stabilizing or improving employment) would be in the long-term best interest of applicants and improve your program efficiency once participants are enrolled.
Enroll Participants Early
It is important to enroll participants early in the project so they will have the maximum amount of time to save and purchase their asset. While AFI Project managers may realize the major time commitment necessary to recruit and enroll participants, they are often stunned by the additional effort required to maintain participant motivation, encourage regular savings, and assist them in purchasing their assets.
Consider planning outreach, recruitment, and training so that participants will have at least 12 months at the end of the project solely for arranging their asset purchase.
Set Savings and Asset Purchase Deadlines Well Ahead of the Project End Date
AFI Project managers are learning that the asset-purchase process is time consuming. It can take some participants several months-even a year-from the time they have successfully achieved their savings goal to when they complete their asset purchase. It can be useful to give participants clear time frames and deadlines for each step of the program. This will help them stay on track for saving and making their asset purchase. Some agencies request that participants complete their savings by the last year and expect them to make their asset purchases well before the end of the grant period. Other agencies individualize time frames. Time frames should also reflect the realities of local communities, such as the availability of affordable housing and additional purchase assistance or the business climate.
If your agency sets these kinds of deadlines, it is best to put them in writing and communicate them often: in participant savings agreements, in newsletters, in savings statements, in special postcard mailings, and so forth. Some agencies ask savers to establish new savings agreements in the final year that spell out any additional timing requirements or expectations.
Develop Individual Action Plans
A number of AFI Projects are finding that individual action plans or asset plans are useful to help savers define time frames for meeting program training requirements, completing their savings, and carrying out the asset-purchase process. Such plans include short-term and intermediary benchmarks for savings, credit repair, or other actions participants need to take to position themselves for a smooth asset purchase at the end of their savings period. They also help project managers to see how well participants are progressing and where there may be difficulties that can be resolved early on.
If you implement this strategy, make sure the individual action plans include concrete steps for the savers; small, intermediary milestones; and a realistic time line for accomplishing the entire plan.
Revisit Training Design
Most AFI Projects develop their initial training designs to maximize participant commitment over a number of years. For example, a common strategy is to require participants to complete financial education as a prerequisite to opening an IDA account. Another strategy is to hold training opportunities as monthly classes or home buyer clubs that participants need to attend for a number of months.
In the later stages of the project period, it may be important to make adjustments to the training strategy. Here are some suggestions for adjusting the training requirements so participants will complete the training more quickly:
- Shorten training schedules.
- Provide training sessions more frequently and adjust the schedule so participants will be better able to attend. Add weekend and weeknight classes, if possible.
- Repeat training for long-term savers. This strategy can help motivate slow savers.
- Expand training options by including a larger network of training partners, distance learning options, and so forth.
- Set priorities for training expectations so that they do not penalize busy participants for missing "extra" sessions, such as monthly home buyer clubs.
Increase Case Management Services
Another good strategy for ensuring that participants finish their savings plans and purchase an asset is simply to give them more intensive assistance.
Suggestions for providing more case management:
- Start case management as soon as possible, especially if your project requires participants to complete financial education before saving in their individual development accounts.
- Create benchmarks for case management. Establish follow-up calls every 10 to 14 days to maintain regular contact with participants in the final months. Send reminders with specific dates through e-mail, postcards, inserts in monthly mailings, and so forth.
- Schedule one-on-one sessions with participants during the final year, particularly during the final months of the project.
- Create staff incentives so experienced case managers will be available, especially during the vital final months of the program.
Provide Special Assistance to Participants with Homeownership Goals
As housing prices continue to rise in almost every community across the United States, it is becoming more difficult for some AFI Project participants to qualify for home loans and afford homes even with their IDA savings. Here are some additional strategies to help home ownership participants:
- Partner with a housing counseling agency certified to provide first-time home buyer assistance. These agencies have resources and expertise to help low- and moderate-income families buy a first home.
- Work with diverse community partners to leverage additional housing resources. Important community partners include affordable housing developers, down payment assistance programs, and low-rate mortgage programs.
- Develop a recruitment timeline that sets priorities for enrolling home buyer participants early in your project and sets a final date for home buyer enrollment.
- Consider gaining more time for potential homeowners by reassigning them to other AFI Projects, if you are operating more than one. (See Information Memorandum 2004-03, for details on how to reassign participants among concurrent AFI Projects.)
In the end, the most productive strategy in some cases may be to help your participants focus on different savings goals to ensure they get the full benefit of their IDA during the required time frame. If home ownership does not seem feasible, redirect participant savings to business startup, vocational training, or postsecondary education so that IDA match funds are expended within the project period. Help them plan for home purchase at a later time. A change of asset goals should be proposed sooner rather than later, perhaps even at enrollment if a participant seems unlikely to be able to resolve barriers to home purchase in the allotted time.
Fast-Track Program Design
Many AFI Projects have successfully modified their project designs. A number of them have changed their strategies or adapted components to support participants who are able to accomplish their savings goals in a shorter amount of time-a fast track.
Some strategies for helping fast-track savers:
- Identify and enroll participants who are able to save quickly.
- Eliminate or reduce presaving requirements.
- Allow participants to open their IDAs before completing the financial education training.
- Speed up the training schedule, providing more frequent group training.
- Enroll participants who are already in the asset-purchase process (e.g., people who are already working with first-time home buyer programs, enrollees in educational or training institutions, or clients of microenterprise programs).
- Encourage participants to contribute to their IDAs through direct deposit or automatic fund transfers.
- Increase or eliminate monthly savings limits.
- Allow lump sum deposits as long as the total deposits do not exceed earned income during the savings period.
Note that a fast-track design might be inconsistent with some of your original project objectives and therefore must be considered carefully. You may, for example, need to rethink your target population. Here are some pros and cons to consider:
Fast-Track Design Pros:
- Offers a design to facilitate recruitment and enrollment in final years.
- Helps ensure full use of match and operating funds available to the project.
- Offers IDA match, financial education, and asset-specific training to more participants.
Fast-Track Design Cons:
- Targets participants who are already close to being self-sufficient. This approach may be counter to the purpose of AFI Projects-that is, to help low-income families become self-sufficient.
- May encourage participants to compromise their real asset goals to save for secondary goals that require less savings or shorter purchase periods.
- Compresses the time period, which may not help participants develop long-term savings behavior.
- May require more frequent and flexible training offerings, which may stretch project staff too thin.
AFI Program staff are continually seeking out and disseminating more information on effective practices developed by AFI grantees. Look for announcements on the AFI Asset-Building Web site or in notices to the AFI ListServ.
Purchasing a first home is a powerful and profound experience for individuals and families. It's a very big step for many, and it is often quite challenging. Here are some strategies to ensure that AFI Project participants succeed in saving and purchasing a home within the project time period.
AFI Program Considerations
AFI Projects help participants save earned income in their IDAs to purchase first homes. For AFI, first-time homebuyers are participants who have not held an ownership interest in a residence within 36 months of when they purchase their homes with their IDA.
AFI Projects allow participants to use their IDA savings-including matching funds-to acquire, construct, and repair a first home. Participants may use their IDA savings for reasonable expenses related to the home purchase, such as settlement costs, financing, inspection, title fees, and other closing costs. The IDA savings and the matching funds from the Project Reserve Account are to be paid directly to the persons to whom the amounts are due (e.g., to the seller, the home inspection company, the title company, or mortgage broker.)
An AFI Project may allocate up to $2,000 in AFI grant funds in the Project Reserve Account to match an individual's IDA savings and no more than $4,000 in AFI grant funds to match savings in IDAs owned by multiple members of one household. AFI Projects must allocate nonfederal funds at least equal to Federal funds to match the participants' IDA savings at the rate given in the Savings Plan Agreement.
Given the high cost of housing stock in many locations, AFI Projects are encouraged to leverage their Federal and nonfederal funds with additional private, community, and government sources and home-buyer assistance programs. Remember, however, that these sources are not counted as part of the nonfederal cash contribution to the overall project.
Program Design: Addressing Local Needs and Opportunities
As you develop your strategy for helping participants save for first homes and make their purchases, consider the following key strategies. They will come in handy.
Before establishing your match rate and maximum savings amount, take time to assess housing costs in your community. Explore the minimum income that will be needed to purchase a home. Think about the total funds project participants will need to purchase a home, including closing costs and related items. Consider those needs in comparison with the savings capacity of your target population and the time frame of your AFI Project. Don't forget the costs of maintaining the home after purchase, such as taxes, insurance, and major repairs.
Going by the calculations, offer a realistic match rate. The following table shows some likely savings patterns, required closing costs, and required match rates for participants in a hypothetical community.
Steps In The Process
1. Recruit and Enroll Participants
Screen participants with an initial interview to assess whether their budget, savings capacity, debt, credit history, and the target time frame are conducive to a home purchase in the local market. If not, encourage the applicant to save for a different asset, such as education.
AFI Projects nearing the final years of their Project Periods could, for example, ask participants for a mortgage preapproval or credit report as condition for enrollment; or they could require a threshold credit score for enrollment with homeownership as the goal.
2. Run Credit Checks and Pursue Relevant Credit Counseling
As early as possible, get information about your AFI Project participant's credit history. If a new participant has no credit history, help him or her establish traditional and nontraditional credit. If a participant has poor credit, a multiyear IDA program can offer time to improve credit. Help the participant obtain free reports by working closely with a financial institution or through State housing finance programs. Federal law now permits anyone to receive one credit report annually at no charge. Assist participants in accessing consumer and credit-counseling agencies that can help them improve their credit rating and deal with debt.
Monitor participants' credit and help them be mortgage-ready when the time comes to purchase their first home.
3. Help Participants Start Saving for a Home
Encourage and support participants in reaching their savings goals.
First, monitor their monthly deposits. Second, provide regular case management that motivates savers and helps ensure they will reach their goals. Recognize achievement of small benchmarks for savings or credit repair along the way.
Case management may also yield discussions regarding difficulties participants are facing and lead to brainstorming about how to get back on track.
4. Help Participants Attend Financial Education
Financial education can be a big boost to first-time homebuyers who need to understand how their finances will affect their ability to acquire and maintain a mortgage.
Creating family budgets, tracking income and expenses, paying down monthly debt, and calculating income-to-debt ratios are crucial for qualifying for a mortgage and for managing asset ownership for the long term. Mortgage lenders generally want total monthly debt (including the mortgage payment) to be no more than about one-third of monthly income. If savers have disproportionate debt, including monthly credit card or car payments, they will find it difficult to get a mortgage. Remind participants not to incur new debt while saving for a home and to consider carefully any employment or residence changes since lenders also look at income, job, and home stability.
5. Enable Participants to Attend First-time Homebuyer Training
If your organization is not a certified housing counseling agency, partner with one that is. Housing counseling agencies offer free comprehensive training, counseling, and certification to low-income families. They also help participants access discounted mortgage rates and down payment or closing cost assistance. Housing counseling agencies are generally aware of affordable housing options in your market and the myriad of down payment assistance, closing cost assistance, and other Federal, State, and community programs that can be leveraged.
Strong homebuyer training includes sessions addressing issues such as the pros and cons of homeownership; the home-buying process (finding the right house, working with a real estate agent, and home inspection); and financing a home (shopping for mortgages, the application process, loan qualification, closing costs, down payment requirements and options, and reserve requirements).
6. Develop Asset Plans with Participants
A homebuyer asset plan helps AFI Project participants define their home-buying process. It helps participants outline feasible time lines for home purchase within the project time frame. An asset plan helps make sure the participants have considered variables such as neighborhood, transportation, household size, schools, value appreciation, and proximity to work. An asset plan can also include a time line for saving, working with banks for mortgage preapproval, getting first-time homebuyer training, house shopping, and so forth.
Asset plans also provide ways for the participant and project staff to recognize and celebrate attainment of important milestones on the way to purchase. Thus, they also offer significant retention benefits for AFI Projects.
7. Help Participants Increase their Saving and Deposit EITC Funds
Continually update participants' asset plans. Encourage participants to save faster, if appropriate. Facilitate participants' getting assistance with filing their taxes and encourage them to deposit all or part of their Earned Income Tax Credit and tax refunds in their IDAs, or to use their refunds to pay down debt.
8. Help Participants Qualify for Financing
Introduce your participants to banks that are ethical and helpful with low-income clients.
Be sure the financial education and homebuyer training have prepared participants to recognize and avoid lending scams. Review participants' proposed mortgage packages to ensure the loans they want to purchase encourage equity building and are not predatory.
9. Encourage Participants as They Shop for a Home
It is no secret: it can take many of us, including AFI Project participants, several months or longer to find the right home at the right price.
Provide participants with names of realtors who are familiar with affordable housing options and affordable housing developers. Be sure to refer participants to realtors who are familiar with individual participants' cultural frameworks, including ones who speak their languages.
10. Ensure THAT Participants Submit Documentation to Receive Matching Funds for Closing
Establish the IDA disbursement process ahead of time and provide participants with a checklist of required documentation, guidance on when to schedule an appointment with you, and a time line for how long it may take to receive the match checks so that they can appropriately schedule home purchase closings.
Typical support documentation includes the following:
- Home purchase asset plan
- Copy of the purchase contract (includes the price of the home and the name and address of the title company)
- Loan application, mortgage approval letter (which includes homeowners insurance)
- First-time buyer verification
- Estimated buyer's closing statement
- Relevant bills and documents (attorney, home inspector, gift letters, etc.)
Ask the participant to provide copies of the settlement charges (the HUD-1 settlement statement) upon closing.
11. Follow-up: Assist Graduates in Finding Homeownership Support
AFI Projects may provide ongoing support for individuals and families who have completed their asset purchases in order to assist them with the new set of financial challenges related to homeownership. If your agency does not do this, connect participants with other support groups or resources that do.
Postsecondary education, vocational training, and recertification are powerful tools to help low- and moderate-income individuals and families in the United States improve their employment and career opportunities. AFI Project managers can support participants in making the most of these educational opportunities by careful design of services related to the postsecondary education option. Among these are assessing community needs and selecting the target population, planning recruitment strategies, designing financial education, and developing community partnerships for effective educational and career counseling.
AFI Program Considerations
AFI IDA resources may be used for a number of educational expenses: tuition, fees, books, supplies, and equipment (including a computer and necessary software) required for enrollment, attendance, or coursework at an eligible educational institution. IDA funds must be paid directly to an eligible educational institution. (Please note, this requirement means even computer purchases must be made through the educational institution.)
Steps In The Process
1. Recruit Participants
Identify residents who will best be able to save and use their education IDA funds during the AFI Project period. Consider partnering with high school internship or school-to-work programs that concentrate on specific professions, such as building trades, graphic arts, or hospitality fields. Seek out high school juniors and seniors with part-time jobs; these students are earning income and may be looking to attend higher education within the coming years.
Community colleges and university recruitment and financial-aid departments can be strong outreach partners. Immigrants and refugees completing English as a second language classes in your community may be ready to move on to additional education or vocational training.
Many clients at one-stop employment centers are looking for training to prepare to return to the workforce or to move up from their present jobs, but remember that some providers of training contracted to these employment centers may not be eligible to receive AFI IDA funds under the definitions of eligible institutions in the AFI statute.
Take time to partner with the many groups in your community-including faith-based groups and other organizations-interested in helping low-income individuals access postsecondary education and training. Such organizations can provide extra help with identifying and recruiting project participants. Employers with large numbers of entry-level workers, including public agencies, are also likely recruiting venues, and many employers offer tuition reimbursement that may help with educational or vocational plans that require preparation over several years.
2. Enroll Participants
Talk with potential participants about their educational goals and career aspirations as part of a preenrollment process.
Be sure to tell them that they will need to spend their IDA education funds by the end of the project period. Most often, this means being enrolled in school for enough classes or semesters during the project period to draw down all the funds.
3. Explain Procedures to Participants
Explain requirements for saving in an IDA and highlight that participants can make incremental withdrawals to pay for education while continuing to save up to the maximum allowed. For example, AFI Projects have learned that education savers typically save over a number of months, make a withdrawal for tuition or supplies, and then continue to save for additional expenses.
In this way, a participant might save $500, which, matched at a $1 to $1 rate, allows her to make a matched withdrawal of $1,000 for a semester's tuition and books. The participant would then continue to save for the following class, semester, or year. Be sure participants understand that any disbursement of matching funds may be made only to the eligible institution and not to the participant or another third party.
4. Work with Participants and Provide Case Management if Needed
Monitoring monthly deposits is helpful to ensure that student savings and match schedules coincide with tuition due dates.
Frequent communication may yield discussions about difficulties participants are facing and may lead to brainstorming about how to get back on track. Tracking how far along participants are with their savings can help make sure they reach their goals. Remember that adult participants will have to manage family and work responsibilities while also attending school.
5. Help Participants Attend Financial Education
Financial education should be structured to provide participants with the right information at the right level. Class schedules and content for youth participants, for example, would be different from those for adult English as second language learners. Arrangements for childcare or transportation may be necessary.
6. Enable Participants to Access Training About Their Education Goals
AFI Projects typically help their participants receive training, advice, or counseling about their education plans and needs. At many higher education and training institutions, counseling and financial-aid staff work with prospective students to help them plan for the future. Partner with schools in your community that are interested in enrolling your participants. Work with them to provide group training or one-on-one counseling to AFI Project participants so that the education purchase becomes an appreciating asset, leading to greater earnings and self-sufficiency.
Depending on the participant's goals, helpful education training might include basic computer classes, guided tours of local universities, career and vocation planning, or information and assistance on financial aid and scholarship opportunities.
7. Help Participants Apply for Scholarships and Financial Aid
Many sources of government and private funding are available to help diverse populations attend school. Funding opportunities may target nationality, financial need, special skills, or course of study. For example, hospitals in need of nurses are making funds available for nursing school, as are employment centers in some locations. Partner with knowledgeable financial aid staff at local colleges and universities. Ask them to help AFI Project participants leverage their IDA funds.
Federal financial aid flows through colleges and schools and requires a long lead time for the application process, up to nine months before enrollment. For detailed information go to the Federal financial aid Web site.
If project participants will be applying for education scholarships or financial aid, helping them pull together comprehensive household budgets will allow them to complete income and expense information on application forms more easily.
8. Develop Education Plans
Preparing an education plan, similar to a business plan, can help project participants set clear goals and time lines and then follow through with those plans. A plan will make it more likely that participants will meet application due dates and financial aid deadlines.
An education plan may include any number of steps such as visiting schools, collecting transcripts and references, and researching scholarship opportunities. As the plan develops, it can describe the courses of study, projected expenses, and anticipated career opportunities. And don't forget personal time management. Work with participants to think through how they will find study time and meet family and work priorities.
9. Ensure That Participants Submit Documents to Access Matching Funds for Educational Expenses
Education expenses can extend over several semesters or years. IDA savings for education are usually accessed in installments. Often, the participant accesses a portion of it before reaching the total savings goal. This pattern necessitates closely tracking a participant's savings and withdrawals; monitoring bank accounts; and checking processing for project staff, agencies, and financial institutions.
It may be desirable to reduce the number of withdrawals or to extend education payments beyond the period of your AFI Project. This may be accomplished by creating partnerships with local education institutions to establish special scholarships or school accounts that put aside funds or prepay courses for the AFI Project participant. Such arrangements must ensure that payments go to eligible institutions only.
Some AFI Projects enable participants to use their IDA savings to prepay tuition. In these situations, it is important for project administrators to work with education institutions on the process for returning any prepaid funds to the AFI Project if the participants prepays but later decides not to attend that institution. In any event, AFI funds must be expended before the end of the Project period and may not be returned to the grantee or participant after the close of the Project.
Give project participants a clear checklist of documentation required to access IDA funds. Let them know when to schedule withdrawal appointments and how long it may take to receive the match funds so they meet tuition due dates.
Typical documentation for education withdrawals includes the following:
- The education plan, with updated benchmarks
- A copy of tuition bills or training registration forms
- Class schedules
- Invoices for educational supplies or equipment (e.g., books, computer)
Obtaining actual receipts postpurchase will strengthen your organization's AFI Project documentation file.
Negotiate with bank partners for free or minimal-cost withdrawal policies. Numerous cashier's checks can be expensive to the agency or the participant!
Encourage AFI Project participants to stay in touch and to send graduation photographs, copies of certificates or diplomas, and posteducation employment achievements. Photographs provide great marketing materials for an AFI Project!
Starting a small business can be an attractive fit with the skills, backgrounds, and aspirations of AFI Project participants. Ownership of a small business is truly an important financial asset that can enable individuals and their families to be economically self-sufficient for the long term. AFI Projects that enable aspiring entrepreneurs to save for small businesses need to ensure that they have access to a variety of business planning assistance services, in addition to the AFI Project financial education and the IDAs.
AFI participants may use their IDA resources to support any number of expenses needed to carry out plans for establishing small businesses or to support existing ones. Typically, participants use their IDA savings for expenditures such as purchasing equipment and inventory, legal requirements for establishing a business, and paying rent. All expenditures must have been included in the participant's business plan as approved by a financial institution, a microenterprise development organization, or a nonprofit loan fund. The plan must include a description of goods or services to be sold, a marketing plan, and projected financial statements. Expenses may cover items such as plant, equipment, working capital, inventory and other expenses.
The most successful AFI Projects that help participants support a microenterprise or small business offer a number of related training and services, such as business technical assistance, business plan preparation, and access to capital in addition to the matched IDA savings.
When developing strategies for helping participants save for a microenterprise, consider the types of business training and support your organization will be able to provide. Reach out to other groups and agencies that specialize in microenterprise services for low-income people. If your organization is not experienced at providing business training and support, consider partnering with one that is, such as a Small Business Administration business development center. A partner, however, may need support from you to be able to serve your AFI Project participants with regard to their education level, culture, and language, for example.
If your organization is not a financial institution or does not manage a nonprofit loan fund or microenterprise program, it will need a partner to approve and qualify business plans prior to making disbursements.
Steps In The Process
1. Market and Recruit Participants
Develop marketing materials for your program. Frame the AFI IDA matched saving as part of an overall package of supports for developing a small business. This approach will have stronger appeal than simply listing microenterprise as a savings goal on general flyers.
In announcements, be sure to advertise the menu of support and services your agency provides for entrepreneurs. These include items such as microloans, entrepreneurial classes, business technical assistance, and business planning and incorporation.
If your organization is partnering with other organizations, work with them to help market the program. Be sure their staff understand IDAs and AFI opportunities and limitations so that they can identify likely eligible and ready applicants.
2. Enroll Participants
Discuss the business development process and concept with potential AFI Project participants during their enrollment or preenrollment interview, or work with a partner organization to help assess the feasibility and viability of each potential participant's business vision.
Knowing up front the feasibility and status of the participant's business model is critical to providing the right assistance to help participants translate their visions into successful, income-generating enterprises during the IDA program period.
3. Participants Begin Saving
Saving in an IDA is a great way for a participant to develop a track record that will be so important for actually owning and managing an ongoing business enterprise. By saving regularly in their IDAs, participants will demonstrate their ability to make regular monthly payments. By saving on a regular basis and not relying too much on sporadic, lump-sum deposits, emerging entrepreneurs will develop a good business credit history. They will also be building a strong relationship with a financial institution.
4. HELP Participants Attend Financial Education
Helping entrepreneurs learn skills to track and manage personal income, debt, and expenses is a basic step to translating these skills into a small business environment. Good financial management is at the core of every successful business.
Since many AFI IDA Project Participants begin business as sole proprietors, learning to track household and business transactions separately will let them make appropriate tax deductions and profit assessments.
Consider a different strategy for providing financial education for participants who are saving for a microenterprise. Integrate the usual financial education into the more specific asset training. Both components are closely related.
5. Run Participant Credit Checks
For AFI Project participants who have bad credit or no credit histories, it may be difficult to obtain a business loan or line of credit. Be sure to assess the credit worthiness of microentrepreneurs early in the program. Take action when needed to ensure that the participant will be able to develop a feasible business plan using available financial resources.
An IDA savings period that extends over more than a year can help participants establish credit in traditional and untraditional ways or repair poor credit histories.
6. Ensure that Participants Attend Business Training
AFI Projects need to provide, directly or with a partner, a diverse and flexible set of business development services for microenterprise participants. This flexibility is necessary because participants typically come with widely varying degrees of skills, knowledge, and understanding of business practices.
Small business training can include group courses on marketing, financial projections, legal structures, licenses, and business plan development.
Emerging entrepreneurs, however, are sometimes guarded with their business ideas and prefer to seek one-on-one assistance with loan applications and strategy development. Look for additional resources in the community through credit unions, law schools, microloan institutions, community mentors, SBA development centers, women's business centers, community development financial institutions, and SCORE (the Service Corps of Retired Executives). Many business schools require community service or encourage graduate-level students to provide technical assistance to small businesses as a way to increase their experience with real business problems.
7. Help Participants Develop Business Plans
AFI requires that microenterprise participants develop and submit a business plan. A business plan describes the services or goods to be sold and includes a marketing plan and projected financial statements. The financial projections in the business plan, including income statements, balance sheets, and cash flow statements, outline necessary business expenses and are used as the basis for disbursements. Costs described in a business plan, such as start-up expenses, equipment, rent, supplies, targeted marketing or advertising expenses, and inventory expenses, are eligible IDA purchases.
Business plans are equally useful for business startups and expansions. An approved business plan not only serves as the basis for disbursing IDA funds but is also a good way to assess the viability of the business. AFI Project savers may require the assistance of an experienced entrepreneurial adviser to develop their business plan.
8. Help Participants Apply for Business Microloans and Bank Loans
AFI Project entrepreneurs will often need to leverage their IDA savings with business loans to implement their startup or expansion plan. Providing linkages to community-based financial institutions and access to starter microloans will lend credibility to a loan application. An AFI Project organization's banking relationships can prove helpful for microenterprise clients.
Many organizations that provide financing for microenterprises and small businesses are creating special fast-track loan products for IDA microentrepreneurs. These vehicles take IDA savings into account when setting interest rates and other terms for loans. Some even have allowed participants to use their own IDA savings (not any portion of the match) as temporary collateral to secure loans.
9. Ensure that Participants Submit Purchase Documentation to Receive Matching Funds
Distribution of AFI IDA funds is based on the participant's approved qualified business plan. The distributions can only be made to a business capitalization account held by the participant or directly to a vendor for eligible purchases.
It is often easier to use the IDA savings to purchase larger capital expenditures on a one-time basis rather than multiple smaller purchases on behalf of the business, but the latter is sometimes more practical for a startup. Smaller expenses allow the entrepreneur to save a little, spend a little, and use funds for business licenses, startup equipment, and so forth while continuing to save. For example, a participant could save $500 and receive a $500 match for a sewing machine and cloth to begin operating a tailoring service. Participants can start to earn money while continuing to save for future matched purchases.
AFI Projects should provide a checklist for participants on the documentation required for disbursement. Typical documentation includes
- Approved business plan (description of the business product or service)
- Market analysis
- Marketing plan
- Management and staffing plan
- Financial projections
In addition, AFI Projects should require participants to provide specific documentation and invoices for proposed purchases and loan agreements (if applicable). As with other AFI asset purchases, all funds must go to a third party, such as equipment suppliers.
AFI Projects should encourage their entrepreneur participants to stay in touch. Agency newsletters and access to local media add free advertising and marketing opportunities for the businesses. This is a win-win situation in which both the AFI Project and the small business get promoted. Agencies with large numbers of graduates can create directories of their small business portfolio and display their entrepreneurs' resources at business fairs to promote sales and increase visibility of the AFI Project in the community. Small businesses that succeed over time also offer compelling evidence of return on investment for nonfederal funders.