The U.S. Department of the Treasury announced on Apr. 9 that it will issue new rules for the Community Development Financial Institutions (CDFI) Fund to ensure compliance with federal law and prevent taxpayer-funded benefits from being used by individuals who are not American citizens or lawful residents.
The announcement is significant because it addresses concerns about the proper use of federal public benefits and aims to reinforce anti-discrimination measures within organizations that receive CDFI Fund awards.
Secretary of the Treasury Scott Bessent said, “Under President Trump’s leadership, we are enforcing the law and preventing the abuse and misuse of CDFI Fund grants intended solely for American citizens and lawful residents.” Bessent also said, “Treasury will continue to use its authority to prevent waste, fraud, and abuse in all forms, including by safeguarding taxpayer money awarded by the CDFI Fund.”
According to Treasury officials, a forthcoming notice of proposed rulemaking will clarify that certain benefits provided through the CDFI Fund are considered “federal public benefits” under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). This clarification means that illegal aliens and other non-qualified aliens would not be eligible for these federally funded benefits.
Additionally, Treasury is introducing a provision in CDFI Fund agreements requiring certified CDFIs to comply with federal anti-discrimination laws. Organizations must avoid employment or financial preferences based on race, ethnicity, or sex if those practices conflict with federal laws. Certified entities will need policies designed for compliance, annual certification regarding their implementation, and must provide documentation upon request.
If an organization fails to comply with these requirements or other terms in its agreement with the fund, possible consequences include decertification as a CDFI, termination of unused funds, or recapture of previously awarded funds. The department stated it intends to “vigorously exercise its remedies” where necessary.
