April 21 and 22, 2005 Chicago, IL

1. AN INFORMED DISCUSSION: Achieving Sustainability, Scale, and Impact in Community Development Finance April 21 and 22, 2005 Chicago, IL

2. Structuring Strategic AlliancesLessons Learned fromH&R Block – Community Action Project of Tulsa County • An Informed Discussion: Achieving Sustainability, Scale, and Impact in Community Development Finance • April 21, 2005

3. Discussion Outline • Mission and Strategy • Partners • Market Trial • Goals • Capabilities • Early Observations • Next Steps • Partnership Lessons

4. Mission Statements • CAP: To help individuals and families in economic need achieve self-sufficiency through emergency aid, medical care, housing community development, education and advocacy delivered in an atmosphere of respect • HRB: To help our clients achieve their financial objectives by serving as their tax and financial partner

5. Partnership Strategic Goals • Leverage existing HRB tax prep infrastructure and CAP social services expertise • Broaden reach of CAP’s benefits screening tool • Increase HRB client satisfaction and retention

6. Why Tulsa? H&R Block and CAP existing relationship Proximity of partners Large base of EIC eligible citizens Cooperate vs. compete

7. Profile—H&R Block, Inc. Serves more than 20M clients annually Over half of clients served have AGI < $30K More than 11,000 retail outlets, plus digital solutions Prepares 1 in 4 of all EITC returns nationally 80,000 tax professionals

8. Profile—CAP • Area’s designated community action agency • Served more than 20,000 clients in 2004 • Completed 14,300 free tax returns • worth $19.3M in refunds • Provides high-impact services in: • Childcare and early childhood education • Employment and savings • Affordable housing • Tax Preparation

9. Trial Overview Offer benefits eligibility screening as part of the tax preparation process HRB tax prep software identified likely clients Tax professionals offered the screening service Clients screened by “outsourced” CAP benefits eligibility specialists

10. The Screening Tool “BESO” = Benefits Eligibility Screeningfor Oklahomans Rules driven, interactive interview format Determines likely eligibility for approximately 20 social services programs Prepares and electronically transmits application for Food Stamps to DHS

11. Optimize completion of tax returns during limited timeframe Introduce service “embedded” in tax prep process Retain more clients Offer eligibility screening service to as many clients as possible Maximize completion and submission of food stamp applications Serve more clients Complementary Goals H&R Block CAP

12. Complementary Objectives H&R Block CAP Test client acceptance of service offer Test tax professional willingness and ability to deliver offer Determine value to client Assess whether offer yields shareholder value Test scalability with non-profit partner • Informally compare alternative distribution channels—”free” vs. “fee” • Test deployment of re-branded BESO application in non-CAP site • Test ability to partner with perceived “competitor” and for profit firm

13. Partners’ Comparative Strengths H&R Block CAP Significant Reach Scale: Enhance and leverage existing national infrastructure: • Software • Competency in defining business rules • E-file and connectivity • Centralized data analysis Tax Expertise • 100 hrs. training before seeing 1st client Brand Equity • Knowledge: Expertise in eligibility criteria and rules driven application • Relationships: With Department of Human Services and other program administrators • Delivery: Trained benefits specialists

14. Early Observations Clients behaved differently than expected • Offer may have “come out of the blue” Clients strongly preferred phone screenings in practice • Early qual may indicate a face to face preference “Value proposition” needs strengthening • “Provider of relevant information” to “Remove stress and hassle in a dignified manner” More to follow in end of season analytics • Data analysis – demographics of who received and selected offer • Qualitative study of clients and reaction to offer

15. Next Steps Qualitative Research • Focus Groups • Individual Interviews • Client Experience De-Briefing Session • Quantify “Outputs” • Lessons Learned by Field Participants Evaluate Data • Modify Application? • Modify Trial Parameters? • Go/No Go for Next Phase

16. Key Partnership Concepts Openness Get past the stereotypes Find Commonalities Acknowledge the differences

17. Key Partnership Concepts Commitment Time Resources Accessibility Flexibility Expect the unexpected Make adjustments quickly Agree on broad scope, not specifics—MOU vs. Definitive Agreement

18. Where We Are—Levels of Scale • Product In early phase—experiment and replicate • To achieve scale Standardization Infrastructure Roll-out

19. Thank You Douglas Hartung Andrea Hughes H&R Block Community Action Project dkhartung@hrblock.comahughes@captc.org

20. AN INFORMED DISCUSSION: Achieving Sustainability, Scale, and Impact in Community Development Finance April 21 and 22, 2005 Chicago, IL

21. Scale and Sustainability Impact in Community Development Finance

22. Scale and Sustainability “New Pathways to Scale…” Aspen Institute (Ratliff/Moy) • Great article, interesting models, thoughtful research • Download at www.chicagofed.org (Profitwise News & Views – Dec 2004) But .. “Which came first – the chicken or the egg?” (Scale or Sustainability?)

23. Scale and Sustainability • Sustainabilitymust be first and foremost. • That’s self-sustainability, too! • CDFIs – A subsidized financial institution is a classic oxymoron. • The World has changed – accept it! (CRA, Community Credit Unions)

24. Scale and Sustainability • Choose aneed that’s sustainable. • Size the organization, infrastructure, and products for the need.

25. Scale and Sustainability • Scale is about doingone thing very, very well. • Counterintuitive? • Economies of scale do exist! • Complexity kills! • The Hot Dog Cart …

26. Scale and Sustainability Sustainability (Products) Yes No √ Savings/Shares √ Credit Cards √ Checking √ Mortgage Loans √ Check Cashing, Wires, PMOs

27. Scale and Sustainability Sustainability (Products) Yes No √Personal Loans √Auto Loans √ Business Loans √Debit Cards (E-Statements!) Convenience, Phone Access Branches √ √

28. Scale and Sustainability Latino / SECU • Need • Immigrant • Language • Culture • Documentation • Distrust • Can’t fail • May not succeed • Flexible operating costs • “Creative” limitations • SECU

29. Scale and Sustainability 6 Rules of Sustainability • Cheaper • Better • Quicker • Simplify • Control the Point of Sale (Quality) • Local, Local, Local

30. Scale and Sustainability Why did SECU partner with Latino Community Credit Union?

31. Scale and Sustainability Our purpose is to change the world.

32. Scale and Sustainability Don’t bet against us…

33. Scale and Sustainability For further information: Jim Blaine President State Employees’ Credit Union admin@ncsecu.org Ph. 919-839-5000 Fax: 919-839-5353 …you’ll lose!! Thank You

34. AN INFORMED DISCUSSION: Achieving Sustainability, Scale, and Impact in Community Development Finance April 21 and 22, 2005 Chicago, IL