21692 Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 

will not take further action on this 

proposed rule 

DATES: Written comments must be 

received by May 20, 2015. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–R01– 

RCRA–2015–0195, by mail to Sharon 

Leitch, RCRA Waste Management and 

UST Section, Office of Site Remediation 

and Restoration (OSRR07–1), U.S. EPA 

Region 1, 5 Post Office Square, Suite 

100, Boston, MA 02109–3912. 

Comments may also be submitted 

electronically or thorough hand 

delivery/courier by following the 

detailed instructions in the ADDRESSES

section of the direct final rule located in 

the rules section of this Federal 

Register. 

FOR FURTHER INFORMATION CONTACT: 

Sharon Leitch, RCRA Waste 

Management and UST Section, Office of 

Site Remediation and Restoration 

(OSRR07–1), U.S. EPA Region 1, 5 Post 

Office Square, Suite 100, Boston, MA 

02109–3912; telephone number: (617) 

918–1647; fax number: (617) 918–0647; 

email address: leitch.sharon@epa.gov. 

SUPPLEMENTARY INFORMATION: In the 

‘‘Rules and Regulations’’ section of this 

Federal Register, EPA is authorizing 

these changes by a direct final rule. EPA 

did not make a proposal prior to the 

direct final rule because we believe this 

action is not controversial and do not 

expect adverse comments that oppose it. 

We have explained the reasons for this 

authorization in the preamble to the 

direct final rule. Unless we receive 

written adverse comments which 

oppose this authorization during the 

comment period, the direct final rule 

will become effective on the date it 

establishes, and we will not take further 

action on this proposal. If we get 

comments that oppose this action, we 

will withdraw the direct final rule and 

it will not take immediate effect. We 

will then respond to public comments 

in a later final rule based on this 

proposal. You may not have another 

opportunity for comment. If you want to 

comment on this action, you should do 

so at this time. 

Dated: March 24, 2015. 

H. Curtis Spalding, 

Regional Administrator, EPA Region 1. 

[FR Doc. 2015–08996 Filed 4–17–15; 8:45 am] 

BILLING CODE 6560–50–P 

LEGAL SERVICES CORPORATION 

45 CFR Parts 1610, 1627, and 1630 

Use of Non-LSC Funds, Transfer of 

LSC Funds, Program Integrity; 

Subgrants and Membership Fees or 

Dues; Cost Standards and Procedures 

AGENCY: Legal Services Corporation. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This proposed rule revises the 

Legal Services Corporation (LSC or 

Corporation) regulations governing 

transfers of LSC funds, subgrants to 

third parties, and cost standards and 

procedures. 

DATES: Comments must be submitted by 

May 20, 2015. 

ADDRESSES: You may submit comments 

by any of the following methods: 

Email: SubgrantRulemaking@lsc.gov. 

Include ‘‘Subgrant Rulemaking’’ in the 

subject line of the message. 

Fax: (202) 337–6519, ATTN: Subgrant 

Rulemaking. 

Mail: Stefanie K. Davis, Assistant 

General Counsel, Legal Services 

Corporation, 3333 K Street NW., 

Washington, DC 20007, ATTN: Subgrant 

Rulemaking. 

Hand Delivery/Courier: Stefanie K. 

Davis, Assistant General Counsel, Legal 

Services Corporation, 3333 K Street 

NW., Washington, DC 20007, ATTN: 

Subgrant Rulemaking. 

Instructions: Electronic submissions 

are preferred via email with attachments 

in Acrobat PDF format. LSC may not 

consider written comments sent via any 

other method or received after the end 

of the comment period. 

FOR FURTHER INFORMATION CONTACT: 

Stefanie K. Davis, Assistant General 

Counsel, Legal Services Corporation, 

3333 K Street NW., Washington, DC 

20007, (202) 295–1563 (phone), (202) 

337–6519 (fax), sdavis@lsc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Regulatory History 

A. Part 1627. LSC initially 

promulgated 45 CFR part 1627 in 1983 

to improve its oversight of and 

accountability for LSC funds transferred 

by recipients to third parties. 48 FR 

54206, 54207, Nov. 30, 1983. Prior to 

the issuance of part 1627, LSC did not 

regulate subawards of its funds. LSC 

intended part 1627 to apply to all 

transfers of LSC funds, which it 

described in the rule as subgrants, fees 

and dues, contributions, transfers to 

other recipients (considered a type of 

subgrant), training and education 

activities, and payments to tax-sheltered 

annuities, retirement accounts, and 

pensions on behalf of employees. Id. at 

54209. LSC did not intend the rule to 

govern a recipient’s procurement of 

goods and services for its own use. 48 

FR 28485, June 22, 1983; 48 FR 54206, 

54209, Nov. 30, 1983. 

In the proposed rule for part 1627, 

LSC defined the term subgrant as 

any transfer of funds received from the 

Corporation by a recipient to any 

organization for the purpose of carrying out 

a portion of the recipient’s program under a 

grant or contract from the Corporation; it 

shall not include a contract for services to be 

rendered directly to the recipient, nor shall 

it include any contract with private attorneys 

or law firms for the direct provision of legal 

services to eligible clients. 

48 FR 28485, 28486, June 22, 1983. In 

the final rule, LSC incorporated the 

quoted language into the definition of 

subrecipient, along with new language 

explaining what LSC considered 

activities conducted ‘‘for the purpose of 

carrying out a portion of the recipient’s 

program.’’ 48 FR 54206, 54207, Nov. 30, 

1983. LSC also made contracts with 

private attorneys or law firms for the 

direct provision of legal services to 

eligible clients subject to the subgrant 

rule if the contract cost exceeded 

$25,000. Id. LSC redefined the term 

subgrant as ‘‘any transfer of Corporation 

funds from a recipient which qualifies 

the organization receiving such funds as 

a subrecipient under the [revised 

definition of subrecipient].’’ Id. 

In part 1627, LSC established the 

process by which a recipient could seek 

approval of a proposed subgrant, the 

maximum duration of a subgrant, the 

recipient’s responsibilities for ensuring 

compliance with LSC’s fiscal and audit 

requirements, and the recipient’s 

responsibility to repay any disallowed 

costs. 48 FR 54206, 54209, Nov. 30, 

1983. LSC also asserted its own rights to 

oversee subgrants to ensure the 

subgrantees’ compliance with the LSC 

Act and other applicable statutes, LSC’s 

regulations, and Corporation guidelines 

and instructions. Id. A separate section 

of the rule made these requirements 

applicable to subgrants from one LSC 

recipient to another. Id. Because a 

subgrant of LSC funds from one LSC 

recipient to another is a transfer of 

funds granted by the same agency, LSC 

established reporting, accounting, and 

repayment rules for these types of 

arrangements that reflect LSC’s 

relationship to both parties. Id. at 54210. 

LSC last revised part 1627 in 1996. 

LSC published an interim rule to reflect 

the complete prohibition on the use of 

LSC funds to pay fees or dues enacted 

as part of its fiscal year 1996 

appropriations act (‘‘FY96 

appropriations act’’). Sec. 505, Public 

Law 104–134, 110 Stat. 1321 (1996). 

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LSC also added a requirement that 

recipients establish adequate 

recordkeeping policies to document 

compliance with part 1627. 61 FR 

45753, 45754, Aug. 29, 1996. The 

subgrant provisions remained 

unchanged, as did the provisions 

prohibiting contributions of LSC funds 

to other organizations and allowing 

recipients to make payments to taxsheltered annuity funds, retirement 

accounts, or pension funds on behalf of 

its employees. Id. at 45753. The interim 

rule became final with only minor, nonsubstantive changes in 1997. 62 FR 

19417, Apr. 21, 1997. 

B. Part 1610. Part 1610 implements 

the statutory restrictions on the use of 

non-LSC funds by LSC recipients. 45 

CFR 1610.1. Originally promulgated in 

1976, part 1610 has been revised 

relatively frequently due to changes in 

statutory restrictions and in LSC’s 

policies regarding the application of 

those restrictions. As with part 1627, 

LSC amended part 1610 in 1996 and 

1997 to implement new restrictions 

Congress placed on recipients’ LSC and 

non-LSC funds through the FY96 

appropriations act. Sec. 504, Public Law 

104–134, 110 Stat. 1321 (1996). 

Relevantly, in the December 1996 final 

rule, LSC added § 1610.7 to govern the 

application of the LSC Act restrictions 

and the FY96 appropriations act 

restrictions to recipient transfers of LSC 

funds and non-LSC funds to third 

parties. 61 FR 63749, 63752, Dec. 2, 

1996. Newly added § 1610.7 also 

established requirements for aligning a 

third-party’s priorities for the use of 

transferred funds with the LSC 

recipient’s priorities and for 

timekeeping on cases and matters 

undertaken with the transferred funds. 

Id. 

LSC issued a new interim rule in 

March 1997 in which it removed 

transfers of non-LSC funds from 

§ 1610.7. 62 FR 12101, Mar. 14, 1997. 

LSC made this change to part 1610 in 

response to an order issued by the 

United States District Court for the 

District of Hawaii preliminarily 

enjoining LSC from enforcing the 

application of some of the FY96 

appropriations act restrictions to nonLSC funds. Id.; see also Legal Aid 

Society of Hawaii v. Legal Services 

Corporation, 961 F. Supp. 1402 (D. 

Haw. 1997). LSC made no other changes 

to § 1610.7 as it applied to transfers of 

LSC funds. Section 1610.7 became final 

with only minor, non-substantive 

changes. 62 FR 27695, 27699, May 21, 

1997. 

In 2010, LSC revised part 1610 in 

response to legislation that removed the 

FY96 appropriations act restriction on 

recipients’ ability to claim or collect 

attorneys’ fees. 79 FR 21506, 21508, 

Apr. 26, 2010. The 2010 revision did not 

affect § 1610.7. 

II. History of This Rulemaking 

A. Office of Inspector General Audit 

of the Technology Initiative Grant 

Program. In 2010, LSC’s Office of 

Inspector General (OIG) conducted an 

audit of the Corporation’s Technology 

Initiative Grant (TIG) program. Among 

its findings was a conclusion that LSC 

improperly applied part 1627 to the TIG 

program. Audit of Legal Services 

Corporation’s Technology Initiative 

Grant Program, Report No. AU–11–01, 

at 41–44, Dec. 2010. In support of its 

finding, OIG looked to the definition of 

the term subrecipient, particularly the 

portion stating that the entity receiving 

the award of LSC funds ‘‘agree[s] to 

conduct certain activities specified by or 

supported by the [original] recipient 

related to the recipient’s programmatic 

activities. Such activities would 

normally include those that might 

otherwise be expected to be conducted 

by the recipient itself[.]’’ Id. at 41; see 

also 45 CFR 1627.2(b)(1). Based on this 

language, OIG found that 

LSC’s subgrant rule applies to all payments 

made by TIG grantees to third parties that 

then carry out some or all of the activities 

that ‘might otherwise be expected to be 

conducted directly by the recipient’ of a TIG 

grant made for the purposes specified in the 

grant documents. The TIG grants specify 

programmatic purposes other than the direct 

provision of legal services, namely the 

implementation of certain technological 

improvements. Payments by TIG grantees to 

third parties for services that fall within these 

purposes amount to subgrants within the 

meaning of LSC’s regulations as currently 

written and should be administered 

consistent with the requirements of Part 

1627. 

Id. at 42. 

OIG reached the same conclusion 

regarding the application of § 1610.7 to 

third-party payments of TIG funds. Id. at 

50. 

OIG noted in its report that 

the programmatic purposes of some TIG 

grants appeared to overlap the sort of 

business services that might not be treated as 

subgrants in other contexts. There is a degree 

of ambiguity in the application of LSC’s 

subgrant rule to grants with relatively 

narrow, technological programmatic 

purposes, as was the case with some TIG 

grants. Part 1627 draws a distinction between 

payments to third parties to carry out 

activities ‘related to the [grantee’s] 

programmatic activities,’ which must be 

treated as subgrants, and services provided 

by ‘vendors or consultants in the normal 

course of business,’ which need not be 

treated as subgrants when the services 

‘would not be expected to be provided 

directly by the [grantee] itself.’ The subgrant 

rule appears to have been written with the 

LSC’s principal legal service grants in mind, 

such that ordinarily, programmatic activities 

consist of the provision of legal services, and 

business services can easily be classified as 

ancillary. This division is not as easy to make 

in the case of TIG grants, and the rule does 

not seem to have anticipated this problem. 

Id. at 42. 

OIG recommended that LSC 

Management ‘‘initiate a process to 

amend LSC regulations to account 

for [unique features of TIG 

projects]. . . .’’ Id. at 44. Management 

responded that LSC would review the 

subgrant rule ‘‘to determine whether it 

adequately accounts for the unique 

features of TIGs’’ and to determine 

whether to make recommendations for 

revising part 1627 to the Board of 

Directors. Id. Management also affirmed 

its reading of the subgrant rule by 

stating that it had consulted the Office 

of Legal Affairs to distinguish between 

‘‘programmatic subgrants’’ and ‘‘nonprogrammatic expenditures for goods 

and services. . . .’’ Id. at 45. OIG 

considered Management’s proposal to 

be responsive, but noted that its own 

recommendation contemplated 

rulemaking beyond merely making 

changes to part 1627. Id. OIG stated that 

it would leave the recommendation 

open until ‘‘all actions are completed 

and the OIG is notified of the results.’’ 

Id. 

B. 2012 Initiation of Rulemaking. 

Consistent with its response to OIG’s 

recommendation, LSC Management 

presented a Rulemaking Options Paper 

(‘‘ROP’’) and Management 

recommendation to the Operations and 

Regulations Committee (‘‘Committee’’) 

of the LSC Board of Directors (‘‘Board’’) 

at its quarterly meeting on April 16, 

2012. In the ROP, LSC staff discussed 

options for addressing two issues raised 

by OIG’s report. The first set of options 

pertained to LSC’s oversight of TIG 

subawards to third parties that were not 

considered subgrants. The second set of 

options related to OIG’s 

recommendation to revise the 

regulations to account for the special 

features of TIGs. 

With respect to LSC’s oversight of 

non-subgrant awards of TIG funds, OIG 

was satisfied that LSC’s newly adopted 

TIG third-party contracting policy 

addressed its concerns. OIG 

consequently closed the related 

recommendations. In light of this 

development, Management 

recommended against rulemaking to 

respond to OIG’s recommendations. The 

Committee voted to adopt 

Management’s recommendation. 

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LSC developed three options to 

address OIG’s concern that TIG 

subawards were not treated properly as 

subgrants. LSC first proposed that the 

Board could choose not to engage in 

rulemaking on the matter and let 

Management continue to apply its 

interpretation of the subgrant rules at 

part 1627 and the transfer rule at part 

1610. LSC’s next options each 

contemplated rulemaking, but in 

opposing directions. The second option 

proposed initiating rulemaking to adopt 

Management’s interpretation of part 

1627: That in order to be considered a 

subgrant, the award to a third party 

must be for carrying out the recipient’s 

overall programmatic purpose of 

providing legal assistance to eligible 

clients. The last option was to initiate 

rulemaking to adopt OIG’s 

interpretation of the rule: That a 

subgrant is any award to a third party 

to carry out the programmatic purposes 

of the particular grant from which the 

award is made. 

In its memo to the Committee, 

Management recommended that the 

Committee initiate rulemaking to amend 

parts 1610 and 1627. Management 

believed that both rules should be 

amended to reflect LSC’s ‘‘longstanding 

reading of these rules—that is, that both 

rules are designed to address legal 

services activities.’’ Management 

explained that the transfer rule, which 

takes the definition of ‘‘transfer’’ 

substantially from part 1627, 

subjects the transferee to all of LSC’s 

substantive restrictions on legal services 

activities, including the 1996 restrictions that 

reach the use of non-LSC funds. These 

restrictions involve legal services activities 

(such as class actions, representation of 

aliens, and lobbying) and legal aid program 

operations (such as program priorities and 

timekeeping for cases and matters). As with 

the subgrant rule, the transfer rule does not 

extend those restrictions to nonprogrammatic procurement of goods or 

services. Management does not believe it 

would be prudent grant management to 

extend these types of restrictions and 

requirements to third-party vendors that 

provide business services and technology 

services as part of TIGs. These LSC 

restrictions are meant to apply to entities that 

receive LSC funds for the provision of legal 

services under the LSC Act. 

Management further explained that its 

interpretation avoids absurd results in 

other contexts. For example, LSC makes 

disaster relief grants to recipients whose 

offices have been damaged or destroyed 

by natural disasters. Those grants may 

be used to hire contractors to rebuild the 

offices or purchase new office supplies. 

Under OIG’s reading, Management said, 

the building contractor would become a 

subgrantee under part 1627 because the 

purpose of the emergency grant is to 

help the recipient rebuild. Under 

Management’s interpretation of parts 

1610 and 1627, it would not. 

The Committee accepted 

Management’s recommendation. On 

April 16, 2012, the Chairman of the 

Committee presented the Committee’s 

recommendation to initiate rulemaking 

on parts 1610 and 1627 to the Board of 

Directors for a vote. Some members of 

the Board raised concerns that because 

conflicting interpretations of parts 1610 

and 1627 were the impetus for the 

rulemaking, rulemaking was perhaps an 

inefficient and inappropriate vehicle for 

resolving the dispute. Rather than 

voting on the Committee’s 

recommendation, the Board voted to 

return the issue to the Committee to 

determine whether LSC could adopt a 

particular interpretation of parts 1610 

and 1627 through a policy document 

rather than through rulemaking. 

In response to the Board’s instruction, 

the Committee directed LSC and OIG 

staff to determine whether LSC had 

options other than rulemaking to resolve 

the ambiguity regarding which 

subawards were covered by part 1627. 

The Committee met telephonically on 

June 18, 2012, to discuss the results of 

the staff deliberations. Both OIG and 

Management concluded that rulemaking 

was necessary to ensure that part 1627 

reflected Management’s concept of 

subgrants as awards to a third party for 

carrying out part of an LSC recipient’s 

grant to provide legal services to eligible 

clients. The Committee concurred, and 

voted again to recommend that the 

Board initiate rulemaking to revise the 

subgrant rule. 

On July 27, 2012, the Chairman of the 

Committee presented the Committee’s 

recommendation to the Board of 

Directors. The Board accepted the 

recommendation and directed LSC staff 

to develop a draft rule for the Board’s 

consideration, and OIG closed the 

related recommendation from its report. 

The rulemaking, however, became a 

lower priority on the Committee’s 

agenda as a result of two factors. The 

first was the issuance of LSC’s Pro Bono 

Task Force Report, which led to the 

extensive rulemaking process to revise 

part 1614. The second was the need to 

revise parts 1613 and 1626 to 

accommodate legislative changes to 

LSC’s authority to provide legal 

assistance to individuals facing criminal 

charges in tribal courts and to certain 

non-citizen victims of violence, 

respectively. LSC revived the part 1627 

rulemaking as a priority item on its 

2015–2016 rulemaking agenda. 

On April 12, 2015, the Committee 

voted to recommend that the Board 

publish this NPRM in the Federal 

Register for notice and comment. On 

April 14, 2015, the Board accepted the 

Committee’s recommendation and 

approved publication of the NPRM. 

III. Section-by-Section Analysis of 

Proposed Changes. 

As will be discussed in more detail 

below, LSC proposes to revise part 1627 

to adopt Management’s interpretation of 

the rule as applying only to those 

subgrants awarded to third parties for 

the purpose of carrying out legal 

assistance activities authorized by the 

recipient’s LSC grant. LSC also proposes 

to transfer § 1610.7, which governs the 

applicability of the restrictions placed 

upon acceptance of LSC funds by the 

LSC Act and § 504 of LSC’s fiscal year 

1996 appropriations act, to part 1627. 

Finally, LSC proposes to transfer 

existing §§ 1627.4, 1627.5, and 1627.7 

from part 1627 to part 1630, which 

governs the allowability and allocability 

of costs to LSC grants. LSC seeks 

comments on each of the proposed 

changes. 

A. Proposed Changes to Part 1627 

§ 1627.1 Purpose. LSC proposes to 

revise this section to state more clearly 

that part 1627 establishes the 

requirements for subgrants of LSC 

funds. 

§ 1627.2 Definitions. LSC proposes 

to alphabetize the definitions for ease of 

reference. Because LSC is proposing to 

relocate existing § 1627.4 to part 1630, 

LSC proposes to remove the definition 

of membership fees or dues currently 

located in paragraph (c) of this section. 

§ 1627.2(a) Private attorney. LSC 

proposes to adopt the definition of the 

term private attorney established by 45 

CFR part 1614. 

§ 1627.2(b) Programmatic. LSC 

proposes to define the term 

programmatic to mean ‘‘activities or 

functions carried out for the purpose of 

providing legal assistance, as defined in 

§ 1002 of the LSC Act, 42 U.S.C. 

2996a(5).’’ Programmatic activities do 

not include the provision of goods or 

services by vendors or consultants that 

the recipient would not be expected to 

provide itself. 

LSC proposes defining programmatic 

to explicitly reference the definition of 

legal assistance provided in the LSC Act 

to ensure that Management’s 

interpretation of part 1627 applies. In 

other words, activities are programmatic 

only if they are conducted in 

furtherance of a recipient’s grant to 

provide legal assistance to eligible 

clients. Activities are not programmatic 

if they are technical in nature, such as 

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the provision of web development 

services. 

§ 1627.2(c) Recipient. LSC proposes to 

remove recipients of grants or contracts 

awarded under section 1006(a)(3) of the 

LSC Act, 42 U.S.C. 2996e(a)(3), from the 

definition of recipient. Section 

1006(a)(3) of the LSC Act authorizes 

LSC ‘‘to undertake directly, or by grant 

or contract, the following activities 

relating to the delivery of legal 

assistance—research . . . training and 

technical assistance, and [] to serve as 

a clearinghouse for information.’’ 42 

U.S.C. 2996e(a)(3). LSC proposes to 

remove these types of awards from the 

scope of part 1627 because, as Congress 

stated, the activities funded through 

these awards are related to the delivery 

of legal assistance, but are not 

themselves an integral part of a 

recipient’s delivery of legal assistance. 

LSC currently does not make awards 

under § 1006(a)(3) of the LSC Act; if LSC 

did, 45 CFR part 1630, LSC’s cost 

standards and procedures, would 

continue to govern entities receiving 

such awards. 

§ 1627.2(d) Subgrant. LSC proposes to 

revise the definition of subgrant 

currently in § 1627.2(b)(2). LSC 

proposes to adopt a definition that 

substantially mirrors the definition of 

subaward contained in the Uniform 

Grants Guidance (UGG), 2 CFR 200.92, 

which applies to Federal awards. LSC 

proposes to revise the definition to 

make clear that the purpose of the 

award is to carry out part of the 

recipient’s grant to provide legal 

assistance and to remove the references 

to ‘‘pass-through entities.’’ LSC is not 

bound by the UGG, and does not intend, 

by adopting this definition, to obligate 

itself or its recipients to abide by the 

rules for pass-through entities and 

subgrantees established by the UGG. 

LSC proposes to retain the exclusion 

from the definition of subgrant for 

judicare arrangements or contracts with 

private attorneys for the direct delivery 

of legal assistance to recipients’ clients. 

LSC also seeks comment regarding the 

$25,000 threshold for private attorney 

involvement (PAI) contracts supported 

with LSC funds. During the rulemaking 

to revise part 1614 on PAI, LSC received 

a comment recommending that LSC 

increase the threshold from $25,000 to 

$60,000 to account for inflation since 

LSC established the $25,000 threshold 

in 1983. 70 FR 61770, 61780, Oct. 15, 

2014. After consideration, LSC 

determined that it would benefit from 

receiving additional information before 

making any adjustments to the 

threshold. For this reason, LSC 

specifically requests comments on 

whether it should amend the $25,000 

threshold, on what amount LSC should 

set as the new threshold, and providing 

justification for the proposed threshold. 

§ 1627.2(e) Subrecipient. LSC 

proposes to simplify the existing 

definition of subrecipient currently 

located at § 1627.2(b)(1). LSC proposes 

to move relevant portions of the current 

definition to the definitions of 

programmatic and subgrant to improve 

clarity. The revised definition will 

continue to make clear that a single 

entity may be a subrecipient with 

respect to some activities, while not 

being a subrecipient for other activities 

it conducts for a recipient. 

§ 1627.3 Characteristics of 

subgrants. LSC proposes to add a new 

§ 1627.3 stating the factors that 

recipients should consider in 

determining whether a potential award 

is a subgrant and requiring recipients to 

support subgrants using funds, rather 

than goods or services. LSC proposes to 

add this section to provide recipients 

with a framework for determining 

whether a proposed award to a third 

party is a subgrant subject to the 

requirements of this part. This section 

will make clear that subgrants are 

awards to third parties that support a 

recipient’s delivery of legal assistance to 

eligible clients, consistent with 

Management’s interpretation of part 

1627. 

The first two paragraphs of proposed 

§ 1627.3 are taken substantially from the 

UGG, specifically 2 CFR 200.330. 

Paragraph (a) adopts the language at 

§ 200.330(c), which explains that the 

listed characteristics are indicative of a 

subgrant, but need not all be present in 

order for an award to be considered a 

subgrant. Paragraph (b) sets forth the 

characteristics of a subgrant from 

§ 200.330(a), with minor revisions to 

make clear that the context for subgrant 

activities and the performance of the 

subrecipient is the LSC recipient’s legal 

services work. 

In considering whether an award 

should be a subgrant, the primary 

question is whether the work the 

subrecipient is doing essentially 

substitutes for the recipient’s legal 

services work. The following examples 

demonstrate whether certain types of 

awards to third parties meet the 

characteristics of a subgrant. 

Example 1: An LSC recipient provides 

an award to another legal services 

organization to conduct telephone 

intake and refer cases either to private 

attorneys for handling or to another 

organization if the caller is not eligible 

for LSC-funded legal assistance. This 

award would properly be considered a 

subgrant because it meets all five of the 

characteristics. First, the subrecipient is 

responsible for determining who is 

eligible, including whether the person’s 

case is within the recipient’s priorities, 

for legal assistance under the recipient’s 

LSC grant. Second, the subrecipient’s 

performance in referring cases to private 

attorneys is measured in relation to the 

recipient’s objectives for referring cases 

to private attorneys in order to meet the 

requirements of the PAI rule. Third, the 

subrecipient has responsibility for 

programmatic decisionmaking because 

it determines which types of cases it 

will refer to private attorneys and which 

it will refer to another provider. Fourth, 

as it acknowledges in the subgrant 

agreement, the subrecipient is 

responsible for adhering to applicable 

LSC program requirements specified in 

the award. Finally, the subrecipient will 

use the LSC funds to carry out legal 

assistance activities authorized by LSC’s 

governing statutes and regulations, as 

opposed to providing goods or services 

for the benefit of the recipient. 

Example 2: An LSC recipient provides 

an award to a web designer to develop 

an online portal for clients and other 

stakeholders to obtain general legal 

information about particular areas of 

law, such as divorces and bankruptcies, 

as well as contact information for the 

legal services providers in the state. 

This award would not be a subgrant 

because it does not have most of the 

characteristics set forth in § 1627.3(b). 

The web designer does not determine 

eligibility to receive legal assistance 

under the recipient’s LSC grant, nor 

does it have responsibility for 

programmatic decision making. The 

designer does not have its performance 

measured in relation to whether the 

recipient’s objectives for providing legal 

services are met, and it is not required 

to adhere to the programmatic 

requirements set forth in the recipient’s 

award from LSC. With respect to the 

fifth characteristic—that the 

subrecipient uses LSC funds to carry out 

a program for a public purpose specified 

in LSC’s governing statutes and 

regulations, rather than providing goods 

or services for the recipient’s benefit— 

there is room for debate about whether 

the web designer’s work is for the public 

purpose of providing legal information 

to eligible clients, or is instead technical 

services provided for the benefit of the 

recipient. On balance, however, this 

type of award appears to be considered 

more appropriately as a procurement 

contract. 

LSC reminds recipients that awards of 

LSC funds to third parties that do not 

meet the characteristics of subgrants, 

including procurements of services, 

must meet the applicable requirements 

of 45 CFR part 1630, as well as the 

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Property Acquisition and Management 

Manual (PAMM). 

Proposed paragraph (c) states that any 

award to a third party that is determined 

to be a subgrant based on an analysis of 

the factors in paragraph (b) must be 

supported using LSC funds. LSC has 

learned that some recipients have 

entered into agreements with other 

entities in which the recipients 

provided goods, including office space 

and office supplies, in exchange for the 

other entities’ carrying out PAI activities 

on behalf of the recipient. The 

recipients in question did not seek prior 

approval of these agreements because 

they were exchanges of goods and 

services, rather than funds; therefore, 

the recipients did not consider the 

arrangements to be subgrants subject to 

the requirements of part 1627. 

As an organization responsible for 

disbursing and ensuring accountability 

for the use of appropriated public funds, 

LSC must be able to determine that any 

funds it awards are spent consistent 

with the terms of its governing statutes 

and regulations. It is difficult to ensure 

that goods and services, which may be 

purchased in whole or in part with LSC 

funds, transferred to a third party are 

used in a manner consistent with LSC’s 

governing statutes. Ensuring the 

accountability of LSC-supported 

resources is particularly crucial when 

the resources are provided to a third 

party that conducts restricted activities 

in addition to the activities that it is 

carrying out on behalf of an LSC 

recipient. In order to ensure the proper 

use of LSC funds by any entity receiving 

those funds or resources supported by 

those funds, LSC believes that any 

arrangement qualifying as a subgrant 

under § 1627.3(b) must be paid for with 

actual funds and not with goods or 

services. 

§ 1627.4 Requirements for all 

subgrants. LSC proposes to transfer 

existing § 1627.4, prohibiting the use of 

LSC funds to pay membership fees or 

dues, to part 1630. LSC proposes this 

transfer to limit the scope of part 1627 

to subgrants and to move a provision 

pertaining to the allowability of costs to 

the part of LSC’s regulations governing 

cost standards. To accommodate the 

inclusion of new § 1627.3, LSC proposes 

to restructure existing § 1627.3 and 

redesignate it as § 1627.4. LSC also 

proposes to revise the text of certain 

paragraphs to reflect changes to the 

grant approval process and the resulting 

changes to the subgrant approval 

process. 

§ 1627.4(a) Corporation approval of 

subgrants. LSC proposes to revise 

paragraph (a) to tell recipients how to 

submit subgrant applications for 

approval. The process will vary based 

on the type of grant—Basic Field or 

special—for which the recipient seeks to 

award a subgrant, and the time at which 

the recipient is seeking approval. 

In paragraph (a)(1)(i), LSC proposes 

that recipients must submit applications 

for subgrants of Basic Field Grant funds 

at the same time as recipients submit 

their proposals for Basic Field Grant 

funding. This would consolidate the 

subgrant approval process with the 

main grant competition process. LSC 

also proposes to prescribe the format 

and substance of requests for subgrant 

approval annually through notice in the 

Federal Register. Finally, in paragraph 

(a)(1)(ii), LSC proposes to inform 

recipients of its decision to approve, 

disapprove, or suggest modifications to 

the proposed subgrants prior to or at the 

same time as it informs recipients of its 

decision whether to award Basic Field 

Grant funding. 

In paragraph (a)(2), LSC proposes to 

formalize in regulation its current 

process for requesting and approving 

subgrants in its special grant programs. 

The application and award processes for 

special grants proceed on different 

schedules from the Basic Field Grant 

application and award process. LSC’s 

special grant programs are all programs 

outside of Basic Field Grants—which 

include Basic Field-Migrant and Basic 

Field-Native American grants. TIG and 

the Pro Bono Innovation Fund (PBIF) 

grants are examples of special grants, as 

are disaster relief grants. 

As described in proposed paragraph 

(a)(2)(i), recipients currently submit 

applications for approval of subgrants in 

special grant programs after LSC has 

awarded them grants. Because the 

special grant programs are highly 

competitive, LSC structured the process 

this way to avoid making recipients 

invest significant amounts of time in 

developing, finalizing, and executing 

subgrant agreements for projects that 

ultimately are not funded. To allow for 

flexibility in the form and substance of 

subgrant applications for the special 

grant programs, LSC also proposes in 

this paragraph to publish the 

requirements for subgrant applications 

on its Web site and in the Federal 

Register on an annual basis. 

In paragraph (a)(2)(ii), LSC proposes 

to adopt existing § 1627.3(a)(2) in 

substantial part. LSC proposes to require 

recipients to submit applications for 

subgrant approval at least 45 days prior 

to the start date of the subgrant. LSC 

will consider and make a decision to 

approve, disapprove, or suggest 

modifications to applications for 

approval. Recipients may resubmit for 

approval applications to which LSC 

suggested modifications or that LSC has 

disapproved. LSC proposes to omit the 

sentence deeming subgrants approved if 

LSC fails to make a decision on the 

subgrant application within the 

specified period of time. LSC is 

committed to making timely decisions 

on recipient requests for subgrant 

approval and does not believe the 

current policy is consistent with its 

responsibility to ensure that recipients 

spend their LSC funds efficiently and 

effectively. 

Finally, LSC proposes to establish in 

§ 1627.4(a)(3) a process for the 

submission and approval of subgrant 

applications during the grant period for 

both Basic Field and special grants. LSC 

recognizes that unanticipated situations, 

such as the need to terminate and 

replace an underperforming 

subrecipient, may cause a recipient to 

need approval of a subgrant during the 

grant period. For mid-grant subgrant 

applications, LSC proposes in paragraph 

(a)(3)(i) that recipients should submit an 

application, using the format prescribed 

by LSC on its Web site and in the 

Federal Register. Finally, LSC proposes 

to adopt the 45-day period for 

submission of applications established 

in paragraph (a)(2)(ii) of this section. 

LSC proposes conforming changes to 

existing § 1627.3(a)(3), which will be 

relocated to § 1627.4(a)(4). 

LSC proposes to remove existing 

§ 1627.3(a)(4), which authorized the 

extension of subgrants that were being 

executed at the time part 1627 became 

effective in 1983. This rule is obsolete 

and should be removed from part 1627. 

Finally, LSC proposes to relocate 

existing § 1627.3(b)(3), which requires 

recipients to seek Corporation approval 

of any substantial changes in the scope, 

objectives, or funding amount of a 

subgrant, to § 1627.4(a)(5) without 

change. LSC proposes this change to 

place all requirements for Corporation 

approval of subgrant proposals or 

substantial changes within the same 

paragraph. 

§ 1627.4(b) Duration of subgrant. LSC 

proposes to revise paragraph (b) to 

establish the maximum length of 

subgrant periods. For Basic Field grants, 

LSC proposes to limit subgrant periods 

to one year and to require recipients to 

submit a new application for each 

subgrant in each year of the Basic Field 

grant. For special grants, including TIG 

and PBIF grants, LSC proposes to allow 

the maximum subgrant period to match 

the period of the recipient’s special 

grant. 

Recipients of Basic Field grants must 

either compete for new grants or apply 

for renewal of their current grants 

annually. This schedule supports a 

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conclusion that recipient’s subgrants 

should likewise be reviewed annually to 

ensure that the subgrants comply with 

LSC’s statutes and regulations, and that 

the subgrants represent an effective and 

efficient use of the recipient’s LSC 

resources. 

By contrast, special grants are for 

discrete, time-limited projects that may 

require recipients to engage the 

subrecipient for the life of the project in 

order to secure the subrecipient’s 

participation. Additionally, LSC 

requires special grant recipients to 

report more frequently about their 

progress toward meeting project 

milestones or objectives. This increased 

reporting allows LSC to assess whether 

a recipient’s subgrants are performing 

effectively and efficiently throughout 

the grant period. Because reporting on 

the performance of a special grant, 

including the performance of 

subrecipients of special grant funds, 

occurs more frequently than once a year, 

it is not necessary for LSC to limit the 

maximum duration of a subgrant 

awarded as part of a special grant to one 

year. 

For similar reasons, LSC proposes to 

treat subgrant funds remaining at the 

end of the grant year differently. In 

paragraph (b)(1), LSC proposes to retain 

the existing language stating that 

unexpended Basic Field subgrant funds 

will be considered part of the recipient’s 

available LSC funds. In paragraph (b)(2), 

LSC proposes to require recipients to 

return funds remaining on a special 

grant program subgrant at the end of the 

grant term to LSC, unless the recipient 

requests and receives approval from the 

Corporation to retain such funds. This 

approach is consistent with the current 

terms of both the TIG and PBIF grant 

assurances, which allow recipients to 

ask LSC for approval to retain any funds 

that were awarded by LSC to carry out 

the project, but that were not spent 

because of lower costs or increased 

efficiencies in the operation of the 

project. 

LSC proposes to redesignate existing 

§ 1627.3(b)(2) as § 1627.4(b)(3) with 

revisions. The most substantive of the 

proposed revisions deletes the 

references to termination and denials of 

refunding as the exclusive events for 

which recipients should have 

procedures for the orderly termination 

of subgrants, and replaces them with 

general language that subgrants should 

terminate ‘‘in the event that the 

recipient is no longer an LSC recipient.’’ 

LSC proposes adopting the general 

language to reflect that a recipient’s 

policies governing the orderly 

termination of subgrants should apply 

in any instance where the recipient 

ceases to be an LSC recipient, including 

termination by LSC, voluntary 

termination by the recipient, or a failure 

to receive funding through competition. 

The other changes LSC proposes are 

editorial. 

§ 1627.4(c) Recipient responsibilities. 

For ease of reference, LSC proposes to 

restructure and consolidate the 

paragraphs of existing § 1627.3 

governing the recipient’s particular 

oversight and repayment obligations 

into a new § 1627.4(c). Proposed 

paragraphs (c)(1) and (2) adopt the first 

two sentences of existing § 1627.3(c) 

regarding recipients’ duties to ensure 

that their subrecipients comply with 

LSC’s financial and audit provisions 

and to ensure that their subrecipients 

properly spend, account for, and audit 

subgrant funds, respectively. LSC 

proposes to relocate existing § 1627.3(d), 

which requires a recipient to repay LSC 

for any disallowed expenditures of LSC 

funds incurred by a subrecipient, to 

paragraph (c)(3). 

§ 1627.4(d) Accounting of funds. LSC 

proposes to restructure and consolidate 

the paragraphs of existing § 1627.3 

governing the accounting of subgrant 

funds into a new § 1627.4(d). This 

paragraph states that subgrants of LSC 

funds are subject to the audit and 

financial requirements of the Audit and 

Accounting Guide for Recipients and 

Auditors. LSC proposes to delete the 

last two sentences in existing 

§ 1627.3(c), which authorize recipients 

to enter into subgrant agreements that 

provide for an alternate auditing 

method. LSC is not aware that this 

provision has been used and proposes to 

remove it as unnecessary. 

§ 1627.4(e) Oversight. LSC proposes to 

relocate existing § 1627.3(e) to new 

§ 1627.4(e) with minor editorial 

changes. 

§ 1627.5 Applicability of restrictions, 

timekeeping, and recipient priorities; 

private attorney involvement subgrants. 

LSC proposes to transfer existing 

§ 1627.5, prohibiting the use of LSC 

funds to make contributions or gifts to 

other organizations or individuals, to 

part 1630. LSC proposes this transfer to 

limit the scope of part 1627 to subgrants 

and to move another provision 

pertaining to the allowability of costs to 

the part of LSC’s regulations governing 

cost standards. 

Additionally, because LSC has 

considered subgrants and transfers as 

functionally the same, LSC proposes to 

transfer 45 CFR 1610.7, the transfer rule, 

to part 1627 and redesignate it as 

§ 1627.5. The restrictions listed in 45 

CFR 1610.2—restrictions established by 

both the LSC Act and the FY96 

appropriations act—will continue to 

apply to all subgrants. LSC proposes to 

make only minor edits to paragraphs (a) 

and (b) for clarity. 

§ 1627.5(c) Timekeeping. LSC 

proposes to move the timekeeping 

requirement to its own paragraph and 

revise the requirement itself. Currently, 

§ 1610.7(b)(2) requires only that 

recipients ‘‘maintain records of time 

spent on each case or matter undertaken 

with the funds transferred.’’ In the 

preamble to the 1997 final rule, LSC tied 

the timekeeping requirement to the 

language in Section 504(a)(10)(A) of the 

FY96 appropriations act, which 

prohibited LSC funds from being 

awarded to any person or entity unless 

‘‘prior to receiving the financial 

assistance, such person or entity agrees 

to maintain records of time spent on 

each case or matter with respect to 

which the person or entity is engaged.’’ 

Sec. 504(a)(10)(A), Pub. L. 104–134, 110 

Stat. 1321, 1321–54. LSC stated in the 

preamble that the rule did not require 

recipients ‘‘to keep time in accordance 

with the Corporation’s timekeeping 

regulation, 45 CFR part 1635,’’ but also 

did not provide guidance to recipients 

about the level of timekeeping that 

would be sufficient ‘‘to ensure 

accountability for [the transferred] 

funds.’’ 62 FR 27695, 27697, May 21, 

1997. To further confuse matters, part 

1614 states that ‘‘[i]f any direct or 

indirect time of staff attorneys or 

paralegals is to be allocated as a cost to 

PAI, such costs must be documented by 

time sheets accounting for the time 

those employees have spent on PAI 

activities.’’ 45 CFR 1614.7(a)(1). 

LSC considered multiple options for 

creating coherent timekeeping 

requirements for recipients and 

subrecipients alike. LSC considered 

leaving the current language in place 

and adding language describing the 

minimum requirements for subrecipient 

timekeeping. Doing so would allow 

recipients and subrecipients flexibility 

to develop timekeeping systems that 

would ensure accountability for 

expenditures of LSC funds, while 

minimizing the administrative burden 

to the subrecipient. LSC also considered 

making the part 1635 timekeeping 

requirements applicable to non-PAI 

subgrants and the part 1614 timekeeping 

requirements applicable to PAI 

subgrants. This option would be 

consistent with the way in which LSC’s 

regulations direct recipients to 

document time spent on the recipients’ 

non-PAI and PAI activities, respectively. 

LSC ultimately chose to propose a 

requirement that all subrecipients 

comply with the part 1635 timekeeping 

requirements for all LSC-funded 

subgrant activities. LSC chose this 

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option for three reasons. First, LSC 

learned that some recipients have 

interpreted § 1610.7(b)(2) as not 

requiring subrecipients to keep time 

records. This interpretation is incorrect. 

Section 1610.7(b)(2) clearly states that 

subrecipients ‘‘are required to maintain 

records of time spent on each case or 

matter undertaken’’ with LSC funds, 

although LSC also stated in the 

preamble to the 1997 final rule for part 

1610 that subrecipients did not have ‘‘to 

keep time in accordance with the 

Corporation’s timekeeping regulation, 

45 CFR part 1635.’’ 62 FR 27695, 27697, 

May 21, 1997. Second, LSC’s experience 

overseeing subgrants over the eighteen 

years since LSC revised § 1610.7 has 

given LSC reason to believe that clear 

timekeeping requirements for subgrants 

will lead to increased accountability for 

the use of LSC funds by subrecipients. 

Finally, LSC believes that having three 

distinct timekeeping requirements 

creates unnecessary confusion about 

which requirements apply to which 

uses of LSC funds. LSC’s proposal will 

make the timekeeping provisions of 

parts 1627 and 1635 consistent and will 

reflect the methods that recipients use 

to document time charged to their LSC 

grants. 

LSC understands that some 

subrecipients may be small 

organizations that currently do not have, 

or may find it difficult to develop, the 

capacity to maintain timekeeping 

records that comply with part 1635. For 

that reason, LSC specifically seeks 

comment on the proposal to require all 

subrecipients to comply with the 

timekeeping requirements of part 1635. 

§ 1627.5(d) PAI subgrants. LSC 

proposes to redesignate existing 

§ 1610.7(c) as § 1627.5(d) and to make 

editorial changes to the paragraph for 

clarity. LSC also proposes to adopt a 

new paragraph (d)(2) stating that, with 

respect to PAI subgrants, all funds that 

a recipient uses to support the subgrant 

are deemed to be LSC funds for 

purposes of the restrictions listed in 45 

CFR 1610.2. LSC requires its recipients 

to expend an amount equal to at least 

12.5% of its LSC grant to PAI activities. 

See 45 CFR 1614.1(a). This language 

gives recipients discretion about 

whether they spend entirely LSC funds, 

entirely non-LSC funds, or some 

combination of the two, on PAI 

activities. The reason for the proposed 

paragraph is to put in the regulation the 

analysis reflected in AO–2009–1004 that 

activities carried out as part of a 

recipient’s PAI program, regardless of 

the source of funds, must be consistent 

with LSC’s governing statutes and 

regulations. See Advisory Opinion AO– 

2009–1004, at 3–4, June 19, 2009. 

§ 1627.6 Subgrants to other 

recipients. LSC proposes to make only 

non-substantive editorial changes to this 

section. 

§ 1627.7 Recipient policies, 

procedures, and recordkeeping. LSC 

proposes to transfer existing § 1627.7, 

regarding recipient payments to taxsheltered annuities, retirement 

accounts, and pensions, to part 1630. 

LSC proposes this transfer to limit the 

scope of part 1627 to subgrants and to 

move the final provision in part 1627 

pertaining to the allowability of costs to 

the part of LSC’s regulations governing 

cost standards. LSC proposes to 

redesignate existing § 1627.8 as § 1627.7 

without revision. 

B. Proposed Changes to Part 1610 

§ 1610.2 Definitions. LSC proposes 

to eliminate the term transfer and 

replace it with the term subgrant, as 

defined in § 1627.2(d). LSC intended the 

current definition of transfer to mirror 

the definition of subgrant, but it does 

not. The slight differences between the 

two definitions have caused confusion 

about whether the terms are 

coextensive. LSC has treated the terms 

as functionally equivalent since it 

enacted § 1610.7 in 1997. LSC’s 

proposed change will eliminate 

ambiguity by combining the two 

concepts into one term. The proposed 

change will not affect the current order 

of definitions in § 1610.2. If this change 

becomes final, LSC will need to amend 

§ 1610.8(a)(2) to conform with the 

change. 

§ 1610.7 Transfers of LSC funds. As 

described more fully above, LSC 

proposes to transfer this section to part 

1627 because it governs the application 

of the LSC Act and FY96 appropriations 

act restrictions listed in § 1610.2 to a 

subrecipient’s LSC and non-LSC funds. 

LSC believes that because § 1610.7 

effectively applies to subgrants, it 

should be located in part 1627 with the 

rest of the subgrant rules. Should this 

proposed change become final, LSC will 

need to redesignate existing §§ 1610.8 

and 1610.9 to reflect the removal of 

§ 1610.7. 

C. Proposed Changes to Part 1630 

In the interest of making its 

regulations easier to use, LSC proposes 

to limit the scope of part 1627 to 

provisions applicable to subgrants. 

Three provisions of part 1627 are not 

related to subgrants, but instead 

proscribe the use of LSC funds to pay 

membership fees or dues (§ 1627.4) or to 

make contributions to other entities or 

individuals (§ 1627.5), or allow 

recipients to make certain benefits 

contributions on behalf of its employees 

(§ 1627.7). LSC proposes to transfer 

these three provisions to part 1630, 

which establishes LSC’s cost standards. 

LSC proposes to redesignate these 

provisions as §§ 1630.14–16. LSC does 

not propose to revise the text of these 

provisions at this time. 

For the reasons stated in the 

preamble, the Legal Services 

Corporation proposes to amend 45 CFR 

chapter XVI as follows: 

PART 1610—USE OF NON-LSC 

FUNDS, TRANSFERS OF LSC FUNDS, 

PROGRAM INTEGRITY 

■ 1. The authority citation for part 1610 

continues to read as follows: 

Authority: 42 U.S.C. 2996i; Pub. L. 104– 

208, 110 Stat. 3009; Pub. L. 104–134, 110 

Stat. 1321; Pub. L. 111–117; 123 Stat. 3034. 

§ 1610.7 [Removed] 

■ 2. Remove § 1610.7. 

§§ 1610.8 and 1610.9 [Redesignated as 

§§ 1610.7 and 1610.8] 

■ 3. Sections 1610.8 and 1610.9 are 

redesignated as §§ 1610.7 and 1610.8, 

respectively. 

PART 1630—COST STANDARDS AND 

PROCEDURES 

■ 4. The authority citation for part 1630 

continues to read as follows: 

Authority: 5 U.S.C. App. 3, 42 U.S.C. 

2996e, 2996f, 2996g, 2996h(c)(1); Pub. L. 

105–119, 111 Stat. 2440; Pub. L. 104–134, 

110 Stat. 1321. 

PART 1627—SUBGRANTS AND 

MEMBERSHIP FEES OR DUES 

■ 5. The authority citation for part 1627 

is revised to read as follows: 

Authority: 42 U.S.C. 2996g(e). 

§ 1627.4 [Transferred to Part 1630 and 

Redesignated as § 1630.14] 

■ 6. Section 1627.4 is transferred to part 

1630 and redesignated as § 1630.14. 

§ 1627.5 [Transferred to Part 1630 and 

Redesignated as § 1630.15] 

■ 7. Section 1627.5 is transferred to part 

1630 and redesignated as § 1630.15. 

§ 1627.7 [Transferred to Part 1630 and 

Redesignated as § 1630.16] 

■ 8. Section 1627.7 is transferred to part 

1630 and redesignated as § 1630.16. 

■ 9. Revise part 1627 to read as follows: 

PART 1627—SUBGRANTS 

Sec. 

1627.1 Purpose. 

1627.2 Definitions. 

1627.3 Characteristics of subgrants. 

1627.4 Requirements for all subgrants. 

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1627.5 Applicability of restrictions, 

timekeeping, and recipient priorities; 

private attorney involvement subgrants. 

1627.6 Transfers to other recipients. 

1627.7 Recipient policies, procedures and 

recordkeeping. 

Authority: 42 U.S.C. 2996g(e). 

§ 1627.1 Purpose. 

The purpose of this part is to establish 

the requirements for subgrants of LSC 

funds from recipients to third parties to 

assist in the recipient’s provision of 

legal assistance to eligible clients. 

§ 1627.2 Definitions. 

(a) Private attorney has the meaning 

given that term in 45 CFR 1614.3(i). 

(b) Programmatic means activities or 

functions carried out to provide legal 

assistance, as defined in § 1002 of the 

LSC Act, 42 U.S.C. 2996a(5). 

Programmatic activities do not include 

the provision of goods or services by 

vendors or consultants in the normal 

course of business that the recipient 

would not be expected to provide itself. 

(c) Recipient as used in this part 

means any recipient as defined in 

section 1002(6) of the Act and any 

grantee or contractor receiving funds 

from LSC under section 1006(a)(1)(B) of 

the Act. 

(d)(1) Subgrant means an award of 

LSC funds provided by a recipient to a 

subrecipient for the subrecipient to 

carry out part of the recipient’s 

programmatic activities. 

(2) Except for judicare arrangements 

and contracts with private attorneys for 

the direct delivery of legal assistance 

under 45 CFR part 1614 that exceed 

$25,000, subgrant does not include 

activities that are covered by a fee-forservice arrangement. 

Subrecipient means any entity 

receiving a subgrant. A single entity 

may be a subrecipient with respect to 

some activities it conducts for a 

recipient while not being a subrecipient 

with respect to other activities it 

conducts for a recipient. 

§ 1627.3 Characteristics of subgrants. 

(a) In determining whether an 

agreement between a recipient and 

another entity should be considered a 

subgrant or a procurement contract, the 

substance of the relationship is more 

important than the form of the 

agreement. All of the characteristics 

listed below may not be present in all 

cases, and the recipient must use 

judgment in classifying each agreement 

as a subgrant or a procurement contract. 

(b) An award from a recipient to 

another entity will be considered a 

subgrant when the entity: 

(1) Determines who is eligible to 

receive legal assistance under the 

recipient’s LSC grant; 

(2) Has its performance measured in 

relation to whether programmatic 

objectives of the LSC grant were met; 

(3) Has responsibility for 

programmatic decisionmaking; 

(4) Is responsible for adherence to 

applicable LSC program requirements 

specified in the LSC grant award; and 

(5) In accordance with its agreement, 

uses the LSC funds to carry out a 

program for a public purpose specified 

in LSC’s governing statutes and 

regulations, as opposed to providing 

goods or services for the benefit of the 

recipient. 

(c) Any award to a third party that is 

determined to be a subgrant based on an 

analysis of these factors must be 

supported using LSC funds. Recipients 

may not use goods and services paid for 

in whole or in part with LSC funds as 

payment for a subgrant. 

§ 1627.4 Requirements for all subgrants. 

(a) Corporation approval of subgrants. 

Recipients must submit all applications 

for subgrants to LSC in writing for prior 

written approval. 

(1) Basic Field Grants. (i) Recipients 

should submit applications for 

subgrants of Basic Field Grant funds 

along with the recipient’s proposal for 

funding, including applications for 

renewals of funding. LSC will publish 

the requirements concerning the format 

and contents of the application annually 

in the Federal Register and on LSC’s 

Web site. 

(ii) LSC will notify a recipient of its 

decision to approve, disapprove, or 

suggest modifications to an application 

for subgrant approval prior to, or at the 

same time as LSC provides notice of its 

decision with respect to the applicant’s 

proposal for Basic Field Grant funding. 

(2) Special grants. (i) Recipients of 

special grants (e.g., Technology 

Initiative Grants, Pro Bono Innovation 

Fund grants, disaster assistance grants), 

should submit their subgrant 

applications following notification of 

approval of special grant funds. LSC 

will publish the requirements 

concerning the format and contents of 

the application annually in the Federal 

Register and on LSC’s Web site. 

(ii) A subgrant application must be 

submitted at least 45 days in advance of 

its proposed effective date. LSC will 

notify the recipient in writing of its 

decision to approve, disapprove, or 

suggest modifications to the subgrant. A 

subgrant that is disapproved or to which 

LSC has suggested modifications may be 

resubmitted for approval. 

(3) Mid-year subgrant requests. A 

recipient may apply for prior approval 

of a subgrant outside of the periods 

prescribed in paragraphs (a)(1) and 

(a)(2) of this section as needed. LSC will 

publish the requirements concerning the 

format and contents of the application 

annually in the Federal Register and on 

LSC’s Web site. LSC will follow the time 

periods prescribed in paragraph (a)(2)(ii) 

of this section to consider and notify a 

recipient of its decision to approve, 

disapprove, or suggest modifications to 

the subgrant. 

(4) Any subgrant not approved 

according to paragraphs (a)(1)–(3) of this 

section will be subject to disallowance 

and recovery of all funds expended 

under the subgrant. 

(5) A recipient must obtain LSC 

approval of any substantial change in 

the scope or objectives of a subgrant or 

an increase or decrease in the funding 

amount of more than 10%. Minor 

changes in the scope or objectives or 

changes in funding of less than 10% do 

not require prior approval, but the 

recipient must notify LSC of such 

changes in writing. 

(b) Duration of subgrant. (1) For Basic 

Field grants, a subgrant may not be for 

a period longer than one year. All funds 

unexpended at the end of the subgrant 

period will be considered part of the 

recipient’s available LSC funds. 

(2) For special grants (e.g., Pro Bono 

Innovation Fund grants, Technology 

Initiative Grants, disaster assistance 

grants), a subgrant may not be for a 

period longer than the term of the grant. 

Absent written approval from LSC, all 

unexpended funds must be returned to 

LSC at the end of the subgrant period. 

(3) All subgrants must contain 

provisions for their orderly termination 

in the event that the recipient is no 

longer an LSC recipient, and for 

suspension of activities if the recipient’s 

funding is suspended. 

(c) Recipient responsibilities. (1) 

Recipients must ensure that 

subrecipients comply with LSC’s 

financial and audit provisions. 

(2) The recipient must ensure that the 

subrecipient properly spends, accounts 

for, and audits funds received through 

the subgrant. 

(3) The recipient must repay LSC for 

any disallowed expenditures by a 

subrecipient. Repayment is required 

regardless of whether the recipient is 

able to recover such expenditures from 

the subrecipient. 

(d) Accounting of funds. Any LSC 

funds paid by a recipient to a 

subrecipient through a subgrant are 

subject to the audit and financial 

requirements of the Audit Guide for 

Recipients and Auditors and the 

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21700 Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 

Accounting Guide for LSC Recipients. 

Subgranted funds may be separately 

disclosed and accounted for, and 

reported upon in the audited financial 

statements of a recipient; or such funds 

may be included in a separate audit 

report of the subrecipient. The 

relationship between the recipient and 

subrecipient will determine the proper 

method of financial reporting following 

generally accepted accounting 

principles. 

(e) Oversight. To ensure subrecipient 

compliance with the LSC Act, LSC’s 

appropriations statutes, Congressional 

restrictions having the force of law, and 

LSC’s regulations, guidelines, and 

instructions, agreements between a 

recipient and a subrecipient must 

provide the same oversight rights for 

LSC with respect to subrecipients as 

apply to subrecipients. 

§ 1627.5 Applicability of restrictions, 

timekeeping, and recipient priorities; 

private attorney involvement subgrants. 

(a) Applicability of restrictions. The 

prohibitions and requirements set forth 

in 45 CFR part 1610 apply both to the 

subgrant and to the subrecipient’s nonLSC funds, except as modified by 

paragraphs (b), (c), and (d) of this 

section. 

(b) Priorities. Subrecipients must 

either: 

(1) Use the subgrant consistent with 

the recipient’s priorities; or 

(2) Establish their own priorities for 

the use of the subgrant consistent with 

45 CFR part 1620; 

(c) Timekeeping. Subrecipients must 

comply with 45 CFR part 1635 regarding 

timekeeping for all LSC-funded subgrant 

activities. 

(d) PAI subgrant. (1) The prohibitions 

and requirements set forth in 45 CFR 

part 1610 apply only to the subgrant, 

when the subrecipient is a bar 

association, pro bono program, private 

attorney or law firm, or other entity that 

receives a subgrant for the sole purpose 

of funding private attorney involvement 

activities (PAI) pursuant to 45 CFR part 

1614. 

(2) Any funds used by a recipient as 

payment for a PAI subgrant are deemed 

LSC funds for purposes of this 

paragraph. 

§ 1627.6 Subgrants to other recipients. 

(a) The requirements of § 1627.4 apply 

to all subgrants from one recipient to 

another recipient. 

(b) The subrecipient must audit any 

funds provided by the recipient under a 

subgrant in its annual audit and supply 

a copy of this audit to the recipient. The 

recipient must either submit the 

relevant part of this audit with its next 

annual audit or, if an audit has been 

recently submitted, submit it as an 

addendum to that recently submitted 

audit. 

(c) In addition to the provisions of 

§ 1627.4(c)(3), LSC may hold the 

recipient responsible for any disallowed 

expenditures of subgrant funds. Thus, 

LSC may recover all of the disallowed 

costs from either the recipient or the 

subrecipient or may divide the recovery 

between the two. LSC’s total recovery 

may not exceed the amount of 

expenditures disallowed. 

(d) Funds received by a recipient from 

other recipients in the form of fees and 

dues shall be accounted for and 

included in the annual audit of the 

recipient receiving these funds as LSC 

funds. 

§ 1627.7 Recipient policies, procedures 

and recordkeeping. 

Each recipient must adopt written 

policies and procedures to guide its staff 

in complying with this part and must 

maintain records sufficient to document 

the recipient’s compliance with this 

part. 

PART 1630—COST STANDARDS AND 

PROCEDURES 

■ 10. In newly transferred and 

redesignated § 1630.14, revise the 

section heading to read as follows: 

§ 1630.14 Membership fees or dues. 

■ 11. In newly transferred and 

redesignated § 1630.15, revise the 

section heading to read as follows: 

§ 1630.15 Contributions. 

■ 12. In newly transferred and 

redesignated § 1630.16, revise the 

section heading to read as follows: 

§ 1630.16 Tax sheltered annuities, 

retirement accounts, and pensions. 

Dated: April 14, 2015. 

Stefanie K. Davis, 

Assistant General Counsel. 

[FR Doc. 2015–08951 Filed 4–17–15; 8:45 am] 

BILLING CODE 7050–01–P 

LEGAL SERVICES CORPORATION 

45 CFR Part 1628 

Recipient Fund Balances 

AGENCY: Legal Services Corporation. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This proposed rule would 

revise the Legal Services Corporation 

(LSC or Corporation) regulation on 

recipient fund balances to provide the 

Corporation with more discretion to 

grant a recipient’s request for a waiver 

to retain a fund balance in excess of 

25% of its annual LSC support. This 

proposed rule would also provide that 

recipients that face extraordinary and 

compelling circumstances may submit a 

waiver request to retain a fund balance 

in excess of 25% of their annual LSC 

support prior to the submission of their 

annual audited financial statements. 

DATE: Comments must be submitted by 

May 20, 2015. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Email: 1628rulemaking@lsc.gov. 

Include ‘‘Comments on Revisions to Part 

1628’’ in the subject line of the message. 

• Fax: (202) 337–6519, ATTN: Part 

1628 Rulemaking. 

• Mail: Stefanie K. Davis, Assistant 

General Counsel, Legal Services 

Corporation, 3333 K Street NW., 

Washington, DC 20007, ATTN: Part 

1628 Rulemaking. 

• Hand Delivery/Courier: Stefanie K. 

Davis, Assistant General Counsel, Legal 

Services Corporation, 3333 K Street 

NW., Washington, DC 20007, ATTN: 

Part 1628 Rulemaking. 

Instructions: Electronic submissions 

are preferred via email with attachments 

in Acrobat PDF format. Written 

comments sent to any other address or 

received after the end of the comment 

period may not be considered by LSC. 

FOR FURTHER INFORMATION CONTACT: 

Stefanie K. Davis, Assistant General 

Counsel, Legal Services Corporation, 

3333 K Street NW., Washington, DC 

20007; (202) 295–1563 (phone), (202) 

337–6519 (fax), or sdavis@lsc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Regulatory Background 

LSC issued its first instruction on 

recipient fund balances in 1983 to 

implement what is now the 

Corporation’s longstanding objective of 

ensuring the timely expenditure of LSC 

funds for the effective and economical 

provision of high quality legal 

assistance to eligible clients. 48 FR 560, 

561, Jan. 5, 1983. Later that year, LSC 

published a redrafted version titled 

Instruction 83–4, Recipient Fund 

Balances (‘‘Instruction’’). 48 FR 49710, 

49711, Oct. 27, 1983. The Instruction 

limited the ability of recipients to carry 

over LSC funds that remained unused at 

the end of the fiscal year. Id. 

Specifically, the Instruction provided 

that, in the absence of a waiver granted 

by the Corporation, a recipient’s end-ofyear fund balance in excess of 10% of 

its total annual LSC support must be 

repaid to LSC. Id. The Instruction also 

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