[Federal Register Volume 75, Number 21 (Tuesday, February 2, 2010)]
[Notices]
[Pages 5351-5353]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-2160]


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LEGAL SERVICES CORPORATION


Proposed Revisions to Accounting Guide for LSC Recipients

AGENCY: Legal Services Corporation.

ACTION: Notice and Request for Comments.

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SUMMARY: The Legal Services Corporation (``LSC'') intends to revise the 
Accounting Guide for LSC Recipients to reflect changes that have 
occurred since the last publication of the Accounting Guide in 1997 and 
is soliciting public comment on the proposed changes. The proposed 
revisions incorporate: (1) New internal control provisions for 
electronic banking transactions; (2) financial oversight concepts from 
the Sarbanes Oxley Act of 2002; (3) references to the accounting 
standards codification by the Financial Standards Accounting Board 
(FASB) released on July 1, 2009; (4) key practices to enhance fraud 
prevention; (5) provisions in other LSC policies, including the LSC 
Property Acquisition and Management Manual and LSC Program Letters; (6) 
revisions to accounting procedures and internal controls to reflect 
current best practices; (7) updated and new references to other

[[Page 5352]]

sources of information; and (8) other changes to clarify existing 
provisions. The proposed revisions to the Accounting Guide for LSC 
Recipients (2010 edition), in redline format indicating the proposed 
changes to the current Accounting Guide (1997), can be located by 
accessing LSC's Web site at http://www.lsc.gov/pdfs/proposed_revisions_to_accounting_guide_for_lsc_recipients.pdf.

DATES: Please submit comments by March 19, 2010.

ADDRESSES: Interested persons are invited to submit written comments on 
the proposed revisions to the Accounting Guide for LSC Recipients (2010 
edition) by mail, fax or e-mail to Chuck Greenfield, Program Counsel, 
Legal Services Corporation, 3333 K St., NW., Washington, DC 20007; 202-
295-1549 (phone); 202-337-6813 (fax); or <a href="/cdn-cgi/l/email-protection#2c6d4f4f4359425845424b6b594548496c405f4f024b435a"><span class="__cf_email__" data-cfemail="753416161a001b011c1b1232001c1110351906165b121a03">[email protected]</span></a> (e-
mail).

FOR FURTHER INFORMATION CONTACT: Chuck Greenfield, Program Counsel, 
Legal Services Corporation, 3333 K St., NW., Washington, DC 20007; 
<a href="/cdn-cgi/l/email-protection#6e091c0b0b0008070b020a0d2e021d0d40090118"><span class="__cf_email__" data-cfemail="7c1b0e1919121a151910181f3c100f1f521b130a">[email protected]</span></a> (e-mail), (212) 295-1549 (phone) or (212) 337-6813 
(fax).

SUPPLEMENTARY INFORMATION: Under the Legal Services Corporation Act, as 
amended, LSC ``is authorized to require such reports as it deems 
necessary from any recipient, contractor or person or entity receiving 
assistance'' 42 U.S.C. 2996g(a). LSC is also ``authorized to prescribe 
the keeping of records with respect to funds provided by grant or 
contract and shall have access to such records'' 42 U.S.C. 2996g(b). 
Further, LSC ``shall conduct or require each recipient, contractor, 
person or entity receiving financial assistance * * * to provide for an 
annual financial audit.'' 42 U.S.C. 2996h(c)(1). In addition, ``funds 
received by any recipient from a source other than the Corporation * * 
* shall be accounted for and reported as receipts and disbursements 
separate and district from Federal funds'' 42 U.S.C. 2996i(c).
    Under authority of the Legal Services Corporation Act, LSC 
published the Accounting Guide for LSC Recipients. The Guide sets forth 
LSC's accounting, financial management and reporting guidelines. In 
general, LSC requires recipients and subrecipients of its funding to: 
(1) manage LSC and non-LSC funds in a stewardship manner and pursuant 
to the cost standards and procedures of 45 CFR 1630; and (2) record 
transactions in accounting records and prepare annual financial 
statements in accordance with generally accepted accounting principles 
(GAAP). The current version of the Accounting Guide was last updated in 
1997.
    In an effort to update the Accounting Guide to reflect more current 
accounting and financial oversight practices, as well as to respond to 
grantee financial issues mentioned in a Government Accountability 
Office (GAO) report, and as a result of the recommendations of the LSC 
Fiscal Advisory Group, LSC developed a number of proposed revisions to 
the Guide. The revisions are in the following eight categories:
    (1) New internal control provisions for electronic banking 
transactions. The current Accounting Guide does not discuss in detail 
electronic banking. Electronic banking arrangements and transactions 
are now common. Many recipients of LSC funding conduct a significant 
portion of their financial transactions electronically. LSC itself 
transmits funds electronically to all recipients. The proposed 
revisions add a new section on electronic banking to the Fundamental 
Criteria and include sections on the authorization process for 
electronic banking activities, the authorization process for employees 
that initiate and transmit electronic fund transactions, review and 
approval procedures for electronic banking transactions, supporting 
documentation for electronic banking transactions, recording electronic 
banking transactions in the general ledger, bank reconciliations and 
safeguards. Section 3-5.15. New sections on electronic transactions 
have also been added to the Accounting Procedures and Internal Control 
Checklist in Appendix VII. Sections G2, G3, and M of Appendix VII.
    (2) Financial oversight concepts from the Sarbanes Oxley Act of 
2002. While only limited provisions of the Sarbanes Oxley Act of 2002 
are required of non profit corporations, LSC has determined that 
certain financial oversight concepts found in Sarbanes Oxley are 
appropriate for recipients of LSC funds. An example is the current 
Accounting Guide requirement that recipients of LSC funds have a 
financial oversight committee of their board of directors, but not a 
separate audit committee. The proposed revisions require that 
recipients must have a financial oversight committee that engages in 
all the activities of an audit committee, including: hiring the 
auditor; setting the auditor's compensation; overseeing the auditor's 
activities; setting rules and processes for complaints about accounting 
practices and internal control practices; reviewing the annual IRS Form 
990 for completeness, accuracy, and on-time filing; providing 
assurances of compliance to the full board; risk assessment; 
governance; and ethics reviews. Section 1-7. In addition, the proposed 
revisions consider it a best practice for the board of directors to 
have an audit committee separate from the finance committee and for the 
board to have at least one member who is a financial expert or for the 
board to have access to a financial expert. Section 1-7. It should be 
noted the LSC Board of Directors at its January 30, 2010 meeting will 
consider the possibility of engaging in rulemaking to require 
recipients to have separate audit committees on their board of 
directors. Should there be a regulatory change requiring recipients to 
have a separate audit committee, there would be a subsequent change to 
section 1-7 (Responsibilities of the Financial Oversight Committee or 
Committees) of the Accounting Guide (2010 edition.)
    (3) References to the accounting standards codification by the 
Financial Standards Accounting Board (FASB). FASB released a new 
codification of its accounting standards on July 1, 2009. The 
standards, an authoritative listing of generally accepted accounting 
principles (GAAP), are referred to in numerous sections of the 
Accounting Guide. All references to the accounting standards in the 
Accounting Guide have been updated and new references have been 
inserted to reflect new section numbers in the FASB accounting 
standards codification.
    (4) Key practices to enhance fraud prevention. While the current 
Accounting Guide lists the elements of an adequate accounting and 
financial reporting system, including the use of specific internal 
controls and risk assessment, there is no separate section on fraud 
prevention. The proposed revisions add a fraud prevention section that 
details key practices to help prevent fraud. Section 3-6.
    (5) Provisions in other LSC policies, including the LSC Property 
Acquisition and Management Manual and LSC Program Letters. Subsequent 
to the publication of the Accounting Guide in 1997, LSC issued other 
guidelines for recipients of LSC funds that impact on the Accounting 
Guide. For example, the LSC Property Acquisition and Management Manual 
(PAMM), issued in 2001, requires recipients to capitalize and 
depreciate all nonexpendable property with a cost in excess of $5,000 
and a useful life of more than one year. However, the current 
Accounting Guide uses $1,000 as the capitalization and depreciation 
threshold. The proposed revisions to the Accounting Guide change the 
threshold to $5,000 to be consistent with the PAAM. Appendix IV, 
Section 1. In addition, LSC has issued Program Letters 08-2 (March 20, 
2008), 08-3 (December 18, 2008) and

[[Page 5353]]

09-3 (December 17, 2009) that contain guidance to recipients on 
compliance and fiscal management issues. Those Program Letters have 
been referenced in the proposed revisions to the Accounting Guide. 
Section 2-3.1. Also, the LSC Board of Directors at its January 30, 2010 
meeting will consider the possibility of engaging in rulemaking to 
modify or eliminate 45 CFR Part 1642 (attorneys' fees) to reflect 
changes contained in the Consolidated Appropriations Act of 2010, P.L. 
111-117. Should there be a regulatory change to 45 CFR Part 1642 there 
would be a subsequent change to section 2-2.6 (Court-Awarded Attorney 
Fees) of the Accounting Guide (2010 edition.)
    (6) Revisions to accounting procedures and internal controls to 
reflect current best practices. Appendix VII of the current Accounting 
Guide (1997) contains a checklist of accounting procedures and internal 
controls. The proposed revisions update the checklist to reflect 
current best practices.
    (7) Updated and new references to other sources of information. The 
Accounting Guide (1997) contains numerous references to other sources 
of information. The proposed revisions update and make new references 
where appropriate.
    (8) Other changes to clarify existing provisions. The proposed 
revisions clarify existing sections to make the provisions easier to 
understand.
    LSC invites public comment on the proposed revisions to the 
Accounting Guide. Interested parties may submit comments to LSC by 
March 19, 2010. The proposed revisions to the Accounting Guide for LSC 
Recipients (2010 edition), in redline format indicating the proposed 
changes to the current Accounting Guide (1997), can be located by 
accessing LSC's Web site at http://www.lsc.gov/pdfs/proposed_revisions_to_accounting_guide_for_lsc_recipients.pdf.

    Dated: January 27, 2010.
Mattie Cohan,
Senior Assistant General Counsel, Legal Services Corporation.
[FR Doc. 2010-2160 Filed 2-1-10; 8:45 am]
BILLING CODE 7050-01-P


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