Sneak Preview: LSC Updates Rules on Usage of Non-LSC Funds

Jerry Ashworth
October 16, 2020 at 08:29:39 ET
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(The following was excerpted from a recent Thompson Grants 360 article.) The Legal Services Corporation (LSC) recently issued a final rule to update its regulations clarifying the restrictions on recipient usage of non-LSC funds. The new regulations become effective Nov. 6.

LSC’s current regulation at 45 C.F.R. Part 1610 imposes restrictions and requirements on the use of LSC and non-LSC funds by grant recipients in delivering civil legal aid. The rule describes two categories of restrictions on legal assistance activities when using non-LSC funds — restrictions established in the LSC Act (42 U.S.C. 2996-2996(l)), and those established in LSC’s annual appropriations. The rule also includes restrictions on recipients’ use of three categories of non-LSC funds — private funds (such as individual donations), public funds (such as government grants) and tribal funds (such as grants from Native American tribes).

While the use of private funds is subject to both LSC Act restrictions and appropriation restrictions, public funds are subject only to the appropriations restrictions. LSC Act restrictions do not apply to the use of public funds as long as the recipient uses those funds consistent with the purpose for which they are provided by the other funding source. If they are not used consistently for that purpose, then the funds would be subject to the LSC Act restrictions. The LSC Act and appropriations restrictions do not normally apply to authorized uses of tribal funds.

LSC has a range of remedial actions to correct a recipient’s violation of a restriction and to prevent recurrences of the violation. For example, LSC may prevent the recipient from charging to the LSC grant any expenses associated with the violation by questioning and disallowing the costs. In rare cases of persistent violations, LSC may suspend funding, impose sanctions or terminate a grant.

LSC’s cost standards regulation at 45 C.F.R. Part 1630 sets rules for when expenditures are allowable under an LSC grant. If a recipient engages in LSC-restricted activities with LSC funds, the corporation can question and disallow those costs, and must provide the recipient with a written notice of the questioned costs identifying the amount, and the factual and legal basis for disallowing them. A recipient has an opportunity to show evidence and arguments to explain why the cost should be allowable.

(The full version of this story has now been made available to all for a limited time here.)

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