LSC Proposes Prior Approval Threshold Change
Recipients of Legal Services Corporation (LSC) financial assistance, take note! The LSC is proposing to amend its regulations at 45 C.F.R Part 1630 and 1631 to double its prior approval threshold. The agency is accepting comments on the proposed change, among others, through June 29.
The proposed rule, issued in the April 30 Federal Register, explains that the revisions aim to “reduce administrative burden, promote consistent oversight and enforcement and strengthen accountability in the use of federal funds.” LSC adds that changes in recipient operations, procurement practices and fiscal environments have “exposed limitations in the current regulatory framework that guidance alone cannot resolve.”
LSC in 2017 last updated its prior approval threshold from $10,000 to $25,000. However, the current provision in 45 C.F.R. Part 1630 states that prior agency approval is required when recipients expend $25,000 or more of LSC funds, while the provision at 45 C.F.R. Part 1631 says that recipients must obtain prior approval when using more than $25,000 of LSC funds. “The phrasing inconsistency between these provisions creates uncertainty about when a recipient must seek prior approval,” LSC explains.
The agency now proposes to align the provisions and increase the threshold to $50,000. This requirement would apply when the cost allocated to the LSC fund is greater than $50,000. ”Transactions that may once have warranted individualized review now routinely exceed the $25,000 threshold, potentially diverting staff resources from higher-risk matters without corresponding compliance benefits,” LSC states. “By increasing the threshold, LSC seeks to focus oversight resources on higher-risk expenditures while reducing the administrative burden on recipients.”
The proposed rule also seeks to clarify how recipients must treat proceeds from fundraising activities that LSC funds support in whole or in part. LSC’s Office of Inspector General has urged the agency to require recipients to treat fundraising proceeds as derivative income, or alternatively, to require recipients to reimburse the LSC account for allowable fundraising costs before allocating remaining proceeds to other accounts. The agency maintained its position that such proceeds are not derivative income. Therefore, that agency now proposes to state explicitly that fundraising income is not derivative, but requires recipients to reimburse the LSC account from the proceeds of fundraising activities supported with LSC funds in proportion to the amount of LSC funds used. “This approach will ensure that recipients use LSC funds only for authorized purposes while preserving incentives for recipients to leverage LSC funding to generate additional resources for legal services,” according to the agency.
LSC stakeholders should check out this proposed rule and be sure to comment on these provisions and other respective changes mentioned in the proposal.
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