45 C.F.R. Parts 1630 and 1631 – What’s New? Main cover slide 960 pixels wide X 720 pixels high (@ 96 dpi) (10” x 7.5”) November 3, 2017

Topics Basics Prior approval Questioned cost proceedings Purchasing Property management Contact information (59.8%) (57.7%) (56.4%) (56.7%)

The Basics Updated and reorganized Part 1630 – Cost standards and procedures Existing version of rule: https://www.federalregister.gov/d/97-34120 Eliminated Property Acquisition and Management Manual (PAMM); substance in new Part 1631 Final rule published August 10, 2017 (82 FR 37327) Effective date: December 31, 2017 Rule changes will be in purple text (59.8%) (57.7%) (56.4%) (56.7%)

Allowable cost standards‒§1630.5 The Basics: Allowable cost standards‒§1630.5 Based on 2 CFR part 200 (formerly OMB Circulars) General principle: costs must be reasonable and necessary to carrying out LSC grant 1630.5(i) -- Recipients may use LSC funds to pay costs associated with fundraising EX-1999-12, Whether Recipients May Use LSC Funds for Fundraising Activities

Prior approval process – § 1631.3 ˃ $25K in LSC funds Requirements in 1631.8 LSC must respond within 30 or 60 days, depending on purchase Response time based on date LSC receives ALL information needed to make decision

Prior approval ‒ § 1630.6 Requirement applies to: Single purchase or lease of personal property Single contract for services Single combined purchase or lease of personal property and contract for services Single purchase of real estate Capital improvements

Definitions Single purchase, single lease, and single contract: Single order or lease of goods; includes order or lease of multiple items Single contract for services from single vendor Single purchase of goods bundled with contract for services

Definitions Capital improvement: Use of more than $25K in LSC funds to improve real estate through construction or addition of fixtures that become integral part of real estate Does not include capital improvements negotiated as part of lease terms Purchase: buying personal property or real estate or contracting for services using LSC funds

Definitions Services: professional and consultant services rendered by people who are members of profession or have special skill and who are not officers or employees of recipient Examples: accountants, custodians, consultants Does not include Services provided to employees as fringe benefits Insurance (e.g. malpractice, D&O liability) Annual audits required by Pub. L. 104-134 § 509(a) Services needed for litigation on behalf of clients Services necessary to address internal personnel issues Contracts for employees

Single Purchase or Lease of Property

Single Purchase or Lease of Property Combination purchase or lease: purchase or lease of personal property and purchase of services made at the same time. Example: A recipient purchases both a telephone system (personal property) and a one-year service and maintenance contract (purchase of services) from one vendor in one transaction.

Prior approval process; exception for exigent circumstances ‒ §1631 Prior approval process; exception for exigent circumstances ‒ §1631.3(d) Four categories Avoid imminent harm to recipient personnel, physical facilities, or systems Remediate or mitigate damage to same Avoid disruption to client service delivery system Respond to natural disaster

Questioned Cost Proceedings ‒ Subpart C New Provisions Eliminated 5-year lookback period Request extensions of time to respond before time expires (§ 1630.11(d)(2)(ii)) Formalized LSC policy requiring management-level review before appealing to President (§ 1630.12(a)(2))

Characteristics of purchases– § 1631.6 Recipient enters agreement with third party who: Provides goods and services to recipient within its normal business operations Provides similar goods or services to many different purchasers Normally operates in a competitive environment Provides goods or services that are ancillary to the operation of the LSC grant Is not subject to LSC’s compliance requirements as a result of the agreement

Example #1 New Urban Legal Services (NULS) wants to improve its volunteer attorney program. NULS gives a consultant $25K to evaluate its existing program, make recommendations about how to improve the program, and help the program implement the recommended changes. Is this a purchase under 1631.6?

Example #2 As part of improving its volunteer attorney program, NULS gives $15K to Old Urban Legal Services to supervise the volunteer attorneys. The OULS attorney will review advice given to clients, provide subject matter expertise to the volunteer attorneys if they have questions, and attend court appearances with the volunteer attorney. Is this a purchase under 1631.6?

Purchasing policies and procedures; Required elements – § 1631.7 Competition thresholds that establish basis for level of competition required at each threshold Establish grounds for non-competitive purchases Establish level of documentation to justify procurement Establish internal controls Establish procedures to ensure quality and cost control Establish procedures for identifying and preventing conflicts of interest

Use of Property – § 1631.10 Must comply with LSC governing statutes and regulations Can be used for other activities if such use does not interfere with legal services activities Restrictions = rent § 1631.16 – applies same rules to real estate

Intellectual property – § 1631.11 IP developed by grantee using LSC funds Grantee owns LSC has royalty-free, nonexclusive, irrevocable license Contracts with vendors who develop or improve LSC-funded products, technologies, and software Must have provision disclosing license Must prohibit vendor from denying, challenging, or interfering with LSC’s use of license

Disposal of personal property ‒ § 1631.12 3 options Trade in Sale (or other when fair market value (FMV) is negligible) Transfer to another LSC grantee or non-profit organization serving the poor in the recipient’s service area

Purchasing real estate with LSC funds ‒ § 1631.14 Taken from PAMM § 4 Must conduct pre-purchase market assessment Must obtain prior approval from LSC Must ensure property meets, or will meet after capital improvements, ADA or state standards, whichever is stricter Must enter into property interest agreement with LSC

Maintenance and Insurance‒ §§ 1631.17, 1631.18 Maintenance – property must be kept In efficient operating condition In compliance with state and local property standards and building codes Insurance Same level of coverage as other recipient property Must have Title insurance Physical destruction policy

Accounting and reporting to LSC – § 1631.19 Amount of LSC funds used to pay acquisition costs, financing, and capital improvements Submit no later than April 30 of year following accounting year or with audited financial statements

Recipient disposal of real estate – § 1631.20 Method of Disposal Compensation Sale after advertising and receiving offers N/A Transfer to another LSC recipient Receiving recipient may pay transferring recipient %age of current FMV equal to %age of LSC funds invested

Questions?

Assistant General Counsel Contact Information Stefanie K. Davis Assistant General Counsel sdavis@lsc.gov 202-295-1563

45 C.F.R. Parts 1630 and 1631 – What’s New? Main cover slide 960 pixels wide X 720 pixels high (@ 96 dpi) (10” x 7.5”) November 3, 2017