PART 1627—SUBGRANTS Authority: 42 U.S.C. 2996g(e). Source: 82 FR 10283, Feb. 10, 2017, unless otherwise noted. § 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 (b) Procurement contract (c) Property (d) Recipient and (e) Subgrant. (2) Subgrant (f) Subrecipient § 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 in paragraph (b) of this section may not be present in all cases, and the recipient must use judgment in classifying each agreement as a subgrant or a procurement contract. The recipient must make case-by-case determinations whether each agreement that it makes with another entity constitutes a subgrant or a procurement contract. (b) Characteristics that support the classification of the agreement as a subgrant include when the other 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 objectives of the LSC grant were met; (3) Has responsibility for programmatic decision-making regarding the delivery of legal assistance under the recipient's LSC grant; (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 or property or services acquired in whole or in part with 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. § 1627.4 Requirements for all subgrants. (a) Threshold. (2) Valuation of in-kind subgrants. (ii) The valuation of the subgrant, either by fair market value or actual cost to the recipient of property or services, must be documented and to the extent feasible supported by the same methods used internally by the recipient. (b) Corporation approval of subgrants. Federal Register (1) Basic Field Grants. (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. e.g., (ii) A subgrant application must be submitted at least 45 days in advance of its proposed effective date. Within 45 days of the date of receipt, LSC will notify the recipient in writing of its decision to approve, disapprove, or suggest modifications to the subgrant; or, if LSC has not made a decision, the date by which LSC expects to make a decision. A subgrant that is disapproved or to which LSC has suggested modifications may be resubmitted for approval. (3) Mid-year subgrant requests. (4) Failure to comply. (5) Changes to subgrants requiring prior approval. (ii) If a subgrant did not require prior approval, and the recipient proposes a change that will cause the total value of the subgrant to exceed the threshold for prior approval, the recipient must obtain LSC's prior written approval before making the change. (c) Duration of subgrant. (2) For special grants ( e.g., (d) Provisions for termination and suspension of subgrants. (e) Recipient responsibilities. (2) The recipient must ensure that the subrecipient properly spends, accounts for, and audits funds or property or services acquired in whole or in part with LSC 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. (f) Accounting and auditing requirements Subgrants of funds. (ii) 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. A subgrant agreement may provide for alternative means of assuring the propriety of subrecipient expenditures, especially in instances where an organization receives a small subgrant. Any request to use an alternative means of assuring propriety of subrecipient funds must be submitted to LSC for consideration as part of the subgrant approval process. If LSC approves a request to use an alternative means, the information provided thereby shall satisfy the recipient's annual audit requirement with regard to the subgrant funds. (2) In-kind subgrants. (ii) Subgrants involving in-kind exchanges of property or services may be separately disclosed and accounted for, and reported upon in the audited financial statements of a recipient. A subgrant agreement may provide for alternative means of assuring the propriety of subrecipient expenditures and use of property or services acquired in whole or in part with LSC funds, especially in instances where an organization receives a small subgrant. Any request to use an alternative means of assuring propriety of subrecipient funds must be submitted to LSC for consideration as part of the subgrant approval process. If LSC approves a request to use an alternative means, the information provided thereby shall satisfy the recipient's annual audit requirement with regard to the subgrant funds. (iii) If accounting for in-kind subgrants is not practicable, a recipient may convert the subgrant to a cash payment and follow the accounting procedures in paragraph (f)(1) of this section. (iv) Subrecipients described in § 1627.5(d)(2) are not subject to the audit and financial requirements of the Audit Guide for Recipients and Auditors and the Accounting Guide for LSC Recipients. Such subrecipients must have financial management systems in place that would allow the recipient and LSC to determine that any resources the subrecipient receives or uses under the subgrant are used consistent with 45 CFR part 1610. (g) Oversight. § 1627.5 Applicability of restrictions, recordkeeping, and recipient priorities; private attorney involvement subgrants. (a) Applicability of restrictions. (b) Priorities. (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) Recordkeeping. (1) A subrecipient that handles matters as defined at 45 CFR 1635.2(b) must maintain adequate records to demonstrate that its attorneys and paralegals used the LSC funds or property or services funded in whole or in part with LSC funds: (i) To carry out the activities described in the subgrant agreement; and (ii) Consistent with the restrictions set forth at 45 CFR part 1610. (2) A subrecipient that handles cases as defined at 45 CFR 1635.2(a): (i) Must require its attorneys and paralegals to maintain records for each case that show the amount of time spent on the case and the activity conducted by date, and a unique client name or case number; and (ii) Either the subrecipient or the recipient must maintain records for each case that show the problem type and the closing code for the case. (iii) This requirement does not apply to subrecipients described in paragraph (d)(2)(ii) of this section. (3) A subrecipient who handles both cases and matters must maintain the types of records described in paragraphs (c)(1) and (2). (d) Subgrants for engaging private attorneys Subgrants of funds. only pro bono (2) In-kind subgrants. only pro bono (i) Conducting private attorney involvement activities (PAI) pursuant to 45 CFR part 1614; or (ii) Providing legal information or legal assistance on a pro bono (3) Treatment of non-LSC funds. (4) Recordkeeping exception. § 1627.6 Transfers to other recipients. (a) The requirements of this part apply to all subgrants from one recipient to another recipient. (b) The subrecipient must audit any funds or property or services acquired in whole or in part with LSC 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. § 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.