[Federal Register Volume 77, Number 152 (Tuesday, August 7, 2012)]
[Proposed Rules]
[Pages 46995-47003]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-19073]
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LEGAL SERVICES CORPORATION
45 CFR Parts 1606, 1618, and 1623
Termination, Limited Reductions in Funding, and Debarment
Procedures; Recompetition; Enforcement; Suspension Procedures
AGENCY: Legal Services Corporation.
ACTION: Further Notice of Proposed Rulemaking.
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SUMMARY: This Further Notice of Proposed Rulemaking (FNPRM) proposes
modifications to the January 31, 2012, NPRM regarding amendments to the
Legal Services Corporation's regulations on termination procedures,
enforcement, and suspension procedures. LSC seeks comments limited to
the substantively new materials as indicated by the questions in the
SUPPLEMENTARY INFORMATION.
DATES: Comments on the FNPRM are due September 6, 2012.
ADDRESSES: Written comments may be submitted by mail, fax, or email to
Mark
[[Page 46996]]
Freedman, Senior Assistant General Counsel, Legal Services Corporation,
3333 K Street NW., Washington, DC 20007; 202-295-1623 (phone); 202-337-
6519 (fax); mfreedman@lsc.gov.
FOR FURTHER INFORMATION CONTACT: Mark Freedman, Senior Assistant
General Counsel, Office of Legal Affairs, Legal Services Corporation,
3333 K Street NW., Washington, DC 20007; 202-295-1623 (phone); 202-337-
6519 (fax); mfreedman@lsc.gov.
SUPPLEMENTARY INFORMATION:
Introduction
The Legal Services Corporation (LSC) Act (the Act) provides general
authority to the Corporation ``to insure the compliance of recipients
and their employees with the provisions of [the Act] and the rules,
regulations, and guidelines promulgated pursuant to [the Act].'' \1\ On
January 31, 2012, LSC published in the Federal Register at 77 FR 4749 a
NPRM proposing changes to LSC's enforcement mechanisms to add a lesser
reduction in funding option and extend the time for suspensions from 30
to 90 days. The NPRM provided history and background that is not
repeated herein.
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\1\ LSC Act, section 1006(b)(1)(A); 42 U.S.C. 2996e(b)(1)(A).
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Nineteen comments were submitted. The comments are available in the
open rulemaking section of LSC's Web site at www.lsc.gov.
http://www.lsc.gov/about/regulations-rules/open-rulemaking.
On June 18, 2012, the Operations and Regulations Committee
(Committee) of the LSC Board of Directors (Board) met to discuss the
comments. Only the comment of the Office of Inspector General (OIG)
supported the proposal as written, although the OIG recommends a rule
providing for suspensions to remain in place until corrective actions
are taken, and the OIG questioned whether the proposed language
regarding imposing immediate special grant conditions was unduly
restricted. Seventeen of the other comments opposed the proposed
changes. Those comments include ones from LSC recipients, coalitions of
legal aid programs, the National Legal Aid and Defender Association
(NLADA), and the New York State Bar Association Committee on Legal Aid.
The American Bar Association Standing Committee on Legal Aid and
Indigent Defendants (SCLAID) did not oppose the rulemaking, but joined
with the other seventeen comments in recommended changes to the
proposed language if LSC proceeds with rulemaking. These comments had a
number of common themes. Fifteen of the comments were two or three
pages. The ABA, NLADA, and Colorado Legal Services provided more
extensive comments (five to seven pages). The OIG's comments in support
of the rule were sixteen pages in length. This further notice of
proposed rulemaking (FNPRM) provides revisions to the proposed language
for further comment. The final rule will include a discussion of all of
the comments received on both the NPRM and the FNPRM.
On July 27, 2012, the Committee met again to discuss the comments
and LSC Management's recommendations. The Committee voted to recommend
to the Board publication of these further revisions to the proposal
based on consideration of the comments and recommendations of
Management. On July 27, 2012, the Board voted to publish this FNPRM for
public comment on the specific items identified below. In addition to
this FNPRM, LSC is publishing on its Web site redlined versions of the
regulations showing each change. Those documents are available in the
Open Rulemaking section of www.lsc.gov.
http://www.lsc.gov/about/regulations-rules/open-rulemaking.
LSC's principal regulation discussing general enforcement authority
and procedures is the Enforcement Procedures regulation at 45 CFR part
1618. In accordance with the requirements of Part 1618, LSC uses a
variety of enforcement tools, formal and informal, to ensure
compliance. Among these are informal consultations and compliance
training, on-site Case Service Report/Case Management System reviews,
the imposition of Required Corrective Actions (RCAs), and the
imposition of Special Grant Conditions (SGCs) at the beginning or
renewal of a grant. Several additional enforcement tools are provided
for in LSC-adopted regulations and are available to the Corporation to
address significant non-compliance by a recipient. In particular, LSC
has adopted suspension procedures (45 CFR part 1623) and questioned-
cost procedures (45 CFR part 1630). LSC has also adopted grant
termination procedures (45 CFR part 1606) that provide for the
termination of funding in whole or in part in cases of a recipient's
substantial noncompliance with LSC statutory or regulatory requirements
and other policies, instructions, or grant terms and conditions. Under
the grant-termination provisions, a reduction of five percent or more
of a recipient's funding is considered a termination and can be
implemented only in compliance with the termination procedures.\2\
Reductions of funding of less than five percent are not considered
terminations. In order to reduce a recipient's funding by less than
five percent without using the 1606 termination procedures, additional
procedures have to be established by rulemaking.\3\ LSC has not yet
adopted regulations establishing such standards and procedures. LSC
also has the authority under Part 1606 to debar recipients from
eligibility to receive future grants.
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\2\ 45 CFR 1606.2(d).
\3\ 45 CFR 1606.2(d)(2)(v).
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The majority of LSC recipients are in substantial compliance with
LSC requirements most of the time. When non-compliance occurs,
recipients almost always work diligently and cooperatively with LSC
staff to come promptly into compliance, but there have been exceptions.
LSC is now considering adding enforcement tools to increase LSC's
flexibility in addressing compliance issues.
In light of its experience with the existing enforcement
mechanisms, discussed more fully in the NPRM, LSC is proposing to amend
its regulations at 45 CFR parts 1606, 1618, and 1623 to adopt standards
and procedures for limited reductions in funding, to allow for the
imposition of SGCs during a grant year, and to amend the maximum
suspension period from 30 to 90 days. LSC is not modifying the proposed
changes to Part 1623 as set out in the NPRM; no further comments on
Part 1623 are requested. The proposed changes and the modifications to
those changes in this FNPRM are discussed in greater detail below.
Amending Part 1606 To Include Standards and Procedures for Limited
Reductions in Funding
LSC proposed adding to Part 1606 a new definition for lesser
reductions in funding and a new Sec. 1606.15 to provide procedures for
imposing them. The proposed procedures were based on the suspension
procedures in Part 1623, which provide a significant opportunity for
recipient input and due process without being unduly complex. Those
proposed procedures would have permitted the recipient to request an
informal conference regarding the proposed reduction in funding. There
were no further avenues of appeal.
Many comments raised the concern that the proposed procedures were
inadequate for lesser reductions in funding because they lacked an
appeal of the informal conference and did not include review by an
impartial person. Suspensions withhold funds from a
[[Page 46997]]
recipient with the expectation that the funds will be provided when the
suspension ends. In contrast, terminations, disallowed costs, and
lesser reductions in funding all involve a nonrecoverable loss of
funding for the recipient. For terminations of five percent or greater,
the recipient has a right to appeal a determination to an impartial
hearing officer appointed by the LSC President. The hearing officer's
decision is then reviewed by the LSC President, who makes the final
decision.\4\ For disallowed costs under Part 1630, the recipient has a
right to appeal a disallowed cost decision to the LSC President. The
President may act on the appeal only if he or she has not ``had prior
involvement in the consideration of the disallowed cost * * *.'' \5\
Otherwise, ``the President shall designate another senior Corporation
employee who has not had prior involvement to review the recipient's
appeal.'' \6\
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\4\ 45 CFR 1606.8-.10.
\5\ 45 CFR 1630.7(f).
\6\ Id.
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LSC agrees that some appeal is appropriate for lesser reductions.
That appeal should also provide for review by someone who was not
involved in the prior LSC decisions regarding the preliminary and final
determinations. The proposed language below would add an appeal to the
LSC President, who would decide the matter unless he or she was
involved in those prior decisions. Alternately, the LSC President can
appoint another LSC senior employee who was not involved in those prior
decisions.
The comments also raised a number of questions regarding the
proposed definitions and procedures. In reviewing the comments, LSC
determined that a separate set of procedures for lesser reductions
creates unnecessary confusion in the rule. This revision uses the
existing Part 1606 procedures for preliminary determinations and
informal hearings. Appeals of terminations and debarments would then
continue to have the existing process and rights. Appeals of lesser
reductions would go directly to the LSC President.
In the proposed Sec. 1606.15(c), the NPRM cross-referenced the
Sec. 1606.3(b) criteria for substantial violations and used those
criteria for lesser reductions. The proposed language below eliminates
the new Sec. 1606.15 and moves the Sec. 1606.3(b) criteria to a new
definition of ``substantial violations'' for use throughout Part 1606.
This approach is designed to improve the structure of the rule. No
changes are made to the language, and no substantive changes are
intended by this restructuring.
Some deadlines have been adjusted for uniformity in the rule.
Questions on Which Comments Are Sought
Q1: Comments are sought on the question whether the lesser
reduction procedures are better handled as proposed in the NPRM or as
proposed herein.
Q2: Comments are sought on the changes to the procedures affecting
lesser reductions. No further comments are sought regarding the
underlying question of the decision to adopt a lesser reductions option
or the use of the existing Sec. 1606.3(b) criteria for lesser
reductions, which is unchanged from the NPRM. Those comments on the
NPRM are already in the rulemaking record. LSC will respond fully to
all comments, including those regarding the rationale for the
rulemaking, in the preamble to any Final Rule, should one be published.
Q3: There are no substantive changes to the rules for terminations
or debarments. Comments are sought on the question whether any of these
proposed changes to the structure of the rule would result in
substantive changes affecting terminations or debarment. No other
comments regarding the existing rules for terminations or debarments
are sought.
Q4: There are new definitions added for clarity. Comments are
sought on the new definitions but not on definitions that are moved
without change from other sections of the existing regulation or from
the NPRM proposed language.
Q5: Comments are sought on the proposed final appeal process.
Section-by-Section Analysis of Part 1606
Section 1606.1 Purpose
The NPRM did not amend this section. The proposed language below
amends paragraph (b) to add to the purpose of the rule lesser
reductions in funding. It also states that the procedures provided are
proportional to the proposed action rather than uniform for all
actions. This takes the place of Sec. 1606.15(1) in the NPRM.
Section 1606.2 Definitions
The NPRM added a definition of limited reduction in funding as a
new paragraph (c). The proposed language below renumbers the following
paragraphs. It also adds language from paragraph (d)(1) for
terminations regarding whether a lesser reduction will affect funding
beyond the current grant year. That addition makes clear that the two
options function the same in this regard. No substantive changes are
made to the definition.
New paragraphs (f), (g), and (h) are added to relocate definitions
of violations, substantial violations, and substantial noncompliance.
No substantive changes are made to these terms. They are moved from
Sec. Sec. 1606.3(a)(1), (b), and (c) into the definitions section so
that they can be easily referenced for all of the available actions in
the rule. This eliminates the cross-reference to these terms in Sec.
1606.15(b) of the NPRM. It also responds to some of the comments by
making clear that the threshold for a substantial violation is the same
for terminations and for lesser reductions.
New paragraph (i) adds a definition of the ``Corporation'' for
purposes of taking actions under the rule, which permits elimination of
the ``designated employee'' under Sec. 1606.6(a). For purposes of
making decisions regarding terminations, debarments, or lesser
reductions, the Corporation must act through someone at the level of a
deputy director or higher. This change addresses concerns expressed by
comments about low-level employees making decisions to reduce funding.
It also adds internal consistency to the rule instead of referring to
the Corporation in some places and to the designated employee in
others. This definition is a change to the NPRM and to the existing
rule, although in practice LSC does not make decisions of this
magnitude through anyone below the level of a deputy director.
New paragraph (j) defines when materials are considered received
for purposes of this part. This is added for clarity. It is intended to
make clear that physical delivery with confirmation from the delivery
service is always sufficient. Alternate modes of delivery, such as
email or fax, are acceptable, but they require confirmation in writing
by a person at the recipient. Automated ``confirmations'' from fax
machines or email systems do not guarantee that the document was in
fact seen by a person at the receiving end.
New paragraph (k) defines days through reference to the rules for
computing time in the Federal Rules for Civil Procedure, with an
exception for excluding weekends and legal holidays for computing
business days. This is added for clarity. In 2009, the Federal rules
eliminated the use of a business days rule for periods of ten days or
fewer and lengthened some of the shorter deadlines accordingly. LSC is
keeping this distinction here because,
[[Page 46998]]
unlike the Federal rules, so many of the deadlines are 10 days or
fewer. The revised sections of the rule specify time in calendar days
or business days. References to days in other sections of the rule
should be treated as calendar days, unless specified otherwise.
Section 1606.3 Grounds for a Termination or a Lesser Reduction in
Funding
The proposed grounds for lesser reductions in the NPRM at
Sec. Sec. 1606.15(a) and (b) have been moved into this section, which
is renamed accordingly. The definition of a substantial violation has
been moved from this section into the new definitions in Sec. 1606.2.
As discussed above, no substantive changes are intended, and this
restructuring should add clarity to the rule.
Section 1606.4 Grounds for Debarment
There are no changes to this section and it is not reprinted in
this notice. LSC considered moving the definition of ``good cause''
from this section to the definitions for structural consistency. LSC
did not do so because the definition applies only to debarments; moving
it would not add clarity and might add confusion to the rule.
Section 1606.5 Procedures
This section is renamed to make it applicable to all actions under
the rule, not only to terminations and debarments. The existing
language is renumbered as paragraph (a). Paragraph (b) is added for
situations involving lesser reductions in funding. It requires that LSC
designate a senior LSC employee who will be able to meet the Sec.
1606.10(d) requirements for handling a final review of a lesser
reduction in funding.
Section 1606.6 Preliminary Determination
In the NPRM, Sec. 1606.15(d) provided requirements for notices of
preliminary and final determinations for lesser reductions that were
worded slightly differently than this section, but they appeared to be
substantively identical. The NPRM language is eliminated and merged in
paragraph (a) with the existing language for preliminary determinations
in this section to provide a process applicable to terminations,
debarments, and lesser reductions. Specific references to procedural
rights in other sections are replaced with a general reference to
procedural rights. No substantive changes are intended by these changes
to paragraph (a).
The references to a ``designated employee'' are eliminated in favor
of a definition of the Corporation for decision-making purposes in
Sec. 1606.2(i), as discussed above.
Language is added to paragraph (b) to affirmatively require LSC to
provide the recipient with the final determination if there is no
further review. This ensures that there is no confusion in situations
in which the recipient does not respond to the preliminary
determination. Paragraph (b) is also modified to state that LSC has the
discretion to make the preliminary determination final when there is no
request for a review. This change is intended to ensure that LSC
retains the discretion to consider factors that come to light after
issuing the preliminary determination. For example, a recipient might
be in such turmoil that it fails to request review, but the local bar
association requests that LSC forestall issuing a final determination.
Under the existing rule and the NPRM, LSC might not have that
discretion.
Section 1606.7 Informal Conference and Review of Written Materials
The NPRM provided in Sec. 1606.15(e), (f), and (g) procedures for
an informal conference to review a proposed lesser reduction in
funding. The NPRM used the language of Part 1623 as the basis for the
informal conference review of a proposed lesser reduction in funding.
The proposed language was substantively similar to the Sec. 1606.7
informal conference for terminations and debarments. To simplify the
rule, the proposed parallel provisions in Sec. 1606.15 are eliminated
in favor of using the existing Sec. 1606.7 procedures.
No substantive changes are made to this section with the exception
of the addition of an option of a paper review for terminations and
debarments and the increase of some time limits from the existing rule
and the NPRM. The current rule for terminations and debarments provides
for an informal conference. Part 1623 also provides for an informal
conference for review of proposed suspensions, but it adds an option of
submission of written materials without a conference. The NPRM used the
same language for lesser-reductions conferences. The revised language
adds the option of a review of written materials for terminations and
debarments as well as for lesser reductions. The NPRM provided that the
informal conference would take place within five days of the
recipient's request. This revision provides that LSC will notify the
recipient within five business days of the time and place of the
conference. This provides more scheduling flexibility.
Paragraph (b) provides the recipient with the right to request an
in-person conference, but otherwise allows the conference to be held
through alternative methods such as a teleconference. For an in-person
meeting, some of the participants may attend through alternative
methods. This is added to ensure that the recipient has the right to a
face-to-face meeting, but it also makes clear that the recipient and
LSC can reduce the cost and burden of the conference through
alternative methods.
Paragraph (e) provides that the final determination must provide
the same type of details as the preliminary determination. This is
similar to the requirements of Sec. 1606.9(b), which apply to
recommended decisions by hearing officers.
Section 1606.8 Hearings for Terminations or Debarments
No substantive changes are made to this section. The title and
paragraph (a) are updated to state that this section applies only to
terminations and debarments. These hearings are not available for
lesser reductions in funding. As discussed in the NPRM, the purpose of
lesser reductions is to provide LSC with a means of taking financial
action against a recipient in an amount of less than five percent,
without the full hearing procedures required for terminations of five
percent or greater.
Section 1606.9 Recommended Decisions for Terminations or Debarments
No substantive changes are made to this section. The title and
paragraph (a) are updated to state that this section applies only to
terminations and debarments. This section involves decisions after
hearings under Sec. 1606.8, which are not available for lesser
reductions in funding.
Section 1606.10 Final Decision
This section is updated to add direct review by the LSC President
of final determinations of lesser reductions in funding. Currently this
section provides only for review by the LSC President of recommended
decisions of impartial hearing officers under Sec. 1606.9, which are
not available for lesser reductions. The time limits of ten calendar
days are expanded to ten business days to ensure there is sufficient
time for the recipient to draft and deliver the request for review by
the President, which ``shall state in detail the reasons for seeking
review.'' \7\ At the end of the year, the
[[Page 46999]]
holidays of December 25 and January 1 can reduce ten calendar days to
only six business days.
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\7\ 45 CFR 1606.10(b).
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Paragraph (c) adds a requirement that the recipient be able to
obtain a copy of the written record on which the President based his or
her decision. This requirement is based on a similar provision in Sec.
1630.7(g) regarding disallowed costs reviews.
A new paragraph (d) is added providing for appeals of final
determinations for lesser reductions in funding. The LSC President, or
other senior LSC employee, will conduct the review and make a final
decision regarding the proposed lesser reduction in funding. As
discussed above, prior to the section-by-section analysis, the final
review should be handled by someone who did not actively participate in
making the decisions regarding the preliminary determination or the
final determination. This requirement ensures that there is at least
one level of review involving a fresh look at the situation, similar to
the Sec. 1606.8 requirements for terminations and the Sec. 1630.7
requirements for disallowed costs.
Normally, this final review and decision would be handled by the
President. LSC expects that the Vice President for Grants Management or
the Director of the Office of Compliance and Enforcement will usually
handle preliminary determinations, informal conferences, and final
determinations for lesser reductions in funding. Nonetheless, these are
significant actions that the President is likely to be kept informed
about throughout the process. The President is not disqualified under
paragraph (d) merely because he or she is briefed about the situation
and options, asks questions, and did not object to the prior lesser
reduction decisions and proceedings. Nor is he or she disqualified if
the recipient or other parties contact him or her directly prior to a
final appeal.
Paragraph (e) (renumbered) adds a requirement that a final decision
reviewing a determination of a lesser reduction shall meet the
specificity requirements of Sec. 1606.6(a). This provides a parallel
requirement to the existing requirement that final decisions reviewing
a hearing officer's recommendation shall meet the specificity
requirements of Sec. 1606.9(b).
Section 1606.13 Interim and Termination Funding; Reprogramming
There are no changes to this section from the NPRM. They are
repeated here in order to provide all of the revisions of Part 1606
proposed by both the NPRM and this FNPRM. No comments are sought on
this section.
Section 1606.15 Limited Reductions of Funding
The NPRM proposed adding a new section. As discussed above, all of
the proposed provisions are now incorporated into the existing
provisions of this part. There is no proposed Sec. 1606.15 in this
FNPRM.
Amending Part 1618 To Permit the Imposition of Immediate Special Grant
Conditions
The NPRM proposed amending Part 1618 to provide clear authority to
impose special grant conditions in the middle of a grant, rather than
only at renewal or competition. The OIG expressed concern that the Part
1618 threshold might unduly restrict the use of these immediate special
grant conditions. The proposal has been revised to specify that
immediate special grant conditions are available for corrective actions
after LSC has determined that a violation exists. This enables LSC to
convert corrective actions required by the Office of Compliance and
Enforcement into special grant conditions immediately rather than
waiting for the next grant renewal or award. This addition does not
affect LSC's existing authority to impose special grant conditions
during renewal, competition, or otherwise.
Additionally, during review of Part 1618 it became apparent that
the language of Part 1618 is outdated. It has not been amended since
1976. Both Part 1606--Terminations and Part 1623--Suspensions refer to
compliance with ``a provision of the LSC Act, the Corporation's
appropriations act or other law applicable to LSC funds, a Corporation
rule, regulation, guideline or instruction, or the terms and conditions
of the recipient's grant or contract with the Corporation.'' \8\ These
rules were extensively updated in 1998. Part 1618 refers only to
violations of ``the Legal Services Corporation Act or the rules and
regulations issued by the Corporation.'' \9\ LSC proposes amending Part
1618 to conform to the language used in the other, later adopted,
regulations to conform to existing practice.
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\8\ 45 CFR 1606.1(a) and 1623.1(a).
\9\ 45 CFR 1618.2.
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Proposed Sec. 1618.5(b) permits LSC to impose a lesser reduction
in funding after ``attempts at informal resolution have been
unsuccessful.'' Informal resolution includes remedial actions,
preventive actions, and sanctions. So, for example, if a recipient has
persistently and intentionally used LSC funds for grassroots lobbying,
then LSC could ultimately proceed to termination or debarment. Section
1618.5(b) requires LSC to attempt to resolve the situations informally
before beginning an enforcement action. LSC could demand that the
recipient cease such activities, put in place measures to ensure that
such activities do not recur, and accept a lesser reduction in funding
as a sanction. If the recipient did not agree to all three actions
during attempts at informal resolution, then LSC could proceed with
suspension, termination, and/or a lesser reduction in funding.
Furthermore, if attempts at informal resolution are unsuccessful, then
LSC may proceed with actions that are more consequential than those
pursued during those unsuccessful attempts. Thus, in this example, LSC
could proceed with a termination of five percent or greater, even if it
offered the recipient the option of resolving the matter through
acceptance of a reduction in funding of less than five percent. There
are no changes to the rule required for this application.
Question on Which Comments Are Sought
Q6: Comments are sought on the new proposed language for Part 1618.
Section-by-Section Analysis of Part 1618
Section 1618.1 Purpose
Reference to the requirements of the LSC Act are updated to refer
to the provisions of the LSC Act, the Corporation's appropriations act
or other law applicable to LSC funds, a Corporation rule, regulation,
guideline, or instruction, or the terms and conditions of the
recipient's grant or contract with the Corporation. This conforms Part
1618 to Part 1606 and Part 1623.
Section 1618.2 Definitions
The existing definition of the term ``Act'' as referring to the LSC
Act, rules, and regulations is removed because it was confusing and
inconsistent with LSC's current governing laws, many of which appear in
appropriations statutes and not the LSC Act, and with Part 1606 and
Part 1623. A new paragraph (a) is added defining the term ``LSC
requirements'' using the language from Part 1606 and Part 1623. A new
paragraph (b) is added to make clear that a violation refers to a
violation of the LSC requirements.
[[Page 47000]]
Section 1618.3 Complaints
The reference to a violation of ``the LSC Act'' is replaced with
reference to the new definition of a ``violation.''
Section 1618.4 Duties of Recipients
References to a violation of the LSC Act are replaced with
references to the new definition of a violation. Paragraphs (a) and (b)
are renumbered as (1) and (2) of a new paragraph (a). The former
paragraph (b) is split into (a)(2) and (a)(3). These changes add
clarity without substantive alterations to the rule. The new (a)(2) is
amended to clarify that the recipient has the discretion to determine
whether a violation by a recipient's employee merits a sanction imposed
by the recipient on the employee under the circumstances. Some
violations can be fully addressed by the recipient without any
sanction. This is not meant to change the substantive requirements of
this paragraph. Paragraph (c) is renumbered as paragraph (b). A new
paragraph (c) is added to clarify that these requirements do not, by
themselves, create substantive rights for recipient employees. A
failure to consult with LSC under this section does not nullify a
recipient's employment action. Rather, it is a matter between LSC and
the recipient.
Section 1618.5 Duties of the Corporation
References to a violation of the LSC Act are replaced with
references to the new definition of a violation. Paragraph (a) is
amended to make clear that the Corporation's investigation may be
limited to determining that the recipient is taking sufficient action.
This is not a substantive change. Paragraph (c) is added regarding
immediate special grant conditions. As discussed above, these would be
available for any violation for which LSC has determined that
corrective action is necessary. Currently LSC makes those
determinations through normal procedures by the Office of Compliance
and Enforcement. The thresholds in paragraph (b) for further actions
such as suspensions or terminations would not apply to immediate
special grant conditions.
List of Subjects
45 CFR Part 1606
Administrative practice and procedure, Grant program--law, Legal
services.
45 CFR Parts 1618 and 1620
Grant programs--law, Legal services.
For reasons set forth above, and under the authority of 42 U.S.C.
Sec. 2996g(e), LSC proposes to amend 45 CFR chapter XVI as follows:
PART 1606--TERMINATION, LIMITED REDUCTION IN FUNDING, AND DEBARMENT
PROCEDURES; RECOMPETITION
1. The authority citation for Part 1606 continues to read as
follows:
Authority: 42 U.S.C. 2996e(b)(1) and 2996f(a)3; Pub. L. 105-
199, 111 Stat. 2440, Secs. 501(b) and (c) and 504; Pub. L. 104-134,
110 Stat. 1321.
2. The heading for part 1606 is revised to read as set forth above.
3. Amend Sec. 1606.1 by revising paragraph (b) to read as follows:
Sec. 1606.1 Purpose
* * * * *
(b) Provide timely and fair due process procedures, proportional to
the proposed action, when the Corporation has made a preliminary
decision to terminate a recipient's LSC grant or contract, to debar a
recipient from receiving future LSC awards of financial assistance, or
to impose a lesser reduction in funding; and
4. Amend Sec. 1606.2 by redesignating paragraphs (c) and (d) as
(d) and (e), revising new paragraph (e), and adding paragraphs (c) and
(f) through (k) to read as follows:
Sec. 1606.2 Definitions.
* * * * *
(c) Limited reduction in funding means a reduction in funding of
less than five percent of a recipient's current annual level of
financial assistance imposed by the Corporation in accordance with the
procedures and requirements of this part. A limited reduction in
funding will affect only the recipient's current year's funding, unless
the Corporation provides otherwise in the final termination decision.
(d) Recipient means any grantee or contractor receiving financial
assistance from the Corporation under section 1006(a)(1)(A) of the LSC
Act.
(e)(1) Termination means that a recipient's level of financial
assistance under its grant or contract with the Corporation will be
reduced in whole or in part prior to the expiration of the term of a
recipient's current grant or contract. A partial termination will
affect only the recipient's current year's funding, unless the
Corporation provides otherwise in the final termination decision.
(2) A termination does not include:
(i) A reduction of funding required by law, including a reduction
in or rescission of the Corporation's appropriation that is apportioned
among all recipients of the same class in proportion to their current
level of funding;
(ii) A reduction or deduction of LSC support for a recipient under
the Corporation's fund balance regulation at 45 CFR part 1628;
(iii) A recovery of disallowed costs under the Corporation's
regulation on costs standards and procedures at 45 CFR part 1630;
(iv) A withholding of funds pursuant to the Corporation's Private
Attorney Involvement rule at 45 CFR part 1614; or
(v) A limited reduction of funding as defined in this section.
(f) Substantial noncompliance means either a substantial violation,
as defined in this section, or a substantial failure, as defined in
this part at Sec. 1606.3(a).
(g) Violation means a violation by the recipient of a provision of
the LSC Act, the Corporation's appropriations act or other law
applicable to LSC funds, or a Corporation rule, regulation, guideline
or instruction, or a term or condition of the recipient's grant or
contract.
(h) Substantial violation means a violation that merits action
under this part based on consideration of the following criteria by the
Corporation:
(1) The number of restrictions or requirements violated;
(2) Whether the violation represents an instance of noncompliance
with a substantive statutory or regulatory restriction or requirement,
rather than an instance of noncompliance with a non-substantive
technical or procedural requirement;
(3) The extent to which the violation is part of a pattern of
noncompliance with LSC requirements or restrictions;
(4) The extent to which the recipient failed to take action to cure
the violation when it became aware of the violation; and
(5) Whether the violation was knowing and willful.
(i) Corporation, when used to refer to decisions by the Legal
Services Corporation, means that those decisions are made by an
individual at the level of an office director, deputy director, or
higher.
(j) Receipt of materials shall mean that the materials were sent to
the normal address for physical mail, email, or fax transmission, and
there is reliable secondary confirmation of delivery. For physical
delivery, confirmation may be provided through tracking information
from the delivery service. For other forms of delivery, confirmation
may be provided through a document such as a confirmation email or a
fax sent from an
[[Page 47001]]
authorized person at the recipient. Receipt of materials by the LSC
recipient is sufficient for the running of applicable time periods.
Proof of receipt by the Board Chair is not necessary unless delivery to
the recipient itself cannot be reasonably accomplished.
(k) Days shall mean the number of actual days as determined by the
rules for computing time in the Federal Rules of Civil Procedure, Rule
6, except that computation of business days shall exclude Saturdays,
Sundays, and legal holidays (as defined in those rules).
5. Amend Sec. 1606.3 by revising the heading of that section,
revising paragraph (a)(1), redesignating paragraph (b) as (c), and
revising newly redesignated paragraph (c) and adding new paragraph (b)
to read as follows:
Sec. 1606.3 Grounds for a termination or a lesser reduction in
funding.
(a) A grant or contract may be terminated when:
(1) There has been a substantial violation by the recipient, and
the violation occurred less than 5 years prior to the date the
recipient receives notice of the violation pursuant to Sec. 1606.6(a);
or
(2) There has been a substantial failure by the recipient to
provide high quality, economical, and effective legal assistance, as
measured by generally accepted professional standards, the provisions
of the LSC Act, or a rule, regulation, including 45 CFR 1634.9(a)(2),
or guidance issued by the Corporation.
(b) The Corporation may impose a limited reduction of funding when
the Corporation determines that there has been a substantial violation
by the recipient but that termination of the recipient's grant, in
whole or in part, is not warranted.
(c) A determination of whether there has been a substantial
violation for the purposes of this section, and the magnitude of any
termination, in whole or in part, or any lesser reduction in funding,
will be based on consideration of the criteria set forth in the
definition of ``substantial violation'' in this part.
6. Amend Sec. 1606.5 to revise the heading of that section, revise
the language and redesignate it as paragraph (a), and add a new
paragraph (b) to read as follows:
Sec. 1606.5 Procedures.
(a) Before a final action is taken under this part, the recipient
will be provided notice and an opportunity to be heard as set out in
this part.
(b) Prior to a preliminary determination involving a lesser
reduction in funding, the Corporation shall designate either the
President or another senior Corporation employee to conduct any final
review that is requested pursuant to Sec. 1606.10 of this part. The
Corporation shall ensure that the person so designated has had no prior
involvement in the preliminary and/or final determinations so as to
meet the criterion set out in Sec. 1606.10(d).
7. Amend Sec. 1606.6 by revising paragraphs (a) and (b) to read as
follows:
Sec. 1606.6 Preliminary determination.
(a) When the Corporation has made a preliminary determination that
a recipient's grant or contract should be terminated, that a lesser
reduction in funding shall be imposed, and/or that a recipient should
be debarred, the Corporation shall issue a written notice to the
recipient and the Chair of the recipient's governing body. The notice
shall:
(1) State the grounds for the proposed action;
(2) Identify, with reasonable specificity, any facts or documents
relied upon as justification for the proposed action;
(3) Inform the recipient of the proposed amount and effective date
for the proposed action;
(4) Advise the recipient of its procedural rights for review of the
proposed action under this part;
(5) Inform the recipient of its right to receive interim funding
pursuant to Sec. 1606.13; and
(6) Specify what, if any, corrective action the recipient can take
to avoid the proposed action.
(b) If the recipient does not request review, as provided for in
this part, then the preliminary determination shall become final, at
LSC's discretion, after the relevant time limits have expired. The
Corporation shall provide the recipient with the final decision, and no
further appeal or review will be available under this part.
8. Amend Sec. 1606.7 by revising the heading and paragraphs (a)
through (e) and adding paragraph (f) to read as follows:
Sec. 1606.7 Informal conference, review of written materials, and
final determination.
(a) A recipient may submit written materials in opposition to the
preliminary determination and/or request an informal conference as
follows:
(i) for terminations or debarments, within 30 calendar days of
receipt of the preliminary determination; or
(ii) for lesser reductions in funding, within 10 business days of
receipt of the preliminary determination.
(b) Within 5 business days of receipt of a request for a
conference, the Corporation shall notify the recipient of the time and
place the conference will be held, which shall be at the Corporation's
discretion. Some or all of the participants in the conference may
attend via telephone, unless the recipient requests an in-person
meeting between the Corporation and at least one representative of the
recipient. If the recipient requests an in-person meeting, then other
participants may attend via telephone. Alternative means of
participation other than the telephone are permissible at the sole
discretion of LSC.
(c) The informal conference shall be conducted by the Corporation
employee who issued the preliminary determination.
(d) At the informal conference, the Corporation and the recipient
shall both have an opportunity to state their case, seek to narrow the
issues, explore the possibilities of settlement or compromise, and
submit written materials.
(e) If an informal meeting is conducted and/or written materials
are submitted by the recipient, the Corporation shall consider any
written materials submitted by the recipient in opposition to the
limited reduction in funding and any oral presentation or written
materials submitted by the recipient at an informal meeting. Based on
the written materials and/or the informal conference, the Corporation
may modify, withdraw, or affirm the preliminary determination through a
final determination in writing, which shall be provided to the
recipient within 15 calendar days of the conclusion of the informal
conference. The final determination shall conform to the requirements
of Sec. 1606.6(a).
(f) If the recipient does not request further process, as provided
for in this part, then, after the relevant time limits have expired,
LSC shall notify the recipient that no further appeal or review will be
available under this part and may proceed to implement the final
determination as a final decision.
9. Amend Sec. 1606.8 by revising the heading and paragraph (a) to
read as follows:
Sec. 1606.8 Hearing for a termination or debarment.
(a) For terminations or debarments only, the recipient may make a
written request for a hearing within 30 days of its receipt of the
preliminary determination or within 15 days of receipt of the written
determination issued by the designated employee after
[[Page 47002]]
the conclusion of the informal conference.
* * * * *
10. Amend Sec. 1606.9 by revising the heading and paragraph (a) to
read as follows:
Sec. 1606.9 Recommended decision for a terminations or debarment.
(a) For termination or debarment hearings under Sec. 1606.8,
within 20 calendar days after the conclusion of the hearing, the
hearing officer shall issue a written recommended decision which may:
* * * * *
11. Amend Sec. 1606.10 by revising the heading and paragraphs (a),
(b), and (c), redesignating paragraphs (d) and (e) to (e) and (f),
respectively, adding new paragraph (d) and revising newly designated
paragraphs (e) and (f) to read as follows:
Sec. 1606.10 Final decision for a termination, debarment, or lesser
reduction.
(a) If neither the Corporation nor the recipient requests review by
the President, a final determination or a recommended decision shall
become a final decision 10 business days after receipt by the
recipient.
(b) The recipient or the Corporation may seek review by the
President of a final determination or a recommended decision. A request
shall be made in writing within 10 business days after receipt of the
recommended decision by the party seeking review and shall state in
detail the reasons for seeking review.
(c) The President's review shall be based solely on the information
in the administrative record of the proceedings, including the appeal
to the President, and any additional submissions, either oral or in
writing, that the President may request. A recipient shall be given a
copy of, and an opportunity to respond to, any additional submissions
made to the President. All submissions and responses made to the
President shall become part of the administrative record. Upon request,
the Corporation shall provide a copy of the written record to the
recipient.
(d) For a direct appeal of a final determination pursuant to Sec.
1606.7, in which there is no hearing under Sec. 1606.8, the President
may not review the appeal if the President has had prior involvement in
the preliminary and/or final determinations. If the President cannot
review the appeal, or the President chooses not to do so, then the
President shall designate another senior Corporation employee who has
not had prior involvement in the preliminary and/or final
determinations.
(e) As soon as practicable after receipt of the request for review
of a recommended decision, but not later than 30 days after the request
for review, the President or designee may adopt, modify, or reverse the
recommended decision or final determination, or direct further
consideration of the matter. In the event of modification or reversal
of a recommended decision pursuant to Sec. 1606.9, this decision shall
conform to the requirements of Sec. 1606.9(b). In the event of
modification or reversal of a final determination pursuant to Sec.
1606.7, the decision shall conform to the substantive requirements of
Sec. 1606.6(a).
(f) The decision of the President or designee under this section
shall become final upon receipt by the recipient.
12. Amend Sec. 1606.13 by revising paragraphs (a), (b), and (d) to
read as follows:
(a) Pending the completion of termination or limited reduction in
funding proceedings under this part, the Corporation shall provide the
recipient with the level of financial assistance provided for under its
current grant or contract with the Corporation.
(b) After a final decision has been made to terminate a recipient's
grant or contract or to impose a limited reduction in funding, the
recipient loses all rights to the terminated or reduced funds.
* * * * *
(d) Funds recovered by the Corporation pursuant to a termination or
limited reduction in funding shall be used in the same service area
from which they were recovered or will be reallocated by the
Corporation for basic field purposes at its sole discretion.
PART 1618--ENFORCEMENT PROCEDURES
13. The authority citation for Part 1618 continues to read as
follows:
Authority: Secs. 1007(a)(8); 1006(b)(6); 1006(b)(4) (42 U.S.C.
2996f(a)(8); 2996e(b)(6); 29963(b)(4)).
14. Revise Sec. 1618.1 to read as follows:
Sec. 1618.1 Purpose.
In order to ensure uniform and consistent interpretation and
application of the provisions of the LSC Act, the Corporation's
appropriations act or other law applicable to LSC funds, a Corporation
rule, regulation, guideline or instruction, or the terms and conditions
of the recipient's grant or contract with the Corporation, and to
prevent a question of whether these requirements have been violated
from becoming an ancillary issue in any case undertaken by a recipient,
this part establishes a systematic procedure for enforcing compliance
with them.
15. Amend Sec. 1618.2 by revising the heading and adding
paragraphs (a) and (b) to read as follows:
Sec. 1618.2 Definitions.
(a) LSC requirements means the provisions of the LSC Act, the
Corporation's appropriations act or other law applicable to LSC funds,
a Corporation rule, regulation, guideline or instruction, or the terms
or conditions of the recipient's grant or contract with the
Corporation.
(b) Violation means a violation by the recipient of the LSC
requirements.
16. Revise Sec. 1618.3 to read as follows:
Sec. 1618.3 Complaints.
A complaint of a violation by a recipient or an employee of a
recipient may be made to the recipient, the State Advisory Council, or
the Corporation.
17. Amend Sec. 1618.4 by revising paragraphs (a) and (b),
redesignating paragraph (c) to (b), revising new paragraph (b), and
adding a new paragraph (c) to read as follows:
Sec. 1618.4 Duties of Recipients.
(a) A recipient shall:
(1) Advise its employees of their responsibilities under the LSC
requirements;
(2) Establish procedures, consistent with the notice and hearing
requirements of section 1011 of the LSC Act, for determining whether an
employee has committed a violation and whether the violation merits a
sanction based on consideration of the totality of the circumstances;
and
(3) Establish a policy for determining the appropriate sanction to
be imposed for a violation, including:
(i) Administrative reprimand if a violation is found to be minor
and unintentional, or otherwise affected by mitigating circumstances;
(ii) Suspension and termination of employment; and
(iii) Other sanctions appropriate for enforcement of the LSC
requirements.
(b) Before suspending or terminating the employment of any person
for a violation, a recipient shall consult the Corporation to ensure
that its interpretation of these requirements is consistent with
Corporation policy.
(c) This section provides procedural requirements between the
Corporation and recipients. It does not create rights for recipient
employees.
18. Amend Sec. 1618.5 by revising paragraphs (a) and (b) and
adding paragraph (c) to read as follows:
[[Page 47003]]
Sec. 1618.5 Duties of the Corporation.
(a) Whenever the Corporation learns that there is reason to believe
that a recipient or a recipient's employee may have committed a
violation, the Corporation shall investigate the matter promptly and
attempt to resolve it through informal consultation with the recipient.
Such actions may be limited to determining if the recipient is
sufficiently investigating and resolving the matter itself.
(b) Whenever there is substantial reason to believe that a
recipient has persistently or intentionally violated the LSC
requirements, or, after notice, has failed to take appropriate remedial
or disciplinary action to ensure compliance by its employees with the
LSC requirements, and attempts at informal resolution have been
unsuccessful, the Corporation may proceed to suspend or terminate
financial support of the recipient, or impose a lesser reduction in
funding, pursuant to the procedures set forth in parts 1623 and 1606,
or may take other action to enforce compliance with the LSC
requirements.
(c) Whenever the Corporation determines that a recipient has
committed a violation, that corrective actions by the recipient are
required to remedy the violation and/or prevent recurrence of the
violation, and that imposition of special grant conditions are needed
prior to the next grant renewal or competition for the service area,
the Corporation may immediately impose Special Grant Conditions on the
recipient to require completion of those corrective actions.
Victor M. Fortuno,
Vice President & General Counsel.
[FR Doc. 2012-19073 Filed 8-6-12; 8:45 am]
BILLING CODE 7050-01-P