Accounting Guide for LSC Recipients (2010 Edition), 42786-42790 [2010-17737]

Download as PDF sroberts on DSKD5P82C1PROD with NOTICES 42786 Federal Register / Vol. 75, No. 140 / Thursday, July 22, 2010 / Notices with respect to Behr Dayton Thermal Systems VOC Plume Superfund Site (‘‘Behr Dayton’’). Under the Settlement Agreement, EPA will receive an allowed general unsecured claim with respect to response costs incurred by the EPA with respect to Behr Dayton in the amount of $26,000,000. The EPA will receive an allowed general unsecured claim with respect to civil penalties in the amount of $5,000,000. Accordingly, the total amount of the EPA’s allowed general unsecured claim will be $31,000,000. The allowed general unsecured claim with respect to civil penalties, however, shall be subordinated under the plan of confirmation to other allowed general unsecured claims. Upon the effective date of the settlement agreement, the United States will also receive a cash payment of $500,000, which will be applied to Behr Dayton. In the event that certain funds reserved for funding environmental cleanup at sites owned by the Liquidation Trust are not needed for their intended purpose because such owned property is transferred or sold to a third party purchaser, the United States would receive additional cash payments in the maximum aggregate amount of $1,500,000 million (which, together with the $500,000 in cash that the United States would receive on the effective date of the settlement agreement, would total $2,000,000), which amount(s) will also be applied to Behr Dayton. The Department of Justice will receive, for a period of thirty days from the date of this publication, comments relating to the Settlement Agreement. Comments should be addressed to the Assistant Attorney General, Environment and Natural Resources Division, and either e-mailed to pubcomment-ees.enrd@usdoj.gov or mailed to P.O. Box 7611, U.S. Department of Justice, Washington, DC 20044–7611, and should refer to In re Old Carco LLC, et al., D.J. Ref. 90–11– 3–09743. Commenters may request an opportunity for a public meeting in the affected area, in accordance with Section 7003(d) of RCRA, 42 U.S.C. 6973(d). The Settlement Agreement may be examined at the Office of the United States Attorney, 86 Chambers Street, 3rd Floor, New York, New York 10007, and at the U.S. Environmental Protection Agency, Ariel Rios Building, 1200 Pennsylvania Avenue, NW., Washington, DC 20460. During the public comment period, the Settlement Agreement may also be examined on the following Department of Justice Web site, http://www.usdoj.gov/enrd/ VerDate Mar<15>2010 18:46 Jul 21, 2010 Jkt 220001 Consent_Decrees.html. Copies of the Settlement Agreement may also be obtained by mail from the Consent Decree Library, P.O. Box 7611, U.S. Department of Justice, Washington, DC 20044–7611 or by faxing or e-mailing a request to Tonia Fleetwood (tonia.fleetwood@usdoj.gov), fax no. (202) 514–0097, phone confirmation number (202) 514–1547. In requesting a copy from the Consent Decree Library, please enclose a check in the amount of $5.00 (25 cents per page reproduction cost) payable to the U.S. Treasury or, if by e-mail or fax, please forward a check in that amount to the Consent Decree Library at the stated address. references to other sources of information; and (8) other changes to clarify existing provisions. The Accounting Guide for LSC Recipients (2010 edition) can be located by accessing LSC’s Web site at http:// www.lsc.gov/pdfs/accounting_guide_ for_lsc_recipients_2010_edition.pdf. DATES: Effective Date: August 23, 2010. FOR FURTHER INFORMATION CONTACT: Chuck Greenfield, Program Counsel, Legal Services Corporation, 3333 K St., NW., Washington DC 20007; greenfieldc@lsc.gov (e-mail), (212) 295– 1549 (phone) or (212) 337–6813 (fax). SUPPLEMENTARY INFORMATION: Maureen Katz, Assistant Section Chief, Environmental Enforcement Section, Environment and Natural Resources Division. Background [FR Doc. 2010–18065 Filed 7–21–10; 8:45 am] BILLING CODE 4410–15–P LEGAL SERVICES CORPORATION Accounting Guide for LSC Recipients (2010 Edition) Legal Services Corporation. Notice. AGENCY: ACTION: The Legal Services Corporation (LSC) is revising the Accounting Guide for LSC Recipients to reflect changes that have occurred since the last publication of the Accounting Guide (the ‘‘Guide’’) in 1997. Notice was published in the Federal Register on February 2, 2010, requesting public comments to proposed revisions to the Guide. Following the receipt of comments from the public, the LSC Office of the Inspector General and members of the LSC Board of Directors, and making changes as deemed appropriate in response to those comments, the LSC Board of Directors approved revisions to the Guide at a meeting held on June 15, 2010. The revisions incorporate: (1) New internal control provisions for electronic banking transactions and contracting; (2) financial oversight concepts from the Sarbanes Oxley Act of 2002; (3) references to the accounting standards codification by the Financial Standards Accounting Board (FASB) released on July 1, 2009; (4) key practices to enhance fraud prevention; (5) provisions in other LSC regulations and policies, including the LSC Property Acquisition and Management Manual and LSC Program Letters; (6) revisions to accounting procedures and internal controls to reflect current best practices; (7) updated and new SUMMARY: PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 Under the Legal Services Corporation Act, as amended, LSC ‘‘is authorized to require such reports as it deems necessary from any recipient, contractor or person or entity receiving assistance’’ 42 U.S.C. 2996g(a). LSC is also ‘‘authorized to prescribe the keeping of records with respect to funds provided by grant or contract and shall have access to such records’’ 42 U.S.C. 2996g(b). Further, LSC ‘‘shall conduct or require each recipient, contractor, person or entity receiving financial assistance * * * to provide for an annual financial audit.’’ 42 U.S.C. 2996h(c)(1). In addition, ‘‘funds received by any recipient from a source other than the Corporation * * * shall be accounted for and reported as receipts and disbursements separate and district from Federal funds’’ 42 U.S.C. 2996i(c). Under authority of the Legal Services Corporation Act, LSC published the Accounting Guide for LSC Recipients. The Guide sets forth LSC’s accounting, financial management and reporting guidelines. In general, LSC requires recipients and subrecipients of its funding to: (1) Manage LSC and nonLSC funds in a stewardship manner and pursuant to the cost standards and procedures of 45 CFR Part 1630; and (2) record transactions in accounting records and prepare annual financial statements in accordance with generally accepted accounting principles (GAAP). The current version of the Guide was last updated in 1997. In an effort to update the Guide to reflect more current accounting and financial oversight practices, as well as to respond to grantee financial issues mentioned in a Government Accountability Office (GAO) report, and as a result of the recommendations of the LSC Fiscal Advisory Group, LSC developed a number of revisions to the Guide. The revisions are in the following eight categories: E:\FR\FM\22JYN1.SGM 22JYN1 sroberts on DSKD5P82C1PROD with NOTICES Federal Register / Vol. 75, No. 140 / Thursday, July 22, 2010 / Notices (1) New internal control provisions for electronic banking transactions and contracting. The current Guide does not discuss in detail electronic banking. Electronic banking arrangements and transactions are now common. Many recipients of LSC funding conduct a significant portion of their financial transactions electronically. LSC itself transmits funds electronically to all recipients. The revisions add a new section on electronic banking to the Fundamental Criteria and include sections on the authorization process for electronic banking activities, the authorization process for employees that initiate and transmit electronic fund transactions, review and approval procedures for electronic banking transactions, supporting documentation for electronic banking transactions, recording electronic banking transactions in the general ledger, bank reconciliations and safeguards. Section 3–5.15. New sections on electronic transactions have also been added to the Accounting Procedures and Internal Control Checklist in Appendix VII. Sections G2, G3, and M of Appendix VII. In addition, a new section was added in the Fundamental Criteria on contracting and includes sections on types of contracts, documenting, competition and approvals. Section 3– 5.16. (2) Financial oversight concepts from the Sarbanes Oxley Act of 2002. While only limited provisions of the Sarbanes Oxley Act of 2002 are required of non profit corporations, LSC has determined that certain financial oversight concepts found in Sarbanes Oxley are appropriate for recipients of LSC funds. An example is the current Accounting Guide requirement that recipients of LSC funds have a financial oversight committee of their board of directors, but not a separate audit committee. The revisions require that recipients must have a financial oversight committee(s) that engages in all the activities of an audit committee, including: Hiring the auditor; setting the auditor’s compensation; overseeing the auditor’s activities; setting rules and processes for complaints about accounting practices and internal control practices; reviewing the annual IRS Form 990 for completeness, accuracy, and on-time filing and providing assurances of compliance to the full board; ensuring the recipient’s operations are conducted and managed in an ethical manner that complies with all applicable laws, regulations and policies; ensuring effective management of the recipient’s resources and risks; and ensuring accountability of persons within the VerDate Mar<15>2010 18:46 Jul 21, 2010 Jkt 220001 organization. Section 1–7. In addition, the revisions consider it a best practice for the board of directors to have an audit committee separate from the finance committee and for the board to have at least one member who is a financial expert or for the board to have access to a financial expert. Section 1– 7. (3) References to the accounting standards codification by the Financial Standards Accounting Board (FASB). FASB released a new codification of its accounting standards on July 1, 2009. The standards, an authoritative listing of generally accepted accounting principles (GAAP), are referred to in numerous sections of the Guide. All references to the accounting standards in the Accounting Guide have been updated and new references have been inserted to reflect new section numbers in the FASB accounting standards codification. (4) Key practices to enhance fraud prevention. While the current Guide lists the elements of an adequate accounting and financial reporting system, including the use of specific internal controls and risk assessment, there is no separate section on fraud prevention. The revisions add a fraud prevention section that details key practices to help prevent fraud. Section 3–6. (5) Provisions in LSC regulations and policies, including the LSC Property Acquisition and Management Manual and LSC Program Letters. The regulation on attorneys’ fees (45 CFR Part 1642) was eliminated in a final rule change effective April 26, 2010, to reflect changes contained in the Consolidated Appropriations Act of 2010, Public Law 111–117. Accordingly, section 2–2.6 (Court-Awarded Attorney Fees) of the Guide was modified. Further, subsequent to the publication of the Guide in 1997, LSC issued other guidelines for recipients of LSC funds that impact on the Guide. For example, the LSC Property Acquisition and Management Manual (PAMM), issued in 2001, requires recipients to capitalize and depreciate all nonexpendable property with a cost in excess of $5,000 and a useful life of more than one year. However, the current Guide uses $1,000 as the capitalization and depreciation threshold. The revisions to the Guide change the threshold to $5,000 to be consistent with the PAAM. Appendix IV, Section 1. In addition, LSC has issued Program Letters 08–2 (March 20, 2008), 08–3 (December 18, 2008) and 09–3 (December 17, 2009) that contain guidance to recipients on compliance and fiscal management issues. Those Program Letters have been referenced in PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 42787 the revisions to the Guide. Section 2– 3.1. (6) Revisions to accounting procedures and internal controls to reflect current best practices. Appendix VII of the current Guide contains a checklist of accounting procedures and internal controls. The revisions update the checklist to reflect current best practices. (7) Updated and new references to other sources of information. The Guide contains numerous references to other sources of information. The revisions update and make new references where appropriate. (8) Other changes to clarify existing provisions. The revisions clarify existing sections to make the provisions easier to understand. Comments Received to Proposed Revisions to Accounting Guide Following the publication of notice of proposed revisions to the Guide in the Federal Register on February 2, 2010, LSC received comments from the public, the LSC Office of the Inspector General, and from members of the LSC Board of Directors. The following is a summary of comments received and LSC’s response to those comments. Responsibilities of the Financial Oversight Committee of Committees (Section 1–7) Section 1–7 sets forth the duties and responsibilities of financial oversight committees, including the finance and audit committees. The Georgia Legal Services Program raised a concern about the prospect of being required to have separate board finance and audit committees. Response: The proposed revisions do not require separate finance and audit committees. Section 1–7 provides that ‘‘it generally is considered a best practice for governing bodies to have both a finance committee and a separate audit committee.’’ However, the proposed revisions do provide that ‘‘[t]he critical point is that all of the finance and audit committee duties * * * must be performed by a financial oversight committee(s).’’ The Georgia Legal Services Program also expressed concern over the use of the term ‘‘financial statements’’ in one of the specified roles of the finance committee. The Georgia program mentions that the review of full financial statements monthly would be time-consuming, burdensome for the program, and potentially confusing. Response: In response to this comment we have revised this section to use the term ‘‘management reports’’ rather than ‘‘financial statements’’ in role No. 2 of the finance committee, with a reference E:\FR\FM\22JYN1.SGM 22JYN1 sroberts on DSKD5P82C1PROD with NOTICES 42788 Federal Register / Vol. 75, No. 140 / Thursday, July 22, 2010 / Notices to budgeted and actual expenses and income, variances, and a statement of cash on hand. We have added sample management reports as Appendix IB and a section entitled ‘‘Statement of Cash on Hand’’ to section 3–5.9 of the Fundamental Criteria (Management Reports). The final comment from the Georgia Legal Services Program is that the provision of financial reports on a quarterly basis, rather than monthly as set forth in the proposed revision, has worked well for their program. Response: While it is recognized that a number of programs provide financial reports to the finance committee and/or the board on a quarterly basis, it is the preferred practice to have these reports produced and reviewed monthly thereby providing the finance committee with as up-to-date information as possible on the financial condition of the program. It should be noted that this provision does not require monthly meetings of the finance committee, but that the reports be reviewed monthly with the chief financial officer, controller, and/or CPA. This review may occur by email or in some other manner. In addition, there were comments from several members of the LSC Board of Directors that this section needs to have more focus on the need for the duties of audit committees to be performed even if a recipient does not have a separate audit committee and on the need of having a financial expert on the financial oversight committee(s) or access to a financial expert. One board member also mentioned that there were too many ‘‘or’’ options in the language. Response: In response to these comments, a new paragraph has been drafted which more clearly emphasizes the critical points that all of the listed duties of a finance and an audit committee must be performed by a financial oversight committee(s) and that the financial oversight committee(s) needs to have a financial expert or access to a financial expert. LSC Board members recommended an expansion of the language in Section 1–7 under role No. 6 of the Audit Committee. Response: Role No. 6 of the Audit Committee in Section 1–7 was expanded to more fully describe the committee’s duties in ensuring compliance with ethical requirements, applicable laws, regulations and policies, effective management of the recipient’s resources and risks, and accountability of persons within the organization. VerDate Mar<15>2010 18:46 Jul 21, 2010 Jkt 220001 Property (Section 2–2.4) Section 2–2.4 sets forth certain principles for the treatment of property, including the requirement that recipients capitalize and depreciate all nonexpendable property with a cost in excess of $5,000 and a useful life of more than one year. A comment was received from the LSC Office of the Inspector General (OIG) suggesting that it might be necessary to include accounting for sensitive assets even when those assets are valued at less than $5,000, as the program may want to track them for other reasons. Response: A new sentence has been added to Section 2–2.4 incorporating this suggestion. Court-Awarded Attorneys Fees (Section 2–2.6) Section 2–2.6 discusses courtawarded attorneys’ fees. A comment was received from the Chair of the Standing Committee on Legal Aid and Indigent Defendants of the American Bar Association, suggesting that, given the elimination of the restriction on the claiming, collection and retention of attorneys’ fees, it would be helpful if there would be an explanation of what attorneys’ fees are permitted. Response: It is correctly noted that the restriction on claiming, collection and retention of attorneys’ fees (former 45 CFR 1642) has been eliminated in a final rule change effective April 26, 2010, to reflect changes contained in the Consolidated Appropriations Act of 2010, Public Law 111–117, and that there is no language in the change to 2–2.6 stating in what situations attorneys’ fees are permitted. The question of when attorneys’ fees are permitted to be collected from the opposing party is generally a matter of state and federal law, as interpreted by the judge deciding the case. LSC does not have a regulation that sets forth when attorneys’ fees are available. It is noted that the recipients of LSC funds are subject to restrictions regarding accepting fee-generating cases, as set forth in 45 CFR 1609. No change to 2–2.6 was made in response to this comment. There was also a comment from the Center on Law and Social Policy recommending a reference in 2–2.6 to the provision on accounting for attorneys’ fees, now set forth in 45 CFR 1609.4. Response: In response to this comment, 2.2–6 has been amended to include this reference. Grant and Contract Costs (Section 2–3.1) Section 2–3.1 addresses grant and contract costs. A comment received PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 from the LSC OIG questioned whether the Program Letter on Compliance Guidance and Interim Guidance on Attorneys’ Fees dated December 17, 2009, was superseded by an interim final rule on attorneys’ fees issued by the LSC on March 15, 2010. Response: The purpose of the reference to Program Letters in 2–3.1 is to let grantees know that the letters themselves contain additional cost allocation and financial management information. The Compliance Guidance and Interim Guidance on Attorneys’ Fees issued on December 17, 2009 as Program Letter 09–03 mostly discusses issues unrelated to attorneys’ fees. The attorneys’ fees discussion is limited to interim guidance and by its terms applies only until LSC Board action on the issue. The interim guidance remains applicable during the period until the Board acted. After reviewing the Program Letter, there appears to be nothing inconsistent between the interim guidance and the Board’s later action. Internal Control/Fundamental Criteria of an Accounting and Financial Reporting System (Chapter 3) The introduction to Chapter 3 discusses the responsibilities of a recipient to maintain adequate accounting records and internal control procedures. An LSC OIG comment recommended the addition of language making clear that internal control is specifically a management responsibility. Response: The first paragraph of Chapter 3 has been modified to add that internal control is ‘‘managed and maintained by the recipient’s board of directors and management.’’ Fundamental Criteria (Section 3–5) Section 3–5 contains the LSC Fundamental Criteria, which is a listing of the elements of an adequate accounting and financial reporting system. A comment from the LSC OIG noted that the discussion on Enterprise Risk Management seemed to be misplaced and not fully developed. Response: As a result of this comment, we have revised section 3–5 to include a fuller discussion of Enterprise Risk Management in the background section. An additional comment from the OIG suggested that a section on contracting should be included in the fundamental criteria. Response: In response to this comment a new section on contracting has been added to the Fundamental Criteria. See Section 3–5.16. A further OIG comment stated that while allocation is covered in Section 3–5.9(c) of the Fundamental Criteria, there is no specific mention of E:\FR\FM\22JYN1.SGM 22JYN1 Federal Register / Vol. 75, No. 140 / Thursday, July 22, 2010 / Notices documenting the methodology. Response: New language has been added to Section 3–5.9(c), under Criteria for Allocations to require adequate written documentation of the allocation formula. A follow-up comment from the OIG recommended that the OIG be specifically mentioned in the new allocation formula language. Response: The OIG has been added to Section 3– 5.9(c), under Criteria for Allocations. An OIG comment recommended the addition of ‘‘a sufficient level of fidelity coverage’’ in Section 3–5.13 (Bonding.) Response: In response to the comment Section 3–5.13 has been changed to make specific reference to the fidelity coverage requirements of 45 CFR 1629.1(a). An OIG comment suggested adding a provision specifying that documents to support competition should be retained and kept with the contract files in Section 3.5.16 (Contracting.) Response: In response to this comment language has been added to the competition section, under criteria, to Section 3.5.16, that incorporates the suggestion. sroberts on DSKD5P82C1PROD with NOTICES Fraud Prevention (Section 3–6) Section 3–6 contains a list of key practices that can help prevent fraud. An LSC OIG comment suggested that there should be an addition to No. 19 to address protection against retaliation for board members and volunteers who report suspected fraud. Response: In response to this comment the recommended language has been added to No. 19. An LSC OIG comment recommended that board members should be reminded that applicable federal and state laws also apply to them. Response: In response to this comment new No. 22 has been added incorporating this language. A comment from the LSC OIG noted that item No. 23 was the only key practice that did not start with a verb. Response: New No. 24 has been changed to start with ‘‘involve.’’ A comment made by an LSC Board member recommended that more specific guidance be given to recipients in the event fraud is discovered. Response: In response to this comment language has been added to provide more specific instructions to grantees in the event fraud is discovered. See Section 3–6, No. 26. This same language is found in LSC Grant Assurance No. 15 for 2010 grants, which is signed by both the recipient’s board chair and executive director. VerDate Mar<15>2010 18:46 Jul 21, 2010 Jkt 220001 Illustrative Financial Statements and Notes to the Financial Statements (Appendix IA) Appendix IA.1 provides a description of illustrative financial statements. A comment from the LSC OIG suggests that the OIG be listed in the first paragraph so that the OIG, as well as LSC, would be able ‘‘to make comparison with budgeted amounts as well as accumulate regional or national data for the legal services network.’’ Response: The suggested language has been added to the first paragraph in Appendix IA.1. Description of Accounting Records— Retention Times for Nonprofit Records (Appendix II) Appendix II contains a section on the retention times for nonprofit records. A comment from a nominee to the LSC Board suggested that we add a provision recognizing that state law may provide a longer retention period for certain types of records. Response: In response to this comment we have added a new sentence recognizing the possibility that state law may require a longer retention period for particular types of records. A comment was also received from the LSC OIG recommending that all financial and financial related information be retained for at least five years, given the fact that questioned costs under 45 CFR 1630 can go back five years. Response: In response to this comment we have changed the retention period for the mentioned financial and financial related information to seven years, to make this section consistent with 45 CFR 1630 and the Grant Assurances. Accounting for Property (Appendix IV) Appendix IV sets forth procedures for accounting for property, including the capitalization and depreciation of property and equipment. We received comments from JAA & Associates, Hawaii, that the proposed revisions to the illustrations of journal entries for capitalization and depreciation are confusing, incomplete or inaccurate. JAA & Associates also suggested changing the title of Illustration 1.1 under Capitalization from ‘‘To record equipment purchased with cash’’ to ‘‘To record equipment purchased with cash or credit.’’ Response: We are also concerned that the proposed revisions in the illustrations in the capitalization and depreciation sections may be confusing. Further, the flow of journal entries can vary somewhat depending on the accounting system used by each LSC grantee. It was determined that while the recommended changes make PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 42789 sense if journal entries are made in a certain way, there are other valid ways to make entries and the proposed changes could cause confusion. Thus, we have reverted to the 1997 language for the illustrations, which is more easily understandable. Other Regulatory Financial Requirements (Appendix VI) Appendix VI contains provisions on other regulatory financial requirements, including tax reporting. An LSC OIG comment recommended that the language be altered to reflect that form 990 is required to be filed and the failure to file for three consecutive years will automatically result in the loss of a non profit’s tax exempt status. Response: In response to this comment the language has been changed in Appendix VI.1 to specifically mention the mandatory requirement of filing the 990 form and the automatic loss of taxexempt status for the failure to file a 990 for three consecutive years. Accounting Procedures and Internal Control Checklist (Appendix VII) Appendix VII provides a checklist for a grantee’s internal controls. An LSC OIG comment suggests requiring employees and officers handling assets to be ‘‘sufficiently bonded’’ under Appendix VII A (General.), No. 6. Response: In response to this comment Appendix VII A, No. 6 has been changed to add a reference to the bonding requirements found in 45 CFR 1629. A comment from the LSC OIG questioned whether it was intended in Appendix VII A (General) to have a monthly reporting requirement of a cash flow statement to the finance committee of a recipient’s board of directors. Response: Monthly reporting to the finance committee was intended and is consistent with the section 1–7 discussion about role No. 2 of the finance committee. We have changed the second sentence in No. 18 to add ‘‘statement of cash on hand,’’ which is also mentioned in sections 1–7, 3– 5.9(b), and Appendix IB. We also received a comment from a nominee to the LSC Board that Appendix VII B (Personnel and Payroll) should mention that it is a best practice to include both a nondiscrimination policy and a signed statement from every employee that they understand their roles in terms of nondiscrimination. Response: In response to this comment a new No. 14 has been added to Appendix VII B incorporating this comment. An LSC OIG comment suggested that Appendix VII D (Procurement) contain E:\FR\FM\22JYN1.SGM 22JYN1 sroberts on DSKD5P82C1PROD with NOTICES 42790 Federal Register / Vol. 75, No. 140 / Thursday, July 22, 2010 / Notices a requirement that each procurement action, above a reasonable level, be fully documented by maintaining the bids received and the approvals given. This would include written justification for sole source purchases above a certain level. Response: In response to this comment a new No. 12 has been added to Appendix D, incorporating the suggestion. Another LSC OIG comment questioned what ‘‘properly executed’’ means in Appendix VII E (Legal Consultants/Contract Services.) Response: In response to this comment we have changed No. 2. in Legal Consultants/Contract Services from ‘‘Are contracts written so that the services to be rendered are clearly defined and properly executed?’’ to the following three sentences: ‘‘Are contracts written so that the services to be rendered are clearly defined?’’; ‘‘Are contracts properly signed by authorized persons?’’ and ‘‘Have all contract terms and modifications been complied with?’’ An LSC OIG comment suggested adding to Appendix VII G1 No. 7 that the check should be marked as void or defaced in a manner that would prevent future use of the check. Response: In response to this comment Appendix VII G1 No. 7 has been changed to include the recommended language. An LSC OIG comment pointed out that there was no reference in Appendix VII H (Controls Over Cash Receipts) to cash received from an individual while in the office, as opposed to receiving money through the mail. Response: In response to this comment, we have added new Nos. 8–12 in Appendix VII H, to include the questions addressing cash received from an individual while in the office. The LSC OIG also commented that No. 15 should provide that the client is entitled to a receipt for cash provided and that if a receipt is not provided that the client should see a supervisor. Response: In response to this comment Appendix VII H No. 15 was changed to include the recommended language. A comment received from the Legal Aid and Defender Association, Detroit, Michigan, questions the segregation of duties guidelines found in Appendix VII, Section J (Segregation of Duties). There is a fear that if duties were assigned to staff outside the accounting department, this staff person may have access to confidential information. Response: Appendix VII J contains guidelines for the management of a recipient’s financial systems. The objective of Section J is to provide the maximum safeguards possible under the circumstances. Accounting duties should be segregated to ensure that no VerDate Mar<15>2010 18:46 Jul 21, 2010 Jkt 220001 individual simultaneously has both the physical control and the record keeping responsibility for any asset, including, but not limited to, cash, client deposits, supplies and property. Duties must be segregated so that no individual can initiate, execute, and record a transaction without a second independent individual being involved in the process. In response to this comment and to clarify the inquiry, we have changed the question to: ‘‘Are checks, after being signed, controlled and mailed out by an individual who does not have any other payables duties?’’ An LSC OIG comment suggested that Appendix VII K (Petty Cash Controls) be changed to add procedures regarding access to and physical control over the petty cash box during and after work hours. Response: In response to this comment a new No. 14 has been added to Appendix VII K to include language regarding access to and physical control over the petty cash box during and after work hours. libraries and library programs and the development of future Presidential libraries. NARA will use the Committee’s recommendations in its implementation of strategies for the efficient operation of the Presidential libraries. FOR FURTHER INFORMATION CONTACT: NARA’s Committee Management Officer is Mary Ann Hadyka. She can be reached at 301–837–1782. Dated: July 13, 2010. Victor M. Fortuno, President, Legal Services Corporation. The U.S. Nuclear Regulatory Commission (NRC) is considering changes to the Emergency Plan, pursuant to 10 CFR 50.54, ‘‘Conditions of licenses,’’ paragraph (q), for Facility Operating License No. NPF–62, issued to Exelon Generation Company, LLC (the licensee), for operation of the Clinton Power Station, located in Clinton, Illinois. In accordance with 10 CFR 51.21, the NRC prepared an environmental assessment documenting its finding. The NRC concluded that the proposed action will have no significant environmental impact. [FR Doc. 2010–17737 Filed 7–21–10; 8:45 am] BILLING CODE 7050–01–P NATIONAL ARCHIVES AND RECORDS ADMINISTRATION Advisory Committee on Presidential Library-Foundation Partnerships. National Archives and Records Administration. ACTION: Renewal of Advisory Committee on Presidential Library-Foundation Partnerships. AGENCY: This notice is published in accordance with the provisions of section 9(a)(2) of the Federal Advisory Committee Act (Pub. L. 92–463, 5 U.S.C., App.) and advises of the renewal of the National Archives and Records Administration’s (NARA) Advisory Committee on Presidential Library-Foundation Partnerships. In accordance with Office of Management and Budget (OMB) Circular A–135, OMB approved the inclusion of the Advisory Committee on Presidential Library-Foundation Partnerships in NARA’s ceiling of discretionary advisory committees. NARA has determined that the renewal of the Advisory Committee is in the public interest due to the expertise and valuable advice the Committee members provide on issues affecting the functioning of existing Presidential SUMMARY: PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 Dated: July 16, 2010. David S. Ferriero, Archivist of the United States. [FR Doc. 2010–17997 Filed 7–21–10; 8:45 am] BILLING CODE 7515–01–P NUCLEAR REGULATORY COMMISSION [Docket No. 50–461; NRC–2010–0252] Exelon Generation Company, LLC; Clinton Power Station; Environmental Assessment and Finding of No Significant Impact Environmental Assessment Identification of the Proposed Action The proposed action is NRC approval of a licensee’s request to revise the staffing requirements for the Exelon Nuclear Radiological Emergency Plan Annex for Clinton Station, Table B–1, ‘‘Minimum Staffing Requirements for the On-Shift Clinton Station Emergency Response Organization (ERO),’’ to allow an increase in the Non-Licensed Operator (NLO) staffing from two to four, allow in-plant protective actions to be performed by personnel assigned other functions, and replace a Mechanical Maintenance person with a NLO. The regulation at 10 CFR 50.54(q) states that, ‘‘The nuclear power reactor licensee may make changes to these plans without Commission approval only if the changes do not decrease the effectiveness of the plans.’’ The licensee concluded that the proposed action constituted a decrease in the plan’s E:\FR\FM\22JYN1.SGM 22JYN1

Agencies

[Federal Register Volume 75, Number 140 (Thursday, July 22, 2010)]
[Notices]
[Pages 42786-42790]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-17737]


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LEGAL SERVICES CORPORATION


Accounting Guide for LSC Recipients (2010 Edition)

AGENCY: Legal Services Corporation.

ACTION: Notice.

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SUMMARY: The Legal Services Corporation (LSC) is revising the 
Accounting Guide for LSC Recipients to reflect changes that have 
occurred since the last publication of the Accounting Guide (the 
``Guide'') in 1997. Notice was published in the Federal Register on 
February 2, 2010, requesting public comments to proposed revisions to 
the Guide. Following the receipt of comments from the public, the LSC 
Office of the Inspector General and members of the LSC Board of 
Directors, and making changes as deemed appropriate in response to 
those comments, the LSC Board of Directors approved revisions to the 
Guide at a meeting held on June 15, 2010.
    The revisions incorporate: (1) New internal control provisions for 
electronic banking transactions and contracting; (2) financial 
oversight concepts from the Sarbanes Oxley Act of 2002; (3) references 
to the accounting standards codification by the Financial Standards 
Accounting Board (FASB) released on July 1, 2009; (4) key practices to 
enhance fraud prevention; (5) provisions in other LSC regulations and 
policies, including the LSC Property Acquisition and Management Manual 
and LSC Program Letters; (6) revisions to accounting procedures and 
internal controls to reflect current best practices; (7) updated and 
new references to other sources of information; and (8) other changes 
to clarify existing provisions. The Accounting Guide for LSC Recipients 
(2010 edition) can be located by accessing LSC's Web site at http://www.lsc.gov/pdfs/accounting_guide_for_lsc_recipients_2010_edition.pdf.

DATES: Effective Date: August 23, 2010.

FOR FURTHER INFORMATION CONTACT: Chuck Greenfield, Program Counsel, 
Legal Services Corporation, 3333 K St., NW., Washington DC 20007; 
greenfieldc@lsc.gov (e-mail), (212) 295-1549 (phone) or (212) 337-6813 
(fax).

SUPPLEMENTARY INFORMATION:

Background

    Under the Legal Services Corporation Act, as amended, LSC ``is 
authorized to require such reports as it deems necessary from any 
recipient, contractor or person or entity receiving assistance'' 42 
U.S.C. 2996g(a). LSC is also ``authorized to prescribe the keeping of 
records with respect to funds provided by grant or contract and shall 
have access to such records'' 42 U.S.C. 2996g(b). Further, LSC ``shall 
conduct or require each recipient, contractor, person or entity 
receiving financial assistance * * * to provide for an annual financial 
audit.'' 42 U.S.C. 2996h(c)(1). In addition, ``funds received by any 
recipient from a source other than the Corporation * * * shall be 
accounted for and reported as receipts and disbursements separate and 
district from Federal funds'' 42 U.S.C. 2996i(c).
    Under authority of the Legal Services Corporation Act, LSC 
published the Accounting Guide for LSC Recipients. The Guide sets forth 
LSC's accounting, financial management and reporting guidelines. In 
general, LSC requires recipients and subrecipients of its funding to: 
(1) Manage LSC and non-LSC funds in a stewardship manner and pursuant 
to the cost standards and procedures of 45 CFR Part 1630; and (2) 
record transactions in accounting records and prepare annual financial 
statements in accordance with generally accepted accounting principles 
(GAAP). The current version of the Guide was last updated in 1997.
    In an effort to update the Guide to reflect more current accounting 
and financial oversight practices, as well as to respond to grantee 
financial issues mentioned in a Government Accountability Office (GAO) 
report, and as a result of the recommendations of the LSC Fiscal 
Advisory Group, LSC developed a number of revisions to the Guide. The 
revisions are in the following eight categories:

[[Page 42787]]

    (1) New internal control provisions for electronic banking 
transactions and contracting. The current Guide does not discuss in 
detail electronic banking. Electronic banking arrangements and 
transactions are now common. Many recipients of LSC funding conduct a 
significant portion of their financial transactions electronically. LSC 
itself transmits funds electronically to all recipients. The revisions 
add a new section on electronic banking to the Fundamental Criteria and 
include sections on the authorization process for electronic banking 
activities, the authorization process for employees that initiate and 
transmit electronic fund transactions, review and approval procedures 
for electronic banking transactions, supporting documentation for 
electronic banking transactions, recording electronic banking 
transactions in the general ledger, bank reconciliations and 
safeguards. Section 3-5.15. New sections on electronic transactions 
have also been added to the Accounting Procedures and Internal Control 
Checklist in Appendix VII. Sections G2, G3, and M of Appendix VII. In 
addition, a new section was added in the Fundamental Criteria on 
contracting and includes sections on types of contracts, documenting, 
competition and approvals. Section 3-5.16.
    (2) Financial oversight concepts from the Sarbanes Oxley Act of 
2002. While only limited provisions of the Sarbanes Oxley Act of 2002 
are required of non profit corporations, LSC has determined that 
certain financial oversight concepts found in Sarbanes Oxley are 
appropriate for recipients of LSC funds. An example is the current 
Accounting Guide requirement that recipients of LSC funds have a 
financial oversight committee of their board of directors, but not a 
separate audit committee. The revisions require that recipients must 
have a financial oversight committee(s) that engages in all the 
activities of an audit committee, including: Hiring the auditor; 
setting the auditor's compensation; overseeing the auditor's 
activities; setting rules and processes for complaints about accounting 
practices and internal control practices; reviewing the annual IRS Form 
990 for completeness, accuracy, and on-time filing and providing 
assurances of compliance to the full board; ensuring the recipient's 
operations are conducted and managed in an ethical manner that complies 
with all applicable laws, regulations and policies; ensuring effective 
management of the recipient's resources and risks; and ensuring 
accountability of persons within the organization. Section 1-7. In 
addition, the revisions consider it a best practice for the board of 
directors to have an audit committee separate from the finance 
committee and for the board to have at least one member who is a 
financial expert or for the board to have access to a financial expert. 
Section 1-7.
    (3) References to the accounting standards codification by the 
Financial Standards Accounting Board (FASB). FASB released a new 
codification of its accounting standards on July 1, 2009. The 
standards, an authoritative listing of generally accepted accounting 
principles (GAAP), are referred to in numerous sections of the Guide. 
All references to the accounting standards in the Accounting Guide have 
been updated and new references have been inserted to reflect new 
section numbers in the FASB accounting standards codification.
    (4) Key practices to enhance fraud prevention. While the current 
Guide lists the elements of an adequate accounting and financial 
reporting system, including the use of specific internal controls and 
risk assessment, there is no separate section on fraud prevention. The 
revisions add a fraud prevention section that details key practices to 
help prevent fraud. Section 3-6.
    (5) Provisions in LSC regulations and policies, including the LSC 
Property Acquisition and Management Manual and LSC Program Letters. The 
regulation on attorneys' fees (45 CFR Part 1642) was eliminated in a 
final rule change effective April 26, 2010, to reflect changes 
contained in the Consolidated Appropriations Act of 2010, Public Law 
111-117. Accordingly, section 2-2.6 (Court-Awarded Attorney Fees) of 
the Guide was modified. Further, subsequent to the publication of the 
Guide in 1997, LSC issued other guidelines for recipients of LSC funds 
that impact on the Guide. For example, the LSC Property Acquisition and 
Management Manual (PAMM), issued in 2001, requires recipients to 
capitalize and depreciate all nonexpendable property with a cost in 
excess of $5,000 and a useful life of more than one year. However, the 
current Guide uses $1,000 as the capitalization and depreciation 
threshold. The revisions to the Guide change the threshold to $5,000 to 
be consistent with the PAAM. Appendix IV, Section 1. In addition, LSC 
has issued Program Letters 08-2 (March 20, 2008), 08-3 (December 18, 
2008) and 09-3 (December 17, 2009) that contain guidance to recipients 
on compliance and fiscal management issues. Those Program Letters have 
been referenced in the revisions to the Guide. Section 2-3.1.
    (6) Revisions to accounting procedures and internal controls to 
reflect current best practices. Appendix VII of the current Guide 
contains a checklist of accounting procedures and internal controls. 
The revisions update the checklist to reflect current best practices.
    (7) Updated and new references to other sources of information. The 
Guide contains numerous references to other sources of information. The 
revisions update and make new references where appropriate.
    (8) Other changes to clarify existing provisions. The revisions 
clarify existing sections to make the provisions easier to understand.

Comments Received to Proposed Revisions to Accounting Guide

    Following the publication of notice of proposed revisions to the 
Guide in the Federal Register on February 2, 2010, LSC received 
comments from the public, the LSC Office of the Inspector General, and 
from members of the LSC Board of Directors. The following is a summary 
of comments received and LSC's response to those comments.

Responsibilities of the Financial Oversight Committee of Committees 
(Section 1-7)

    Section 1-7 sets forth the duties and responsibilities of financial 
oversight committees, including the finance and audit committees. The 
Georgia Legal Services Program raised a concern about the prospect of 
being required to have separate board finance and audit committees. 
Response: The proposed revisions do not require separate finance and 
audit committees. Section 1-7 provides that ``it generally is 
considered a best practice for governing bodies to have both a finance 
committee and a separate audit committee.'' However, the proposed 
revisions do provide that ``[t]he critical point is that all of the 
finance and audit committee duties * * * must be performed by a 
financial oversight committee(s).''
    The Georgia Legal Services Program also expressed concern over the 
use of the term ``financial statements'' in one of the specified roles 
of the finance committee. The Georgia program mentions that the review 
of full financial statements monthly would be time-consuming, 
burdensome for the program, and potentially confusing. Response: In 
response to this comment we have revised this section to use the term 
``management reports'' rather than ``financial statements'' in role No. 
2 of the finance committee, with a reference

[[Page 42788]]

to budgeted and actual expenses and income, variances, and a statement 
of cash on hand. We have added sample management reports as Appendix IB 
and a section entitled ``Statement of Cash on Hand'' to section 3-5.9 
of the Fundamental Criteria (Management Reports).
    The final comment from the Georgia Legal Services Program is that 
the provision of financial reports on a quarterly basis, rather than 
monthly as set forth in the proposed revision, has worked well for 
their program. Response: While it is recognized that a number of 
programs provide financial reports to the finance committee and/or the 
board on a quarterly basis, it is the preferred practice to have these 
reports produced and reviewed monthly thereby providing the finance 
committee with as up-to-date information as possible on the financial 
condition of the program. It should be noted that this provision does 
not require monthly meetings of the finance committee, but that the 
reports be reviewed monthly with the chief financial officer, 
controller, and/or CPA. This review may occur by email or in some other 
manner.
    In addition, there were comments from several members of the LSC 
Board of Directors that this section needs to have more focus on the 
need for the duties of audit committees to be performed even if a 
recipient does not have a separate audit committee and on the need of 
having a financial expert on the financial oversight committee(s) or 
access to a financial expert. One board member also mentioned that 
there were too many ``or'' options in the language. Response: In 
response to these comments, a new paragraph has been drafted which more 
clearly emphasizes the critical points that all of the listed duties of 
a finance and an audit committee must be performed by a financial 
oversight committee(s) and that the financial oversight committee(s) 
needs to have a financial expert or access to a financial expert.
    LSC Board members recommended an expansion of the language in 
Section 1-7 under role No. 6 of the Audit Committee. Response: Role No. 
6 of the Audit Committee in Section 1-7 was expanded to more fully 
describe the committee's duties in ensuring compliance with ethical 
requirements, applicable laws, regulations and policies, effective 
management of the recipient's resources and risks, and accountability 
of persons within the organization.

Property (Section 2-2.4)

    Section 2-2.4 sets forth certain principles for the treatment of 
property, including the requirement that recipients capitalize and 
depreciate all nonexpendable property with a cost in excess of $5,000 
and a useful life of more than one year. A comment was received from 
the LSC Office of the Inspector General (OIG) suggesting that it might 
be necessary to include accounting for sensitive assets even when those 
assets are valued at less than $5,000, as the program may want to track 
them for other reasons. Response: A new sentence has been added to 
Section 2-2.4 incorporating this suggestion.

Court-Awarded Attorneys Fees (Section 2-2.6)

    Section 2-2.6 discusses court-awarded attorneys' fees. A comment 
was received from the Chair of the Standing Committee on Legal Aid and 
Indigent Defendants of the American Bar Association, suggesting that, 
given the elimination of the restriction on the claiming, collection 
and retention of attorneys' fees, it would be helpful if there would be 
an explanation of what attorneys' fees are permitted. Response: It is 
correctly noted that the restriction on claiming, collection and 
retention of attorneys' fees (former 45 CFR 1642) has been eliminated 
in a final rule change effective April 26, 2010, to reflect changes 
contained in the Consolidated Appropriations Act of 2010, Public Law 
111-117, and that there is no language in the change to 2-2.6 stating 
in what situations attorneys' fees are permitted. The question of when 
attorneys' fees are permitted to be collected from the opposing party 
is generally a matter of state and federal law, as interpreted by the 
judge deciding the case. LSC does not have a regulation that sets forth 
when attorneys' fees are available. It is noted that the recipients of 
LSC funds are subject to restrictions regarding accepting fee-
generating cases, as set forth in 45 CFR 1609. No change to 2-2.6 was 
made in response to this comment.
    There was also a comment from the Center on Law and Social Policy 
recommending a reference in 2-2.6 to the provision on accounting for 
attorneys' fees, now set forth in 45 CFR 1609.4. Response: In response 
to this comment, 2.2-6 has been amended to include this reference.

Grant and Contract Costs (Section 2-3.1)

    Section 2-3.1 addresses grant and contract costs. A comment 
received from the LSC OIG questioned whether the Program Letter on 
Compliance Guidance and Interim Guidance on Attorneys' Fees dated 
December 17, 2009, was superseded by an interim final rule on 
attorneys' fees issued by the LSC on March 15, 2010. Response: The 
purpose of the reference to Program Letters in 2-3.1 is to let grantees 
know that the letters themselves contain additional cost allocation and 
financial management information. The Compliance Guidance and Interim 
Guidance on Attorneys' Fees issued on December 17, 2009 as Program 
Letter 09-03 mostly discusses issues unrelated to attorneys' fees. The 
attorneys' fees discussion is limited to interim guidance and by its 
terms applies only until LSC Board action on the issue. The interim 
guidance remains applicable during the period until the Board acted. 
After reviewing the Program Letter, there appears to be nothing 
inconsistent between the interim guidance and the Board's later action.

Internal Control/Fundamental Criteria of an Accounting and Financial 
Reporting System (Chapter 3)

    The introduction to Chapter 3 discusses the responsibilities of a 
recipient to maintain adequate accounting records and internal control 
procedures. An LSC OIG comment recommended the addition of language 
making clear that internal control is specifically a management 
responsibility. Response: The first paragraph of Chapter 3 has been 
modified to add that internal control is ``managed and maintained by 
the recipient's board of directors and management.''

Fundamental Criteria (Section 3-5)

    Section 3-5 contains the LSC Fundamental Criteria, which is a 
listing of the elements of an adequate accounting and financial 
reporting system. A comment from the LSC OIG noted that the discussion 
on Enterprise Risk Management seemed to be misplaced and not fully 
developed. Response: As a result of this comment, we have revised 
section 3-5 to include a fuller discussion of Enterprise Risk 
Management in the background section.
    An additional comment from the OIG suggested that a section on 
contracting should be included in the fundamental criteria. Response: 
In response to this comment a new section on contracting has been added 
to the Fundamental Criteria. See Section 3-5.16.
    A further OIG comment stated that while allocation is covered in 
Section 3-5.9(c) of the Fundamental Criteria, there is no specific 
mention of

[[Page 42789]]

documenting the methodology. Response: New language has been added to 
Section 3-5.9(c), under Criteria for Allocations to require adequate 
written documentation of the allocation formula.
    A follow-up comment from the OIG recommended that the OIG be 
specifically mentioned in the new allocation formula language. 
Response: The OIG has been added to Section 3-5.9(c), under Criteria 
for Allocations.
    An OIG comment recommended the addition of ``a sufficient level of 
fidelity coverage'' in Section 3-5.13 (Bonding.) Response: In response 
to the comment Section 3-5.13 has been changed to make specific 
reference to the fidelity coverage requirements of 45 CFR 1629.1(a).
    An OIG comment suggested adding a provision specifying that 
documents to support competition should be retained and kept with the 
contract files in Section 3.5.16 (Contracting.) Response: In response 
to this comment language has been added to the competition section, 
under criteria, to Section 3.5.16, that incorporates the suggestion.

Fraud Prevention (Section 3-6)

    Section 3-6 contains a list of key practices that can help prevent 
fraud. An LSC OIG comment suggested that there should be an addition to 
No. 19 to address protection against retaliation for board members and 
volunteers who report suspected fraud. Response: In response to this 
comment the recommended language has been added to No. 19.
    An LSC OIG comment recommended that board members should be 
reminded that applicable federal and state laws also apply to them. 
Response: In response to this comment new No. 22 has been added 
incorporating this language.
    A comment from the LSC OIG noted that item No. 23 was the only key 
practice that did not start with a verb. Response: New No. 24 has been 
changed to start with ``involve.''
    A comment made by an LSC Board member recommended that more 
specific guidance be given to recipients in the event fraud is 
discovered. Response: In response to this comment language has been 
added to provide more specific instructions to grantees in the event 
fraud is discovered. See Section 3-6, No. 26. This same language is 
found in LSC Grant Assurance No. 15 for 2010 grants, which is signed by 
both the recipient's board chair and executive director.

Illustrative Financial Statements and Notes to the Financial Statements 
(Appendix IA)

    Appendix IA.1 provides a description of illustrative financial 
statements. A comment from the LSC OIG suggests that the OIG be listed 
in the first paragraph so that the OIG, as well as LSC, would be able 
``to make comparison with budgeted amounts as well as accumulate 
regional or national data for the legal services network.'' Response: 
The suggested language has been added to the first paragraph in 
Appendix IA.1.

Description of Accounting Records--Retention Times for Nonprofit 
Records (Appendix II)

    Appendix II contains a section on the retention times for nonprofit 
records. A comment from a nominee to the LSC Board suggested that we 
add a provision recognizing that state law may provide a longer 
retention period for certain types of records. Response: In response to 
this comment we have added a new sentence recognizing the possibility 
that state law may require a longer retention period for particular 
types of records.
    A comment was also received from the LSC OIG recommending that all 
financial and financial related information be retained for at least 
five years, given the fact that questioned costs under 45 CFR 1630 can 
go back five years. Response: In response to this comment we have 
changed the retention period for the mentioned financial and financial 
related information to seven years, to make this section consistent 
with 45 CFR 1630 and the Grant Assurances.

Accounting for Property (Appendix IV)

    Appendix IV sets forth procedures for accounting for property, 
including the capitalization and depreciation of property and 
equipment. We received comments from JAA & Associates, Hawaii, that the 
proposed revisions to the illustrations of journal entries for 
capitalization and depreciation are confusing, incomplete or 
inaccurate. JAA & Associates also suggested changing the title of 
Illustration 1.1 under Capitalization from ``To record equipment 
purchased with cash'' to ``To record equipment purchased with cash or 
credit.'' Response: We are also concerned that the proposed revisions 
in the illustrations in the capitalization and depreciation sections 
may be confusing. Further, the flow of journal entries can vary 
somewhat depending on the accounting system used by each LSC grantee. 
It was determined that while the recommended changes make sense if 
journal entries are made in a certain way, there are other valid ways 
to make entries and the proposed changes could cause confusion. Thus, 
we have reverted to the 1997 language for the illustrations, which is 
more easily understandable.

Other Regulatory Financial Requirements (Appendix VI)

    Appendix VI contains provisions on other regulatory financial 
requirements, including tax reporting. An LSC OIG comment recommended 
that the language be altered to reflect that form 990 is required to be 
filed and the failure to file for three consecutive years will 
automatically result in the loss of a non profit's tax exempt status. 
Response: In response to this comment the language has been changed in 
Appendix VI.1 to specifically mention the mandatory requirement of 
filing the 990 form and the automatic loss of tax-exempt status for the 
failure to file a 990 for three consecutive years.

Accounting Procedures and Internal Control Checklist (Appendix VII)

    Appendix VII provides a checklist for a grantee's internal 
controls. An LSC OIG comment suggests requiring employees and officers 
handling assets to be ``sufficiently bonded'' under Appendix VII A 
(General.), No. 6. Response: In response to this comment Appendix VII 
A, No. 6 has been changed to add a reference to the bonding 
requirements found in 45 CFR 1629.
    A comment from the LSC OIG questioned whether it was intended in 
Appendix VII A (General) to have a monthly reporting requirement of a 
cash flow statement to the finance committee of a recipient's board of 
directors. Response: Monthly reporting to the finance committee was 
intended and is consistent with the section 1-7 discussion about role 
No. 2 of the finance committee. We have changed the second sentence in 
No. 18 to add ``statement of cash on hand,'' which is also mentioned in 
sections 1-7, 3-5.9(b), and Appendix IB.
    We also received a comment from a nominee to the LSC Board that 
Appendix VII B (Personnel and Payroll) should mention that it is a best 
practice to include both a nondiscrimination policy and a signed 
statement from every employee that they understand their roles in terms 
of nondiscrimination. Response: In response to this comment a new No. 
14 has been added to Appendix VII B incorporating this comment.
    An LSC OIG comment suggested that Appendix VII D (Procurement) 
contain

[[Page 42790]]

a requirement that each procurement action, above a reasonable level, 
be fully documented by maintaining the bids received and the approvals 
given. This would include written justification for sole source 
purchases above a certain level. Response: In response to this comment 
a new No. 12 has been added to Appendix D, incorporating the 
suggestion.
    Another LSC OIG comment questioned what ``properly executed'' means 
in Appendix VII E (Legal Consultants/Contract Services.) Response: In 
response to this comment we have changed No. 2. in Legal Consultants/
Contract Services from ``Are contracts written so that the services to 
be rendered are clearly defined and properly executed?'' to the 
following three sentences: ``Are contracts written so that the services 
to be rendered are clearly defined?''; ``Are contracts properly signed 
by authorized persons?'' and ``Have all contract terms and 
modifications been complied with?''
    An LSC OIG comment suggested adding to Appendix VII G1 No. 7 that 
the check should be marked as void or defaced in a manner that would 
prevent future use of the check. Response: In response to this comment 
Appendix VII G1 No. 7 has been changed to include the recommended 
language.
    An LSC OIG comment pointed out that there was no reference in 
Appendix VII H (Controls Over Cash Receipts) to cash received from an 
individual while in the office, as opposed to receiving money through 
the mail. Response: In response to this comment, we have added new Nos. 
8-12 in Appendix VII H, to include the questions addressing cash 
received from an individual while in the office.
    The LSC OIG also commented that No. 15 should provide that the 
client is entitled to a receipt for cash provided and that if a receipt 
is not provided that the client should see a supervisor. Response: In 
response to this comment Appendix VII H No. 15 was changed to include 
the recommended language.
    A comment received from the Legal Aid and Defender Association, 
Detroit, Michigan, questions the segregation of duties guidelines found 
in Appendix VII, Section J (Segregation of Duties). There is a fear 
that if duties were assigned to staff outside the accounting 
department, this staff person may have access to confidential 
information. Response: Appendix VII J contains guidelines for the 
management of a recipient's financial systems. The objective of Section 
J is to provide the maximum safeguards possible under the 
circumstances. Accounting duties should be segregated to ensure that no 
individual simultaneously has both the physical control and the record 
keeping responsibility for any asset, including, but not limited to, 
cash, client deposits, supplies and property. Duties must be segregated 
so that no individual can initiate, execute, and record a transaction 
without a second independent individual being involved in the process. 
In response to this comment and to clarify the inquiry, we have changed 
the question to: ``Are checks, after being signed, controlled and 
mailed out by an individual who does not have any other payables 
duties?''
    An LSC OIG comment suggested that Appendix VII K (Petty Cash 
Controls) be changed to add procedures regarding access to and physical 
control over the petty cash box during and after work hours. Response: 
In response to this comment a new No. 14 has been added to Appendix VII 
K to include language regarding access to and physical control over the 
petty cash box during and after work hours.

     Dated: July 13, 2010.
Victor M. Fortuno,
President, Legal Services Corporation.
[FR Doc. 2010-17737 Filed 7-21-10; 8:45 am]
BILLING CODE 7050-01-P