Timekeeping Requirement, 27037-27042 [2021-10137]

Agencies

• LEGAL SERVICES CORPORATION

[Federal Register Volume 86, Number 95 (Wednesday, May 19, 2021)]
[Rules and Regulations]
[Pages 27037-27042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10137]


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LEGAL SERVICES CORPORATION

45 CFR Part 1635


Timekeeping Requirement

AGENCY: Legal Services Corporation.

ACTION: Final rule.

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SUMMARY: The Legal Services Corporation (LSC) is adopting a final rule 
amending its regulation related to the timekeeping requirements of 
employees at LSC funding recipients. The final rule makes multiple 
changes to how recipients keep time. Aside from making multiple 
technical edits for clarity, the final rule defines the term ``case 
oversight'' and clarifies that employees who are subject to the 
timekeeping requirement are those doing work that can be charged to any 
of the recipient's awards as a direct cost. The final rule changes the 
requirements for timekeeping by requiring recipient employees who 
charge their time to awards as direct costs to keep time consistent 
with this part; establishing that employees must submit their time by 
the end of the pay period; requiring recipients to use the same 
documentation and standards for LSC grants as non-LSC grants; and 
allowing recipients to decide the time increments that their employees 
should use to record their time.

[[Page 27038]]


DATES: This final rule is effective on January 1, 2022.

FOR FURTHER INFORMATION CONTACT: Stefanie K. Davis, Senior Assistant 
General Counsel, Legal Services Corporation, 3333 K Street NW, 
Washington, DC 20007; (202) 295-1563 (phone), (202) 337-6519 (fax), or 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    In 1995, LSC initiated rulemaking to require recipient employees to 
keep records of time spent working on LSC-funded activities. 60 FR 
48956, Sep. 21, 1995. LSC took this step to ``improve accountability of 
recipients for their Corporation funds, and in response to concerns 
expressed during Congressional hearings.'' Id. LSC wanted to assure 
that recipients maintained adequate documentation to support allocation 
of costs to the LSC grant. Id. at 48957. Consequently, LSC intended the 
rule ``to require all recipients to account for the time spent on all 
cases, matters and other activities by their attorneys and paralegals, 
whether funded by [LSC] or other sources.'' Id. LSC did not define 
either ``attorney'' or ``paralegal,'' although LSC did define the terms 
``cases'' and ``matters.'' Id. LSC did not prescribe either the format 
or the content of the required timekeeping reports. Id.
    After receiving public comment, LSC adopted the proposed rule as 
final, with limited changes. 61 FR 14261, Apr. 1, 1996. In the preamble 
to the final rule, LSC stated that the rule applied to recipient 
attorneys and paralegals regardless of whether their salaries were paid 
using LSC funds. Id. Applying the rule to all attorneys and paralegals, 
LSC explained, reflected language that Congress included in a version 
of the fiscal year 1996 appropriations act that it passed, but the 
President vetoed. Id. LSC retained the requirement because it 
anticipated that Congress and the President would agree on legislation 
containing a similar requirement for fiscal year 1996, which they did. 
Sec. 504(a)(10), Pubic Law 104-134, 110 Stat. 1321, 1321-54 (1996) 
(stating that LSC could not award appropriated funds to any person or 
entity unless ``such person or entity agrees to maintain records of 
time spent on each case or matter with respect to which the person or 
entity is engaged.''). This requirement has been incorporated by 
reference annually thereafter.
    In the preamble to the final rule, LSC explained how it expected 
recipients to implement the requirement to maintain ``contemporaneous'' 
time records. LSC stated that ``contemporaneous'' meant ``in most 
cases, by the end of the day.'' 61 FR at 14262.
    LSC initiated its first revision of part 1635 in 1998. That year, 
the Office of Inspector General (OIG) conducted an audit of recipients' 
compliance with specific regulations, including part 1635, and issued a 
report that formed the basis for Management's recommended changes. In 
the report, OIG stated its finding that, based on records maintained in 
compliance with part 1635, it could not tell whether part-time 
employees of an LSC funding recipient engaged in restricted work during 
LSC-funded time. 63 FR 56594, Oct. 22, 1998.
    In response to OIG's findings, LSC proposed two changes. The first 
was to require recipients to ensure that the time records for both 
full- and part-time employees were consistent with their payroll time 
and attendance records. In other words, ``the time spent by an employee 
must at least add up to the amount reflected in the attendance 
records.'' Id. at 56595. LSC also proposed to require full-time and 
part-time attorneys and paralegals to record, for each case, matter, or 
supporting activity that they handled, the date and exact time of day 
they worked on that activity. Id. Alternatively, LSC proposed that 
part-time attorneys and paralegals could certify that they did not 
engage in restricted activities during the time they were working for 
the recipient. Id.
    LSC did not finalize its revisions to part 1635 until 2000. At that 
time, LSC adopted the rule with two changes relevant here. 65 FR 41879, 
Jul. 7, 2000. First, LSC removed the proposed text requiring attorney 
and paralegal time records to be consistent with their payroll time and 
attendance records. Id. at 41880. Several commenters on the proposed 
rule expressed concern that a rule requiring employee time records to 
match the payroll records would put recipients at risk of violating the 
Fair Labor Standards Act. Id. Although LSC did not agree with the 
commenter raising the concern, LSC removed the language because it 
believed the language was not necessary. Id. Second, LSC adopted the 
certification requirement for part-time attorneys and paralegals. Id. 
Put differently, part-time attorneys and paralegals do not have to 
report the date and exact time of day that they worked on cases, 
matter, or supporting activities, but must certify that they did not 
work on restricted activities during the hours they worked for a 
recipient.
    Management believes regulatory action is justified at this time for 
three reasons. First, the lack of a definition for the term 
``paralegal'' creates a lack of uniformity across recipients regarding 
which employees must keep time. In other words, some recipients employ 
staff who are called paralegals, but who do only administrative work, 
while others employ staff who perform substantive legal work under an 
attorney's supervision or who have satisfied their state's requirements 
for holding oneself out as a paralegal, but who may not have the title 
of paralegal. Because the regulation does not define the term 
``paralegal,'' it is unclear whether some or all recipient employees 
described in the preceding sentence must keep time consistent with part 
1635. Consequently, LSC cannot be certain that part 1635 covers all 
recipient employees who are doing significant amounts of work on the 
LSC grant, which appears to be what LSC intended when it originally 
drafted the rule to cover attorneys and paralegals. LSC proposes to 
remedy this problem by revising the language to include all employee 
staff, regardless of qualification or title, who are doing work that 
can be identified with specific awards. Conversely, employee staff 
whose work is solely allocated across awards as indirect costs need not 
record their time under part 1635.
    Second, the federal government rules governing recipient 
timekeeping have changed significantly, as have best practices for 
nonprofit timekeeping. LSC believes it is reasonable to reconsider the 
requirements of part 1635 in light of these advances and determine 
whether to revise the rule to reflect the new standards. Finally, LSC 
proposes to remove any provisions of the rule that are obsolete.
    LSC added rulemaking on part 1635 to its annual rulemaking agenda 
in April 2016. On January 30, 2020, the Operations and Regulations 
Committee (``Committee'') of the Board voted to recommend that the 
Board authorize rulemaking on part 1635. The Board voted to authorize 
rulemaking on January 31, 2020. On October 19, 2020, the Committee 
voted to recommend that the Board approve publication of an NPRM in the 
Federal Register with a 60-day public comment period. On October 20, 
2020, the Board accepted the Committee's recommendation and voted to 
approve publication of the NPRM. LSC published the rule in the Federal 
Register on November 5, 2020. The comment period remained open for 
ninety-two days and closed on February 5, 2021.
    On April 19, 2021, the Committee voted to recommend that the Board 
adopt this final rule and approve its publication in the Federal 
Register. On

[[Page 27039]]

April 20, 2021, the Board voted to adopt and publish this final rule.
    Materials regarding this rulemaking are available in the open 
rulemaking section of LSC's website at https://www.lsc.gov/about-lsc/laws-regulations-guidance/rulemaking. After publication of the final 
rule, materials will migrate to the closed rulemaking section of LSC's 
website.

II. Section-by-Section Discussion of Proposed Changes and Comments

    LSC received eleven relevant comments--nine from executive 
directors of grantee organizations, one from the National Legal Aid and 
Defender Association (NLADA), and one from the Management Information 
Exchange. LSC also had a follow-up conversation with NLADA about their 
concerns with proposed Sec.  1635.5.

Sec.  1635.1 What is the purpose of this section?

    LSC proposed making technical edits to this section for clarity.
    Comments: NLADA affirmatively endorsed the proposed changes. Four 
other commenters stated that they joined in NLADA's comments generally. 
No other comments explicitly referenced this section.
    Response: LSC adopts the proposed rule as final without changes.

Sec.  1635.2 Definitions

    LSC proposed revising the definition of the term ``case'' in 
paragraph (a) to be more consistent with the definition of the same 
term in the Case Service Report Handbook. LSC proposed introducing a 
new definition for the term ``case oversight'' in paragraph (b) of this 
section.
    Comments: LSC received few comments addressing this section, and 
the opinions about the changes varied. NLADA endorsed the proposed 
changes; they liked the addition of the new term ``case oversight'' and 
liked that it can be billed as a matter or case activity. One 
commenter, like NLADA, supported the addition of case oversight as a 
new time activity that will capture the review of cases at closing and 
the review of open cases. However, they wanted LSC to make it more 
explicit whether ``case oversight'' is a matter or case activity.
    The sole commenter who criticized the change stated that ``case 
oversight'' is newly defined, and it is not clear why. They suggested 
explaining or removing the definition as unnecessary.
    Response: LSC adopts the proposed rule as final with minor changes. 
LSC will include language in the definition explaining that a 
supervisor's ``case oversight'' activities may be included within case 
activities when it involves extensive work on a single case--for 
example, reviewing, in detail, the advice provided to a client--and 
included within supporting activities when the oversight involves the 
aggregate work on a number of different cases, such as reviewing 
multiple files for a retainers or citizenship attestations.

Sec.  1635.3 Who is covered by the timekeeping requirement?

    LSC proposed creating a new section dedicated to explaining which 
recipient employees must report time consistent with the requirements 
of this section. LSC proposed replacing the language limiting the 
application to part 1635 to recipient employees with language extending 
part 1635 to any recipient employee whose salary is allocated, in whole 
or in part, to any of the recipient's funding sources as a direct cost.
    Comments: LSC received six comments about this section. All 
commenters objected to LSC's proposed changes to this section, although 
they proposed different solutions.
    NLADA said that the proposed requirement covers a broader group of 
recipient employees than necessary. They recommended that LSC revisit 
this proposal or add clarification about distinguishing between 
employees doing substantive legal work and non-substantive work. 
Generally, the comments evinced a concern among NLADA's stakeholders 
that the proposed rule would require a legal aid employee who is doing 
non-substantive work (like screening or intake) but whose salary is 
billed as a direct cost to comply with the part 1635 timekeeping 
requirements--an outcome that they believe to be ``over-inclusive'' and 
burdensome.
    Three comments suggested that clearly defining ``paralegal'' is a 
better solution to the problem. One commenter stated that they are 
confused as to who must keep time under the proposed change; they 
stated that the preamble had many different definitions, but the actual 
regulation was ``minimalist.'' They proposed that the language instead 
be changed to, ``Any attorney, paralegal, or other recipient employees 
who perform substantive legal work that is charged as a direct cost (as 
defined in 45 CFR 1630.5(d)) must keep time according to the standards 
set forth in Sec.  1635.4.''
    Another commenter suggested LSC add a sentence so that the 
definition of paralegal ``does not include non-attorney time on 
administrative or supporting tasks that are not directly involved in 
providing clients substantive legal services, regardless of whether the 
compensation for the staff is characterized as direct or indirect in 
any applicable grant award.''
    Response: LSC adopts the proposed rule as final with changes. LSC 
did not intend for employees doing an insubstantial amount of work on a 
grant (such as intake or screening) to be subject to the timekeeping 
requirement. Rather, the intention was for anyone doing work 
identifiable to a grant to comply with the timekeeping requirement. LSC 
will modify the final rule in line with the suggestion of a commenter, 
so that the rule is clear that employees must comply with section 
1635.4 when the work is charged to any award as a direct cost.

Sec.  1635.4 What are LSC's timekeeping standards?

    LSC proposed replacing existing section 1635.3 with a new section 
1635.4 that adopts documentation requirements for personal compensation 
from the Uniform Guidance. LSC specifically sought comment on the 
question of when employees covered by part 1635 must record their time 
in a recipient's timekeeping system.
    Paragraph (a) proposed to establish several requirements for 
recipients' timekeeping records, including that records encompass both 
LSC-funded and all other activities compensated by the recipient on an 
integrated basis. LSC specifically requested comments on the question 
of when employees covered by part 1635 must record their time in a 
recipient's timekeeping system. Paragraph (b) proposed to require 
recipients to maintain records for employees who are not exempt from 
Fair Labor Standards Act overtime requirements stating the total number 
of hours worked each day. Paragraph (c) proposed to require recipients 
to use the same documentation and standards to justify counting 
salaries and wages of staff working on the LSC grant toward the cost-
matching requirements of any Federal awards that they use to charge the 
salaries to the LSC grant.
    Paragraph (d) proposed to allow recipients to establish the 
increments for which employees subject to part 1635 report their time, 
with the recommendation that the increment be no greater than one-
quarter of an hour. LSC proposed that paragraph (e) be a rewrite of 
previous paragraph (d), with the language clarified and the reference 
to de minimis activities removed.
    Comments: All eleven commenters discussed the proposed changes to 
this section. The comments on Sec.  1635.4 clustered around five major 
subcategories, outlined below.

[[Page 27040]]

1. Comments About the Deadline for Entering Time
    Seven commenters stated that the time period by which an employee's 
time needs to be entered into the system should be by the end of the 
employee's pay period (usually every two weeks or bimonthly). One 
recipient commenter stated that it currently asks its staff to enter 
time at least every 14 days and that they believe this satisfies the 
current requirement that time records be entered contemporaneously with 
the work being done. Another commenter stated that having a deadline to 
enter as the end of the pay period would ``address the reality of legal 
work while providing a uniform definition.''
    NLADA did not specifically suggest that the end of the pay period 
be the deadline by which to enter time. Rather, they encouraged LSC to 
develop as long a timeframe as possible for employees to enter time. 
One commenter echoed this sentiment, asking for the deadline to be as 
liberal as possible, but ``no less than 30 days.'' According to this 
commenter, this would avoid instances of noncompliance and allow 
programs to meet requirements of various funders.
    Response: LSC adopts the proposed rule as final with changes. LSC 
adopts a deadline for entering time that is the end of the recipient 
employee's pay period.
2. Comments About Proposed Section 1635.4(a) and Requirements for 
Timekeeping Records/``Integrated Basis''
    Three grantees and NLADA expressed concern about the proposed 
changes to this part of the section. The comments indicated that 
recipients share confusion about what ``integrated basis'' means. On 
top of that, the example provided in paragraph (a)(7)(ii) raised 
concerns that costs would need to be allocated to a specified funding 
source by every attorney at the moment the attorney enters time.
    NLADA stated that its stakeholders did not know what LSC intended 
by the term ``integrated basis.'' However, they also said that if the 
term just means that LSC and non-LSC work be located in the same case 
management system, then they have no objection. One commenter said that 
if ``integrated basis'' means that LSC will require that other funds 
and other types of grants be integrated into a single payroll system, 
the requirement would be a problem for them.
    The example that LSC provided in Sec.  1635.4(a)(7)(ii) said: ``For 
example, if a recipient employee conducts a legal information session 
on filing a pro se divorce petition, the employee could record `pro se 
divorce group information session, 1.5 hours, LSC grant.' '' Several 
commenters expressed alarm that this example indicated that LSC 
expected grantee employees to make funding allocations up front when 
they are entering their hours. They stated that this would be a problem 
because funding allocations are not made at that stage or by individual 
attorneys.
    As a separate concern with this section, one commenter pointed out 
a discrepancy that arose in this section of whether ``matter'' includes 
indirect services. They wrote:

    Section 1635.2 states that a ``Matter'' may include indirect 
services. Section 1635.4(a)(7)(ii) provides, however, that a 
recipient's time system must contain `[f]or matters or supporting 
activities, the amount of time and type of activity on which a 
recipient employee spent time and sufficient information to link the 
activity to a specific award.' This implies that matters include 
only direct services since indirect services may not be linked to a 
specific award.

    One commenter, also noting this as a potential point of confusion, 
proposed changing the language of the rule to reflect how grantees 
allocate costs to ``link the activity to a specific award or indirect 
cost amount.''
    Response: LSC adopts the proposed rule as final with changes. LSC 
will clarify that LSC and non-LSC funds need to be ``integrated'' into 
the same case management system, not the same payroll system. LSC will 
remove the part of the example in Sec.  1635.4(a)(7)(ii) that describes 
the attorney entering and also allocating the time, as this does not 
reflect how time is allocated in recipient organizations. Finally, LSC 
will insert language in Sec.  1635.4(a)(7)(ii) clarifying that 
``matter'' does include indirect services.
3. Comments About Paragraphs (b) and (c)
    NLADA, referring to paragraphs 1635.4(b) and (c), took no position 
on whether to state DOL's regulations within LSC's regulations. They 
said that while it seemed unnecessary, it imposed no new burdens on LSC 
recipients. They did discuss general concerns with looking towards 
Uniform Guidance to regulate recipients, as ``the relationship between 
LSC and its recipients is a unique one,'' and the Uniform Guidance 
``will never be a perfect fit for LSC programs.'' No other commenters 
addressed this section.
    Response: LSC adopts the proposed rule as final without changes.
4. Comments About Paragraph (d) and Recording Time in Particular Time 
Increments
    Most commenters were either silent on this proposed change or 
supportive. NLADA endorsed LSC's removal of 15-minute time increments 
but wanted LSC to remove the language that it ``recommends'' still 
using increments of no more than 15 minutes. One commenter stated 
something similar, writing:

    Essentially, by maintaining this language, LSC is continuing to 
encourage this inefficient practice. Also, a `recommendation' from 
LSC carries weight. It conveys that this is a `best practice' and 
this surely cannot be the intent here.

    Response: LSC adopts the proposed rule as final without change. LSC 
will maintain the recommendation that grantees enter time in 15-minute 
time intervals, as this is an increment of time that is small enough to 
capture the minimum amount of time an employee spends on a case or 
matter, but not so small as to create a significant time entry burden 
on employees subject to part 1635.
5. Comments About Paragraph (e), the Removal of De Minimis Language and 
Quarterly Basis Certification
    LSC received two comments about proposed paragraph (e). NLADA and 
another commenter wanted LSC to clarify if the exception for de minimis 
activities still exists because the language was removed in the 
proposed revision. The commenter said that having the exception makes 
the rule clearer. They expressed the concern that in deleting the 
language, this might be interpreted as deleting the exception.
    Response: LSC adopts the proposed rule as final with changes. LSC 
will re-insert the de minimis exception to clarify that the exception 
still exists.

Sec.  1635.5 What are LSC's standards for ensuring the proper 
allocation of employee compensation costs across awards?

    LSC proposed to create a new section requiring recipients to have a 
method for ensuring the accuracy of timekeeping records and proper 
allocation of salaries and wages charged to awards as direct costs.
    Comments: Eight commenters raised significant concerns with LSC's 
proposed changes in this section. NLADA flatly opposed the changes, 
saying:

    The proposed Sec.  1635.5 is an overly prescriptive solution 
that attempts to impose a one-size-fits-all approach to direct cost 
allocation. It would require extensive

[[Page 27041]]

additional administrative costs, is not necessarily the most 
sensible approach for salaried staff working on the basic field 
grant, and would not necessarily provide any clear benefit when it 
comes to accurately allocating direct costs across funding sources.

    The commenters read the proposed changes as meaning that LSC would 
require the reconciling of hours between a recipient's payroll system 
and timekeeping system. One commenter discussed the fact that most 
payroll records do not reflect total hours that attorneys work. Rather, 
payroll tracks attendance and leave. Thus, they assert that ``payroll 
and timekeeping systems cannot be linked.'' Echoing this theme, another 
commenter said that the proposed changes ``conflates two separate, 
independent record keeping systems.'' This commenter stated that in 
most situations, the payroll and timekeeping records for attorneys will 
not match. Another commenter said that the requirement to reconcile 
``deprives organizations of flexibility and options . . . by conflating 
these systems in the timekeeping regulation.''
    At least five commenters simply indicated that they didn't know 
what LSC meant by ``reconciling.'' A commenter urged LSC not to adopt 
proposed Sec.  1635.5. But if LSC does adopt it, they asked that LSC 
clarify if ``reconciliation'' means a true reconciliation--an 
accounting process that ensures two sets of records are in agreement--
or a more general comparison of records. Furthermore, this commenter 
advocated for LSC to allow the ``sampling'' of data as a means of 
comparison.
    Other commenters expressed confusion over why LSC issued the 
proposed change in the first place. One commenter pointed out that LSC 
already can review timekeeping records as part of its annual audit. 
This commenter would like LSC to provide a more detailed discussion of 
the challenges it has faced so that it can provide alternate solutions. 
Additionally, another commenter would like to have a better 
understanding of LSC's needs in proposing this change. NLADA is unclear 
what the benefit would be to LSC.
    Finally, a commenter suggested that Sec.  1635.5 not be added to 
the Timekeeping Requirement, but instead be located in part 1630--Cost 
Standards and Procedures.
    In LSC's conversation with NLADA, NLADA reiterated its 
stakeholders' concerns with proposed Sec.  1635.5. NLADA stated that 
they would like for LSC to clarify why the reconciliation requirement 
was incorporated in the first place. They said that recipient 
organizations reported that if they knew what the underlying problem 
was that LSC was attempting to correct with this rulemaking, they could 
then make alternative suggestions that would be less burdensome for 
them.
    Response: LSC appreciates the commenters' thoughtful concerns and 
will remove this section from the final rule. LSC drafted this proposed 
change to address issues raised by its compliance staff regarding 
difficulty they had experienced finding support in recipients' records 
to justify salaries and wages the recipient charged directly to LSC 
grants and contracts. The comments make clear that LSC's proposed 
approach raises legitimate concerns about administrative burdens on 
grantees, as well as whether the approach will address the oversight 
concern LSC intended to resolve. LSC will proceed with finalizing the 
rest of the changes proposed in this rulemaking; upon completion of 
this rulemaking, LSC will initiate conversations with stakeholders 
about how to address LSC's oversight needs while responding to 
stakeholders' concerns.

Section 1635.6 Who outside the recipient has access to these records?

    LSC proposed to make only stylistic changes to changes to this 
section.
    Comments: NLADA stated that they did not have any objections to 
these changes. All other comments were silent on this section.
    Response: LSC will redesignate this section as 1635.5 in the final 
rule and adopt the rule without additional changes.

Additional Comments

    Comments: NLADA and another commenter suggested that changes not be 
implemented until 2022. An additional commenter requested that LSC 
invite further discussion before adoption of any of the provisions.
    Response: LSC agrees with the commenters. LSC will adopt the rule 
with an effective date of January 1, 2022.

List of Subjects in 45 CFR Part 1635

    Grant program--law; Legal services; Reporting and recordkeeping 
requirements.

0
For the reasons discussed in the preamble, the Legal Services 
Corporation revises 45 CFR part 1635 to read as follows:

PART 1635--TIMEKEEPING REQUIREMENT

Sec.
1635.1 What is the purpose of this part?
1635.2 Definitions.
1635.3 Who is covered by the timekeeping requirement?
1635.4 What are LSC's timekeeping standards?
1635.5 Who outside the recipient has access to these records?

    Authority: 42 U.S.C. 2996g(e).


Sec.  1635.1  What is the purpose of this part?

    This part is intended to improve recipient accountability for the 
use of all funds by:
    (a) Assuring that allocations of direct costs to a recipient's LSC 
grant pursuant to 45 CFR part 1630 are supported by accurate records of 
the cases, matters, and supporting activities for which the funds have 
been expended;
    (b) Enhancing the recipient's ability to determine the cost of 
specific functions; and
    (c) Increasing the information available to LSC for assuring 
recipient compliance with Federal law and LSC rules and regulations.


Sec.  1635.2  Definitions.

    As used in this part--
    (a) Case means a form of program service in which a recipient 
employee provides legal assistance to one or more specific clients, 
including but not limited to providing representation in litigation, 
administrative proceedings, and negotiations, and such actions as 
advice, providing brief services, and transactional assistance.
    (b)(1) Case oversight means a supervisor's review of a case for 
regulatory compliance, consistency with Case Service Report reporting 
rules, and quality control purposes. Case oversight activities include, 
but are not limited to, review of file for retainer, citizenship 
attestation or documentation of eligible non-citizen status, and 
documentation of financial eligibility determination; review of closing 
codes; and review of advice provided or pleadings filed.
    (2) Case oversight activities may be counted as case activity when 
the supervisor conducts extended review of the substantive legal advice 
provided in the case. Case oversight activities may be reported as a 
supporting activity when it represents the aggregate of a supervisor's 
time spent doing brief review of a large number of cases.
    (c) Matter means an action that contributes to the overall delivery 
of program services but does not involve direct legal advice to or 
legal representation of one or more specific clients. Examples of 
matters include both direct services, such as community education 
presentations, operating pro se clinics, providing information about 
the availability of legal assistance, and

[[Page 27042]]

developing written materials explaining legal rights and 
responsibilities; and indirect services, such as training, continuing 
legal education, supervision of program services, preparing and 
disseminating desk manuals, PAI recruitment, referral, intake when no 
case is undertaken, and tracking substantive law developments.
    (d) Restricted activities means those activities that recipients 
may not engage in pursuant to 45 CFR part 1610.
    (e) Supporting activity means any action that is not a case or 
matter.


Sec.  1635.3  Who is covered by the timekeeping requirement?

    Any attorney, paralegal, or other recipient employee who performs 
work that is charged to one or more awards as a direct cost (as defined 
in 45 CFR 1630.5(d)) must keep time according to the standards set 
forth in Sec.  1635.4.


Sec.  1635.4  What are LSC's timekeeping standards?

    (a) Recipients must base allocations of salaries and wages on 
records that accurately reflect the work performed. These records must:
    (1) Be supported by a system of internal control which provides 
reasonable assurance that the charges are accurate, allowable, and 
properly allocated;
    (2) Be incorporated into the recipient's official records by no 
later than the end of the employee's pay period, generally every two 
weeks;
    (3) Reflect the total activity for which the recipient compensates 
the employee;
    (4) Encompass within the grantee's case management system both LSC-
funded and all other direct cost activities compensated by the 
recipient, but may include the use of subsidiary records as defined in 
the recipient's written policies;
    (5) Comply with the recipient's established accounting policies and 
practices;
    (6) Support the distribution of the employee's salary or wages 
among specific activities or cost objectives if the employee works on 
more than one award or an indirect cost activity and a direct cost 
activity;
    (7) Contain
    (i) For cases, a unique client name or case number, the amount of 
time spent on the case, a description of the activities performed, and 
the dates on which a recipient employee worked on the case;
    (ii) For matters or supporting activities, the amount of time and 
type of activity on which a recipient employee spent time and 
sufficient information to link the activity to a specific award or 
indirect cost amount. For example, if a recipient employee conducts a 
legal information session on filing a pro se divorce petition, the 
employee could record ``pro se divorce group information session, 1.5 
hours.''
    (b) In accordance with Department of Labor regulations implementing 
the Fair Labor Standards Act (FLSA) (29 CFR part 516), charges for the 
salaries and wages of nonexempt employees, in addition to the 
supporting documentation described in this section, must also be 
supported by records indicating the total number of hours worked each 
day.
    (c) Salaries and wages of employees used in meeting cost sharing or 
matching requirements of Federal awards must be supported in the same 
manner as salaries and wages claimed for reimbursement from Federal 
awards.
    (d) Recipients may establish the increments of time for which 
employees must record their activities (e.g., .25 hours, one-sixth of 
an hour). LSC recommends that recipients require employees to record 
their time in increments no greater than one quarter of an hour.
    (e)(1) Any recipient employee subject to this part who works part-
time for the recipient and part-time for an organization that engages 
in restricted activities shall certify in writing that the employee has 
not engaged in restricted activity during any time for which the 
employee was compensated by the recipient or has not used recipient 
resources to carry out restricted activities.
    (2) The certification requirement does not apply to a de minimis 
action related to a restricted activity. Actions consistent with the de 
minimis standard are those that meet all or most of the following 
criteria: Actions that are of little substance; require little time; 
are not initiated by the part-time employee; and, for the most part, 
are unavoidable. Employees shall make the required certification on a 
quarterly basis using a form determined by LSC.


Sec.  1635.5  Who outside the recipient has access to these records?

    Recipients must make time records required by this section 
available for examination by auditors and representatives of LSC, and 
by any other person or entity statutorily entitled to access to such 
records. LSC shall not disclose any time record except to a Federal, 
State, or local law enforcement official or to an official of an 
appropriate bar association to enable such bar association official to 
investigate of an alleged violation of the rules of professional 
conduct.

    Dated: May 10, 2021.
Stefanie Davis,
Senior Assistant General Counsel.
[FR Doc. 2021-10137 Filed 5-18-21; 8:45 am]
BILLING CODE 7050-01-P