[Federal Register Volume 63, Number 107 (Thursday, June 4, 1998)]
[Proposed Rules]
[Pages 30446-30449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14773]
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LEGAL SERVICES CORPORATION
45 CFR Part 1623
Suspension Procedures
AGENCY: Legal Services Corporation.
ACTION: Proposed rule.
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SUMMARY: This proposed rule substantially revises the Legal Services
Corporation's rule on procedures for the suspension of financial
assistance to recipients to implement changes in the law governing how
the Corporation deals with post-award grant disputes.
DATES: Comments should be received on or before August 3, 1998.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First St. NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Office of the General Counsel, 202-
336-8817.
SUPPLEMENTARY INFORMATION: The Operations and Regulations Committee
(Committee) of the Legal Services Corporation's (LSC) Board of
Directors (Board) met on April 5, 1998, in Phoenix, Arizona, to
consider proposed revisions to the Corporation's rule on procedures for
suspending funding to LSC recipients. The Committee made several
changes to the draft rule and adopted this proposed rule for
publication in the Federal Register for public comment. This proposed
rule is intended to implement major changes in the law governing how
the Corporation deals with post-award grant disputes.
Prior to 1996, LSC recipients could not be denied refunding, nor
could their funding be suspended or their grants terminated, unless the
Corporation complied with sections 1007(a)(9) and 1011 of the LSC Act,
42 U.S.C. 2996 et seq., as amended. For suspensions, the Corporation
could not suspend financial assistance unless the recipient had been
provided reasonable notice and an opportunity to show cause why the
action should not be taken. For terminations and denials of refunding,
[[Page 30447]]
the Corporation was required to provide the opportunity for a ``timely,
full and fair hearing'' before an independent hearing examiner.
In 1996, the Corporation implemented a system of competition for
grants that ended a recipient's right to yearly refunding. Under the
competition system, grants are now awarded for specific terms, and, at
the end of a grant term, a recipient has no right to refunding and must
reapply as a competitive applicant for a new grant.
The FY 1998 appropriations act made additional changes to the law
affecting LSC recipients' rights to continued funding. See Pub. L. 105-
119, 111 Stat. 2440 (1997). Section 501(b) of the appropriations act
provides that a recipient's hearing rights under sections 1007(a)(9)
and 1011 are no longer applicable to the provision, denial, suspension,
or termination of financial assistance to recipients. This proposed
rule implements this new law as it applies to suspensions. This
proposed rule would also remove 45 CFR part 1625 from the Code of
Federal Regulations as no longer consistent with applicable law.
Another proposed rule, also in this publication of the Federal
Register, deals with the new law as it applies to terminations and
denials of refunding. See Proposed rule 45 CFR part 1606, which would
revise the Corporations's policies and procedures for terminations and
proposes to add provisions dealing with debarments and recompetition.
The change in the law regarding suspensions does not mean that
grant recipients have no hearing rights before their funds are
suspended. Constitutional due process generally requires that a
discretionary grant recipient is entitled to ``some type of notice''
and ``some type of hearing'' before its grant funding can be suspended
or terminated during the grant period. Stein, Administrative Law at
Sec. 53.05(4). However, the new law emphasizes a congressional intent
to strengthen the ability of the Corporation to ensure that recipients
are in full compliance with the LSC Act and regulations. See H. Rep.
No. 207, 105th. Cong., 1st Sess. 140 (1997). Accordingly, under this
proposed rule, the hearing procedures for suspensions have been
streamlined. The changes emphasize the seriousness with which the
Corporation takes its obligation to ensure that recipients comply with
the terms of their grants and provide quality legal assistance but, at
the same time, recipients are provided notice and a fair opportunity to
be heard before any suspension action is taken.
Section-by-Section Analysis
Section 1623.1 Purpose
This section is revised to clarify the purpose of a suspension, as
opposed to other sanctions the Corporation might choose to apply to a
recipient. A suspension is one of several actions that may be taken by
the Corporation in a post-award grant dispute to ensure the compliance
of LSC recipients with the terms of their LSC grants. A suspension is
generally used by Federal agencies as a temporary withdrawal of a
grantee's authority to obligate or receive grant funds, pending
corrective action by the grantee or a decision by the agency to
terminate the grant. Stein J., Administrative Law at Sec. 53.02(3).
Suspensions are intended to be used in emergency situations which
require prompt action and thus are normally not subject to full
administrative appeals. Id. For example, the Corporation might choose
to suspend when quick action is necessary to safeguard against a loss
of LSC funds or the Corporation believes that prompt action will bring
about corrective action and prevent the likely recurrence of
violations.
Section 1623.2 Definition
The definition of suspension is revised to clarify the nature of a
suspension and the differences between a suspension and a termination.
The proposed definition states that a suspension withholds funding to a
recipient until the end of the suspension period. This means that when
the Corporation suspends funding after a hearing under this part, it
may only withhold the funds until the end of the suspension period as
provided in Sec. 1623.4(e) and (f). After the suspension period, the
Corporation returns the funds to the recipient, and either begins
termination proceedings or determines that the recipient is taking
adequate steps to cure the problem. By contrast, a termination is a
permanent taking of a recipient's financial assistance. When the
Corporation terminates funding, in whole or in part, the funds are not
returned to the recipient, even if the problems are cured at a later
date.
Section 1623.3 Grounds for Suspension
Paragraph (a) of this section sets out the grounds for most
suspensions. The underlying reason for a suspension is a substantial
violation by the recipient of the terms of its LSC grant. A decision to
suspend, rather than terminate, funding will usually be made when the
Corporation has reason to believe that prompt action is necessary to
safeguard LSC funds, effect an immediate cure for the problem at issue,
or prevent further substantive harm.
A provision setting out new proposed criteria for determining
whether there has been a ``substantial violation'' is included in this
section in paragraph (b). The current rules on suspension, termination
and denial of refunding include two different undefined standards.
Terminations or suspensions are undertaken for substantial violations
and denial of refunding for significant violations. Because there has
been some confusion over the years about the scope of the meaning of
the two standards, the Committee included this paragraph in the rule to
provide better guidance to recipients on what constitutes a violation
sufficient to constitute grounds for a suspension action.
The proposed criteria include the consideration of whether the
violation is intentional, the importance of the restriction or
requirement violated, and whether the violation is of a serious nature
rather than merely technical or minor. The Corporation would also
consider whether the immediate problem is part of a history of
violations by the recipient. These criteria would permit the
Corporation to take action, for example, for a single serious
violation.
The fourth criterion permits the Corporation to consider whether
the violation was intentional. Although the Committee included this
criterion in the proposed rule, it requests public comment on other
standards that might be more appropriate: for example, whether the
recipient ``knowingly and willfully'' committed the violation.
Paragraph (c) implements section 509 of the Corporation's 1996
appropriations act, which has been incorporated by the Corporation's FY
1998 appropriations act. Section 509 requires recipients to complete
audits which are consistent with the guidance promulgated by the Office
of Inspector General. In addition, it authorizes the Corporation, after
receiving a recommendation from the OIG, to suspend funding to a
recipient who fails to have an acceptable audit and allows the
Corporation to continue the suspension until the recipient has
completed an acceptable audit. An audit is acceptable when it is deemed
to be acceptable by the OIG. This generally means that the audit is
prepared according to the OIG audit guidances, which consist of the LSC
Audit Guide for Recipients and Auditors and any relevant bulletins
issued by the OIG. Pursuant to this provision, the OIG determines
whether an audit is acceptable and makes a recommendation to the
Corporation to suspend. The Corporation then may
[[Page 30448]]
suspend and the suspension will be ended when the OIG determines that
the audit is acceptable.
Section 1623.4 Suspension Procedures
The suspension procedures in this section are substantially the
same as in the current rule, but are set out in a new structure for
clarity. However, several changes have been made.
First, references to the employee who ordered a suspension are
replaced by a reference to the Corporation. Second, this section
deletes the provision in Sec. 1623.3(c) of the current rule that
requires the Corporation, except for unusual circumstances, to give the
recipient an opportunity to take effective corrective action before
suspending funding. Instead, paragraph (a)(3) provides the Corporation
the flexibility needed in extraordinary circumstances addressed by
suspensions to suspend funding before corrective action has taken
place. However, the Corporation must identify any corrective action the
recipient can undertake to avoid or end the suspension in the proposed
determination.
Paragraph (a) of this section authorizes the Corporation to issue a
written proposed determination to suspend funding to the recipient. The
use of ``proposed'' before ``determination'' is intended to clarify
that the Corporation has not made a prejudgment but rather has reason
to believe that grounds exist for a suspension. The recipient then has
the burden to show cause why the suspension should not take place. The
Committee seeks comments on whether the language in the rule adequately
describes this intent.
The proposed determination is required to state the grounds for the
action, identify the relevant facts and documents underlying the
determination, specify any corrective action the recipient may take,
and advise the recipient of its right to submit written materials in
response to the proposed determination and to request an informal
hearing with the Corporation. Paragraph (c) requires the Corporation to
consider all materials and oral evidence presented under this section
and, if the Corporation thereafter determines that grounds for a
suspension exist, the Corporation may issue a written final
determination to suspend and shall provide that determination to the
recipient.
Paragraph (e) permits the Corporation to rescind or modify the
terms of the final determination to suspend and, after providing
written notice to the recipient, reinstate the suspension without any
additional proceedings under this part. Paragraph (e) also states that,
except for suspensions for the failure of a recipient to complete an
audit consistent with the guidance promulgated by the Office of
Inspector General, a suspension shall not exceed 30 days, unless there
is agreement between the recipient and the Corporation to extend the
suspension for up to 60 days. This reflects the presumption that a
suspension of too long a duration would likely endanger a recipient's
ability to function. A suspension is intended to be used for
extraordinary circumstances when prompt intervention is likely to bring
about immediate corrective action. At some point, the Corporation
should either end the suspension because the problem is solved and is
unlikely to reoccur, or because the recipient is seriously attempting
to come into compliance; or initiate a termination process under part
1606.
Paragraph (f) implements section 509 of Public Law 104-134, which
requires that suspensions for failure to have an acceptable audit
should last until the recipient has completed an acceptable audit.
Section 1623.5 Time Extension and Waiver
This section provides that extensions of time may be provided for
good cause, except for the time limits in Sec. 1623.4(e). It also
permits any other provision of this part to be waived or modified by
agreement of the recipient and the Corporation for good cause.
Section 1623.6 Interim Funding
Generally, this section is the same as in the current rule. It
requires the Corporation to continue funding the recipient at the
current level during suspension proceedings. This is necessary to
prevent an injustice if the proceedings reveal that a suspension is not
in order and to ensure the continued availability of legal services to
the poor in the recipient's service area. Paragraph (b) provides that a
failure of the Corporation to meet a time requirement does not preclude
the Corporation from suspending a recipient's grant or contract with
the Corporation. See Brock v. Pierce County, 476 U.S. 253 (1986).
List of Subjects in 45 CFR Part 1623
Administrative practice and procedures, legal services.
For reasons set forth in the preamble, LSC proposes to revise 45
CFR part 1623 to read as follows:
PART 1623--SUSPENSION PROCEDURES
Sec.
1623.1 Purpose.
1623.2 Definition.
1623.3 Grounds for suspension.
1623.4 Suspension procedures.
1623.5 Time extensions and waiver.
1623.6 Interim funding.
Authority: 42 U.S.C. 2996e (b)(1); Pub. L. 104-134, 110 Stat.
1321, sec. 509; Pub. L. 105-119, 111 Stat. 2440, sec. 501(b).
Sec. 1623.1 Purpose.
The purpose of this rule is to:
(a) Ensure that the Corporation is able to take prompt action when
necessary to safeguard LSC funds or to ensure the compliance of a
recipient with applicable provisions of law, or a rule, regulation,
guideline or instruction issued by the Corporation, or the terms and
conditions of a recipient's grant or contract with the Corporation; and
(b) Provide procedures for prompt review that will ensure informed
deliberation by the Corporation when it has made a proposed
determination that financial assistance to a recipient should be
suspended.
Sec. 1623.2 Definition.
For the purposes of this part, suspension means an action taken
during the term of the recipient's current grant or contract with the
Corporation that withholds financial assistance to a recipient, in
whole or in part, until the end of the suspension period pending
corrective action by the recipient or a decision by the Corporation to
initiate termination proceedings.
Sec. 1623.3 Grounds for suspension.
(a) Financial assistance provided to a recipient may be suspended
when the Corporation determines that there has been a substantial
violation by the recipient of an applicable provision of law, or a
rule, regulation, guideline or instruction issued by the Corporation,
or a term or condition of the recipient's current grant or contract
with the Corporation; and the Corporation has reason to believe that
prompt action is necessary to:
(1) Safeguard LSC funds; or
(2) Ensure immediate corrective action necessary to bring a
recipient into compliance with an applicable provision of law, or a
rule, regulation, guideline or instruction issued by the Corporation,
or the terms and conditions of the recipient's grant or contract with
the Corporation.
(b) A determination of whether there has been a substantial
violation for the purposes of paragraph (a) of this section
[[Page 30449]]
will be based on consideration of the following criteria:
(1) The importance and number of restrictions or requirements
violated;
(2) The seriousness of the violation;
(3) The extent to which the violation is part of a pattern; and
(4) Whether the violation was intentional.
(c) Financial assistance provided to a recipient may also be
suspended by the Corporation pursuant to a recommendation by the Office
of Inspector General when the recipient has failed to have an
acceptable audit in accordance with the guidance promulgated by the
Corporation's Office of Inspector General.
Sec. 1623.4 Suspension procedures.
(a) When the Corporation has made a proposed determination, based
on the grounds set out in Sec. 1623.3, that financial assistance to a
recipient should be suspended, the Corporation shall serve a written
proposed determination on the recipient. The proposed determination
shall:
(1) State the grounds and effective date for the proposed
suspension;
(2) Identify, with reasonable specificity, any facts or documents
relied upon as justification for the suspension;
(3) Specify what, if any, corrective action the recipient can take
to avoid or end the suspension;
(4) Advise the recipient that it may request, within 5 days of
receipt of the proposed determination, an informal meeting with the
Corporation at which it may attempt to show that the proposed
suspension should not be imposed; and
(5) Advise the recipient that, within 10 days of its receipt of the
proposed determination and without regard to whether it requests an
informal meeting, it may submit written materials in opposition to the
proposed suspension.
(b) If the recipient requests an informal meeting with the
Corporation, the Corporation shall designate the time and place for the
meeting. The meeting shall occur within 5 days after the recipient's
request is received.
(c) The Corporation shall consider any written materials submitted
by the recipient in opposition to the proposed suspension and any oral
presentation or written materials submitted by the recipient at an
informal meeting. If, after considering such materials, the Corporation
determines that the recipient has failed to show that the suspension
should not become effective, the Corporation may issue a written final
determination to suspend financial assistance to the recipient in whole
or in part and under such terms and conditions the Corporation deems
appropriate and necessary.
(d) The final determination shall be promptly transmitted to the
recipient in a manner that verifies receipt of the determination by the
recipient, and the suspension shall become effective when the final
determination is received by the recipient or on such later date as is
specified therein.
(e) The Corporation may at any time rescind or modify the terms of
the final determination to suspend and, on written notice to the
recipient, may reinstate the suspension without further proceedings
under this part. Except as provided in paragraph (f) of this section,
the total time of a suspension shall not exceed 30 days, unless the
Corporation and the recipient agree to a continuation of the suspension
for up to a total of 60 days without further proceedings under this
part.
(f) When the suspension is based on the grounds in Sec. 1623.3(c),
a recipient's funds may be suspended until an acceptable audit is
completed.
Sec. 1623.5 Time extensions and waiver.
(a) Except for the time limits in Sec. 1623.4(e), any period of
time provided in this part may be extended by the Corporation for good
cause. Requests for extensions of time shall be considered in light of
the overall objective that the procedures prescribed by this part
ordinarily shall be concluded within 30 days of the service of the
proposed determination.
(b) Any other provision of this part may be waived or modified by
agreement of the recipient and the Corporation for good cause.
Sec. 1623.6 Interim funding.
(a) Pending the completion of suspension proceedings under this
part, the Corporation shall provide the recipient with the level of
financial assistance provided for under its current grant or contract
with the Corporation.
(b) Failure by the Corporation to meet a time requirement of this
part shall not preclude the Corporation from suspending a recipient's
grant or contract with the Corporation.
Dated: May 29, 1998.
Victor M. Fortuno,
General Counsel.
[FR Doc. 98-14773 Filed 6-3-98; 8:45 am]
BILLING CODE 7050-01-P
