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Advisory Opinion 2020-005

Non-Federal Status of LSC and LSC Grants and Contracts

November 6, 2020

Questions Presented

  1. Is the Legal Services Corporation (LSC) a federal agency, a federal grantee, or a federal contractor?
  2. Are LSC funds federal funds and are LSC grants federal grants, the provision of federal financial assistance, or federal contracts?
  3. Are LSC grantees federal grantees?

Brief Answer

In general,

  1. LSC is not a federal agency, federal grantee, or a federal contractor.
  2. LSC funds are not federal funds and LSC grants are not federal grants, do not constitute the provision of federal financial assistance, and are not federal contracts.
  3. LSC’s grants do not make its grantees federal grantees.

In some situations, specific statutes or other authorities treat LSC or LSC grants as if LSC was a federal program, but only within the scope of those specific statutes or authorities.  For example, the LSC Act makes LSC subject to the Freedom of Information Act.  42 U.S.C. § 2996d(g).  The LSC Office of Legal Affairs can address questions about any specific situations.

Analysis

Congress created LSC as a D.C. nonprofit corporation that “shall not be considered a department, agency, or instrumentality[] of the Federal Government.”  42 U.S.C. § 2996d(e)(1).  In light of this plain statutory language, the federal courts have consistently ruled that LSC is not an agency except when Congress specifically states otherwise.  See, e.g., Regional Management Corp. v. Legal Services Corp., 186 F.3d 457 (4th 1999) (LSC is not an agency under the Administrative Procedure Act).  Where Congress has applied an agency requirement to LSC by statute, it has explicitly done so, such as in the provision of the LSC Act that subjects LSC to the Freedom of Information Act.  42 U.S.C. § 2996d(g) (LSC “shall be subject to the provisions of section 552 of title 5” (relating to freedom of information)).  Similarly, although LSC is not a federal entity, the LSC Act authorizes the President of the United States to “direct that appropriate support functions of the Federal Government may be made available to the Corporation in carrying out its activities.”  42 U.S.C § 2995k.  That authority permits LSC, unlike other nonprofit corporations, to use government rates and benefits such as the GSA purchasing schedule and use of a .gov domain.

The United States Government Accountability Office (GAO) has explained that LSC is not a federal agency and, thus not subject to the laws that generally govern federal agencies.  See GAO-07-993 (August 2007) (discussing the structure of LSC and that it is not a federal agency or a U.S. government corporation).  Furthermore, LSC is not within or subject to the authority of the Executive Branch, which cannot direct LSC operations.  For example, “Congress authorized LSC, unlike federal agencies in general, to submit its annual budget requests directly to Congress and to receive its appropriation in one installment at the beginning of the fiscal year without apportionment by the Office of Management and Budget.  42 U.S.C. §§ 2996d(e)(2), 2996i(a) (1994). Cf. 31 U.S.C § 1512 (1994).”  GAO Letter to LSC Office of Inspector General, B-261708 (May 5, 1998). 

The following are examples of some, but not all, requirements on federal grants that do not apply to LSC grants.

  1. LSC grants are not subject to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Office of Management and Budget (OMB), 2 C.F.R. Part 200. Rather, LSC sets cost standards and audit requirements on LSC grants.  Neither LSC nor LSC funds meet the definitions of a federal agency, federal program, or federal financial assistance under 2 C.F.R. Part 200.  Instead, LSC sets out cost principles at 45 C.F.R. Part 1630, and those principles in some places refer to OMB regulations for guidance.
  2. LSC grants are not included in the Catalog of Federal Domestic Assistance.
  3. LSC grants are not subject to the Federal Funding Accountability and Transparency Act (FFATA) or the Digital Accountability and Transparency Act (DATA Act). Thus, LSC grants are not included in the USASpending.gov data reporting system.  Rather, LSC collects and publishes financial and case service data regarding LSC grants.
  4. Neither LSC nor LSC grants are within the authority of the Executive Branch to direct operations because LSC is not an agency and LSC grants are not federal grants. Thus, LSC and LSC grants are not subject to directives by the Office of Management and Budget or Executive Orders of the U.S. President that are directed to “agencies” or address requirements for federal grants.

The following are examples of some, but not all, federal requirements that apply to LSC grants because of specific mandates in statutory or other authorities.

  1. For purposes of specific federal laws relating to waste, fraud, and abuse with federal funds, LSC “shall be considered to be a Federal agency and all funds provided by [LSC] shall be considered to be Federal funds provided by grant or contract.” L. 104-134, Sect. 504(a)(19) (1996) (incorporated by reference in LSC’s annual appropriation).  See 45 C.F.R. Part 1640—Application of Federal Law to LSC Recipients.  The exhaustive list of those laws appears at www.lsc.gov/part1640.
  2. LSC grants are audited under generally accepted government auditing standards and, for audit purposes, are treated as federal funds. Pub. L. 104-134, Sect. 509 (1996) (incorporated by reference in LSC’s annual appropriation).  For this reason, LSC grants appear on the Schedule of Federal Awards in LSC grantees’ financial statements, although they are not federal awards for any other purpose.
  3. LSC has an Office of Inspector General (OIG) as a “designated federal entity” under section 8G of the Inspector General Act, [5 U.S.C. §§ 401–424]. The LSC OIG conducts audits, investigations, and other reviews of both LSC and LSC grants.

For any questions regarding these issues, including questions about whether other specific federal requirements apply to LSC grants, please contact Mark Freedman, Senior Associate General Counsel, at mfreedman@lsc.gov.

RONALD S. FLAGG
Vice President for Legal Affairs and General Counsel

MARK FREEDMAN
Senior Associate General Counsel