Ronald S. Flagg, President

May 12, 2023

• Program Letter 23-1
• Return to Program Letters Home Page

Recent bank failures demand increased vigilance from LSC's grantees to protect LSC (and non-LSC) funds on deposit with banking institutions, particularly deposits exceeding the $250,000 Federal Deposit Insurance Corporation (FDIC) limit. LSC strongly advises grantees to implement proactive safeguards in response to the LSC Office of Inspector General's (OIG) recent "Fraud Corner" article, which urged grantees to comply with LSC's banking and investment guidelines. Further, LSC reminds grantees of its investment requirements outlined in Section 2.3.3 of the LSC Financial Guide. 

LSC has long advised its grantees to protect LSC funds that exceed the FDIC's limit. Investment requirements are clearly stated in the LSC Financial Guide, and instruct grantees to:

• Maintain LSC funds held for operating expenses in federally insured bank accounts.
• Invest LSC funds exceeding the FDIC limit and not needed for immediate operating expenses with another financial institution in federally insured accounts or certificates or invest in U.S. Treasury notes or bills or investment instruments (e.g., money market accounts and repurchase agreements that invest in U.S. government securities). 

The LSC Financial Guide acknowledges that the grantees' Board of Directors may adopt policies outside these requirements. In those cases, the Board must acknowledge, by resolution, the divergence from LSC's official policy and accept full responsibility for the security of any investments made outside of LSC's requirements. For purposes of personal liability, grantees' Board members will be held to the standard of care imposed by applicable state or federal law for any losses of LSC funds resulting from investment decisions may contrary to LSC's requirements. 

Grantees must maintain investment policies that explain their investment practices, either conforming to LSC's requirements or electing alternative investment practices. The Financial Oversight Committee of the grantees' Board of Directors must "regularly review and make recommendations about investment policies" as part of its primary responsibilities. 

LSC is primarily concerned with how grantees are assessing and mitigating their financial risk in light of recent and potential banking instability and their compliance with LSC's investment requirements. Considering these concerns, LSC's Office of Compliance and Enforcement (OCE) will offer two online office hours sessions during which LSC Financial Compliance Analysts (FCAs) will be available to answer grantee questions about LSC's investment requirements. Questions asked during the sessions may be added to the LSC Financial Guide Frequently Asked Questions, currently under development. 

Office hours sessions will be conducted via Zoom on the following dates:

• Wednesday, May 17, 2023, 2:00 PM - 3:00 PM EDT; click here for Zoom link.
• Tuesday, May 23, 2023, 2:00 PM - 3:00 PM EDT; click here for Zoom link.

If grantees have additional questions after the sessions, they should contact their assigned FCA in OCE.