[Federal Register Volume 65, Number 189 (Thursday, September 28, 2000)]
[Notices]
[Pages 58288-58295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-24835]


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LEGAL SERVICES CORPORATION


Proposed Property Acquisition and Management Manual

AGENCY: Legal Services Corporation

ACTION: Notice of proposed Property Acquisition and Management Manual.

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SUMMARY: This Notice sets forth the text of a proposed Property 
Acquisition and Management Manual that, once adopted, will govern the 
use by recipients of LSC funds to acquire, use and dispose of real and 
nonexpendable personal property. The proposed Property Acquisition and 
Management Manual is intended to provide recipients with a single 
complete and consolidated set of policies and procedures related to 
property acquisition, use and disposal and would supercede guidance 
currently contained in several LSC documents.

[[Page 58289]]


DATES: Written comments must be received on or before November 27, 
2000.

ADDRESSES: Written comments may be submitted by mail, fax or email to 
Mattie C. Condray at the addresses listed below.

FOR FURTHER INFORMATION CONTACT: Mattie C. Condray, Senior Assistant 
General Counsel, Office of Legal Affairs, Legal Services Corporation, 
750 First Street, NE., Washington, DC 20002-4250; 202/336-8817 (phone); 
202/336-8952 (fax); [email protected].

SUPPLEMENTARY INFORMATION:

Background

    The Legal Services Corporation's (LSC) policies and procedures 
regarding LSC-funded recipients' property acquisition, use and disposal 
are incomplete, outdated and disbursed among several different LSC 
documents. In 1975 and again in 1979, LSC published Instructions in the 
Federal Register setting out procedures for the procurement, inventory 
control and disposal of nonexpendable personal property by LSC 
recipients. See 44 FR 22525, April 16, 1979. In 1981, the 1979 
Instruction was superseded by the Property Management Manual for LSC 
Programs (``1981 Property Manual'').\1\
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    \1\ The Introduction to the 1981 Property Manual states that it 
was intended to supersede the 1975 Instruction. No mention is made 
of the 1979 Instruction. However, because the Manual was finalized 
as a slightly revised version of the 1979 Instruction, longstanding 
LSC policy has been that the 1981 Property Manual superseded the 
1979 Instruction as well. Current LSC grant assurances and the 
current Accounting Guide for LSC Recipients reference the Property 
Manual ``or its duly adopted successor.''
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    LSC also addressed property acquisition and management issues in 
the 1981 version of the Audit and Accounting Guide for Recipients and 
Auditors (``1981 Audit Guide''). The 1981 Audit Guide included 
provisions requiring LSC's prior approval of certain purchases and 
leases of property (real and personal). These provisions were 
superseded by the LSC rule on cost standards and procedures, 45 CFR 
part 1630, which was adopted in 1986. See 51 FR 29082, August 13, 1986. 
Under the current part 1630 rule, LSC must approve in advance all 
purchases of real property, purchases or leases of personal property 
with a value of over $10,000 and capital expenditures of more than 
$10,000 to improve real property. 45 CFR 1630.5(b).
    Notwithstanding the 1981 Audit Guide (or the current part 1630 
requirements), the 1981 Property Manual, like its predecessor 
Instructions, does not address the acquisition, use or disposal of real 
property.\2\ LSC has instead established its policies relating to real 
property in a variety of internal memoranda, Program Letters, 
regulations, grant assurances and individual agreements with recipients 
purchasing real property which have either restricted the use or 
regulated the disposal of the property in the event of cessation of LSC 
funding. Having policies related to real property in such unconnected 
and disparate sources has become untenable. For example, grant 
assurances on property have not been consistent over time and have on 
occasion been challenged as lacking legal authority.
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    \2\ There have been suggestions to LSC that the 1981 Property 
Manual was originally intended to apply to real property and was so 
applied at sometime in the past. LSC's reading of the terms of the 
manual, however, and LSC's practice over the last several years 
applying the requirements of the 1981 Property Manual only to 
personal property, indicate that it does not, in fact, apply to real 
property.
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    Accordingly, LSC has decided that all of the relevant policies and 
requirements related to the acquisition, use and disposal of real and 
personal property should be consolidated and issued in one document. 
LSC offers the following proposed Property Acquisition and Management 
Manual (PAMM) for comment prior to adopting a final, revised version.

Purpose and Scope

    LSC proposes that this PAMM apply to both real and non-expendable 
personal property (equipment), but not apply to expendable personal 
property (supplies) or services, except for services related to capital 
expenditures as defined in the PAMM. LSC has not previously applied its 
standards in the 1981 Property Manual to supplies or services and LSC 
does not believe it is necessary to enlarge the scope of its oversight 
in such a manner.
    LSC proposes to apply the requirements of the PAMM to purchases 
made on or after the PAMM's effective date as published in the Federal 
Register. For purchases of real property prior to the PAMM's effective 
date, the written agreement between the program and LSC will control. 
For prior purchases of personal property, the 1981 Property Manual will 
control.

Proposed Property Acquisition and Management Manual

Generally

    The proposed PAMM contains both existing and new or revised 
standards and procedures. In developing the new or revised standards 
and procedures, LSC looked to three existing Federal sources of 
property acquisition and management policy: the Federal Acquisition 
Regulations (FAR); the Federal Property Management Regulations; and 
Office of Management and Budget (OMB) Circular A-110, ``Uniform 
Administrative Requirements for Grants and Agreements with Institutions 
of Higher Education, Hospitals, and Other Non-Profit Organizations'' 
which contains standards governing the use and disposition of personal 
and real property by non-profit recipients of Federal funding. While 
many provisions of the proposed PAMM are based on equivalent sections 
on these sources, LSC has revised these provisions as necessary to be 
consistent with LSC law and practice.
    The proposed personal property use standards are intended to give 
recipients flexibility in using such property acquired with LSC funds, 
provided that the primary use of the property is for the delivery of 
legal services to eligible clients in accordance with the requirements 
of the LSC Act and regulations. The proposed standards governing the 
disposal of personal property revise existing policy to reflect the 
heightened need, in this era of reduced funding and competition for 
grants, for LSC to be compensated for its interest in LSC-funded 
property. Accordingly, in the event that a recipient owning personal 
property purchased with LSC funds ceases to receive LSC funding, these 
standards require LSC approval prior to disposal of the property.
    The proposed PAMM would retain LSC's longstanding policy to permit 
recipients, with LSC's approval, to use LSC funds to purchase real 
property for the delivery of legal services to eligible clients. The 
proposed procedures, which incorporate provisions from Program Letter 
98-4, would require recipients to demonstrate that purchasing is more 
economical than leasing. Recipients would also be required to agree to 
reimburse LSC in the event of a discontinuation of funding.

Section-by-Section Analysis

Section 1--Purpose and Scope

    The section contains a statement indicating that the purpose of 
this PAMM is to set forth standards governing the acquisition, 
retention, use and disposal of personal and real property acquired in 
whole or in part with LSC funds. The section would also specify that 
LSC intends the standards in this PAMM to apply to both real and non-
expendable personal property

[[Page 58290]]

(equipment), but not to expendable personal property (supplies) or 
services, except services for capital improvements which are subject to 
the requirements of Section 4(f). LSC has not previously applied the 
1981 Property Manual standards to supplies and LSC does not believe 
that it is necessary to enlarge the scope of its oversight in such a 
manner. Finally, this section makes clear that LSC proposes to apply 
the requirements of the PAMM to purchases made on or after the PAMM's 
effective date as published in the Federal Register. For purchases of 
real property prior to the PAMM's effective date, the written agreement 
between the program and LSC would control. For prior purchases of 
personal property, LSC intends that the 1981 Property Manual would 
control.

Section 2--Definitions

    This section sets forth proposed definitions of key terms used 
throughout the PAMM.
    Section (2)(a) would define acquisition as a purchase of real 
property or a purchase or lease of personal property. It can consist of 
a single item or it can consist of multiple items obtained 
simultaneously through a single contract. This definition of 
acquisition is adapted from the definition of acquisition appearing in 
the FAR. The FAR definition of acquisition includes leases of real 
property as well, but LSC proposes to leave real property leases out of 
the definition of acquisition because LSC proposes to exclude leases of 
real property from the coverage of the PAMM. LSC proposes to use the 
term ``acquisition'' throughout the PAMM, except in those instances in 
which it is necessary to differentiate between personal property which 
is leased and personal property which has been purchased. In those 
cases, the terms ``lease'' or ``purchase'' will be used as appropriate.
    Section 2(b), capital improvement, incorporates the $10,000 
capitalization threshold of LSC's regulation governing cost standards 
and procedures, 45 CFR 1530.5(b)(2).
    Section 2(c) proposes to define lease as a contract for the use of 
property during a specified period for a specified price. Under a 
lease, the lessee does not take ownership of or title to the property.
    Section 2(d) contains a definition for LSC property interest 
agreement, a term used in Sections 4(e) and 8(d) of this PAMM. The 
proposed definition is consistent with section 2-2.4 of the Accounting 
Guide for LSC Recipients, which sets forth the principle that LSC 
possesses a reversionary interest in real property purchased in whole 
or in part with LSC funds. LSC is not, however, proposing to use the 
term ``reversionary interest'' because LSC believes that the use of 
``reversionary interest'' might be confusing. Although LSC's recipients 
who have entered into agreements with LSC pursuant to the purchase of 
real property understand what reversionary interest means in the 
context of their agreements, the term is a widely used term of art in 
the property law context with a somewhat broader and different meaning. 
To avoid potential confusion, LSC proposes to use the more accurate 
``LSC property interest agreement.''
    Section 2(e) contains a definition of personal property adapted 
from OMB Circular A-110. LSC proposes to omit supplies, which are 
considered to be personal property in the OMB Circular, from the 
definition because LSC does not intend to apply its property 
acquisition and management standards to the purchase, retention or use 
of supplies.
    Section 2(f) proposes to limit the definition of real or personal 
property to property with a market value of over $1000 and a useful 
life of more than one year. This definition is taken from Section 2-2.4 
of the Accounting Guide for LSC Recipients. This definition is 
consistent with OMB Circular A-110, except that LSC has chosen a 
capitalization threshold of $1,000 instead of $5,000. The lower 
threshold is intended to maintain consistency with the LSC Accounting 
Guide. With this definition, LSC proposes that the property acquisition 
and management standards would not apply to property excluded from the 
definition.
    Section 2(g) contains a proposed definition of purchase. LSC 
proposes to use the term purchase in reference to personal property 
which the recipient obtains ownership of, as distinguished from leased 
personal property.
    Section 2(h) sets forth a proposed definition for quote which 
incorporates language from the definition of ``offer'' in the FAR. For 
the purposes of the PAMM, a quote is intended to be the basis for 
informal negotiation which results in an offer by the recipient, 
typically in the form of a purchase order, which a source may accept or 
reject.
    Section 2(i) sets forth a proposed definition of real property 
taken from the definition of the same term in OMB Circular A-110.
    Section 2(j) contains a proposed definition of source as a 
supplier, vendor or contractor who has agreed to provide property to a 
recipient through a purchase or lease agreement.

Section 3--Acquisition Procedures for Personal Property

    This section sets forth the proposed procedures governing the 
acquisition of personal property with LSC funds. The requirements 
herein are based on both the FAR and OMB Circular A-110. Through the 
use of these procedures, LSC intends to encourage recipients to conduct 
their property acquisitions in a manner that provides free and open 
competition to the maximum extent practical.
    Acquisitions of over $10,000 would have to be accomplished by 
written competitive quote.\3\ The FAR and OMB Circular A-110 each 
require that requests for quotes clearly identify the salient 
characteristics of the property to be acquired, as well as the basis 
for evaluating quotes and selecting a source. LSC proposes to require 
competitive quotes to help ensure that the recipient has a reasonable 
basis for determining that it is receiving a fair deal that meets its 
needs.
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    \3\ The proposed requirement for ``written'' quotes is intended 
to include electronic transmission of information. This approach is 
consistent with Federal policy in the FAR.
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    The proposed procedures would permit sole source acquisitions if 
circumstances prevent requesting competitive quotes. In such cases, 
recipients would have to document the reason(s) for conducting the 
acquisition on a sole source basis. This proposed requirement is 
consistent with the FAR.
    Further, individual item acquisitions of over $10,000 would have to 
be approved in advance by LSC. This includes acquisitions made to 
replace already-existing property, the original acquisition of which 
LSC may have approved at a prior point in time. Consistent with 
previous LSC guidance, requests for prior approvals would have to 
include a justification stating the need for the acquisition, a brief 
description of the property to be acquired and a description of the 
acquisition process used, including the quotes received by the 
recipient.

Section 4--Acquisition Procedures for Real Property

    Section 4 contains the proposed procedures for the acquisition of 
real property. Under this section, prior to acquiring real property, a 
recipient would have to identify and evaluate at least three potential 
sites. This proposal draws upon a similar requirement in the FAR 
relating to the selection of sources for the leasing of real property. 
The types of costs to be considered in an analysis of an acquisition of 
real property would be those which LSC

[[Page 58291]]

asks recipients to describe when seeking prior approval of an 
acquisition of real property pursuant to LSC Program Letter 98-4, dated 
July 1, 1998. Recipients are encouraged to negotiate with potential 
sources prior to entering a contract in order to obtain the most 
favorable contract terms possible.
    This section proposes to retain LSC's prior approval requirement 
for acquisitions of real property.\4\ Sections 4(d)(1) through (7) 
reflect provisions from Program Letter 98-4 setting forth the types of 
information which LSC requires recipients to submit in support of a 
request for prior approval of an acquisition of real property.
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    \4\ LSC's longstanding policy is that leases of real property do 
not require prior approval and LSC does not propose any change to 
that policy.
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    This section also proposes to retain LSC's longstanding practice of 
requiring, as a condition of LSC's approval of the acquisition of real 
property, a formal agreement between LSC and the recipient setting 
forth the terms of LSC's approval. These agreements have included 
provisions governing the disposal of property purchased with LSC funds, 
both during the grant term and upon cessation of funding and requiring 
the recipient to record LSC's interest in the property.
    Finally, LSC proposes to restate in the PAMM, LSC's requirement in 
45 CFR 1630.5(b)(4) that recipients obtain prior approval of 
expenditures for capital improvements. This requirement applies to 
leasehold improvements as well as improvements to recipient-owned 
property. LSC proposes to retain the existing requirement from Program 
Letter 98-4 that recipients submit certain information in support of 
requests for prior approval of capital improvements.

Section 5--Retention and Use of Property Acquired With LSC Funds

    Section 5 sets forth the proposed standards for the management of 
real and personal property acquired with LSC funds. These standards 
build upon the principle contained in OMB Circular A-110, that grant 
recipients should possess full ownership of personal and real property 
purchased in whole or in part with grant funds. With regard to leased 
personal property, LSC proposes to make clear current LSC policy that 
leased property may be used according to the lease terms during the 
term of an LSC grant or contract, and must be disposed of according to 
the lease terms in the event that there is a cessation of LSC funding.
    Under the provisions of this section, recipients would be permitted 
to retain property as long as they continue to receive LSC funding. 
This represents a change from the existing policy which permits 
recipients to retain property as long as it is needed for civil legal 
assistance. This change is being proposed to reflect the heightened 
need, in the competitive grant environment, for LSC to ensure that its 
funds are available to the maximum extent possible for LSC recipients 
and programs.
    Notwithstanding the above, LSC proposes to permit recipients to use 
property acquired with LSC funds for permissible non-LSC activities, 
such as the representation of income-ineligible clients, provided that 
such other use does not interfere with the performance of the 
recipient's duties under its LSC grant. This flexibility parallels 
similar provisions in OMB Circular A-110. LSC further proposes to allow 
a recipient to lease space to others or otherwise allow the use of its 
property for restricted activities, provided that the recipient charges 
a fair market price for such lease or property use. Any such use would 
also have to be consistent with the program integrity requirements of 
45 CFR Part 1610. These provisions incorporate language from OMB 
Circular A-110 and are consistent with IRS rules governing the 
provision of services by non-profit organizations.
    Section 5(f) addresses the use of a particular subset of personal 
property--copyrights. Incorporating language from OMB Circular A-110, 
this paragraph proposes that recipients be permitted to own copyrights 
to publications, software, and other copyrightable works created in 
whole or part with LSC funds. However, in conformance with longstanding 
LSC policy, recipients creating or otherwise obtaining copyrightable 
materials with LSC funds would have to provide LSC free access to and 
use of such materials, including the right to make such materials 
available to other LSC recipients.

Section 6--Disposal of Personal Property Acquired With LSC Funds

    This section proposes to establish requirements governing the 
disposal of personal property. Generally, a recipient would have 
considerable discretion in selecting methods of disposing of personal 
property purchased with LSC funds, except at the point that the 
recipient ceased to receive LSC funds. At the cessation of LSC funding, 
recipients would have an obligation to LSC with respect to items of 
personal property.
    LSC proposes, as noted above, to permit recipients, considerable 
latitude in disposing of personal property purchased with LSC funds 
during the term of an LSC grant. Specifically, under this section, 
recipients would be permitted to: (1) Trade property to suppliers or 
vendors in return for reductions in the acquisition price of new or 
replacement property; (2) sell the property, by the solicitation of 
formal quotes for property with a value of over $15,000, or by 
negotiation where the property has a value $15,000 or less or where 
advertising for bids has not resulted in reasonable bid prices; \5\ (3) 
transfer the property to third parties which are eligible under statute 
to receive support from LSC; (4) transfer the property to non-LSC 
programs, subject to LSC approval; or (5) transfer the property to 
other nonprofit programs serving the poor in the same community. These 
options are consistent with current Federal practice as reflected in 
OMB Circular A-110, the Federal Property Management Regulations (41 CFR 
Chapter 101) and the 1981 Property Manual.
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    \5\ By reference to 45 CFR 1630.12, section 6(c) would clarify 
that income from the sale of property purchased with LSC funds is 
LSC derivative income subject to the requirements of the LSC Act, 
regulations, and other applicable law. As such, LSC derivative 
income becomes part of the LSC fund balance which may need to be 
returned to LSC if the fund balance amount exceeds the 10 or 25 
percent limits established by 45 CFR Part 1628.
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    Under this section, recipients would be prohibited from disposing 
of personal property purchased with LSC funds by making such property 
available to recipients' board members or employees (by sale or 
otherwise). Although Federal policy does not restrict sales of property 
to employees, LSC is concerned that such sales could create a real or 
perceived conflict of interest, particularly since such property would 
have significant market value (since property would be defined as 
having to be worth more than $1000). Disposition of items not meeting 
the $1000 value threshold would not be considered property subject to 
the PAMM and, therefore, would not be subject to this restriction. LSC 
specifically seeks comment on this issue. What are recipients' current 
policies and experience in this area?
    LSC is proposing different options for the disposal of personal 
property at the point that a recipient ceases to receive LSC funding. 
Recipients would be permitted to transfer or retain personal property 
purchased with LSC funds, provided that LSC would be compensated in an 
amount equal to the percentage of the property's acquisition cost 
funded with LSC monies. These provisions are based on disposal options 
set forth in OMB Circular A-110. It is

[[Page 58292]]

anticipated that LSC and recipients will identify, on a case by case 
basis at the time of cessation of funding, the best method for 
disposing of personal property purchased with LSC funds.
    With respect to leased personal property, LSC proposes that during 
the term of an LSC grant or contract, recipients be permitted to 
dispose of such leased with LSC funds in accordance with the terms of 
the lease. When a recipient ceases to receive LSC funding, the 
recipient would be required to dispose of items of personal property 
leased with LSC funds in accordance with the terms of the lease.

Section 7--Disposal of Real Property Acquired With LSC Funds

    Section 7 sets forth the proposed standards for the disposal of 
real property purchased with LSC funds. As with the personal property 
disposal standards in Section 6, LSC proposes to provide different 
options for disposals occurring during the grant term and at the 
cessation of LSC funding
    For recipients seeking to dispose of real property during the grant 
term, LSC proposes to continue the longstanding LSC policy whereby 
recipients are permitted to sell real property acquired with LSC 
funds.\6\ Recipients would also be permitted to transfer real property 
to other LSC recipients. This is consistent with most LSC property 
interest agreements between LSC and recipients using LSC funds to 
purchase real property.
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    \6\ By reference to 45 CFR 1630.12, Section 7(b) would clarify 
that income from the sale of property acquired with LSC funds is LSC 
derivative income subject to the requirements of the LSC Act, 
regulations, and other applicable law. As such, LSC derivative 
income becomes part of the LSC fund balance which may need to be 
returned to LSC if the fund balance amount exceeds the limits 
established by 45 CFR Part 1628.
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    At the point of cessation of LSC funding, LSC proposes to permit 
recipients to sell, transfer or retain real property acquired with LSC 
funds, provided that LSC is compensated in an amount equal to the 
percentage of the property's acquisition cost funded by LSC monies. LSC 
would have to approve any such disposition in advance.

Section 8--Documentation and Recordkeeping Requirements

    Section 8 contains proposed requirements for the documentation of 
property acquisitions and disposals. This section is intended to ensure 
that recipients create and retain the required records in support of 
property acquisition and disposal decisions and LSC fund expenditures 
related thereto.

Section 9--Recipient Policies and Procedures

    This section proposes to require that recipients adopt written 
procurement procedures. This proposal stems from OMB Circular A-110 and 
is intended to ensure that recipients have standardized procurement 
procedures that are consistent with LSC requirements. LSC does not 
propose to collect, review or approve such procedures, although a 
recipient would have to make them available to LSC upon request for LSC 
oversight and compliance purposes.

Property Acquisition and Management Manual

Sec. 1  Purpose and Scope.
Sec. 2  Definitions.
Sec. 3  Acquisition Procedures for Personal Property.
Sec. 4  Acquisition Procedures for Real Property.
Sec. 5  Retention and Use of Property Acquired with LSC Funds.
Sec. 6  Disposal of Personal Property Acquired with LSC Funds.
Sec. 7  Disposal of Real Property Acquired with LSC Funds.
Sec. 8  Documentation and Recordkeeping Requirements.
Sec. 9  Recipient Policies and Procedures.

Section 1--Purpose and Scope

    The purpose of this PAMM is to set forth standards governing the 
acquisition, retention, use and disposal of personal and real property 
acquired in whole or in part with LSC funds. The standards set forth 
herein apply to both real and non-expendable personal property 
(equipment), but not apply to expendable personal property (supplies) 
or services, except for services for capital improvements which are 
subject to the requirements of Section 4(f) herein.
    The requirements set forth herein apply to acquisitions made on or 
after the PAMM's effective date as published in the Federal Register. 
For purchases of real property prior to the PAMM's effective date, the 
written agreement between the program and LSC will control. For prior 
acquisitions of personal property, the 1981 Property Manual will 
control.

Section 2--Definitions

    (a) Acquisition means a purchase of real property or a purchase or 
lease of personal property in whole or in part with LSC funds. For the 
purposes of this PAMM, recipients should treat a purchase or lease of 
related property as a single acquisition when the property can be 
readily obtained through a single contract with a single source.
    (b) Capital improvement means an expenditure of an amount exceeding 
$10,000 to improve real property through construction or the purchase 
of immovable items which become an integral part of real property.
    (c) Lease means a contract for the use of property during a 
specified period for a specified price.
    (d) LSC property interest agreement means a formal written 
agreement between LSC and a recipient setting forth the terms of LSC's 
approval of the recipient's use of LSC funds to acquire real property.
    (e) Personal Property means property of any kind, including 
tangible property (having physical existence), such as equipment, or 
intangible (having no physical existence), such as copyrights or 
patents, but does not include supplies or real property or improvements 
to real property. \7\
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    \7\ Section 2(c) adapts and incorporates the definition of 
personal property which appears in Section 2(v) of OMB Circular A-
110. For the purposes of this manual, supplies, which are normally 
considered to be personal property, are omitted from the definition 
because the manual is not applicable to the purchase, retention or 
use of supplies.
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    (f) Property means any real or personal property having a market 
value greater than $1,000 and a useful life of more than one year.
    (g) Purchase means to obtain and take ownership of property through 
the payment of money or its equivalent.
    (h) Quote means a quotation or bid from a potential source 
interested in selling or leasing property to a recipient.
    (i) Real property means land, buildings, and appurtenances, 
including capital improvements thereto, but not including moveable 
personal property.
    (j) Source means a supplier, vendor, or contractor who has agreed 
to provide property to a recipient through a purchase or lease 
agreement.

Section 3--Acquisition Procedures for Personal Property

    (a) Before making an acquisition of personal property that has an 
aggregate cost over $10,000, a recipient shall make a written request 
from at least three potential sources for competitive quotes for the 
property.
    (b) Written requests for quotes must include:
    (1) A clear and accurate description of the property to be 
acquired; and
    (2) Identification of the criteria which will be the basis for the 
recipient's selection of a source.
    (c) The selection of a source shall be on the basis of criteria 
established in the request for quotes. Such criteria may include price 
alone or price in combination with other factors.
    (d) Notwithstanding paragraph (a) of this section, a recipient may 
request

[[Page 58293]]

quotes from a sole source when circumstances prevent the requesting of 
competitive quotes. When a request for quotes is made to a sole source, 
the recipient shall maintain written documentation of the reason(s) for 
not obtaining competitive quotes.
    (e) The use of more than $10,000 of LSC funds to acquire an 
individual item of personal property requires LSC's prior approval 
pursuant to 45 CFR 1630.5(b)(2), whether or not the acquisition is to 
replace existing property. When requesting LSC's prior approval of an 
acquisition of personal property, recipients shall provide to LSC:
    (1) Three written quotes, if obtained; and
    (2) A letter or memorandum containing:
    (i) A statement of need explaining how the acquisition will further 
the delivery of legal services to eligible clients;
    (ii) A brief description of the property to be acquired, including 
the make and manufacture of the item, the name of the source supplying 
the item, the quantity to be acquired, and the total dollar amount of 
the acquisition; and
    (iii) A brief description of the acquisition process, including the 
names of the potential sources who submitted quotes, the amounts of the 
quotes, the quantity of items offered by the potential sources, and a 
brief explanation of the reasons for selecting a particular source to 
supply the item(s). In the absence of quotes, the description should 
explain what circumstances prevented the recipient from obtaining 
quotes.

Section 4--Acquisition Procedures for Real Property

    (a) Prior to acquiring real property with LSC funds, recipients 
shall conduct an informal market survey in order to identify and 
evaluate at least three potential sources. Recipients may retain a real 
estate agent or broker for the purposes of conducting a market survey, 
provided that the cost is reasonable.
    (b) The evaluation of potential acquisitions of real property shall 
include consideration of:
    (1) The total cost of the acquisition; and
    (2) The quality of the property to be acquired.
    (c) Recipients shall conduct an analysis of the average annual cost 
of the acquisition, including the costs of a down payment, interest and 
principal payments on debt acquired to finance the acquisition, closing 
costs, renovation costs, and the costs of utilities, maintenance, and 
taxes, where applicable. The cost analysis shall include a comparison 
of:
    (1) The total costs of acquiring the property over the life of the 
financing of the acquisition; with
    (2) The total costs of leasing similar property over the same 
period of time.
    (d) The use of LSC funds to acquire real property requires LSC's 
prior approval pursuant to 45 CFR 1630.5(b)(3). When requesting LSC 
prior approval of an acquisition of real property, recipients shall 
provide to LSC in writing:
    (1) A statement of need explaining how the acquisition will further 
the delivery of legal services to eligible clients in terms of:
    (i) The location of the property in terms of accessibility to 
program clients;
    (ii) Trends in funding and program staffing levels in relation to 
space needs; and
    (iii) Whether the property will replace or be in addition to 
existing program offices;
    (2) A brief analysis comparing:
    (i) The estimated average annual cost of the planned acquisition 
over the life of the financing of the acquisition, including the costs 
of maintenance, utilities, and taxes; with
    (ii) The estimated average annual cost of leasing or purchasing 
other, similar property over the same period of time;
    (3) A current, independent appraisal of a type sufficient to secure 
a mortgage;
    (4) Documentation of board approval consisting of either a board 
resolution or board minutes demonstrating approval of the acquisition;
    (5) A statement of handicapped accessibility sufficient to meet the 
requirements of 45 CFR 1624.5(c);
    (6) A copy of an acquisition agreement, contract, or other document 
containing a description of the property and the terms of the 
acquisition; and
    (7) An explanation of the anticipated financing of the acquisition 
including:
    (i) The estimated total cost of the acquisition, including 
renovations, moving, and closing costs;
    (ii) The source and amount of funds to be applied toward a down 
payment;
    (iii) The source of funds to be applied toward a monthly mortgage 
payment, if any;
    (iv) The monthly amount of principal and interest payments on debt 
secured to finance the acquisition, if any; and
    (v) The source and estimated amounts of funds needed to cover 
moving, renovations, and closing costs.
    (e) At the time of approving a recipient's use of LSC funds to 
acquire real property, LSC and the recipient shall enter into a written 
LSC property interest agreement, which shall include, at a minimum:
    (1) Provisions consistent with Sections 5(a), 7(a) and 7(b) herein;
    (2) An agreement by the recipient not to encumber the property 
without prior approval of LSC;
    (3) An agreement by the recipient to record, in accordance with 
appropriate and applicable state law, LSC's interest in the property.
    (f) Expenditures for capital improvements require LSC's prior 
approval pursuant to 45 CFR 1630.5(b)(4). When requesting LSC's prior 
approval of such expenditures, recipients shall provide to LSC in 
writing, the following:
    (1) A statement of need explaining how the improvement will further 
the delivery of legal services to eligible clients;
    (2) A brief description of the improvement, including the nature of 
the work to be done, the name of the contractor performing the work, 
and the total expected cost of the improvement; and
    (3) A brief description of the contractor selection process, 
including the names of the contractors who submitted quotes, the 
amounts of the quotes, and a brief explanation of the reason(s) for 
selecting a particular contractor to perform the work.

Section 5--Retention and Use of Property Acquired With LSC Funds

    (a) Subject to the requirements herein, recipients may use LSC 
funds to acquire and use personal and real property for the purpose of 
delivering legal services to eligible clients. Title to personal and 
real property purchased in whole or in part with LSC funds vests in the 
recipient subject to the conditions set out in paragraphs (b) through 
(f) of this section.
    (b) Recipients may retain personal and real property purchased with 
LSC funds for as long as they continue to receive LSC funding. When a 
recipient ceases to receive LSC funding, property purchased with LSC 
funds shall be disposed of in accordance with the requirements of 
Sections 6(d) and 7(c) herein.
    (c) Recipients may retain personal property obtained through a 
lease using LSC funds for as long as they continue to receive LSC 
funds, subject to the terms of the lease. When a recipient ceases to 
receive LSC funding, property leased with LSC funds shall be disposed 
of in accordance with Section 6(b) herein.
    (d) When using personal or real property acquired in whole or in 
part with LSC funds for the performance of

[[Page 58294]]

an LSC grant or contract, recipients may use such property for other 
activities, provided that such other activities do not interfere with 
the performance of the LSC grant or contract, and provided that such 
other uses meet the requirements of paragraphs (e) and (f) of this 
section.
    (e) If a recipient uses personal property acquired in whole or in 
part with LSC funds to provide services to another organization which 
engages in activity restricted by the LSC Act, regulations, or other 
applicable law, the recipient shall charge the other organization a fee 
which shall not be less than that which private non-profit 
organizations in the same locality charge for the same services under 
similar conditions.
    (f) If a recipient uses real property acquired in whole or in part 
with LSC funds to provide space to another organization which engages 
in activity restricted by the LSC Act, regulations, or other applicable 
law, the recipient shall charge the other organization an amount of 
rent which shall not be less than that which private non-profit 
organizations in the same locality charge for the same amount of space 
under similar conditions.
    (g) Recipients may copyright any work that is subject to copyright 
and was developed, or for which ownership was obtained, under an LSC 
grant or contract, provided that LSC reserves a royalty-free, 
nonexclusive, and irrevocable license to reproduce, publish, or 
otherwise use work copyrighted by recipients, when the work is obtained 
or developed in whole or in part with LSC funds.

Section 6--Disposal of Personal Property Acquired With LSC Funds

    (a) During the term of an LSC grant or contract, recipients may 
dispose of items of personal property leased with LSC funds in 
accordance with the terms of the lease.
    (b) When a recipient ceases to receive LSC funding, the recipient 
shall dispose of items of personal property leased with LSC funds in 
accordance with the terms of the lease.
    (c) During the term of an LSC grant or contract, recipients may 
dispose of items of personal property purchased with LSC funds by:
    (1) Trading in the property at the time of acquiring replacement 
property;
    (2) Selling the property at a reasonable negotiated price, without 
advertising for quotes, where the property item has a current fair 
market value not exceeding $15,000;
    (3) Selling the property after having advertised for and received 
quotes, where the current fair market value of the property item 
exceeds $15,000;
    (4) Transferring the property to another recipient of LSC funds; or
    (5) With the approval of LSC, transferring the property to another 
nonprofit organization serving the poor in the same service area.
    (d) Recipients shall not dispose of items of personal property by 
sale, donation or other transfer of the property to the recipients' 
board members and employees.
    (e) During the term of an LSC grant or contract, recipients selling 
personal property purchased with LSC funds may retain and use income 
from the sale according to the requirements of 45 CFR 1630.12 and 45 
CFR 1628.3.
    (f) When a recipient ceases to receive LSC funding, subject to the 
approval of LSC, recipients shall dispose of individual items of 
personal property purchased with LSC funds according to one of the 
following methods:
    (1) The recipient may transfer the property to another recipient of 
LSC funds, in which case the recipient transferring the property shall 
be entitled to compensation in the amount of that percentage of the 
property's current fair market value which is equal to that percentage 
of the property's acquisition cost which was borne by non-LSC funds;
    (2) The recipient may transfer the property to another nonprofit 
organization serving the poor in the same service area, in which case 
LSC shall be entitled to compensation for that percentage of the 
property's current fair market value which is equal to that percentage 
of the property's acquisition cost which was borne by LSC funds;
    (3) The recipient may sell the property and retain the proceeds 
from the sale after compensating LSC for that percentage of the 
property's current fair market value which is equal to that percentage 
of the property's acquisition cost which was borne by LSC funds;
    (4) The recipient may retain the property, in which case LSC shall 
be entitled to compensation from the recipient for that percentage of 
the property's current fair market value which is equal to that 
percentage of the property's acquisition cost which was borne by LSC 
funds.

Section 7--Disposal of Real Property Acquired With LSC Funds

    (a) During the term of an LSC grant or contract, recipients may 
dispose of real property acquired with LSC funds by:
    (1) Selling the property after having advertised for and received 
offers, in which case the recipient may retain and use the proceeds 
from the sale of the property for the purpose of delivering legal 
services to eligible clients; or
    (2) Transferring the property to another recipient of LSC funds, in 
which case the recipient transferring the property shall be entitled to 
compensation in the amount of that percentage of the property's current 
fair market value which is equal to that percentage of the property's 
acquisition cost which was borne by non-LSC funds.
    (b) During the term of an LSC grant or contract, recipients selling 
real property acquired with LSC funds may retain and use income from 
the sale of the property according to the requirements of 45 CFR 
1630.12 and 45 CFR 1628.3.
    (c) When a recipient owning real property acquired with LSC funds 
ceases to receive funding from LSC, the recipient shall, with the 
approval of LSC, dispose of the real property according to one of the 
following methods:
    (1) The recipient may transfer title to the property to another 
recipient of LSC funds, in which case the recipient transferring the 
property shall be entitled to compensation for that percentage of the 
property's current fair market value which is equal to that percentage 
of the property's acquisition cost which was borne by non-LSC funds;
    (2) The recipient may retain title to the property without further 
obligation to LSC after the recipient compensates LSC for that 
percentage of the property's current fair market value which is equal 
to the percentage of the property's acquisition cost which was borne by 
LSC funds;
    (3) The recipient may sell the property and compensate LSC for that 
percentage of the property's current fair market value which is equal 
to the percentage of the property's acquisition cost that was borne by 
LSC funds, after the deduction of actual and reasonable selling and 
fix-up expenses, if any.

Section 8--Documentation and Recordkeeping Requirements

    (a) Recipients shall account for personal property acquired with 
LSC funds according to the requirements of Sections 2-2.4 and 3-5.4(c) 
of the Accounting Guide for LSC Recipients.
    (b) Recipients acquiring real property with LSC funds shall keep 
such records as are customary for the retention of real property in the 
jurisdiction where the property is located.
    (c) Recipients shall account for income earned from the sale of 
real or personal property purchased with LSC funds in accordance with 
the requirements of 45 CFR 1630.12.

[[Page 58295]]

    (d) Documentation of real property acquisitions shall consist of 
the acquisition contract, evidence of a market survey, cost or price 
analysis, and an explanation of the reason(s) for selecting a 
particular source, a copy of an independent appraisal of the property's 
market value, evidence of board approval of the acquisition, a 
statement of handicapped accessibility sufficient to meet the 
requirements of 45 CFR 1624.5(c), and a copy of the LSC property 
interest agreement required by Section 4(e) herein.

Section 9--Recipient Policies and Procedures

    Recipients shall develop written policies and procedures which 
implement, at a minimum, the requirements of Sections 3 and 4 herein.

Victor M. Fortuno,
General Counsel and Vice President for Legal Affairs.
[FR Doc. 00-24835 Filed 9-27-00; 8:45 am]
BILLING CODE 7050-01-P