Program Letter 20-3

Ronald S. Flagg, President
April 10, 2020

LSC grantees may charge to LSC funds paid administrative leave and other costs related to maintaining readiness in response to the coronavirus pandemic, subject to reasonableness, adoption and implementation of policies, and appropriate documentation. Maintaining readiness is reasonable and necessary for LSC grant objectives. Furthermore, such measures promote national and local health and safety consistent with the global pandemic and the responses of the federal, state, and local governments involving containment and treatment. The coronavirus pandemic presents new and unfamiliar circumstances justifying new kinds of reasonable approaches. In consideration of the urgency of responding to the dire situation, grantees may have to make decisions quickly based on limited information and indeterminate forecasts. The health, safety, and stability of grantee staff and operations take precedence over most other considerations. Documented, deliberative decisions by grantees are presumptively reasonable absent clear evidence of fraud, intentional abuse, or excessive and unjustified waste.

Paid administrative leave is an employee benefit subject to grantees’ broad discretion. Grantees may charge LSC funds for paid administrative leave for maintaining pre-pandemic levels of compensation and benefits for staff who lack sufficient work or the ability to perform work due to the effects of the coronavirus pandemic, including the need to provide regular or sick care for children or others. As with all employee benefits, grantees must adopt, implement, and document policies and procedures for providing paid administrative leave and the use of such leave. Grantees may provide such leave without employees having to first use or exhaust other available leave. Grantees may also charge some or all of such leave to LSC funds when other funding is not available, even if prior to the pandemic the employee’s costs had been allocated to multiple funders. Please contact LSC for guidance on allocation in those situations. Grantees are not required to deplete other assets prior to charging such leave to LSC funds.

The same principles apply to other costs related to maintaining readiness during the pandemic. For example, grantees may charge to LSC funds costs for maintaining relationships with contractors, vendors, or others when the grantee determines that those costs are reasonable for maintaining readiness, even if the other party provides little or no services due to the pandemic.

STANDARDS

Grantees must adopt, implement, and document any new policies or changes in policies. Grantee records should contain sufficient materials for reviewers or auditors to determine what occurred and the basis for the grantee’s actions. Grantees should have clear procedures, criteria, and recordkeeping. All policies must be consistent with applicable laws and requirements. LSC can only provide flexibility for LSC-imposed rules.

Normally, grantees charge employee benefits to LSC and other funders based on a number of factors, including an indirect cost allocation methodology. If possible, please treat this pandemic-related paid administrative leave the same way and allocate the same portion to LSC funds as you would for normal sick leave or vacation leave. LSC also permits charging to LSC funds some indirect costs associated with LSC-eligible activities funded by another entity that will not pay for all of those indirect costs. 45 C.F.R. § 1630.5(g). Additionally,  unlike most project-based grants, the LSC basic field grant and forthcoming pandemic-relief grants support the general ability to maintain services and readiness. Thus, in most, and perhaps all, situations, you may charge most or all of this paid administrative leave to LSC funds when other funding is not available. The same rules apply to other costs discussed in this program letter. Please contact LSC for specific guidance in your situation.

Furthermore, we recognize that you may have to make decisions before other funders provide guidance or answer questions regarding using their funds for these unusual costs related to the pandemic. Thus, you may plan to charge to LSC funds those indirect costs pursuant to § 1630.5(g)  as if you had obtained already the required “affirmative refusal” discussed in Program Letter 18-2. We expect you to follow up with the other funders about paying their normal share when you can reasonably do so.  Nonetheless, we will not disallow the cost based on a lack of advance guidance from them.

The following examples are purely illustrative. Grantees could adopt different options that significantly vary from these examples. Please note that you do not have to use the term “paid administrative leave.” For example, the federal government has “weather and safety leave” that provides full pay when circumstances prevent employees “from safely traveling to or performing work at an approved location.” 5 U.S.C. § 6923c(b). You should adopt policies that work best for you, your employees, and your client services under the circumstances.

Examples of Paid Administrative Leave

A grantee may set a goal that all employees maintain their originally projected pay throughout the pandemic, including planned changes in hours, rates of pay, or benefits. Staff who can work their regular schedules would continue to do so. The grantee could authorize paid administrative leave for staff who meet any of the following criteria, as related to the pandemic:

  • Cannot work remotely despite reasonable efforts.
  • Has less available work.
  • Has less available time for work due to providing care for a small child not in school, an elderly parent who lacks usual caregivers, or other household members.

The grantee could also have other reasonable critera.  The grantee could model the process for taking such leave on other existing leave practices or develop a new practice appropriate for the circumstances. The grantee could charge the paid administrative leave to LSC funds, even for entire work weeks, if the grantee determines that is appropriate. The grantee can also decide whether to allow employees to use paid administrative leave for coronavirus illness or quarantine before using normal sick leave.

The grantee could allow staff to use this leave prior to taking other leave. Staff would still take other leave for normal purposes unrelated to the pandemic. For example, a grantee might provide a full-time staff attorney with an extra ten hours of paid administrative leave each week to care for small children. If that staff attorney takes a one work-week vacation, the grantee could require that the employee charge five full days of vacation leave for that week as a regular vacation without the additional paid administrative leave for that week. Lastly, the grantee should make use of the new pandemic payroll-tax credits for leave and other programs to avoid unnecessarily charging LSC funds for costs that could be covered otherwise.  For example, after receiving the tax credit for pandemic leave charged to LSC funds, the grantee would retore to the LSC account the same amount as the tax credit reduces the grantee’s payroll taxes.

Example of Funding Paid Administrative Leave

  • A grantee may have a budget showing 30% in operating reserves. The grantee does not have to spend down the reserves prior to charging administrative leave to LSC.
  • Some of the grantee’s non-LSC funders consider but fail to announce a decision about charging to their funds their normal share of indirect costs related to pandemic. Absent a clear decision, the grantee would have to start forcing staff funded by those grants to take unpaid leave time. The grantee may accept the indecision as a refusal to agree to those indirect costs, which is sufficient under the circumstance for using LSC funds for those costs, subject to other requirements.
  • The grantee must take reasonable steps to explore viable alternatives. For example, the grantee should explore other options, such as the new federal benefits tied to payroll tax credits.

Example of Other Costs

A grantee has contracts for custodian services and landscaping at the grantee’s main office building that are normally charged to LSC funds (perhaps also to other funders through an allocation formula). Some of the workers are unavailable, and others are available but only 10% of normal work is needed because the building is almost empty. The grantee may decide that it’s reasonable for maintaining readiness to continue making payments on these contracts even when work cannot be performed.  As with paid administrative leave, those payments may be charged to LSC funds.

OTHER FUNDERS

LSC is monitoring guidance from OMB for federal employees and oversight of federal grants. Generally, LSC will provide at least as much flexibility as permitted by federal agencies for their grantees. In some cases, LSC may provide more flexibility. The following are two examples from the federal government.

  • OMB M-20-17: Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations.
  • The CARES Act, Pub. L. 116-136 (2020), provides that any agency may use any appropriated funds to pay contractors to provide paid leave “to keep its employees or subcontractors in a ready state” when “closures or restrictions” on a work site mean that both (a) those people cannot work on-site and (b) those people’s job duties cannot be performed remotely during the health emergency.

Please share with LSC any guidance from other funders about these or similar issues.

Please don’t hesitate to contact your program liaison in OPP or OCE with questions about the topics covered in this program letter. LSC will answer promptly and, if needed, LSC can provide additional public guidance.