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Ronald S. Flagg, President

April 1, 2024

BACKGROUND

This Program Letter provides guidance on allowable and reasonable uses of LSC Basic Field Grant funds to strengthen employee recruitment and retention through incentive payments. As a result of recruiting and retention challenges, several Legal Services Corporation (“LSC”) recipients have raised questions concerning the optimal use of Basic Field Grant funds to mitigate the staffing issues. Recently, there has been increased interest among recipients to use Basic Field Grant funds to offer employment-related incentive payments to attract, engage, and retain talent.

LSC confirms that employment-related incentive payments (“Incentive Payments”) are an allowable use of Basic Field Grant funds, with the stipulation that the development and application of such incentive payment programs must adhere to LSC requirements and the recipient’s established policies.

Recipients could offer several types of incentive payments to attract and retain talent. Common examples include¹:
• Retention bonuses
• Law School loan repayment programs
• Signing bonuses
• Annual incentive plans
• Spot award programs
• Project bonuses
• Team/small group incentives
• Relocation incentives

Many recipients are also Federal Award recipients and are subject to the Uniform Grant Guidance (“UGG”) requirements. The UGG allows various types of incentive payments as well, such as:
• Incentive compensation (See 2 C.F.R. § 200.430(f))
• Recruiting costs (See 2 C.F.R. § 200.463)
• Relocation costs (See 2 C.F.R. § 200.464)

Recipients have also expressed an interest in using Basic Field Grant funds to support salary and wage increases. While LSC allows these costs, assuming they are reasonable in nature, recipients must assess and determine their ability to sustain increased expenses. LSC does not approve increased salary and wage amounts; these decisions are within the scope of recipients’ management. However, non-profits commonly use compensation surveys to justify salary and wage increases; recipients are encouraged to do the same.

APPLICATION

Generally, LSC allows incentive payments provided they satisfy the cost standards outlined in 45 C.F.R. § 1630.5. Specifically, recipients must actually incur the costs in the performance of the grant or contract, the costs must be reasonable and necessary, allocable to the grant or contract, compliant with all LSC authoritative requirements, consistent with accounting policies and procedures that apply uniformly to LSC- and non-LSC-funded activities, accorded consistent treatment over time, GAAP-compliant, and adequately documented consistent with § 1630.5(a)(8). Incentive payments must be made in accordance with a recipient’s established policies and procedures. 

Recipients who use LSC funds to pay for incentives must follow their cost allocation policy. Further, recipients must establish adequate internal controls to include Board-approved policies and procedures that define the incentive types to be offered, eligibility criteria, maximum amounts for each incentive type, review/approval requirements, and documentation requirements.

For more information or questions, please contact your assigned Fiscal Compliance Analyst in the Office of Compliance and Enforcement.

¹Please note, this list is not all-inclusive. If a recipient has ideas for incentive payments other than those listed, please reach out to your assigned Fiscal Compliance Analyst in LSC’s Office of Compliance and Enforcement to discuss.