This is the accessible text file for GAO report number GAO-10-540
entitled 'Legal Services Corporation: Improvements Needed in Controls
over Grant Awards and Grantee Program Effectiveness' which was
released on July 13, 2010.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as
part of a longer term project to improve GAO products' accessibility.
Every attempt has been made to maintain the structural and data
integrity of the original printed product. Accessibility features,
such as text descriptions of tables, consecutively numbered footnotes
placed at the end of the file, and the text of agency comment letters,
are provided but may not exactly duplicate the presentation or format
of the printed version. The portable document format (PDF) file is an
exact electronic replica of the printed version. We welcome your
feedback. Please E-mail your comments regarding the contents or
accessibility features of this document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to the Ranking Member, Committee on Finance, U.S. Senate:
United States Government Accountability Office:
GAO:
June 2010:
Legal Services Corporation:
Improvements Needed in Controls over Grant Awards and Grantee Program
Effectiveness:
GAO-10-540:
GAO Highlights:
Highlights of GAO-10-540, a report to the Ranking Member, Committee on
Finance, U.S. Senate.
Why GAO Did This Study:
The Legal Services Corporation (LSC) was created as a private,
nonprofit corporation to support legal assistance for low-income
individuals on civil legal matters, primarily through federal grants
and is primarily funded through federal appropriations. Effective
internal controls over grant awards and oversight of grantees’
performance are critical to LSC’s mission. GAO and the LSC Inspector
General have previously reported weaknesses and made recommendations.
GAO’s objectives for this report were to determine the extent to which
LSC (1) implemented key internal controls in awarding and overseeing
grantees, (2) measured its performance, (3) evaluated staffing needs,
and (4) adhered to its budget execution processes.
GAO analyzed key records and prior recommendations as well as
interviewed LSC officials regarding LSC’s internal control and
performance frameworks, staffing, and contract processes.
What GAO Found:
Although LSC’s controls over reviewing and awarding grants are
intended to help ensure fair and equitable consideration, they need
improvement. Final award and fund decisions are documented and
approved; however, LSC’s grant application evaluation process and
associated decisions were not documented, including key management
discussions in the evaluation process. This lack of documentation of
factors considered in making these decisions increases the risk that
grantee application evaluation and funding decisions may not consider
all key relevant information and makes it difficult to describe the
basis for decisions later. In addition, LSC has no requirement for
carrying out and documenting managerial review and approval of
competitive grant evaluations or renewals, limiting its ability to
identify gaps or incompatible data in applications. Although LSC has
efforts underway to ensure it visits all grantee sites at least once
every 3 years, LSC did not consistently or explicitly document the
application of risk criteria when selecting which grantees to visit,
complete timely site visit reports, or track the recommendations from
the site visits. These weaknesses hindered LSC’s ability to
effectively oversee grantees.
LSC is not required to follow the Government Performance and Results
Act but has developed a Strategic Directions document with some
performance measures. However, these measures do not reflect all of LSC’
s core activities and are not linked to its two primary offices for
awarding and overseeing grants. Therefore, LSC cannot effectively
measure its performance in several key dimensions, such as identifying
and targeting resources in addressing the most pressing civil legal
needs of low-income individuals across the nation.
LSC has not systematically assessed its long-term staffing needs to
achieve strategic goals and objectives, which could help ensure it has
the staff capabilities needed to meet its short- and long-term goals.
LSC has not consistently provided performance reviews for all of its
staff, limiting opportunities to encourage high performance, identify
training needs, and communicate with staff.
At times, LSC did not adhere to its budget execution process in
awarding contracts supporting its key grant-making responsibilities.
Because officials did not follow LSC’s approval controls for two
contracts and there was a breakdown in tracking funds, LSC had a
budget shortfall of $70,000 in 2009.
Missing or flawed internal controls limit LSC’s ability to effectively
manage its grant award and grantee performance oversight
responsibilities. Although LSC has taken steps to address all 17 GAO
recommendations identified in prior work, several have yet to be fully
addressed. In the near term, it will be important for LSC leadership
to address both current and continuing weaknesses. For the long term,
LSC will need to focus on strengthening its overall system of internal
controls in order to establish a solid basis for effectively
accomplishing its core mission.
What GAO Recommends:
GAO makes recommendations to LSC management to improve internal
controls over grant awards and oversight including such key areas as
(1) documenting specific controls over the grant application review,
evaluation, and approval processes, (2) implementing a tracking system
for LSC’s recommendations, and (3) establishing comprehensive
performance measures linked to responsible offices. LSC agreed with
GAO’s recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-10-540] or key
components. For more information, contact Susan Ragland at (202) 512-
9095 or raglands@gao.gov.
[End of section]
Contents:
Letter:
Background:
Controls over Grant Application Review and Award Process Need
Improvement:
Control Weaknesses Hinder LSC's Ability to Oversee Grantees and Ensure
Compliance:
Performance Measures Could Be Better Aligned with Core Activities and
Organizational Responsibilities:
LSC Management Has Not Consistently Focused on Key Human Capital
Issues:
Controls over Contract Approval and Budgetary Tracking Were Not Always
Effective:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Prior GAO Reports Recommendation Status:
Appendix III: Comments from Legal Services Corporation:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Timeliness of OCE Site Visit Reports:
Table 2: Status of August 2007 GAO Report Recommendations on
Governance Practices to LSC Board of Directors:
Table 3: Status of August 2007 GAO Report Recommendations on
Management Practices to LSC Management:
Table 4: Status of December 2007 GAO Report Recommendations on Grants
Management to LSC Management and Board:
Figures:
Figure 1: Comparison of OPP and OCE Staffing to Total LSC Staffing
(1999 through 2009):
Figure 2: LSC Organization Chart:
Figure 3: Overview of the LSC Grant Award Process:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
June 11, 2010:
The Honorable Charles E. Grassley:
Ranking Member:
Committee on Finance:
United States Senate:
Dear Senator Grassley:
The Legal Services Corporation's (LSC) mission is to make federal
funding available to support the provision of legal assistance in
civil matters to low-income individuals throughout the United States.
LSC pursues this mission primarily by making grants to legal service
providers who serve low-income individuals otherwise unable to afford
such legal assistance. Because of the recent economic recession and
accompanying increase in housing foreclosures, LSC grantees' services
are in high demand.
Established by charter in 1974 as a federally funded private,
nonprofit corporation, LSC is dependent on federal appropriations for
the vast majority of its operations. In fiscal year 2009, LSC received
over 99 percent of its funding from federal appropriations--totaling
$390 million[Footnote 1]--and the remaining less than 1 percent
(approximately $1.7 million) from grants it received through the
Department of Veterans Affairs. Since LSC pursues its mission
primarily by making federally funded grants[Footnote 2] to legal
service providers, the effectiveness of LSC's controls over (1) grant
awards and overall monitoring of grantee program quality, and (2)
grantee compliance are key to LSC's mission. Controls over grant
awards and monitoring of grantee program performance include those
relied on for awarding competitive grants, encouraging competition,
and developing and implementing strategies to improve grantee program
quality and efficiency, including promoting and supporting enhanced
and strategic utilization of technology by LSC grantee programs to
improve clients' and communities' access to services. Controls over
grantee compliance include those relied on to ensure grantees'
compliance with the Legal Services Corporation Act (LSC Act) and its
implementing regulations,[Footnote 3] respond to inquiries and written
complaints concerning grantees received from members of the public or
Congress, and provide follow up on the referrals of findings from
LSC's Office of Inspector General.
We issued two reports in 2007 that identified weaknesses in LSC's
internal controls over grant awards and monitoring of program
effectiveness.[Footnote 4],[Footnote 5] LSC has completed action on 11
recommendations. For example, LSC established an audit committee
function to provide oversight to LSC's financial reporting and audit
process; established a shorter time frame for issuing LSC's audited
financial statements; established a comprehensive and effective
continuity of operations plan program; and performed follow up on all
improper or potentially improper uses of grant funds that we
identified in our prior report.[Footnote 6] However, 6 out of 17
recommendations remain to be fully implemented. These include
recommendations in such key LSC grant award and compliance areas as
(1) developing and implementing procedures to periodically evaluate
key management processes, including, at a minimum, processes for risk
assessment and mitigation, internal control, and financial reporting;
(2) implementing an approach for selecting grantees for internal
control and compliance reviews that is founded on risk-based criteria,
uses information and results from oversight and audit activities, and
is consistently applied; and (3) developing and implementing policies
that clearly delineate organizational roles and responsibilities for
grantee oversight and monitoring, including grantee internal controls
and compliance. Appendix II provides a summary of the status as of
April 2010 of our prior recommendations. Further, a 2009 LSC Inspector
General audit identified questionable fiscal practices related to
grants in following up on our December 2007 report.[Footnote 7]
The objectives of this report are to determine the extent to which LSC:
* properly implemented key internal controls in awarding grants and
overseeing grantee program performance;
* measured its performance in awarding grants and overseeing[Footnote
8] grantees;
* evaluated staffing needs for grant awards management and grantee
performance oversight; and:
* followed appropriate budget execution processes for awarding
contracts related to grants award and grantee performance and
oversight.
To address the first two objectives, we interviewed current members of
LSC's management and staff, staff in LSC's Office of Inspector General
(OIG), and the audit firm employed by the OIG to obtain information on
the functions and processes of LSC's grant awards and monitoring of
grantee program performance and grantee compliance. We also reviewed
LSC documentation on internal control activities related to the
awarding of grants and oversight of grantee programs. In addition, we
selected a probability sample of grant applications and application
evaluations and compared evaluation results with instructions in LSC
Grants, a computer-based grants application system. We analyzed the
document setting out LSC-wide and component-specific goals and
performance measures and compared this to federal guidance on
performance measurement. We also observed LSC site visits at two
grantees--in Indianapolis and Philadelphia. To obtain information on
LSC controls for assessing staffing needs for its grants functions, we
interviewed LSC management and reviewed policies and procedures. We
compared LSC's staffing needs assessment processes to federal best
practices in workforce planning principles.[Footnote 9] To obtain
information on controls over contract approval and budget execution,
we reviewed relevant policies, procedures and guidance and tested
contracts. For each of our objectives we compared the information
obtained with federal best practices in internal control in our
Standards for Internal Controls in the Federal Government.[Footnote
10] Appendix I contains a more complete description of our scope and
methodology. We conducted our work in Washington, D.C.; Indianapolis,
Indiana; and Philadelphia, Pennsylvania; from March 2009 to May 2010
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient appropriate evidence to provide a reasonable basis for our
findings and conclusions. We believe the evidence obtained provided a
reasonable basis for our audit findings and conclusions.
Background:
LSC relies heavily on its Office of Compliance and Enforcement (OCE)
and its Office of Program Performance (OPP) to carry out activities
related to grant awards, grantee program effectiveness, and grantee
compliance responsibilities. According to LSC officials, LSC
established OCE in 1997 and OPP in 1999 to (1) help ensure compliance
with requirements of the LSC Act, and (2) evaluate, fund, monitor and
oversee grantee programs, including quality of services provided.
Figure 1 shows staffing levels for OPP and OCE and LSC overall between
1999 and 2009.
Figure 1: Comparison of OPP and OCE Staffing to Total LSC Staffing
(1999 through 2009):
[Refer to PDF for image: stacked vertical bar graph]
Number of employees:
Fiscal year: 1999;
Office program performance: 14;
Office compliance and enforcement: 11;
Total LSC employees (does not include OIG staff): 78.
Fiscal year: 2000;
Office program performance: 17;
Office compliance and enforcement: 11;
Total LSC employees (does not include OIG staff): 87.
Fiscal year: 2001;
Office program performance: 21;
Office compliance and enforcement: 17;
Total LSC employees (does not include OIG staff): 99.
Fiscal year: 2002;
Office program performance: 25;
Office compliance and enforcement: 18;
Total LSC employees (does not include OIG staff): 98.
Fiscal year: 2003;
Office program performance: 24;
Office compliance and enforcement: 18;
Total LSC employees (does not include OIG staff): 102.
Fiscal year: 2004;
Office program performance: 24;
Office compliance and enforcement: 17;
Total LSC employees (does not include OIG staff): 97.
Fiscal year: 2005;
Office program performance: 21;
Office compliance and enforcement: 16;
Total LSC employees (does not include OIG staff): 90.
Fiscal year: 2006;
Office program performance: 26;
Office compliance and enforcement: 17;
Total LSC employees (does not include OIG staff): 93.
Fiscal year: 2007;
Office program performance: 24;
Office compliance and enforcement: 16;
Total LSC employees (does not include OIG staff): 86.
Fiscal year: 2008;
Office program performance: 22;
Office compliance and enforcement: 16;
Total LSC employees (does not include OIG staff): 82.
Fiscal year: 2009;
Office program performance: 26;
Office compliance and enforcement: 20;
Total LSC employees (does not include OIG staff): 91.
Source: GAO analysis of LSC policies and procedures.
[End of figure]
As shown in figure 2, the Directors of OPP and OCE report to the Vice
President for Programs and Compliance, who reports to the LSC
President. LSC's President reports to an LSC board composed of 11
members. In April 2010, the 11 member board was undergoing transition,
with: 1 board member continuing, 6 of the remaining 10 being sworn in
during April, 2 board members awaiting to be named, and 2 others
awaiting Senate confirmation.
Figure 2: LSC Organization Chart:
[Refer to PDF for image: organization chart]
Top level:
LSC Board of Directors;
* Office of the Inspector General (directly reports to the BOD).
Second level:
* President of LSC[A] (directly reports to the BOD).
Third level, direct reporting to President of LSC:
* Vice President for Programs and Compliance;
* Chief Administrative Officer;
* Vice President of Legal Affairs,[A] General Counsel,[A] and
Corporate Secretary, Office of Legal Affairs (also indirectly reports
to BOD).
Fourth level, direct reporting to Vice President for Programs and
Compliance:
* Director, Office of Compliance and Enforcement (OCE);
* Director, Office of Program Performance (OPP);
* Director, Office of Information Management.
Fourth level, direct reporting to Chief Administrative Officer:
* Director, Office of Information Technology;
* Director, Office of Human Resources;
* Treasurer, Comptroller, Office of Financial and Administrative
Services (also indirectly reports to President of LSC and BOD).
Fourth level, direct reporting to President of LSC:
* Director, Office of Government Relations and Public Affairs.
Source: LSC.
[A] These positions are occupied by the same individual.
[End of figure]
According to the LSC Vice President of Programs and Compliance's goals
and objectives document (LSC workplan), the Vice President for
Programs and Compliance is responsible for coordinating OPP and OCE;
implementing efforts to improve LSC's oversight of grantees; assessing
LSC component directors' staffing allocations and assignments;
conducting quarterly joint staff meetings and training sessions; and
overseeing LSC's internal quality agenda, including providing staff
training. In accordance with the LSC Workplan, the Vice President for
Programs and Compliance also oversees LSC's grantee compliance and
program functions, with emphasis on intra-office coordination,
improved grantee guidance, and improved grantee follow-up activities
by OCE and OPP.
According to LSC's policy and the 2009 OPP Procedures Manual, OPP's
responsibilities include designing and administering LSC's process for
awarding competitive grants, and developing and implementing
strategies to improve grantee program quality.[Footnote 11] In
carrying out its responsibilities, OPP is to issue requests for
proposals, guide grant applicants through the application process, and
evaluate applications against performance criteria.
According to the 2008 Roles and Responsibilities of LSC Offices
Responsible for Grantee Oversight, OCE is charged with reviewing
grantees' compliance with the LSC Act and implementing regulations,
responding to inquiries and written complaints concerning grantees
received from members of the public or Congress, and providing follow
up on the referrals of findings from LSC's Office of Inspector
General.[Footnote 12],[Footnote 13] In carrying out its
responsibilities, OCE is to conduct grantee case[Footnote 14] service
reports and case management system site visits; review grantee
compliance with the LSC accounting manual and fiscal-related
regulations; review the audited financial statements of grantees; and
initiate questioned-cost proceedings as necessary.[Footnote 15] To
increase compliance, OCE is also responsible for issuing corrective
action notices to grantees and for following up on corrective action
plans through conducting interviews, reviewing grantee corrective
action plans, and performing follow-up reviews.
Figure 3 presents an overview of LSC grant award process
responsibilities as prescribed by LSC's policies and procedures.
Figure 3: Overview of the LSC Grant Award Process:
[Refer to PDF for image: illustration]
Request for Proposal (RFP):
Applicants are to submit electronic grant applications to LSC using
the LSC Grants system.
Grant application evaluation process:
OPP staff are to evaluate grant applications, and enter assessments
and funding term recommendations into the LSC Grants system. The OCE
and OIG are to provide feedback to OPP regarding the applicants based
on reviews, complaint investigations, etc. For multiple applicant
service areas, staff are to conduct capability assessments of each of
the applicants for the service area; prepare capability assessment
reports; and convene an independent review panel that assesses the
capacities of the applicants. Staff and the review panel are to
prepare written funding recommendations; both of which are to be
presented to the President.
Management review and approval:
For single applicant service areas, staff are to meet with the OPP
management and the Grants Manager to discuss the grant applications
and staff’s evaluations, proposed special grant conditions, and
funding term recommendations. Subsequently, the Vice President for
Programs and Compliance, the directors of OPP and OCE, Grants Manager
and other staff as appropriate are to meet to review the grant
applications and staff’s evaluations, proposed special grant
conditions and funding recommendations. The final funding term
recommendations and special grant conditions are then to be reviewed
with the President.
Funding decision:
The LSC President is to make the final grantee funding decisions.
Source: GAO analysis of LSC policies and procedures.
[End of figure]
In addition, the Office of Legal Affairs (OLA) has some
responsibilities with respect to LSC's grantee oversight.
Specifically, according to the Roles and Responsibilities of LSC
Offices Responsible for Grantee Oversight, OLA, headed by a Vice
President of Legal Affairs who reports to LSC's President, is
responsible for providing legal services for LSC, such as interpreting
statutory and regulatory authorities applicable to LSC grantees and
approving contracts prior to award. OPP and OCE and other operating
units seek legal counsel and information from OLA on application of
relevant laws and regulations, as well as legal issues arising from
oversight and enforcement activities.[Footnote 16]
Controls over Grant Application Review and Award Process Need
Improvement:
LSC controls over reviewing and awarding grants are intended to help
ensure the fair and equitable consideration of applicants. Recently
LSC has taken action intended to improve controls in this area. For
example, LSC enhanced documentation of its grant application
evaluation process through its 2010 Reader Guide. In addition, the LSC
grants system contains detailed application evaluation questions based
on the LSC Performance Criteria, and LSC has developed training
materials and provided training to OPP personnel on the application
evaluation process. However, at the time of our review, we found LSC's
controls over reviewing grantee applications and awarding grants were
deficient in the following areas:
* documenting grant award decisions,
* carrying out and documenting management review of grant
applications, and:
* using automated grantee data available in the LSC Grants system.
These deficiencies increase the risk that LSC may not be considering
all relevant information in a consistent manner, limit LSC's ability
to explain the results of award decisions, and have resulted in
incomplete and inaccurate information in the LSC grants grantee
application evaluations.
Grant Application Evaluations and Decisions Lacked Supporting
Documentation:
LSC's grant application evaluation process and basis for the resulting
decisions were not clearly documented, including key management
discussions in the evaluation-making process.
According to the Standards for Internal Control in the Federal
Government,[Footnote 17] all significant events should be clearly
documented, and readily available for examination. We found LSC
procedures did not require, nor did the staff maintain, a
comprehensive record documenting (1) the extent to which management
held discussions and considered all available, relevant information in
the grant funding decision-making process for each applicant, and (2)
that a complete record of the deliberative process (i.e., inputs,
discussions, decisions made) was used, leading up to a grant
application being funded or denied by LSC. Instead, LSC uses
presentation notebooks, including multiple data sources, including
grant applicant information, which are prepared for OPP staff funding
recommendation presentations to OPP management and later for
presentations to LSC management and the LSC President. Final grant
award decisions are summarized in a chart initialed by responsible
staff, LSC management and the President and individual grant award
letters are certified by the LSC President.
LSC's procedures provided for documenting summaries of grantee
application data. Specifically, LSC procedures required a one-page
applicant overview and a two-page program summary for each applicant.
OPP staff prepare the one-page applicant overview to document (1)
information (such as poverty levels) about the applicant's service
area,[Footnote 18] (2) an overall score based on the reviewer's
evaluation, and (3) whether there are any special grant conditions,
such as those due to prior grantee problems, including noncompliance
with LSC regulations. OPP staff also prepare a two-page program
summary that is to document their assessment of the grantee
considering past performance as well as information in the application
related to the following four performance areas:
(1) effectiveness in identifying the most pressing civil legal needs
of low-income people in the service area and targeting resources to
address those needs,
(2) effectiveness in engaging and serving the low-income population
throughout the service area,
(3) effectiveness of legal representation and other program activities
intended to benefit the low-income population in the service area, and:
(4) effectiveness of governance, leadership, and administration.
According to the Vice President for Programs and Compliance, while not
explicitly required to do so by current LSC procedures, LSC officials
also develop and use other data and analyses in addition to these two
summary documents. Specifically, LSC staff prepare other relevant
information and record the information in notebooks, such as the
results of prior site visits. LSC staff use these notebooks to
facilitate discussions with management about prospective grantee
awards. However, the extent to which this other relevant information
influenced award decisions was not documented.
During a part of our review, we were not able to determine the extent
to which the information in any of the notebooks we obtained was used
or how it was considered in the funding decisions. LSC managers held a
series of meetings where funding and award decisions were discussed.
Following these meetings, LSC staff prepared a funding decision chart
that was initialed by the Director of OPP, Vice President for Programs
and Compliance, and the LSC President to document the final funding
decisions. This chart, however, does not document how the managers'
consideration of various elements or relative risks contributed to the
final decisions.
Therefore, this lack of documentation of the factors considered in
making these decisions increases the risks that grantee application
evaluation and funding decisions may not consider all key, relevant
information and makes it difficult to describe the basis for decisions
later.
Grant Application Evaluation Process Lacked Requirements for
Managerial Review:
LSC has no requirement for carrying out and documenting OPP Director
managerial review and approval of competitive grant[Footnote 19]
evaluations or renewals by the OPP primary staff reviewers. According
to the Standards for Internal Control in the Federal Government,
[Footnote 20] control activities, such as conducting and documenting
reviews, are an integral part of an entity's stewardship of government
resources and achieving effective results.
Existing LSC guidance, such as the 2010 Reader Guide, provides that
each application be reviewed against specific elements (derived from
the LSC Performance Criteria and the ABA Standards for the Provision
of Civil Legal Aid). The Guide is used in conjunction with an
automated evaluation form in LSC Grants that reviewers use to record
their assessments of each grant application. However, the guidance
does not provide specific steps to carry out or document management
review of the application evaluation in the LSC grants system.
Consequently, the OPP grant application evaluations we reviewed lacked
any evidence in LSC Grants that the OPP Director had reviewed them.
The OPP Director did not sign any of the evaluation forms we reviewed
in the LSC grants system, a key internal control activity.
Specifically we selected a probability sample of 80 grantees from a
population of 140, which encompassed 57 renewal applications and 23
competitive grant applications. We found that none of the 80 (100
percent)[Footnote 21] grant files contained any documentation
demonstrating that managers had reviewed and approved the OPP staffs'
evaluation of the application.[Footnote 22] This lack of documented
management review impairs LSC's ability to identify gaps or
incompatible data in the applications or evaluations prior to making
the grant award. We found instances where an effective OPP manager's
review should have identified and corrected evaluation errors. For
example, we identified 14 grant applications where the reviewer
incorrectly identified projected expenses for the grant as matching
the projected expenditures in another section of the application.
[Footnote 23]
Full LSC Grants System Capabilities Not Utilized:
LSC Grants is a computer-based application intended to assist LSC in
data collection and review of applications submitted in response to an
LSC Request for Proposal. However, because LSC's Grants system lacked
basic automated controls to ensure integrity over information in the
system related to its grants application evaluation process, the
system's full capabilities were not utilized. The Standards for
Internal Control in the Federal Government[Footnote 24] provide that
entities should have application controls designed to help ensure the
completeness and accuracy of transactions.
Specifically, we found the data in LSC Grants was erroneous and
inconsistent because the system did not have edit checks preventing
the OPP staff reader from entering incomplete or incompatible data.
Lacking complete and reliable grantee applicant evaluation data in LSC
Grants, required LSC management to instead rely on inefficient, manual
compilation and review of grantee application evaluation data in
making decisions about whether to approve and fund a grantee.
Our review found 7 of the 57 (12 percent)[Footnote 25] renewal
grantees' files had input fields that were blank and required
information was not included. Similarly, we found 3 of the 23
competitive grantees (13 percent)[Footnote 26] where essential grantee
evaluation data were not filled out. We also found numerous instances
in both the renewal grantees, 15 out of 57 (26 percent)[Footnote 27]
and competitive grantees, 6 out of 23 (26 percent),[Footnote 28] where
grantees entered data in different parts of the grant application and
the data were inconsistent. In addition, we found one grantee where
the grant was to be funded with restrictions on the length of the
grant term. However, the space where the reason for this restriction
was required was left blank by the OPP staff. According to LSC, the
evaluation process relies on both a qualitative and substantive
analysis of an applicant's proposal narrative to assess its capacity
to provide high quality legal services. OPP staff's judgment inherent
in the substantive evaluation cannot be flagged or assessed by
information validation fields. Nonetheless, LSC acknowledged the
consistency and accuracy of information within the application can be
addressed. LSC management also informed us that it is reviewing the
LSC grants system for improvements.
LSC's external auditor's 2008 report[Footnote 29] identified similar
issues concerning inconsistent documentation of grantee evaluations.
The auditor noted incomplete data in the grants system, used prior to
LSC Grants, for 12 out of 32 grantee evaluations. The auditor
recommended that the Office of Program Performance establish
procedures to ensure that evaluation forms are properly completed
before grant awards are made.
Control Weaknesses Hinder LSC's Ability to Oversee Grantees and Ensure
Compliance:
While LSC recognized the importance of grantee site visits and had
established overall policies and reasonable risk-based criteria to be
used for such visits, it had not yet established detailed procedures
on (1) conducting and documenting site visit selection, (2) timely
completion of site visit reports, and (3) timely resolution of site
visit recommendations and corrective actions.[Footnote 30] Control
weaknesses hampered effective grantee site visits. These control
weaknesses hinder LSC's ability to effectively oversee its grantees'
compliance with LSC regulations and limits its ability to ensure
grantees are visited according to their relative risk levels and that
any compliance issues are identified and resolved in a timely manner.
Risk Assessment Process for Program Visits Not Documented or
Consistently Applied:
We observed good site visit planning techniques and interview
execution in Philadelphia, Pennsylvania, and Indianapolis, Indiana. We
also noted that LSC has an overall goal that provides for grantee site
visits at least once every 3 years; however, LSC did not have
procedures detailing how identified risks factors are to be used in a
risk-based determination of which grantees should receive site visits
by either OPP or OCE personnel. According to the Standards for
Internal Control in the Federal Government,[Footnote 31] management's
internal control assessment should consider identified risks and their
possible effect. By not formally documenting specific procedures on
how risk assessment criteria are to be used in decisions about which
sites to visit, LSC does not have adequate assurance that grantees
with the greatest risk of noncompliance receive priority attention and
oversight.
In a prior GAO report,[Footnote 32] we recommended that LSC develop
and implement an approach for selecting grantees for internal control
and compliance reviews that is founded on risk-based criteria, uses
information and results from oversight and audit activities, and is
consistently applied. Although LSC has identified risk factors to
consider,[Footnote 33] as of April 2010 it did not yet have procedures
for how each risk factor is to be applied or considered when
determining which grantee sites to visit.
OPP officials told us that their program liaisons make recommendations
for visits, which are reviewed by the three OPP regional teams (North,
South and West). Then OPP meets as a group to discuss the teams'
recommendations and make preliminary recommendations for the next
year's visits. The OPP director and deputy director meet with the OPP
regional teams when those recommendations are made and with all of OPP
program staff to make final recommendations. After consultations with
OCE, OPP's recommendations are sent to the Vice President for Program
Performance and Compliance. The deputy director and director approve
the final list when they send it to the Vice President for Program
Performance and Compliance for approval. However, we found no
documentation demonstrating whether regional teams appropriately
applied the risk factors, nor whether risk assessment results were
summarized consistently in making the final recommendations for site
visits.
OCE Site Visit Reports Have Not Been Timely:
As shown in table 1, our review of all OCE site visit reports on
grantee compliance, completed between October 2007 and July 2009,
showed that 15 of 22 exceeded the 120 day goal set for reporting on
grantee compliance. OCE's Procedures Manual provides that OCE's
grantee compliance site visit final reports are to be issued within
120 days of each site visit trip's completion. According to LSC, the
OCE Procedures Manual was updated in April 2008 to establish a time
frame of 120 days for completing site visits. Overall, our analysis
showed that the average length of time required to complete the OCE
site visit reports was about 150 days.
Table 1: Timeliness of OCE Site Visit Reports:
Type of report: Program integrity[A];
Total completed between October 5, 2007 and July 15, 2009: 2;
Number of reports completed > 120 days: 2;
Average calendar days to complete: 183.5;
Number pending: 2;
Longest: 221;
Shortest: 146;
Longest pending as of July 15, 2009: 96.
Type of report: Case reviews[B];
Total completed between October 5, 2007 and July 15, 2009: 12;
Number of reports completed > 120 days: 11;
Average calendar days to complete: 166.7;
Number pending: 4;
Longest: 299;
Shortest: 89;
Longest pending as of July 15, 2009: 264.
Type of report: Follow-up reviews[C];
Total completed between October 5, 2007 and July 15, 2009: 8;
Number of reports completed > 120 days: 2;
Average calendar days to complete: 100.5;
Number pending: 4;
Longest: 266;
Shortest: 18;
Longest pending as of July 15, 2009: 131.
Type of report: Overall;
Total completed between October 5, 2007 and July 15, 2009: 22;
Number of reports completed > 120 days: 15;
Average calendar days to complete: 150.2;
Number pending: 10;
Longest: 299;
Shortest: 18;
Longest pending as of July 15, 2009: 264.
Source: GAO Analysis of LSC data (as of July 15, 2009).
[A] Program integrity reviews, required by LSC regulations in 45
C.F.R. § 1610.8, are performed in order to ensure that grantees
maintain objective integrity and independence from other organizations
that engage in activities restricted by the LSC Act.
[B] Case reviews refer to Case Service Report/Case Management System
reviews (CSR/CMS) which assess and determine compliance by the
grantees with LSC regulations and guidelines, as well as the case
management and CSR reporting compliance of the grantees.
[C] Follow-up reviews (FUR) are conducted when necessary to assess the
extent to which grantees have implemented corrective action measures
or program improvement recommendations.
[End of table]
Delays in formally communicating grantee site visit findings to
grantees can delay grantees' resolution of any internal control
weaknesses (for example, if the grantees did not inquire about
prospective income during client intake)[Footnote 34] and legal
noncompliance issues identified during the site visits. Information on
any continuing or serious internal control or compliance issues can be
critical in making grantee funding decisions. According to LSC, there
are informal means by which LSC informs grantees of preliminary
findings. For example, OCE staff generally provides grantees with
technical assistance in correcting compliance matters during site
visits to facilitate immediate correction. LSC officials further
stated that at the end of the visit staff hold an exit conference to
advise the grantee of the preliminary findings and discuss how to make
the necessary corrections.
The LSC financial statement auditor also reported in 2010 that its
review of OCE site visit reports found that 2009 grantee site visit
reports were not issued on time, based on OCE's 120 day goal.[Footnote
35] For example, the auditor reported that one out of the nine reports
they sampled was issued 289 calendar days after the completion of
fieldwork.
One of the keys to completing timely OCE site visit reports within
prescribed time frames is obtaining timely OLA opinions on LSC
regulations. An LSC Director told us that site visit reports are held
pending receipt of any requests to OLA for a legal opinion related to
a possible noncompliance issue. However, LSC did not have specific
procedures defining expected time frames and for overseeing OCE
receipt of OLA opinions within such time frames. As of January 28,
2010, OLA had issued 47 opinions since January 2004. The average time
elapsed from the date of the request for an OLA opinion and the
issuance of the opinion was approximately 200 days. Of those 47
opinions, over 50 percent (25) took longer than 120 days to issue,
with an average delivery time of approximately 334 days. As of January
28, 2010, two opinions had been outstanding for 721 and 603 days,
respectively[Footnote 36], and two other reports were not complete due
to a pending legal opinion on prospective income, which was issued 465
days after being requested.
LSC Did Not Track Resolution of Site Visit Recommendations for
Improvement:
While our review found indications that cognizant LSC components share
visit reports, LSC did not require and document its process for
tracking and assessing actions in response to site visit
recommendations and corrective actions.[Footnote 37] According to the
Standards for Internal Control in the Federal Government,[Footnote 38]
an entity's internal control activities should include monitoring
control improvement efforts. It further provides that such controls
should assess the quality of performance over time and ensure the
findings of audits and other reviews are promptly resolved. Over time,
the trend of the number and types of findings, recommendations, and
corrective actions, if analyzed and used appropriately, should provide
information that could assist LSC management in determining and
addressing any issues concerning the quality of grantee program
performance and compliance. Consequently, the absence of required
documented procedures for tracking OPP and OCE recommendations and
corrective actions reduces LSC's assurance that site visit results
information is monitored for necessary corrective action and
appropriately shared among cognizant LSC component organizations.
According to an OIG manager and the OPP and OCE Directors, OPP and OCE
share information on site visit recommendations through the LSC
intranet--where site visit reports are posted. Although not required
by LSC procedures, according to an LSC Director, OCE submitted site
visit reports on grantee compliance--including recommendations and
needed corrective actions--to OPP staff responsible for grant awards
and monitoring of grantee program performance. According to LSC's
President, OPP staff are in regular contact with grantee executive
directors and other program management and program engagement visits
are often used as a vehicle for following up on recommendations. The
OCE Director told us that OPP staff provided program quality
information obtained through its review of site visit reports to OCE
for consideration in grantee compliance reviews. Although staff may
share information about site visits, an LSC official who is
responsible for monitoring program performance told us that LSC does
not consider or track whether recommendations are open or closed, but
rather provides the recommendations as possible best practices for
grantees to consider implementing as their programs develop.
Therefore, an LSC Director told us that the site visit report
recommendations are not tracked for remediation purposes or for
trending and analysis by LSC because these recommendations are
considered best practices which may or may not be implemented. The
Vice President for Program Performance and Compliance said that OPP
prioritizes the recommendations included in its reports and only
includes what OPP believes to be the most important recommendations.
By undertaking the effort to make recommendations and prioritizing
them to highlight important areas, but not tracking their completion
and analyzing the results, LSC is missing an opportunity to assess the
extent of progress made and leverage the value of these
recommendations.
Performance Measures Could Be Better Aligned with Core Activities and
Organizational Responsibilities:
LSC performance measures were not aligned with LSC's core activities
nor were they linked to specific offices responsible for making grant
awards and monitoring grantee program performance and grantee
compliance functions. Further, LSC did not have procedures in place to
periodically reassess measures to ensure they are current. According
to GAO's Executive Guide: Effectively Implementing the Government
Performance and Results Act,[Footnote 39] as a best practice, entities
should assess performance to ensure that programs meet intended goals,
assess the efficiency of processes, and promote continuous
improvement. It further provides that performance measures should be
linked directly to organizational components that have responsibility
for making programs work and that routinely revisiting and updating an
entity's performance measures would help ensure they are relevant in
providing feedback about whether the entity is achieving its current
objectives.
Performance measures that are not linked to the responsible office
hinder accountability for program results, including the extent to
which the LSC organizational components contribute toward LSC's
mission and where improvements are needed, and limit transparency and
accountability to LSC's Board on any organizational performance issues.
LSC issued a Strategic Directions plan in 2006 laying out LSC's
performance measures. However, the plan's performance measures did not
account for the full range of LSC's key grant awards and monitoring of
grantee program performance and organizational grantee compliance
responsibilities. For example, LSC's plan did not include metrics to
measure performance in the following core LSC activities related to
its key grant awards or monitor grantee program performance and
grantee compliance with respect to:
* identifying and targeting LSC's own resources to address the most
pressing civil legal needs of low-income individuals in the nation,
and:
* ensuring that grantees use the funding they receive to serve the low-
income population throughout the nation.
In addition, not all measures in LSC's strategic plan were linked to
specific LSC components. For example, LSC did not link scores on
competitive grant evaluations with either OPP's or OCE's performance,
even though these offices have responsibility for grantee program
quality and compliance oversight. In addition, LSC did not link the
performance measure number of technical assistance and training
sessions conducted by LSC to the OPP organization even though OPP has
organizational responsibility for such technical assistance.
Further, we found LSC did not have procedures providing for periodic
reassessment of key metrics to ensure they reflect up-to-date LSC
mission priorities and objectives. According to the Chief
Administrative Officer, LSC has recognized that its existing
performance measures should be revised and periodically reassessed to
ensure they are up-to-date and have begun actions in this regard. For
example, since 2006, management has been developing a performance
measure to obtain current information on "timeliness and degree of
resolution of OCE corrective action notices." LSC reviewed the results
of a number of follow-up visits to confirm grantee resolution of OCE
corrective action notices. The review found that the existing measure
based on using the corrective action notices as an indicator of
timeliness of resolution was insufficient. Instead, it was determined
that without site visit verification of the resolution of original
site visit findings the performance measure could not be reported on.
LSC Management Has Not Consistently Focused on Key Human Capital
Issues:
LSC's employee handbook provides overall policy direction over its
human capital practices. However, we found existing procedures were
flawed in several key respects concerning staffing needs assessments,
evaluating performance, and providing appropriate internal control
training. Specifically, LSC did not (1) systematically assess short-
and long-term workload and staffing needs in relation to the
corporation's strategic goals and objectives, (2) provide required
performance reviews for OPP staff in 3 of the 6 years we reviewed and
for OCE staff in 2 of the 6 years we evaluated, or (3) provide formal
training for current and incoming staff on internal controls.
Standards for Internal Control in the Federal Government[Footnote 40]
provides that all personnel are to possess and maintain a level of
competence enabling them to effectively accomplish their assigned
duties. In addition, Human Capital Principles for Effective Strategic
Workforce Planning[Footnote 41] provides that effective staffing
assessments should provide short-and long-term strategies for
acquiring, developing, and retaining staff to achieve programmatic
goals. Strategic human capital practices are key to ensuring that an
entity (1) has the staff capabilities needed to meet short-and long-
term goals, (2) can effectively address performance problems, and (3)
has staff who are trained in internal controls and related sound
management practices.
Our review found that LSC did not have procedures for assessing
staffing needs. According to the Chief Administrative Officer and
Director of Human Resources, LSC does not use mission priorities to
establish staffing needs. Instead, the Vice President for Programs and
Compliance said OPP and OCE consider workload needs and required
staffing levels when preparing their budgets.
According to the LSC employee handbook, LSC's policy is that employee
performance is to be evaluated annually at the beginning of the
calendar year by the supervisor of record, based on job performance in
the prior year. OPP staff stated that it is through the annual
employee performance evaluation process that training needs are
identified.
However, LSC did not have procedures for ensuring review of employee
performance and training. For calendar years (CY) 2003 and 2005, OPP
and OCE personnel did not receive annual performance evaluations, and
for CY 2008 OPP personnel did not receive performance evaluations. For
2003 and 2005, the Director of OHR stated that LSC did not follow its
employee performance evaluation policy for conducting the required
staff evaluations in 2003 and 2005 because of concerns about the
appraisal process. As a result, LSC's President suspended the
appraisal process for these years. In 2008, according to the OPP
director, OPP personnel did not receive appraisals because of a
concern that evaluations would have to be done by a combination of
people, none of whom had complete responsibility for overseeing the
work throughout the year. Without the employee performance appraisals
for all of its staff, LSC has limited its opportunities to encourage
high performance, identify training needs, and communicate with staff.
Controls over Contract Approval and Budgetary Tracking Were Not Always
Effective:
Although LSC had policies requiring approval and funds availability
determination before issuing contracts for its grant activities and
programs, it had not established specific funds tracking procedures to
ensure that necessary approvals were obtained and funds were available
before awarding contracts.[Footnote 42] Lacking effective contract
approval and fund availability controls, LSC is at increased risk of
improper contract awards and undetected budget shortfalls.
LSC's Administrative Manual's policy requires approvals from OLA, the
Comptroller, and, if the contract is over $10,500, the President,
before contract award. However, our review found that LSC did not
obtain contract approvals by OLA, the Comptroller, and LSC President--
a critical accountability control--for any of the nine contracts over
$10,500 issued in fiscal years 2008 and 2009. Our review of the nine
contracts that exceeded the $10,500 presidential approval threshold
revealed that LSC lacked any documentation showing that the required
Contract Approval Form was completed before the contracts were
awarded. The LSC Chief Administrative Officer (CAO) told us that
verbal approvals were given by the President for five of the
contracts.[Footnote 43] Of the remaining four contracts, one had the
LSC President's approval on the contract itself (but not the contract
approval form), while the remaining three LSC contracts did not have
any evidence of approvals. The LSC Administrative Manual, issued in
February 2005, requires review and approval of all contracts before
award by (1) office directors to ensure that they are within budgetary
limitations; (2) OLA for legal assurance; (3) the Comptroller to
ensure the requirements of the Administrative Manual were followed and
to start a purchase order; and (4) if over $10,500, the LSC President.
In accordance with the LSC Administrative Manual, a Contract Approval
Form, which shows all approvals by designee signature, must be used to
meet documentation requirements and be retained for all contracts
awarded.
Two contracts that did not follow LSC's approval process resulted in
an unplanned budgetary adjustment for fiscal year 2009. Specifically,
we found two Office of Information Technology (OIT) contracts
supporting grants management and administration that were not properly
authorized and for which fund availability was not determined prior to
contract award, which resulted in a LSC budget shortfall of over
$70,000 in fiscal year 2009.[Footnote 44] According to the Director of
OIT, after verbal approval by the LSC CAO, these contracts were
executed by the Director of OIT without taking any action to determine
that sufficient monies were available to fund the contracts, and
without obtaining the required prior approval of OLA, the Comptroller,
and the LSC President. LSC's Comptroller informed the Board of
Directors, President, and Inspector General of OIT's overspending and
asked for and received a $70,000 internal budgetary adjustment on
August 31, 2009, to transfer budgeted funds from LSC's capital
expenditures account to the consulting budget.
Consistent with our findings, the LSC financial statement auditor
reported in its January 2010 Report of Deficiencies in Internal
Control Over Financial Reporting and Other Matters for 2009 that the
Contract Approval Forms were not used as required by the LSC
Administrative Manual, and there was no evidence of approval by OLA.
The auditors recommended in January 2010 that LSC implement procedures
to ensure policies for contract awards are followed.
LSC recently revised its Administrative Manual, effective October 1,
2009, to include a Contract Approval Form, with a provision that the
LSC President approve all contracts over $10,500. Further, the LSC CAO
stated that training was provided for all administrative staff on the
proper procedures to follow for processing contracts. Such training
should help ensure that a Contract Approval Form accompanies all LSC
contracts, and that OLA and the Comptroller both review and document
approval of all contracts and sign off on the Contract Approval Form
before contract execution. However, the training may be of limited
value unless LSC also establishes specific, detailed procedures on the
steps required to ensure that all necessary approvals and fund
availability certification is carried out and documented.
Conclusions:
Effective governance, accountability, and internal control are key to
maintaining public trust and credibility. As such, identifying and
implementing effective internal controls will assist LSC in ensuring
that the federal funds LSC receives are being used efficiently and
effectively.
LSC has taken actions to improve its governance and accountability
practices by implementing or partially implementing all 17 of the
recommendations from our August 2007[Footnote 45] and December 2007
[Footnote 46] reports. Progress continues since our prior testimony in
October 2009 as LSC has implemented two additional recommendations and
continues to take actions on the remaining recommendations. However,
several key recommendations related to LSC's grantee oversight
responsibilities remain to be fully implemented.
The control deficiencies we identified, along with the continuing
nature of several related deficiencies first identified nearly 3 years
ago, are indicative of weaknesses in LSC's overall control
environment. A weak control environment limits LSC's ability to
effectively manage its grant award and grantee performance oversight
responsibilities. As such, it will be important for the LSC President
and Board of Directors to continue to set a "tone at the top"
supportive of establishing and maintaining effective internal control
not only by managers but also by personnel throughout the entity's
program operations. In this regard, LSC would benefit from an
entitywide internal control assessment, including whether the risks
associated with grantee selection are effectively considered, past
recommendations and corrective actions are properly tracked, and
whether effective controls are in place over performance measurement,
performance evaluation, and contract awards. LSC could also strengthen
its overall control environment by providing training to staff
throughout the entity on how internal controls, when functioning as
intended, are integral to the achievement of the entity's mission
objectives.
In the near term, it will be important for LSC leadership to direct
immediate action to address the continuing weaknesses, as well as
those identified in our current review. For the long term, LSC will
need to focus on monitoring the sustained commitment to an effective
overall system of internal controls necessary to achieve a solid basis
for effectively accomplishing its core mission of enabling the
grantees to provide legal services to individuals who otherwise could
not afford such services.
Recommendations for Executive Action:
In order to improve key control processes over grant awards and
monitoring of grantee program performance and grantee compliance, we
recommend the President of LSC, and the Vice President for Programs
and Compliance, take the following 17 actions:
Grant Application Processing and Award:
* Develop and implement procedures to provide a complete record of all
data used, discussions held, and decisions made on grant applications.
* Develop and implement procedures to carry out and document
management's review and approval of the grant evaluation and award
decisions.
* Conduct and document a risk-based assessment of the adequacy of
internal control of the grant evaluation and award and monitoring
process from the point that the Request for Proposal is created
through award, and grantee selection.
* Conduct and document a cost benefit assessment of improving the
effectiveness of application controls in LSC Grants such that the
system's information capabilities could be utilized to a greater
extent in the grantee application evaluation and decision-making
process.
Grantee Oversight Activities:
* Develop and implement procedures to ensure that grantee site visit
selection risk criteria are consistently used and to provide for
summarizing results by grantee.
* Establish and implement procedures to monitor OCE grantee site visit
report completion against the 120 day time frame provided in the OCE
Procedures Manual.
* Execute a study to determine an appropriate standard timeframe for
OLA opinions to be developed and issued. Develop and implement
procedures to monitor completion of OLA opinions related to OCE site
visits against the target time frame for issuing opinions.
* Develop and implement procedures to provide a centralized tracking
system for LSC's recommendations to grantees identified during grantee
site visits and the status of grantees' corrective actions.
Performance Management:
* Develop and implement procedures to link performance measures (1) to
specific offices and their core functions and activities, and (2) to
LSC's strategic goals and objectives.
* Develop and implement procedures for periodically assessing
performance measures to ensure they are up-to-date.
Staffing Needs Assessment:
* Develop and implement procedures to provide for assessing all LSC
component staffing needs in relation to LSC's strategic and strategic
human capital plans.
* Develop and implement a mechanism to ensure that all LSC staff
receive annual performance assessments.
Budget Controls:
* Develop and implement a process to monitor contract approvals to
ensure that all proposed contracts are properly approved before award.
* Develop and implement procedures for contracts at or above
established policy thresholds, to ensure the LSC President provides
written approval in accordance with policy before contract award.
* Develop and implement procedures to ensure budget funds are
available for all contract proposals before contracts are awarded.
Internal Control Environment:
* Develop and implement procedures for providing and periodically
updating training for LSC management and staff on applicable internal
controls necessary to effectively carry out LSC's grant award and
grantee performance oversight responsibilities.
* Establish a mechanism to monitor progress in taking corrective
actions to address recommendations related to improving LSC grants
award, evaluation, and monitoring.
Agency Comments and Our Evaluation:
We provided copies of the draft report to LSC's management for comment
prior to finalizing the report. We received a written comment letter
from LSC's President on behalf of LSC's management (see appendix III).
In its written comments, LSC agreed with our findings and
recommendations and identified specific actions it has taken and plans
to take to implement these recommendations. LSC also provided
technical comments which we considered and incorporated as appropriate.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we will not distribute it until 30 days from
its date. At that time, we will send copies of the report to other
appropriate congressional committees and the president of LSC. This
report will also be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov]. If you have any questions or would
like to discuss this report, please contact me at (202) 512-9095 or by
e-mail at raglands@gao.gov. Major contributors to this report are
listed in appendix IV.
Signed by:
Susan Ragland:
Director:
Financial Management and Assurance:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Our reporting objectives were to determine the extent to which the
Legal Services Corporation (LSC):
* properly implemented key internal controls in awarding grants and
overseeing grantee program performance;
* measured its performance in awarding grants and overseeing[Footnote
47] grantees;
* evaluated staffing needs for grant awards management and grantee
performance oversight; and:
* followed appropriate budget execution processes for awarding
contracts related to grants award and grantee performance and
oversight.
To address the first two objectives, we interviewed current members of
LSC's management and staff, staff in LSC's Office of Inspector General
(OIG), and the audit firm employed by the OIG to obtain information on
the functions and processes of LSC's grant awards and monitoring of
grantee program performance and grantee compliance. We also reviewed
LSC documentation on internal control activities related to the
awarding of grants and oversight of grantee programs, including policy
manuals, audit reports, and management reports.
In addition, we selected a probability sample of 80 out of 140
grantees and reviewed related grant applications and application
evaluations (for the 2009 funding year), and compared evaluation
results with instructions in LSC Grants, a computer-based grants
application system. Results based on probability samples are subject
to sampling error. The sample we drew for our review is only one of a
large number of samples we might have drawn. Because different samples
could have provided different estimates, we express our confidence in
the precision of our particular sample results as a 95 percent
confidence interval. This is the interval that would contain the
actual population values for 95 percent of the samples we could have
drawn. All survey estimates in this report are presented along with
their margins of error.
We analyzed the document setting out LSC-wide and component-specific
goals and performance measures and compared this to federal guidance
on performance measurement. We also observed LSC site visits at two
grantees in Philadelphia and Indianapolis. To obtain information on
LSC controls for assessing staffing needs for its grants functions, we
interviewed LSC management and reviewed policies and procedures for
evaluating staffing needs, training, and professional development, and
reviewed relevant literature. We compared LSC's staffing needs
assessment processes to federal best practices in workforce planning
principles.[Footnote 48] To obtain information on controls over
contract approval and budget execution, we reviewed LSC's
administrative policy and procedure manual and consolidated operating
budget guidance, documented budget execution requirements, and tested
contracts for proper approval. For each of our objectives, we compared
the information obtained with federal best practices in internal
control in GAO's Standards for Internal Control in the Federal
Government.[Footnote 49] We conducted our work in Washington, D.C.;
Indianapolis, Indiana; and Philadelphia, Pennsylvania, from March 2009
to May 2010 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient appropriate evidence to provide a reasonable
basis for our findings and conclusions. We believe the evidence
obtained provided a reasonable basis for our audit findings and
conclusions.
[End of section]
Appendix II: Prior GAO Reports Recommendation Status:
Our August 2007[Footnote 50] report recommendations to improve and
modernize the governance processes and structure of LSC, along with
our views on the status of LSC's efforts to implement these
recommendations (as of March 2010), are summarized in table 2. LSC
data, which we obtained and analyzed as part of our follow-up work
conducted between May 2009 and March 2010, showed that the board had
fully implemented five of the eight recommendations, and had taken
some action on the remaining three recommendations.
Table 2: Status of August 2007 GAO Report Recommendations on
Governance Practices to LSC Board of Directors:
Recommendation: Establish an audit committee function to provide
oversight to LSC's financial reporting and audit processes, either
through creating separate audit committee or by rewriting the charter
of the board's finance committee;
Status: Implemented.
Recommendation: Establish charters for the Board of Directors and all
existing committees and any newly developed committees to clearly
establish committees' purposes, duties, and responsibilities;
Status: Implemented.
Recommendation: Establish a shorter time frame (e.g., 60 days) for
issuing LSC's audited financial statements;
Status: Implemented.
Recommendation: Establish and implement a comprehensive orientation
program for new board members to include key topics such as fiduciary
duties, tax law requirements, and interpretation of the financial
statements;
Status: Partially implemented[A].
Recommendation: Develop a plan for providing a regular training
program for board members that includes providing updates or changes
in LSC's operating environment and relevant governance and
accountability practices;
Status: Implemented.
Recommendation: Establish a compensation committee function to oversee
compensation matters involving LSC officers and overall compensation
structure either through creating a separate compensation committee or
by rewriting the charter of the board's annual performance review
committee;
Status: Implemented.
Recommendation: Implement a periodic self-assessment of the board's,
the committees', and each individual member's performance for purposes
of evaluating whether improvements can be made to the board's
structure and processes;
Status: Partially implemented.
Recommendation: Develop and implement procedures to periodically
evaluate key management processes, including, at a minimum, processes
for risk assessment and mitigation, internal control, and financial
reporting;
Status: Partially implemented.
Source: GAO analysis of LSC data.
[A] LSC has established a policy and materials for a comprehensive
orientation; however, we need to evaluate whether the implementation
of the orientation program is operating as intended.
[End of table]
Our August 2007 report recommendations to improve and modernize key
management processes at LSC, along with the status of LSC's efforts to
implement those recommendations (as of March 2010), are summarized in
table 3.
Table 3: Status of August 2007 GAO Report Recommendations on
Management Practices to LSC Management:
Recommendation: Conduct and document a risk assessment and implement a
corresponding risk management program that is part of a comprehensive
evaluation of internal control;
Status: Implemented.
Recommendation: With the board's oversight, evaluate and document
relevant requirements of the Sarbanes-Oxley Act of 2002 and practices
of the New York Stock Exchange and American Bar Association that are
used to establish a comprehensive code of conduct, including ethics
and conflict-of-interest policies and procedures for employees and
officers of the corporation;
Status: Implemented.
Recommendation: Establish a comprehensive and effective continuity of
operations plan (COOP) program, including conducting a simulation to
test the established program;
Status: Implemented.
Recommendation: Conduct an evaluation to determine whether standards
issued by the Government Accounting Standards Board (GASB) should be
adopted as a financial reporting standard for LSC's annual financial
statements;
Status: Implemented.
Source: GAO analysis of LSC data.
[End of table]
Our December 2007[Footnote 51] report recommendations to improve LSC's
internal control and oversight of grantees, along with our views on
the status of LSC's efforts to implement those recommendations (as of
March 2010), are summarized in table 4.
Table 4: Status of December 2007 GAO Report Recommendations on Grants
Management to LSC Management and Board:
Recommendation: Develop and implement policies and procedures for
information sharing among the OIG, OCE, and OPP and coordination of
OCE and OPP site visits;
To: Management;
Status: Implemented.
Recommendation: Perform follow up on each of the improper or
potentially improper uses of grant funds that GAO identified in the
LSC Improved Internal Controls Needed in Grants Management and
Oversight report (GAO-08-37);
To: Management;
Status: Implemented.
Recommendation: Implement an approach for selecting grantees for
internal control and compliance reviews that is founded on risk-based
criteria, uses information and results from oversight and audit
activities, and is consistently applied;
To: Management;
Status: Partially implemented.
Recommendation: Implement procedures to improve the effectiveness of
the current LSC fiscal compliance reviews by revising LSC current
guidelines to provide:
* a direct link to the results of OPP reviews and OIG and Independent
Public Accountant (IPA) audit findings;
* guidance for performing follow-up on responses from grantee
interviews, and;
* examples of fiscal and internal control review procedures that may
be appropriate based on individual risk factors and circumstances at
grantees;
To: Management;
Status: Partially implemented.
Recommendation: Develop and implement policies that clearly delineate
organizational roles and responsibilities for grantee oversight and
monitoring, including grantee internal controls and compliance;
To: Board;
Status: Partially implemented.
Source: GAO analysis based on LSC data.
[End of table]
[End of section]
Appendix III: Comments from Legal Services Corporation:
Legal Services Corporation:
America's Partner For Equal Justice:
3333 K Street, NW, 3rd Floor:
Washington, DC 20007-3522:
Phone 202.295.1500:
Fax 202.337.6797:
[hyperlink, http://www.lsc.gov]
President: Victor M. Fortuno:
Board of Directors:
John G. Levi, Chicago, IL, Chairman:
Martha Minow, Cambridge, MA, Vice Chair:
Sharon L. Browne, Sacramento, CA:
Jonann C. Chiles, Little Rock, AR:
Thomas A. Fuentes, Lake Forest, CA:
Robert J. Grey, Jr., Richmond, VA:
Charles N. W. Keckler, Arlington, VA:
Victor B. Maddox, Louisville, KY:
Thomas R. Meites, Chicago, IL:
Laurie Mikva, Evanston, IL:
Hon. Sarah M. Singleton, Santa Fe, NM:
May 28, 2010:
Susan Ragland, Director:
Financial Management and Assurance:
U.S. Government Accountability Office:
411 G Street, N.W.
Washington, D.C. 20542:
Dear Ms. Ragland:
Thank you for giving the Legal Services Corporation ("LSC" or
"Corporation") the opportunity to respond to the GAO Draft Report
entitled Improvements Needed in Controls Over Grant Awards and Grant
Program Effectiveness, GA0-10-540. Previous GAO reports have led to
improvements at LSC and we are confident that will be the case once
again We offer the following comments in response to the 17
recommendations in the Draft Report.
As noted in the Draft Report, LSC operates as an independent 501(c)(3)
nonprofit corporation that is funded by Congress. The Corporation
distributes those annual appropriations to 136 independent nonprofit
legal services programs across the nation and they provide civil legal
assistance and information to low-income Americans who qualify for
assistance. These local legal services providers are critical to the
well-being of the nation, especially as demand for legal services
increases during economic downturns. Currently, 54 million Americans —
one-sixth of the population — qualify for LSC-funded civil legal
assistance.
Congress has directed by law that grants from LSC's basic field line be
allocated to provide "an equal figure per individual in poverty for
all geographic areas, as determined on the basis of the most recent
decennial census."[Footnote 52] The private nonprofit legal services
programs funded by LSC operate independently from LSC and are governed
by local boards of directors that set priorities for addressing the
urgent civil legal needs of their communities. The Corporation's staff
provides oversight over these LSC grantees, conducting compliance
reviews to ensure appropriations are spent in accordance with law and
regulation, and offers advice on how to improve performance and
quality representation. The LSC Office of Inspector General oversees
the annual financial statement audits of the grantees, conducts
independent and objective performance and financial audits of LSC's
programs and functions, and conducts investigations into possible
fraud, waste, abuse, and noncompliance.
With this background, LSC management's comments in response to the 17
recommendations of the Draft Report are as follows.
Recommendation — Grant Application Processing and Award:
1. Develop and implement procedures to provide a complete record of
all data used, discussions held, and decisions made on grant
applications.
Response: LSC accepts this recommendation and will designate
additional fields in LSC Grants as "required" fields to further ensure
complete and consistent application reviews; document in LSC Grants
the data and reports that reviewers use in the application evaluation
and funding recommendation process, and document OPP management's
funding recommendations in LSC Grants.
2. Develop and implement procedures to carry out and document
management's review and approval of the grant evaluation and award
decisions.
Response: LSC accepts this recommendation. LSC will document the
results of the LSC Vice President for Programs and Compliance funding
recommendations, as well as the President's review of those
recommendations and resulting decisions.
3. Conduct and document a risk-based assessment of the adequacy of
internal control of the grant evaluation and award and monitoring
process from the point that the request for proposal is created to
award, and grantee selection.
Response: LSC accepts this recommendation. The Corporation implemented
its system of competitive grant awards in April 1996 and since then
has made major improvements to the process, including, in 2009, the
implementation of LSC Grants, an online grants system.
Because 95 percent of LSC's annual appropriation is awarded through
LSC Grants, LSC agrees that it is appropriate to undertake an internal
control assessment, consistent with those provisions of the Standards
for Internal Control in the Federal Government applicable to LSC. To
ensure the most comprehensive review, LSC will engage an outside
expert to develop and perform a full evaluation and assessment of the
competitive grants process. This will include conducting a risk-based
assessment of the internal control of the grant evaluation, award, and
monitoring process; recommendations of additional internal control
options; recommendations of options for maximizing information
reporting capabilities; and a report on internal controls and options
implemented.
4. Conduct and document a cost benefit assessment of improving the
effectiveness of application controls in LSC Grants such that the
system's data information capabilities could be utilized to a greater
extent in the grantee application evaluation and decision-making
process.
Response: LSC agrees with the goal of improving the effectiveness of
application controls in LSC Grants. Many additional application
controls were instituted in Fall 2009, and others are planned for
Spring 2010. LSC will conduct annual reviews of the performance of LSC
Grants and incorporate any needed improvements. The Corporation has
already determined that these application controls are desirable
additions to the grants process. These ongoing improvements are
already in progress and will continue. LSC submits that we have
already implemented this recommendation.
Recommendation — Grantee Oversight Activities:
5. Develop and implement procedures to ensure grantee site visit
selection risk criteria are consistently used and to provide for
summarizing results by grantee.
Response: LSC accepts this recommendation. We note that both the OCE
and OPP Office Procedures Manuals outline the various risk factors
that are considered in selecting grantees for on-site reviews. The
application of those risk factors has now been formalized and will be
included in the next revision of the manuals. Consideration of risk
factors will be documented for each grantee on an annual basis.
6. Establish and implement procedures to monitor OCE grantee site
visit report completion against a reasonable time frame (as such 120
days in accord with the OCE Procedures Manual goal).
Response: LSC accepts this recommendation. While we note that an
internal system is already used by OCE to monitor report due dates and
completion, a more formal system for tracking and reporting the status
of each report is being developed pursuant to a recent request from
LSC's Board of Directors.
Depending on the reporting format established in response to the Board
of Directors' request, additional or modified tracking methods may be
developed and implemented. Additionally, to address several issues
related to report timeframes, OCE proposes to develop and implement a
new timeline for report writing.
7. Execute a study to determine an appropriate standard timeframe for
OLA opinions to be developed and issued. Develop and implement
procedures to monitor completion of OLA opinions related to OCE site
visits against the target timeframe for issuing opinions.
Response: LSC accepts this recommendation. The Office of Legal Affairs
("OLA") has been developing and will shortly be implementing a new
Opinions Protocol which will set forth the procedures and processes to
be followed in the development and issuance of both Advisory and
Internal Opinions. (Advisory Opinions provide interpretive guidance to
staff, grantees and the public on the application of the LSC statutes
and regulations, while Internal Opinions provide traditional formal
legal advice to the Corporation's management.) As part of this effort,
OLA will be implementing appropriate timeframes for response to
requests for opinions.
8. Develop and implement procedures to provide a centralized tracking
system for LSC's recommendations to grantee identified during grantee
site visits and the status of grantees' corrective actions.
Response: LSC accepts the goal of this recommendation and will work
with the GAO on how best to address the objective.
Recommendation — Performance Management:
9. Develop and implement procedures to link performance measures (1)
to specific offices and their core functions and activities and (2) to
LSC 's strategic goals and objectives.
Response: LSC accepts this recommendation. As stated in LSC Strategic
Directions 2006-2010, LSC's current measures are linked to LSC's
strategic goals. Beginning on page 15 of the Strategic Directions
document, the performance measures are grouped under the specific goal
for which they are intended as a measure of progress. LSC recognizes
that its performance measures need improvement and has been working to
develop better measures and better data. The new LSC Board of
Directors will be developing a new strategic plan for the Corporation,
and it is fully expected that the new plan will link performance
measures to LSC's strategic goals and objectives. However, as
strategic plans and their related performance measures are not
intended to state and measure the routine activities of each office,
the revised LSC strategic plan may not include measures for each
function and activity of each individual office.
10. Develop and implement procedures for periodically assessing
performance measures to ensure they are up-to-date.
Response: LSC accepts this recommendation and will include provisions
for periodically assessing performance measures in the new strategic
plan.
Recommendation — Staffing Needs Assessment:
11 Develop and implement procedures to provide for assessing all LSC
component staffing needs in relation to LSC's strategic and strategic
human capital plans.
Response: LSC accepts this recommendation and will develop and
implement procedures for assessing staffing needs in advance of the
budget planning process for the FY 2012 appropriations request.
12. Develop and implement a mechanism to ensure that all LSC staff
receive annual performance assessments.
Response: LSC accepts this recommendation.
Recommendation — Budget Controls:
13. Develop and implement a process to monitor contract approvals to
ensure that all proposed contracts are properly approved before award.
Response: The issue was noted in LSC's annual financial audit
delivered in January of 2009 and in an Office of Inspector General
audit report in July 2009, and LSC implemented new Administrative
Manual procedures in October 2009 to better monitor contract approvals
and ensure that funds are available and all contracts receive
appropriate approvals prior to issuance. This policy and practice was
in place prior to GAO's completing their fieldwork for this report,
and a review of LSC's practices since October 1, 2009 will show that
the procedures are being followed and all contracts are now being
properly approved. LSC submits that we have already implemented this
recommendation.
14. Develop and implement procedures for contracts at or above
established policy thresholds, to ensure the LSC President provides
written approval in accordance with policy before contact award.
Response: This issue is the same as in recommendation number 13 above.
See response to item number 13.
15. Develop and implement procedures to ensure budget funds are
available for all contract proposals before contracts are awarded.
Response: This issue is the same as in recommendation number 13 above.
See response to item number 13.
Recommendation — Internal Control Environment:
16. Develop and implement procedures for providing and periodically
updating training for LSC management and staff on applicable internal
controls necessary to effectively carry out LSC's grant award and
grantee performance oversight responsibilities.
Response: LSC accepts this recommendation. LSC's oversight offices —
OPP, OCE and Office of Information Management (01M) — currently
participate in quarterly joint staff meetings for the purposes of
training and oversight updates. Management will annually review staff
needs for specific training and provide such training to ensure
ongoing staff development in understanding applicable internal
controls, consistent with oversight responsibilities.
17. Establish a mechanism to monitor progress in taking corrective
actions to address recommendations related to improving LSC grants
award, evaluation, and monitoring.
Response: LSC accepts this recommendation and will establish a formal
process to monitor and track actions taken by LSC in response to
recommendations from the LSC Office of Inspector General and GAO. This
written procedure will include the person/office responsible for
maintaining the tracking system and include quarterly reporting on the
status of any remediation efforts to the Board of Directors.
Again, the Legal Services Corporation appreciates the opportunity to
comment on the Draft Report prior to its publication. Please feel free
to contact me if you have any questions.
Sincerely yours,
Signed by:
Victor M. Fortuno:
President:
cc:
LSC Board of Directors:
LSC Inspector General:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Susan Ragland, (202) 512-9095 or raglands@gao.gov:
Acknowledgments:
In addition to the contact named above, Kimberley A. McGatlin,
Assistant Director; Lisa Crye; Patrick Frey; Cole Haase; Bernice M.
Lemaire; Mitch Owings; Melanie Swift; and Carrie Wehrly made key
contributions to this report. F. Abe Dymond, Lauren S. Fassler, and
Justin Fisher provided technical assistance.
[End of section]
Footnotes:
[1] In fiscal year 2010, LSC's annual appropriation was $420 million,
an increase of about 7.7 percent over its fiscal year 2009
appropriation. See Commerce, Justice, Science, and Related Agencies
Appropriations Act, 2010, Pub. L. No. 111-117, div. B, 123 Stat. 3034,
3113, 3148 (Dec. 16, 2009).
[2] As used in this report, the term grant encompasses all of the
agreements LSC uses to distribute federal funding to providers of
civil legal assistance to low-income persons, and the term grantee
refers to those who enter into such agreements. LSC sometimes uses
contracts to distribute financial assistance. See LSC Act, 42 U.S.C.
§§ 2996a(6), 2996e(a)(1)(A).
[3] See Legal Services Corporation Act of 1974, Pub. L. No. 93-355, 88
Stat. 378 (July 25, 1974), codified, as amended, at 42 U.S.C. §§
2996 - 2996l (LSC Act), and implementing regulations, codified, as
amended, at 45 C.F.R. chapter 16.
[4] GAO, Legal Services Corporation: Governance and Accountability
Practices Need to Be Modernized and Strengthened, [hyperlink,
http://www.gao.gov/products/GAO-07-993] (Washington, D.C.: Aug. 15,
2007); and Legal Services Corporation: Improved Internal Controls
Needed in Grants Management and Oversight, [hyperlink,
http://www.gao.gov/products/GAO-08-37] (Washington, D.C.: Dec. 28,
2007).
[5] The recommendations status presented in our prior testimony, Legal
Services Corporation: Some Progress Made in Addressing Governance and
Accountability Weaknesses, but Challenges Remain, [hyperlink,
http://www.gao.gov/products/GAO-10-194T] (Washington, D.C.: Oct. 27,
2009), has been updated as of April 2010.
[6] [hyperlink, http://www.gao.gov/products/GAO-08-37].
[7] LSC, Office of Inspector General, Response to LSC Management
Referral of Grantee Program Issues Identified in the GAO Draft Report
(Washington, D.C.: Mar. 31, 2009).
[8] Overseeing grantees, as used in this report, refers to activities
such as monitoring grantee program performance and grantee compliance.
[9] GAO, Human Capital: Key Principles for Effective Strategic
Workforce Planning, [hyperlink, http://www.gao.gov/products/GAO-04-39]
(Washington, D.C.: Dec. 11, 2003).
[10] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington, D.C.: Nov. 1999). Because LSC is not a federal agency, it
is not required to follow these standards; however, adopting these
standards would help LSC implement a strong internal control
environment and effective control activities and monitoring in order
to ensure that LSC achieves its objectives and accomplishes its
mission.
[11] These responsibilities are referred to as grant awards and
monitoring of program performance in this report.
[12] These responsibilities are referred to as grantee compliance
throughout this report.
[13] According to the OCE Procedures Manual, the Grantee Audit Follow-
Up process establishes a system for LSC to ensure that (1) findings
and recommendations, which relate to grantee operations and are
addressed to grantee management, are effectively resolved, and (2)
corrective action is completed and reported in a timely manner. This
is accomplished under the authority of the LSC Act; Inspector General
Act of 1978, as amended; and administrative provisions that have been
included in LSC's annual appropriations since fiscal year 1996.
[14] A case is defined as the provision of permissible legal
assistance to an eligible client who has a legal problem, or set of
closely related legal problems, and is accepted by a grantee for
assistance in accordance with the requirements of the LSC Act,
regulations, and other applicable law.
[15] During the course of a grant, LSC can question, disallow, and
recover the costs of an activity that violated regulations or laws,
pursuant to the process set forth in LSC's implementing regulations on
cost standards and procedures, which are codified at 45 C.F.R. part
1630.
[16] In addition, LSC grantees may directly contact OLA for advisory
opinions or for legal information on the application of LSC laws and
regulatory authorities. OLA internal opinions are often on topics that
could be or are subject to litigation. OLA's external opinions provide
the public with interpretations of LSC's requirements that apply to
LSC grantees. External opinions may be requested by a grantee or LSC
office as the result of a site visit where interpretation of an LSC
regulation is required. At any time, LSC management or the General
Counsel (GC) may determine that an opinion is not warranted or
appropriate.
[17] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[18] A service area is the geographical area that is to be serviced by
the grantee.
[19] Beginning in 1996, the administrative provisions included each
year in the acts making appropriations to LSC have required that
grants be awarded through a system of competition and that LSC
management issue regulations to implement this requirement. See
Department of State and Related Agencies Appropriations Act, 1996,
Pub. L. No. 104-134, tit. IV, § 503, 110 Stat. 1321, 1321-52 (Apr. 26,
1996); see also implementing regulations in 45 C.F.R. part 1634.
[20] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[21] The 95 percent confidence interval is between 97 percent and 100
percent.
[22] Although nine of the competitive grants application evaluations
in our sample contained a manager's name in the grant application
management review and sign off space, LSC's Director of OPP stated
this information had been entered in error and not by a manager.
[23] We also found two instances where the initial application
evaluation incorrectly identified the projected expenses in one
section of the application as not matching the projected expenses in
another section, when in fact they did match.
[24] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[25] The 95 percent confidence interval for this estimate is from 7
percent to 21 percent.
[26] The 95 percent confidence interval for this estimate is from 7
percent to 28 percent.
[27] The 95 percent confidence interval for this estimate is from 19
percent to 36 percent.
[28] The 95 percent confidence interval for this estimate is from 14
percent to 44 percent.
[29] WilthumSmith and Brown, Letter of Deficiencies LSC Corporation,
(Silver Spring, MD: Jan. 6, 2009).
[30] OCE corrective actions are based on regulatory and statutory
compliance requirements. These actions are to be addressed by the
grantee and enforced by LSC. OCE recommendations are suggested
effective practices, but they are not required by regulatory or
statutory authorities. These recommendations are not enforced by LSC
and the grantee is not required to take any actions with respect to
these items. They represent suggestions or actions that in OCE staff
experience, could help the grantee with topics addressed in the report
or address potential issues to avoid future compliance errors. OPP
recommendations are effective practices and based on the guidelines of
the LSC Performance Criteria and the American Bar Association
Standards. These recommendations are intended to support the high
quality delivery of legal services and are not generally based on
regulatory or statutory requirements.
[31] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[32] [hyperlink, http://www.gao.gov/products/GAO-08-37] p. 21.
[33] Risk factors include: date of last visit by OCE/OPP; significant
program or compliance issues; complaints filed or pending against the
program; results of financial statements reviews; issues identified by
OIG, including audit follow-up referral information provided to OCE or
other information from the OIG that is referred to management for
follow-up; issues identified by OCE/OPP as part of OPP's competitive
grant evaluation process; issues identified by OCE/OPP as part of the
grantee's required reporting to LSC; issues identified through
grantees' contacts with LSC personnel; and issues which have been
identified by other entities that make funds available, such as the
Department of Veterans Affairs.
[34] The LSC Act requires LSC to establish guidelines to insure that
its grantees determine client financial eligibility based on the
client's income, liquid assets, and other factors related to the
client's financial inability to afford legal assistance. 42 U.S.C. §
2996f(a)(2)(B). In implementing regulations, LSC requires its grantees
to adopt simple client intake forms and procedures to determine an
applicant's financial eligibility based on a "reasonable inquiry
regarding sources of the applicant's income, income prospects and
assets." 45 C.F.R. § 1611.7. By not asking an applicant about his or
her prospective income during client intake, a grantee increases its
risk of providing legal assistance to an ineligible client.
[35] Thompson, Cobb, Bazilio and Associates, PC, Letter of
Deficiencies LSC Corporation, (Washington, D.C.: Jan. 13, 2010).
[36] The delays were primarily due to OLA staff workload, lengthy
periods of discussion at the request of LSC's executive team as
directed by the Opinions Protocol of 2005, and management directives
to temporarily cease work on Private Attorney Involvement (PAI)
allocation (pending work of the LSC PAI Advisory Committee, a working
group consisting of OPP and OCE staff).
[37] OPP site reviews result in findings and recommendations, and OCE
site reviews result in recommendations and corrective actions, which
together are intended to improve grantee program quality and to bring
the grantee into compliance.
[38] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[39] GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, [hyperlink,
http://www.gao.gov/products/GAO/GGD-96-118] (Washington, D.C.: June
1996).
[40] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[41] GAO, Human Capital Key Principles for Effective Strategic
Workforce Planning, [hyperlink, http://www.gao.gov/products/GAO-04-39]
(Washington, D.C.: Dec. 11, 2003).
[42] According to the LSC Administrative Manual (February 2005), the
LSC Vice Presidents, CAO, and office directors are responsible for
ensuring that expenditures for procurement of goods and contracts for
services are within their budgetary limitations and each office should
maintain a log or open file of purchase orders that are prepared for
their respective offices.
[43] All five of these contracts were with different hotels at which
employees stayed for board meetings or the annual LSC conference.
[44] The two contracts dealt with updating the LSC Grants system and
updating information security software that helps safeguard network IT
functions at LSC.
[45] [hyperlink, http://www.gao.gov/products/GAO-07-993].
[46] [hyperlink, http://www.gao.gov/products/GAO-08-37].
[47] Overseeing grantees refers to activities such as monitoring
grantee program performance and grantee compliance.
[48] GAO, Human Capital: Key Principles for Effective Strategic
Workforce Planning, [hyperlink, http://www.gao.gov/products/GAO-04-39]
(Washington, D.C.: Dec. 11, 2003).
[49] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington, D.C.: November 1999). Because LSC is not a federal
agency, it is not required to follow these standards; however,
adopting these standards would help LSC implement a strong internal
control environment and effective control activities and monitoring in
order to ensure that LSC achieves its objectives and accomplishes its
mission.
[50] GAO, Legal Services Corporation: Governance and Accountability
Practices Need to Be Modernized and Strengthened, [hyperlink,
http://www.gao.gov/products/GAO-07-993] (Washington, D.C.: Aug. 15,
2007).
[51] GAO, Legal Services Corporation: Improved Internal Controls
Needed in Grants Management and Oversight, [hyperlink,
http://www.gao.gov/products/GAO-08-37] (Washington, D.C.: Dec. 28,
2007).
[52] Public Law 104-134, 110 Stat. 1321, (1996); carried forward in
subsequent appropriations including LSC's current appropriations, Pub.
L. 111-117, 123 Stat. 3035 (2009).
[End of section]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Phone:
The price of each GAO publication reflects GAO’s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO’s Web site,
[hyperlink, http://www.gao.gov/ordering.htm].
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548: