Federal Agency: Legal Services Corporation (LSC) Federal Program Name: LSC Grants Assistance Listing Number: 09.706060 Federal Award Identification Number and Year: 09.706060 - 2025 Award Period: January 1, 2025 – December 31, 2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: Federal regulations (45 CFR 1630.6(b)) specify that without LSC’s prior written approval, a recipient may not expend $25,000 or more of LSC funds on any of the following: (i) A single purchase or single lease of person property; (ii) A single contract for services; (iii) A single combined purchase or lease of personal property and contract for services; and (iv) Capital improvements. Condition: During our testing, we noted that the Organization expended $31,214 related to a single contract for $111,384 in the year under audit and it could not provide evidence that it obtained prior written approval from LSC for such costs. Questioned Costs: None. Context: This instance was noted during testing of four single contracts where the Organization expended more than $25,000. Cause: The Organization does not have a control process in place to ensure that it obtains prior written approval from LSC for all of its costs that require such an approval. Effect: The Organization may not be in compliance with federal regulations related to the expenditure of LSC funds. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization implement a control process to ensure that it obtains LSC prior written approval where required in accordance with 45 CFR 1630.6(b). Views of responsible officials: With respect to the recommended control process, CLS has an established procedure incorporated within its accounting manual. The organization will reinforce and ensure consistent application of this procedure throughout 2026.
Federal Agency: Legal Services Corporation (LSC) Federal Program Name: LSC Grants Assistance Listing Number: 09.706060 Federal Award Identification Number and Year: 09.706060 - 2025 Award Period: January 1, 2025 – December 31, 2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: Federal regulations (45 CFR 1620.6) specify that all staff who handle cases or matters, or are authorized to make decisions about case acceptance, must sign a simple agreement developed by the recipient which indicates that the signatory: a) Has read and is familiar with the priorities of the recipient; b) Has read and is familiar with the definition of an emergency situation and the procedures for dealing with an emergency that have been adopted by the recipient; and c) Will not undertake any case or matter for the recipient that is not a priority or an emergency. Condition: During our testing, we noted one instance where the Organization was not able to provide evidence of a signed simple agreement for a staff member who handle cases or matters, or is authorized to make decisions about case acceptance. Questioned Costs: None. Context: This instance was noted during testing of sixteen signed simple agreements for staff members who handle cases or matters, or are authorized to make decisions about case acceptance. Cause: The Organization does not have a control process in place to ensure that the required signed simple agreements are obtained for all staff members who handle cases or matters or are authorized to make decisions about case acceptance. Effect: The Organization may not be in compliance with federal regulations related to the required signed written simple agreements for all staff members who handle cases or matters or are authorized to make decisions about case acceptance. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization implement a control process to ensure that it obtains signed written simple agreements for all staff members who handle cases or matters or are authorized to make decisions about case acceptance where required in accordance with 45 CFR 1620.6. Views of responsible officials: CLS implemented an onboarding process in 2025 through its HR system, BambooHR, which includes verification of this and other required elements. While this process has been applied to new hires, CLS will extend and enforce the verification of these requirements for employees who joined the organization prior to 2025. CLS believes that this matter would be more appropriately communicated in the management letter rather than presented as part of the overall audit report. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations reference above specify that signed written simple agreements must be obtained all staff members who handle cases or matters, or is authorized to make decisions about case acceptance.
Federal Agency: Legal Services Corporation (LSC) Federal Program Name: LSC Grants Assistance Listing Number: 09.706060 Federal Award Identification Number and Year: 09.706060 - 2025 Award Period: January 1, 2025 – December 31, 2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: Federal regulations (45 CFR 1624.5(c)) specify that a legal services program shall, to the maximum extent feasible, ensure that new facilities that it rents or purchases are accessible to persons with disabilities. Prior to entering into any lease or contract for the purchase of a building, a legal services program shall submit a statement to LSC certifying that the facilities covered by the lease or contract will be accessible to persons with disabilities, or if the facilities will not be accessible, a detailed description of the efforts the program made to obtain accessible space, the reasons why the inaccessible facility was nevertheless selected, and the specific steps that will be taken by the legal services program to ensure that its services are accessible to persons with disabilities who would otherwise use that facility. Condition: During our testing, we noted that the Organization entered into a lease for new office facilities in downtown Denver and moved into the new space but did not submit a statement to LSC certifying that the facilities covered by the lease or contract will be accessible to persons with disabilities. Questioned Costs: None Context: This instance was noting during testing of seventeen reports required to be submitted to LSC during the period under audit. Cause: The Organization does not have a control process in place to ensure that it meets its reporting requirements during the grant period. Effect: The Organization may not be in compliance with its reporting requirements under federal regulations. Repeat Finding: The finding is not a repeat of a finding. Recommendation: We recommend that the Organization implement a control process to ensure that it complies with its reporting requirements during the grant period. Views of responsible officials: CLS believes that this matter would be more appropriately communicated in the management letter rather than presented as part of the overall audit report. CLS will extend and enforce the verification of these requirements. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations reference above specify that the report above must be submitted to the LSC.
Federal Agency: Legal Services Corporation (LSC) U.S. Department of Health and Human Services Federal Program Name: LSC Grants Aging Cluster - Special Programs for the Aging, Title III, Part B Assistance Listing Number: 09.706060 93.044 Federal Award Identification Number and Year: 09-706060 - 2025 Various – Aging Cluster Pass-Through Agency: Various – Aging Cluster, see SEFA Pass-Through Numbers: Various – Aging Cluster, see SEFA Award Period: Various – see SEFA Type of Finding: • Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), indicate that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Federal regulations (45 CFR 1630.5 and 2 CFR 200.403) indicate that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities. It also states that costs must be adequately documented. The LSC financial guide also articulates that a cost allocation base must be cost-driven and that budgeted numbers or percentage of revenue are not allowable allocation bases. Condition: During our testing we noted: • LSC Payroll Transactions: Fourteen instances of errors totaling a net under allocation amount of $2,657. The under allocation was due to various over allocations of costs to other grants that were not based on employees’ time charged to the respective other grants in their timesheets. We also noted that the Organization allocated costs from the general fund (which consists of two unrestricted grants and the LSC grants) to LSC grants using allocation bases of percentage of revenue and projected revenue of the grants that make up the general fund. However, as revenue was recognized as expenses were incurred for the general fund, the allocations based on revenue approximated an allocation method based on a cost driver. • LSC Native American Grant Payroll Transactions: Three instances where a total of $4,383 was charged to payroll costs via an estimated fixed percentage allocation of employee time spent on the LSC Native American grant. The Organization was not able to provide supporting documentation for the fixed percentage. • Aging Cluster Payroll Transactions: Seven instances of errors totaling a net overallocation of payroll costs of $144 where an unsupported allocation percentage was used to allocate the employee's pay to the grant. The Organization used an allocation base of monthly hours coded to the grant per timesheets divided by 150 hours for the monthly pay period instead of total monthly hours listed in the employees’ timesheets. • Aging Cluster Fringe-benefit Transactions: Five instances where $2,797 of additional medical insurance costs were allocated to grants based on reconciliations of budgeted grant revenue to period-to-date actual grant expenses that showed revenue exceeding expenses. Based on discussions with management and subsequent recalculations, it appears that the allocated costs (and more) could have been allocated via an allowable cost driver method (grant salaries compared to total organization salaries for the year). Questioned Costs: None. Context: These 29 instances were noting during testing of 120 transactions. Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC allocation base (based on revenue or projected revenue) for the period divided by the total allocation base (based on revenue or projected revenue) coded to the Organization’s general fund, but it often includes manual adjustments based on review of individual time records, expense and other data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities and in a manner where costs are not applied uniformly to both LSC (or, federally)-funded and non-LSC (of, federally) -funded activities. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2024-002 and 2024-004. Recommendation: We recommend that the Organization consider updating its cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations that are calculated in a consistent manner that ensure costs are applied uniformly to respective benefited activities, and that are reflective on employees’ time and effort records. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Lastly, the Organization could consider removing LSC from the general fund into its own fund, and using fringe benefit rate and indirect cost rate allocation methods to simplify its cost allocation process. Views of responsible officials: Management partially agrees with this finding. First, 45 CFR Part 1635 codifies the timekeeping requirement. CLS keeps track of every case and time dedicated by staff in strict compliance with this requirement. Manual adjustments primarily result from planned internal reconciliations and reviews designed to ensure the accuracy of CLS allocations. These reconciliations are conducted on a monthly basis and form an integral part of the Organization’s internal control framework. Additionally, with respect to the Native American grant transactions, CLS implemented the necessary correction to the referenced percentage effective beginning in 2026. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations specify that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.