Audit 48954

Finding: 2022-102 ALN and Title: 09.829050 ? Legal Services Program Cluster Name: N/A Federal Agency: Office of Inspector General ? Legal Services Corporation Passthrough Entity: N/A Type of Finding: Material Weakness Compliance Requirement: A/B. Allowable Costs and Activities ? Compliance Supplement for Audits of LSC Recipients Part 1630 Criteria: LSC recipients that use LSC funds per 45 C.F.R. ? 1630.5(g) (indirect costs and LSCeligible work with non-LSC funding) must have a policy and set of procedures to calculate and allocate those indirect costs consistent with the requirements of 45 C.F.R. ? 1630.5(g) and Program Letter 18-2 or their successors. Condition: During testing procedures over expenses, it was noted that NLS had not allocated expenses fully for the month of December 2022. Cause: The Organization had a change in staffing during the year under audit and the Organization did not have adequate internal controls to ensure that clean up adjustments to indirect cost pools were properly allocated to grants. Effect: The allocation of the remaining indirect costs deviated from the pattern observed throughout the rest of the year. An estimated allocation was carried out, relying on the current cost within that specific pool as a proportion of the total costs in that pool. However, pursuing consistency in allocation throughout the entire year was considered impractical and expensive in terms of time and resources. The anticipated variance between the allocation methodology employed at year-end and the allocation method aligned with the rest of the year was judged to be inconsequential. Questioned costs: N/A Context: A review of indirect cost allocations was completed and not all indirect costs were allocated completely. Recommendation: It is recommended that the Organization implement adequate controls to ensure all indirect costs are allocated every month and consistently applied. See also item 2022- 002 for further details. Views of Responsible Officials: Management agrees with this recommendation. See auditee prepared corrective action plan for details.

Finding: 2022-003 ALN and Title: 09.829050 ? Legal Services Program Cluster Name: N/A Federal Agency: Office of Inspector General ? Legal Services Corporation Passthrough Entity: N/A Type of Finding: Significant Deficiency Compliance Requirement: N. Special Tests and Provisions ? Compliance Supplement for Audits of LSC Recipients Part 1611 Criteria: The Compliance Supplement for Audits of LSC Recipients Part 1611 states, ?The recipient must execute a retainer agreement with each client when extended service representation commences or as soon thereafter as is practicable.? Condition: During testing procedures over a sample of case files, it was noted that NLS had not executed a retainer with a client that had extended service representation. Cause: The Organization had a change in staffing during the year under audit and the Organization did not have adequate internal controls to ensure that through transitions, a retainer is executed with a client when one is required. Effect: A retainer was not executed in a timely manner. At the time of testing the case had been closed. Questioned costs: N/A Context: A nonstatistical sample was utilized. Out of 60 case files tested, one file did not have an executed retainer when it was required. Recommendation: It is recommended that the Organization implement adequate controls to ensure a retainer is always executed and included in the client?s case file when required. Views of Responsible Officials: Management agrees with this recommendation. See auditee prepared corrective action plan for details.

Finding: 2022-102 ALN and Title: 09.829050 ? Legal Services Program Cluster Name: N/A Federal Agency: Office of Inspector General ? Legal Services Corporation Passthrough Entity: N/A Type of Finding: Material Weakness Compliance Requirement: A/B. Allowable Costs and Activities ? Compliance Supplement for Audits of LSC Recipients Part 1630 Criteria: LSC recipients that use LSC funds per 45 C.F.R. ? 1630.5(g) (indirect costs and LSCeligible work with non-LSC funding) must have a policy and set of procedures to calculate and allocate those indirect costs consistent with the requirements of 45 C.F.R. ? 1630.5(g) and Program Letter 18-2 or their successors. Condition: During testing procedures over expenses, it was noted that NLS had not allocated expenses fully for the month of December 2022. Cause: The Organization had a change in staffing during the year under audit and the Organization did not have adequate internal controls to ensure that clean up adjustments to indirect cost pools were properly allocated to grants. Effect: The allocation of the remaining indirect costs deviated from the pattern observed throughout the rest of the year. An estimated allocation was carried out, relying on the current cost within that specific pool as a proportion of the total costs in that pool. However, pursuing consistency in allocation throughout the entire year was considered impractical and expensive in terms of time and resources. The anticipated variance between the allocation methodology employed at year-end and the allocation method aligned with the rest of the year was judged to be inconsequential. Questioned costs: N/A Context: A review of indirect cost allocations was completed and not all indirect costs were allocated completely. Recommendation: It is recommended that the Organization implement adequate controls to ensure all indirect costs are allocated every month and consistently applied. See also item 2022- 002 for further details. Views of Responsible Officials: Management agrees with this recommendation. See auditee prepared corrective action plan for details.

Finding: 2022-003 ALN and Title: 09.829050 ? Legal Services Program Cluster Name: N/A Federal Agency: Office of Inspector General ? Legal Services Corporation Passthrough Entity: N/A Type of Finding: Significant Deficiency Compliance Requirement: N. Special Tests and Provisions ? Compliance Supplement for Audits of LSC Recipients Part 1611 Criteria: The Compliance Supplement for Audits of LSC Recipients Part 1611 states, ?The recipient must execute a retainer agreement with each client when extended service representation commences or as soon thereafter as is practicable.? Condition: During testing procedures over a sample of case files, it was noted that NLS had not executed a retainer with a client that had extended service representation. Cause: The Organization had a change in staffing during the year under audit and the Organization did not have adequate internal controls to ensure that through transitions, a retainer is executed with a client when one is required. Effect: A retainer was not executed in a timely manner. At the time of testing the case had been closed. Questioned costs: N/A Context: A nonstatistical sample was utilized. Out of 60 case files tested, one file did not have an executed retainer when it was required. Recommendation: It is recommended that the Organization implement adequate controls to ensure a retainer is always executed and included in the client?s case file when required. Views of Responsible Officials: Management agrees with this recommendation. See auditee prepared corrective action plan for details.