Finding Text
Legal Services Corporation
FFAL #09-542026 Legal Services Corporation – Basic Field Grant
Special Tests & Provisions – Accounting Requirements
Significant Deficiency in Internal Control over Compliance
Criteria: Per Section 2.5.3 of the LSC Financial Guide, recipients are required to have written security policies and procedures for physical and digital assets including all financial data and records in any form (e.g., electronic data processing (EDP) and cybersecurity policies and procedures). These policies and practices should be part of an overall data and records security policy and an annual overall risk assessment process. LSC recommends obtaining guidance from qualified experts in data and records security, including cybersecurity. LSC also recommends including in the risk assessment process consideration of appropriate insurance policies or determining if the recipient is sufficiently self-insured.
Recipients must establish physical, administrative, technical, and virtual/remote access controls and other measures to safeguard physical and digital assets (e.g., office space, computers, information systems, sensitive information, and financial data/records), including modifications to assets and systems. The policies should specifically address cybersecurity and the risk from cyber incidents such as data breaches, business interruption, and network damage. Recipients should also consider what actions (including notification) to take in the event of such cyber incidents.
Policies and procedures must include the following requirements:
Perform (and document) an annual risk assessment
Resolve any risk findings or conclusions
Maintain physical access controls for servers and storage rooms
Develop and periodically test an emergency disaster prevention and recovery plan
Perform regular back up of electronic records and systems stored offsite or in a virtual environment with easy-to-use restoration options
Formally assign computer and data security responsibilities
Recipients should implement these policies and regularly check that they are followed. Recipients should evaluate these policies and update them as appropriate through an annual risk assessment process. These controls will vary with the type of software used, size of the organization, and the number of personnel involved in making, processing, and approving financial transactions.
Risk assessment procedures will vary by recipient. However, at minimum, the process should:
Identify the physical and digital assets susceptible to cyberattacks
Identify risks to those assets (risks should be evaluated annually for changes)
Evaluate the risks (e.g., high, medium, or low) based on likelihood and impact
Document the results of the risk assessment, including the development and implementation of appropriate controls
Condition: The Organization did not perform an annual risk assessment during 2024 and did not test an emergency disaster prevention and recovery plan.
Cause: Management became aware of these compliance requirements during the Organization’s audit for the year ended December 31, 2023. The Organization continued to make progress with their technology improvement plan put into place towards the end of 2022; however, no annual risk assessment and testing of an emergency disaster prevent and recovery plan was completed during 2024.
Effect: Without completing a written evaluation detailing the identified risks and the resolution of any prior risk findings or conclusion, the Organization may be less prepared for a security incident.
Questioned Costs: None reported.
Context/Sampling: Sampling was not used.
Repeat Finding from Prior Year: Yes – 2023-002
Recommendation: We recommend management review the requirements of the 2023 LSC Financial Guide to ensure compliance.
Views of Responsible Officials: Management is in agreement.