Finding Text
Finding 2024-002 LSC Financial Guide § 3.3 Fund Balance Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2024 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: Per LSC Financial Guide § 3.3 Fund Balance, LSC carryover funds must be used on a “first-in, first-out” basis, before the expenditure of current grant funds awarded for the same purposes. Condition: The 2024 audit schedule that we received indicated that MLSC did not first use the fund balance carried over from the past year, and instead spent current LSC grant received and adjusted the ending fund balance at the year end. Cause : MLSC did not follow the LSC Financial Guide § 3.3 Fund Balance guidance, MLSC did not monitor the ending balance of the LSC fund and did not properly review the use of the LSC fund balance. Effect: Not using prior-year carryover funds first results in noncompliance with LSC Financial Guide § 3.3. This increases the risk of misstating the fund balance, reporting inaccurate carryover amounts to LSC, and creating questioned costs if expenditures are not properly matched to the correct grant year. It also reflects delayed use of prior-year funds, which may affect LSC’s assessment of MLSC’s grant administration. Finding 2024-002 LSC Financial Guide § 3.3 Fund Balance, continued Recommendation: MLSC should monitor the fund balance timely, and should ensure that the prior year fund balance is spent before the current year’s grant. MLSC should separately list the expenditures spent under the prior year carryover and the expenditures under the current year LSC grant. Management’s Response and Corrective Action Plan: MLSC management would like to provide the following clarification regarding the finding that MLSC did not use the prior-year end fund balance before expending the current year’s LSC grant. Just in the first month of 2024, we already have a substantial deficit from the funding that we received. We have started using the fund balance that is in our bank account. There was no other source of funds for us but the fund balance. Being non-profit, whatever is on hand is used first and whatever is received last is the actual cash on hand at the end of the year. It is also important to note that MLSC’s local funder's grants are not received on a regular monthly basis. Some are disbursed quarterly, and FSM is received only once—typically toward the end of the fiscal year. The appearance of using current-year funds first is due to the timing and presentation in the audit schedule, not the actual fund flow. Responsible person: Chief Fiscal Officer, Jocelyn Mallari Corrective action planned: None Anticipated completion date: Completed.