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LEGAL SERVICES CORPORATION


BOARD OF DIRECTORS'

SEMIANNUAL REPORT TO THE CONGRESS

 

_________________________________________

Decisions, Final Actions, and Comments
on the Office of Inspector General's
Semiannual Report to the Congress
____________

October 1, 1997 - March 31, 1998

__________________________________________

May 29, 1998







FOREWORD


      I am pleased to transmit the report of the Legal Services Corporation ("LSC" or "Corporation") regarding the Semiannual Report of LSC's Office of Inspector General ("OIG") for the six-month period of October 1, 1997 through March 31, 1998.

     The Corporation's Board of Directors ("Board") recognizes the value of the Inspector General function and remains committed to working with the Inspector General to achieve our goal of providing high quality legal assistance to the poor of our nation.



-----------------------------------
Douglas S. Eakeley, Chairman      
Legal Services Corporation         



May 29, 1998


TABLE OF CONTENTS

Message of the Board of Directors

Background

    The Legal Services Corporation
    Grant-Making Activities

Management Initiatives

    Competition
    Compliance Monitoring and Enforcement
    Regulatory Review
    Technology
    Strategic Planning
    Other Matters

Program Integrity

    Status of Findings and Recommendations
    Inspection of Alternative Work Arrangements
    Corporation's Annual Financial Statement Audit
    Investigations

TABLE 1: Management Report on OIG Audit Reports of Grantees Issued with Questioned Costs for the Six-Month Period Ending September 30, 1997

TABLE 2: Management Report on Audit Reports Issued During the Six-Month Period Ending September 30, 1997, With Recommendations That Funds Be Put to Better Use

Footnotes


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MESSAGE OF THE BOARD OF DIRECTORS


     The centerpiece of the Inspector General's Report for this period was the release of two summary reports measuring compliance with Congressional limitations on certain types of legal assistance: one on the results of the Independent Public Accountants' (IPAs) audits for FY 96 and the other on the special compliance audits conducted by the OIG itself. These summary reports confirm what review of the individual reports had indicated -- the grantees have overwhelmingly brought themselves into compliance with the new restrictions. The compliance audits by the IPAs disclosed no substantial non-compliance with the statutory restrictions and LSC's implementing regulations. All matters reported by those audits have been addressed by the Corporation's management to ensure effective correction is taken. Similarly, the special audits conducted by the OIG which focused on compliance with six new requirements found, for the most part, no evidence of non-compliance. However, in a few instances the OIG was unable to reach a conclusion with respect to work performed by part-time employees due to inadequate record keeping and poor timekeeping controls at three programs. The Board and Management fully support the OIG's recommendations that internal controls and record keeping requirements need to be strengthened to ensure the adequacy and accuracy of future compliance monitoring.

      With the transition period under the new statutory requirements securely and successfully behind us, the Corporation is moving forward to build upon the strengths of its achievements. To guide the Corporation through these future endeavors, the Board in November 1997 adopted a Strategic Plan for FY 1998-2003. LSC's Strategic Plan sets out six general objectives for the planning period:

  • Preserve and strengthen a legal services delivery system that provides a foundation for meeting the critical legal needs of low-income people throughout the nation;


  • Ensure compliance by grantees with legal requirements and restrictions;


  • Enhance the effectiveness and quality of services to clients;


  • Expand the delivery of legal services to clients through partnerships and initiatives that build upon federal funding;


  • Preserve and strengthen our national commitment to equal access to justice; and


  • Maximize efficiency and effectiveness in the Corporation's internal operations.


Among the immediate steps identified in the Annual Performance Plan to be taken toward accomplishing these goals are:

  • Increasing by 5% the number of cases handled by LSC grantees through a modest increase in budget authority and the expansion and more efficient use of the private bar;


  • Obtaining funding for three technology initiatives designed to improve the delivery of legal services, including expansion of client self-help methods and preventive measures through better use of information technology;


  • Targeting for special priority funding program initiatives to address domestic violence and the unmet legal needs of children; and


  • Relieving the burden on LSC's small, but highly efficient staff by authorizing a modest number of new positions to meet the demands of its ongoing responsibilities as well as to aid in carrying out the new initiatives.

      The goals that LSC has set for itself are ambitious, to be sure. But such goals are necessary if the Corporation and its grantees are to overcome the great challenges they face in trying to meet the overwhelming need for legal services while ensuring accountability to the Congress and maintaining public confidence in the program. The Board is confident -- based on the Corporation's past accomplishments -- that it is up to the task. The Board also wishes to acknowledge the instrumental role of the OIG in assisting the Corporation in achieving its successful compliance efforts and in shaping its future accomplishments.

      Ironically, one such effort by the Board to implement a recommendation of the IG has been criticized by the IG. The Board's development and implementation of an annual performance evaluation process for the IG and the President have been perceived by the IG as posing a threat to the independence of his office and impairing the performance of his statutory duties. Nothing could be further from the truth. Clearly, in structuring the evaluation process -- a process in which the IG was directly involved from the start -- the Board did not intend to interfere in any way with the IG's independence or the exercise of his statutory authorities. Nor does the Board believe that its evaluation of the IG had that effect. In any event, the appropriate oversight committees have been consulted and the Board is working actively with the IG to resolve this difference of opinion so that all parties may get on with the important work at hand.


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BACKGROUND


The Legal Services Corporation

      The Corporation is a private, non-profit corporation established in the District of Columbia by the Legal Services Corporation Act of 1974, as amended ("the LSC Act"), ¹  to provide financial support for legal assistance in non-criminal proceedings to persons unable to afford legal services. Under the LSC Act, the Corporation is governed by an eleven-member bi-partisan Board of Directors appointed by the President of the United States, with the advice and consent of the Senate. The Board appoints the President of the Corporation, who serves as the Corporation's chief executive officer, subject to general policies established by the Board.

      The 1988 Amendments to the Inspector General Act of 1978 required LSC to establish an Office of Inspector General ("OIG") and extended specific provisions of the 1978 Act to LSC. Accordingly, such an office was established by and for the Corporation. The Inspector General is appointed by, reports to and serves under the general supervision of the Corporation's Board of Directors.

Grant-Making Activities

      To carry out the purposes of the LSC Act, Congress appropriated to the Corporation $283 million for fiscal year 1998 (Pub. L. 105-119), $274.4 million of which the Corporation is using to fund 263 legal services programs to provide legal assistance to indigent persons throughout the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam and Micronesia.


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MANAGEMENT INITIATIVES


      During the reporting period, the Corporation substantially completed the grant award decisions for the 1998 calendar year. Additionally, two initiatives to improve the competition process and the delivery of legal services in general were undertaken. First, a detailed and comprehensive technical assistance package on the delivery of legal services was prepared for applicants, recipients, and other interested parties. Second, the Corporation launched an initiative calling upon its recipients to renew their efforts at statewide planning and coordination of legal services delivery systems. The Corporation also completed its first strategic planning process and continued to pursue its technology initiatives as available resources permitted.

Competition

      The 1998 competitive grants award process was substantially completed during the reporting period. A funding decision in one service area is pending. This applicant was placed on short funding to permit LSC to engage in a more extensive review and evaluation due to program delivery issues that have potential compliance implications. A final funding decision for this service area is expected in the near future. All other grant awards were completed for the 1998 calendar year.

      Consistent with past practice, the Corporation assessed the 1998 competitive grants process and made revisions where necessary to improve both the mechanics and the substantive content of the process. This ongoing evaluation of the competitive grants process is required for the Corporation to keep current with the dynamic changes and innovations in the delivery of legal services.

      In the 1998 competitive grants award process, as noted in the previous reporting period, LSC solicited proposals and grant renewal applications for 346 service areas for calendar year 1998 funding.² During the 1998 competitive grants award process, the Corporation used an electronic filing procedure for the Notice of Intent to Compete and two other Request for Proposal ("RFP") forms. Both LSC staff and applicants' responses to this electronic filing process were overwhelmingly positive. Its use simplified the process for applicants, while LSC staff had the benefit of immediate access to proposal information from applicants. For the 1999 competitive grants award process, the Corporation has expanded the use of electronic filing and will have all eight proposal forms and the Grant Renewal Application submitted electronically.

      As noted in previous reports, the competitive grants process captures a significant amount of information about legal services delivery nationwide. The Corporation continues to work directly with applicants and recipients to achieve improvements in delivery systems by setting high quality standards, identifying areas for improvement within programs, providing technical assistance, and making the decision not to fund those applicants that fail to demonstrate the capacity to provide quality legal services to eligible clients. Two new initiatives were begun during this period:

  • One major activity has been the preparation for distribution of a technical assistance document on the delivery of legal services. Shortly after the close of this reporting period, the Corporation made available to all applicants, recipients, and other interested parties, the evaluation guidelines that were used in evaluating the 1998 grants proposals. These guidelines, based on the highly regarded ABA Standards for Providers of Civil Legal Services to the Poor, the ABA Standards for Pro Bono Providers, and the LSC Performance Criteria, are indicators of the factors that enable a legal services provider to deliver effective and efficient legal services.


  • A second major activity has been a renewed call to LSC recipients to engage in statewide planning and coordination of the delivery of legal services. The purpose is to have each state reevaluate its delivery system to identify areas where change is needed, with the primary goal being an improved statewide delivery system for clients.


Corporation staff continue to balance the responsibility of implementing a competitive grants process with the ongoing responsibility to provide guidance to current recipients.

Compliance Monitoring and Enforcement

      The Corporation is gratified that the new system for compliance monitoring found substantial compliance with Congressional restrictions. Moreover, as a result of the rapid referral of findings to Management through the Audit Information Management System ("AIMS"), developed by the OIG to track findings of grantee annual audits, Management was able to resolve or otherwise formulate appropriate corrective action to address the few findings of non-compliance before the OIG's summary report of the IPA audits was issued.

      Regarding the final, consolidated report on the special compliance audits conducted by the OIG, Management has reviewed and is in basic agreement with the four recommendations of the OIG. The two recommendations concerning the proper accommodation of the unique needs of juveniles and mentally incapacitated adults and the need for more precise timekeeping requirements for part-time employees will be addressed through proposed amendments to the regulations or other clarifications of policy, as appropriate. The OIG findings with respect to the inadequate controls of one grantee resulted in a follow-up, on-site review by management staff. Appropriate action will be taken based on the findings of that visit. In addition, Management has initiated a questioned cost proceeding to recover funds used by one grantee in relation to the two class action cases found by OIG.

Regulatory Review

      During this period the Corporation finalized two rules: one which revised the Corporation's rules on costs standards and procedures, and the other to implement provisions of the Assisted Suicide Funding Restriction Act of 1997 that are applicable to LSC funds. The Corporation also published two proposed rules. One would revise the Corporation's Freedom of Information Act (FOIA) rule to implement the Electronic Freedom of Information Act Amendments of 1996. The other is a new rule intended to implement a new statutory provision requiring the disclosure of certain case information on cases filed by recipient attorneys.

      The Corporation anticipates that, in the second half of FY 1998, it will, at a minimum, finalize the FOIA and case disclosure rules. It will also complete amendments to regulations governing the Corporation's suspension or termination of financial assistance to recipients and to implement the new statutory authority to debar recipients from future grant competition for good cause. In addition, the Corporation will consider amendments to the regulations, as necessary, to implement the recommendations from the OIG relating to accommodations for juveniles and mentally incompetent adults and to more stringent timekeeping requirements for part-time employees.

      The OIG continues to work closely with the Board and Corporation's staff on all these regulatory efforts.

Technology

      The Board remains committed to technological improvements to enhance the delivery of services by its grantees in such areas as intake systems, case management, legal work production, legal research, exchange of information, and program management. The current Budget request seeks $17 million in FY 1999 for new initiatives to expand client self-help and improve the delivery of legal services through better use of information technology. In addition, progress continues to be made on the Corporation's internal technology initiatives to enhance the efficiency of its program administration and oversight functions.

      As noted in the section on Competition, the Grantee Information Management System ("GIMS"), was an unqualified success in achieving the electronic filing of three forms used in the 1998 competitive grant award process. Building on this success, the electronic filing procedures will be expanded during the 1999 grant awards process to include all eight proposal forms and the Grant Renewal Application. Moreover, all recipients but one successfully submitted their Grant Activity Reports for 1998 to LSC through the Internet component of GIMS. Information from GIMS has been compiled in the 1998 LSC Factbook, as well as in the state planning materials which LSC is making available to all current recipients and others engaged in the state planning initiative.

      During the reporting period, the Corporation made substantial progress in the implementation of its technology enhanced internal accounting and human resources systems. Employee training on the new human resources system is nearly completed and has begun on the new accounting, purchasing, and inventory system. When fully operational, these systems will assist the Corporation in managing its programs effectively despite the increasing demands and diminishing resources.

      In addition, the Corporation has taken the initial steps toward assuring the readiness of its information systems for the new millennium. The Corporation is addressing its Year 2000 needs, as well as those of its grantees. The FY 1999 budget request for technology initiatives includes the necessary funding for both the Corporation and its grantees to achieve Year 2000 compliance and to move into the next millennium with the technological capacity to continue to provide equal access to justice.

Strategic Planning

      As reported last time, the Corporation has voluntarily undertaken to follow the planning process for its budget set forth by The Government Performance and Results Act ("GPRA"). During the reporting period, the Board, at its November 1997 meeting, considered and adopted a Strategic Plan for FY 1998-FY 2003, covering the activities of both the Corporation's management and administration and its Office of Inspector General. The Board also approved an Annual Performance Plan for FY 1999 and submitted its FY 1999 Budget Request in support of that plan. The planning process involved all LSC staff and the LSC Board of Directors, with comments solicited from grantees, clients, other entities involved in the provision of legal services, Congress and the Administration. The OIG provided helpful advice and comment to the Corporation's management as it developed the programmatic portion of the proposed Plan.

      As provided for by GPRA, LSC's proposed Strategic Plan sets forth: a statement of LSC's mission; LSC's general goals for the period; how LSC plans to achieve those goals; key external factors which could significantly affect LSC's achievement of its goals; how LSC's general goals and objectives will be translated into more specific, objectively expressed performance goals for each year in an Annual Performance Plan, and how LSC's performance will be evaluated. The OIG drafted a separate section of the proposed Plan, devoted to the special mission, goals and strategies of the Office of Inspector General.

      During this period, the Board, in conjunction with its Strategic Planning process, completed its first annual performance evaluation of the President and the Inspector General. With the cooperation of, and after extensive consultation with, both the President and the Inspector General, the Board adopted in July 1997 a detailed protocol to guide its evaluation of the two Corporation executives who report directly and solely to the Board. In this reporting period, the Board finalized the annual performance evaluation procedures at its meeting in November 1997, and proceeded to complete the performance evaluations in February 1998. Overall, the Board considered the process to be a productive learning experience. While the evaluation procedures remain a "work in progress," the difficult work in 1997 has established a firm foundation on which to build improvements for future evaluations. For example, with the Strategic Planning process now in place, future evaluations will have the benefit of annual performance plans for the President and the Inspector General, prepared in advance of the evaluation period -- a valuable measuring standard which could not be used in this initial round of evaluations.

Other Matters

      The Corporation prepared and presented to Congress a proposed $340 million budget for FY 1999, which as noted above, includes $17 million for new technology initiatives. The proposed budget also sought a 5.5% increase in funding for basic grants, $23 million for initiatives in the area of domestic violence and children's legal needs, and an increase in funding for management and administration and the OIG.

      The Inspector General, under the heading "Legislative and Regulatory Review," reports that he received during the period the litigation reports which he had characterized in his prior report as "a refusal of access to requested documents." We note that despite the satisfactory resolution of this issue, the IG continues to recommend a "legislative clarification of the effect of common law privileges, such as attorney client, on the IG's statutory right of access to agency information and documents." In light of this recommendation, the Corporation must likewise reiterate its position that -- at least with regard to the particular incident reported by the IG -- the issue was not that of statutory access by the OIG to Corporation documents subject to attorney-client privilege, but rather, the more complex issue of whether such access to privileged documents results in a waiver of that privilege as to all other third parties. In conjunction with its OIG, the Corporation found a non-legislative solution to the issue which balances both the need for OIG access and the Corporation's interests in preserving its attorney-client privilege. The Corporation continues to find ill-advised any recommended legislative solution which does not, likewise, address both the question of access and the issue of waiver of the attorney-client privilege.


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PROGRAM INTEGRITY


Status of Findings and Recommendations

      The Board is pleased that the Inspector General's Report for this period reflects no pattern of noncompliance among the grantees or any significant compliance findings.

      As noted above, Management had taken action to ensure compliance with all reported audit findings referred by the OIG from the annual recipient audits even before receiving the summary report in this reporting period.

      Regarding the Grantee Compliance Audits conducted by the OIG, only four recommendations are addressed to Management and it is in basic agreement with the OIG's suggestions. First, the OIG recommended that Management take appropriate action with respect to one grantee which did not have adequate controls in place to ensure compliance. Based on this recommendation, Management conducted its own on-site review of the grantee during the reporting period. The report from that visit is being prepared and will recommend appropriate action to be taken based on its findings. Second, the OIG recommended appropriate corrective action be taken with respect to one grantee that continued representation in two class action cases beyond the deadline for divestiture. In response to this recommendation, Management has initiated a questioned cost proceeding to recover funds related to the prohibited representation. Third, the OIG recommended that Management evaluate the need for clarification of LSC regulations that fail to accommodate the unique needs of juveniles and mentally incompetent adults. Management agrees with the need to evaluate the regulations and will consider appropriate amendments to or clarifications of its policies as they relate to these clients. Fourth, the OIG recommended that LSC require all part-time employees of grantees to account for their time worked by date and time of day as a means to ensure they are not doing restricted work while receiving LSC funds. Management agrees with the need for grantees to maintain sufficiently detailed records to determine compliance with the Act and regulations. Modifications to LSC's timekeeping regulations have already been scheduled and will be expanded to encompass the OIG proposals or other specific controls equally effective in demonstrating compliance.

Inspection of Alternative Work Arrangements

      During the reporting period, the Corporation received the final report from the OIG of its Inspection of Alternative Work Arrangements, which focused on implementation of the Corporation's alternative work schedule policies for the period March 8, 1997 to June 30, 1997. The report found no significant deficiencies and the recommendations to provide more flexible options and improve documentation requirements were generally consistent with those developed by management through its own on-going internal review of personnel procedures. Implementation of the recommendations was, therefore, begun prior to the issuance of the final report.

Corporation's Annual Financial Statement Audit

      Corporation is once again pleased with the unqualified opinion given by the independent CPA firm auditing its annual corporate financial statement audit. The statements were found to be fairly presented and free of material errors and no material weaknesses were found with regard to the Corporation's compliance with laws and regulations and its internal controls.

Investigations

      Corporation management has completed work with the landlord's office of Tenant Services and the Federal Protective Services Agency to develop a new Workplace Safety Awareness Program. The OIG recommendation regarding the use of Corporation ID badges was supported in that report, and implementation of the program is currently in progress.


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TABLE 1

Management Report on
Office of Inspector General Audits of Grantees
Issued With Questioned Costs
For the Six-Month Period Ending March 31, 1998


Number of Reports Questioned Costs Unsupported Costs
A.   Audit Reports for grantees on which no management decision had been made by the commencement of the reporting period. 0 $0 $0
B.   Audit Reports issued during the reporting period. 0 $0 $0
Subtotals (A + B) 0 $0 $0
MINUS:
C.   Audit Reports for which a management decision was made during the reporting period: 0 $0 $0
(i) dollar value of recommendations that were agreed to by management 0 $0 $0
(ii) dollar value of recommendations that were not agreed to by management. 0 $0 $0
D.   Audit Reports for which no management decision had been made by the end of the reporting period. 0 $0 $0
 Audit Reports for which no management decision had been made within six months of issuance. 0 $0 $0


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TABLE 2

Management Report on Audit Reports Issued During
the Six-Month Period Ending March 31, 1998
With Recommendations That Funds Be Put to Better Use

  Number of Reports Dollar Value
A.   Audit Reports for which no management decision has been made by the commencement of the reporting period. 0 $0
B.  Audit Reports issued during the reporting period. 0 $0
Subtotals (A + B) 0 $0
MINUS:
C.   Audit Reports for which a management decision was made during the reporting period: 0 $0
(i) dollar value of recommendations that were agreed to by management 0 $0
(ii) dollar value of recommendations that were not agreed to by management. 0 $0
D.   Audit Reports for which no management decision had been made by the end of the reporting period. 0 $0
      Audit Reports for which no management decision had been made within six months of issuance. 0 $0


Footnotes

¹    42 U.S.C. §§ 2996 - 2996l.

² It should be noted that several recipients are awarded funding to provide legal services in more than one service area; for example, a single recipient may receive both basic field and Native American funding. With its 1997 competitive grants process, the Corporation instituted a multi-year funding policy which resulted in applicants receiving one, two, or three year grants, based on certain criteria. Thus, for 1998, competitive proposals were solicited for slightly more than one-third of the service areas, the majority of which will be eligible for three year grants. Grant renewal applications were submitted for the other two-thirds of the service areas.


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