81 FR 15646 - Compliance Supplement for Audits of LSC Recipients

LEGAL SERVICES CORPORATION

Federal Register Volume 81, Issue 57 (March 24, 2016)

The Legal Services Corporation (``LSC'') Office of Inspector General (``OIG'') is updating its Compliance Supplement for Audits of LSC Recipients for fiscal years ending April 30, 2016, and thereafter. The revisions primarily affect certain regulatory requirements to be audited pursuant to LSC regulations. In addition, the LSC OIG has included for audit certain regulatory requirements which impact recipient staff's involvement in the outside practice of law. Finally, suggested audit procedures for several regulations have been updated and revised for clarification and simplification purposes.

[Federal Register Volume 81, Number 57 (Thursday, March 24, 2016)]
[Rules and Regulations]
[Pages 15646-15647]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-06451]


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LEGAL SERVICES CORPORATION

45 CFR Chapter XVI


Compliance Supplement for Audits of LSC Recipients

AGENCY: Legal Services Corporation.

ACTION: Notice of final changes to Compliance Supplement for Audits of 
LSC Recipients.

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SUMMARY: The Legal Services Corporation (``LSC'') Office of Inspector 
General (``OIG'') is updating its Compliance Supplement for Audits of 
LSC Recipients for fiscal years ending April 30, 2016, and thereafter. 
The revisions primarily affect certain regulatory requirements to be 
audited pursuant to LSC regulations. In addition, the LSC OIG has 
included for audit certain regulatory requirements which impact 
recipient staff's involvement in the outside practice of law. Finally, 
suggested audit procedures for several regulations have been updated 
and revised for clarification and simplification purposes.

DATES: The Compliance Supplement for Audits of LSC Recipients will be 
effective on April 25, 2016.

FOR FURTHER INFORMATION CONTACT: Anthony M. Ramirez, Director of 
Planning, Policy & Reporting, Legal Services Corporation Office of 
Inspector General, 3333 K Street NW., Washington, DC 20007; (202) 295-
1668 (phone), (202) 337-6616 (fax), or [email protected].

SUPPLEMENTARY INFORMATION:

I. History of This Action

    The purpose of the Compliance Supplement for Audits of LSC 
Recipients is to set forth the LSC regulatory requirements to be 
audited by the Independent Public Accountants (``IPA'') as part of the 
recipients' annual financial statement audit and to provide suggested 
guidance to the IPAs in accomplishing this task. Pursuant to 45 CFR 
part 1641, IPAs are subject to suspension, removal, and/or debarment 
for not following OIG audit guidance as set out in the Compliance 
Supplement for Audits of LSC Recipients. Since the last revision of the 
LSC OIG's Compliance Supplement for Audits of LSC Recipients, LSC has 
significantly revised and updated several regulations. By revising the 
Compliance Supplement for Audits of LSC Recipients, the LSC OIG intends 
that the Compliance Supplement accurately reflects these regulatory 
revisions and updates, including the corresponding changes to suggested 
audit guidance provided to the IPAs. A summary of the proposed changes 
follows.
    The LSC OIG has included regulatory requirements under 45 CFR part 
1604 in the Compliance Supplement for Audits of LSC Recipients. The 
inclusion sets forth the requirements dealing with the permissibility 
of recipient staff engaged in the outside practice of law along with 
suggested audit guidance for use by the IPAs.
    The LSC OIG made major revisions to several regulatory summaries to 
reflect LSC's revisions to its regulations. Revised summaries include 
those for 45 CFR parts 1609 (fee generating cases); 1611 (eligibility); 
1614 (private attorney involvement); 1626 (restrictions on legal 
assistance to aliens); and to a lesser extent, 1635 (timekeeping 
requirement). The summaries now follow the existing law and LSC 
regulations. The suggested audit procedures for each of these sections 
have been revised and updated to incorporate and take into 
consideration the regulatory changes.
    The LSC OIG revised the case sampling methodology by reducing 
criteria utilized in the case selection process to clarify and simplify 
the process.
    The LSC OIG updated and revised suggested audit procedures for the 
regulations. The updates and revisions are intended for clarification 
and simplification purposes and to provide added emphasis on internal 
controls.

II. General Discussion of Comments

    The LSC OIG received ten comments during the public comment period. 
Four comments were submitted by LSC funded recipients: Prairie State 
Legal Services (PSLS), Colorado Legal Services (CLS), Land of Lincoln 
Legal Assistance Foundation, Inc. (LOLLAF) and Legal Assistance 
Foundation of Metropolitan Chicago (LAF). Three comments were submitted 
by IPAs. One comment was submitted by the Lawyers Trust Fund of 
Illinois (LTFI), separately joined by LAF. One comment was submitted by 
the Standing Committee on Legal Aid & Indigent Defendants (SCLAID) of 
the American Bar Association. One comment was submitted by the non-LSC 
funded non-profit National Legal Aid and Defender Association (NLADA) 
through its Civil Policy Group and its Regulations and Policy 
Committee, which was also separately joined by LAF. All commenters 
appeared generally supportive of the changes the LSC OIG proposed to 
the Compliance Supplement for Audits of LSC Recipients.
    The LSC OIG proposed making the Compliance Supplement for Audits of 
LSC Recipients effective for audits of fiscal years ending on or after 
December 31, 2015. Four commenters (PSLS, NLADA, CLS, LTFI) expressed 
concern over retroactive application of the revised Compliance 
Supplement for Audits of LSC Recipients which they believed would 
result in additional audit costs, delays in submission and impact the 
current audit process that may be underway. The LSC OIG will make the 
Compliance Supplement for Audits of LSC Recipients effective for audits 
of fiscal years ending on or after April 30, 2016.
    As part of finalizing the Compliance Supplement for Audits of LSC 
Recipients, typos were corrected and formatting problems were resolved 
in both the regulatory summaries and in the suggested audit procedures. 
One commenter (SCLAID) identified a formatting issue and typos in 
separate regulatory summaries that were all corrected.

III. Section-by-Section Discussion of Comments

A. Proposed Inclusion of 45 CFR Part 1604--Outside Practice of Law

    The LSC OIG proposed inclusion of 45 CFR part 1604 in the 
Compliance Supplement for Audits of LSC Recipients and provided a 
regulatory summary of the applicable compliance requirements.
    Comment--Two commenters (NLADA, CLS) expressed concern that the 
regulatory summary did not fully list all the permissible circumstances 
for the outside practice of law, specifically those contained in 45 CFR 
1604.4(c)(2) and (c)(3).
    Response--The LSC OIG has revised the regulatory summary to include 
the language contained in 45 CFR 1604.4(c)(2), (c)(3) and (c)(4).

B. Proposed Regulatory Summary for 45 CFR Part 1611--Financial 
Eligibility

    The LSC OIG proposed revisions to update the regulatory summary for 
45 CFR part 1611 in order to follow the current LSC regulation. The LSC 
OIG also proposed what it believed to be clarifying language relating 
to Older Americans Act (OAA) funds.
    Comment 1--Six commenters (including NLADA, PSLS, CLS, LOLLAF, 
LTFI, LAF) expressed significant concern on the inclusion of the 
language relating to the OAA funds,

[[Page 15647]]

arguing that it changed longstanding LSC policy and would have a 
detrimental impact on providing services to the elderly. NLADA stated 
``This section significantly changes longstanding guidance regarding 
eligibility determinations for senior citizens that would result in a 
reduction of services available to individuals age 60 and over.'' This 
was mirrored by several other LSC funded commenters.
    Response--To avoid confusion and unintended consequences, the LSC 
OIG has removed the language referring to OAA funds from this section.
    Comment 2--NLADA also expressed concern relating to a suggested 
audit procedure for assessing the waiver of eligibility requirements. 
NLADA believed that the language needed revision ``so that an auditor 
does not waste time looking for evidence of a waiver determination, but 
rather reviews whether the appropriate factors allowing income 
eligibility have been identified for households with income between 
125% and 200% of the Federal Poverty Level.''
    Response--The LSC OIG has modified the suggested audit procedure to 
provide better clarity by including the following language at the end 
of the suggested audit procedure: ``or the recipient determined the 
client was eligible based on the factors set forth in 45 CFR 
1611.5(a)(3) or (4).''

C. Regulatory Summary Adjustment for Part 1612--Restrictions on 
Lobbying and Certain Other Activities

    Comment--Two commenters (NLADA, CLS) expressed concern over the 
regulatory summary language regarding the prohibitions contained in 45 
CFR 1612.6(c), describing it as ``overly broad and/or confusing.'' 
NLADA stated ``The regulation does not contain a general prohibition on 
providing information in connection with legislation or rulemaking.'' 
CLS stated ``This sentence omits key elements in the actual Regulation 
that employees are only prohibited from soliciting or arranging for a 
request from any official to testify or otherwise provide information 
in connection with legislation or rulemaking.''
    Response--The LSC OIG has revised the regulatory summary language 
pertaining to 45 CFR 1612.6(c) to more accurately reflect the 
prohibitions. Also, a technical correction was made to the 45 CFR 
1612.3 language contained in the regulatory summary in order to include 
phraseology that had been inadvertently omitted from the initial draft 
publication. The language added is as follows (with emphasis placed on 
the additions and corrections):
    (5) the issuance, amendment or revocation of any executive order. 
Recipients shall not use any funds to pay for any personal service, 
advertisement, telegram, telephone communication, letter, printed or 
written matter, administrative expense, or related expense, associated 
with an activity prohibited in (1)--(5) detailed above (45 CFR 1612.3).

D. Proposed Regulatory Summary for Part 1614--Private Attorney 
Involvement

    The LSC OIG proposed revisions to update the regulatory summary for 
45 CFR part 1614 in order to follow the current LSC regulation.
    Comment--Two commenters (NLADA, CLS) expressed concern that the 
revised regulatory summary discussing Sec.  1614.4(b)(1) omitted an 
important clause. NLADA stated that ``The sentence in the Draft 
Supplement currently only references including support provided by 
private attorneys to the recipient'' and does not mention subrecipient, 
an entire category of organizations that may receive private attorney 
support.
    Response--The LSC OIG has revised the regulatory summary language 
as follows:

    Activities undertaken by the recipient to meet the requirements 
of this Part may also include, but are not limited to: (1) support 
provided by private attorneys to the recipient or a subrecipient as 
part of its delivery of legal assistance. . . .

E. Audit Considerations and Proposed Suggested Audit Procedures

    Comment 1--Two commenters (NLADA, CLS) expressed concern over the 
LSC OIG policy on high risk designation for LSC grantees, stating that 
it is unwarranted, could be confusing to stakeholders and be a misnomer 
to a specific auditee. NLADA recommended the elimination of this 
blanket designation by the LSC OIG.
    Response--The LSC OIG will retain the policy of high risk 
designation at this time. If the LSC OIG accepted the requested 
modification to this section, it could allow IPAs to designate LSC 
grantees as low risk. Such a designation would result in audits not in 
compliance with statutory requirements.
    Comment 2--NLADA also expressed concern relating to the suggested 
audit procedure on obtaining an understanding of internal controls in 
place associated with specific regulations. NLADA recommended that the 
LSC OIG include clarification that ``. . . understanding internal 
controls means that the auditor has identified that there are systems 
in place to assure compliance.''
    Response--The LSC OIG believes that the current language is 
sufficiently clear to the IPA that the internal controls relate to 
compliance with the applicable LSC regulatory requirement. No 
additional changes were made.
    Comments provided by all three IPAs related to non-audit questions, 
satisfaction with improved procedures and commentary on utilizing the 
suggested audit procedures. No additional changes were made.
    For the reasons stated above, the Legal Services Corporation Office 
of Inspector General revises the Compliance Supplement for Audits of 
LSC Recipients. The Revised Compliance Supplement for Audits of LSC 
Recipients is available on the LSC OIG Web site at: https://www.oig.lsc.gov/images/pdfs/ipa_resources/April_2016_Compliance_Supplement.pdf.

    Dated: March 17, 2016.
Stefanie K. Davis,
Assistant General Counsel.
[FR Doc. 2016-06451 Filed 3-23-16; 8:45 am]
 BILLING CODE 7050-01-P