83 FR 14047 - Notice of Revisions to Performance Area Four of LSC's Performance Criteria
LEGAL SERVICES CORPORATION
Federal Register Volume 83, Issue 63 (April 2, 2018)
Page Range
14047-14060
FR Document
2018-06532
To provide grantees with the most effective guidance, in 2018 the Legal Services Corporation revised Performance Area Four to refine and expand the areas of inquiry to focus on those criteria for which LSC has found the most deficiencies, particularly Criteria 1 (Board Governance), 4 (Financial Administration), and 7 (General Resource Development). The 2018 revisions codify the work of LSC staff with numerous grantees and provide evidence-based guidance to recipients on how to run a high-performing nonprofit organization.
Federal Register, Volume 83 Issue 63 (Monday, April 2, 2018)
[Federal Register Volume 83, Number 63 (Monday, April 2, 2018)]
[Notices]
[Pages 14047-14060]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2018-06532]
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LEGAL SERVICES CORPORATION
Notice of Revisions to Performance Area Four of LSC's Performance
Criteria
AGENCY: Legal Services Corporation.
ACTION: Notice of revisions to guidelines.
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SUMMARY: To provide grantees with the most effective guidance, in 2018
the Legal Services Corporation revised Performance Area Four to refine
and expand the areas of inquiry to focus on those criteria for which
LSC has found the most deficiencies, particularly Criteria 1 (Board
Governance), 4 (Financial Administration), and 7 (General Resource
Development). The 2018 revisions codify the work of LSC staff with
numerous grantees and provide evidence-based guidance to recipients on
how to run a high-performing nonprofit organization.
FOR FURTHER INFORMATION CONTACT: Lynn Jennings, Vice President for
Grants Management, Legal Services Corporation, 3333 K Street NW,
Washington, DC 20007, (202) 295-1645, [email protected].
SUPPLEMENTARY INFORMATION: LSC's Performance Criteria indicate that
legal services programs should be led and managed effectively with
high-quality governance, administrative systems, procedures, and
policies. Good leadership and strong internal operations increase the
likelihood of effective program services for clients.
Over the past several years, LSC has observed some areas of
weakness in grantee governance through performance quality visits,
compliance reviews, and Office of Inspector General (OIG) visits. The
2018 revisions codify the work of LSC staff with numerous grantees and
provide evidence-based guidance to recipients on how to run a high-
performing nonprofit organization.
Since 2010, LSC's Office of Program Performance has conducted 133
Program Quality Visits of 124 grantees. LSC issued 1,901 Tier One \1\
recommendations across the reports summarizing those visits. Of the
1,901 Tier One recommendations, 695 recommendations--36.5%, the most of
any performance area--pertained to Performance Area 4. From 2011 to
2016, LSC's Office of Compliance and Enforcement conducted 111
Compliance Reviews of 106 grantees. LSC issued more than 1,200 Required
Corrective Actions (RCAs) related to both regulatory and fiscal issues.
Approximately 25% of the RCAs identified deficiencies in the grantees'
financial administration. Additionally, OIG conducted 41 A-50 reviews
between June 2012 and September 2017. As a result of those reviews, the
OIG made 160 referrals to OCE. The referrals covered issues related to
timekeeping, deficiencies in policies and procedures, cost allocation,
and internal controls.
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\1\ According to LSC's Office of Program Performance Procedure
Manual:
Tier One Recommendations are those recommendations that
are determined to be significant and will be included in the next
Request for Proposal to the grantee.
Tier One Recommendations are those that if addressed,
have the potential for significantly improving program quality and/
or program performance within the short term, i.e., two years.
A Tier One Recommendation must:
be stated in simple straightforward terms such that
there is no doubt by the program that a response is required; and
have an objective, the value of which equals or
outweighs any additional burden that the recommendation imposes on
the program (does not apply to statutory or regulatory
requirements).
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This is the background against which LSC evaluated the existing
criteria for Performance Area 4. The statistics above gave LSC valuable
information about which areas of grantee administration, leadership,
and governance needed more rigorous evaluation.
These Performance Criteria are guidelines for ensuring high program
quality. They are not requirements. They reflect best practices to
which programs should aspire and which they should, to the extent
possible and consistent with program resources, attempt to achieve.
These revisions do not reflect a change in the purposes of the
Performance Criteria stated in the Introduction to the 2007 revised
version. The purposes of the Performance Criteria are twofold. First,
the Performance Criteria ``guide LSC's assessments of program
performance generally and in the competitive grants process.'' Second,
the Performance Criteria serve as a ``useful framework for internal
program self-evaluations, planning, and program development, as well as
external peer reviews and expert assessments by other funding
sources.''
LSC will begin using the revised Performance Area 4 on June 1,
2018. LSC management recognizes that it may take time, guidance, and
experience for all grantees to adjust to the revisions. LSC will,
therefore, provide training and forums to discuss the implementation of
the changes. When conducting program assessments, LSC staff will take
the scope of the revisions and each program's capacity into
consideration when making recommendations.
As the table below indicates, LSC reorganized the order of the
Performance Criteria. The current Criterion 3--Overall Management and
Administration--includes a limited review of a grantee's technology
infrastructure and administration. To more accurately reflect the role
technology plays in the daily operations of an organization and in
providing efficient and effective client services, LSC proposed
creating a separate, new technology criterion, Criterion 3: Technology
Infrastructure and Administration. The criterion for Overall
Administration and Management would now be Criterion 6, with Internal
Communication being folded into the proposed Criterion 6.
[[Page 14048]]
Performance Area 4: Criterion Ordering
------------------------------------------------------------------------
Current ordering of Performance 2018 Revised ordering of Performance
Area 4 Criteria Area 4 Criteria
------------------------------------------------------------------------
Criterion 1: Board Governance.... Criterion 1: Board Governance
Criterion 2: Leadership.......... Criterion 2: Leadership
Criterion 3: Overall Management Criterion 3: Technology
and Administration. Infrastructure and Administration
Criterion 4: Financial Criterion 4: Financial Administration
Administration.
Criterion 5: Human Resources Criterion 5: Human Resources
Administration. Administration
Criterion 6: Internal Criterion 6: Overall Management and
Communication. Administration
Criterion 7: General Resource Criterion 7: General Resource
Development and Maintenance. Development and Maintenance
------------------------------------------------------------------------
Criterion 1. Board Governance. The program articulates a clear
mission for the organization. Each board member demonstrates commitment
to the program and its mission through consistent engagement in Board
activities that involve all other board members. The board effectively
engages in strategic organizational planning with program leadership
and staff. It is responsible for major policy decisions, while holding
organizational management accountable for effective performance of
their responsibilities. The board assists with or oversees, as
appropriate, the organization's efforts to develop and maintain
resources. The board also promotes public awareness of the program in
the community in a manner that aims to enhance the program's overall
effectiveness and influence.
------------------------------------------------------------------------
Indicators Areas of inquiry
------------------------------------------------------------------------
Board Composition, Size and Tenure
------------------------------------------------------------------------
As a whole, the board is Is the board membership diverse
appropriately diverse and and representative of the service area?
representative of the various Is the board either composed of
geographical areas and low- an appropriate mix of members that are
income populations served by sufficiently expert in areas applicable
the program. to the program's operations and
achievement of overall goals related to
the mission--e.g. non-profit
management, financial oversight,
fundraising, community engagement--or
has it taken steps to ensure that such
expertise is available to the board on
a consistent basis?
Does the board adhere to LSC
regulations regarding board
composition?
The size of the board is Is there evidence that the
conducive to effective board's size facilitates the
oversight. effectiveness of its operation?
When determining board tenure, What is the tenure of each of
the board struck a balance the board members, including the board
between longevity and board chair(s)?
experience and the need for Does the organization impose
new ideas and insights. term limits on board membership?
If so, what are the term
limits?
Does the board have a policy or
practice regarding length of service on
the board and on its Executive
Committee?
If the board imposes term
limits, how does the organization avoid
the loss of the experience and
expertise of valued directors?
Is there a process for removing
board members?
The board has processes and Does the board have and follow
procedures for recruiting and established policies and practices
orienting new board members. regarding recruitment, qualification
and retention and engagement of new
members?
Is there a job description for
board members explaining their role and
duties?
Is the job description provided
to board members?
Is there an onboarding process
for new members?
Are board members given
appropriate orientation and continuing
training, including: training on the
role of the board, potential conflicts
of interest, and on fiscal, fiduciary,
and other responsibilities?
Is there training on the LSC
Act, LSC regulations, LSC performance
criteria, and other best practices?
------------------------------------------------------------------------
Board Committees
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The board's committees What is the board's committee
structure promotes effective structure?
oversight of the organization. What is the composition of each
committee?
Does each committee have
clearly defined responsibilities that
are documented in written form?
If so, is there periodic review
and updating of the documents?
Is there a committee
responsible for assessing the
performance of the board?
Is there an executive
committee, and, if so, what is its
composition?
How often does the executive
committee meet?
What is the scope of business
usually conducted?
Is there a separate Finance or
Audit Committee?
Does a member of the audit or
finance committee have a financial
background?
If not, does the committee
engage sufficient assistance from non-
board sources to provide consistent and
competent guidance on financial
matters?
Is there a separate fundraising
committee?
------------------------------------------------------------------------
[[Page 14049]]
Board Meetings and Deliberations
------------------------------------------------------------------------
The board fulfills the meeting The board of directors meets at
requirements of LSC least four times a year.
regulations. There is public notice of
meeting and meetings are public.
The board has quorum Is the board required to reach
requirements that are adhered a membership attendance quorum before
to it can take formal action?
What is the percentage or
number requirement for a quorum?
How many times within the past
two years has the board tried to meet
but has not had a quorum?
If there is no quorum, what
percentage of the board attended each
meeting?
Does the organization permit
its board to act through virtual
meetings such as email voting, in
addition to remote participation by
teleconferences or videoconference?
Are there guidelines or a
protocol for virtual meetings?
The board and committee Are there pre-circulated
meetings are well planned and agendas for all board and committee
focused to ensure that the meetings?
board and its committees can If so, who sets the agenda?
carry out their oversight Do the board chair or committee
function. chair and the executive officer
contribute to the agenda?
Meeting materials............. Do individual members feel that
the board packets distributed in the
board and committee meetings provide
them with useful information about the
program and equip them to participate
meaningfully in the board or committee
meeting?
What is the quality of the
materials?
How far in advance is board
information circulated?
Do board materials contain
updated financial information?
Executive session............. Do board meetings include an
executive session without any staff
(including the executive director)?
The board members are engaged What is the level of attendance
and regularly attend and at board and committee meetings?
participate in board and Do individual members prepare
committee meetings. for and participate in meetings?
Are client board members
actively engaged in board meetings and
decisions?
Board and committee decisions Are board decisions
are appropriately documented. appropriately documented in board
minutes?
Minutes of full board and
committee meetings are prepared,
reviewed and approved by the board at
least by the next scheduled meeting.
Who prepares the meeting
minutes?
Apart from minutes of board
meetings, does the board maintain a
separately indexed chronological record
of resolutions that reference their
initial date of adoption and subsequent
actions?
------------------------------------------------------------------------
Board Transparency and Accountability
------------------------------------------------------------------------
The board and members Is the board supportive of the
individually, are committed program?
to the program and its Does the board have a policy or
mission. The board properly practice that effectively deals with
discloses and manages any conflicts of interest or potential
organizational or personal conflicts of interest?
conflicts. Is the policy or practice in
writing?
Are organizational or
individual conflicts addressed quickly
and effectively?
------------------------------------------------------------------------
Board Engagement with Strategic Planning
------------------------------------------------------------------------
The board ensures that the Does the board adopt a mission
program establishes and statement, that has been
adheres to effective collaboratively developed with
strategic planning. management?
Does the board establish a
vision for the future?
Does the board approve
strategic goals?
Does the board articulate core
values/principles?
What is the board's role in
developing the strategic plan?
Does the board work in close
partnership with the management to
ensure a successful planning process?
Does the board regularly review
progress in accomplishing the goals of
the strategic plan and take appropriate
action to ensure implementation?
Does it periodically discuss
progress toward strategic goals with
program management?
------------------------------------------------------------------------
Board Oversight of the Organization--Programmatic
------------------------------------------------------------------------
The board is involved in major How are major policy decisions
policy decisions, aware of made?
issues in and performance of Do board members understand and
the program, while leaving adhere to clear distinctions between
day-to-day management of board governance and program
program operations to program management?
management personnel. Do board members understand the
major issues at stake for the program?
How does the board exercise its
oversight of program operations?
Does the board receive regular
reports providing objective data on
program performance?
Monitoring: Does the board
receive periodic information on the
work of the program?
Evaluating: Does the board seek
information to evaluate the
effectiveness of the program's
services?
------------------------------------------------------------------------
[[Page 14050]]
Board Oversight of the Organization--Financial
------------------------------------------------------------------------
The board exercises effective Are board members aware of and
financial oversight. accurate in their perception have a
general understanding of the
requirements of the program's funding
sources.
What systems and procedures
does the board have to ensure effective
financial oversight?
Ensure funds are used for How often does the board review
intended charitable purposes, financial statements and do they
and funds are appropriately understand what the financial
accounted for. statements say?
Do they have experience in or
guidance from board members or other
advisors in interpreting the financial
statements?
Is there a finance and/or audit
committee to select the independent
auditor?
Is the Form 990 presented to
the board and management team prior to
or after it is filed with the IRS?
Are there opportunities for the
CFO/Controller or highest ranking
financial officer to confer with the
board, or members of the board?
Has the board established
budget guidelines?
The board safeguards Are policies in place to
investments. evaluate the organization's investment
decisions and performance?
Are policies in place to
safeguard the organization's assets and
tax-exempt status?
------------------------------------------------------------------------
Evaluation of the Executive Director
------------------------------------------------------------------------
The board effectively What is the process for
evaluates the chief executive evaluating the Executive Director and
officer or executive director. other top officers in the organization?
Do they employ a 360
evaluation?
Who is involved in the
evaluation process?
How frequently does the board
evaluate the chief executive officer or
executive director?
What, if any, are the criteria
used for evaluating the Executive
Director?
The boards practices Is there a process for
appropriate oversight over reviewing and setting executive
the Executive Director's compensation?
Compensation plan. If so, what is the process?
Who is involved in this
process?
Are all board members aware of
the Executive Director's entire
compensation package?
Is the Executive Director's
compensation based on market data?
Is there contemporaneous
substantiation of the board's
deliberation and decision on the
Executive Director's compensation?
------------------------------------------------------------------------
Board's Role as Ambassador for the Organization
------------------------------------------------------------------------
The board effectively promotes Do individual members,
and expands the reach and including client members, speak on
influence of the program in behalf of the organization to external
the communities it serves. audiences at appropriate opportunities?
Is there a protocol for who
speaks on behalf of the board and the
organization?
Does everyone know the
``elevator speech?''
Do individual members represent
the community to the organization by
bringing back concerns, ideas,
suggestions and compliments when they
have merit or possibility?
------------------------------------------------------------------------
Board's Role in Resource Development
------------------------------------------------------------------------
The board effectively promotes Do board members assist
and expands the reach and effectively in fundraising and
influence of the program in development activity?
the communities it serves, Does the board consult and
and develops additional communicate with the Executive Director
resources for the program. to identify and, where appropriate,
pursue all types of needed resources?
Determines how board members
will participate in fundraising from
sources where they have knowledge or
influence, such as the private bar?
Does the board receive regular
reports on staff fundraising activity?
The board ensures that the Has the organization adopted
program is in compliance with policies to ensure compliance with
state and local laws related federal/state laws on solicitation of
to solicitation. funds?
Are solicitation materials
accurate?
The board ensures donations Donations are properly recorded
comply with LSC Requirements. pursuant to LSC regulations
------------------------------------------------------------------------
Continuous Learning and Assessment
------------------------------------------------------------------------
The board is committed to Does the organization maintain
continuous improvement. and provide its board members with an
up-to-date board handbook or on-line
resources?
Do members keep up with issues
that affect the functioning and future
of the organization?
Does the board engage in
periodic formal or informal self-
assessment processes?
------------------------------------------------------------------------
[[Page 14051]]
General Good Governance Practices
------------------------------------------------------------------------
The board ensures legal and Does the board adopt and
ethical integrity and regularly evaluate a code of ethics
maintains accountability. that describes behaviors it wants to
encourage and behavior it wants to
discourage?
Did the board adopt a policy
for handling employee and client
complaints?
Are there established
procedures for employees to report
financial impropriety or misuse of the
organization's resources?
Does the organization have a
whistleblower policy?
Does the board periodically
review the bylaws to ensure that the
organization is in compliance with its
governing documents and relevant laws?
Does the board have policies
establishing standards for document
retention and destruction?
Does the organization keep
books and records relevant to its tax-
exempt status and IRS filings for
appropriate time periods?
The board ensures transparency Are the program's Form 990 and
and accountability by making annual report reported on its public
information available to the website? Are these documents available
public on the program's to the public upon request?
mission, activities, finance
and governance.
The members of the board Is there evidence that board members
exercise independent judgment engage in independent analysis of
in general board decision- materials and information provided to
making. them?
------------------------------------------------------------------------
Criterion 2. Leadership. The program has effective leadership that
establishes and maintains a shared sense of vision and mission. Program
leadership means a commitment to and achievement of the program's goals
and objectives according to a model that emphasizes teamwork,
transparency, excellence, effectiveness, efficiency, and innovation.
------------------------------------------------------------------------
Indicators Areas of inquiry
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General Leadership
------------------------------------------------------------------------
Key program staff, starting Starting with the chief
with the executive director executive officer, are there
or chief executive officer, recognized, positive, and effective
are respected and recognized leaders in the program?
as the program leaders. Do board members, community
leaders, clients and the legal
community express confidence in the
program's leadership?
Program leaders hold What specific leadership and
themselves accountable for professional development training and
motivating staff, and for activities has the program provided?
promoting an environment that What are the outcomes of these
embraces mentoring and the efforts?
professional development of What opportunities are afforded
all staff, helping them to staff to develop and exercise
achieve their fullest leadership skills?
potential. Do staff see themselves as
valued members of the program's team?
Do program leaders model and
encourage teamwork?
Do program leaders delegate
effectively?
Key staff are appropriately Does the program's leadership
involved in decision-making seek the opinions and input of staff
processes. and other stakeholders in its decision-
making processes?
The program's leadership Beginning with the executive
demonstrates strong, director or chief executive officer, is
effective communication there evidence that the leadership of
skills and the capacity to the program communicates effectively
engage in positive conflict with the board, staff and community
resolution. stakeholders?
Do program leaders effectively
address challenges and issues that
impede the program's progress in
accomplishing its mission?
Starting with the executive
director or chief executive officer, is
there evidence that program leadership
effectively models, motivates and
inspires creativity, innovation,
excellence, and achievement?
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Mission and Vision
------------------------------------------------------------------------
Program leaders frame a vision Is there a shared sense of
and mission. vision and mission?
Is it expressed in written
form?
Are staff aware of it?
Program leaders model a high What mechanisms does the
level of energy, commitment program's leadership use to measure
and integrity in carrying out program effectiveness and adherence to
the program's mission. the mission and vision?
In what ways does the program's
stated mission and vision guide the
program's planning and decision-making?
------------------------------------------------------------------------
Diversity
------------------------------------------------------------------------
Starting with the executive In what ways does the program
director or chief executive and its leadership demonstrate
officer, the program values inclusion and an appreciation for
and embraces diversity and diversity?
provides opportunities for Is the program's leadership and
the development of a diverse management diverse, and, is there
group of leaders. evidence that diversity and inclusion
are valued by the program?
------------------------------------------------------------------------
[[Page 14052]]
Succession Plan
------------------------------------------------------------------------
The program has a leadership Does the program have a clear
succession plan that and reasonable succession plan?
addresses preserving Is it written?
institutional knowledge and
strong leadership across all
levels of program management.
------------------------------------------------------------------------
Criterion 3. Technology infrastructure and administration. The
program provides a stable and secure technology infrastructure
sufficient for staff to work efficiently and effectively in the
delivery of legal services and to support the operations of the
organization. It devotes appropriate resources to provide the
capacities outlined in LSC's ``Technologies That Should Be in Place in
a Legal Aid Office Today.''
------------------------------------------------------------------------
Indicators Areas of inquiry
------------------------------------------------------------------------
Technology planning is ongoing Who is involved in technology
and integrated into the planning?
overall strategic plan of the Does the program get input from
program, includes staff staff on technology needs?
input, and is reviewed and Has the program ever had an
updated at least annually. outside technology audit?
How often is the technology
plan reviewed and updated?
Does the plan include deadlines
for implementation?
The program has competent IT What type of network does the
staff and/or consultants with program have?
appropriate training and Are there appropriate
certifications to properly firewalls?
maintain and support its Are servers hosted on-site, off-
technology systems. site, cloud-based?
If on-site, where are they and
how are they secured (locked office,
server room, appropriate A/C)?
What is the program's IT
security program, its policies, user
security training and are the servers,
computers and devices patched and kept
up to on a regular schedule? Is the
network scanned for IT vulnerabilities
regularly?
The grantee informs employees Does the grantee have a warning
of their rights when using banner that appears while employees are
grantee-owned computers. logging on and notifies employees of
their rights when using their grantee-
owned computer?
The program devotes What is the internet bandwidth
appropriate resources to in each office (any redundant
establish and maintain its connection available)?
technological infrastructure, Do offices have Wi-Fi available
including planning and (is it password protected)?
budgeting appropriately for
ongoing replacement/upgrades
of its technology systems.
The program has a proper Is server equipment kept in a
written IT security program secure environment with appropriate
to include robust IT security ventilation and cooling? Are IT systems
policies and procedures currently patched and updated?
regarding protecting client Is there a disaster recovery
and case data, ensuring the plan (that includes periodic testing)
security and integrity of for mission critical technology
passwords, use of the systems?
Internet and social media, Are there security policies and
policies for the use of procedures for protecting client and
mobile devices, and if staff case data, sensitive personal and
can bring their own devices personnel data, and all communications
(BYOD) to access work from loss or unauthorized intrusion?
documents. Staff are familiar Are there security policies and
with and follow such policies procedures for use of the Internet and
and procedures. social media, content security on all
devices, and integrity of passwords,
retention and deletion of data?
Are employees given notice
concerning prohibited uses of their
computer equipment including a warning
banner that notifies employees of their
rights (including no expectation of
privacy) when using their grantee-owned
computer?
Is there routine IT security
training for staff?
Is the user's system access
granted based on roles and
responsibilities?
The program has sufficient What are the backup procedures?
procedures to back up its Are test restores done
data and has testing periodically from the backups?
protocols to demonstrate that
data recovery/protection
policies work in practice.
The program stays informed of What is the replacement cycle
new technology developments for technology equipment (desktops/
and how it can make better laptops, servers, printers, scanners,
use of technology to meet its copiers, telephones, etc.)?
mission. What type of phone system does
the program use?
How old is it?
When was the last upgrade?
What reports can it provide?
Who maintains it?
------------------------------------------------------------------------
Extent to Which Technology Enhances Program Operations and Service
Delivery
------------------------------------------------------------------------
Maximum use of technology is Does the program use technology
made to facilitate and effectively to enhance the efficiency
enhance internal of program operations and service
communication. delivery?
How does the program use
technology to facilitate and enhance
communication?
Does the program's website
effectively follow the Ernst and Young
Best Practices (http://webassessment.lsc.gov/report/)?
------------------------------------------------------------------------
[[Page 14053]]
Staff Training
------------------------------------------------------------------------
Program staff are provided Does the program have a policy
with appropriate training on for the secure use of its technology,
the use of technology. including protecting data (including
Personally Identifiable Information),
use of the Internet and social media,
password policies and if/when staff can
bring their own devices?
Do staff understand and follow
the policy?
What software does the program
use, including case management system
manufacturer and version?
Are staff provided with ongoing
training in its use?
------------------------------------------------------------------------
Criterion 4. Financial administration. The program has and follows
financial policies, procedures, and practices that comport with
Generally Accepted Accounting Principles (GAAP), requirements of the
program's funding sources, and comply with federal, state and local
government regulations. The program has established sound internal
controls and conducts effective budget planning and oversight.
------------------------------------------------------------------------
Indicators Areas of inquiry
------------------------------------------------------------------------
Fiscal Policies and Staff
------------------------------------------------------------------------
The program has detailed Is the program's accounting
written policies and manual current and updated as
procedures describing its appropriate?
financial operations which
comply with all applicable
requirements. The program
follows such policies and
procedures.
The program has sufficient, How many financial staff does
capable, trained and the program have?
effective staff dedicated to Does the program have competent
financial administration. financial personnel?
What is the training and
background of the financial staff?
The job descriptions of
personnel are clear and lay out the
roles and responsibilities of each
position.
Is periodic training given to
program staff, management, and the
governing body regarding LSC
regulations and accounting guide, as
applicable?
Top management and the Is the budget consistent with
governing body are actively the program's mission, goals, and
involved in the budgeting objectives?
process. The budget is Does the program effectively
updated periodically and adhere to its budget?
changes/variances are Is the budget updated monthly
reviewed. The program engages (or at least quarterly), based on
in financial planning beyond changes in revenues or expenditures?
the current year. Does the program engage in
financial planning beyond the current
year?
The program maintains LSC Does the recipient adhere to
funds held for immediate LSC Investment Guidelines?
operating expenses in
federally-insured bank
accounts.
------------------------------------------------------------------------
Board of Directors
------------------------------------------------------------------------
The recipient's governing body Has the board established a
has fulfilled its fiduciary financial oversight committee or
responsibility to the program committees that perform the roles of a
through the establishment of finance committee and an audit
a financial oversight committee?
committee or committees. The Does the financial oversight
financial oversight committee collectively possess the
committee(s) has at least one knowledge to set the strategic,
member who is a financial financial course for the recipient and
expert or the board has oversee management in execution of the
access to a financial expert. strategy?
Does the financial oversight
committee have the leadership of
individual well-versed in non-profit
GAAP, COSO Internal Control Framework,
and other relevant standards and
guidelines?
Does the financial oversight
committee meet on a regular basis?
Does the committee have a
charter or governing document and
fulfill the responsibilities outlined
therein?
Does the financial oversight
committee set the strategic direction
of the recipient for financial and
audit related matters?
The governing body regularly Does a governing body set and
determines the compensation review the compensation of the
of the program's Executive Executive Director using an independent
Director. compensation consultant, comparable pay
studies from other nonprofit
organizations, and/or a compensation
survey?
The Executive Director's Are there procedures in place
expenses are approved by a that require approval of the Executive
member of the board. Director's expenses by a member of the
governing body?
------------------------------------------------------------------------
Audited Financial Statements
------------------------------------------------------------------------
The program issues accurate Are the audited financial
financial statements on a statements submitted to LSC in
timely basis. accordance with the LSC Audit Guide for
Recipients and Auditors?
Has the program submitted their
audited financial statements in a
timely manner over the last 3 years?
Executed one-time grants, such Are executed one-time grants,
as TIG and PBIF awards, are such as TIG and PBIF awards, reported
reported separately in the either as a supplemental schedule of
program's audited financial related revenue and expense or a
statements in accordance with separate column within the financial
45 CFR 1628.3(e). statement?
[[Page 14054]]
Annual program audits do not Do past audits or outside
reveal any significant reports and evaluations reflect
problems or issues; where problems?
such items have been Have any such problems been
identified, the program addressed?
addresses them effectively Is there any evidence of
and promptly. failure to comply with applicable
funder or governmental requirements?
What type of auditor's report
did the IPA issue regarding the
financial statements? Unmodified or
modified? If modified, why?
What type of auditor's report
did the IPA issue regarding Federal
Awards? Unqualified or Qualified? If
qualified, why?
Did the IPA issue findings in
the audited financial statements? What
were the findings? Have they been
addressed?
Did the IPA issue a management
letter? What did it contain? Has the
recipient addressed the issues?
Are audit findings repeated
from one fiscal year end to the next in
the audited financial statements?
Does the recipient adequately
address audit findings by performing
the corrective actions outlined in the
audited financial statements?
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Internal Controls
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The recipient has established There is sufficient segregation
and maintains adequate of duties.
accounting records and Do the accounting policies and
internal control procedures. procedures require an appropriate level
which is designed to provide of supervisory review and adequate
reasonable assurance of checks and balances to ensure the
achieving the following accuracy, completeness and timeliness
objectives: (1) Safeguarding of transaction processing?
of assets against The recipient has established
unauthorized use or and adheres to an adequate system of
disposition; (2) reliability internal control following the
of financial information and principles of the COSO Integrated
reporting; and (3) compliance Internal Control Framework.
with regulations and laws
that have a direct and
material effect on the
program.
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Contracting
------------------------------------------------------------------------
The program has a contracting Does the program have a
policy to prevent abuse, contracting policy?
limit waste of scarce funds, Does the policy identify the
and prevent possible contracting procedures for the various
questioned cost proceeding. types of contracts, dollar thresholds,
and competition requirements?
Is the process used for each
contract action fully documented and is
the documentation maintained in a
central file?
Is the required approval level
(including items that need to be
approved by LSC) established for each
contract type and dollar threshold,
including when the board of directors
should be notified and/or give
approval?
Do policies include procedures
for documenting and deviating from the
approved contracting process, such as
when sole-source contracts are
executed?
Is each contract or agreement
executed with a price, time-period, and
services to be performed?
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Fraud Prevention
------------------------------------------------------------------------
The program has robust Assess the organization's
policies and safeguards in segregation of duties.
place to prevent fraud. Who has access to the program's
bank accounts?
How are permissions and
authorizations assigned?
Does the program have
Whistleblower and Conflict of Interest
Policies?
Is the program's IT
infrastructure adequately secure?
Is the physical and logical
access to the program's computer
network adequately secure?
Does the program's governance
and management of IT resources promote
effective operations and provide a
robust system of internal control?
Do the program's computer
applications incorporate and facilitate
a robust system of internal control?
Have thorough and well
documented hiring practices and
procedures?
Are staff periodically trained
or reminded of the Whistleblower and
Conflict of Interest Policies?
Does the program employ
computer banners on all servers,
computers and devices to inform
employees of prohibited use activities
and no right to privacy of grantee
equipment?
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Cash Disbursements
------------------------------------------------------------------------
The program's disbursements Are procedures adequate to
are approved in writing by an provide that salary and wage rates are
authorized individual. approved by an authorized individual
and employees are paid in accordance
with approved wage and salary plans?
Were invoices properly
approved, with dates, before
disbursement checks were processed?
Do policies and procedures for
disbursements address unallowable
expenses, purchase approvals, securing
and approving new vendors, segregation
of purchasing duties, and duplicate
payment controls?
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The program's criteria and Is there a procedure for proper
procedures for purchases are payment and approval of expenditures at
documented. an appropriate level of management?
------------------------------------------------------------------------
Cash Receipts
------------------------------------------------------------------------
The program has established Is initial accountability for
internal control procedures cash established as soon as a cash item
related to cash receipts. is received?
Do the accounting records
adequately identify all cash receipts
as to source and purpose?
Is an effective chain of
custody in place for cash receipts?
The program maintains a client Has the program established a
trust fund and accounting method to determine the balance for
system to account for funds each client trust account?
held on the client's behalf. Does the program have a process
to ensure that dormant funds are
escheated to the state in compliance
with state requirements?
------------------------------------------------------------------------
Asset and Property Records
------------------------------------------------------------------------
A physical inventory of Is a physical inventory
property purchased with LSC conducted at least once every two (2)
funds is conducted at least years?
once every two (2) years and Are any differences between the
the results are reconciled physical inventory and the accounting
with property records. records reconciled?
The program has established Is there a surprise count of
adequate internal controls to petty cash conducted periodically?
safeguard its petty cash Are the petty cash and client
funds. trust funds secured in locked location?
Are all petty cash
disbursements supported by an original
receipt or appropriate supporting
documentation?
------------------------------------------------------------------------
Subgrants
------------------------------------------------------------------------
The program has established Does the subgrant agreement or
adequate procedures related contract with the sub recipient specify
to the subgranting of LSC financial reporting responsibility?
funds to ensure compliance Where a relationship with a sub
and proper fiscal oversight. recipient exists, do the notes to the
financial statements of the recipient
and subrecipient fully disclose the
nature of that relationship?
------------------------------------------------------------------------
Bonding of Recipients
------------------------------------------------------------------------
The program maintains fidelity Does the program carry at least
bond coverage at a minimum the minimum level of fidelity bond
level of at least ten (10) coverage for fraud and employee
percent of the program's dishonesty as described in 45 CFR Part
annualized LSC funding level 1629?
for the previous fiscal year,
or of the initial grant or
contract.
The program carries adequate Does the program carry fidelity
fidelity bond coverage for bond coverage for all staff required to
all staff required to be be bonded: Every director, officer,
bonded. employee and agent of a program who
handles funds?
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Accounting Software
------------------------------------------------------------------------
The program's accounting Does the program use up-to-date
software is appropriate to technology to enhance efficient
support the operations and financial operation?
financial oversight of the Is the software appropriate to
organization. support the operations of the
organization?
Does the accounting software
incorporate adequate internal controls?
Is the recipient effectively
using the software to ensure internal
controls are in place?
The program limits access to Does the program limit access
its accounting software. to its accounting software?
Does each user have his/her own
password security based on their fiscal
functions and are accounting software
passwords changed periodically?
Is a user's system access
granted based on roles and
responsibilities?
------------------------------------------------------------------------
Criterion 5. Human resources administration. The program promotes
organizational excellence through the recruitment, management, and
retention of a high-performing, diverse workforce consistent with its
mission and goals. The program develops and communicates sound policies
and procedures that ensure compliance with applicable federal, state,
and local laws and has a knowledgeable, accessible, and professional
staff to the program in the areas of recruitment and retention,
training, professional development, compensation and benefits,
performance appraisal, and organizational governing personnel
development.
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Indicators Areas of inquiry
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Human Resources Staffing and Workplace Policies
------------------------------------------------------------------------
The program has sufficient, Who is responsible for the
capable, trained, and human resources functions within the
effective professional staff program?
assigned to human resources If responsibilities are shared,
administration. how are duties defined?