Copyright 1999 Federal News Service, Inc.
Federal News Service
SEPTEMBER 29, 1999, WEDNESDAY
SECTION: IN THE NEWS
LENGTH:
3135 words
HEADLINE: PREPARED STATEMENT OF
EDOUARD
QUATREVAUX
INSPECTOR GENERAL
THE OFFICE OF INSPECTOR GENERAL
LEGAL SERVICES CORPORATION
BEFORE THE
HOUSE JUDICIARY COMMITTEE
SUBCOMMITTEE ON COMMERCIAL AND
ADMINISTRATIVE LAW
BODY:
Mr. Chairman,
Members of the Subcommittee, thank you for the opportunity to report to you
regarding the Office of Inspector General audits of LSC grantee Case Statistical
Reports.
LSC OFFICE OF INSPECTOR GENERAL
The Inspector General Act of
1978 created Offices of Inspector General, or "OIGs," at 12 cabinet agencies.
These OIGs are different from other federal organizations in that they are
independent of the agencies for which they provide oversight. The law grants
Inspectors General (IGs) independent authorities for personnel, procurement, and
budget. Operationally, the law provides that IGs independently conduct audits
and investigations, refer evidence of crimes to prosecutors, coordinate with
other federal, state and local agencies, and report to Congress and to the
agency head. The law gives IGs access to all agency documents and information,
and the authority to issue subpoenas and to administer oaths.
President
Reagan embraced the IG concept, and under his leadership the number of OIGs
increased to 57. In fiscal year 1998, the OIGs recommended that $15.8 billion in
Federal funds be put to better use, questioned costs of $3.5 billion, and
recovered $1.4 billion through investigations. In the same year, OIG actions led
to almost 15,000 criminal prosecutions, 1,900 civil actions, 1,200 personnel
actions, and 7,100 suspensions or debarments.
The LSC Office of Inspector
General, like all federal OIGs, has the missions of preventing and detecting
fraud and abuse, and promoting efficiency and effectiveness in the operations of
LSC and its grantees. The LSC appropriation statute added the mission of
overseeing the checking of grantee compliance with restrictions and prohibitions
through a system of annual audits of grantees conducted by independent public
accounting firms. The OIG has 14 staff, including five auditors, to provide
oversight of LSC and its 257 grantees.
I am especially glad to be here
today, so that I can provide the facts concerning our audits of Case Statistical
Reports. Unfortunately, a well-known institution published an article suggesting
that the OIG failed to report the results of its audits as required by the IG
Act. It was implied that this alleged failure was a deliberate attempt to affect
the appropriation under consideration in summer 1998. The facts prove the
suggestion cannot be accurate. Because members of the Subcommittee may have read
this article, I will briefly address this point.
INFORMATION NEEDS
Let
me say at the outset that I think Congress should receive accurate, reliable
information concerning the performance of LSC and its grantees - much better and
much more comprehensive information than it now receives. Congress needs to be
able to determine the return on its investment in the federal legal services
program.
That is true for LSC management as well. They need comprehensive
performance information from grantees, and the information currently collected
is incomplete. In LSC's 25 years, five GAO audits have found that LSC did not
have sufficient information with which to evaluate the cost-effectiveness of its
grantees. The finding is still valid today, and that is the primary reason why I
directed that these audits be conducted.
Before reviewing the timing of the
audits that were conducted in 1998, I need to make a technical point.
OPEN
CASES
Our audits covered both closed cases and open cases, and some media
accounts have mistakenly lumped the two together. The first chart makes the
point that open cases are not part of workload. Open cases are defined as those
open on December 31st. Cases open at the end of Year 1 are usually closed in
Year 2 because most cases involve brief services. If one counts the open cases
in Year 1 as workload, and those cases are closed in Year 2, then those cases
would be double- counted. Therefore, open cases are irrelevant to the discussion
of caseload levels as a basis for funding.
We believe that open cases are
important but for a different reason. If a grantee's case management system
contains significant errors, then it raises questions as to how well that
organization is managing its cases. Again, open cases are important, but simply
not relevant to workload or funding.
GOVERNMENT AUDITS
The second chart
depicts the process set forth in the Comptroller General's Government Auditing
Standards. All OIGs are required to comply with those standards by the Inspector
General Act, and every audit is required to have a statement to that effect. In
the planning phase, objectives and methodology are set, evaluation criteria
specified, information sources identified, and a plan prepared. When auditors go
on-site, they conduct testing, gather evidence and begin to prepare the
documentation required by Government Auditing Standards. Field work is usually
the shortest phase.
The reporting phase is normally the longest phase,
because quality control procedures take place in this phase. Auditors returning
from the field present an analysis of the evidence they collected to their
supervisor. They then organize their work papers and create detailed schedules
on every matter expected to appear in the audit report.
Internal draft
reports are then submitted to the audit chief until the draft is approved. The
audit chief reviews those detailed work papers to ensure that every factual
statement in the audit report is supported by documentary evidence. Next, a
draft audit report is issued to the audited organization for comment. This is a
very important quality control step in ensuring that the report is fair,
complete, and balanced. Finally, those comments are evaluated, the report
adjusted as appropriate, and a final report issued.
This is not a fast
process, but it is mandatory for all audits performed by OIGs. We have a goal of
issuing a draft report within 30 days of returning from the field. That goal is
extremely ambitious and rarely achieved. We normally give auditees 30 days for
comments, and aim to issue a final audit report within 30 days of receiving
those comments. At best, this process takes three months. Normally it takes much
longer to complete.
Until these quality control procedures are completed,
auditors should not report results, because the audit is unfinished and any
"results" are preliminary. An exception is permitted by Government Auditing
Standards when the audit uncovers evidence of illegal acts. I would add to that
exceptions for public safety and national security.
However, the LSC Fact
Book, which contained the caseload numbers, hardly rises to this level.
It is not required by statute, and I am told that it was not even sent
to Congress for the five years between 1992 through 1996.
Here are the
facts. Chart 3 shows when OIG auditors were on-site in 1998. Auditors were
on-site at Northern Virginia April 20th-May 28th. The original audit plan
covered both case statistics and timekeeping. After completion of the Northern
Virginia audit, we decided to focus future audits on case statistics and
eliminated the timekeeping component.
OIG auditors found 559 excess closed
cases reported, which was 13 percent of the total reported by the grantee. The
audit report was issued five months later. Then OIG auditors went to the Gulf
Coast and Wisconsin grantees in June and July, and found reported closed cases
to be overstated by 23 percent and 6 percent, respectively.
The House
considered an amendment increasing the LSC appropriation by $109 million on
August 3rd and 4th. Even if we thought the results of these first 3 audits
demonstrated a significant systemic problem, which we did not, and we completely
skipped mandatory audit procedures, we could not have reported these before the
House debate. Our auditors traveled back from Wisconsin on Friday, July 31st.
The House deliberations took place on the following Monday and Tuesday.
At
that time, preliminary results indicated that three of the 260 LSC grantees may
have overstated closed cases by 2,800 cases out of 1.4 million reported, or two
tenths of one percent. We could not have provided any assurance that the number
was accurate because we had not performed our quality control procedures. To
report to Congress on that basis would have been irresponsible, and would have
risked the OIG's professional reputation.
The suggestion that the OIG
delayed reporting to Congress is refuted by these facts.
The suggestion
offends common sense as well as the facts. These audits were 100 percent
discretionary. We could have audited petty cash. We did not have to do these
audits -- we chose to do them. If we did not want to report such results, we
could have stopped after the first or second audit. If the Office of Inspector
General did not want to report the results of these audits to Congress, why did
it begin them? There are no answers to these questions because the suggestion is
untrue and not credible. The LSC Office of Inspector General is proud of its
work on the Case Statistical Audits. The OIG risk assessment identified the
problem, and OIG audits produced the detailed documentation of the problem that
prompted the start of corrective action. GAO's work was based on the OIG audits
and echoed those findings. Since then, OIG audits of the 1998 statistical
reports have produced additional valuable information.
While these audits
were underway, the OIG audit staff also reviewed 468 grantee audit reports
prepared by independent public accountants, and managed 60 audit service reviews
of those independent accountants' work papers to determine if their compliance
checking was adequate. OIG audit staff also supervised the conduct of the LSC
annual financial audit. I think the LSC OIG audit staff should be commended for
these accomplishments.
AUDITS OF 1997 CASE STATISTICAL AUDITS
Chart 4
depicts the results of our audits of the 1997 Case Statistical Reports. Two of
the grantees audited, San Diego and Miami, were responsible for 91 percent of
the 41,000 overstated closed cases.
The audit of the San Diego grantee
disclosed that 14,398 telephone calls had been reported as closed cases even
though legal services had not been provided. The Miami audit revealed that
15,160 telephone calls and visits had been reported as closed cases although no
legal services had been provided. These cases were reported in a category termed
"referred after legal assessment."
These deficiencies should not diminish
the value of legal helplines as a highly efficient way to provide legal
services. The OIG's 1996 report entitled "Increasing Legal Services Delivery
Through Information Technology," estimated that LSC grantees could quintuple the
number of people receiving legal services through helplines, Internet-based
legal services, and the use of multimedia kiosks.
By next Spring in Orange
County California, domestic abuse victims will be able to file petitions for
temporary restraining orders directly from a legal services kiosk in a shelter.
Just as businesses minimize staff costs through customer self-service, so can
legal services grantees by assisting pro se representation wherever it is
practical. The telephone helplines, the Internet, and kiosks are all highly
efficient legal services delivery vehicles.
The next largest reporting error
concerned 4,700 cases that the San Diego grantee had reported as closed. LSC
required that reported cases be funded, at least in part, by LSC funds and we
determined that these cases were funded by other sources.
The San Diego
audit also revealed a problem with input to the LSC reporting system. The
grantee printed a report from its automated case management system, and then
manually entered the data into the automated LSC system. Although some of the
entry errors understated the number of closed cases, the net result was an
overstatement of 2,692 closed cases. We also saw some counting problems in
Northern Virginia that occurred because the grantee's branch offices were not
electronically linked to the main office.
The audits revealed about 2,000
instances where the cases reported as closed in 1997 should have been closed and
reported in previous years, because legal services had ceased before 1997.
The audits also disclosed 969 duplicate cases, i.e., instances where there
were multiple cases for the same client. The remaining errors were of various
types.
AUDITS OF 1998 CASE STATISTICAL REPORTS
The final chart depicts
the results of this year's audits of the 1998 Case Statistical Reports. Four
final reports have been issued, and draft reports for the audits of North Texas
and Boston have been issued to the grantees for comment.
The results are
shown as a range for North Texas, because we are awaiting its comments on our
draft report. Although the report of the Boston grantee is still in draft,
auditors found no material errors. Therefore, the number will not change.
As
you can see, the results show continued problems with the Case Statistical
Reports submitted. Although an improvement over the results of last year's
audits of the 1997 data, overstatements averaged 29 percent for the 1998 data
audited by the OIG.
The first two audits found that a single error accounted
for most of the overstatement. In Monroe County, the grantee partially funded a
centralized telephone intake and referral service. The grantee erroneously
reported 1,410 unspecified cases based solely on an allocation of the funding.
The grantee did not provide direct services to any of the clients. In
Philadelphia, a new director failed to delete cases coded as "rejected" before
printing a summary report from the case management system, and 1,072 cases were
mistakenly reported. Absent these two errors, both case statistical reports
would have been much closer to accurate.
The Maryland results are limited to
the Baltimore office because the grantee denied OIG auditors access to the
information we needed to complete the audit. Auditors found an estimated 2,696
excess cases reported, almost all relating to untimely case closings.
The
audit of the Eastern Missouri grantee disclosed an estimated 5,478 overstatement
in closed cases, consisting of duplicate cases, cases where no legal services
were provided, and cases with no identified client.
The largest source of
errors found by this year's audits was untimely closing, i.e., the cases should
have been reported in prior years because all activity had ceased prior to 1998.
The audits of two grantees disclosed a new type of error - no client name.
Various reasons were given why the client name had not been obtained. Our view
is that if a client name is not documented in the case management system, the
case is unsupported and cannot be reported to LSC. LSC management agreed that a
client name is necessary to report a case.
The audits found 2,576 cases for
which no legal services had been provided, most of which resulted from the
allocation error at Monroe County.
Duplicate cases, the
previously-mentioned inclusion of rejected cases, and a variety of other error
types accounted for the remaining excess cases.
Before moving on to
Conclusions and Recommendations, I want to note that we found no indication of
fraud in the course of our work. Also, the House Appropriations Committee has
requested that the OIG provide an assessment, by July 2000, of the accuracy of
the grantees' 1999 case data. We plan a variety of actions that would develop
the information needed for that assessment.
CONCLUSIONS AND RECOMMENDATIONS
Almost every audit concluded that the grantee needed to establish better
management controls over the case management system, and that grantee managers
needed to oversee the preparation of the report to LSC.
I believe this
outcome has a number of causes. Prior to 1998, LSC management did not emphasize
the importance of these reports. Prior to 1998, LSC did not adequately analyze
the data received, which would have revealed some anomalies. Prior to the 1998
revision of the Case Statistical Report Handbook, some guidance needed
clarification. LSC management has taken corrective actions in these areas but
those actions need to be maintained.
Some grantee managers did not believe
that the current report permits a full expression of the services they provided,
and may have reported other services despite LSC guidance. LSC management is
attempting to design a broader, more comprehensive measurement system, which is
important for another reason.
As GAO has reported five times in 25 years,
LSC does not have sufficient information to evaluate grantee cost-effectiveness.
To evaluate grantee cost-effectiveness, LSC must collect information on all
services provided by a grantee and all funding received regardless of source.
These services vary widely in effort and cost, and should not be aggregated into
one number. Nor should non-LSC funded activities be combined with LSC-funded
services. Most important, LSC management must really use this information for
evaluation. By this I mean that grantees must be held accountable for the volume
of services provided, as well as compliance with restrictions. The Results Act
would provide an excellent framework to ensure success. Last, some grantee
responses to OIG audit reports have not been constructive, and some were clearly
hostile and thus inappropriate. I believe this attitude is a legacy of the past,
and reflects in part the relatively limited means LSC has to deal with its
grantees. The LSC Act, continued for 19 years through appropriations acts, gives
LSC far less leverage with its grantees than most federal grant agencies.
Congress needs to reauthorize the federal legal services program, not to
reaffirm it, for Congress has done that in its appropriations. Congress needs to
reauthorize the legal services program in order to conform the program to
Congressional intent, to recognize the lessons learned over the years, and to
provide the leverage that LSC management needs to improve program performance.
At a minimum, Congress needs to reauthorize to provide for an inspection unit to
conduct on-site inspections on a routine basis, and to encourage and reward new
and highly efficient service delivery mechanisms such as that I described in
Orange County, California.
Last, LSC management is attempting to resolve the
access issue encountered in Baltimore, as it did last summer in San Diego. If
the effort is not successful, then the OIG and LSC management would need
legislation to ensure access to the records needed to perform our respective
duties.
For these and other reasons, Congress needs to replace the 1977 LSC
Act with one that will improve LSC management's ability to do the job Congress
expects.
Thank you for giving me the opportunity to comment in detail. I
look forward to your questions.
END
LOAD-DATE:
September 30, 1999 
