• withheld important information about the over-counting during congressional budget deliberations which enhanced prospects for getting increased program funding for FY 1999 and FY 2000,

• misrepresented the scope, magnitude, and type of case over-counting problems after being caught trying to cover-up the problem, and

• provided inaccurate and incomplete descriptions of the laws and standards governing their responsibility to report serious problems to congressional appropriators and overseers.

Counting cases that never existed, counting single cases more than once, and counting other non-reportable issues such as classifying telephone calls as cases without providing any legal assistance or determining whether callers were eligible to receive assistance were among the chief reasons for the over-counting. Documentation acquired by past and present Corporation and OIG auditors, evaluators, and analysts prove the case reporting and over-counting problems were significant, widespread, deep-rooted, and longstanding.

The actions and statements of some Corporation and local program officials, according to some members of Congress and the public, may violate certain provisions of the LSC Act, the IG Act, and may also constitute fraudulent activity. In layman's terms, Webster's Dictionary defines fraud as "a deliberate deception practiced so as to secure unfair or unlawful gain".

Further details appear in the report and appendices, along with conclusions and recommendations on pages 11 and 12 of the report.
 

A. Notable LSC Quotes

B. Glossary of Important Terms

C. Important Sources of Information

D. Background

E. Applicable Case Reporting Criterion

F. Summary Results of Examinations of Case Reports for the 1997 Legal Services Program

G. Discussion of the Scandal

H. Conclusions and Recommendations

APPENDIX 1 - LSC Act, As Amended, 1977 (Excerpt)

APPENDIX 2 - IG Act, As Amended, 1978 (Excerpt)

APPENDIX 3 - Government Auditing Standards (Excerpt)

APPENDIX 4 - LSC Annual Report Summaries for 1996 and 1997 Programs (Fact Books) (Excerpt)

APPENDIX 5 - Analysis of Average Cost Per Case and Total Cases Closed For 1980 - 1997

APPENDIX 6 - Analysis of Case Reports for Local Programs Financed Primarily with Non-LSC Funding

APPENDIX 7 - Timeline and Facts

APPENDIX 8 - Analysis of 13 Case Reports for 1997 Program

"I'm pleased this effort will not include a (formal) report."

- John McKay, LSC President, in a message to the LSC Inspector General on November 25, 1997 stating that he was pleased the IG decided not to publicly release a November 1997 report that contained, among other things, a conclusion that the Corporation's case statistics were unreliable and should not be used as a bulwark, as they had been, to support continuance of federally funding legal services.
 
 

"You are correct that the numbers provided to Congress were inaccurate, … in February 2000 … we will make our public statements … and also allow management to fix the problems we observed…"

 - Eduoard Quatrevaux, LSC Inspector General, acknowledging, in writing, to members of his staff on September 23, 1998, that the Corporation grossly overstated program accomplishments by claiming in a report to Congress that the 1997 program served 1.9 million clients. By keeping this materially significant information from Congress, the IG allowed Congress to unknowingly use bloated case numbers as it made the decision to approve a $17 million appropriation increase for LSC's FY 1999 program.
 

 

"…That is strictly an accounting of the number of cases reported by our recipients. They report them to us and we report them back to Congress … What we are trying to capture is the service that we provide to eligible clients so that you and others in the Congress can determine what they are getting for the investment … we are tightening up our reporting requirements. We do not anticipate a real significant change in the number of cases we handle …"

- John McKay, LSC President, responding to a question from Rep. Tom Latham (R-Iowa) during the March 3, 1999, congressional budget hearing on how LSC got the number 1.9 million cases it reported to Congress.

"…My understanding that as a result of the tightened reporting requirements imposed by the CSR handbook … we will be looking at approximately five percent reduction in caseload reports, overall magnitude."

- Douglas Eakeley, LSC Board Chairman, responding to a question from Rep. Latham during the March 3, 1999, congressional budget hearing on the magnitude of the case over-counting problem for the 1997 program.

"That is not accurate."

- John McKay, LSC President, responding to a question from Rep. Latham during the March 3, 1999, congressional budget hearing on whether 2/3 of about 149,000 open and closed cases reported by the San Francisco, Florida Rural, Northern Virginia, Houston, San Diego, an Miami legal services programs were invalid.

"We haven't completed the audit reports. No, I'm not suppose to under government auditing standards."

- Eduoard Quatrevaux, LSC Inspector General, responding to a question from Rep. Latham during the March 3, 1999 congressional budget hearing on whether he reported the case over-counting problem to Congress.

"The problem is not program-wide. It is limited to one discreet type of problem - referred after legal assessment."

- Eduoard Quatrevaux, LSC Inspector General, responding, March 1999, to a question from the staff of the House Committee on Government Reform and Oversight, about LSC's case over-counting problem.
 
 

• "… his charge that we "cooked the books" was untrue … Congressman Latham's criticism of the IG was also clearly unwarranted. At least three times, Congressman Latham was advised that the GAO auditing standards do not allow the release of preliminary data…we have been forced to respond to attacks…reinforced by grossly inaccurate information."

- John Erlenborn, LSC Board Vice Chairman, in a May 14, 1999 letter he sent to House Majority Leader Dick Armey (R-Tex.) and the entire House of Representatives which was highly critical of Congressmen Armey and Latham. Evidence subsequently acquired by Congress revealed that LSC's annual program produced only about 900,000 cases as opposed to the 1.9 million cases claimed by LSC in the 1999 budget hearing.  The evidence also shows that GAO auditing standards allow the release of preliminary audit data to legislators (Appendix 3).

Annual case service report. A compilation of all case activity during the annual calendar year period. It is required by the grant agreement with the Corporation. Local programs are required to inform the Corporation of how many cases are open at the end of the year and how many cases are closed during the year. Instructions for preparing this annual report appear in the Corporation's Case Service Report (CSR) Handbook and Grant Activity Reporting Instructions. The Corporation used the information provided in case service reports to inform the Congress what the program was accomplishing, in terms of cases produced, with annual appropriations. The Corporation also used these reports as evaluation factors in making competitive grant award decisions and to support requests for program funding from the Congress. Congress used the annual case report it received from the Corporation to make judgments on annual appropriations for the program.

Open case. Before a local program can open a case, it must first accept the applicant into the program as a client after determining that the applicant meets the eligibility requirements of the LSC Act and Corporation regulations. The applicant's legal issue must also be within stated program priorities and the case must also conform to the Corporation's case reporting standards. The vast majority of cases opened by local programs fall into the category of limited services (70-80 percent). Limited services cases are typically resolved in a relatively short period of time, many on the same day. They should be promptly closed and reported to LSC in the period the legal service was provided.

Closed case. Local programs close a case when the legal action on the client's case is completed. Annual case reports contain two general categories of closed cases - limited services and extended services. Extended services frequently require negotiations and/or representation at judicial proceedings.

Cases handled. A term used by local programs when referring to the total number of open and closed cases on the books at any one time.

Phantom case. It is a case that never existed and for which the local program could not produce any record of a client.

Single case reported more than once. Typically found in combinations of open/open, open/closed, or closed/closed in the subsidiary records supporting the annual case service report and identifiable by same client name, same date, and same legal issue for a client. Some local programs close and recount open/open and open/closed duplicates in different years making detection more difficult. Prevalent in programs having unusually large numbers of open cases.

Non-reportable issue. When client eligibility is undetermined or undocumented according to the LSC Act and Corporation regulations or when the local program violates a congressional restriction on allowable case services (e.g., abortion or redistricting cases). A telephone call in which eligibility is not determined and the application is not legally assessed by a qualified legal representative of the program also does not qualify as a reportable case.
 

Transcripts of House Appropriations Subcommittee hearings on LSC budget requests dated February 25, 1998 and March 3, 1999; LSC Inspector General semiannual reports to Congress for the periods ending March 31, 1998, September 30, 1998, and March 31, 1999; LSC Fact Books for the 1996 and 1997 programs and supporting documents; LSC and LSC OIG communications, reports, and briefings from September 1997 to April 2000; Associated Press Report dated April 8, 1999; General Accounting Office Report dated June 25, 1999; Heritage Foundation Report dated July 22, 1999; House Judiciary Subcommittee report on LSC hearing of September 29, 1999; Congressional Record, Congressional "Dear Colleague" letters, the LSC website http://www.lsc.gov/, and the LSC Act, IG Act, and government auditing standards (excerpts in Appendices 1, 2, and 3).
 

The public accounting for legal services rendered is one of the most important functions performed by the Corporation. It is important because it enables the President, the Congress, and the public (benefactors and beneficiaries alike) to see what is being accomplished, in terms of cases produced, with the several hundred million dollars the U.S. Government spends on this program each year. In addition to being used to monitor program performance and effectiveness, the program's annual case workload is also important because it is used by the Corporation to support and justify annual funding requests and by the Congress to make judgements on annual funding levels.

The Corporation reported to Congress that the 1997 program had 471,600 cases open at the end of the year and 1,461,013 cases closed during the year. It summed open and closed cases when claiming the program served 1,932,613 clients during the year (Appendix 4). The Corporation obtained this information from annual case reports submitted by 269 grantees. The program received funding totaling $511.8 million for the 1997 program from the Federal appropriation and non-Corporation-funding sources. Based on the reported closed case count, the average cost per case for the entire 1997 program was $350 ranging from $80 at one program to $4,790 at another (Appendices 5 and 6). The Corporation submitted information from this fact book to Congress in support of the FY 1999 and FY 2000 appropriations. The Congress relied on 1996 and 1997 annual caseload program data when making the decision to increase the Corporation's FY 1999 Federal appropriation by $17 million.
 

The LSC Act (Appendix 1) requires the Corporation to provide the President and Congress with an annual report on legal services provided. The Act also requires prospective clients to be financially eligible to receive legal assistance (e.g., must be within established poverty guidelines). Local programs must determine eligibility before applicants can be properly accepted into the program and their legal issues counted as cases in annual reports to the Corporation.

The IG Act (Appendix 2) requires inspectors general to keep the Congress "fully and currently informed" of "significant problems, abuses, and deficiencies" resulting from OIG activities, through "semiannual reports and otherwise". The IG Act also requires immediate reports for serious or flagrant problems. In addition to audits, "OIG activities" typically include such functions as investigations, inspections, program assessments, and other special reviews and studies. Any "significant problem, abuse, and deficiency" disclosed during while performing audit or non-audit OIG activities are within the purview of the reporting requirements of the IG Act. When performing audits, the IG Act requires OIG's to use the Comptroller General's government auditing standards. The IG Act does not require OIG's to use these standards when performing other non-audit activities.

Government auditing standards (Appendix 3) provide specific protocols for the performance of audits and issuance of draft and final audit reports. When audit work identifies important matters requiring the prompt attention of management and legislators, the standards allow the OIG to temporarily bypass the often time-consuming protocols typically associated with processing and issuing final reports on the results of audit. They can do so through the issuance of issue interim oral or written reports. Interim briefings and reports on important issues and commonplace in the IG community, particularly when facts are indisputable (as was the case with many of the facts emanating from audits and examinations of local legal services programs by the Corporation OIG). The IG community typically refers to them as "quick reaction" reports.

The Corporation's case reporting standards (handbook and grant activity instructions) and grant agreements require local programs to submit annual case reports, in specified format and content, to the Corporation. The Corporation uses this information to prepare the annual caseload report and to justify and support funding requests to the Congress. The standards are based on relevant sections of the LSC Act, Corporation regulations, and Corporation policies and procedures. In general, they require local programs to determine if applicants are eligible to receive legal assistance (e.g., must be poor and in most instances an U.S. citizen) before "opening" cases for prospective applicants and their legal issues legitimately reported to the Corporation as opened or closed cases. The Corporation did not authorize local programs, for the 1997 program; to report cases "exclusively" financed with non-Corporation funds. It did require local programs to report cases "primarily" financed with non-Corporation funds.

The Corporation revised and reissued the handbook on November 24, 1998. The supplanted version of the handbook was dated July 1993. The stated purpose of the revised handbook is to "gather quantifiable information on cases for use in annual funding requests." Each year, the Corporation issues a new set of grant activity reporting instructions to local programs which complement the reporting requirements of the handbook. For 1999, the Corporation reversed a longstanding policy and required local programs to report cases exclusively financed with non-Corporation funds (over the objections of the House Majority Leader). Local programs must also establish legitimate attorney/client relationships and provide legal services to the clients before establishing and reporting cases to the Corporation.

Corporation headquarters did not have written standards and necessary quality control procedures to ensure the annual report to Congress was accurate.

The Inspector General and a senior program analyst and supervising senior auditor in the OIG organization independently reviewed and analyzed the quality of annual caseload information available at Corporation headquarters for the 1997 legal services program. These analyses were performed in November 1997, June 1998, and July 1998 and concluded the (1) information was unreliable and should not be used as a bulwark to obtain Federal funding, (2) numbers are likely wrong and astounding, and (3) the numbers reported to Congress are poor, at best. The July analysis also identified several hundred thousand questionable cases in the system.

Another series of audits and evaluations performed by OIG and GAO buttressed the other assessments made by OIG that there was something seriously wrong with the quality of 1997 program data in the Corporation's annual report to Congress. OIG and GAO staff determined that 172,570 of 397,295 (43.4 percent) cases reported by 13 legal services programs for the 1997 legal services program to the Corporation and included in the report to Congress were invalid and/or questionable. The Congress asked the GAO to review the accuracy of LSC's case statistics for the 1997 program in May 1999 after LSC officials continually denied existence of a serious and widespread reporting problem during the first several months in 1999.

Even more evidence of a serious and systemic reporting problem became available during the course of three reviews performed in 1998 by the Corporations headquarters staff. They reviewed the Central Michigan, Alameda, Farmworkers of North Carolina legal services programs and found serious problems; similar to OIG and GAO, at each program reviewed. These three programs had reported 25,950 cases to the Corporation for the 1997 program. The problems were so serious that the Corporation ceased funding the Alameda program and levied a fine against the North Carolina program. Unlike OIG and GAO, the Corporation reviews did not quantify the scope and magnitude of the problems.

Another analysis of the numbers in the 1997 annual caseload report revealed the Corporation's annual case-count was also boosted by a policy allowing local programs to report cases "primarily" financed with non-Corporation funding causing the annual closed caseload to be further overstated by about 144,000 cases (Appendix 6). Also, a procedure to sum open and closed cases in the annual caseload report to arrive at a annual "client served" figure resulted in 420,000 single cases to be counted in the 1996 fact book and recounted in the fact book for the 1997 program (Appendix 4).

It is reasonable to conclude from the results of all of these analyses, examinations, and audits that the Corporation's 1997 annual caseload report was unreliable and significantly overstated.

A complete chronology of the scandal appears under the title "Timeline and Facts" in Appendix 7.

The scandal began in November 1997 with the issuance of an OIG report to the Corporation chronicling a host of problems and concluding with a comment suggesting case statistics should not be used as a bulwark for continuance of Federally funding civil legal services. The OIG issued this report to the Corporation for comment but did not release report conclusions to the Congress or public. In a written response to this report, the Corporation President expressed satisfaction that the Inspector General would not make this report public.

Corporation officials disregarded this OIG report when they decided to continue using the annual caseload as a basis for justifying a request for increased program funding for FY 1999. In the budget hearing on February 25, 1998, the leadership informed congressional appropriators that a $57 million increase would enable local programs to increase the annual closed case-count from 1.4 million cases to 1.6 million cases. It also stated a funding increase of $17 million (85 percent for local programs) might enable local programs to increase the case-count to about 1.5 million cases. The 1.4 million closed case-count figure is traceable to the annual caseload report (fact book) for the 1996 program (Appendix 4).

The following year, the Corporation leadership made more use of information in the fact book for the 1997 program in the FY 2000 budget request as they sought another substantial increase in funding for the program. The FY 2000 budget hearing was March 3, 1999. In the FY 2000 budget request, Corporation leaders stated a $40 million budget increase would enable local programs to address over 1.6 million legal issues. They also claimed the 1997 program addressed 1.5 million legal issues. This closed case-count figure with some slight upward rounding, as well as graphs illustrating the type of legal issues addressed and reasons for closing cases appeared in the FY 2000 budget request. They are traceable to the fact book for the 1997 program (Appendix 4).

The Corporation's annual caseload numbers, budget requests, and testimony illustrate the high degree of importance it placed on the 1997 program case statistics in formulating the overall budget strategy for FY 1999 and FY 2000. The reviews performed by OIG, LSC, and GAO staffs revealed the case information for the 1997 program was significantly overstated (Appendix 8).

As Congress worked with the inflated case numbers during the budget process, the Corporation leadership and Inspector General acquired even more evidence of how bad the numbers were (Appendix 7). Every OIG analyses, audit, and examination from November 1997 to September 1999 revealed case over-counting and reporting problems. The Corporation found the same things in its concurrent reviews of local program case reports. The OIG and Corporation routinely and formally exchanged information about all of the reviews in briefings and/or interim reports.

In September 1998, the Inspector General wrote and sent a message to some members of his staff acknowledging that the Corporation provided inaccurate case statistics to Congress. In the same message, the Inspector General stated he was going to give the Corporation until February 2000 to fix the problem. The Inspector General's decision to keep the Congress in the dark enabled the Corporation to escape congressional scrutiny prior to Congress approving the FY 1999 appropriation increase of $17 million in October 1998. His decision would also have enabled the Corporation to continue using phony and inflated case numbers in the FY 2000 appropriation request had it not been for someone from inside of the Corporation stepping forward and reporting the problem to a member of the House Appropriation Subcommittee.

The member of the House Appropriations Subcommittee intervened during the March 3, 1999 budget hearing. In a series of penetrating questions and statements he methodically removed the cover of a scandal. The member astutely and correctly pointed out that about two-thirds of the approximate 149,000 open and closed cases included in the annual case reports of the Northern Virginia, Houston, San Diego, Miami, San Francisco, and Florida Rural programs were invalid. He simply wanted to know why the Corporation had not said anything about any of these problems in the hearing or in reports required by the IG Act.

Despite overwhelming evidence to the contrary, Corporation officials denied serious case-over-counting and reporting problems existed in response to the House appropriator's questions and later, in a steady stream of questions from other members of Congress, congressional staff, and the media. The Corporation issued a press release in April 1999 claiming, among other things, the national impact of the case reporting problem was minor. A subsequent investigation by the Associated Press and the results of several audits, belatedly completed and issued by the Inspector General, confirmed the House appropriator was correct in his statement the six programs discussed in the hearing had serious case reporting problems (Appendix 8). In addition, evidence collected by Congress proves the Corporation and Inspector General knew about all of the problems at the six programs before the March 3, 1999, congressional budget hearing.

The central defense of the Corporation leadership and the Inspector General since March 3, 1999 is that all of the information emanated from OIG audits and that strict protocols in government auditing standards did not allow them to release information from unfinished audits. Their claim is contradicted by three important facts.

First, not all of the significant information involving the case reporting problems emanated from the limited number of audits done by OIG, but rather through other important and routine "OIG activities" such as analyses, examinations, and program assessments (Appendix 7). Under the IG Act, the Inspector General is obliged to report important matters to Congress when they represent significant problems, abuses, or deficiencies. In addition to the information developed by OIG, other information also became available to the Inspector General through reviews of local program case reports by Corporation attorneys. They too, confirmed the existence of systemic and significant case reporting problems. This information would have been extremely valuable to congressional appropriators and legislators as they deliberated the FY 1999 appropriation. It is a bogus argument to suggest that the IG Act and government auditing standards prevented Corporation leadership and the Inspector General from doing so.

Second, the government auditing standards permit and encourage interim reporting, oral and written, to legislative officials on important matters requiring prompt attention (Appendix 3). The standards state a carefully prepared report may be of little value to management and legislators if it arrives too late (e.g., after Congress made the final decision on annual program funding). The Corporation leadership and the Inspector General knew this but neglected to disclose this important aspect of the standards in testimony to Congress on March 3, 1999, and September 29, 1999. To state the standards prevented the Inspector General from alerting congressional overseers about phony cases in the Corporation's annual caseload report and budget request is not true.

Third, Corporation leadership and the Inspector General claimed government auditing standards prevented them from reporting information arising from unfinished audits in the September 30, 1998 semiannual report and the March 3, 1999 budget hearing testimony. On December 7, 1998, the Inspector General asked the Corporation Board Chairman, in writing, to discuss serious case reporting problems disclosed through some unfinished OIG audits with members of a private association (Appendix 7). The content and timing of the December 7 statement is inconsistent with statements made before Congress in the March 3, 1999 and September 29, 1999 hearings. If the standards prevented the Inspector General from reporting this information to Congress, the standards should have also prevented him from asking the Board Chairman to release the same information to a private association.

Corporation denials of significant case over-count problems ceased not long after the General Accounting Office (GAO) was asked, on May 3, 1999 to review a selected number of case reports for the 1997 program. The House Majority Leader, Chairman of the House Government Reform and Oversight Committee, and three House Appropriations Subcommittee members, asked GAO to independently evaluate whether grantees had misreported the number of cases for the 1997 program. On June 25, 1999, the GAO completed reviews of five of the largest local programs in the system and reported substantial case reporting problems to the Congressmen.

The congressional request for GAO to perform an independent inquiry of the case reporting problems prompted the Corporation leadership and the Inspector General to change their strategy. A little over one week after the congressional request to GAO, the Corporation asked local programs to self-inspect and certify reported 1998 case totals. After the Chairman of the House Judiciary Subcommittee announced in August that an oversight hearing would be held, the Corporation released the revised case figures for 1998 disclosing a significant case over-count. The Inspector General also began issuing audit reports at much faster pace than before which also disclosed a substantial case over-count (Appendix 7).

Evidence suggests OIG may have engaged in surreptitious activity to prevent the problems from becoming public prior to the March 3, 1999 budget hearing. The OIG did this by slowing the pace of completing audits and spreading the results of them over several semiannual reporting periods. With only piecemeal information, congressional overseers would be unable to discern a serious problem that may have had an adverse impact on the FY 1999 and FY 2000 budget requests. OIG started seven audits in 1998 and only one report was issued before the March 3, 1999 budget hearing. These are not complicated audits as illustrated by the speed in which GAO was able to complete its inquiry. OIG audits started before this budget hearing took about eight months to complete, the four audits started after the March 3 hearing took, on average, just four months to complete. Further, OIG issued the four final audit reports in September 1999 just as the Judiciary Subcommittee was about to hold this hearing. The Chairman's announcement of a hearing undoubtedly motivated the Inspector General to rapidly speed up completion of final audit reports. All eight of the OIG audit reports issued in 1999 disclosed case over-counting and contradict earlier testimony provided by Corporation officials and/or the Inspector General before the House Appropriations Subcommittee and House Committee on Government Reform and Oversight staff.

After months of denying a problem, the Corporation reported in September 1999, the 1998 program only produced 1.1 million closed cases. In April 2000 the Corporation reported 924,000 cases as the annual volume of work for the 1999 program. The greatly reduced numbers for the 1998 and 1999 programs, along with the case overstatements identified by OIG and GAO staffs for the 1997 program, offer compelling proof of how many phony cases were in the system when Corporation officials claimed to Congress that the case over-counting problem was minor.

After the scandal became public, Corporation officials have claimed and/or implied local programs and the Corporation do not have an incentive to over-count cases primarily because program funding is distributed according to the poverty population. This is not a fully accurate statement. Local programs know the Corporation uses the annual reported caseload as an evaluation factor when making the competitive grant award decision. It is part of the grant application process. The Congress uses the program's annual caseload to make level of funding decisions. In the budget request for FY 1999, the Corporation used a projected increase in the annual caseload that would result from increased funding as a basis for requesting additional funding from the Congress.

The bottom line is Corporation officials inappropriately supplied the Congress with unreliable and bloated annual caseload information to support request for increased funding in FY 1999 and FY 2000. They did not officially acknowledge or mention any case reporting problems to Congress prior March 3, 1999. Afterwards, the Corporation leadership did not fully disclose or accurately describe the scope and magnitude of the problems in subsequent reports, testimony, and statements to the Congress. The Congress made judgments based on Corporation misrepresentations.

The Inspector General is expected to be the watchdog of the program. The IG Act required the Inspector General to promptly notify the Board and Congress about the case over-counting and reporting problems because of its potential impact on the Corporation appropriation. Beginning November 1997 and thereafter, the Inspector General met his obligation to keep the Corporation fully and currently informed of all case reporting problems as quickly as the information became available. However, from November 1997 through March 1999 and thereafter he kept the Congress in the dark about the scope and magnitude of the case over-counting problems. When asked direct questions from members of Congress and congressional staff in March 1999 he did not provide accurate or complete answers. Further, he did not mention anything about case reporting problems in the March 31, 1998 and September 30, 1998 semiannual reports or fully disclose widespread problems in the March 31, 1999 semiannual report to Congress. In September 1999 House Judiciary Subcommittee hearing, the Inspector General again withheld important information from Congress. He did not inform the Subcommittee that the primary cause of the case overstatements was non-compliance with the LSC Act and Corporation regulations on client eligibility and that government auditing standards actually allowed him to report information from unfinished audits to Congress (Appendices 7 and 3).

The LSC President achieved one of his major employment objectives when Congress approved the $17 million funding increase for FY 1999 and the Board praised his efforts in getting the funding increase and awarded him a new contract. After the Inspector General did not report, and later denied, existence of any significant and widespread case reporting problems in semiannual reports to Congress, the March 3 budget hearing, and March 1999 discussion with congressional staff, he benefited by having misconduct charges against him dropped. In March 1998, the Board had circulated to congressional staff a document detailing charges that the Inspector General attempted to mislead congressional staff, misused his office, and violated the Corporation's communication policy with Congress. The Board also filed these charges with other authorities. After the Inspector General did not disclose serious case reporting problems to the Congress before passage of the FY 1999 appropriation, the Board publicly resolved the issues with him. After the Inspector General continued to not report significant and widespread case reporting problems to Congress after the FY 2000 budget hearing, the Board passed a resolution to increase his salary.
 

The Congress should maintain stringent oversight of all of the Corporation's case reporting activities, through budget and oversight hearings, until it is confident that all of the information supplied by Corporation leadership and the Inspector General in future reports and statements is complete, accurate, and reliable.

The Congress should also correct a weak link in the accountability chain. The LSC Act presently requires an annual report to the U.S. President and the U.S. Congress on legal services provided. However, the applicable provision lacks clarity and specificity (Appendix 1). The Act should be amended to require a complete and accurate accounting of all cases remaining open at the end of the year and closed during the year. The annual reporting requirement should also require Corporation leadership to certify that the contents of the report is complete, accurate, and reliable. Such a requirement would make it more likely the President, the Congress, and the general public would get a more accurate view of what the program is accomplishing, in terms of legal services rendered, with the several hundred million dollars invested in the program each year. Without a specific statutory requirement for case information, it is very unlikely the Corporation will produce a timely and accurate report.

The Congress should take a fresh look at the current Corporation organizational structure to determine if any major changes are warranted at this time. It appears the Corporation is unable to perform the basic, and critically important, function of counting cases. It has been refining and upgrading the case reporting system for about 20 years and despite a major system upgrade in 1995, it still cannot get accurate performance data to the President, Congress, and public. If it cannot perform this basic task, then how can these program administrators be trusted to oversee the delivery of quality legal services to the poor? Something is clearly wrong and needs to be fixed. A congressionally mandated study of the LSC organization, by a group of renowned people outside of LSC organizational influences, with a tasking to provide recommendations on organization restructuring to Congress is one plausible way to approach this problem.

The Congress should complete the record by making a judgment on whether this Inspector General met his statutory responsibility for keeping the Congress "fully and currently" informed of all "significant problems, abuses, and deficiencies" as required by the IG Act. There is a preponderance of evidence suggesting the Inspector General did not fulfill his dual reporting responsibility to the Congress on this matter. Materially significant information pertaining to the FY 1999 and FY 2000 Corporation budget requests was in the possession of the Inspector General and was not provided to Congress. In semiannual reports to Congress and when questioned about the case reporting problem by a member of Congress and congressional staff, the Inspector General proceeded to deny a significant and widespread problem existed or fully disclose important matters. Afterwards, the Board proceeded to resolve serious charges against him along with passing a resolution to increase his salary. Based on this episode, it is reasonable to conclude that the incumbent Inspector General is not an independent, credible, or effective watchdog of the Corporation. If the incumbent were, the Congress would have found out about the case over-counting and reporting problem in February 1998 and certainly during the summer of 1998. If the Congress cannot rely on the Corporation Inspector General to alert it about significant matters effecting the budget and the credibility of the Corporation, one can reasonably expect that equally important and serious matters may not be promptly and properly reported in the future as well.

Sec. 1002. As used in this title the term--

(1) "Board" means the Board of Directors of the Legal Services Corporation;

(2) "Corporation" means the Legal Services Corporation established under this title;

(3) "eligible client" means any person financially unable to afford legal assistance;

(4) "Governor" means the chief executive officer of a State;

(5) "legal assistance" means the provision of any legal services consistent with the purposes and provisions of this title;

(6) "recipient" means any grantee, contractee, or recipient of financial assistance described in clause (A) of section 1006(a)(1);

Sec. 1003(a). There is established in the District of Columbia a private nonmembership nonprofit corporation, which shall be known as the Legal Services Corporation, for the purpose of providing financial support for legal assistance in noncriminal proceedings or matters to persons financially unable to afford legal assistance.
 

GRANT AND CONTRACTS

Sec. 1007(a). With respect to grants or contracts in connection with the provision of legal assistance to eligible clients under this title, the Corporation shall--

(1) insure the maintenance of the highest quality of service and professional standards, the preservation of attorney-client relationships, and the protection of the integrity of the adversary process from any impairment in furnishing legal assistance to eligible clients;

(2) (A) establish, in consultation with the Director of the Office of Management and Budget and with the Governors of the several States, maximum income levels (taking into account family size, urban and rural differences, and substantial cost-of-living variations) for individuals eligible for legal assistance under this title;

(B) establish guidelines to insure that eligibility of clients will be determined by recipients on the basis of factors which include--

(i) the liquid assets and income level of the client,
(ii) the fixed debts, medical expenses, and other factors which affect the client's ability to pay,
(iii) the cost of living in the locality, and
(iv) such other factors as relate to financial inability to afford legal assistance, which may include evidence of a prior determination that such individual's lack of income results from refusal or unwillingness, without good cause, to seek or accept an employment situation; and

(C) insure that (i) recipients, consistent with goals established by the Corporation, adopt procedures for determining and implementing priorities for the provision of such assistance, taking into account the relative needs of eligible clients for such assistance (including such outreach, training, and support services as may be necessary), including particularly the needs for service on the part of significant segments of the population with eligible clients with special difficulties of access to legal services or special legal problems (including elderly and handicapped individuals); and (ii) appropriate training and support services are provided in order to provide such assistance to such significant segments of the population of eligible clients;

Sec.1008(a). The Corporation is authorized to require such reports as it deems necessary from any grantee, contractor or person or entity receiving financial assistance under this title regarding activities carried out pursuant to this title.

(b) The Corporation is authorized to prescribe the keeping of records with respect to funds provided by grant or contract and shall have access to such records at all reasonable times for the purpose of insuring compliance with the grant or contract or the terms and conditions upon which financial assistance was provided.

(c) The Corporation shall publish an annual report which shall be filed by the Corporation with the President and the Congress. Such report shall include a description of services provided pursuant to section 1007(a)(2)(C)(i) and (ii).
 

Comments:
Section 1008(c) requires an annual report to the President and Congress. It would greatly improve Corporation accountability to the President, Congress, and public if this important section of the LSC Act was amended to require the Corporation to submit an annual performance report that identifies the total number of cases open at the end of the year and closed during the year for the entire program. This would allow the President, Congress, and public to see what the program is producing, in terms of cases produced, for the several hundred million dollars invested in the program each year. Requiring Corporation officials to certify the annual report as accurate could further strengthen the Act.

The current wording of the Act as it pertains to the annual reporting requirement is very ambiguous (see section 1007(a)(2)(C)(I) and (ii) above) and does not afford the President, Congress, and public the level of visibility needed to properly oversee program performance.
 

Sec. 1. Short title

Sec. 2. Purpose and establishment of Offices of Inspector General; departments and agencies involved
In order to create independent and objective units --

(3) to provide a means for keeping the head of the establishment and the Congress fully and currently informed about problems and deficiencies relating to the administration of such programs and operations and the necessity for and progress of corrective action;

(3) to recommend policies for, and to conduct, supervise, or coordinate other activities carried out or financed by such establishment for the purpose of promoting economy and efficiency in the administration of, or preventing and detecting fraud and abuse in, its programs and operations;

(5) to keep the head of such establishment and the Congress fully and currently informed, by means of the reports required by section 5 and otherwise, concerning fraud and other serious problems, abuses, and deficiencies relating to the administration of programs and operations administered or financed by such establishment, to recommend corrective action concerning such problems, abuses, and deficiencies, and to report on the progress made in implementing such corrective action.

(1) a description of significant problems, abuses, and deficiencies relating to the administration of programs and operations of such establishment disclosed by such activities during the reporting period;

(2) a description of the recommendations for corrective action made by the Office during the reporting period with respect to significant problems, abuses, or deficiencies identified pursuant to paragraph (1);

(3) an identification of each significant recommendation described in previous semiannual reports on which corrective action has not been completed;

(1) any comments such head determines appropriate;

• Table of Contents
• Chapter 1
• Chapter 2
• Chapter 3
• Chapter 4
• Chapter 5
• Chapter 6
• Chapter 7

Auditors should appropriately issue the reports to make the information available for timely use by management, legislative officials, and other interested parties.

7.7 To be of maximum use, the report must be timely. A carefully prepared report may be of little value to decisionmakers if it arrives too late. Therefore, auditors should plan for the appropriate issuance of the audit report and conduct the audit with this goal in mind.

7.8 The auditors should consider interim reporting, during the audit, of significant matters to appropriate officials. Such communication, which may be oral or written, is not a substitute for a final report, but it does alert officials to matters needing immediate attention and permits them to correct them before the final report is completed.
 

Comments:
1. GAO standards 7.6, 7.7, and 7.8 were applicable in 1997 and 1998 as the Inspector General's staff performed audits and identified significant case reporting problems.

2. LSC Board Vice Chairman Erlenborn and LSC Inspector General Quatrevaux incorrectly told members of Congress government auditing standards do not allow the release of information from unfinished audits. GAO standard 7.8 clearly allows interim reporting, oral or written, before completing a final report. There was, and is nothing, in the IG Act or government auditing standards that would have prevented the LSC Inspector General from simply picking up the phone and alerting House and Senate appropriators that the Corporation's annual caseload report was unreliable.

2. The average cost per case for the 1997 program is $350 ($511.8 million/1.461 million closed cases.

3. The Corporation summed .420 million open cases with 1.426 million closed cases in 1996 to arrive at a "clients served" total. Single open cases in 1996 were recounted as part of the 1997 program when the Corporation used the same procedure to arrive at a "clients served" total. The recounting occurred because cases open at the end of 1996 were either closed in 1997 or still remaining open at the end of 1997.

4. OIG staff documented that open and closed case totals in these annual reports to Congress contained a disproportionately large number of cases dating back to previous years, some into the 1980's. This suggests some programs may prop up annual case totals by reporting old cases in current reporting periods. When local programs fail to properly manage and report cases in the year the service was provided, they wind up recounting them year after year.

Comments:
1. The primary source for this analysis is the fact book for the 1997 program.

2. The analyst determined average cost per case figures by dividing total funding by total cases closed. The chart shows that average costs were greatest in years the program received the most total funding (1992-1995).

3. LSC reported the 1998 program produced 1.1 million cases. It was the lowest reported number in program history until LSC reported to Congress that the 1999 program only produced 924,000 cases.

4. The Corporation did not report any closed cases for 1986 in this fact book.
 

2. The analyst examined the 269 programs submitting case reports to the Corporation for the 1997 program. 114 of 269 programs received non-Corporation funding that was in excess of the Corporation grant. Total funding is to sum of the Corporation grant and funds provided by non-Corporation funding sources. Average cost per case for each program was determined by dividing total funding by total number of closed cases reported. Case inflation was determined by dividing the average cost per case for each program into the amount of non-Corporation funding exceeding the Corporation grant. The nation-wide application results in case inflation of 143,948 cases. This figure represents the sum of case inflation for 114 programs.

2. February 28, 1998 Corporation Testimony on FY 1999 Appropriation Request. The Corporation disregarded the results of the OIG Study, and with the knowledge of the Corporation President and the Inspector General, the Corporation used information from the fact book for the 1996 program to gain congressional support for the FY 1999 appropriation.

3. March 20, 1998, Corporation Vice Chairman Sends Document to House and Senate Staff Detailing Inspector General's Attempt to Mislead Congressional Staff, Misuse of Office, and Violating Corporation's Communication Policy with Congress.

4. March 31, 1998, Semiannual Report to the Congress. The Board endorsed the report. The Inspector General stated there were no significant problems, abuses, or deficiencies to report. On page 9, the Inspector General stated a preliminary review of case statistics was completed. He did not inform the Congress that an OIG report had been issued to the Corporation in November 1997 for comment and that comments had been provided. He also did not report a principal conclusion of the report stating Corporation case statistics were unreliable and should not be used as a bulwark to support federally funding legal services. At the time, the Corporation had used unreliable case statistics in the February 1998 budget hearing.

5. March/April 1998 Corporation Issues Draft Report on Central Michigan Program. The Corporation's draft report for this examination identified a litany of case reporting problems. The Corporation provided the draft report to the Inspector General for comment. The OIG audit staff used substantial portions of the report to develop audit steps for the case reporting audits.

6. May 1998 Corporation Issues Fact Book for the 1997 Program to Congress, Press, and Public. On May 13, 1998, the Corporation President issued a nation-wide message on the Fact Book stating, we are just completing the Fact Book (nation-wide report on program performance) and we think this publication provides overwhelming documentation of LSC's success in achieving its mission, and we hope that it will build further support for the program in the Congress and the public. The fact book was issued to congressional appropriators and legislators in May 1998. It was released with an accompanying Corporation President message stating it included complete statistics on 1997 activities and preliminary reports and estimates for 1998. He also stated that the 1997 statistics augur well for the future of legal services and, despite a slight reduction in overall program staff, the number of cases closed during the year showed a modest increase over 1996 levels. The Corporation provided this document to congressional appropriators and legislators as the Congress deliberated on the FY 1999 appropriation and also used it to support the FY 2000 budget request.

7. May 26, 1998 Corporation Issues Report on Alameda Program. The Corporation provided this report to the Inspector General on May 27, 1998. It reported, among other things, that the program failed to carry out basic processes regarding client eligibility, case management, and case reporting. It deemed the program's intake system and client eligibility documentation as wholly inadequate. It evidenced reporting prohibited cases, providing services to over-income clients, duplicative reporting, and misuse of categories such as client withdrew and referred after legal assessment. It concluded by stated the program extensively violated Corporation reporting directives and provided multiple inaccurate numbers in report to the Corporation. The Corporation President decided to stop funding the program on June 26, 1998.

8. June 13, 1998 OIG Receives Draft Audit Report on Northern Virginia Program. The report identified significant case reporting problems including a 3,432 overstatement of open cases in the report to the Corporation. The report showed many of the cases were no longer being serviced and dated back to the early 90's and into the 80's. Evidence suggested many cases still in the system as open had been reported as closed in previous years.

9. June 26, 1998 Inspector General Analyzes Case Data in Corporation's Case Reporting System and Provides Report to OIG Staff and Corporation. The Inspector General analyzed case report information provided by 269 legal services programs. The information was obtained from the database that produced the fact book for the 1997 program. The Inspector General distributed the information to the OIG staff and discussed the analysis with the Corporation's Vice President for Programs and members of the headquarters staff on July 28, 1998. The Inspector General stated that the numbers are likely wrong and astounding. He cited cost per case variations ranging from $97 per case for one program to $4,642 for another. The variances signify problems with the quality of case data and possible uneconomical or inefficient program operations.

10. July 20, 1998, Inspector General Receives and Comments on OIG Staff Analysis of Quality of Data in Corporation's Case Reporting System. The Inspector General received a written report from OIG staff, as requested, on the overall quality of grantee case reports submitted to the Corporation. This scope of the review was the 269 case service reports submitted by grantees for the 1997 program. It was performed at Corporation headquarters and supplemented by on-site visits to two local programs. The report concluded that the overall quality of data in the case reporting system was poor, at best. It identified an estimated several hundred thousand questionable cases in the system. It stated that the Corporation's policy of reporting cases primarily funded with non-Corporation funds makes the Corporation and grantees vulnerable to a possible charge that they may be padding the books to justify continuation of the program. It attributed the over-counting problems to Corporation efforts to bolster the case-count, local program mismanagement of cases, excessive open case inventories, excessive numbers of case referrals in the system and non-standard computer hardware and software as the underlying causes. 112 local programs exceeded open case norms and 55 programs exceeded case referral norms established by the Corporation. As examples of the problems, the author of this report used the Florida Rural program as an example of open case problems and the San Diego and San Francisco programs as examples of the referral problems with attendant client eligibility problems. After this review was completed and after the three programs had been contacted by OIG staff, the three programs collectively reduced reported case reports for the 1997 program from 102,979 open and closed cases to only 29,364 cases. The Inspector General thanked the author for the paper and expressed concern about how to deal with the "primarily" financed with non-Corporation funds issue. On an earlier date, he indicated in writing that this was a very serious problem. The Inspector General discussed contents of this report with the Corporation President and Vice President for Programs.

11. July 28, 1998, OIG Meets with Corporation Vice President and Headquarters Staff. The Inspector General arranged and attended the meeting. The issues contained in the June 26 and July 28 analysis were discussed along with the results of the Northern Virginia and Houston audits. The Northern Virginia audit disclosed serious case management problems. The Houston audit disclosed serious double-counting problems spanning quite a few years as well as problems with controlling open case inventories. The Inspector General subsequently reported the Northern Virginia program overstated open cases by 3,432 (69 percent of reported total). He also reported that the Houston program overstated closed cases by 1,945 cases (21.5 percent of reported total).

12. August 3, 1998 the Corporation Reduces Florida Rural Case Report for the 1997 Program by 39,471 cases. The OIG staff contacted the program on July 7, 1998, and received information from the program indicating the reported cases did not exist. After being informed by the OIG staff of this serious irregularity, the local program and the Corporation processed an internal adjustment but did not process an adjustment in the report provided to Congress. The Inspector General was aware of this serious case over-counting problem but did not authorize an audit of the program or tell Congress about it.

13. August 7, 1998, OIG Receives Draft Audit Report on the Houston Program. The audit was performed in June 1998 and identified serious problems with the management of open case inventories and reporting single case more than once. The program's database produced a report showing over 15,000 instances where the same client had more than one case in the system. The draft report was slightly delayed to allow OIG staff to complete the July 20 analysis of system deficiencies as requested by the Inspector General.

14. September 3, 1998, Assistant Inspector General Sends Letter to Corporation Vice President for Programs. As the result of an OIG audit of the San Diego program in August 1998, the Assistant Inspector General reported to the Corporation's Vice President for Programs the San Diego program had overstated the number of reported closed cases for the 1997 program by "at least 21,504" cases. This finding was developed and resolved during an on-site visit to the program several weeks earlier. The pervasive cause of this overstatement (over 14,000 instances) was the failure of the program to determine financial eligibility as required by the LSC Act and Corporation regulations. The local program claimed in a letter to OIG that it began counting these matters as cases several years earlier upon advice received from Corporation representatives. The local program admitted the overstatement and agreed to process an adjustment in August 1998. The OIG staff revisited the program in October to review other matters. The matter of the overstatement was resolved on the first day of the audit in August 1998 when the program agreed to process the adjustment. The adjustment eventually occurred on January 22, 1999 for 21,788 cases. The program followed up with reduced case figures for the 1998 program on March 1, 1999,that was 23,906 cases fewer than originally reported for the 1997 program. The Inspector General incorrectly stated in the September 29, 1999 hearing that this phase of the audit was not completed until October 1998.

15. September 12, 1998 Corporation Board Meets and Discusses Case Reporting Problems. The Corporation President discussed case reporting problems identified by OIG at the public session of the Board meeting. The minutes of this meeting chronicle exact comments. In subsequent public statements, the Corporation President admitted that the Inspector General kept him informed about the case reporting audits during the summer of 1998.

16. September 18, 1998 Corporation Issues Report on the Farmworker of North Carolina Legal Services Program. The Corporation reported, among other things, that the program failed to document client eligibility in a large percentage of cases as required by the LSC Act and Corporation regulations. It also reported that case reports provided to the Corporation inappropriately included ineligible and rejected matters, which overstated the case reports. The Corporation provided this report to OIG.

17. September 23, 1998 OIG Meets with Corporation Vice President and Headquarters Staff on the Results of the First Phase of the San Diego Audit. The Inspector General arranged and attended this meeting. The OIG staff presented the audit findings on the 21,504 case overstatement as discussed in the Assistant Inspector General's letter of September 3. During the meeting other important issues were discussed. They related to access issues involving the program's computer and associate volunteer lawyer program.

18. September 23, 1998 Inspector General Comments on Inaccurate Case Data Supplied to Congress. Responding to a message from OIG staff that the Corporation's fact book for the 1997 program was grossly exaggerated, the Inspector General stated in writing he agreed that the information the Corporation provided to Congress was inaccurate. He also stated that he was not going to make a public comment on the Corporation's case statistics until February 2000. He said he wanted to give the Corporation a chance to fix the problem. This decision effectively prevented the Congress from learning about the case reporting problems prior to approving the FY 1999 appropriation.

19. September 30, 1998, Inspector General Semiannual Report to the Congress. The Inspector General reported that the Corporation did not have any significant problems, abuses, or deficiencies". The only reference in the report to the subject of case reporting was a simple statement that five case reporting audits had begun during the period. The Board endorsed this report. At the time of this report, Corporation leadership and the Inspector General were aware of three OIG analyses, which evidenced systemic case reporting problems. The July 20 analysis and report disclosed very serious case reporting and over-count problems at the Northern Virginia, Houston, San Diego, Florida Rural, and San Francisco programs as well as a host of other programs identified in the backup documents for this analysis. Despite evidence of significant case reporting problems, the Inspector General would not authorize an audit of the Florida Rural program and actually removed the San Francisco program from the audit schedule after discussions with the Corporation President. At the time, The Inspector General and the Corporation leadership were also aware of serious case reporting problems at the Central Michigan, Alameda, and Farmworker of North Carolina programs. They were also aware that the Corporation had provided inaccurate case information to Congress in support of the FY appropriation request in February 1998. They also knew that Congress was still deliberating on the FY 1999 appropriation. Final approval occurred on the appropriation on October 21, 1998.

20. October 1998 OIG Issues Final Audit Report on Northern Virginia Program. The audit was performed in April/May 1998 and identified overstatements totaling 3,959 cases.

21. October 21, 1998 Congress Approved a $17 million Appropriation Increase for the Corporation.

22. November 5, 1998 OIG Briefs the Second Phase of the San Diego Audit to Corporation's Vice President and Headquarters Staff. The Inspector General arranged and attended this meeting. The OIG briefed the Corporation's Vice President on the second phase of the San Diego audit. The OIG staff reported that it confirmed the program reported about 2,400 cases that did not exist. It also reported the program granted access to computer and associate program offices.

23. November 1998 Corporation Board Resolves Charges of Misconduct Against the Inspector General for Attempting to Mislead Congressional Staff, Misusing Office for Personal Purposes, and Violating Corporation's Communication Policy with Congress.

24. On or about December 2, 1998, OIG Briefs Results of Miami Audit to Corporation's Vice President and Headquarters Staff. The Inspector General and Assistant Inspector General reported that the program overstated 16,418 closed cases and 462 open cases in reports submitted to the Corporation for the 1997 program. The primary cause of the closed case overstatement was the failure of the program to determine client eligibility before referring the applicants elsewhere. The primary cause of the open case problem was the failure to manage open case inventories.

25. December 7, 1998, the Inspector General asks Corporation Board Chairman to Discuss the Results of OIG Audits with Private Association. The Inspector General asked the Board Chairman, in writing, to discuss serious case reporting problems identified by OIG audits at the annual meeting of the National Legal Aid and Defenders Association. The problems he asked to be discussed dealt with audit findings relating to the San Diego and Miami programs. At the time, the draft audit reports had not been formally issued. The final audit reports were issued in March 1999 after the March 3, budget hearing. At the time of the Inspector General's request, the Corporation Leadership and the Inspector General were unwilling to share this information with the Congress.

26. December 16, 1998, OIG Management Receives Draft Audit Report on San Diego Program. The first phase of the San Diego audit was completed in August 1998 and identified a closed case overstatement in the case report for the 1997 program totaling at least 21,500 cases. The second phase of the audit was completed in October and identified an additional 500 closed case overstatement. The primary reason for of the overstatement of at least 14,000 cases was because the program did not determine eligibility as required by the LSC Act, Corporation regulations, and case reporting standards. The program also did not accept these telephone applicants into the program or legally assess the merits of the issues presented to the program.

27. December 30, 1998, the San Francisco Program Requests the Corporation to Reduce Reported Case Statistics for the 1997 program by 12,356 cases. The OIG staff contacted the program in the spring on several occasions to arrange an audit of the program. The executive director eventually went on sabbatical leave. The Inspector General removed this program from the audit schedule in July 1998 after discussions with the Corporation President. The reduced numbers appear to pertain to the failure of the program to determine client eligibility prior to referring applicants elsewhere. The Corporation and OIG staff reported this reduction to the Inspector General in January 1999.

28. December 31, 1998, OIG Management Receives Draft Audit Report on Miami Program. The Miami audit was performed in November 1998 and identified the overstatements in the case report for the 1997 program totaling 462 open cases and 16,418 closed cases. The primary reason for the closed case overstatement was because the program did not determine eligibility as required by the LSC Act, Corporation regulation, and case reporting standards. The program also did not accept these telephone applicants into the program or legally assess the merits of the issues presented to the program. If eligibility is not determined local programs should not accept applicants into the program or legally access the merits of issues.

29. January 22, 1999, the Corporation Reduces the San Diego Program Case Report by 21,788 cases. The case reduction was the result of an agreement reached on August 10, 1998, with the OIG staff. The reduction was necessary primarily because the program did not determine client eligibility prior to referring applicants elsewhere and reporting the cases to the Corporation. The Corporation and OIG staff reported this reduction to the Inspector General in January 1999.

30. On or about March 1, 1999, the Miami Program Submits a Case Report for the 1998 Program that was 17,110 Cases less than the Previous Year. The substantial case reduction over the previous year was the direct result of OIG work. The reduction was necessary primarily because the program did not determine client eligibility.

31. March 3, 1999, Budget Hearing before the House Appropriations Subcommittee. The Corporation used the fact book for the 1997 program and the closed case portion of the handbook to justify, in part, a requested appropriation increase of $40 million for the program. In written testimony and opening remarks, the Corporation Leadership did not mention anything about any case reporting problems. When asked by a Subcommittee member, the leadership and Inspector General denied existence of a problem. When pressed, they stated IG Act and government auditing standards prevented them from informing the Congress about problems that did exist. They insisted the problems were not significant and widespread.

32. March 15-19, 1999, House Government Reform and Oversight Staff Contacted the Inspector General. The House staff asked the Inspector General about the case reporting problems discussed in the March 3 budget hearing. The Inspector General assured the staff that the case reporting problems occurred in one discreet category (referred after legal assessment), were not program wide, and were not found at other programs audited by the OIG. As evidenced by the facts, these statements of the Inspector General were untrue.

33. March 1999 OIG Issues Final Audit Report on San Diego Program. The audit was performed in August and October 1998 and identified several thousand cases that did not exist, significant eligibility problems, and net overstatements totaling 21,741 cases.

34. March 1999 OIG Issues Final Audit Report on Miami Program. The audit was performed in November 1998 and identified significant eligibility problems and overstatements totaling 16,193 cases.

35. March 31, 1999, Semiannual Report to the Congress. The Inspector General reported issuing three audit reports (Northern Virginia, San Diego, and Miami) during the period, two after the March 3 hearing, which reported overstatements totaling about 42,000 cases. The Board endorsed the report and stated the vast majority of overstatements pertained to "legitimate services". In fact, about 30,000 of the case overstatements in this report were primarily the result of program failure to properly determine client eligibility as required by the LSC Act and Corporation regulations before referring applicants elsewhere. In these instances, the local program recorded telephone contacts as cases even though no legal services were provided and they did not even "legally assess" the legal issues presented to them because the calls were handled by telephone operators. The Corporation Board misrepresented the 30,000 cases to Congress as "legitimate services" when, in fact, they represented "potential violations" of the LSC Act and Corporation regulations.

36. April 8, 1999 Associated Press Investigation Reveals that Five Legal Services Programs (Northern Virginia, San Diego, Miami, Florida Rural, and San Francisco) Overstated Annual Caseload by more than 90,000 Cases.

37. April 8, 1999 Corporation Issues Press Release Claiming, among other things, the National Impact of Case Reporting Issue is Minor, Programs have No Incentive to Over-report Cases, and the Inspector General Has Not Found Any Evidence of Fraud.

38. April 1999 Corporation Board Passes a Resolution to Increase Inspector General's Salary.

39. May 3, 1999, House Majority Leader, Chairman of House Government Reform and Oversight Committee, and Three Members of House Appropriations Subcommittee Ask GAO to Review Case Over-counting Problems. The GAO reviews five of the largest programs in the system (New York, Chicago, Baltimore, Los Angeles, and Puerto Rico) and finds, in a report issued June 25, 1999, the programs overstated annual caseloads by nearly 75,000 of about 221,000 cases reported to the Corporation and Congress for the 1997 program.

40. May 14, 1999, Board Member Sends Letter to House Majority Leader and Entire House of Representative Criticizing House Member Who Inquired About Case Reporting Problem in March 3, 1999 Budget Hearing.

41. May 14, 1999, Corporation Requests Local Programs to Self-Inspect and Certify Reported 1998 Case Data.

42. May 1999 OIG Issues Final Audit Report on Prairie State Program. The Audit was performed October 1998 and identified eligibility problems and case overstatements totaling 1,642 cases.

43. June 25, 1999 GAO Issues Report to Congress on Substantial Problems in Case Reporting by Five of LSC's Largest Grantees (Baltimore, Chicago, Los Angeles, New York City, and Puerto Rico Programs. The review was performed in May/June 1999 and identified that nearly 75,000 of about 221,000 cases reported by these programs for LSC's 1997 legal services program were questionable.

44. July 1999 OIG Issues Final Audit Report on Houston (Gulf Coast) Program. The audit was performed in June 1998 and identified eligibility problems and case overstatements totaling 2,023 cases.

45. August 1999 OIG Issues Final Audit Report on Wisconsin Program. The audit was performed in July 1998 and identified case overstatements totaling 698 cases.

46. September 1999 OIG Issues Final Audit Report on Eastern Missouri Program. The audit was performed June 1999 and identified eligibility problems and case overstatements totaling 5,872 cases.

47. September 1999 OIG Issues Final Audit Report on Philadelphia Program. The audit was performed April 1999 and identified eligibility problems and case overstatements totaling 3,332 cases.

48. September 1999 OIG Issues Final Audit Report on Monroe County Program. The audit was performed April 1999 and identified eligibility problems and case overstatements totaling 4,926 cases.

49. September 1999 OIG Issues Final Audit Report on Baltimore Program. The audit was performed May 1999 and identified case overstatements total 4,499 cases.

50. September 1999 the OIG Still Had Not Issued Final Audit Report on New Orleans Program. This audit began in June 1998 and reviewed 1997 program data. The OIG revisited the program in October 1998. OIG revisited this program again in October 1999, audited 1998 program data, and issued a report in 2000 identifying overstatements 1,319 cases. The OIG did not explain what happened to the earlier evaluation of the 1997 case statistics.

51. September 29, 1999 Hearing Before House Judiciary Subcommittee. The Inspector General did not disclose (1) all case reporting problems identified through all OIG activities such as the OIG analyses and examinations; (2) the provision of the government auditing standards allowing interim oral and written reports on unfinished audits; (3) the complete circumstances on the San Diego audit; and (4) the failure of many programs to determine eligibility as required by the LSC Act and Corporation regulations as the primary reason for the case over-counting. The Inspector General testified to the Subcommittee that the primary cause of the case overstatements identified during the course of the OIG reviews was because local programs failed to provide legal services on 30,053 reported cases. He failed to mention that these 30,053 reported cases were deemed invalid by his audit staff primarily because local programs failed to determine eligibility as required by the LSC Act and Corporation regulations and also failed to provide any legal service to the people who contacted the programs by phone. This non-compliance with law is a much more serious matter and undoubtedly would have triggered concern about the integrity of the entire program had the Inspector General been truthful in his testimony.

2. The OIG issued audit reports on the Northern Virginia, Gulf Coast Houston, San Diego, Miami, Prairie State, and Wisconsin programs. The GAO issued a report on the Baltimore, New York City, Puerto Rico, Chicago, and Los Angeles programs.

3. OIG staff and GAO staff examined annual case reports submitted 13 of the 269 grantees. These grantees collectively reported that their programs produced 397,295 cases in 1997. This number represents 20.5 percent of the total number of cases reported to Congress (1,932,613 cases) for the 1997 legal services program.

4. OIG staff and GAO staff determined that 172,570 of the 397,295 (43.4 percent) cases reported to LSC and included in the LSC report to Congress for the 1997 program were invalid and/or questionable.

5. GAO performed the reviews in May and June 1998 at the request of Congress. Congress requested the special GAO review after LSC leadership and the LSC Inspector General persisted in misrepresenting the scope, magnitude, and types of the case over-counting problems.

6. LSC staff reviewed three other case reports submitted by the Central Michigan, Alameda, and Farmworkers of North Carolina programs for the 1997 program. They also found serious case reporting problems. The problems identified at the Alameda and North Carolina programs were so serious that LSC decided to cease funding one program and fined the other.

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