LSC was established in 1974 as a private, nonprofit, federally funded corporation to provide legal assistance to low-income people in civil matters. LSC provides the assistance indirectly through grants to competitively selected local programs. LSC distributes funds to the grantees on the basis of the number of low-income persons living within a service area. Grantees may receive additional funding from non-LSC sources. During 1998, LSC funded 262 local grantees that operated through approximately 900 neighborhood law offices employing about 3,600 attorneys and 1,400 paralegals. Each local program is governed by its own board of directors and is required to spend at least 12.5 percent of its LSC grant to encourage private attorney involvement (PAI) in delivering legal services to low-income clients. In fiscal years 1998 and 1999, LSC received appropriations of $283 million and $300 million, respectively. LSC’s authorizing legislation restricts it from engaging in lobbying; political activities; class actions except under certain conditions; and cases involving abortion, school desegregation, and draft registration or desertion from the military. Annual appropriations laws have placed additional restrictions on the activities in which LSC grantees can engage, even with non-LSC funds. In 1996, for example, grantees were prohibited from engaging in challenges to welfare reform, litigation on behalf of prisoners, representation in drug-related public housing evictions, and representation of certain categories of aliens. Grantees must serve only those clients who meet financial and citizenship/alien eligibility requirements. With respect to client financial eligibility, local programs are to establish their own criteria, which, in general, require that clients’ income not exceed 125 percent of the federal poverty guidelines. With appropriate documentation of the grantee’s decision, clients who are between 125 percent and 187.5 percent of the federal poverty level may be found eligible. LSC regulations require that grantees (1) adopt a form and procedure to obtain eligibility information and (2) preserve that information for audit by LSC. With regard to citizenship/alien eligibility, only citizens and certain categories of aliens are eligible for services. For clients who are provided services in person, a citizen attestation form or documentation of eligible alien status is required. For clients who are provided services on the telephone, grantees must document that they made inquiries regarding the individuals’ citizenship/alien eligibility. LSC uses a Case Service Reporting (CSR) system to gather quantifiable information from grantees on the services they provide that meet LSC’s definition of a case. The CSR Handbook is LSC’s primary official guidance to grantees on how to record and report cases. According to the 1999 CSR Handbook, which revised and expanded the guidance in LSC’s 1993 Handbook, information about cases is an important indicator of the number of legal problems that programs address each year, and LSC relies on such case information in its annual request for federal funding for legal services. Audit reports on five grantees issued by LSC’s OIG between October 1998 and July 1999 reported that all five grantees misreported the number of cases they had closed during calendar year 1997 and the number of cases that remained open at the end of that year. The OIG found that all five grantees overstated the number of closed cases, while four overstated and one understated open cases. The OIG attributed the overreporting to such factors as (1) counting as cases telephone calls in which individuals were not provided any legal assistance and only partial eligibility determinations were made; (2) counting wholly non-LSC funded cases as LSC cases; (3) double counting of the same cases; (4) reporting cases as closed during 1997, or as still open at the end of 1997, when service ceased in prior years; and (5) counting as cases the provision of services to over-income clients. In June 1999, in response to Congress’ request for information on whether the 1997 case data of other LSC programs had problems similar to those reported by LSC’s OIG, we issued a report on our audit of five of LSC’s largest grantees: Baltimore, Chicago, Los Angeles, New York City, and Puerto Rico. We found similar types of reporting errors at the five grantees and estimated that, overall, 75,000 of the 221,000 open and closed cases that the five grantees reported to LSC were questionable. Interviews that we conducted with LSC officials and executive directors of the 5 audited grantees indicated that they had taken or were planning to take steps to correct the causes of these case-reporting problems. Our objectives were to determine (1) what efforts LSC and its grantees have made to correct problems with case service reporting, and (2) whether these efforts are likely to resolve the case reporting problems that occurred in 1997. To address the objectives, we reviewed documents that contained LSC case reporting guidance, interviewed cognizant officials at LSC headquarters, and conducted structured telephone interviews with a random sample of grantee executive directors. Specifically, we reviewed LSC regulations and LSC’s 1993 and 1999 CSR Handbook, as well as supplemental guidance that LSC distributed to grantees in the form of program letters and frequently asked questions and answers about case reporting. We also collected documentation and interviewed LSC officials and grantee executive directors to gather information about a self- inspection process that LSC required all grantees to undertake in order to determine the accuracy of their 1998 case data. In our telephone interviews with executive directors, we asked if the directors viewed LSC’s case reporting requirements as being clear, what changes they have made or planned to make as a result of the requirements, and the results of their self-inspection of 1998 case data. We also interviewed LSC officials and grantee executive directors about areas of case reporting that they felt needed further clarification. To identify the universe of LSC grantees, an LSC official referred us to the list of LSC programs on the corporation’s Internet Web site. As of July 15, 1999, the Internet site listed 256 programs. From this list, we randomly selected 80 programs for our sample. We developed the interview instrument, pretested it with executive directors from two grantees, revised the instrument based on the pretest results, and completed approximately 1-hour-long structured interviews by telephone with the executive directors of 79 of the 80 programs, for a 99 percent response rate. (After numerous attempts over several days, we were unable to contact the executive director of one LSC grantee.) Our sample was designed so that we could generalize our findings with 95-percent confidence and a maximum 10-percent margin of error to the universe of LSC grantees. We performed our work from July through September 1999 in accordance with generally accepted government auditing standards. We requested comments on a draft of this report from the President of LSC. LSC’s comments are discussed at the end of this letter and included as appendix I. LSC issued a new CSR Handbook and distributed other written communications intended to clarify reporting requirements to its grantees. Most grantees indicated that the new guidance helped clarify LSC’s reporting requirements, and virtually all of them indicated that they had or planned to make program changes as a result of the requirements. Many grantees, however, identified areas of case reporting that remained unclear to them. To address specific problems identified by the OIG and LSC’s own internal program reviews, LSC has issued revised reporting guidance. In November 1998, LSC issued the 1999 CSR Handbook, which replaced the 1993 CSR Handbook. The 1999 handbook instituted changes to some of LSC’s reporting requirements and provided more detailed information on other requirements than previously existed. LSC also distributed program letters and a list of frequently asked CSR questions and answers that further elaborated on points made in the 1999 handbook. The 1999 CSR Handbook instituted several notable changes to case reporting requirements. These included (1) procedures for timely closing of cases; (2) procedures for management review of case service reports; (3) procedures for ensuring single recording of cases; (4) requirements to report LSC-eligible cases, regardless of funding source; and (5) requirements for reporting PAI cases separately. In addition, grantees were required to use automated case management systems and procedures that would ensure that program managers had timely access to accurate information on cases and the capacity to meet their reporting requirements. On November 24, 1998, LSC informed its grantees that two of the changes in the 1999 CSR Handbook were to be applied to the 1998 case data. The two changes pertained to timely closing of cases and management review of case service reports. The timely closing provision required grantees to ensure that cases in which legal assistance had ceased in 1998, and was not likely to resume, would be closed prior to grantees’ submission of case service reports to LSC in March 1999. To the extent practicable, cases in which the only assistance provided to the client was counsel and advice, brief service, or referral after legal assessment were to be closed in the year in which these types of service were provided. Cases involving other types of service were to be closed in the year in which program staff determined that further legal assistance was unnecessary, not possible, or inadvisable and a closing memorandum or other case-closing notation was prepared. The management review provision required the executive director, or a designee, to review the program’s case service reports prior to their submission to LSC in order to ensure their accuracy and completeness. The remaining new provisions of the 1999 CSR Handbook were not applicable to 1998 cases. For example, for 1998, there was no requirement for grantees to ensure that cases were not double counted. For 1999, LSC is requiring the use of automated case management systems and procedures to ensure that cases involving the same client and specific legal problem are not reported to LSC more than once.