Purpose

The objective of our examination was to determine whether payments Unified Courts System (Courts) made to Legal Aid Society of New York City (Legal Aid) from April 1, 2012 through March 31, 2013 were appropriate under the terms and conditions of the contract.

Background

The Attorneys for Children Program (AFC Program) provides legal representation and associated support services (e.g. social workers, investigators, etc.) to minors residing in ten New York counties. To carry out the AFC Program in the New York City region, for the period January 1, 2010 through December 31, 2014, Courts entered into a $236,512,842 contract with Legal Aid. Legal Aid is comprised of a Civil Practice, a Criminal Practice, and a Juvenile Rights Practice (JRP). The JRP administers the AFC Progra through the contract with Court. During our examination period, Courts paid Legal Aid quarterly advances totaling $39,450,972, or 100 percent of the amount budgeted for the annual period.

Key Findings

We reviewed select payments totaling $5,448,384 Courts made to Legal Aid for salaries, equipment, and real estate rentals and found Legal Aid spent these AFC program funds appropriately.However, we found Courts overpaid Legal Aid $412,184 for fringe benefit expenses that were not actual and allowable under the terms and conditions of the contract. Legal Aid did not appropriately reconcile fringe benefits at year end, moved funds in every non-personal services budget category without providing Courts with the required notification, and moved $546,803 from non-personal services budget categories to personal services budget categories without obtaining the required prior written approval from Courts.

Courts officials did not timely identify these inappropriate and/or unreconciled expenses or the unapproved movement of funds between budget categories. Had Courts exercised the appropriate level of scrutiny over the AFC Program, which includes verifying that the amounts on Legal Aid’s reconciliation reports were correct and complied with the terms and conditions of the contract, officials may have increased the likelihood of identifying the inappropriate expenses.

During the examination, we discussed with Courts and Legal Aid how to improve the contract language to allow for better transparency of contract funds. We worked with our Bureau of Contracts to provide suggestions for potential contract revisions for Courts’ review. Subsequent to these discussions, we noted that for AFC Program contracts starting in January 1, 2015, Courts amended the contract language to allow for better transparency and accountability of contract funds.

Key Recommendations

• Recover $412,184 overpaid to Legal Aid for fringe benefit expenses during the examination period.
• Determine the amount of actual fringe benefit expenses Legal Aid incurred since the inception of the contract in 2010. Recover any additional overpayments.
• Ensure Legal Aid performs sufficient reconciliations as required by the contract.
• Modify the budget and reconciliation reports to ensure transparency and accountability for contract funds.
• Ensure Legal Aid obtains prior approval from Courts before interchanging funds between budget categories
• Promote an environment that emphasizes the importance of internal controls and professional skepticism by monitoring to ensure Legal Aid is meeting the terms and conditions of the contract.
• Consider reviewing terms and conditions of other contracts with Legal Aid to determine if payments for fringe benefit and administrative expenses were appropriate.