Open Recommendations

We recommend the CEO perform a review of the Incurred Costs Grant budget application and timekeeping records related to the disasters from 2020 and 2021 to identify the actual hours worked and corresponding costs for case time and administrative leave hours for office closures. The review should clearly distinguish between distinct categories of hours, including actual case/matter/supporting activity hours and leave.

We recommend the CEO implement a procedure to ensure that all relevant information, including the dates of office closures, offices impacted or closed, and staff on administrative leave due to disasters Hurricane Laura and Winter Storm Uri are adequately documented; and do so each time such actions are taken in response to future disasters.

We recommend that the CEO revise LSLA’s contracting policy to require recompeting recurring purchases and long-standing contracts every three to five years.

We recommend that the CEO implement a process to ensure LSLA follows its procurement policy. This includes documenting bids for all applicable purchases. Additionally, sole-source justifications should be documented and approved.

We recommend that the CEO implement a process to ensure unauthorized personnel do not enter into contracts on behalf of LSLA. Alternatively, if LSLA decides that it would be beneficial to allow more flexibility in contract approval authority, this should be formalized in the written policies and any deviations from the written policies should be adequately documented and approved.

We recommend that the CEO ensure LSLA's written cost allocation policies are updated to fully align with LSC requirements. Subjective adjustments should be minimized, and the considerations resulting in those adjustments should be formalized in the policies.

We recommend that the CEO update LSLA’s cost allocation methodology to ensure unrestricted funds are equitably included as a source to pay for indirect costs.

We recommend that the CEO ensure LSLA allocates the maximum allowable indirect costs to all funding sources, as per LSC guidance.

We recommend the CEO update the LSLA Accounting Manual to include policies and procedures surrounding card usage, statement reviews, payment processes and the credit card reconciliation process.

We recommend the CEO establish explicit written policies and procedures for board travel reimbursement policies. In addition, the policies should stipulate when per diem allowance limits can be overridden as well as the required documentation of review and approval.

We recommend that the CEO revise LSLA's written policies to include the following details:
• Timeline for preparing management reports
• Identification of known commitments
• Contents of the income and expense report
• Support of projections by schedules that document assumptions used to arrive at final projected amounts
• Budget constructions from cost centers
• Format of management reports
• Preparation of a budget to actual report or similar report containing the required information

We recommend that the CEO implement a process to document management's review of monthly reports. This should include a signature and date to denote the review and ensure compliance with LSC’s Financial Guide.

We recommend the CEO update the LSLA Accounting Manual to include policies for reconciling labor costs with timekeeping records, and to ensure that paid time off is allocated proportionally based on hours worked across different funding sources.

We recommend that the CEO ensure LSLA's written policies reflect the actual practices in place and comply with the applicable legal requirements for unclaimed client funds.

We identified questioned costs of $438,032 due to improper documentation and non-compliance with disaster grant requirements.QC further broken down as follows:
• LADRC – Leave & Holiday Hours totaling $39,983 in Questioned Costs.
• Incurred Costs Grant – Unallowable Expenses Totaling $287,624 in Questioned Costs.
• Incurred Costs Grant – Leave Hours Totaling $110,425 in Questioned Costs.

The Chief, Tax Compliance Officer, should review the 1,130 tax returns with potentially erroneous clean vehicle tax credits and assess the additional tax owed, if any.

As of May 2024, our analysis identified 225 individual taxpayers who had their tax returns incorrectly rejected for Tax Year 2023. The IRS incorrectly rejected tax returns when the taxpayer claimed the Previously Owned Clean Vehicles Credit on the Form 1040, U.S. Individual Income Tax Return, Schedule 3, Additional Credits and Payments, and attached the Form 8936. This occurred because the business rule was looking for the Form 8936 to be attached to the specific line claiming the credit instead of attached to the tax return.

In February 2024, we notified the IRS of concerns with seven business rules on the Form 8936 not functioning as stated in the business rule documentation. These business rules ensure the accuracy of the calculations on the Form 8936. Although the rules worked appropriately based on the context of the tax form, the business rule documentation did not match the computer programming.

The Chief, Taxpayer Service should develop a strategic approach that includes the assessment of available data, such as the volume and geographic location of taxpayers receiving Letter 5747C, lack of appointment availability, etc., to proactively anticipate the potential demand for Saturday Help events at various TAC locations.

The Chief, Taxpayer Service should evaluate additional actions that can be taken to better assist taxpayers and reduce the demand on the TAC from individuals required to verify their identity, such as having dedicated Saturday Help events to conduct in-person identity verification.

The Chief, Taxpayer Services should implement a service-wide policy that will require the TACs holding Saturday Help events to follow a consistent triage process of taxpayers. Ideally, the process would allow TACs to identify taxpayers who are there seeking services that cannot be rendered and identify the estimated population(s) of taxpayers who will be able to be assisted at a particular site during Saturday operations, potentially reducing the crowd size at the TAC offices.

The Chief, Taxpayer Services should issue guidance to IRS TAC employees advising them to not triage taxpayers outside the facility and if they do go outside to engage with taxpayers to ensure the appropriate physical security measures are in place.

The Chief, Taxpayer Services should provide explicit notifications on the IRS website of closed sites that were previously listed and scheduled to be open.

Develop training for examination staff that
(a) provides an overview of the Bank Exams Tailored to Risk model risk metrics, adjustment factors, and bump-up rules.
(b) provides an overview of the process for using Bank Exams Tailored to Risk to scope an examination.
(c) reinforces the resources and guidance materials available to help examination staff understand these topics.

Establish a process to periodically assess the need for additional training as the Bank Exams Tailored to Risk Program redevelops the models and implements new adjustment factors and bump-up rules.