Standards for the Provision of Civil Legal Aid

Standard 1.1-3 on Fiscal Matters

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Standard

The governing body should assure the financial integrity and viability of the provider.

Commentary

General considerations

The governing body should assure that the provider achieves its budget goals and that its funds are spent and accounted for in a way that fully meets the provider's responsibility to its clients, its funding sources and the public. The governing body should rely on a senior manager to help assure that the provider effectively meets its responsibilities for budgeting, financial planning and accountability. Larger providers should consider having a senior manager who is qualified to act as the chief financial officer for the organization.

Budgeting and financial planning

The governing body's fiscal responsibilities begin with the adoption of a budget that commits available resources to the provider's priorities. Budget responsibilities involve more than mechanical approval of broad spending categories and perfunctory review to assure that income and expenditures balance. The governing body should approach the budget as the mechanism through which it implements major policy decisions on the provider's direction and operation. It should recognize, for example, that decisions about the provider's personnel budget may substantially affect its capacity to serve particular geographic areas or address specific substantive legal issues.

Budget planning also provides the opportunity to monitor the provider's receipt of projected income, assess future resource needs and plan for expected changes in available resources. Foreseeable expansion or reductions in resources should be anticipated in current budget decisions to ease the transition to a new level of operation.

The budget should include adequate resources to assure that the provider’s staff is capable of providing high quality legal assistance to its clients and to help the provider strike the appropriate balance necessary as it strives to achieve the goals set by these Standards. In order to encourage continued service to clients by experienced practitioners and to discourage high staff turnover, sufficient resources should be budgeted to assure that the provider offers adequate salaries and benefits to its staff. The provider’s management is responsible for spending resources according to the budget approved by the governing body. Budget decisions, however, cannot always anticipate the precise cost of provider activities or unforeseen contingencies. Some deviations will be unavoidable. The governing body should establish guidelines that give management the flexibility necessary to make reasonable adjustments in response to changing circumstances. Management should provide the governing body with periodic reports on the provider's fiscal situation to permit the governing body to monitor the provider's receipt of revenue and expenditure of funds and anticipate and correct potential resource problems.

Financial accountability

Oversight of the provider's finances carries the responsibility to assure that the provider's funds are spent for the purposes for which they were granted, are properly accounted for and that there is no fraud or misuse of funds. The governing body should act proactively to assure that the financial integrity of the provider is protected. It should adopt policies that require adequate internal controls to assure the reliability and integrity of financial and operating information. It should also assure that the provider is in compliance with federal and state laws governing whistleblower protection and the destruction of documents. It should assure that management takes appropriate action to correct any shortcomings identified in its fiscal accounting by an audit or other financial review.

A legal aid provider should undergo an annual independent financial audit that measures compliance with sound accounting principles and funder audit requirements. The governing body should adopt procedures that assure the highest level of service from its auditors. It should establish an active audit committee and should periodically solicit bids from auditing firms to perform the annual financial audit.

The governing body should be certain to hire auditors who are familiar with the special audit requirements that apply generally to non-profits and capable of meeting the specific audit requirements imposed by the provider's funders. The auditing contract should establish the work to be done and should specify the particular requirements imposed by the provider's funders. The contract should include the maximum cost for the audit and should provide for submission of a timely report, usually within 90 days of the close of the fiscal year.

On receipt of the financial report, the governing body's audit committee should meet with the auditors to discuss their findings, their recommendations for responding to identified problems, and their suggestions for improving and updating the provider's fiscal systems. The audit committee should report to the full governing body, which has ultimate responsibility for the provider's fiscal health.