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CLA reports unmodified audit opinion for Legal Services Corporation, flags restatement and material weakness
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Summary
CLA told the combined audit and finance committees that it issued an unmodified opinion on Legal Services Corporation's financial statements but included an emphasis-of-matter noting a prior-period restatement and a related material weakness; the committee moved to a closed session with auditors and will finalize the audit via notational vote after requested deliverables are provided.
Kimberly Penn, principal on the engagement for CLA, told the combined audit and finance committees that CLA issued an unmodified opinion on Legal Services Corporation’s financial statements — "the highest level of assurance," she said — while including an emphasis-of-matter paragraph describing a restatement of prior-period net assets.
Roxanne Caruso, assistant inspector general for audit, told the committee that CLA is reviewing committee feedback with its National Assurance/technical group and that the draft reports were not available at the meeting; she said the committees will not vote on acceptance of the draft financial statement audits at this session and instead will finalize the audits through a notational vote or at another meeting after CLA and Legal Services Corporation coordinate on outstanding items.
Penn said the restatement reflects a change in classification of net assets — previously reported as donor-restricted, now presented as without donor restriction — and that CLA identified a material weakness related to that restatement. She said CLA performed tests of compliance with certain laws, regulations, contracts and grants in the course of the audit and "did not note any noncompliance" within the scope of those tests.
On governance communications, Penn reported no change in the planned audit scope, neutral and consistent disclosures, no significant difficulties encountered and no disagreements with management. She told the committee that finalizing the audit will require LSC's management representation letter and an updated confirmation from LSC's internal general counsel; the auditors also said they had incorporated committee comments into the draft and were seeking a technical confirmation about which comparative period the restatement should cover (the auditors said guidance points to the earliest comparative period, which would be 09/30/2023, but that final technical confirmation was pending).
Following the presentation, a committee member moved, and another seconded, that the combined audit and finance committees and board members enter closed session so the committees could speak directly with CLA "about the audit without management present," as meeting staff explained. The chair announced the motion carried and participants moved into a breakout/closed session. The committees returned to open session later and then moved to adjourn; the chair declared the meeting adjourned.
Next steps identified by the auditors and committee staff include CLA issuing updated draft reports that reflect the committee’s requested changes, LSC providing the management representation letter and internal counsel confirmation, and the committee completing the acceptance of the financial statement audit by notational vote or at a future meeting.
