MICRONESIAN LEGAL SERVICES CORPORATION

Finding 2025-001 LSC Financial Guide § 3.6.2 Physical Inventory Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2025 Repeat Finding From Prior Audit? Yes Finding Type: Significant deficiency Criteria: Section 3.6.2 of the LSC Financial Guide requires recipients to perform and document a physical inventory of all capital assets recorded in the property subsidiary ledger at least once every two years. The inventory should include a physical count of assets, reconciliation of the physical count to the property subsidiary ledger, investigation and resolution of discrepancies, and appropriate approval and documentation for asset disposals or write-offs. Documentation should include the date of the inventory, personnel performing the count, evidence of supervisory review, and reconciliation of differences identified during the inventory process. Condition: During the 2025 audit, management represented that a physical inventory of capital assets was performed during 2024. However, MLSC was unable to provide sufficient documentation to support that the inventory was properly completed in accordance with the LSC Financial Guide. Specifically, we noted the following: • Documentation supporting the physical inventory performed in 2024 was incomplete and did not identify the personnel who performed the inventory, the date of the physical count, or evidence of supervisory review. • The results of the physical inventory were not reconciled to the property subsidiary ledger, and no documentation was available showing that discrepancies, if any, were investigated and resolved. Finding 2025-001 LSC Financial Guide § 3.6.2 Physical Inventory, continued • Documentation supporting asset disposals or write-offs, including management approval, was not available. • Several assets on the fixed asset listing were identified as damaged, inactive, or no longer in service; however, no supporting documentation was maintained to demonstrate that these assets had been evaluated for disposal or removed from the accounting records where appropriate. As a result, we were unable to determine whether the physical inventory performed in 2024 was complete or accurate, or whether the property records accurately reflected the capital assets owned by MLSC as of December 31, 2025. Cause : MLSC did not establish adequate procedures to document the physical inventory process or reconcile the results of the physical inventory to the property subsidiary ledger as required by the LSC Financial Guide. In addition, management did not maintain sufficient documentation to support asset disposals, write-offs, and supervisory review of the inventory process. Effect: Failure to properly perform, reconcile, and document the required physical inventory results in noncompliance with LSC Financial Guide § 3.6.2. Without a reliable and documented physical inventory, MLSC cannot adequately demonstrate the existence, completeness, and accuracy of its capital assets. This increases the risk that capital assets may be misstated, lost, stolen, damaged, or improperly disposed of without timely detection and appropriate accounting treatment. Recommendation: MLSC should strengthen its capital asset inventory procedures to ensure compliance with LSC Financial Guide § 3.6.2. At a minimum, management should: • Perform and document a complete physical inventory of capital assets at least once every two years. • Reconcile the physical inventory results to the property subsidiary ledger and investigate and resolve all differences. • Maintain documentation identifying the date of the inventory, personnel performing the count, evidence of supervisory review, and reconciliation procedures performed. • Maintain written approval and supporting documentation for all asset disposals and write-offs. Finding 2025-001 LSC Financial Guide § 3.6.2 Physical Inventory, continued Management’s Response and Corrective Action Plan: MLSC acknowledges the finding and concurs in part. In response to 2024 audit, MSLC committed to completing a future physical inventory in accordance with the corrective action plan with an expected completion date of June 30, 2026, to include the date of the count, signature of the personnel conducting the inventory, reviewer and proper documentation for any write-offs or disposals, and reconciliation with the subsidiary ledger. The physical inventory was initiated in accordance with the corrective action plan. However, implementation was significantly disrupted by two severe typhoons that impacted the island in April and early of July 2026. These events resulted in prolonged office closures, and the temporary suspension of normal operations, preventing completion of the inventory within the planned timeframe. To date, one office has completed its physical inventory, signed by the person who conducted the inventory and the reviewer, and reconciliation of the physical inventory results to the property subsidiary ledger is currently underway. Responsible person: Chief Fiscal Officer, Jocelyn Mallari Corrective action planned: Complete the physical inventory of all offices; reconcile inventory results to the property subsidiary ledger; investigate any discrepancies identified, resolved and ensure all required inventory documentation is complete, including supervisory review and approvals, is maintained. Assets determined to be missing, obsolete, or no longer in service will be processed in accordance with MLSC’s property management procedures and the Financial Guide. Anticipated completion date: August 31, 2026.

Finding 2025-002 LSC Compliance 45 C.F.R Part 1629 bond insurance Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2025 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: Pursuant to 45 C.F.R. Part 1629, recipients of Legal Services Corporation (LSC) funding are required to maintain a fidelity bond or similar insurance covering employees, officers, directors, agents, volunteers, and third-party contractors who handle LSC funds. The required coverage must protect against losses resulting from fraud, dishonesty, theft, embezzlement, forgery, misappropriation, wrongful conversion, willful misapplication, and other fraudulent or dishonest acts. In accordance with 45 C.F.R. § 1629.6, recipients are required to maintain fidelity bond or similar insurance coverage in an amount of not less than ten percent (10%) of the recipient's annualized LSC funding for the preceding year. The LSC Financial Guide also recommends that the Board of Directors annually review and ratify the organization's fidelity bond or similar insurance coverage. Condition: During our audit, we noted that MLSC's fidelity bond (or similar insurance coverage) expired during 2025 and was not renewed. As a result, MLSC was operating without the fidelity bond or similar insurance required under 45 C.F.R. Part 1629. Management informed us that it made numerous attempts to obtain replacement coverage by contacting multiple insurance providers within the Commonwealth of the Northern Mariana Islands. However, insurance carriers were either unwilling or unable to provide the required fidelity bond or similar insurance coverage. As of the date of our audit report, MLSC had not been able to secure the required coverage despite its documented efforts. Finding 2025-002 LSC Compliance 45 C.F.R Part 1629 bond insurance, continued Cause : The required fidelity bond or similar insurance was unavailable from insurance carriers contacted by MLSC. Although management made reasonable and documented efforts to obtain the required coverage, no insurer was willing or able to issue a policy meeting the requirements of 45 C.F.R. Part 1629. Effect: MLSC was not in compliance with the fidelity bond insurance requirements established by 45 C.F.R. Part 1629 during the period in which coverage was unavailable. Without the required fidelity bond or similar insurance, MLSC is exposed to an increased risk of financial loss resulting from fraudulent or dishonest acts involving individuals who handle LSC funds. In addition, continued noncompliance could result in findings by the Legal Services Corporation or other oversight agencies. Recommendation: MLSC should continue its efforts to obtain fidelity bond or similar insurance that complies with 45 C.F.R. Part 1629. Management should maintain documentation of all communications with insurance providers, including applications, quotations, declinations, and other correspondence demonstrating its efforts to obtain the required coverage. If coverage remains unavailable, MLSC should promptly notify the Legal Services Corporation in writing of the circumstances, provide documentation of its efforts to obtain coverage, and request guidance regarding acceptable alternative risk mitigation measures or other actions necessary to address the regulatory requirement. Finding 2025-002 LSC Compliance 45 C.F.R Part 1629 bond insurance, continued Management’s Response and Corrective Action Plan: MLSC concurs with the finding. The required commercial crime/fidelity bond insurance expired on November 27, 2024, after the insurance carrier declined to renew the policy due to a pending insurance claim. Since that time, MLSC has made continuous efforts to obtain replacement coverage by contacting multiple insurance providers in the CNMI and Guam. Although one insurer offered limited commercial crime coverage, the proposed policy did not satisfy the requirements of 45 C.F.R Part 1629 because it excluded one office and provided substantially lower coverage limits than required. MLSC continued to pursue alternative coverage, including submitting an application through Travelers Casualty and Surety Company for coverage that would meet LSC requirement. Effective July 1, 2026, MLSC obtained the only fidelity coverage reasonably available in the market, thereby resolving the finding. Corrective Action Taken - Secured a fidelity bond effective July 1, 2026 - Maintained documentation of all efforts to obtain replacement coverage during the period coverage was unavailable. - Continued reporting insurance procurement efforts to the Board of Directors. - Will continue to pursue broader fidelity coverage as market conditions permit. - Will monitor renewal date to ensure timely renewal before expiration and prevent future lapses in coverage. Responsible Persons: Executive Director, Lee Pliscou Completion Date: July 1, 2026

Finding 2024-001 Financial Management Tasks Finding Type: Significant Deficiency in Internal Controls Criteria: Government Auditing Standards require that a nonprofit entity establish and implement internal control policies to ensure that financial statements are properly prepared, reviewed, and reconciled on a timely basis, and that all financial information is accurate. According to the LSC Financial Guide, recipients must have procedures in place to properly account for and track all capitalized real and personal property, conduct a physical count of assets listed in the property subsidiary ledger at least once every two years, and maintain a cost allocation policy that is consistently applied. Condition: Based on our 2024 audit, we received the trial balance three times—in March, May, and June and each version contained significant differences. For the initial versions of the trial balance many accounts either lacked supporting schedules or the schedules provided did not reconcile to the corresponding trial balance accounts. The financial statements were not prepared or reconciled in accordance with the supporting records. For example, accounts payable and accounts receivable schedules were not provided; the property and equipment schedule provided was from 2023 with no updates, which was not reasonable; indirect cost allocations were incomplete; and grant expense allocations were not properly prepared or reconciled. Cause: MLSC did not have an effective process in place to ensure the timely preparation, review, and reconciliation of financial statements on a periodic basis. Effect: As a result, the financial records were incomplete and inaccurate, creating audit conditions that increased the risk of material misstatement and reduced the reliability of financial reporting. Finding 2024-001 Financial Management Tasks, continued Recommendation: We recommend that MLSC strengthen its internal control procedures over financial reporting by: 1. Establishing a formal timeline and responsibilities for the preparation, review, and reconciliation of financial statements. 2. Ensuring that all supporting schedules (including accounts receivable, accounts payable, and fixed asset schedules) are reconciled to the general ledger before submission to auditors. 3. Performing periodic reviews of indirect cost allocations and grant expense allocations to ensure they are accurate and comply with the organization’s cost allocation policy. 4. Conducting regular training for accounting and management staff on financial reporting and reconciliation procedures in accordance with LSC and Government Auditing Standards requirements. Management’s Response and Corrective Action Plan: MLSC acknowledges the finding and concurs with the auditor’s recommendation. Management is committed to maintaining accurate, timely, and reliable financial reporting in accordance with Government Auditing Standards and the LSC Financial Guide. Responsible person: Exec. Director, Lee Pliscou Corrective action planned: MLSC currently has a Financial Management and Internal Control Policy. This policy is strictly being enforced and fully implemented to ensure compliance with both the LSC Financial Guide and Government Auditing Standards. • MLSC has established a financial oversight and audit committee, and identifies the duties of the committee in writings. • The financial oversight and audit committee is required to review quarterly the management report prepared by the Chief Fiscal Officer. • The Chief Fiscal Officer will review and reconcile the subsidiary ledger after the month-end close and before the submission of monthly report to the Board of Directors. • To ensure that internal controls are strengthened and that future financial statements are properly prepared, the Chief Fiscal Officer will conduct an annual training with all accounting staff on reconciliation procedures before the year-end close. Anticipated completion date: Dec. 31, 2026

Finding 2024-002 LSC Financial Guide § 3.3 Fund Balance Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2024 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: Per LSC Financial Guide § 3.3 Fund Balance, LSC carryover funds must be used on a “first-in, first-out” basis, before the expenditure of current grant funds awarded for the same purposes. Condition: The 2024 audit schedule that we received indicated that MLSC did not first use the fund balance carried over from the past year, and instead spent current LSC grant received and adjusted the ending fund balance at the year end. Cause : MLSC did not follow the LSC Financial Guide § 3.3 Fund Balance guidance, MLSC did not monitor the ending balance of the LSC fund and did not properly review the use of the LSC fund balance. Effect: Not using prior-year carryover funds first results in noncompliance with LSC Financial Guide § 3.3. This increases the risk of misstating the fund balance, reporting inaccurate carryover amounts to LSC, and creating questioned costs if expenditures are not properly matched to the correct grant year. It also reflects delayed use of prior-year funds, which may affect LSC’s assessment of MLSC’s grant administration. Finding 2024-002 LSC Financial Guide § 3.3 Fund Balance, continued Recommendation: MLSC should monitor the fund balance timely, and should ensure that the prior year fund balance is spent before the current year’s grant. MLSC should separately list the expenditures spent under the prior year carryover and the expenditures under the current year LSC grant. Management’s Response and Corrective Action Plan: MLSC management would like to provide the following clarification regarding the finding that MLSC did not use the prior-year end fund balance before expending the current year’s LSC grant. Just in the first month of 2024, we already have a substantial deficit from the funding that we received. We have started using the fund balance that is in our bank account. There was no other source of funds for us but the fund balance. Being non-profit, whatever is on hand is used first and whatever is received last is the actual cash on hand at the end of the year. It is also important to note that MLSC’s local funder's grants are not received on a regular monthly basis. Some are disbursed quarterly, and FSM is received only once—typically toward the end of the fiscal year. The appearance of using current-year funds first is due to the timing and presentation in the audit schedule, not the actual fund flow. Responsible person: Chief Fiscal Officer, Jocelyn Mallari Corrective action planned: None Anticipated completion date: Completed.

Finding 2024-003 LSC Financial Guide § 3.6.1 Capitalized Assets Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2024 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: Per LSC Financial Guide § 3.6.1 Capitalized Assets, recipients must have procedures in place to properly account for and track all of their capitalized real and personal property, such as land, buildings, leasehold improvements, capital improvements, furniture, fixtures, and equipment. LSC requires capitalized property and equipment to be recorded in a property subsidiary ledger that reconciles to the general ledger. The property subsidiary ledger must include: • Description of the property • Date acquired • Check number (if applicable) • Original cost (if purchased) • Fair value (if donated) • Method of valuation (if donated) • Salvage value (if any) • Funding source(s) • Estimated life • Depreciation method • Identification number • Location Recipients are required to report in their financial statements the value of LSC-funded vs. non-LSC funded property and equipment, including accumulated depreciation. Condition: MLSC did not maintain the accounting records to track all fixed assets purchased, including the description, the useful life, the value and the depreciation during the year. We discovered that during the year, fixed assets were not monitored and no lapsing schedule was maintained. We were not provided a listing that segregated the LSC-funded property and equipment from the non-LSC funded property and equipment. Finding 2024-003 LSC Financial Guide § 3.6.1 Capitalized Assets, continued Cause : MLSC did not monitor or to keep a list of the fixed assets on hand to track the value, the existence or the deprecation of the fixed assets during the year. Effect: The absence of a complete and accurate fixed asset subsidiary ledger results in noncompliance with LSC Financial Guide § 3.6.1. Without proper tracking, MLSC cannot reliably determine the value, location, or existence of its assets, nor verify whether depreciation is recorded correctly. This increases the risk of misstated financial statements, inadequate safeguarding of property, and incorrect reporting of LSC-funded versus non–LSC-funded assets. Recommendation: MLSC should follow the LSC Financial Guide § 3.6.1 Capitalized Assets guidance and keep tracking all the fixed assets. Management’s Response and Corrective Action Plan: MLSC management acknowledges the finding and concurs in part. MLSC has an established Fixed Asset and Capitalization Policy in accordance with LSC Financial Guide § 3.6.1, which includes maintaining a detailed subsidiary ledger and lapsing (depreciation) schedule. During the audit, the lapsing schedule was provided to the auditors upon request. However, the master fixed asset record (which includes itemized property details, funding source, and location) was not submitted because it was not requested during the audit process. Responsible person: Chief Fiscal Officer, Jocelyn Mallari Corrective action planned: To further ensure full compliance and to strengthen documentation and transparency, MSLC, with the supervision of the Chief Fiscal Officer, MLSC continues to enforce the existing Fixed Asset and Capitalization Policy and ensures that all property records are maintained in accordance with LSC Financial Guide 3.6.1. MLSC ensures to conduct periodic internal review of fixed assets registry and continues to maintain these records and made them readily available and provided to auditors, even if not specifically requested. Anticipated completion date: Completed.

Finding 2024-004 LSC Financial Guide § 3.6.2 Physical Inventory Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2024 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: LSC Financial Guide § 3.6.2 requires recipients to perform a physical inventory of all assets listed in the property subsidiary ledger at least once every two years. The inventory process must be documented, including the physical count, reconciliation of any differences between the physical count and the subsidiary ledger, and proper authorization and documentation for any write-offs. Documentation should include dates, personnel involved, evidence of supervisory review, and approvals for asset disposals. Condition: We inquired with the MLSC, and MLSC was able to provide the list of fixed assets for each office. However, there is no record showing the inventory process and the investigation and reconciliation of any differences between the physical inspection and the property subsidiary ledger. The list of fixed assets in each office was not reconciled to the property ledger and we could not determine the accuracy of the inventory count or the property ledger as there was no property ledger for 2024. There were no documents to support fixed assets written off, or for the approval of the write offs. There were many items on the fixed assets listing indicated as damaged or inactive. We were able to see the list but we could not verify if the physical count was performed. There was no signature of the person who performed the inventory count, and no date or signature of a witness or for a management review. Cause : MLSC did not perform physical inventory count or reconcile the physical count to the property subsidiary ledger. Finding 2024-004 LSC Financial Guide § 3.6.2 Physical Inventory, continued Effect: Failure to conduct and document a complete physical inventory results in noncompliance with LSC Financial Guide §3.6.2. Without a reconciled, verified asset listing, MLSC cannot ensure the accuracy or existence of its fixed assets, increasing the risk of misstated asset balances, unrecorded write-offs, or undetected loss, damage, or misappropriation of property. The absence of supporting documentation also limits MLSC’s ability to demonstrate proper stewardship of LSC-funded assets. Recommendation: MLSC should follow the LSC Financial Guide § 3.6.2 Physical Inventory and conduct the required periodic physical inventories count. Management’s Response and Corrective Action Plan: MLSC management acknowledges the finding and concurs in part. MLSC has an established Fixed Asset and Physical Inventory Policy in accordance with LSC Financial Guide § 3.6.2. The policy requires that a complete physical inventory be conducted at least once every two years, and MLSC has been performing these inventories regularly. However, management recognizes that the documentation of the most recent physical inventory was incomplete, specifically lacking the signatures, dates, and reconciliation notes required to demonstrate full compliance. Responsible person: Chief Fiscal Officer, Jocelyn Mallari Corrective action planned: To address this issue and ensure full adherence to the policy, MLSC, with the supervision of the Chief Fiscal Officer continued the implementation of Physical Inventory Procedures requiring a full physical inventory every two years, including proper documentation and reconciliation with the subsidiary ledger. To improve documentation, the Chief Fiscal Officer will conduct training to ensure that each future physical inventory count includes the date of the count, signature of personnel conducting the inventory, a witness and management reviewer, reconciliation records, and authorization and documentation for any write-offs or disposals. Anticipated completion date: June 30, 2026.

Finding 2024-005 LSC Financial Guide § 3.7.1 Cost Allocation Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2024 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: Per LSC Financial Guide § 3.7.1 Cost Allocation. The cost allocation policy must address the following: • Direct and indirect cost definitions • Direct cost allocation methodology(ies) • Indirect cost allocation methodology(ies) including allocation bases (e.g., total direct costs, direct salaries and wages, attorney hours, numbers of cases, numbers of employees) • Frequency of allocation • Who conducts the allocation and who performs the review • Documentation requirements to support the allocation • Reconciliation process related to salaries and wages directly charged to LSC grants and contracts Methodology to address “exception for certain indirect costs” Condition: Our testing and inquiries indicated that MLSC performs its cost allocations through year-end reclassifications rather than through a consistent, documented process during the year. Direct costs were reclassified at year-end to assign expenses to the appropriate funding source, and indirect costs were calculated and allocated only after multiple versions of the trial balance were prepared. MLSC provided only an Excel adjusting journal entry for the indirect cost allocation, with no supporting documentation, no calculation worksheets, no approval evidence, and no explanation of the allocation methodology. As a result, we were unable to verify the accuracy of the allocations or determine whether the methods used complied with LSC requirements. Finding 2024-005 LSC Financial Guide § 3.7.1 Cost Allocation, continued Cause : MLSC did not perform timely review or monitoring of direct and indirect cost allocations, and the allocation methodologies used were not clearly defined, consistently applied, or aligned with LSC guidance or MLSC’s internal policies. Effect: MLSC did not comply with LSC Financial Guide § 3.7.1. The lack of documented, consistent, and supportable allocation methodologies increases the risk of inaccurate cost allocations, misclassification of expenses, and questioned costs due to insufficient support for charges to the LSC grant. Recommendation: MLSC should follow the LSC Financial Guide § 3.7.1 Cost Allocation. Management’s Response and Corrective Action Plan: Management agrees. Responsible person: Executive Director Lee Pliscou Corrective action planned: This has been corrected as of October 2025. MLSC Board of Directors approved a revised MLSC Accounting Manual with updates intended to comply with LSC’s Financial Guide on cost allocation. In particular, our new cost allocation policy addresses: ● Direct and indirect cost definitions ● Direct cost allocation methodology ● Indirect cost allocation methodology including allocation bases (total direct costs) ● Frequency of allocation (annual) ● Who conducts the allocation and who performs the review (Chief Fiscal Officer, Executive Director) ● Documentation requirements to support the allocation (calculation work papers) ● Reconciliation process related to salaries and wages directly charged to LSC grants and contracts ● Methodology to address “exception for certain indirect costs.” Anticipated completion date: Completed.

Finding 2024-006 CSR Handbook § 3.3 Timely Closing of Cases Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2024 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: Per CSR Handbook § 3.3 Timely Closing of Cases, to ensure accurate case service reporting for each grant term, LSC recipients are required to close cases in a timely manner, LSC recipients should close cases in the grant year in which legal assistance has ceased, although there are limited exceptions to this provision. Condition: Based on our testing of the cases, 5 out of 142 cases or 3.5% of the cases we selected, the cases were not closed on time. Here are the case numbers. 13E-7000131-1 20E-7017958-1 17E-6000738-1 22E-6000296-1 21E-5010550-1 Cause : MLSC did not monitor many of the cases and track the case status to ensure the cases are closed on time. Finding 2024-006 CSR Handbook § 3.3 Timely Closing of Cases, continued Effect: Failure to close cases in the year legal assistance ended results in noncompliance with CSR Handbook § 3.3 and increases the risk of inaccurate case service reporting to LSC. Untimely case closures can lead to overstated active caseloads, misreported service volumes, and reduced reliability of MLSC’s CSR data, which may affect LSC’s assessment of MLSC’s program performance and compliance. Recommendation: MLSC should follow the CSR Handbook § 3.3 Timely Closing of Cases. Management’s Response and Corrective Action Plan: Management agrees. Management will address this as follows: Responsible person: Lee Pliscou The cases identified in the audit as not having been closed on time do not reflect any pattern—the cases are from different offices, with different staff assigned to each, and with differing, unique fact situations which lead to the office keeping them open. Management will provide training to the regional office directing attorneys on following protocols to review open cases in each office to ensure cases are timely closed. Management will provide follow up supervision for each of the directing attorneys by running reports from our case management system to identify cases in their respective offices that may need attention to ensure they are timely closed. Anticipated completion date: February 28, 2026

Finding 2024-007 LSC Financial Guide § 2.1.1 a. General Accounting Controls Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2024 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: Per LSC Financial Guide § 2.1.1 a. general accounting controls, the recipient needs to have written policies and procedures to request and approve changes to the chart of accounts. Condition: MLSC does not have written policies and procedures to request and approve changes to the chart of accounts. We did not see any documentation to indicate any requests or approvals of the changes to the chart of accounts. Cause : MLSC did not establish policies and procedures to govern the changes to the chart of accounts. Effect: The absence of documented policies and procedures for requesting and approving changes to the chart of accounts results in noncompliance with LSC Financial Guide § 2.1.1(a). Without formal controls, there is an increased risk of unauthorized or inconsistent account changes, misclassification of transactions, and reduced reliability of financial reporting. Recommendation: MLSC should develop and implement written policies and procedures governing changes to the chart of accounts. These procedures should outline who may request changes, who must review and approve them, and what documentation is required to ensure proper authorization and maintain an accurate and controlled accounting structure. Finding 2024-007 LSC Financial Guide § 2.1.1 a. General Accounting Controls, continued Management’s Response and Corrective Action Plan: Management agrees. Management has addressed this as follows: Responsible person: Lee Pliscou Since July 2024, management has required that accounting staff must request changes to the chart of accounts by completing a Google Form, which is reviewed and approved by the Executive Director. This policy is carried over into our new Accounting Manual, approved by MLSC’s Board in October 2025: • Accounting staff must request any changes to our GL account using this form: https://docs.google.com/forms/d/e/1FAIpQLSceN9Qaipv786HA5HH8VR2ayb6MmtW-aocJDYwHauU1RLC45w/viewform?usp=sf_link • The Executive Director will review these promptly, and approve as informed by our financial operations. • Records of the request and review are saved here: https://docs.google.com/spreadsheets/d/10__3CiYXwORgspzysd_xtnxYFovuPeDLbHSAN3A2JQE/edit?usp=sharing We have been using this form since July 2024. Anticipated completion date: Completed.

Finding 2024-008 LSC Financial Guide § 2.5.3 Electronic Data Processing and Cybersecurity Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2024 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: Per LSC Financial Guide § 2.5.3 Electronic Data Processing and Cybersecurity, the recipient is required to have written security policies and procedures for physical and digital assets including all financial data and records. The policies and procedures should be part of an overall data and records security policy and an annual overall risk-assessment process. Condition: MLSC did not conduct an annual risk assessment. MLSC’s cybersecurity policies are not complete and do not include controls and other measures to safeguard physical and digital assets, maintenance of physical access controls for servers and storage rooms, and development and periodic testing of its emergency disaster prevention and recovery plan and performance of regular backups and offsite storage of data records. There is no person within MLSC who is formally assigned to oversee computer and data security responsibilities. Cause : MLSC did not establish the policies and controls that meet the LSC Financial Guide § 2.5.3 Electronic Data Processing and Cybersecurity requirements. Effect: MLSC’s lack of a comprehensive cybersecurity program and annual risk assessment results in noncompliance with LSC Financial Guide § 2.5.3. The absence of documented security controls, defined responsibilities, disaster recovery procedures, and offsite backups increases the risk of unauthorized access, data loss, service disruption, and compromised financial and client information. These gaps weaken MLSC’s ability to safeguard both physical and digital assets. Finding 2024-008 LSC Financial Guide § 2.5.3 Electronic Data Processing and Cybersecurity, continued Recommendation: MLSC should develop and implement a complete cybersecurity and data security framework consistent with LSC Financial Guide § 2.5.3. This should include (1) conducting an annual risk assessment, (2) establishing formal security policies and procedures, (3) defining staff roles and responsibilities, (4) implementing physical and digital access controls, and (5) maintaining and periodically testing a disaster recovery and data backup plan, including offsite storage of critical records. Management’s Response and Corrective Action Plan: Management agrees, and has addressed this as follows: Responsible person: Lee Pliscou MLSC Board of Directors approved a revised accounting manual in October 2025 which requires an annual cybersecurity assessment and response in compliance with LSC Financial Guide § 2.5.3, together with a formal risk assessment of banking operations to identify and address vulnerabilities, as required by LSC Financial Guide § 3.2.1. Specifically, our cybersecurity policies include the following requirements: ● Perform (and document) an annual risk assessment ● Resolve any risk findings or conclusions ● Maintain physical access controls for servers and storage rooms ● Develop and periodically test an emergency disaster prevention and recovery plan ● Perform regular back up of electronic records and systems stored offsite or in a virtual environment with easy-to-use restoration options ● Formally assign computer and data security responsibilities The risk assessment process: ● Identifies the physical and digital assets susceptible to cyberattacks ● Identifies risks to those assets (risks should be evaluated annually for changes) ● Evaluates the risks (e.g., high, medium, or low) based on likelihood and impact ● Documents the results of the risk assessment, including the development and implementation of appropriate controls Finding 2024-008 LSC Financial Guide § 2.5.3 Electronic Data Processing and Cybersecurity, continued Also, per our new Accounting Manual, MLSC conducts a risk assessment of its electronic banking policies and procedures to identify areas that need additional safeguards and protections. We do this in conjunction with the annual cybersecurity risk assessment. As of November 2025, MLSC has contracted with a consultant to provide such an assessment, and the contractor has delivered a first draft of an assessment. Anticipated completion date: MLSC has already completed the requirement to have policies in compliance with LSC Financial Guide Sections 2.5.3 (Electronic Data Processing and Cybersecurity) and 3.2.1 (Bank accounts). MLSC will complete the annual assessment by February 28, 2026.

Finding 2024-009 LSC Financial Guide § 3.2.1 Bank accounts Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2024 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: Per LSC Financial Guide § 3.2.1 Bank accounts, the recipient needs to have policies and procedures for all banking activities, including electronic banking. Specifically, LSC requires recipients to conduct risk assessments of their electronic banking policies and procedures to identify areas that need additional safeguards and protections. Condition: MLSC did not have policies and procedures for this area and no risk assessment was conducted for this area. Cause : MLSC failed to update the policies and procedures to include the risk assessment to meet the LSC financial guide requirement. Effect: MLSC's lack of documented policies, procedures, and risk assessments for banking activities, including electronic banking, increases the risk of non-compliance with LSC requirements and potential mismanagement or fraud related to bank accounts. Recommendation: MLSC should develop and implement comprehensive policies and procedures for all banking activities, including electronic banking, and conduct formal risk assessments to identify and address vulnerabilities. This will ensure compliance with LSC Financial Guide § 3.2.1 and enhance the safeguarding of their banking operations. Finding 2024-009 LSC Financial Guide § 3.2.1 Bank accounts, continued Management’s Response and Corrective Action Plan: See the response on finding 2024-009

Finding 2024-0010 LSC Financial Guide § 3.2.4 Cash Disbursements Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2024 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: Per LSC Financial Guide § 3.2.4 Cash Disbursements, the recipient is required to have procedures for timely review and approval of transactions (including electronic transactions) , a process to confirm disbursements are made to approved payees, procedures in place to identify and prevent improper or duplicate payments, procedures in place to verify invoice details (vendor, quantities, and price of goods/services received) against goods/services received. 3.2.4.a Employee Expense Reimbursements Recipients are required to adopt written expense reimbursement policies and procedures. The policy should include procedure details, roles/responsibilities, reimbursement submission deadlines, documentation requirements, review/approval requirements. 3.2.4.b Travel Expenses, Recipients are required to have detailed local travel policies. 3.2.4.b.ii Travel Advances In the event a recipient allows employees to request and receive travel advances, the recipient’s travel policy must identify when the employee is permitted to request a travel advance, how much the employee is permitted to request, and the process for such an advance to be approved. The policy should also address those situations where an employee must repay an advance. Condition: MLSC did not have a complete cash disbursement policy to demonstrate compliance with LSC requirements. Cause : MLSC failed to update the cash disbursement policy to reflect the requirements under § 3.2.4 Cash Disbursements. Finding 2024-0010 LSC Financial Guide § 3.2.4 Cash Disbursements, continued Effect: MLSC's lack of a comprehensive cash disbursement policy that addresses timely review, approval, verification, and controls increases the risk of improper, duplicate, or unauthorized payments, leading to potential non-compliance with LSC requirements and financial mismanagement. Recommendation: MLS should develop and implement a complete cash disbursement policy that includes procedures for review and approval of transactions, confirmation of payees, prevention of improper or duplicate payments, and verification of invoice details. This will ensure adherence to the requirements outlined in LSC Financial Guide § 3.2.4 and strengthen internal controls over cash disbursements. Management’s Response and Corrective Action Plan: MLSC concurs with the audit finding. Management acknowledges that the previous cash disbursement policy did not fully incorporate the requirements outlined in LSC Financial Guide § 3.2.4. MLSC believes that with the implementation of the revised Cash Disbursement Policy and related staff training, all recommendations in the audit finding have been fully addressed. Responsible person: Exec. Director, Lee Pliscou and Chief Fiscal Officer, Jocelyn Mallari Corrective action planned: MLSC has reviewed and revised the policy, and the Board of Directors approved an updated Cash Disbursement policy that fully aligned with the LSC Financial Guide. MLSC staff were trained on the new procedures to ensure full understanding and compliance. The revised policy was shared with all the staff at MLSC’s share drive. Anticipated completion date: Completed

Finding 2024-0011 LSC Financial Guide § 3.2.5 Petty Cash Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2024 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: Per LSC Financial Guide § 3.2.5 Petty Cash, The policy must address the following: • Identify the employees responsible for custody, disbursement, approval, and reconciliation with proper segregation of duties • Require monthly reconciliation of all petty cash funds (including confirming actual cash balance against records) and outline proper documentation • Describe allowable uses of petty cash (e.g., transaction limit, types of expenses) • Describe the documentation necessary to support each petty cash disbursement • Outline procedures to follow in the event there is an overage or shortage in the fund Condition: MLSC’s petty cash policy did not include the required elements outlined in the LSC Financial Guide §3.2.5, such as segregation of duties, monthly reconciliation procedures, allowable uses, supporting documentation, and procedures for overages or shortages. Additionally, MLSC failed to provide documentation of monthly reconciliations and cash counts, and the only recorded cash count lacked proper verification details. The theft of $400 in petty cash in May 2024 remained unresolved, with no recovery or clearance. Cause: MLSC did not update or establish a petty cash policy that meets the requirements of LSC Financial Guide §3.2.5, leading to inadequate controls and oversight over petty cash transactions. Finding 2024-0011 LSC Financial Guide § 3.2.5 Petty Cash, continued Effect: MLSC's failure to comply with the established policies and procedures increases the risk of misappropriation, unaccounted petty cash, and weak internal controls, as evidenced by the unresolved theft and lack of proper reconciliation documentation. Recommendation: MLSC should develop and implement a comprehensive petty cash policy aligned with LSC Financial Guide §3.2.5 requirements. The policy should include segregation of duties, monthly reconciliation procedures with proper documentation and approval, clear allowable uses, and procedures for addressing overages or shortages. Regular monitoring and proper recordkeeping will strengthen internal controls and prevent future loss or mismanagement of petty cash. Management’s Response and Corrective Action Plan: MLSC management acknowledges the finding and concurs with the auditor’s recommendation. Management would like to note that MSLC has an existing Petty Cash Policy, which was recently updated and approved by the Board of Directors to ensure full compliance with LSC Financial Guide §3.2.5 that address the following: • Segregation of duties • Required monthly reconciliation of all petty cash funds • Allowable use of petty cash • Documentation necessary to support each petty cash disbursement • Procedures to follow in the event of overage or shortage in the fund Responsible person: Chief Fiscal Officer, Jocelyn Mallari Corrective action planned: The updated Petty Cash Policy is immediately implemented to strengthen internal control, ensure accountability, and prevent future loss or mismanagement. A monthly petty cash reconciliations for each office is scheduled. These corrective actions will ensure compliance with LSC requirements Anticipated completion date: Completed

Criteria: Per 45 C.F.R. ? 1636.2, 1636.3, 1636.5 compliance requirement. A recipient must, prior to the initiation of litigation or settlement negotiations, prepare for each case in which it files a complaint in a court of law or institutes or participates in litigation against a defendant, or engages in pre-complaint settlement negotiations where the filing of a suit has been authorized by the plaintiff if negotiations fail, a dated written statement (in English and, if necessary, in another language which the plaintiff understands) signed by each plaintiff, enumerating the particular facts known to the plaintiff supporting the complaint. Condition: For 1 or 1% of 94 cases selected for testing, MLSC did not generate statements of facts. 15E-6000380-1 Cause: MLSC established the client identity and statement of facts policy. However, MLSC did not follow the policy. Effect: MLSC is not in compliance with client identity and statement of facts requirements. No questioned cost is presented as the fee incurred is not determinable. Recommendation: MLSC should monitor compliance with its policies over client identity and statement of facts requirements. Views of Responsible Officials: MLSC agrees and describes corrective action in the Corrective Action Plan.

In accordance with 45 CFR Part 1635.3 Timekeeping Requirement, recipients of LSC funds are required to account for the time spent on all cases, matters, and supporting activities by their attorneys and paralegals, whether funded by LSC or by other sources. Each record of time spent on a case must contain a unique client name or case number. MLSC uses the Prime Reporting System. Condition: For nine (9) or 11% of eight-two case files tested, time spent on the case was not recorded as follows: Case No. Date Opened 19E-9002802 10/01/2019 20E-9002830 01/10/2020 20E-9002877 04/17/2020 20E-9002958 12/14/2020 20E-7003723 09/07/2020 20E-7003744 09/07/2020 19E-7003703 09/04/2020 19E-7003645 09/02/2020 20E-7003913 09/29/2020 Cause: MLSC did not enforce controls over timekeeping requirements. MLSC does not require the recording of time incurred by secretaries on individual cases classified as brief services and allows for the aggregation of hours on such brief services. Effect: MLSC is not in compliance with timekeeping requirements. No questioned cost is presented as the time incurred is not determinable. Recommendation: MLSC should establish procedures over timekeeping requirements. Views of Responsible Officials: MLSC agrees and describes corrective action in the Corrective Action Plan.

Criteria: In accordance with 45 CFR Part 1635.3 Timekeeping Requirement, recipients of LSC funds are required to account for the time spent on all cases, matters, and supporting activities by their attorneys and paralegals, whether funded by LSC or by other sources. Each record of time spent on a case must contain a unique client name or case number. MLSC uses the Prime Reporting System. Condition: For nine (9) or 15% of sixty case files tested, time spent on the case was not recorded as follows: Case No. Date Opened 18E-7002808 6/12/2018 19E-8009589 5/27/2019 19E-8009525 4/22/2019 19E-8009916 10/14/2019 19E-6000360 3/28/2019 19E-6000836 7/12/2019 19E-6000231 3/04/2019 19E-6001413 11/26/2019 19E-6000014 1/04/2019 Finding 2019-001 Part 1635 Timekeeping Requirement, continued Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2019 Repeat Finding From Prior Audit? Yes Finding Type: Significant deficiency Cause: MLSC did not enforce controls over timekeeping requirements. MLSC does not require the recording of time incurred by secretaries on individual cases classified as brief services and allows for the aggregation of hours on such brief services. Effect: MLSC is in noncompliance with timekeeping requirements. No questioned cost is presented as the time incurred is not determinable. Recommendation: MLSC should establish procedures over timekeeping requirements. Views of Responsible Officials: MLSC agrees and describes corrective action in the Corrective Action Plan.

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