Legal Services Investigated for Waste

(CBS)  In this troubled economy, more people need free legal help. That's one reason why Congress is on track to give Legal Services Corporation a $50 million increase in its $390-million federal budget. The non-profit grants most of that money to 137 legal aid programs around the country, reports CBS News investigative correspondent Sharyl Attkisson.

But Senator Charles Grassley says too much of the money isn't going to help the poor.

"There's just a lot of money being wasted," Grassley said.

Grassley points to multiple GAO and Inspector General reports that have uncovered examples like these:

Legal Aid Defender Association of Detroit or "LADA" overpaid one contractor $500,000 - $267,000 of it federal tax money. They also spent thousands on alcohol. There were also "unsupported travel payments, unsupported cost reallocations and duplicate postings."

At California Indian Legal Services, the Inspector General questioned about $80,000 in costs, half of that related to one conference. According to the IG, CILS did such a poor job estimating conference attendance, it ended up paying $6,384 dollars for hotel rooms that were never used.

California Rural Legal Assistance has been under a cloud of investigation since September of 2005 and has refused to comply with a subpoena for documents. Yet it's received annual funding increases every year since. Legal Services says it has no choice but to fund the grantee according to a formula dictated by Congress, and that it will conduct its own investigation once the IG finishes its own.

Legal Aid of North West Texas in Ft. Worth reportedly spent $150,000 on a natural stone wall in new offices, shown in photos from The Washington Times. The Inspector General found the wall to be purely "decorative in nature," something Legal Services disputes.

"There should be not one dollar wasted upon some fancy stone project if it could be responding to the legal needs of low-income people," Grassley said.

Read a .pdf of the letter from Senator Charles Grassley

And while many Americans may have trouble getting loans a legal aid office, Philadelphia Legal Assistance Center, got caught using your tax dollars to give interest-free loans to its employees. They weren't even required to sign contracts, and the GAO says controls on those loans was "nonexistent."

A new Inspector General audit also finds Legal Services often bypassed competitive bidding, and failed to follow its own policies in 37 out of 38 consultant contracts reviewed.

And when the non-profit hosted a catered affair at the Capitol that cost nearly $5,000, the IG found it was paid for with tax money despite the invitation which claimed "no federal funds" were used.

The event was invitation-only and included purchase of alcohol, food, drinks, awards and photography.

The Inspector General also determined Legal Services violated its own by-laws by renewing the contract of Legal Services President Helaine Barnett behind closed doors without the appropriate public notice. Barnett was not available for an interview, but her organization gave us a letter saying it "reimbursed" taxpayers for the party on Capitol Hill. And those no-interest loans to employees? They were considered "salary advances."

Legal Services also says it has strengthened oversight and is fixing each problem raised. The group told Senator Grassley in a letter: "We have followed-up responsibly and implemented all recommendations made by GAO. With respect to the contracting recommendations made by the (Inspector General), we expect to implement them all by October 1, 2009." Meantime, the Senate is expected to approve the non-profit's 11 percent budget increase as early as this week.