Legal Fees Paid by the FDIC to Dickstein, Shapiro & Morin, L.L.P.

Legal Fees Paid by the FDIC to Dickstein, Shapiro & Morin, L.L.P.

(Audit Report No. 98-063, June 23, 1998)

Summary

The Office of Inspector General (OIG) has completed an audit of legal fees paid to Dickstein, Shapiro & Morin, L.L.P. The audit was conducted by the independent public accounting firm (IPA) of Ollie Green & Company, CPA's, through a contract with the OIG, and covered billings paid for the period from January 1, 1990 through December 9, 1993.

The objective of the audit was to determine whether Dickstein, Shapiro & Morin's legal bills were adequately supported and in compliance with the cost limitations set forth by the FDIC and that the charges for legal services were reasonable. The total fees paid to the firm during the audit period were $738,286. The IPA identified questioned costs of $8,742 from an audit sample of $37,172.

Recommendations

That the Assistant General Counsel, Legal Operations Section, Legal Division, disallow:

(1) $7,865 for unsupported time charges,
(2) $699 for unallowable expenses,
(3) $121 for hourly rate variances, and
(4) $57 for unsupported expenses.

Management Response

Management disallowed questioned costs totaling $703. Although management's corrective actions for recommendations 1, 2, and 4 differed from the recommended corrective actions, we consider management's response as providing the requisites for a management decision on each of the recommendations.

In recommendation 1, the OIG recommended disallowance of $7,865 for professional fees not supported by original time sheets or other source documentation. Management allowed all of the questioned costs because the Legal Division had never advised outside counsel of the standards for electronic billing. The Legal Division has decided to accept the law firm's computer generated records as adequate support for the fees billed. The law firm asserted that its computerized records were the original time sheets. Based on its review, the IPA concluded that the computerized time and billing controls did not ensure data integrity. Therefore, the IPA only accepted time charges supported by original time sheets. The OIG will continue to question $7,865, which represents the amount of professional fees not supported by original time sheets.

Due to the increased use of computerized records, the Legal Division entered into an effort with the OIG to study internal controls for billing systems. The OIG and Legal Division jointly developed minimum standards for electronic billing systems which were distributed to all outside counsel on December 31, 1997.

In recommendations 2 and 4, the OIG recommended disallowances of $699 for unallowable expenses and $57 for unsupported expenses, respectively. Management allowed $117 based on additional information and disallowed $582 of the unallowable expenses. Accordingly, the OIG has reduced its questioned costs for unallowable expenses to $582. Management allowed the $57 questioned for unsupported expenses. However, we will continue to question the $57 in unsupported expenses because the support provided relates to other invoiced amounts.

Based on the IPA's audit work, $8,742 in questioned costs were reported to management in the draft audit report. After considering $703 in disallowances taken by management and management's comments on the IPA's findings, we will report questioned costs of $8,625 (including $57 in unsupported costs) in our Semiannual Report to the Congress.

Last Updated 03/27/01