The Legal Services Commission (the Commission) is a body corporate established pursuant to subsection 6(1) of the Legal Services Commission Act 1977. As determined by subsection 6(3) of the Act the Commission is not an instrumentality of the Crown and is independent of the Government.
The Commission provides legal assistance throughout the State to people who, in matters arising under either Commonwealth or State laws, are in need of legal assistance. Assistance is provided both by Commission staff, and by referrals to private practitioners.
In meeting the cost of providing legal aid, the Commission is funded by the Commonwealth in accordance with an agreement between the Commonwealth and State Governments. The agreement commenced on 1 July 2000 and covers a four year period to 30 June 2004.
The funding provided by the State is determined through the budgetary process of the South Australian Government.
The Commonwealth grants received by the Commission are expended in accordance with the agreement between the Commonwealth and State Governments. Legal assistance is only to be provided within South Australia for matters arising under Commonwealth law, and being a matter of priority. The matters of priority are predominantly in the areas of family law, criminal law, and certain civil matters.
The State grants received by the Commission are expended on State Law matters and these are predominately criminal cases, and community advice and education.
The structure of the Commission is:
Operating Surplus from Ordinary Activities decreased by $1.4 million from $2.3 million to $900 000.
Grants from Commonwealth and State Governments increased by $1.7 million from $20.6 million to $22.3 million. This increase is principally attributable to general grant funding received from both the State and Commonwealth Government.
Total legal expenses increased by $1.1 million from $11.1 million to $12.2 million due primarily to an increase in expenditure in solicitor fees, council fees and disbursements to private practitioners reflecting an increase in the scale of fees and activity (ie referrals).
Section 25 of the Legal Services Commission Act 1977 provides for the Auditor-General to audit the accounts of the Commission in respect of each financial year.
The audit program covered all major financial systems and was directed primarily towards obtaining sufficient evidence to enable an audit opinion to be formed with respect to the financial statements and internal control.
The scope of the audit for 2001-02 included:
payroll
legal expenses and commitments
administrative expenses
revenue
cash receipting and banking
accounts receivable
non-current assets.
In addition, audit coverage included a review of the status of the implementation of some strategic mandatory elements of the Financial Management Framework for the Commission.
During the year a management letter communicating the results of the audit was forwarded to the Chairperson of the Commission and a satisfactory response was received. Issues raised and relevant responses are summarised in ‘Audit Findings and Comments’ hereunder.
The 1999-2000 and 2000-01 audits included a review of the Commission’s progress with respect to implementing the prescribed principles set out in the Financial Management Framework (FMF). The audits revealed that the Commission was progressing satisfactorily with respect to the Asset and Liability Management, Reporting and Transaction Processing components of the FMF, but that there was a need for further attention to the Planning and Analysis and Control components.
Audit coverage for 2001-02 included a follow-up of the progress made by the Commission relating to the implementation of the FMF. The follow-up revealed that the Commission continued to build on the progress achieved in previous years and, in Audit’s opinion, there continued to be scope for further improvement in relation to the implementation of the Control component of the FMF.
The 2001-02 audit revealed that at the time of the audit, responsible Commission staff were in the process of finalising a review of the Risk Management Plan with results of the review to be reported to the Commission in early 2002-03 once the review has been finalised. Audit also noted Commission staff developed a risk management reporting framework which was to include the annual reporting of the status of risk management strategies implemented to address identified risks. At the time of the audit this framework had not been documented or presented to the Commission for endorsement.
Audit recommended that the risk management reporting framework be appropriately documented and formally endorsed by the Commission.
Response
The Commission will consider the outcomes of a recent extensive review of its Risk Management Plan at its next corporate planning day. The amended Risk Management Plan will then be submitted to the Commission for formal endorsement.
The Commission's Audit Committee, with specific terms of reference, was established in June 1988 and was to meet approximately six times a year. The 2000-01 audit revealed that the terms of reference of the Audit Committee were not revised to reflect current practice. Further, Audit noted that the Commission had not reviewed the scope of the internal audit function to reflect the current control environment.
Audit follow-up conducted as part of the 2001-02 audit revealed that the Commission had progressed work regarding review of its Internal Audit Charter. It was noted, however, that
the Commission had not finalised its review of the internal audit function
the terms of reference for the Audit Committee had not been reviewed and appropriately updated
no officer was allocated with responsibility for the internal audit function, hence no internal audit reviews were performed.
The lack of an internal audit function may have a significant impact on agencies control environment and it is important to ensure that internal audit contributes to a cost effective control environment. Audit noted the Commission facilitated the finalisation of a draft Internal Audit Plan for 2002, however, at the time of the audit the plan had not been considered and approved by the Audit Committee nor had the Commission finalised resourcing arrangements with respect to undertaking the projects included in the plan.
Audit recommended the Commission review the requirements for an internal audit function and the terms of reference for the Audit Committee. Such review should include consideration of cost effective risk management. Subsequent to review, Audit recommended that the Commission finalise resourcing arrangements consistent with the outcome of the review.
Response
The Commission has been working with the Justice Portfolio and a consultant to develop a risk based internal audit plan. The results of this work will be considered by the Audit Committee and subsequently presented to the Commission. The Commission will then consider options for resourcing the internal audit function based on the established plan.
The 2000-01 audit revealed that the Justice Portfolio was in the process of writing a set of policies and procedures to be utilised by agencies within the portfolio and the Commission intended to utilise certain policies and procedures developed by the Justice Portfolio. Audit recommended the Commission consider formulating a framework for the adoption/development, documentation, promulgation and regular review of its policies, practices and procedures.
Audit follow-up conducted as part of the 2001-02 audit revealed that, in August 2002 the Commission finalised a register of Commission policies and procedures. The Commission, however, had not established a framework for the approval and review of its policies and procedures. In this regard, it was noted that the Commission's delegations of authority were silent regarding the approval of policies and procedures. It is considered good practice for the Commission's delegations of authority to specify who has delegated authority to approve Commission policies and procedures.
Audit recommended the Commission give consideration to establishing a framework for the approval and regular review of its policies and procedures. Also, Audit recommended that consideration be given to updating the Commission's delegations of authority to include details of who has delegated authority to approve policies and procedures.
Response
The Commission will consider the creation of a project to address Audit’s recommendation.
The audit of the Commission’s general control environment revealed that internal controls were operating satisfactorily. Notwithstanding this observation, Audit identified opportunities to enhance the existing controls. These matters were raised with the Commission for consideration and a satisfactory response was received.
As required by subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987, the audit of the Legal Services Commission included an assessment of the controls exercised in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities. The assessment also considered whether those controls were consistent with the prescribed elements of the Financial Management Framework as required by Treasurer’s Instruction 2 ‘Financial Management Policies’.
Audit formed the opinion that the controls exercised by the Legal Services Commission in relation to the receipt, expenditure and investment of money; the acquisition and disposal of property; and the incurring of liabilities, were sufficient to provide reasonable assurance that the financial transactions of the organisation were conducted properly and in accordance with law.
The Statement of Financial Performance for the year ended 30 June 2002 reports total Revenues from Ordinary Activities of $25.5 million ($24.5 million) and total Expenses from Ordinary Activities of $24.6 million ($22.3 million), resulting in an Operating Surplus from Ordinary Activities of $900 000 ($2.3 million).
General grants from the State Government and Commonwealth Government provided in accordance with the funding agreement (excluding specific State grants for expensive cases of $2.6 million and specific Commonwealth grants provided for primary dispute resolution of $82 000 and child support of $325 000), totalled $19.3 million ($18 million) and comprised 76 percent (73 percent) of total Revenues from Ordinary Activities of the Commission.
Grants provided by the State Government and Commonwealth Government
The above graph illustrates for the past five years, the proportions of State and Commonwealth funding provided in accordance with the agreement between the Governments (excluding specific grants for expensive cases, primary dispute resolution and child support).
The following chart shows the changing composition of the Commission’s expenses over the past five years.
Composition of Expenses
The graph illustrates that the composition of the Commission’s expenses has remained relatively constant for the three years up to 1999-2000, however, with the increased expenditure on expensive cases in the past two years, there has been a small decrease in employee entitlements and general legal expenses as a proportion of total Commission expenses.
Referrals to Private and In-house Practitioners
Referrals to private practitioners for the 2001-02 year totalled 7 895 (7 605) or 60 percent (59 percent) of approvals. Fees to private legal practitioners for these cases (legal expenses) amounted to $9.6 million ($8.6 million) and comprised 39 percent (38 percent) of total Expenses from Ordinary Activities.
Applications assigned to the in-house practice totalled 5 347 (5 275) or 40 percent (41 percent).
The following graph shows the trend in referrals to private practitioners and assignment to in-house practitioners over the past five years.
As at 30 June 2002 the Commission had:
cash at bank and on hand of $6.5 million ($5.7 million);
legal creditors of $991 000 ($709000);
reserves for expensive cases of $800 000 ($920000);