The Legal Services 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. This agreement commenced on 1 July 1997 and was due for review by 30 June 2000. At the time of this Report, a new agreement covering the four year period from 1 July 2000 had not yet been signed. The level of funding provided by the Commonwealth to the Commission over the three year period to 30 June 2000 pursuant to the agreement was $9.0 million per annum.
The funding provided by the State is determined through the budgetary process for 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 or State 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 in a similar manner.
The structure of the Commission is:
Operating grants increased by $2.0 million from $15.1 million.
Employee entitlements and legal expenses increased by $2.1 million to $16.3 million.
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 1999-2000 included:
payroll
legal expenses and commitments
administrative expenses
cash at bank
statutory charge debtors and sundry debtors
receipting and banking
computer and other equipment.
In addition, the status of the implementation of some strategic mandatory elements of the Financial Management Framework for the Commission was reviewed.
During the year a management letter communicating issues arising from the audit was forwarded to the Chairperson and a satisfactory response was received. Issues raised and relevant responses summarised in ‘Audit Findings and Comments’ hereunder, are regarded as impacting on the reasonableness of the overall control environment.
Audit found that the Commission was progressing satisfactorily with regard to the asset and liability management, reporting and transaction processing components of the Financial Management Framework, but that there was a need for further attention to the planning and analysis and control components. Although not pervasive to the control environment, there was evidence that the matters identified had impacted on the operations of the Commission; most notably, on the process adopted by the Commission for the implementation of a new payroll system.
At the time of the Audit, although a number of documents existed which together provided the purpose and role of the Commission upon which the Commission relied, it was not evident that the direction, goals and values of the Commission for the 1999-2000 financial year had been formalised in, for example, a strategic/corporate plan. In addition, formalised strategies and timeframes to achieve the goals of the Commission in the most efficient and effective manner were not apparent.
The Commission agreed that all the elements captured by the documents concerned had not been drawn together in a cohesive strategic plan and that it would be beneficial to do so but that circumstances had not allowed such action to be taken on a timely basis. The Commission indicated that a corporate planning exercise was to commence in the near future.
In addition, Audit noted that with the formalisation of the strategic objectives of the Commission, an assessment could be made of whether current reporting, which was generally consistent with Commonwealth and/or State requirements, would adequately measure the achievement of all the strategic and operational objectives of the Commission. Audit recommended that this assessment should involve the identification of activities and tasks related to the achievement of objectives and data relevant to measuring progress toward the objectives.
The Commission advised that the adequacy of
its reporting in this regard would be reviewed as part of the strategic planning exercise
and that the approach suggested by Audit would be adopted.
Audit noted that a high-level risk assessment had been undertaken as part of an exercise to facilitate the development of the Justice Portfolio risk management framework with which the Commission was involved. The exercise focused on the risk exposures of the Justice Portfolio as opposed to those specific to the operations of the Commission. Audit recommended that a risk assessment specific to the Commission be undertaken as soon as practicable. The Commission agreed that a risk assessment (and consequent management plan) specific to the Commission was required. The Commission indicated that planning had already commenced with the results to be incorporated in the overall strategic plan.
In addition, Audit noted that the internal audit function of the Commission was not operating as originally intended. Audit recommended that the scope of the internal audit function be reviewed in light of the requirements of the Commission with regard to its control environment. The Commission indicated that the scope of the internal audit function would be reviewed in the context of its emerging risk assessment and taking into account resourcing issues.
Comment was also provided by Audit to the Commission in relation to documenting procedures and developing specific policies instead of adopting generic guidance from the Justice Portfolio. The Commission advised that it considered that its procedures were adequately documented. To the extent necessary, given the generic policies provided by the Justice Portfolio and so as to avoid duplication of effort, the Commission would develop and promulgate specific policies for its major activities.
Matters were raised in relation to a number of areas including that, in Audit's opinion, the preceding matters had impacted on the processing of payroll, where Audit concluded that the procedures established for the new payroll system did not provide adequate control over payments. Notwithstanding, comprehensive testing by Audit did not disclose any material errors.
The Commission responded positively to the comments provided by Audit and, in particular, indicated that the processing of payroll had been reviewed and the appropriate recommended action taken.
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, except for the matters outlined under ‘Audit Findings and Comments’, were sufficient to provide reasonable assurance that the financial transactions of the organisation were conducted properly and in accordance with the law.
The Operating Statement for the year ended 30 June 2000 reports total operating revenues of $19.6 million ($17.1 million) and total operating expenses of $18.9 million ($16.6 million), resulting in an operating surplus of $0.6 million ($0.5 million).
Grants from the State Government and Commonwealth Government provided in accordance with the funding agreement (and excluding the specific Commonwealth grant for expensive cases of $0.3 million), totalled $16.8 million ($15.1 million) and comprised 86 percent (88 percent) of total operating revenues of the Commission.
Grants provided by the State
Government and Commonwealth Government
in accordance with the Funding
Agreement
The above diagram illustrates for the past five years, the proportions of State funding and, Commonwealth funding provided in accordance with the agreement between the Governments. It also illustrates, that while Commonwealth funding for legal aid has declined, State Government funding has increased, resulting in an overall increase in funding provided.
Referrals to private practitioners for the 1999-2000 year totalled 7616 (8183) or 59 percent (60 percent) of approvals. Fees to private legal practitioners for these cases (legal expenses) amounted to $8.3 million ($6.8 million) and comprised 44 percent (41 percent) of total operating expenses. The Commission has advised that the major reasons for the increase in legal expenses are an increase in legal creditors of $0.5 million due to a campaign to finalise billing of work completed prior to implementation of the Goods and Services Tax and, an increase in the scale of fees resulting in an increase in payments of approximately $0.8 million.
Applications assigned to the in-house practice totalled 5335 (5498) or 41 percent (40 percent).
Employee entitlements and administrative expenses incurred in administering the Commission including the funding agreement, case allocation and the in-house practice totalled $10.7 million ($9.8 million) and accounted for 56 percent (59 percent) of total operating expenses.
As at 30 June 2000 the Commission had:
cash at bank and on hand of $4.2 million ($3 million);
legal creditors of $1.0 million ($0.5 million);
reserves for expensive cases of $1.3 million ($1.3 million);
a commitment of $1.9 million ($3.5 million) on legal cases referred to private legal practitioners.