1 The financial management and governance
of the Legal Services Commission
1. The Legal Services Commission (the Commission)
is a Non-Departmental Public Body sponsored by the Ministry of
Justice (the Department). In 2008-09 it spent £2.1 billion
on procuring and administering criminal and civil legal aid, 20%
of the Department's annual budget of £10 billion, and spent
another £125 million on administration.[3]
The Commission has successfully controlled the growth in legal
aid spending and effectively fixed the budget at 2006 levels.[4]
However, it has weak financial controls and management information
to oversee this spending.[5]
2. Despite the scale of legal aid spending and
the acknowledged weaknesses in the Commission's oversight of it,
the Committee's Hearing was not attended by the Department's Accounting
Officer. The Committee reminded the Department of the established
protocol that Permanent Secretaries should be responsible for
accounting for how their budgets are spent by attending relevant
hearings of the Committee of Public Accounts.[6]
3. The rationale for the Commission's status
as a Non-Departmental Public Body of the Ministry of Justice was
that this provided a separation between Ministers and decisions
about entitlement to legal aid. However, the Department acknowledged
that the governance arrangements for delivering legal aid services
may no longer be appropriate. The Department had employed 34 people
at an annual cost of £2 million overseeing legal aid policy
and spending, although this number had reduced following a reorganisation
of its sponsorship and policy capability.[7]
In addition, the relationship between the Department and the Commission
has been subject to a review by Sir Ian Magee which was ongoing
at the time of the Hearing.[8]
4. Although the Department put considerable resources
into overseeing legal aid, the division of responsibilities between
it and the Commission lacked clarity and this had resulted in
unnecessary duplication and complexity.[9]
This lack of clarity had been demonstrated by the Department intervening
in the Commission's everyday activities, such as negotiations
with the legal professions around funding arrangements.[10]
5. The Department admitted that it was completely
unacceptable that the Commission's accounts had been qualified
for 2008-09. This qualification was because the Commission had
made an estimated £25 million of overpayments to solicitors
providing both civil and criminal legal aid due to weak financial
controls, specifically that the Commission's processes for auditing
the payments it made to solicitors were insufficiently robust.[11]
There was evidence of a failure to prioritise financial management
at the most senior level, as the Commission's senior management
team did not feature a qualified accountant with responsibility
for financial management. The Commission was in the process of
recruiting a new Finance Director who would be appointed to its
senior management team.[12]
6. Given that the Commission is an organisation
which makes a lot of payments, it had been surprisingly slow to
address the risks which had resulted in the qualification of its
accounts. The Commission had identified in the autumn of 2008
significant risks around matters which included the accuracy of
providers' claims, the controls over the means of assessing the
eligibility of applicants, and the robustness of its accounting
systems. Yet it did not begin to undertake further work on these
risks until May 2009.[13]
7. The Commission assured us that it had taken
immediate steps to address the issues which had led to the qualification
of its accounts. It had increased the size of its internal audit
team and had doubled the number of payments that it checked.[14]
It was also already introducing specific measures to further improve
its financial systems with key milestones to be met by April 2010,
overseen by the Department's Finance Director, with further measures
to follow. A cornerstone of these changes was the move from a
paper-based to an electronic verification system for making payments
to solicitors.[15]
3 Q 35 Back
4
Q 96 Back
5
Q 1 Back
6
Q 2 Back
7
Q 4 Back
8
Q 52 Back
9
Q 96 Back
10
Qq 98-101 Back
11
Qq 5 and 53 Back
12
Qq 30-36 Back
13
Qq 40 and 41 Back
14
Q 6 Back
15
Q 44 Back
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