Mr Kieran Donnelly, the Comptroller and Auditor General (C&AG) for Northern Ireland and Head of the Northern Ireland Audit Office (NIAO) has reported the results of the annual audit work carried out on the Northern Ireland Legal Services Commission’s financial statements for 2010-11.
Mr Donnelly stated that “I am concerned that the Northern Ireland Legal Services Commission’s (NILSC) accounts on legal aid expenditure have been qualified every year since it was formed in 2003 and, in particular, that its controls to prevent and detect fraud do not provide the assurance I need to establish the level of fraud incurred . No estimate is currently available. Legal aid expenditure of £92.5 million was incurred in 2010-11. I welcome the actions that NILSC is taking to prevent, detect and disclose fraud, but it seems likely to me that it will take some time before there are sufficient safeguards in place to provide me with the assurance I need to provide an unqualified report on these accounts”.
The accounts of the Northern Ireland Legal Services Commission (NILSC) which record the payment and use of legal aid funds (“the Grant Account”) have been qualified every year since it was established due to a lack of sufficient audit evidence on the level of fraud incurred and the amount of legal aid liabilities.
The nature of the legal aid scheme creates difficulties for the NILSC in determining whether legal aid should have been provided or if overpayments have been made.
Whilst a small counter fraud unit operates at the NILSC, it does not currently undertake inspection visits to the offices of legal professionals to audit records supporting bills issued for legal services. Improvements are also needed to identify applicant fraud and to estimate the likely scale of fraud in categories of legal aid expenditure. The work undertaken by the counter fraud unit does not therefore provide the same level of assurance as do fully fledged inspection regimes in Legal Aid bodies in other parts of the UK. In the absence of such key controls, sufficient audit evidence could not be obtained to demonstrate that material fraud did not exist.
This issue has once again resulted in the qualification of the audit opinion on the proper use of legal aid. The qualification of these accounts was also referred to in the C&AG’s report to the Assembly on Managing Criminal Legal Aid NIAO Report “Managing Criminal Legal Aid” published 29 June 2011.. In considering this matter, the Public Accounts Committee (PAC) Report NIA 20/11-15 Public Accounts Committee – Managing Criminal Legal Aid, Session 2011/2012, dated 26 October 2011. stated that the absence of a cohesive counter-fraud strategy, based on established best practice, meant that the Commission is not well placed to manage the risk of fraud and it recommended that the NILSC take urgent action to identify the risks of fraud and establish proactive counter-fraud measures to manage them.
The Department of Justice’s (DOJ) response to PAC’s recommendationDepartment of Finance and Personnel Memorandum dated 26 January 2012 on the 1st Report from the Public Accounts Committee Mandate 2011-2015. noted actions being taken by NILSC, such as: work on improving counter-fraud arrangements; a voluntary registration scheme that requires legal practitioners to permit access to records for inspection purposes; direct confirmation of welfare benefits declared; and, developing a database of all bills from providers of legal aid services for analysis purposes.
Since the inception of the NILSC in 2003, there have also been significant issues in the way NILSC estimates liabilities for services provided by legal advisors to Legal Aid claimants at each financial year end. These liabilities, referred to as Legal Aid provisions, were estimated to be £108.6 million at 31 March 2011 and £107.4 million at 31 March 2010. Over time the NILSC has resolved many of the issues identified with their estimation of provisions but there remain difficulties in providing sufficient evidence to support the key assumptions used and judgements made and these require further work by NILSC.
Mr Donnelly confirmed that he will monitor the NILSC’s progress in implementing these improvements in future audits.
Notes for Editors
- The NIAO Report, “Managing Criminal Legal Aid” was published on 29 June 2011.
- Report NIA 20/11-15 Public Accounts Committee – Managing Criminal Legal Aid, Session 2011/2012, dated 26 October 2011.
- Department of Finance and Personnel Memorandum dated 26 January 2012 on the 1st Report from the Public Accounts Committee Mandate 2011-2015.
- The Northern Ireland Legal Services Commission (NILSC) was established in 2003 to provide Legal Aid in Northern Ireland. Following the devolution of policing and justice functions in April 2010, NILSC became a Non Departmental Public Body of the Department of Justice.
- The NILSC prepares accounts for both its use of Legal Aid funds (the “Grant Account”) and for its administrative operations (the “Grant-in-Aid Account”). Prior to devolution the accounts were audited by the C&AG heading the National Audit Office.
- The Comptroller and Auditor General is Head of the Northern Ireland Audit Office (the Audit Office). He and the NIAO are totally independent of Government. He certifies the accounts of Government Departments and a range of other public sector bodies. He has statutory authority to report to the Assembly on the economy, efficiency and effectiveness with which departments and public bodies use their resources. His reports are published as Assembly papers.
- The report relevant to this Press Release is attached and is published with the 2010-11 NILSC Annual Report and Accounts which can be obtained from the NILSC website at http://www.nilsc.org.uk/uploads/corporate/documents/NILSCannrep201011.pdf from 9 May 2012.
- Background briefing can be obtained from the Northern Ireland Audit Office by contacting Stephen McCormick (028 90251067).