Wednesday 11 July 2012 by Catherine Baksi

The National Audit Office has qualified the Legal Services Commission's accounts for the fourth year running due to overpayments made to providers.

The LSC's annual report, published today, revealed a substantial drop in expenditure in 2011-12, in large part reflecting the fact it funded almost a quarter of a million fewer cases than in the previous year.

The report shows that over the past year the LSC spent £2.08bn on funding the community legal service and the criminal defence service, £37m less than the £2.12bn spent in the previous year. The amount spent administering its budget dropped from £99m to £82.1m.

The number of acts of assistance funded over the year also fell by 237,000 from 2.7m in 2010-11 to just under 2.5m. The number of civil contracts held by solicitors fell from 2,039 in 2010-11 to 1,711 last year and the number of criminal contracts fell from 1,733 to 1640.

Over the last year, the LSC overpaid providers by an estimated £35.6m. Of that sum £20.4m was due to errors made by solicitors and £15.2m in cases were claimants were not eligible for legal aid or whose eligibility could not be proven.

The total figure has fallen by 28% compared with the £49.5m overpayments made during 2010/11, which the NAO said marked 'significant improvements'.

The main areas of improvement were in the immigration and family legal help schemes, where estimated overpayments fell from £14m to £2.8m, and the civil representation scheme, where irregularity was down from £18.2m to £12.8m.

However, overpayments to solicitors and advocates for Crown court work increased from £1m to £4.5m.

NAO comptroller and auditor general Amyas Morse said: 'The LSC has made significant progress in the last year and I have noted the reduction in payment errors in my report.'

But he said that the error rate, particularly in relation to legal aid providers, is still high.

Morse said: 'The need for further progress is particularly strong given the forthcoming reforms. I expect the Commission to reconsider its risks and assurance regime ahead of these changes.'

LSC chief executive Matthew Coats said the report highlighted the strong progress being made to improve performance and reduce processing times.

Coats added: 'We've improved our records and processes for debt management and welcome the removal of the NAO's account qualification relating to our debtor balances that was in place for 2010-11.'

Commenting on the 28% reduction in overpayments, Coats welcomed the NAO's acknowledgment of the progress made: 'We have undertaken a significant amount of work to analyse the causes of errors across all legal aid schemes and have taken remedial action, where appropriate.'

He added: 'We remain committed to continuing to make further improvements to our financial and operational control, both to reduce errors further and recover inaccurate payments.'

The LSC's full annual report and accounts can be read on its website.