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Financial overview

Managing the budget

Our budgeted expenditure for 1 July 2013 to 30 June 2014 was $114 million.

  Budget $'000 Actual $'000
Grants and other contributions 110 061 110 315
User charges 2200 2135
Other revenue 1695 1531
Total income 113 956 113 981
Employee expenses 41 467 41 467
Supplies and services 11 171 12 377
Outsourced service delivery 59 654 54 724
Grants and subsidies 0 141
Depreciation and amortisation 1434 1235
Revaluation decrement 0 2776
Impairment losses 230 94
Other 0 236
Total expenses 113 956 113 055

Table 1. Published 2013–14 budget versus actual performance

Summary

Our overall financial position for 2013–14 is healthy and reflects the board and management’s commitment to sound financial management principles, and ensuring the long term sustainability of core services. We had an operating surplus of $0.926 million for the year ended 30 June 2014 compared with a balanced budget. The organisation has performed well financially, with most revenue and expenditure categories in line with or under budget. This result is consistent with our strategic plan value of delivering sustainable and cost effective services. To achieve this result we have maintained our focus on financial management, maintaining the strength of our balance sheet and ensuring we continue to deliver within our overall budget allocation. Importantly, we have achieved this surplus result while also investing in our assets and operational infrastructure, which ultimately assists us in delivering more effectively and efficiently to our clients. We will continue to minimise costs and risks in relation to liabilities and contingent liabilities.

The actual operating surplus of $0.926 million for the year ended 30 June 2014 was considerably lower than the actual surplus for the year ended 30 June 2013. A substantial item influencing the lower surplus result in 2013–14 was the write-down in fair value assessment of the Herschel Street building in Brisbane following a comprehensive valuation undertaken during the year. In addition to this and following the building valuation assessment, a large expenditure associated with the refurbishment works undertaken during 2013–14 was deemed operational in nature, which impacted on the overall surplus result. While the building valuation assessment was less than previously recognised, the land component was assessed higher. This resulted in the overall outcome for the Herschel Street property valuation being relatively unchanged compared with the last valuation undertaken in 2008–09, and the interim years leading up to 2013–14. This outcome, along with the surplus, has allowed us to maintain a sound balance sheet position.

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Figure 3. Income and expenditure

Income

Federal and state government grants are our main income source, with relatively little income coming from service charges or clients’ contributions towards their legal costs. We also receive a significant amount of funding from the Legal Practitioner Interest on Trust Accounts Fund (see Figure 4 for more information).

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Figure 4. Income 2013–14

Expenses

A substantial amount of our expenditure is paid to private law firms to carry out legal aid work on our behalf (see Figure 6 for more information). This is consistent with our service delivery model which allocates almost 80 percent of legally-aided matters to private lawyers. The remaining costs support the in-house legal practice and infrastructure for all service delivery (see Figure 5 for more information).

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Figure 5. Expenses 2013–14

Assets

The most valuable assets we have are cash and cash equivalents (of $35.6 million), and our land and building in Brisbane (worth about $16 million). Other assets include our unique computer-based business systems and money owed to us by clients.

Our total assets have increased compared with 2012–13 because of increased cash reserves and investment in software.

Liabilities

Our largest liability is money we have to put aside to pay private lawyers for work assigned to them but not yet completed. Sometimes these cases can take years to complete so money needs to be kept aside from the outset. In addition to this, our other main liabilities include known future payments to suppliers and providing payments associated with annual leave entitlements for our staff.

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Figure 6. Payments to private lawyers 2013–14

Equity

Equity is made up of two components — first the accumulated surplus, which is essentially money in the bank and available to use for business needs, and secondly the land revaluation reserve. The accumulated surplus balance as at 30 June 2014 was $23.9 million, which represents about 65 percent of our total equity. The second component of our equity is the land revaluation reserve and this represents the increase over time in the value of the land we own. Following the valuation of our Herschel Street property in 2013–14, the land revaluation reserve has increased by $2.75 million.

Cash

We have maintained healthy cash levels over the past few years to make sure we can pay private solicitors for matters they finalise and to allow us to replace equipment and other assets when and where required. We invest this cash in low-risk funds managed by state government institutions. This investment strategy provides us with some income from interest earned but importantly also protects us from market fluctuations.

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