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Financial overview 2018–19 annual report

Budget $’000

Actual $’000

Grants and other contributions

134 420

136 238

User charges

2100

1588

Interest and other revenue

1536

1805

Gains on disposal/revaluation of assets

12

Total income

138 056

139 643

Employee expenses

54 921

59 746

Supplies and services

14 617

15 234

Outsourced service delivery

66 754

65 797

Grants and subsidies

53

Depreciation and amortisation

1578

1330

Other

186

156

Total expenses

138 056

142 316

Operating result from continuing operations

(2673)

Table 2. Published 2018–19 budget versus actual performance

The strong demand for services has shaped the outcome financially for us in 2018–19 with an operating deficit of $2.673 million, or 1.9 percent of total income. This result, compared with a balanced operating budget, is primarily influenced by greater salary and wages expenses, along with strong demand in general criminal law and child protection matters. These drivers contributing to the operating deficit have largely provided frontline services to clients in need of legal assistance. Despite the operating deficit of $2.673 million for this year, our financial position remains healthy and reflects the board and management’s commitment to sound financial management principles to ensure the long term sustainability of core services.

Our continued focus on managing our finances has maintained our balance sheet’s strength and stability while allowing the organisation to continue to deliver frontline services in a timely and effective way. This sound financial position allows us to invest in our assets and operational infrastructure, which ultimately helps us deliver services more efficiently to our clients. We will continue to minimise costs and risks in relation to liabilities and contingent liabilities through our ongoing focus on sound governance practices in our financial management.

The organisation collectively has a strong focus on financial management and this allows for a greater ability to plan and deliver against objectives while meeting our core responsibility to provide cost effective services to financially disadvantaged Queenslanders.

Income

Federal and state government grants are our main income source, with relatively little income derived from service charges or clients’ contributions towards their legal costs (see Figure 4 for more information).

Another part of our overall income management focuses on interest income earned on cash investments. This portion of income is moderate in nature but important as it helps deliver core services and provide operational support functions.

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Figure 3. Income and expenditure

Expenses

Our major expenditure categories cover salary and wages for our staff along with paying our statewide network of private law firms to carry out legal aid work on our behalf (see Figure 6 for more information). The expenditure paid to private law firms is consistent with our mixed service delivery model, which allocates about 75 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). Our continued focus on expenditure management has contributed significantly to the organisational delivery.

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Figure 4. Income 2018–19

Assets

The most valuable assets we have are cash and cash equivalents (of $50.4 million), and our land and building in Brisbane (currently valued at $23.9 million). Other assets we own include unique computer-based business systems, car fleet and money owed to us by clients.

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 several years to complete so money needs to be kept aside from the outset of the matter. This is shown as a provision in the accounts. 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.

Equity

Equity is made up of two components—first the accumulated surplus (also known as retained earnings), which essentially is money in the bank and available to use for business needs, and secondly the land asset revaluation reserve. The accumulated surplus balance as at 30 June 2019 was $27.4 million, which represents about 62 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 in Brisbane where our head office is located. The 30 June 2019 balance of the land asset revaluation reserve was $16.9 million.

Cash

We have maintained and managed healthy cash levels over the past number of years to ensure we can pay our employees, ensure payment to our network of private lawyers for matters they finalise, and to allow us to replace equipment and other assets along with upgrading our facilities when and where required. We invest this cash in low-risk funds managed by the Queensland Government’s central financing authority. This investment strategy provides us with some income from interest earned but also protects us from market fluctuations.

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Figure 5. Expenses 2018–19

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Figure 6. Payments to private lawyers 2018–19
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