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Financial overview

  Budget $’000 Actual $’000

Grants and other contributions

114 986

116 254

User charges

2100

2585

Other revenue

1553

1406

Gains on disposal/revaluation of assets

3684

Total income 118 639 123 929

Employee expenses

46 481

46 372

Supplies and services

15 770

11 607

Outsourced service delivery

59 053

62 955

Grants and subsidies

50

Depreciation and amortisation

1838

1572

Impairment losses/(reversals)

250

108

Other

93

205

Total expenses

123 485

122 869

Operating result from continuing operations (4846) 1060
Table 2. Published 2016–17 budget versus actual performance

Our overall financial position for 2016–17 is healthy and reflects the board and management’s commitment to sound financial management principles to ensure the long term sustainability of core services. The operating surplus for 2016–17 of $1.060 million (or 0.86 percent of total income) compared with a deficit budget of $4.846 million is primarily related to a valuation increase of $3.665 million associated with our building at 44 Herschel Street, Brisbane as assessed at 30 June 2017. The deficit budget for 2016–17 was due to the planned Brisbane office refurbishment project, which did not proceed due to a much higher than anticipated level of demand for criminal law services during 2016–17, this being the primary influence to a higher than budgeted expenditure for outsourced service delivery.

The 2016–17 year presented some unique and unforeseen challenges financially with the unexpected increase in demand for criminal law services. Importantly though, we managed this demand by closely managing our budget, and 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. The 2016–17 actual operating surplus follows seven previous years of operating surplus results and this provides a continued foundation for strong financial management into the future.

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.

The non-cash gain on revaluation of $3.665 million related to our Brisbane building has contributed to an increase in revenue in 2016–17.

Figure 3 Income and expenditure

Figure 3. Income and expenditure

Figure 4 Income 2016-17

Figure 4. Income 2016–17

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 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). Our continued focus on expenditure management has contributed significantly to the organisational delivery and actual surplus achieved for the year ended 30 June 2017.

Figure 5 Expenses 2016-17

Figure 5. Expenses 2016–17

Figure 6 Payments to private lawyers 2016-17

Figure 6. Payments to private lawyers 2016–17

Assets

The most valuable assets we have are cash and cash equivalents (of $44.7 million), and our land and building in Brisbane (currently valued at $23 million). Other assets we own include unique computer-based business systems 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. 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 2017 was $25.4 million, which represents about 60 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. Following the independent valuation of our Herschel Street property in 2016–17, the land asset revaluation reserve has decreased to $16.91 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 a state government institution. This investment strategy provides us with some income from interest earned but also protects us from market fluctuations.

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