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

The commission’s annual report, published today, reveals that in 2010/11 the LSC overpaid legal aid providers an estimated £51 million; £29.5m due to solicitors’ errors, and £21.2m in cases where there was insufficient evidence that the applicant was eligible for legal aid.

The sum marks a 34% improvement in performance from 2009/10, when the commission overpaid an estimated £76.5m, and equates to just over 2% of the LSC’s total expenditure.

During the financial year the LSC recovered £7.1m of overpayments that had been made to legal aid firms, a 50% increase on its performance in 2009/10.

The report shows that over the past year the LSC spent £99m administering its £2.1bn legal aid budget, a cut of 8.4% from the previous year. The number of acts of assistance was also down, to 2.7 million, from 2.97m the previous year.

Its four current directors received £433,000 in salary and allowances between them, with chief executive Carolyn Downs receiving £169,000, and Hugh Barrett, director of commissioning and case management £140,000.

Comptroller and auditor general Amyas Morse said: ‘The commission has made significant improvements in the level of total irregular expenditure in 2010/11.’

In particular he said improvements had been made in some criminal work and legal help. He said the improvements were due to the LSC’s increased focus on higher risk areas, enhanced audit testing and provision of additional clarity and guidance to providers.

But he added: ‘There are some areas where the level of error has not significantly changed, or has increased. It is therefore important that the commission continues to quantify and monitor the level of error across all streams of income and expenditure, so that appropriate action can be taken were risk or error remains high.’

LSC chair Sir Bill Callahan said the commission was ‘very grateful’ to legal aid practitioners who had worked with it to help reduce the overspend. ‘Most legal aid practitioners do an excellent job in delivering legal aid and managing their business.

'There is however an ongoing need to work with practitioners to ensure that claims for the work they have done are accurate and that we are doing all we can to protect the legal aid fund for those members of the public that need it.’

Callaghan said the LSC would continue to work with practitioners to improve the accuracy of its claims. ‘As we move towards becoming an executive agency, we will continue to work closely with the Ministry of Justice to improve the way we procure and manage legal aid services so that our budget is spent effectively, provides value for money to the taxpayer and access to justice.’

The Law Society welcomed a ‘noticeable reduction’ in errors at the LSC, and the LSC’s recognition of the work of solicitors in reducing the error rate. Law Society chief executive Desmond Hudson said: ‘By working with the Society and its members the LSC has made a positive step towards being more accurate and efficient. We recognise the significant efforts made by the LSC in tackling these problems.’

He said the Law Society would continue to work with LSC, but said its system was ‘too complex and susceptible to errors’, which was ‘unacceptable when every possible penny should be spent on improving access to justice’.

‘The legal aid budget, already under pressure, will, if current proposals before parliament are passed, be cut further, so we welcome the LSC’s continuing commitment to work with us and the legal profession to improve its administration,’ said Hudson.