Not for Profit
Contract Compliance Audits (CCA)
The Legal Services Commission is accountable to the Government and the taxpayer for money paid out under contracts. The audit process is aimed at providing assurance that contract work is directed towards the purpose for which funds have been provided and is being undertaken in accordance with the contract rules.
This section sets out the way the LSC audits files for compliance with the rules and guidance of the General Civil Contract and the General Criminal Contract (together with the Criminal Bills Assessment Manual and the The Police Station/Court Duty Solicitor Cost Assessment Manual), including whether the work is properly evidenced on the file and whether costs incurred are reasonable. Files are also audited for evidence that Specialist Quality Mark requirements are met.
The LSC can also conduct Contract Compliance Audits to assess Not-for-Profit (NfP) suppliers against the rules set out in the General Civil Contract (Not for Profit).
The File Audit Process
When the Commission selects files for review, the sample is designed to be representative of Solicitors’ work billed across the specific categories of work chosen for audit. If more than one category of work is to be audited, the number of files selected from each area of law will be in the same proportion to the number of claims submitted in these categories. The files are selected at random by computer and firms are then given 14 calendar days to submit the requested files to the relevant LSC Regional Office.
Once submitted for audit, LSC auditors will review each file against the requirements set out in the General Civil and Criminal Contracts (and the Specialist Quality Mark), looking for objective evidence in support of all items being claimed.
When the audit is complete, the files are returned to the supplier. The firm will also receive a separate letter from the LSC confirming the results of the audit; attached to this will be both a summary and detailed report of the specific audit findings.
The overall result Categorisations are based on the assessment rate, as follows:
Category 1: less than 10% reduction of claims made.
Category 2: 10% to 20% reduction of claims made.
Category 3: Over 20% reduction of claims made.
For both category 2 and category 3 outcomes, the LSC will apply the findings from the initial audit by way of a percentage reduction across the firm’s other files. This is known as extrapolation. Generally, there will be no extrapolation of costs assessments for Category 1 outcomes.
In order to minimise the cost and expense of appeals, the Commission will extrapolate at 5 percentage points below the assessment in all cases where there is no appeal. Thus, a supplier which is assessed at 24% overall on the sampled files will have 19% recovered from its population of claims subject to audit (a supplier's categorisation will continue to be determined by its assessment results even where extrapolation will be at 5 percentage points less). In general terms, the claims to which extrapolation will apply will be all bills submitted after the date files were called for in connection with the previous audit, up to the date files were called for in connection with the current audit, subject to not going back earlier than 12 months if there is a longer period between audits.
Suppliers found to be in Category 3 will receive a contract notice on the first occasion during the life of the contract, which will be a formal warning that a second consecutive finding of Category 3, if confirmed, will result in contract termination.
Suppliers have the right of appeal against our assessment findings. Any supplier wishing to appeal must comply strictly with the 28 day time limit, or apply for a short extension before the first 21 days of the limit expires. That right includes the right to appeal on the grounds that the sample taken is not truly representative of the supplier's work over the relevant period, as well as the assessment of the individual audited files. Specific evidence that the audited sample is not representative may lead to further files being audited.
For Category 2 or 3 firms, if no appeal is received at the end of the 28 days the LSC shall then arrange implementation of the appropriate recoupment. In essence, this recovery will be effected by a reduction in the claims to be reconciled against the contract payments.
The Appeals Process
On receipt of an appeal, which must be made in writing and accompanied by the relevant files, an Internal Reviewer will undertake a formal and detailed review of the original decision. The Internal Reviewer will compile a written response to the supplier’s representations detailing any changes to the original decision. If the Internal Reviewer’s decision is then accepted, the appeal process ends. Should the firm remain in either Category 2 or Category 3, the extrapolation amount will be re-calculated and the LSC will proceed to the recoupment process.If the Internal Reviewer’s decision is not accepted, the matter proceeds to an Independent Costs Assessor who shall review the assessment by confirming, increasing or decreasing the amount assessed.
Any appeal to an Assessor is typically considered on paper, as there is no general right for either the supplier or the LSC to attend or to be represented on the appeal. If, however, either party considers that there are exceptional circumstances, which means that their concerns or issues cannot be addressed in writing, they can submit a written application to the Assessor for an oral hearing. The Assessor will consider any such application and notify both parties of their decision. The Assessor can give procedural directions as to how the appeal is conducted whether the appeal is to be dealt with on documents only or oral hearing basis.
The Assessor will then compose a written determination that will be forwarded to the Supplier along with the revised assessment rate and any applicable recoupment figure.
At any point after the submission of an appeal to the Assessor, but not later than 21 days after receipt of the Assessor’s final decision, either the Commission or the Supplier can seek clarification on the costs rules and provisions. This is by way of an application for certification of a Point of Principle of General Importance. Such an application can be made to the LSC or direct to an Assessor if one has been appointed. This will be forwarded within seven days of receipt to the LSC’s Legal Director and the Assessor (if one has been appointed).
An application for certification of a Point of Principle of General Importance must set out the exact wording of the Point of Principle of General Importance sought.
The LSC’s Legal Director will decide whether the matter should progress to the Costs Appeals Committee. The decision of the LSC’s Legal Director and/or the Costs Appeals Committee will be notified to the Supplier, the LSC and if appropriate to the Assessor.
Last updated: 26 February 2007