Aid pay delays crippling firms

KIRSTY JOHNSTON
Last updated 05:00 23/09/2012

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A bureaucratic botch-up has brought the Waitangi ''gravy train'' to a halt, with dozens of lawyers on the brink of insolvency.

Delays of up to two years in processing Waitangi legal aid invoices have seen staff go unpaid, workers fired, offices sold, homes mortgaged and personal loans racked up.

Firms spoken to by the Sunday Star-Times said they were still owed up to $500,000, even after emergency remedy payments, but owed thousands to Inland Revenue for GST.

Ministry of Justice staff are working to clear the backlog but still have thousands of files to check, and about 800 invoices to catch up on from this year.

Lawyers say for many of them the payments have come too late for their staff, and clients, whose claims have been affected.

“Letting staff go was the worst thing I've ever had to do,” Auckland's Te Mata Law boss David Stone said. “I paid them as much as I could for as long as I could. I took out loans, my wife went back to work, but in the end there was no money coming in.”

The ministry says the backlog began when a new computer system was introduced in 2010, and worsened when it absorbed the Legal Services Agency last year. There were not enough staff to process requests and some languished for months before they were dealt with. More staff would be used but the backlog always built up again.

It was then discovered there were 3000 files at least two years old that were incomplete, with no records to show if they had be paid.

“Each one is being checked again,” a ministry spokesperson said. “We are about quarter of the way through and are finding most were paid but weren't recorded as they should have been.”

Legal Services Commissioner Nigel Fyfe has asked for a review to determine how the delays can be resolved, and has committed to a one-month processing time by November.

Urgent advance payments were made in February to help relieve the pressure, but lawyers say the damage had already been done, and doubt the remedies will work.

Kaikohe's Kotoku Chambers lawyer Tony Shepherd is owed $300,000 and says the situation is a nightmare.

“We've got insolvency on the horizon. I employ five people. That's their livelihoods.”

Some, like Stone, have had to sell their offices, and even a car, to try to keep money coming in.

“The stress has been massive,” he says.

“My staff have missed mortgage payments and some have nearly lost their homes. It's ludicrous.”

He said the worst part was that they knew they had let clients down, losing months of work, missing meetings and being unable to do the research needed because they couldn't pay staff.

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The ministry said part of the issue was poor quality invoicing by lawyers, meaning the computer system could not process invoices.

- Sunday Star Times

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