Lawyers fear for some of Otago's smaller law firms who remain unpaid for legal aid work due to ongoing problems with the Legal Services Agency's (LSA) computer system.
New Zealand Law Society Otago branch president Alastair Logan says 26 Otago lawyers are owed about $700,000 dollars for legal aid work and some have been forced to take out overdrafts and bank loans or extend credit card limits to keep their businesses afloat.
Many had not been paid by the Legal Services Agency for three months.
While the agency was trying to resolve issues with processing invoices, lawyers were struggling to see the light at the end of the tunnel, Mr Logan said.
He said some Otago firms had had to extend loans while they waited to be paid, which further increased their bank fees, and some had been told they could borrow no more.
"There are some individuals who are very stressed by the position they have been put in."
So far, one person had indicated they were seriously considering whether they would continue with legal aid work.
Most of Otago's criminal lawyers, and some family lawyers, did legal aid work, and several firms relied heavily on it.
Criminal lawyers needed to take on legal aid work because, as opposed to private work, it offered the security of being paid and - until recently - being paid in a timely manner, he said.
"[Legal aid] means you can run your business on the expectation of a certain cashflow."
The payment delays, on top of the lower rate of pay for legal aid and not being paid for all the time put in to each case, added another disincentive for lawyers to continue with legal aid work, Mr Logan said.
The law society had been working with the agency on trying to clear the backlog faster and accepted the agency had been frank in its acknowledgement of the problem and kept the society and lawyers informed.
The society accepted the agency was working hard on pushing payments through, but some lawyers were finding it financially very difficult.
There has been some progress, as the agency made payments totalling $50,000 last Thursday, Friday and on Monday - but not at a pace from which financially stretched practitioners could get any comfort, Mr Logan said.
Most lawyers owed money from legal aid declined to comment beyond confirming they were waiting on payment, when contacted this week.
Dunedin lawyer Simon Claver said he was owed about $16,000 for legal aid work.
Anne Stevens, of Dunedin, said she was owed $24,000, but was able to manage on her income from private clients.
There were some firms she knew that were owed hundreds of thousands of dollars.
Jenny Beck, of Dunedin, said her firm was owed a "huge amount" and it was "extraordinarily distressing".
She felt local agency staff were coping as best they could under the circumstances, which were that an under-resourced agency had implemented a new system without thinking it through.
The agency said the problem was the combination of a change to a new legal aid-granting computer system in September, as well as a change from using GST-inclusive legal aid rates to GST-exclusive rates, plus the altered GST rate.
Service delivery manager Sally Babington said extra staff had been put on in the Dunedin legal aid office to work through the invoice backlog and had worked weekends.
She felt the agency was making headway, but acknowledged the impact any delays were having on lawyers.
"However, we are accountable for the financial management of taxpayer funds and we need to make sure that the invoices reconcile with payments we make."
The delays were in ensuring that the information provided was correct and complete, she said.
In early December, the agency would also provide special training for Otago legal aid providers to assist them with completing invoices.
The delays were worse in the South Island than in the North Island, she said, but did not elaborate.
