The State Bar of California
It Will Need a Mandatory Licensing Fee Increase
in  to Support Its Operations
April 2023
REPORT -
For questions regarding the contents of this report, please contact our Public Affairs Office at 916.445.0255
This report is also available online at www.auditor.ca.gov | Alternative format reports available upon request | Permission is granted to reproduce reports
 Capitol Mall, Suite  | Sacramento | CA | 
CALIFORNIA STATE AUDITOR
.. | TTY ..
...
For complaints of state employee misconduct,
contact us through the Whistleblower Hotline:
Don’t want to miss any of our reports? Subscribe to our email list at
auditor.ca.gov
Grant Parks State Auditor
621 Capitol Mall, Suite 1200 | Sacramento, CA 95814 | 916.445.0255 | 916.327.0019 fax | www.auditor.ca.gov
April 13, 2023
2022‑031
e Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As required by Business and Professions Code section 6145 and Government Code section 8546.1,
my office conducted an audit of the State Bar of California (State Bar). In general, we determined
that the State Bar will need a mandatory licensing fee increase in 2024 to support its operations,
and we identified some actions the State Bar should take to improve its process for administering
external disciplinary cases.
In recent years, the State Bar has often spent more from its general fund than it has received
in revenue. e State Bar deposits the majority of its mandatory licensing fee revenue into its
general fund, and it then uses this fund to pay for its administrative offices and nine of its 11 public
protection programs. e State Bar’s personnel costs have recently increased and will continue
to increase in the coming years. Although the State Bar will need a mandatory fee increase in
2024, it can minimize this increase and other future increases by raising other fees it charges for
providing certain services to fully cover the associated costs and updating other out-of-date fees.
My office also found that the State Bar should take action to improve its disciplinary process
when using contracted investigators. e State Bar has a team of independent contractors who are
responsible for investigating and prosecuting complaints against attorneys for which StateBar staff
have a conflict of interest that could raise concerns about its impartiality. Although the StateBar
tracks centralized data related to such cases through its case management system, we found
multiple errors and omissions in these data, impeding the State Bar’s ability to effectively monitor
the status of these external investigations. Similarly, although state law sets a goal for the StateBar
to conclude such investigations within six months, we found that external investigators did not
consistently conclude their investigations within this time frame. Finally, the State Bar has not
formalized its process to ensure that its external investigators are free from conflicts ofinterest.
Respectfully submitted,
GRANT PARKS
California State Auditor
Selected Abbreviations Used in This Report
CFO chief financial officer
GFOA Government Finance Officers Association
MCLE Minimum Continuing Legal Education
iv CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Contents
Summary 1
Introduction 3
The State Bar Will Need an Increase in Its Mandatory Licensing Fees
in 2024 9
Recommendations 20
The State Bar Should Improve Its Process for Administering External
Disciplinary Cases 23
Recommendations 31
Other Area We Reviewed
Administrative Cost Allocation 33
Appendix A
State Bar Programs and Administrative Offices 37
Appendix B
Scope and Methodology 47
Response to the Audit
The State Bar of California 51
California State Auditor’s Comments on the Response From
the State Bar of California 57
vCALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Blank page inserted for reproduction purposes only.
vi CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Page 9
Page 23
Summary
State law charges the StateBar of California (StateBar) with protecting the public through
the licensure and regulation of attorneys. To meet this responsibility, the StateBar oversees
16 programs that address aspects of its mission, such as attorney discipline, administration
of the California bar exam, and promotion of diversity and inclusion in the legal system.
e StateBar primarily supports most of its programs through general fund revenue, the
vast majority of which is derived from mandatory annual licensing fees that attorneys must
pay eachyear.
The StateBar Will Need an Increase in Its Mandatory
Licensing Fees in 
e StateBar is currently in a difficult financial position. In recent years, it
has often spent more from its general fund than it has received in revenue.
As a result, its general fund reserve has fallen below the minimum amount
established in its policy. e StateBar’s deficit spending has largely been
the result of its rising personnel costs, which will continue to increase as
it implements planned cost-of-living and merit salary adjustments for its
staff in the coming years. Further, none of the StateBar’s administrative
offices are fully meeting their performance measures, likely in part because
some have high staff vacancy rates. To address its growing costs and rebuild
its general fund reserve, the StateBar will need a mandatory licensing fee
increase in 2024. However, it can minimize this increase and other future
increases by raising other fees it charges for certain services to fully cover
its associated costs and updating other out-of-date fees.
The StateBar Should Improve Its Process for Administering External
Disciplinary Cases
e StateBar’s Office of the Chief Trial Counsel is responsible for investigating
and prosecuting complaints against attorneys. However, if a conflict of interest
related to a complaint could raise concerns about the Office of the Chief
TrialCounsel’s impartiality, the chief trial counsel must refer that complaint to
a special deputy trial counsel administrator (administrator)—an independent
contractor who has all the powers and duties of the chief trial counsel. Ateam
of about 20 special deputy trial counsels (external investigators), who are
also independent contractors, support the administrator in investigating
and prosecuting external disciplinary cases. Although the StateBar tracks
centralized data related to such cases through its case management system,
we found multiple errors and omissions in these data, impeding its ability
to effectively monitor external investigations. We also found that external
investigators did not consistently conclude their investigations within
sixmonths. Finally, the StateBar has not formalized its process to ensure that
its external investigators are free from conflicts of interest.
1CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Agency Comments
e State Bar agreed with all of our recommendations, but included what it referred
to as additional contextual information in its response. e State Bar also indicated
its willingness to work with the Legislature to implement all of our recommendations.
2 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Introduction
Background
Every person who is admitted and licensed to
practice law in California must be a licensee of
the StateBar of California (StateBar), unless
that individual is then holding office as a judge
of a court of record. e StateBar is a public
entity within the judicial branch of California’s
government. To meet its primary responsibility of
protecting the public from attorney misconduct,
the StateBar performs a variety of activities related
to the licensure, regulation, and discipline of
attorneys, as the text box describes. In addition,
the StateBar offers resources to attorneys such
as educational events and a hotline where staff
members answer attorneys’ questions regarding
their professionalresponsibilities.
e StateBar is governed by the 13-member
Board of Trustees of the StateBar (board). Seven
of these members are attorneys appointed by the
SupremeCourt of California (California Supreme
Court) or the Legislature. e remaining six are
members of the public who are not attorneys, four of whom are appointed by the
Governor and two of whom are appointed by the Legislature. e board adopts a
strategic plan with goals that reflect the StateBar’s vision for achieving its mission.
The StateBar Uses Fee Revenue to Fund Its Operations
e StateBar operates 16 major programs. ese programs address different aspects
of its mission, such as investigating and prosecuting attorneys for rules violations,
administering the California bar exam, and promoting diversity and inclusion in the
legal system. e StateBar primarily supports most of its programs through general
fund revenue, the vast majority of which comes from mandatory annual licensing
fees that attorneys must pay each year. In addition, the StateBar collects two other
types of fees that provide revenue to its general fund: fees that licensed attorneys
can opt out of paying (voluntary fees), and fees it charges for specific services
that it provides to attorneys and the public (service fees). e Legislature sets the
mandatory licensing fee and voluntary fee amounts in an annual fee bill. We discuss
the StateBar’s fees later in this report. Table1 shows the three types of fees the
StateBar collects and their amounts for 2023.
The State Bar’s
Core Mission and Selected Responsibilities
Core Mission
State law establishes that “protection of the public ... shall
be the highest priority for the State Bar of California and the
board of trustees in exercising their licensing, regulatory,
and disciplinary functions. Whenever the protection of
the public is inconsistent with other interests sought to be
promoted, the protection of the public shall be paramount.”
Selected Responsibilities
• Licensure of attorneys in California.
• Enforcement of the Rules of Professional Conduct
forattorneys.
• Discipline of attorneys who violate rules and laws.
• Administration of the California bar exam.
Source: State law and the State Bar’s website.
3CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Table1
The StateBar Collects Three Types of Fees
FEE TYPE
2023 FEE AMOUNT FOR
ACTIVE LICENSEES
2023 FEE AMOUNT FOR
INACTIVE LICENSEES
MANDATORY FEES
Annual License $390 $92.40
Client Security Fund 40 10
Discipline 25 25
Lawyer Assistance 10 5
TOTALS $465 $132.40
VOLUNTARY, OPTOUT FEES
Legal Services Assistance $45 $45
Elimination of Bias
(fee amount included in annual licensing fee)
2 2
Legislative Activities 5 5
TOTALS $52 $52
SERVICE FEES 2023 FEE AMOUNT
Minimum Continuing Legal Education (MCLE) Provider Certification
Certifies that providers of legal education meet appropriate MCLE requirements.
$90–$360
MCLE Compliance
Ensures that attorneys are meeting continuing education requirements.
25–200
Mandatory Fee Arbitration
Resolves fee disputes between attorneys and clients.
50–5,000*
Lawyer Referral Service
Certifies organizations to help the public find legal assistance by connecting members of the
public with lawyers.
1,000–10,000
†
Certificates of Standing
Provides, among other information, a one‑page document verifying an attorney’s status and
public discipline information.
25
Law Corporations
Certifies professional corporations that wish to practice law.
75–200
Limited Liability Partnerships
Certifies professional partnerships that limit partners’ liability.
75–2,500
Source: State law, StateBar board resolution, and StateBar fee assessments presented to the board finance committee in
July2022 and November 2022.
*
These fees are paid by clients at the time they file a request for fee arbitration and represent 5percent of the disputed
amount with a minimum fee of $50 and a maximum fee of $5,000.
†
The StateBar charges the $1,000–$10,000 presented in the table for initial certification of nonprofit applicants. To recertify
applicants, the StateBar charges 1percent of the applicant’s gross revenue up to a maximum of $10,000.
In 2022 the StateBar received about $96million in mandatory licensing fee revenue.
1
As Figure1 shows, the StateBar spent most of this revenue—$60.9million—
operating the Office of the Chief Trial Counsel of the StateBar. e Office of the
Chief Trial Counsel receives, reviews, and analyzes complaints against attorneys;
1
Throughout this report, we refer to  revenues and expenditures. These  amounts represent projected actuals from
the State Bar’s  approved budget because the StateBar had not finalized its year-end accounting records, nor had it
completed its  financial audit, at the time of our audit.
4 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
investigates allegations of unethical and unprofessional conduct against attorneys;
and prosecutes attorneys in formal disciplinary hearings for violations of the
StateBar Act or the Rules of Professional Conduct. During this same period, the
StateBar spent more than $14million for the operation of the StateBar Court.
Composed of independent professional judges, the StateBar Court adjudicates
formal disciplinary matters filed by the Office of the Chief Trial Counsel that may
result in the imposition of discipline or a recommendation of discipline to the
California Supreme Court.
Figure1
The StateBar Spends Most of Its Mandatory Licensing Fee Revenue on Attorney Discipline
$97.6
*
MILLION
$4.8
Other Programs
$3.5
Professional Competence
$7.1
Attorney Regulation and Consumer Resources
$2.3
Lawyer Assistance Program
$14.3
State Bar Court (D iscipline)
$4.7
Client Security Fund (Discipline)
$60.9
Office of the Chief Trial Counsel (Discipline)
Source: StateBar’s 2022 financial projections from its 2023 approved budget.
* The StateBar projects that it spent more than the about $96million it collected in mandatory licensing fees in 2022.
As a result, in 2022 the StateBar expended some of it reserves to fund its programs.
In contrast to the mandatory licensing fees, the voluntary fees provide funding
for specific StateBar functions that may not directly relate to regulating the legal
profession or improving the quality of legal services. In total, the StateBar received
$8.2million in revenue from voluntary fees in 2022. One voluntary fee is responsible
for the largest portion of this revenue. State law authorizes the StateBar to collect a
$45 fee to support eligible organizations that provide legal services, without charge,
for indigent persons. Of that $45 fee, the StateBar must earmark $5 for summer
fellowships for law students to work with those legal aid organizations. In 2022 the
StateBar received about $7.1million of such revenue, which it allocates through
its Legal Services Trust Fund Commission. Another voluntary fee, the StateBar’s
Elimination of Bias (EOB) fee, funds programs that address concerns of access and bias
in the legal profession and the justice system. In 2022 the StateBar received more than
$320,000 in revenue from thisfee.
5CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Finally, in 2022, the StateBar collected nearly $3million in service fees it charged
attorneys and the public for specific services. One such fee provides attorneys with
Certificates of Standing, a document verifying an attorney’s name, bar number,
admission date, current status, any name or status changes, and any public discipline
as of the date of the certificate. e StateBar collected over $300,000 from this fee
in 2022. e StateBar also collects a suite of fees to certify Minimum Continuing
Legal Education (MCLE) providers and to monitor attorneys’ compliance with MCLE
requirements, which include requirements related to the subject areas of legal ethics
and competence. e StateBar collected over $554,000 in MCLE-related fees in2022.
In addition to its 16 major programs, the StateBar also has 10 administrative offices
that provide support to all StateBar activities. To address the full scope of this audit,
Appendix A lists the amounts of mandatory fee revenue the StateBar received in
2022, the amounts it spent on each of its programs and offices, the performance
metrics associated with each program and office, and the number of employees in
each program or office.
The StateBar Uses External Investigators to Administer Disciplinary Cases When Its
Staff Have Conflicts of Interest
According to the Rules of Procedure of the StateBar, the chief trial counsel is
required to recuse the Office of the Chief Trial Counsel from investigating or
prosecuting complaints against attorneys if a conflict of interest, or the appearance of
a conflict of interest, could raise concerns about the office’s impartiality. An example
of such a conflict would be if the StateBar received a complaint about an attorney
that the StateBar employs. To address conflicts of interest, the StateBar’s Rules of
Procedure include Rule2201, which is a procedure for referring such complaints
or inquiries to a special deputy trial counsel administrator (administrator). e
StateBar’s intake unit will generally identify and refer these complaints or inquiries
to the administrator.
Although the board’s Regulation and Discipline Committee oversees the Rule2201
program, the administrator is an independent contractor who has all the powers
and duties of the chief trial counsel. A team of about 20 special deputy trial counsels
(external investigators)—who are also independent contractors—support the
administrator. e administrator and external investigators perform the duties of
their positions without the support or resources of the Office of the Chief Trial
Counsel, other than coordinated training. Before 2016 the Rule2201 program
operated with volunteers, meaning that the external investigators were not paid
for their work and were entitled only to reimbursement for costs upon request. In
addition, the StateBar’s assistant general counsel confirmed that before 2016 there
was no administrator role. In July 2016, the StateBar amended Rule2201 to create an
administrator structure, and to authorize compensation for services rendered at an
hourly rate of $100 for external investigators.
According to the StateBar, the independent nature of the administrator’s and
external investigators’ positions requires recruitment of highly qualified individuals
who are experienced litigators and who are knowledgeable about attorney ethics
6 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
and the attorney disciplinary system. In September 2021, the StateBar determined
that the hourly contract rate for the administrator and external investigators was
significantly below market rate for similar work. To ensure that its compensation was
more commensurate with the market rate and to improve recruitment and retention
of qualified practitioners, the StateBar increased the external investigators’ hourly
rate to $250. In May 2022, to increase the efficiency of the Rule2201 program’s case
processing, the StateBar’s board approved a contract for a full-time administrator/
external investigator. e administrator confirmed that she began her duties in
June2022. e current administrator’s contract states she can bill up to 120 hours
per month for external investigator duties at a $114 hourly rate, and she can bill
up to 45hours per month for administrator duties at a $125 hourly rate. Further,
according to the terms of her contract, she is expected to spend 25percent of her
time as administrator and 75percent of her time as an external investigator each
month. In 2022 the StateBar allocated about $456,000 to the Rule2201 program but
subsequently exceeded this budget by $431,000.
7CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Blank page inserted for reproduction purposes only.
8 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
The State Bar Will Need an Increase in Its
Mandatory Licensing Fees in 2024
Key Points
• In recent years, the StateBar has often spent more from its general fund than
it has received in revenue, requiring it to rely on its general fund reserve. As
a result, that reserve is now below the minimum amount the StateBar has
established in its policies.
• Some of the StateBar’s administrative offices have high staff vacancy rates
and—likely, in part, as a consequence—have failed to meet a number of metrics
intended to measure the effectiveness of their performance. e StateBar’s
personnel costs have also risen recently and will continue to do so in coming
years, both because of salary increases and because of the need to fill vacancies.
• e StateBar will need a mandatory licensing fee increase in 2024 to address its
growing costs and rebuild its general fund reserve. However, the StateBar could
minimize this increase and other future increases by increasing fees to fully
cover the costs of providing certain services.
• e StateBar is not proactively planning for its financial future through
long-term financial forecasting. is process would enable it to better identify
and address future sources of financial stress.
The StateBar Has Operated Its General Fund at a Deficit
e StateBar deposits the majority of its mandatory licensing fee revenue into its
general fund. It then uses the general fund to pay for office operations and most of
its public protection programs. In fact, nine of the 11 StateBar programs funded
by mandatory licensing fees receive their funding from the general fund; the only
exceptions are the Client Security Program and the Lawyer Assistance Program,
which receive funding from the Client Security Fund and Lawyer Assistance Program
Fund, respectively. e financial health of the general fund is therefore critical to the
StateBar’s ability to fulfill its public protection mission.
However, in recent years, spending from the StateBar’s general fund has often
exceeded its revenues, creating a spending deficit (deficit). e general fund’s primary
source of funding is the annual mandatory licensing fees that both active and inactive
licensees of the StateBar pay. Although the Legislature authorized a mandatory
licensing fee increase beginning in 2020, the StateBar’s general fund reserve fell from
$19million at the end of 2020 to just $12.4million by the end of 2022. Further, the
StateBar projected in its 2023 approved budget that its revenue would fall short of
9CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
its expenditures by $1.5million in 2022 and by $4.3million in 2023.
2
ese deficits
jeopardize the StateBar’s ability to continue fully funding the performance of its key
responsibilities.
A likely cause of the StateBar’s deficits is rising personnel costs throughout the
organization. e StateBar paid $79.5million in personnel costs from its general
fund in 2019. In 2022 these costs had increased to $84.8million. e StateBar
expects its personnel costs to continue to increase, as we describe in the nextsection.
To address its recent deficits, the StateBar has relied on its general fund reserve. e
Government Finance Officers Association (GFOA) recommends that organizations
maintain at least a two-month reserve in their general funds to protect them from
unexpected changes in financial condition.
3
To comply with GFOA best practices
and to address a 2015 recommendation we made to the Legislature regarding its
general fund reserve, the StateBar established a reserve policy in 2016 that states
that it should maintain a minimum reserve equal to two months, or 17 percent,
of its annual operating expenditures.
4
In alignment with that policy, the StateBar
had a general fund reserve of $23million in 2018. However, as Figure2 shows, its
reserve fell to $12.4million by the end of 2022. Based on its 2022 expenditures, its
general fund reserve should have been more than $16million at that time. Further,
the StateBar projects that its reserves will fall to just $8.1million at the end of 2023.
If the StateBar continues to operate its general fund at a deficit, it risks depleting its
reserve and not being able to pay for its programs and administrative offices.
We expected that to avoid operating at a deficit, the StateBar would have requested
that the Legislature increase the maximum mandatory licensing fees as necessary.
However, when it introduced its recent legislative priorities to legislative staff, the
StateBar did not provide clear explanations of the need for its proposed increases.
When we asked the StateBar about its recent proposed increases, the executive
director explained that because its effective collaboration and partnership with the
Legislature is critical to the StateBar’s ability to carry out its mission, the StateBar
did not publicly seek fee increases in all instances where it believed it needed
more funding. She stated that StateBar staff have preliminary conversations with
legislative staff and key legislators annually, and these conversations have addressed
the StateBar’s need for mandatory licensing fee increases and a stable and consistent
funding mechanism for the StateBar. However, she explained that the StateBar
has received feedback from legislative staff and key legislators indicating that they
will not consider increases to the maximum mandatory licensing fee or that these
requests are unwelcome. Given this feedback, the executive director believes it is not
in the best interests of the StateBar to destabilize these relationships by continuing
to request fee increases.
2
Throughout this report, we refer to  revenues and expenditures. These  amounts represent projected actuals from
the State Bar’s  approved budget because the StateBar had not finalized its year-end accounting records, nor had it
completed its  financial audit, at the time of our audit.
3
The GFOA, whose mission is to advance excellence in public finance, represents public finance officials throughout the
United States and Canada through its membership of more than , federal, state, provincial, and local finance officials.
4
StateBar of California: It Has Not Consistently Protected the Public Through Its Attorney Discipline Process and LacksAccountability,
Report -, June .
[ Insert Figure 2 ]
10 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
e StateBar’s most significant recent proposal for additional fee revenue was a
2022 request for an annual increase to the mandatory licensing fees based on the
rate of inflation. e StateBar’s proposal stated that the increase would allow it to
hire new staff, meet performance metrics, and fund negotiated merit increases and
cost-of-living adjustments for its employees. We expected this proposal would also
clearly identify the amount of funding required, the specific programs that needed
additional funding, and the explicit reasons why the funding was necessary. However,
the StateBar did not justify why an annual adjustment to the mandatory licensing fee
based on the rate of inflation was the best way for it to fund its costs or how it would
allocate the funding for each individual purpose. It also did not identify the specific
amount of funding necessary for it to address its spending deficits and pay for its
programs going forward. e absence of these details in the StateBar’s 2022 proposal
is in contrast to an earlier proposal. Specifically, the StateBar’s proposed mandatory
licensing fee increase for 2020 identified a specific fee increase as well as the amount
of funding needed for specific purposes and programs.
e Legislature did not enact the StateBar’s requested fee increase in 2022. It instead
directed our office to evaluate the StateBar’s operations to determine the fee levels
that should be charged to cover its annual costs.
Figure 2
In Recent Years, the State Bar’s General Fund Reserve Has Decreased
Year
2018 2019 2020 2021 2022
Year-End Reserve
0
5
10
15
20
$25
2019:
-$10.5 million
2021:
-$5.1 million
2022
†
:
-$1.5 million
2020*:
$6.4 million
Source: State Bar financial statements and 2023 budget.
Note: The State Bar defines its general fund reserve as the difference between its current assets and its current liabilities.
* The Legislature enacted a license fee increase for 2020 and the State Bar subsequently collected about $17 million more in
licensing fee revenue compared to 2019. As a result, its general fund reserve increased by $6.4 million in 2020.
†
The State Bar operates on a January to December fiscal year. Audited financial information for fiscal year 2022 was not
available at the time of our audit, therefore, fiscal year 2022 information is based on the State Bar’s fiscal year 2022
projections in its 2023 budget.
11CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
The StateBar’s Administrative and Personnel Costs Are Increasing
As we previously indicate, the StateBar uses mandatory licensing fee revenue not only to
fund most of its public protection programs but also to pay for a significant portion of its
administrative costs. In fact, the StateBar paid for nearly 80percent of its administrative costs
using mandatory licensing fee revenue in 2022. In recent years, those costs have risen: overall,
the StateBar’s administrative spending increased by about $6.5million or 17percent from 2020
through 2022, and it is likely to keep rising.
One factor that will likely affect the StateBar’s spending is its need to improve the performance
of its administrative offices. Organizations often use performance metrics to measure outcomes
related to the specific tasks they perform. In 2018 the StateBar engaged with a consultant to
develop performance metrics related to the StateBar’s various programs and offices. We detail
the StateBar’s current metrics with performance targets for each program and administrative
office in AppendixA. Although the StateBar has other metrics without targets, we only
included those metrics with performance targets to identify which programs had measurable
success. As Figure3 shows, just three of the StateBar’s programs have met all of their
performance metrics, while none of its administrative offices have done so.
Figure3
Only Three StateBar Programs Met All of Their Performance Metrics Targets
Programs
Office of the Chief Trial Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . 4/4
Client Security Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/2
State Bar Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3/5
Attorney Regulation and Consumer Resources*. . . . . . . . . . . . 3/7
Lawyer Assistance Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4/5
Professional Competence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3/5
Probation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/1
Strategic Communications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/2
Center on Access to Justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3/4
Judicial Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/1
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24/36
Administrative Offices
General Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0/2
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0/4
Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0/2
General Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3/4
Information Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/4
Recruitment and Retention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0/4
Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2/4
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6/24
Met all performance metric targets during the year . . . . . . . . . . . . . . . .
Did not meet all of its performance metric targets during the year. . .
(Includes Member Billing office metrics.) (Includes building improvement metrics.)
(Includes Mandatory Fee Arbitration program metrics.)
(Within the Office of Access and Inclusion.)
Source: The 2021 StateBar Metrics Report.
* Although Member Billing is an administrative office, its metrics are tracked and reported by the AttorneyRegulation and
Consumer Resources program.
12 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Although StateBar spending has increased for most administrative offices and decreased
for others, none of these offices met all performance metrics in 2021. Forexample, the
StateBar spent over $2million more, or a 20percent increase, on its Office of Information
Technology in 2022 than in 2021. However, this office met only one of its metrics.
e office’s unmet metrics included the completion of 90percent of planned major
information technology projects on schedule and on budget. Similarly, the StateBar
increased its spending on the Office of Recruitment and Retention by $150,000 or
14percent between 2020 and 2022 and this office met none of its metrics. Conversely,
the Office of Finance spent $500,000 less in 2022 than in 2021, a 16percent decrease.
at office did not meet any of its four performance metrics in 2021, including having
90percent of its internal clients report a high level of overall satisfaction with itsservices.
Because the StateBar’s administrative offices have not fully met their performance
metrics, it may need to consider filling vacant positions to make these offices more
effective, which could result in increased spending. Overall, the StateBar’s administrative
offices had a staff vacancy rate of nearly 21percent in 2022; by contrast, the programs had
an overall vacancy rate of just 8 percent. For example, in 2022 the Office of the Chief Trial
Counsel—the StateBar’s largest program area—had a vacancy rate of just under 7percent
across its 289 budgeted positions. In 2021 the Office of the Chief Trial Counsel met all of
its performance metrics that had targets. In contrast, the General Counsel’s Office had a
vacancy rate of nearly 38percent across its 24 positions in 2022 and failed to meet any of
its performance metrics. e StateBar cited the General Counsel’s Office vacancies and
recruitment challenges as a reason for it not generally meeting performance metrics in a
report on the 2021 metrics outcomes.
To the extent the StateBar attempts to achieve some of its performance metrics by filling
vacant positions, the StateBar will likely need additional funding for its administrative
offices. e StateBar’s 2023 budget assumes a 15percent staff vacancy rate across the
organization. e executive director indicated that, because some offices have vacancy
rates lower than 15 percent, other offices may need to have vacancy rates higher than
15percent for the StateBar to maintain a 15percent vacancy rate across the organization.
If funding is available and vacancies are not too low in other offices, the StateBar’s budget
assumes it may be able to fill some positions in those offices that have higher vacancies.
e executive director indicated that performance metrics can inform the StateBar’s
budget process and that the StateBar increased the Office of the Chief Trial Counsel’s
budget to help it meet that office’s metrics.
In addition to filling its vacant administrative positions, the StateBar’s personnel costs will
also likely continue to increase in the coming years because of cost-of-living and merit salary
adjustments for its staff. In December 2022, the StateBar reached new agreements with its
employee bargaining units that include salary increases to account for rising living costs.
e agreements, which became effective in January 2023, include a 5percent general salary
increase for all StateBar staff as well as a 2.5percent salary increase for all staff in 2024 and
2025. Attorneys received additional increases in 2023 beyond the 5percent general salary
increase: 5percent for senior and supervising attorneys and 2.5percent for other attorneys.
e StateBar estimates that the 2023 salary increases will lead to a $4.2million increase
in personnel costs and that the 2024 increases will lead to about an additional $2million
increase in personnel costs. e StateBar has not yet projected the impact that salary
increases will have in 2025.
13CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
In line with other state agencies, the StateBar also provides its staff with
5percent annual merit salary adjustments. Merit salary adjustments are distinct
from the general salary increases in that they are salary increases granted to
employees for satisfactory job performance. All StateBar employees who earn a
MeetsRequirements or better overall performance rating receive a 5percent increase
to their salary on their employment anniversary date each year up to the maximum
salary for their position. Over time, these adjustments lead to higher personnel costs
overall, particularly as the StateBar fills its vacant positions.
Because the StateBar expects its costs to continue increasing in 2023 and beyond, in
January 2023 its board approved securing an increase in the mandatory licensing fee
as a legislative priority. We agree that given the StateBar’s operational deficits and
rising personnel costs, a mandatory licensing fee increase is necessary. However, as
we discuss below, the StateBar can take steps now to minimize the amount of future
fee increases.
By Taking Action Now, the StateBar Can Minimize Future Mandatory LicensingFeeIncreases
By making certain operational changes, the StateBar could reduce the amount of
the 2024 mandatory licensing fee increase that is needed. As Figure4 shows, we
calculated the StateBar’s likely 2024 general fund revenue requirements by taking
its 2024 projected expenses and adding the amount it will need to save to begin
rebuilding its general fund reserve. e StateBar’s 2024 projected general fund
expenses include a $4.6million increase in personnel costs that incorporates the
cost-of-living and merit adjustments we describe in the previous section. We also
identified the estimated amounts of general fund revenue from sources other than
mandatory licensing fees, such as investment income and lease revenue. We then
determined that the StateBar could increase its revenue by raising certain service
fees to align with its costs and updating other out‑of‑date fees. If the StateBar takes
the steps we recommend, it could limit the annual revenue its general fund will
need from the mandatory licensing fees to about $91.1million. It could generate
this $91.1million if the Legislature increases the maximum mandatory licensing fee
so that the StateBar can add $24 to the current $390 for a total of $414 for active
licensees and $6 to the current $97.40 for a total of $103.40 for inactive licensees.
As we describe previously, the StateBar also collects mandatory fees for the Client
Security Fund and Lawyer Assistance Program. ese programs are not funded by
the general fund and we did not identify a need to adjust the fees for either program.
e Client Security Fund had a one-time fee increase in 2020 to pay for pending
claims, and since receiving the increase, the StateBar has reduced the number of
outstanding claims. e Lawyer Assistance Program fee was partially suspended by
the Legislature for one year in 2020, with the fee set at only $1 for active licensees
and a $0 fee for inactive licensees, after that fund had built up a significant reserve
of nearly $3.7million. e StateBar has reduced that reserve in the subsequent
years and its projected reserve at the end of 2023 is only $1million. Because the
StateBar has not requested fee increases for these programs and we did not identify
operational concerns, we are not recommending any changes to these fees.
14 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Figure4
The StateBar Needs Additional Mandatory Licensing Fee Revenues to Fulfill Its ExistingResponsibilities
2024 General Fund Fee Requirements
State Bar's 2024 projected general fund expenditures . . . . . . . . . . . . . . . . . . . . . $97.8 million
State Auditor’s proposed changes to increase required revenue. . . . . . . . . . . . $1.6 million*
Rebuild general fund reserve
General fund revenue required in 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $99.4 million
Nonmandatory licensing fee revenue sources
To determine the amount of mandatory licensing fee revenue, we subtract the other revenue
sources below.
State Auditor recommends increasing service fees for
programs operating with structural deficits.
†
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.9 million
State Auditor recommends updating out-of-date limited liability partnerships
and law corporation service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.0 million
State Bar's forecasted general fund revenue in 2024 from
other sources:
Other fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4.3 million
Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.3 million
Investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.4 million
Lease revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.4 million
Total nonmandatory general fund fee revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8.3 million
General fund revenue required from mandatory licensing fees
State Auditor’s recommendation to the Legislature:
Increase the maximum annual license fee for active licensees from $390 to $414 and the maximum
annual license fee for inactive licensees from $97.40 to $103.40 to generate a total of $85.2 million in
mandatory licensing fee revenue. Maintain the discipline fee at $25 to generate a total of $5.9 million
in mandatory licensing fee revenue.
‡
Annual license fee for active licensees revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $81.3 million
Annual license fee for inactive licensees revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3.9 million
Annual discipline fee for active licensees revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4.9 million
Annual discipline fee for inactive licensees revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.0 million
Total general fund mandatory licensing fee revenues in 2024 . . . . . . . . . . . . . . $91.1 million
Source: State law and analysis of StateBar budgets and fee analyses.
* We based this number on the annual amount necessary for the StateBar to rebuild its general fund reserve by $8.1million over a five-yearperiod.
The State Bar’s reserve policy states that it should strive to return reserves to the minimum reserve level of 17 percent within five years.
†
As we acknowledge in our report, the StateBar may determine that it does not want to raise the fees for some of these programs because it may result
in the public using these services less. If so, the Legislature would need to increase the maximum mandatory licensing fee the State Bar can charge
further than we suggest to enable the State Bar to generate this needed revenue.
‡
We based this calculation on the StateBar’s methodology for projecting the amount of licensing fee revenue its general fund will receive from a set
level of mandatory licensing fees. The StateBar does not deposit the $2 EOB opt-out fee in its general fund, so the amount of general fund revenue it
collects from active and inactive licensees is $2 lower than the amount set by the StateBar for the annual license fee. As of March2023, the StateBar
had 195,093 active licensees and 74,082 inactive licensees. The StateBar allows active attorneys whose salary is less than a certain threshold to pay
a 25percent reduced annual license fee and allows attorneys admitted to the bar after June 1 to pay half of the annual license fee. It also does not
charge any fee to inactive licensees who are age 70 or older. To incorporate these variables, we relied on the same methodology that the StateBar
used to calculate its projected 2022 annual general fund revenue fromlicensees.
The two mandatory licensing fees that fund the general fund are the annual licensing fee and the discipline fee. We recommend changing the
annual licensing fee instead of the discipline fee because that is the fee which the Legislature has adjusted in recent years and the StateBar has
not requested changes to the discipline fee. The ratio of fee increases is based on the current ratio in state law where the active annual licensing
fee is four times the inactive annual licensing fee. Our calculation also incorporates our recommendation that the StateBar charge the maximum
amount allowed under state law to inactive licensees.
15CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
For a number of years, the StateBar has not collected sufficient service fees to cover
its costs as Table2 shows. For example, the StateBar charges attorneys a $25 fee to
issue Certificates of Standing that certify the attorney is a licensee of the StateBar.
e StateBar also charges fees of $90 or $360 to providers of legal education,
depending on the type of provider, to approve them to teach MCLE to licensed
attorneys. e StateBar intends for both of these programs to be self-sufficient—
meaning that the fees it charges fully cover the costs of providing the services.
However, because the fees are not sufficient to cover the costs, the StateBar has used
mandatory licensing fee revenue to subsidize theseservices.
Table2
The StateBar Has Not Updated a Number of Its Service Fees
OFFICE PROGRAM
IS THE STATEBAR
COLLECTING SUFFICIENT
FEES TO PAY FOR
THE PROGRAM?
SIZE OF ANNUAL
STRUCTURAL DEFICIT
Attorney Regulation and
Consumer Resources
MCLE Compliance
The StateBar audits attorneys’ continuing
education and charges late fees.
No $525,000
Certificates of Standing
Upon a licensee’s request, the StateBar issues
certificates to verify the attorney’s name, bar
number, admission date, and current status.
No 105,000
Professional Competence
Lawyer Referral Service
The StateBar certifies lawyer referral services
that help the public find legal assistance.
No 257,000
Mandatory Fee Arbitration
The StateBar resolves fee disputes
between attorneys and clients by helping
them to communicate disagreements to
independentarbitrators.
No 231,000
MCLE Provider Certification
The StateBar approves providers of legal
education so that their services can satisfy
ongoing MCLE requirements.
No 775,000
TOTAL $1,893,000
Source: StateBar staff reports and auditor analysis of accounting records.
As Table2 shows, the StateBar concluded in a 2022 analysis that its programs that
were not self-sufficient had a nearly $2million combined annual deficit and that they
were consequently relying on mandatory licensing fee revenue. For example, the
MCLE provider certification program had a structural deficit of nearly $800,000.
Similarly, the Certificates of Standing program had a structural deficit of a little more
than $100,000. We obtained and analyzed the StateBar’s underlying accounting
records and confirmed that the service fee revenue dedicated to these programs was
inadequate to fully support program spending. If the StateBar increases its service
fees to eliminate these structural deficits, it could use its mandatory licensing fee
revenue to pay for other costs or to rebuild its general fund reserve.
16 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
e StateBar is considering whether some programs serve a public protection
function that supersedes the need for them to be self-sufficient, meaning that it may
decide not to raise all of these fees. In particular, according to the chief financial
officer (CFO), the StateBar believes that increasing fees for its Mandatory Fee
Arbitration program and Lawyer Referral Service program (both service fees) could
result in the public using these programs less. e Mandatory Fee Arbitration
program provides public protection services to clients who may be victims of
attorneys by providing a low-cost method for resolving issues with attorney fees,
and the Lawyer Referral Service program helps the public find legal assistance.
Although the fees for the Lawyer Referral Service are paid by the organizations
receiving referrals instead of by the public who use the services, the CFO indicated
that the fee increases could put referral service organizations out of business. ese
two programs operate at a combined deficit of nearly $500,000. We believe that the
StateBar should analyze the impact that raising the service fees for these programs
would have on public participation in the programs. It should raise the fees to avoid
operating the programs at deficits unless its analysis determines that increases would
reduce public participation.
In its 2022 analysis, the StateBar also determined that it could generate additional
general fund revenue of more than $1million by increasing fees for its Limited
Liability Partnerships (LLPs) and Law Corporations programs that have not had
fee updates in years. Similar to the process through which the StateBar licenses
attorneys by charging mandatory licensing fees, it charges fees to certify LLPs to
allow partners to limit their liability for the actions of their partners and employees
and to certify law corporations to practice law. e StateBar’s analysis found that
the fees for the two programs had not changed in a decade or more. Further, the
LLPs program’s fees are currently regressive, meaning that firms with 1,000 attorneys
pay the same amount as firms with 100 attorneys, a structure that the StateBar has
identified as being unfair to smaller firms.
State law requires the StateBar to use fee revenue from the LLPs and Law
Corporations programs for regulatory and disciplinary purposes. Specifically, the
StateBar can use the revenue it collects from these fees to make improvements to
those two programs. For example, it intends to use the increased Law Corporations
program fees to streamline the registration process for law corporations. However,
the StateBar can also use these fees to pay for its core regulatory and disciplinary
programs, such as the Office of the Chief Trial Counsel, instead of using mandatory
licensing fee revenue.
StateBar staff recommended changes to the LLPs program’s fees that would
generate from $500,000 to more than $700,000 annually and changes to the Law
Corporations program’s fees that would generate more than $300,000 annually in
addition to the current fee revenues generated by the programs. e StateBar is in
the process of soliciting feedback from impacted parties on the appropriate fee level
for LLPs. e StateBar intends to present all of its recommended fee increases to
its board in May 2023. If it is able to raise these fees, it could make improvements to
these programs and to other disciplinary or regulatory programs without needing to
spend mandatory licensing fee revenue to do so.
17CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
e StateBar has also not charged the full allowable annual license fee to inactive
licensees. State law allows the StateBar to set its annual license fee for inactive
licensees to a maximum of $97.40. However, the board authorized an annual license
fee of $92.40 for inactive licensees in 2023. Consequently, the StateBar will collect
about $190,000 less in general fund revenue than if it had charged the full amount.
isdecision was not financially prudent given the StateBar’s financial situation. By
not charging the full annual license fee authorized for inactive licensees, the StateBar
has minimized its ability to address its rising costs. e StateBar acknowledged
that a plain reading of the statute setting the maximum annual inactive license fee
supports its ability to charge inactive licensees up to $97.40 in 2023. In response to
our questions about the lower fee amount, it referred to its belief that the legislative
intent when the Legislature most recently revised the annual licensing fee was to
limit the inactive licensing fee to $92.40 in 2023. Nevertheless, given the StateBar’s
financial situation, it should charge the maximum annual license fee authorized
under state law.
In addition, the StateBar could realize further cost‑savings if it sells the real estate
it owns. State law allows the StateBar to purchase, lease, and sell real property. e
StateBar owns two buildings—one in San Francisco and the other in LosAngeles.
Based on recent estimates, the StateBar occupies about 60percent of its SanFrancisco
space and about 80percent of its Los Angeles space. It leases out the remaining space
in both buildings. e StateBar is in the process of trying to sell its San Francisco
building. If it is able to do so, it could realize significant savings, particularly given
that the ownership costs for the building have increased in recent years. In 2021
the StateBar spent nearly $5.7million on both capital improvements and building
operations for its San Francisco building, and estimates its 2022 costs were nearly
$5.6million. e StateBar projects that it could save an average of more than
$4million annually in building operating expenses alone if it sells the building.
Selling the San Francisco building would, therefore, have an immediate impact on
the StateBar’s costs. Moreover, if it is able to sell the building, the StateBar plans
to fully repay a 2021 loan for building improvements and information technology
projects, which would eliminate $2.4million in ongoing annual expenses in 2023 and
2024, $1.6million annually from 2025 through 2031, and $1million annually from
2032 through 2036. e total savings—along with the $4million annually in building
operating expenses— would be partially offset by the loss of rental income, currently
$1.8million annually. In addition, the StateBar would need to lease office space for
its San Francisco operations.
5
e StateBar is concerned that it will not be able to
sell the building because of a declining real estate market in San Francisco. If it is
unable to sell the building, it will need to continue to pay for the building’s ongoing
operational and capital improvement costs.
e StateBar’s 2023 budget assumes that it will sell its San Francisco building by
June 2023. Accordingly, it does not budget for any building related expenses or lease
revenue after the first six months of 2023. If it does not sell the building in the first
5
The StateBar would likely also receive significant funds from the sale of the building and be able to put them toward
paying its lease costs and rebuilding its general fund. However, we do not estimate the potential sale price here given the
uncertainty of the real estate market.
18 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
half of 2023, the StateBar plans to submit a midyear budget adjustment to its board.
at midyear budget adjustment would add back in the expenses and lease revenues
related to owning the building for the second half of the year. is could further impact
the StateBar’s financial situation in 2024 if the building does sell by the end of 2023
which is one reason why we recommend that the StateBar inform the Legislature of any
significant financial changes after we publish our audit.
e StateBar might also reduce its costs by selling its Los Angeles building. However,
the StateBar has yet to take critical steps to determine whether it is cost-effective to do
so. Specifically, the StateBar explained that it has not obtained a recent estimate of the
Los Angeles building’s value nor assessed the costs and benefits of continuing to own
the building. According to the chief administrative officer, the StateBar has not taken
such steps because the San Francisco building analysis has been a higher priority in
recent years because of the significant amount of capital investment the San Francisco
building requires and the challenges of leasing 40percent of the building to tenants;
both of these have created a more pressing financial concern. e Los Angeles building,
by comparison, is smaller, requires fewer capital improvements, and has only one
tenant. However, according to the chief administrative officer, the StateBar plans to
assess its options for its Los Angeles building beginning in 2023.
The StateBar Is Not Proactively Planning for Its Financial Future
As we discuss throughout the previous sections, the StateBar is in a difficult financial
position. Its personnel costs have increased in recent years and will continue to do
so. Its general fund reserve has fallen below its established minimum. Some of its
administrative offices have high staff vacancy rates, and none are fully meeting their
performance metrics. It has not collected sufficient fees to cover the costs for some of
the services it provides. Finally, changes in the San Francisco real estate market may
hinder its ability to sell its building there, requiring it to continue to pay the high costs
of operating and maintaining the building.
To address these financial difficulties, the StateBar will need to take a proactive
approach to planning for its financial future. One method that could help the StateBar
do so is long‑term forecasting. GFOA best practices indicate that organizations
should use this tool to identify future revenue or expenditure trends that may have an
immediate or long-term impact on government policies or strategic goals. According
to the GFOA, an effective forecast allows for improved decision making in maintaining
fiscal discipline. Further, the GFOA recommends that all governments maintain a
long-term financial plan that projects revenue, expenses, financial position, and external
factors for all key government operations and funds at least five years into the future.
In the past, the StateBar produced five-year forecasts for its general fund—a practice
that we recommended in our April 2019 audit report that it continue to annually
perform to enable it to effectively determine its budget.
6
However, the StateBar no
6
StateBar of California: It Should Balance Fee Increases With Other Actions to Raise Revenue and Decrease Costs, Report-,
April .
19CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
longer produces these forecasts and could not provide us with a compelling reason
for having ceased to do so. e StateBar most recently produced a five-year general
fund forecast in 2021. In that same year, our office assessed that the StateBar had
fully implemented our 2019 recommendation that it continue to annually prepare
five-year budget projections. When we asked in the course of this audit why it did
not produce a forecast in 2022, the CFO indicated that she does not believe that a
five-year forecast is reasonable when so many uncertainties exist that can affect the
forecast’s accuracy. However, she acknowledged that a three-year forecast might be
reasonable and that the StateBar may need to create a new forecast in the future to
assess funding needs for its new strategic plan.
We believe that the StateBar should begin to annually create forecasts again:
uncertainties should not prevent it from attempting to assess its upcoming needs.
Rather, uncertainties are one reason why forecasts are such a valuable tool. Forecasts
allow organizations to better anticipate the likely financial situations they could
find themselves in and plan accordingly. As the GFOA notes, a forecast can help
governments diagnose potential risks and causes of fiscal distress and allow them to
take preemptive action to mitigate forecasted financial distress. We believe that the
StateBar could use forecasting to address its current financial situation and provide
the public and the Legislature with clear information about its financial outlook.
For example, incorporating the potential sale of its San Francisco building into its
forecasts could allow the StateBar to identify the effect that the sale might have
on its general fund reserve level and mandatory licensing fee needs. A three-year
forecast would reasonably allow the StateBar to identify any future causes of fiscal
distress while still providing it sufficient time to either seek additional funding or
adjust its spending.
Recommendations
Legislature
e Legislature should set the maximum annual licensing fee that the StateBar may
charge for 2024 to $414 for actively licensed attorneys and $103.40 for inactive licensees.
However, before the Legislature finalizes the maximum annual licensing fee amounts
for 2024, it should request that the StateBar provide it with the followinginformation:
• An itemized listing of the mandatory licensing fee revenue that the StateBar will
need to fund its operations in 2024 program by program. is breakdown should
identify any changes in the StateBar’s financial situation following the release of
this audit, such as the sale of its San Francisco building or the StateBar choosing
not to increase some of its service fees to fully recoup its costs as we recommend
below. e StateBar will need to identify the effect that any changes to its financial
situation will have on the mandatory licensing fee amounts we have identified
asnecessary.
20 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
• A list of any programs funded by licensing fees that need additional funding
beyond the program-by-program breakdown to operate effectively and to meet
related performance metrics. e list should specify the StateBar’s understanding
of the amount of funding needed per program.
e Legislature should require the StateBar to provide the above information each
year when submitting its annual budget to the Legislature, as required by state
law, or it should otherwise specify the format and level of detail needed through
statutorychange.
For 2024 the Legislature should maintain the Lawyer Assistance fee at $10 for active
licensees and $5 for inactive licensees, the Client Security Fund fee at $40 for active
licensees and $10 for inactive licensees, and the discipline fee at $25 for all licensees.
StateBar
By October 2023, the StateBar should identify any service fees that do not fully
cover the costs of providing the services. e StateBar should increase the fees it has
identified to the amount necessary to recoup its costs unless it determines that doing
so would limit the public’s access to the services. It should also identify any service
fees that have not been updated in five years or more and assess whether they should
be updated. e StateBar should then determine the effect that the increased service
fees will have on the amount of mandatory licensing fee revenue that it needs.
To ensure that it appropriately plans for its upcoming funding needs and takes all
steps possible to maintain an adequate reserve level, the StateBar should reinstitute
its practice of producing and posting on its public website forecasts for its general
fund starting with its 2024 budget. ese forecasts should encompass at least the
following three years.
21CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Blank page inserted for reproduction purposes only.
22 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
The State Bar Should Improve Its Process for
Administering External Disciplinary Cases
Key Points
• e StateBar uses its case management system to track data related to the
discipline cases that its external investigators handle. However, these data contain
multiple errors and omissions.
• e StateBar has not ensured that the Rule2201 program consistently concluded
its external disciplinary cases within the time frame it has established for doing so.
• e StateBar has not provided access to its case management system to all of
its external investigators, leaving it less able to identify the origins of delays in
caseprocessing.
• e StateBar established the Rule2201 program so that it could assign external
investigators to disciplinary cases when its own staff have conflicts of interest.
However, the StateBar itself has not formalized a permanent process to ensure
that its current and future administrators are identifying external investigators’
potential conflicts of interest.
• e StateBar considered rates for comparable legal services before recently raising
its contracted hourly rate for its external investigators.
Data Errors Limit the StateBar’s Ability to Track the Timeliness of External
DisciplinaryCases
According to state law, the StateBar’s goal is to conclude its disciplinary cases within
six months of receiving a complaint alleging attorney misconduct.
7
e StateBar
can conclude a case by dismissing the complaint, admonishing the attorney, or filing
formal charges against the attorney with the StateBar Court. As the Introduction
describes, when the StateBar identifies a conflict of interest related to an inquiry or
complaint, the Office of the Chief Trial Counsel refers that complaint or inquiry to
the Rule2201 program. e administrator and external investigators subsequently
conduct the investigation and all other proceedings as necessary. According to the
administrator, external investigators follow the Office of the Chief Trial Counsel’s
policies and procedures related to processing cases to the extent possible; therefore,
they must adhere to the same time frame as the Office of the Chief Trial Counsel’s
staff for reaching a conclusion on cases they process. Figure5 shows the StateBar’s
process for reviewing discipline cases.
7
State law also states that if the StateBar designates a disciplinary case as complicated, the time frame for completing
that case increases to  months. However, the administrator confirmed that the only goal for the Rule program is to
complete cases within six months.
23CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Figure5
The StateBar Uses Similar Processes for Reviewing Internal and External Disciplinary Cases
Complaint
Filed
Complaint closed if it does not indicate misconduct.
Post-Filing Stage
Cases can be closed, settled, or decided by
a judge and may include disciplinary action.
Formal charges filed in
State Bar Court
State Bar Court
hearing or trial
State Bar Court
review or appeal
California
Supreme Court
Intake
Stage
Investigation
Stage
Prefiling
Stage
If the State Bar identifies a conflict during the intake or
investigation stages, internal investigators cease review and
send the case to the external investigators who generally
continue to follow the State Bar’s investigative process.
The Four Stages of the External Disciplinary Case Review Process
1. Intake: The administrator or external investigator conducts a preliminary legal review to determine whether the alleged
misconduct constitutes an actionable violation of professional misconduct.
2. Investigation: The administrator or external investigator conducts an investigation to determine whether there is clear and
convincing evidence to support the allegation of professional misconduct.
3. Prefiling: The administrator or external investigator makes preparations for a complaint to be filed in the State Bar Court.
4. Postfiling: The State Bar Court conducts evidentiary hearings and then renders a decision with findings and
recommendations of discipline or no discipline. The State Bar Court’s review department hears appeals from these
decisions. Review department decisions can be appealed to the California Supreme Court.
Source: The StateBar’s website and Investigative Procedures Manual.
Although the StateBar tracks centralized data related to its discipline cases through
Odyssey, its case management system, we were unable to entirely rely on these data to
determine whether the Rule2201 program has been meeting the six-month goal for
concluding discipline cases. To determine if the Rule2201 program was concluding external
discipline cases within this time frame, we requested a listing of all external discipline cases
and we identified those it closed during fiscal years2019–20 through 2021–22. However,
when we attempted to verify these data—which included a total of 429 cases—we identified
numerous omissions or errors. For example, the StateBar informed us that it initially
omitted two cases from the data we received and that it could not determine what caused
the omissions. erefore, there is a possibility that other data was omitted. In addition,
the data erroneously showed that an external investigator closed two cases after her
resignation. However, upon review of the data, the StateBar confirmed the completion dates
in Odyssey were incorrect and, in fact, the external investigator closed both cases before
her resignation. Further, when we compared the available hard-copy files for a judgmental
selection of 10 cases to the data in Odyssey, we identified seven discrepancies in 42 data
fields. For example, Odyssey data show that it closed one of the cases seven months after
the last activity contained in that case’s complaint file, which occurred when the external
investigator sent a closing letter to the complainant. e administrator indicated that she
identified no further substantive activity on the case after the closing letter was sent and that
24 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
the StateBar should likely have considered the case closed at that time. In addition, we were
not able to fully review the data associated with these 10 cases because the StateBar was
unable to provide us complete copies of the case files for three of them. erefore, the true
error count may have been even higher than the seven errors weidentified.
ese data accuracy and completeness issues highlight limitations in the State Bar’s
case management system for the purpose of evaluating the timeliness of its external
investigations. Moreover, the fact that we identified numerous data entry errors through
our limited review brings into question the accuracy of the dataset as a whole. Because of
these concerns, we used our selection of 10 cases to gain insight into the timeliness of the
Rule2201 programs’ handling of external discipline cases, as we discuss in the next section.
However, we also present global data in Odyssey because it is the only readily available
source of data on the overall timeliness of cases processed by externalinvestigators.
The Rule2201 Program Has Not Consistently Closed External Disciplinary Cases Within a
Six-Month Time Frame
Our review of the 10 cases we judgmentally selected from the pool of cases with the
longest length of time between the case being opened and it being closed, as well as the
Odyssey data, found that external investigators did not consistently administer cases in
a timely manner, as Figure6 shows. e StateBar’s procedure, which also applies to the
administrator and external investigators, requires that it complete a preliminary review of
a case at the intake stage within 60 days of receiving a complaint. However, we found that
the preliminary reviews for four cases handled by external investigators lasted significantly
longer than 60 days. We found similar results when reviewing the Odyssey data, which show
that the external investigators took more than 60 days to complete preliminary reviews of
162, or nearly 40 percent, of the total cases in the three fiscal yearsunder our review.
We also found that external investigators did not always complete their investigations
within the six‑month goal. Specifically, they did not conclude seven of the 10cases we
selected within that time frame. Although this was not surprising because we based our
selection of 10 cases on those that took the longest to complete, we also found concerns
about the timeliness of investigations when reviewing the global data. Specifically, the
Odyssey data showed that external investigators did not close 130 cases, or 30 percent,
ofthe total external disciplinary cases from our audit period within sixmonths.
When the Rule2201 program and its external investigators do not close cases in a timely
manner, they risk failing to adequately protect the public. For example, one of the 10 cases
we reviewed remained open for multiple years. When the StateBar initially received this
case, the Office of the Chief Trial Counsel closed it within six months without taking any
action. However, the complainant requested a second review, and two years after it received
the initial complaint, the StateBar’s Audit and Review Unit determined that the StateBar
needed to reopen the case for furtherinvestigation.
8
8
In  the StateBar’s Audit and Review Unit moved to the Office of the General Counsel and the unit’s name changed to the
Complaint Review Unit, which handles requests for a second review from complainants who have had their matters closed by the
Office of the Chief Trial Counsel without disciplinary charges filed.
[ Insert Figure 6 ]
25CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
About four months into the investigation, the Office of the Chief Trial Counsel
referred the case to the Rule2201 program. e external investigator assigned to it
reached a conclusion and drafted disciplinary charges for the case two years after
the StateBar reopened it. Six years after the StateBar initially received the case, the
StateBar Court finally ordered that the respondent to the complaint be suspended
from practicing law. e administrator did not know whether the respondent
attorney continued to practice law until that time; however, because the StateBar
and the external investigators did not review this case in a timely manner, the
Figure 6
The Rule 2201 Program Has At Times Exceeded the Time Frames Established for Completing Stages
of Its External Disciplinary Process
10
cases reviewed from above 429 cases
The preliminary review was not complete within 60 days in
4 cases or
40%
*
Intake
The administrator shall complete the preliminary review within
60 days after the written inquiry or complaint is first received.
61–90 days
0
91–120 days
0
121+ days
4
429
cases from Odyssey reviewed
during three fiscal years
The preliminary review was not complete within 60 days in
162 cases or
38%
Preliminary Review Completed
Preliminary Review Completed
61–90 days
65
91–120 days
18
121+ days
79
10
cases reviewed from above 429 cases
Cases were not closed within six months in
7 cases or
70%
Investigation
State law has established the goal of dismissing a complaint,
admonishing an attorney, or filing formal charges within six months
after the State Bar receives that complaint.
6–12 months
1
1–3 years
4
3+ years
2
429
cases from Odyssey reviewed
during three fiscal years
Cases were not closed within six months in
130 cases or
30%
Case Review Completed
Case Review Completed
6–12 months
43
1–3 years
68
3+ years
19
Source: Analysis of cases the State Bar closed during fiscal years 2019–20 through 2021–22, state law, and the State Bar’s
Rules of Procedure.
* For one of the 10 cases we reviewed, the administrator asserted that the case was closed because it was duplicative of
another case. However, she could not provide documentation supporting the intake completion date. In the absence of
this documentation, we relied on the intake completion date in Odyssey, which shows the case remained in intake for
about two and a half years before it was closed.
26 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
attorney remained eligible to practice law for a total of six years after the StateBar
received the initial complaint. When it allows delays of this magnitude, the StateBar
cannot adequately protect the public from attorney misconduct.
e StateBar has provided a number of different reasons why its external review
process can be lengthy. In particular, it previously cited its limited pool of part‑time
external investigators although it recently contracted with three new individuals to
serve in this position. In addition, the administrator explained that a standard step
in all investigations is to request a written response from the respondent attorney
and that some attorneys request an extension or multiple extensions to submit their
responses. e administrator also noted that more complex cases may require more
time. For example, when a case requires bank statements, the bank can take up to
30days to provide them. Further, the investigation of some cases may be deferred
pending resolution of related criminal or civil cases. Even so, the StateBar could not
readily identify that these reasons were, in fact, the underlying causes of the delays
weidentified.
The StateBar Does Not Have the Ability to Adequately Monitor the Timeliness of
External Disciplinary Cases
e StateBar lacks the ability to monitor the timeliness of certain external disciplinary
cases, leaving it less able to identify when and why delays in case processing occur. e
administrator explained that she runs reports from Odyssey to determine the length
of time a specific external investigator has been assigned to a case and to show the
dates when the case status changed from the intake stage to the investigation stage.
However, the majority of external investigators do not yet use Odyssey, lessening the
administrator’s ability to use the system to monitor the timeliness of the cases. As of
March 2023, eight out of about 20 external investigators were actively using Odyssey.
e Office of the Chief Trial Counsel implemented the Odyssey system in 2019 for
administering discipline cases. According to staff within the StateBar’s Office of
Research and Institutional Accountability, employees within the Office of the Chief
Trial Counsel who administer discipline cases create a record in Odyssey for each
of their cases. ese employees then must enter every major event throughout
the investigation process into the electronic record. However, according to the
administrator, before her tenure began in 2022, her predecessor was the only one in
the Rule2201 program to have access to Odyssey.
e staff in the Office of Research and Institutional Accountability stated that
the StateBar is currently providing Odyssey access and training on a rolling basis
to its existing external investigators who handle the highest volume of cases.
Although the StateBar does not have a projected completion date for this rollout,
the administrator explained that the StateBar is implementing Odyssey access
and training gradually because it requires significant time and resources. Further,
she believes that having all external investigators change their way of file handling
overnight would be highly disruptive to case processing. e StateBar’s Office of
Information Technology confirmed that all newly contracted external investigators
are given access to Odyssey as soon as they start. However, until all other external
27CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
investigators also begin using Odyssey, the administrator will lack the ability to
readily and fully identify investigations that are exceeding the Rule2201 program’s
six-month time frame and the ability to determine the causes of those delays.
Further, until the StateBar provides Odyssey access to all of the Rule2201 program
contractors, it also risks misplacing or losing critical documentation for cases.
External investigators without Odyssey access currently receive an electronic copy
of the documents from the administrator and will either work from these electronic
case files or they will print the documents and create a hard copy case file. At the
conclusion of each case, the external investigators send the administrator a digital
copy of the cases’ closing documents, which the administrator then directs the
Rule2201 program’s legalsecretary to upload to Odyssey. If an external investigator
created a hard copy case file, the remainder of the case information stays in the
hard-copy file, which the Office of the Chief Trial Counsel explained it transfers
to the StateBar’s storage facilities in Los Angeles or San Francisco. e StateBar’s
records retention policy requires it to retain discipline case files indefinitely.
According to the StateBar’s chief trial counsel, although it began retaining case files
electronically effective January 2021 by scanning the hard-copy files into Odyssey,
theStateBar still maintains hard-copy files of Rule2201 program cases. When
external investigators return the hard-copy files to the Office of the Chief Trial
Counsel following the case closure, it archives and retains the files. However, of the
10 case files we requested, the StateBar was unable to provide us with two files and
only very limited documentation related to a third. As a result, we relied on Odyssey
data to determine the timeliness of these cases.
Without retaining case file evidence, whether electronically or in hard-copy files, the
StateBar is unable to review the support for data, such as key case processing dates,
entered into Odyssey. Further, given that the files can contain sensitive information,
such as bank statements, we find it concerning that the StateBar could not locate a
complete record for nearly one-third of the files we requested.
The StateBar Needs to Formalize a Process for Identifying External Investigators’
Conflicts of Interests
As the Introduction explains, the Rules of Procedure of the StateBar require its
chief trial counsel to recuse the Office of the Chief Trial Counsel from inquiries or
complaints against attorneys if a conflict of interest, or the appearance of a conflict of
interest, could raise concerns about its impartiality. To make this determination, the
StateBar requires its employees to complete an annual questionnaire in which they
disclose the personal, financial, and professional relationships they have with licensed
California attorneys. e StateBar then adds these attorneys to a conflicts-of-interest
list and flags the attorneys in Odyssey.
However, the StateBar has not formalized a process to ensure that external
investigators are free from conflicts of interest when administering disciplinary
cases. According to the administrator, the StateBar does not have a written policy
or procedure that she or her external investigators adhere to regarding conflicts of
interest. e administrator explained that she does not know why the StateBar does
28 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
not have such policies or procedures for contractors to follow. Although the external
investigators complete a similar annual questionnaire as StateBar employees, the
administrator does not track external investigators’ conflicts of interest in a list
similar to the list for StateBar employees. erefore, the Rule2201 program runs the
risk that it will not appropriately identify and address any conflicts of interest that
external investigators may have.
In the absence of a formal policy from the StateBar, the administrator has adopted an
informal process for identifying conflicts of interest. Specifically, she explained that
when she assigns an inquiry or complaint to an external investigator, she generally
discloses relevant names, such as the respondent and key witnesses, and she asks the
external investigator to confirm in writing whether he or she has a conflict of interest. If
an external investigator discloses such a conflict of interest, the administrator will flag it
in Odyssey and will not assign the case to that external investigator. e administrator
stated that after she assigns an external investigator to a case, she provides that
individual with the name of any other external investigators who have conflicts of
interest with the subject of the complaint or individuals related to the investigation. She
explained that the assigned external investigator will know going forward to not discuss
the case with any external investigators who have these conflicts of interest.
If followed, the process described by the administrator seems reasonable to us. In
response to our concern, the administrator developed her own policy directive, which
outlines the process described above, and distributed it to the external investigators
in March 2023. However, the StateBar has not established a formal process for
ensuring that the Rule2201 program’s current and future administrators will
consistently ensure that they do not assign external investigators to cases in which
conflicts of interest exist. Given that the administrator and external investigators are
independent contractors with limited-term contracts, we believe the StateBar is best
equipped to provide formal guidance to the Rule2201 program. When we asked the
StateBar’s executive director about this issue, she agreed that the StateBar needs to
finalize a conflict-of-interest verification process for the Rule2201program.
The StateBar Appears to Be Administering Its External Disciplinary Cases
Cost-Effectively
As we previously discuss, the StateBar’s external investigators are contractors, not
employees. According to the StateBar’s 2021 annual report on the use of outside
counsel, it paid more than $488,000 to external investigators in 2021, up from the
$282,000 it paid in 2020, an increase of more than 70 percent. e report cites two
reasons for this change: an increase in the hourly rates it pays and the continued
professionalization of the Rule2201 program. More specifically, the report explains
that the increase in costs in 2021 is attributable to the StateBar’s effort to decrease
the backlog of aged cases and prepare more cases for trial.
To determine whether the StateBar’s process for handling external disciplinary
cases is cost-effective, we considered its options for administering disciplinary cases
when its staff cannot do so. We concluded that engaging contractors to administer
these cases was a reasonable option for the StateBar. We then considered if the
29CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
StateBar determined whether it was obtaining the external investigators’ services at
a reasonable price. Although, as an example, state law does not require the StateBar
to competitively bid legal services contracts, we reviewed the StateBar’s most recent
hourly rate increase from $100 to $250 for its external investigators, which its board
approved in September 2021.
To justify the rate increase to its board, the StateBar compared its new proposed
hourly rate of $250 to the rates for comparable legal services. Specifically, it looked at
the StateBar Court’s appointed respondent’s counsel, private ethics counsel, private
discipline defense counsel, and private insurance rate malpractice defense counsel.
We agree that these are reasonable comparisons because the services are similar to
those the external investigators provide. e StateBar found that its proposed hourly
rate of $250 was below the hourly rates for the other legal services, which it identified
as ranging from $300 to $500. It also reviewed a 2020 report on legal trends by a
company that provides law practice management software. is report included an
average hourly rate for lawyers in California of nearly $340. Because the StateBar
considered comparative rates, some of which we verified, before increasing the
hourly rate for external investigators, we believe it took sufficient steps to ensure that
it was paying a reasonable rate for these services.
We also asked the StateBar if it had any perspective regarding the cost-effectiveness
of its administration of external disciplinary cases. e assistant general counsel
explained that external investigators are independent from the StateBar and bill
their work at an hourly rate. In contrast, the Office of the Chief Trial Counsel has
dedicated staff—including investigators, paralegals, and administrators—who
have roles in the investigation process of a disciplinary case. Because of external
investigators’ independence, they do not have administrative staff and must complete
all of the investigative and administrative work necessary on a case themselves.
erefore, when an external investigator bills for work on a case, there are no
differences in the costs associated with the different tasks that they complete. Given
this setup, the assistant general counsel stated that it naturally costs the StateBar
more to complete an external investigation case than one completed internally.
She also acknowledged that although it is not entirely feasible for the StateBar
to determine whether there could be any cost savings in conducting external
investigations because of their independence and set hourly rate, it could conduct
in-depth audits of the external investigators’ billing statements to ensure that their
billed amounts are reasonable. Although the StateBar currently does not conduct
in-depth audits, we believe doing so could be a good practice.
Finally, given that the StateBar only very recently began to track external
investigators’ expenses, it is premature to determine the overall cost‑effectiveness of
the Rule2201 program. Specifically, after its board approved the most recent hourly
rate increase, the StateBar’s Finance Department created an invoice template for all
external investigators to use, and it now requires them to submit separate invoices
for each case. is now allows the StateBar to track external investigators’ expenses
by case number. Although the assistant general counsel acknowledged that the
StateBar currently does not have enough data to conduct a fiscal analysis, it intends
to perform a fiscal analysis no later than September 2023 as the board’s Regulation
and Discipline Committee recommended during its board meeting. Further, she
30 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
explained that one fiscal analysis could determine how much money and time the
StateBar spends on external disciplinary cases from the time cases first open to
when they close. is type of “from open to close” cost analysis could be useful for
identifying any outliers. Until the StateBar completes this work, it will be unable
to set acceptable performance metrics that ensure the cost-effectiveness of the
Rule2201 program.
Recommendations
StateBar
To ensure that it can correctly calculate the timeliness of its administration of
external disciplinary cases, the StateBar should immediately review the accuracy of
the data in its Odyssey system for these cases and should correct any errors. Unless
required, it should not report data from the system to the public and the Legislature
until it verifies the data’s accuracy.
To ensure the impartiality of the processing of external disciplinary cases, the
StateBar should, by October 2023, formalize the administrator’s process for
identifying her own and any external investigators’ conflicts of interest related to
these cases.
To ensure the cost-effectiveness of its external investigation process, the StateBar
should, by October 2023, conduct in-depth audits for a selection of the external
investigators’ billing statements to ensure that their billed amounts are reasonable. In
addition, by September 2023, it should complete its fiscal analysis to determine how
much money and time is spent on external disciplinary cases from the time cases
first open to when they close.
31CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Blank page inserted for reproduction purposes only.
32 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Other Area We Reviewed
To address the audit objectives, we also reviewed the StateBar’s cost allocation plan.
Administrative Cost Allocation
State law requires us to review the StateBar’s cost allocation plan as a part of this
audit. e GFOA describes a cost allocation plan as a systematic and rational
methodology to calculate the amount of shared costs, including administrative
expenses, allocated among the programs that those shared costs support. In 2019
the StateBar adopted its current cost allocation plan, which includes two elements:
a policy document that describes the allocation methodology for each of the
StateBar’s administrative areas and a spreadsheet the StateBar uses to calculate
the allocation amounts based on its annual budget. We found that the plan uses a
reasonable methodology for allocating costs. Table3 lists the administrative areas
of the StateBar’s cost allocation plan, summarizes the functions of those areas, and
provides the allocation basis and projected amounts of total annual expenditures and
total amountsrecovered.
e StateBar engaged two different consultants to develop its current cost allocation
plan. In 1999 the StateBar engaged an accounting firm to recommend a cost
allocation methodology, and that accounting firm conducted a second review in 2001.
e StateBar did not engage an independent consultant to review and assess its cost
allocation methodology again until 2015. e StateBar finance manager was not aware
of, nor could he produce any records of, reviews conducted from 2002 through 2015.
Although GFOA recommends that organizations use their cost allocation plans for
a maximum of three years, we believe that the StateBar’s current policy to review
its cost allocation plan every five years is reasonable. e StateBar finance manager
noted that conducting reviews every three years—rather than every five years—
would increase costs if the StateBar had to hire an outside consultant. Additionally,
we found the StateBar’s current cost allocation plan was generally consistent with
its 2001 plan, suggesting that the StateBar may not experience frequent changes
that affect its cost allocations. Moreover, the StateBar’s current policy states that it
will update its cost allocation plan as necessary. For these reasons, we believe it is
reasonable that the StateBar reviews the cost allocation plan every five years and
makes changes as necessary. We are, therefore, not making any recommendations
regarding cost allocation at this time.
We also attempted to assess the reasonableness of the StateBar’s administrative
costs by looking for comparable entities. We did not identify a comparable agency
or bar association—for example, large states such as Massachusetts, New York, and
Florida do not have a single bar association that oversees licensing and discipline—
and according to the StateBar’s finance manager, there is not an industry standard
for administrative cost amounts. He also indicated that he was not aware of any
comparable entities, including cities, counties, or other state agencies because the
StateBar’s functions are more self-contained. e StateBar’s administrative costs as a
percentage of its overall costs from 2019 through 2022 ranged from about 26percent
[ Insert Table 3 ]
33CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Table 3
Cost Allocation by Administrative Area
ADMINISTRATIVE AREA BASIS FOR ALLOCATION
PROJECTED
TOTAL COST
2022
TOTAL AMOUNT
RECOVERED
FROM PROGRAM
AREAS 2022
Executive Director
Ensures that the StateBar fulfills its mission and
achieves its goals; supports board by implementing
its policies; and sets the direction for staff.
Program or office direct
costs as a percentage of total
StateBarcosts.
$3,590,244 $2,784,739
Board
Governs the StateBar and guides
policymakingdecisions.
Program or office direct
costs as a percentage of total
StateBarcosts.
22,865 24,410
Appointments
Manages and supports appointees to the Judicial
Nominees Evaluation Commission.
Number of members in a given
committee or commission relative
to previous year.
– 97
Licensee Billing
Processes attorney fees and responds to
billinginquiries.
Program or office revenue as
a percentage of total StateBar
member fees.
728,476 722,700
General Services
Provides facilities, administrative, and procurement
services that support the work of all StateBar offices.
Percentage of square footage
occupied by the program
oroffice relative to number of
staff members.
8,567,348 7,749,823
General Counsel
Legally advises and represents the StateBar, its
board, executive staff, and all StateBar subentities
and programmatic clients.
Percentage of full-time equivalent
(FTEs) in the program or office
relative to State Bar’s overall FTEs.
4,587,547 4,019,577
Human Resources
Maintains labor relations and administers personnel
policy, nondiscrimination policy, and benefits.
Percentage of FTEs in the
program or office relative to
StateBar’s overall FTEs.
2,005,844 1,555,665
Information Technology
Provides the software and hardware systems that
support the StateBar, including developing and
improving its internal and public‑facing applications,
and maintains its networkinfrastructure.
Percentage of FTEs in the
program or office relative to
StateBar’s overall FTEs. 13,783,447 10,685,951
Finance
Conducts financial reporting and analysis,
develops and oversees the budget, and implements
financialcontrols.
Program or office direct
costs as a percentage of total
StateBarcosts.
2,490,744 1,738,750
Other—Nondepartmental
Holds all StateBar revenue for eventual
disbursement; StateBar pays OPEB indirect costs
from the Non‑Departmental Fund.
Program or office direct
costs as a percentage of total
StateBarcosts.
3,649,000 3,014,990
Building Improvement/
Property Related
One‑off improvements to StateBar properties.
Allocated on a case-by-case basis,
taking into account the programs
that benefit from the project.
1,736,600 1,179,489
TOTALS $41,162,115 $33,476,191
Source: 2021 State Bar cost allocation policy, 2022 State Bar budget, and 2022 financial documents
34 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
to 32 percent.
9
We did not identify any concerns with the StateBar’s providing
additional funding for its administrative offices in terms of the reasonableness of its
overall administrative expenses.
We conducted this performance audit in accordance with generally accepted
government auditing standards and under the authority vested in the California State
Auditor by Government Code sections8543 et seq. ose standards require that we
plan and perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on the audit objectives. We
believe that the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Respectfully submitted,
GRANT PARKS
California State Auditor
Date: April 13, 2023
Staff: Laura G. Kearney, Audit Principal
Brian D. Boone, CIA, CFE
Stephen Franz
Kaleb Knoblauch
Lily Nuñez, MPP
Chris Paparian
Legal Counsel: Abigail Maurer, Sr. Staff Counsel
9
We calculated the cost percentage for the years  through  using the StateBar’s total administrative costs for a
given year, dividing it by the annual total expenditures, excluding grant expenditures. We excluded grant expenditures
from the calculation because the StateBar excludes grant expenditures when allocating its administrative costs.
35CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Blank page inserted for reproduction purposes only.
36 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Appendix A
StateBar Programs and Administrative Offices
e Legislature directed our office to evaluate each program and office of the
StateBar that receives support from the annual mandatory licensing fees and other
fees required of active and inactive licensees. TableA presents a list of all of the
StateBar’s programs and offices that receive support from such fees. We did not
review the programs and offices that receive support from fees that licensees of the
StateBar are not required to pay, such as voluntary fees and service fees.
e Legislature also directed our office to assess the programs’ and offices’ budgeted
and actual expenditures of fee revenue, their staffing levels, and their other resources,
as well as to evaluate the StateBar’s related performance measures, which the
StateBar refers to as metrics. TableA provides information on the current budgets,
expenditures, staffing, and performance metrics for each program and office
that receives support from required fees. We used the State Bar’s projections of
2022 expenditures from its 2023 budget because the State Bar had not finalized
its year-end accounting records through December 2022 or its 2022 financial
audit during our audit period. ese 2022 projections therefore do not reflect
the State Bar’s final 2022 expenditures. e table also presents a three-year trend
in expenditures of mandatory licensing fees for each program. e totals for the
programs include both the direct costs for operating the programs and the indirect
costs allocated to each program to pay for the administrative offices. Accordingly,
the costs for administrative offices are included both under the administrative offices
and within the programs as indirect costs. In the table, we included performance
metrics only if the StateBar established targets for them and addressed them in its
most recent report on performance metrics. e StateBar tracks some performance
metrics at monthly, quarterly, semiannual, or annual frequencies, while others are
one-time in nature. We considered a performance metric met if it met its targets for
the entire year as reported in its most recent performance metrics report.
37CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Table A
State Bar Programs and Administrative Offices
PROGRAM/OFFICE
PERFORMANCE METRICS IN AREA
Text is green if a program/office successfully met a target for the entireyear.
Text is red if a program/office did not meet a target for the entire year.
TOTAL 2022
BUDGET FOR
PROGRAM
2022 BUDGET
FROM
MANDATORY FEES
TOTAL
EXPENDITURES FOR
PROGRAM 2022
PROJECTIONS
TOTAL
EXPENDITURES FROM
MANDATORY FEES
2022 PROJECTIONS
BUDGETED
STAFFING
ACTUAL
STAFFING
VACANCY
RATE
2020
EXPENDITURES
OF MANDATORY
FEES
2021
EXPENDITURES
OF MANDATORY
FEES
2022
EXPENDITURES
OF MANDATORY
FEES
PROJECTIONS
CHANGE
FROM
20202022
PROGRAMS
Office of the Chief Trial Counsel
Investigates complaints of attorney misconduct and takes
disciplinary action as necessary.
• Maintain an annual caseload clearance rate of at
least 100%.
• Maintain current level of Complaint Review Unit
reopens for reasons other than new evidence.
• Maintain current level of Walker Petition reopens.
• Decrease the number of random audit reopens for
substantive reasons.
$61,498,806 $61,438,806
$61,020,668 $60,928,463 289.00 269.00 7% $61,004,577 $59,097,544 $60,928,463 Even
Client Security Fund
Receives applications from individuals who suffer monetary
losses because of dishonest conduct by attorneys. It authorizes
and provides recovery to eligible applicants from funds the
State Bar collects for this purpose.
• Resolve at least 1,350 cases in 2021.
• Decrease time to payout after final discipline by 5%.
9,898,771 8,020,090 4,737,559 4,642,811 8.54 6.54 23 13,764,724 6,382,095 4,642,811
Trending
Down
State Bar Court
Adjudicates formal disciplinary matters resulting in the
final imposition of discipline. In certain instances involving
suspension or disbarments, it recommends discipline to the
California Supreme Court.
• Hearing Department: 90% of cases to be processed
within case type timeline.
• Hearing Department: 100% of cases to be processed
within 150% of case type timeline.
• Review Department: 90% of cases to be processed
within case type timeline.
• Review Department: 100% of cases to be processed
within 150% of case type timeline.
• Effectuations: 100% of cases to be processed
withintimeline.
14,267,214 14,263,214 14,326,653 14,323,278 42.00 41.00 2 13,687,748 13,740,849 14,323,278
Trending
Up
Attorney Regulation and Consumer Resources*
Maintains the roll of attorneys the State Bar has admitted to
practice law as well as the records of all State Bar licensees.
• Less than 38% of Resource Center calls transferredout.
• Less than 25% of calls abandoned.
• Average call wait time of less than seven minutes.
• Process 75% of MCLE applications within 30 days
of receipt.
• Continue implementation of LLP online renewal
with a goal of 90% of LLPs completing online by the
fourth quarter of2021.
• Fulfill 95% of requests for certificates of standing
within five business days of receipt.
• For the first and second quarters of 2021, send
three email blasts and conduct eight MCLE provider
trainings per quarter on the new MCLE provider
management system.
6,780,633 5,945,133 7,970,449 7,083,775 33.00 29.00 12 4,119,883 5,078,555 7,083,775
Trending
Up
38 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Table A
State Bar Programs and Administrative Offices
PROGRAM/OFFICE
PERFORMANCE METRICS IN AREA
Text is green if a program/office successfully met a target for the entireyear.
Text is red if a program/office did not meet a target for the entire year.
TOTAL 2022
BUDGET FOR
PROGRAM
2022 BUDGET
FROM
MANDATORY FEES
TOTAL
EXPENDITURES FOR
PROGRAM 2022
PROJECTIONS
TOTAL
EXPENDITURES FROM
MANDATORY FEES
2022 PROJECTIONS
BUDGETED
STAFFING
ACTUAL
STAFFING
VACANCY
RATE
2020
EXPENDITURES
OF MANDATORY
FEES
2021
EXPENDITURES
OF MANDATORY
FEES
2022
EXPENDITURES
OF MANDATORY
FEES
PROJECTIONS
CHANGE
FROM
20202022
PROGRAMS
Office of the Chief Trial Counsel
Investigates complaints of attorney misconduct and takes
disciplinary action as necessary.
• Maintain an annual caseload clearance rate of at
least 100%.
• Maintain current level of Complaint Review Unit
reopens for reasons other than new evidence.
• Maintain current level of Walker Petition reopens.
• Decrease the number of random audit reopens for
substantive reasons.
$61,498,806 $61,438,806
$61,020,668 $60,928,463 289.00 269.00 7% $61,004,577 $59,097,544 $60,928,463 Even
Client Security Fund
Receives applications from individuals who suffer monetary
losses because of dishonest conduct by attorneys. It authorizes
and provides recovery to eligible applicants from funds the
State Bar collects for this purpose.
• Resolve at least 1,350 cases in 2021.
• Decrease time to payout after final discipline by 5%.
9,898,771 8,020,090 4,737,559 4,642,811 8.54 6.54 23 13,764,724 6,382,095 4,642,811
Trending
Down
State Bar Court
Adjudicates formal disciplinary matters resulting in the
final imposition of discipline. In certain instances involving
suspension or disbarments, it recommends discipline to the
California Supreme Court.
• Hearing Department: 90% of cases to be processed
within case type timeline.
• Hearing Department: 100% of cases to be processed
within 150% of case type timeline.
• Review Department: 90% of cases to be processed
within case type timeline.
• Review Department: 100% of cases to be processed
within 150% of case type timeline.
• Effectuations: 100% of cases to be processed
withintimeline.
14,267,214 14,263,214 14,326,653 14,323,278 42.00 41.00 2 13,687,748 13,740,849 14,323,278
Trending
Up
Attorney Regulation and Consumer Resources*
Maintains the roll of attorneys the State Bar has admitted to
practice law as well as the records of all State Bar licensees.
• Less than 38% of Resource Center calls transferredout.
• Less than 25% of calls abandoned.
• Average call wait time of less than seven minutes.
• Process 75% of MCLE applications within 30 days
of receipt.
• Continue implementation of LLP online renewal
with a goal of 90% of LLPs completing online by the
fourth quarter of2021.
• Fulfill 95% of requests for certificates of standing
within five business days of receipt.
• For the first and second quarters of 2021, send
three email blasts and conduct eight MCLE provider
trainings per quarter on the new MCLE provider
management system.
6,780,633 5,945,133 7,970,449 7,083,775 33.00 29.00 12 4,119,883 5,078,555 7,083,775
Trending
Up
continued on next page …
39CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
PROGRAM/OFFICE
PERFORMANCE METRICS IN AREA
Text is green if a program/office successfully met a target for the entireyear.
Text is red if a program/office did not meet a target for the entire year.
TOTAL 2022
BUDGET FOR
PROGRAM
2022 BUDGET
FROM
MANDATORY FEES
TOTAL
EXPENDITURES FOR
PROGRAM 2022
PROJECTIONS
TOTAL
EXPENDITURES FROM
MANDATORY FEES
2022 PROJECTIONS
BUDGETED
STAFFING
ACTUAL
STAFFING
VACANCY
RATE
2020
EXPENDITURES
OF MANDATORY
FEES
2021
EXPENDITURES
OF MANDATORY
FEES
2022
EXPENDITURES
OF MANDATORY
FEES
PROJECTIONS
CHANGE
FROM
20202022
Professional Competence
Promulgates professional standards, assists licensees’
compliance with standards, and develops programs to
enhance competence.
• 80% of callers report a high level of overall
satisfaction with the Ethics Hotline experience.
• Voluntary e-learning courses: 85% of participants
report these courses met their expectations.
• Mandatory e-learning courses: 70% of participants
report these courses met their expectations.
• 80% of all annual Lawyer Referral Service
recertification applications processed within 60 days
of receipt of a completed submission.
• 90% of requests for arbitration of attorney-client
fee disputes are served on the responding
attorney within 10 business days of receipt of a
completedsubmission.
$4,101,926 $4,041,726 $3,633,132 $3,541,733 14.30 11.30 21% $2,710,641 $3,218,176 $3,541,733
Trending
Up
Lawyer Assistance Program
Identifies and rehabilitates attorneys who are impaired
because of mental illness or abuse of drugs or alcohol.
• Increase intakes by 10%.
• Respond to 100% of requests for presentations
within two business days.
• Complete 10 law school presentations and 20 bar
association or law firm presentations in 2021.
• 80% of survey participants report that the Lawyer
Assistance Program addressed their goals.
• 80% of survey participants report they are satisfied
with their Lawyer Assistance Program experience.
2,601,650 2,095,180 2,257,231 2,256,406 9.63 7.63 21 2,286,870 2,141,698 2,256,406 Even
Probation
Monitors disciplined attorneys who have been ordered to
comply with probation.
80% of courtesy reminder letters are provided to
respondents within three weeks of case initiation. 1,870,712 1,870,712 1,800,330 1,800,330 8.53 7.53 12 1,969,446 1,763,644 1,800,330
Trending
Down
Strategic Communications
Conveys information to the public and legal community
about the State Bar’s public protection role and methods of
protecting the public from attorney misconduct.
• 90% of stakeholders report a high level of overall
satisfaction with quality of internal communications.
• Expand communications engagement with
Spanish-speaking audiences through a campaign
involving paid social media placements and radio
public service announcements.
1,438,899 1,363,899
1,539,202 1,489,823 6.00 5.00 17 890,645 900,226 1,489,823
Trending
Up
Center on Access to Justice within the Office of Access
and Inclusion
Develops policies and initiatives in collaboration with
other institutions working to expand access to justice for
low‑income Californians.
• Closely monitor Interest on Lawyer’s Trust Accounts
rates, including continued strategy around
Leadership Bank Program, to stabilize funding.
• Issue report on law school retention by the
thirdquarter of 2021.
• Provide commissioners with meeting materials five
to seven days in advance at least 80% of the time.
• Issue 80% of monitoring visit and fiscal visit findings
within 60 days.
741,512 741,512
614,527 614,527 2.00 1.40 30 762,498 1,021,744 614,527
Trending
Down
Judicial Evaluation
Evaluates all candidates under consideration for a
judicial appointment to assist the Governor in the judicial
selectionprocess.
100% of Judicial Nominees Evaluation candidates
evaluated within 90 days.
775,667 775,667 842,249 842,249 3.10 3.10 0 394,356 250,305 842,249
Trending
Up
Mandatory Fee Arbitration
Resolves fee disputes between attorneys and clients.
Metrics for this area are listed above in the row for
the Office of Professional Competence.
62,644 31,144 161,933 43,928 – – – (7,455) (4,997) 43,928
Trending
Up
TOTALS $104,038,434 $100,587,083 $98,903,933 $97,567,323 416 382 8% $101,583,933 $93,589,839 $97,567,323
Trending
Down
40 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
PROGRAM/OFFICE
PERFORMANCE METRICS IN AREA
Text is green if a program/office successfully met a target for the entireyear.
Text is red if a program/office did not meet a target for the entire year.
TOTAL 2022
BUDGET FOR
PROGRAM
2022 BUDGET
FROM
MANDATORY FEES
TOTAL
EXPENDITURES FOR
PROGRAM 2022
PROJECTIONS
TOTAL
EXPENDITURES FROM
MANDATORY FEES
2022 PROJECTIONS
BUDGETED
STAFFING
ACTUAL
STAFFING
VACANCY
RATE
2020
EXPENDITURES
OF MANDATORY
FEES
2021
EXPENDITURES
OF MANDATORY
FEES
2022
EXPENDITURES
OF MANDATORY
FEES
PROJECTIONS
CHANGE
FROM
20202022
Professional Competence
Promulgates professional standards, assists licensees’
compliance with standards, and develops programs to
enhance competence.
• 80% of callers report a high level of overall
satisfaction with the Ethics Hotline experience.
• Voluntary e-learning courses: 85% of participants
report these courses met their expectations.
• Mandatory e-learning courses: 70% of participants
report these courses met their expectations.
• 80% of all annual Lawyer Referral Service
recertification applications processed within 60 days
of receipt of a completed submission.
• 90% of requests for arbitration of attorney-client
fee disputes are served on the responding
attorney within 10 business days of receipt of a
completedsubmission.
$4,101,926 $4,041,726 $3,633,132 $3,541,733 14.30 11.30 21% $2,710,641 $3,218,176 $3,541,733
Trending
Up
Lawyer Assistance Program
Identifies and rehabilitates attorneys who are impaired
because of mental illness or abuse of drugs or alcohol.
• Increase intakes by 10%.
• Respond to 100% of requests for presentations
within two business days.
• Complete 10 law school presentations and 20 bar
association or law firm presentations in 2021.
• 80% of survey participants report that the Lawyer
Assistance Program addressed their goals.
• 80% of survey participants report they are satisfied
with their Lawyer Assistance Program experience.
2,601,650 2,095,180 2,257,231 2,256,406 9.63 7.63 21 2,286,870 2,141,698 2,256,406 Even
Probation
Monitors disciplined attorneys who have been ordered to
comply with probation.
80% of courtesy reminder letters are provided to
respondents within three weeks of case initiation. 1,870,712 1,870,712 1,800,330 1,800,330 8.53 7.53 12 1,969,446 1,763,644 1,800,330
Trending
Down
Strategic Communications
Conveys information to the public and legal community
about the State Bar’s public protection role and methods of
protecting the public from attorney misconduct.
• 90% of stakeholders report a high level of overall
satisfaction with quality of internal communications.
• Expand communications engagement with
Spanish-speaking audiences through a campaign
involving paid social media placements and radio
public service announcements.
1,438,899 1,363,899
1,539,202 1,489,823 6.00 5.00 17 890,645 900,226 1,489,823
Trending
Up
Center on Access to Justice within the Office of Access
and Inclusion
Develops policies and initiatives in collaboration with
other institutions working to expand access to justice for
low‑income Californians.
• Closely monitor Interest on Lawyer’s Trust Accounts
rates, including continued strategy around
Leadership Bank Program, to stabilize funding.
• Issue report on law school retention by the
thirdquarter of 2021.
• Provide commissioners with meeting materials five
to seven days in advance at least 80% of the time.
• Issue 80% of monitoring visit and fiscal visit findings
within 60 days.
741,512 741,512
614,527 614,527 2.00 1.40 30 762,498 1,021,744 614,527
Trending
Down
Judicial Evaluation
Evaluates all candidates under consideration for a
judicial appointment to assist the Governor in the judicial
selectionprocess.
100% of Judicial Nominees Evaluation candidates
evaluated within 90 days.
775,667 775,667 842,249 842,249 3.10 3.10 0 394,356 250,305 842,249
Trending
Up
Mandatory Fee Arbitration
Resolves fee disputes between attorneys and clients.
Metrics for this area are listed above in the row for
the Office of Professional Competence.
62,644 31,144 161,933 43,928 – – – (7,455) (4,997) 43,928
Trending
Up
TOTALS $104,038,434 $100,587,083 $98,903,933 $97,567,323 416 382 8% $101,583,933 $93,589,839 $97,567,323
Trending
Down
continued on next page …
41CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
PROGRAM/OFFICE
PERFORMANCE METRICS IN AREA
Text is green if a program/office successfully met a target for the entireyear.
Text is red if a program/office did not meet a target for the entire year.
TOTAL 2022
BUDGET FOR
PROGRAM
2022 BUDGET
FROM
MANDATORY FEES
TOTAL
EXPENDITURES FOR
PROGRAM 2022
PROJECTIONS
TOTAL
EXPENDITURES FROM
MANDATORY FEES
2022 PROJECTIONS
BUDGETED
STAFFING
ACTUAL
STAFFING
VACANCY
RATE
2020
EXPENDITURES
OF MANDATORY
FEES
2021
EXPENDITURES
OF MANDATORY
FEES
2022
EXPENDITURES
OF MANDATORY
FEES
PROJECTIONS
CHANGE
FROM
20202022
ADMINISTRATIVE OFFICES
General Counsel
Provides legal advice and representation to the State Bar and
the board.
• Complete and resolve an average of 60 Complaint
Review Unit cases per month.
• 90% of clients report a high level of overall
satisfaction with services provided by Office of
General Counsel staff.
$4,864,838 $4,019,577
$4,587,547 $4,019,577 24.00 15.00 38% $4,079,046 $3,791,172 $4,019,577 Even
Finance
Manages the State Bar’s financial reporting and
budgetdevelopment.
• Provide fiscal year-to-date budget-actual analysis
on a monthly basis to enable efficient financial
management by client division or office and the
executive director within 30 days of the end of
themonth.
• Pay 90% of vendor invoices within 30 days of receipt.
• Complete monthly adjusting journal entries and
close the books timely and accurately within
20business days of the end of the month.
• 90% of internal clients report a high level of overall
satisfaction with services provided by Finance staff.
2,421,813 1,738,750
2,490,744 1,738,750 14.00 12.00 14 2,131,844 2,037,905 1,738,750
Trending
Down
Member Billing
Ensures that fee payments from licensees are
properlyprocessed.
Metrics for this area are listed above in the row for
Attorney Regulation and Consumer Resources. 799,800 722,700 728,476 722,700 4.00 4.00 0 480,487 863,524 722,700
Trending
Up
Human Resources
Provides human resources services to the State Bar.
• Conduct 80% of performance evaluations by
anniversary date or, for executives, the due date.
• 90% of internal customers report a high level
of overall satisfaction with services provided by
Human Resourcesstaff.
1,882,800 1,555,665
2,005,844 1,555,665 10.66 9.66 9 2,006,699 1,431,268 1,555,665
Trending
Down
General Services—Los Angeles
Manages the State Bar’s office space in Los Angeles.
• Process 90% of procurement requisitions with
100%accuracy within three days.
• Process 85% of all facilities requests (not requiring
parts or equipment ordering) within three or fewer
business days.
• 90% of internal customers report a high level
of overall satisfaction with services provided by
General Services staff.
• Advance capital improvement projects per capital
improvement plan by the fourth quarter of
2021including the following:
• Complete HVAC/chiller project.
• Execute contract for generator project and
prepare site for 2022 installation.
• Execute contract for elevator modernization
project for 2022–2024 phased upgrade.
4,201,450 3,557,716
4,158,403 3,557,716 9.00 9.00 0 3,249,175 3,657,489 3,557,716
Trending
Up
General Services—San Francisco
Manages the State Bar’s office space in San Francisco.
4,772,170 4,192,107
4,408,945 4,192,107 10.68 9.68 9 4,274,694 4,403,555 4,192,107
Trending
Down
Information Technology
Provides software and hardware systems to support
operations and programs.
• 90% of stakeholders report a high level of overall
satisfaction with new technology deployments.
• Process 85% of all information technology service
requests (not requiring parts or equipment ordering or
software development) within five business days or less.
• Complete 90% of planned major information
technology projects on schedule and on budget.
• 90% of internal customers report a high level
of overall satisfaction with services provided by
information technology staff.
12,933,058 10,685,951
13,783,447 10,685,951 45.66 35.66 22 11,061,567 9,699,377 10,685,951
Trending
Down
42 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
PROGRAM/OFFICE
PERFORMANCE METRICS IN AREA
Text is green if a program/office successfully met a target for the entireyear.
Text is red if a program/office did not meet a target for the entire year.
TOTAL 2022
BUDGET FOR
PROGRAM
2022 BUDGET
FROM
MANDATORY FEES
TOTAL
EXPENDITURES FOR
PROGRAM 2022
PROJECTIONS
TOTAL
EXPENDITURES FROM
MANDATORY FEES
2022 PROJECTIONS
BUDGETED
STAFFING
ACTUAL
STAFFING
VACANCY
RATE
2020
EXPENDITURES
OF MANDATORY
FEES
2021
EXPENDITURES
OF MANDATORY
FEES
2022
EXPENDITURES
OF MANDATORY
FEES
PROJECTIONS
CHANGE
FROM
20202022
ADMINISTRATIVE OFFICES
General Counsel
Provides legal advice and representation to the State Bar and
the board.
• Complete and resolve an average of 60 Complaint
Review Unit cases per month.
• 90% of clients report a high level of overall
satisfaction with services provided by Office of
General Counsel staff.
$4,864,838 $4,019,577
$4,587,547 $4,019,577 24.00 15.00 38% $4,079,046 $3,791,172 $4,019,577 Even
Finance
Manages the State Bar’s financial reporting and
budgetdevelopment.
• Provide fiscal year-to-date budget-actual analysis
on a monthly basis to enable efficient financial
management by client division or office and the
executive director within 30 days of the end of
themonth.
• Pay 90% of vendor invoices within 30 days of receipt.
• Complete monthly adjusting journal entries and
close the books timely and accurately within
20business days of the end of the month.
• 90% of internal clients report a high level of overall
satisfaction with services provided by Finance staff.
2,421,813 1,738,750
2,490,744 1,738,750 14.00 12.00 14 2,131,844 2,037,905 1,738,750
Trending
Down
Member Billing
Ensures that fee payments from licensees are
properlyprocessed.
Metrics for this area are listed above in the row for
Attorney Regulation and Consumer Resources. 799,800 722,700 728,476 722,700 4.00 4.00 0 480,487 863,524 722,700
Trending
Up
Human Resources
Provides human resources services to the State Bar.
• Conduct 80% of performance evaluations by
anniversary date or, for executives, the due date.
• 90% of internal customers report a high level
of overall satisfaction with services provided by
Human Resourcesstaff.
1,882,800 1,555,665
2,005,844 1,555,665 10.66 9.66 9 2,006,699 1,431,268 1,555,665
Trending
Down
General Services—Los Angeles
Manages the State Bar’s office space in Los Angeles.
• Process 90% of procurement requisitions with
100%accuracy within three days.
• Process 85% of all facilities requests (not requiring
parts or equipment ordering) within three or fewer
business days.
• 90% of internal customers report a high level
of overall satisfaction with services provided by
General Services staff.
• Advance capital improvement projects per capital
improvement plan by the fourth quarter of
2021including the following:
• Complete HVAC/chiller project.
• Execute contract for generator project and
prepare site for 2022 installation.
• Execute contract for elevator modernization
project for 2022–2024 phased upgrade.
4,201,450 3,557,716
4,158,403 3,557,716 9.00 9.00 0 3,249,175 3,657,489 3,557,716
Trending
Up
General Services—San Francisco
Manages the State Bar’s office space in San Francisco.
4,772,170 4,192,107
4,408,945 4,192,107 10.68 9.68 9 4,274,694 4,403,555 4,192,107
Trending
Down
Information Technology
Provides software and hardware systems to support
operations and programs.
• 90% of stakeholders report a high level of overall
satisfaction with new technology deployments.
• Process 85% of all information technology service
requests (not requiring parts or equipment ordering or
software development) within five business days or less.
• Complete 90% of planned major information
technology projects on schedule and on budget.
• 90% of internal customers report a high level
of overall satisfaction with services provided by
information technology staff.
12,933,058 10,685,951
13,783,447 10,685,951 45.66 35.66 22 11,061,567 9,699,377 10,685,951
Trending
Down
continued on next page …
43CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
PROGRAM/OFFICE
PERFORMANCE METRICS IN AREA
Text is green if a program/office successfully met a target for the entireyear.
Text is red if a program/office did not meet a target for the entire year.
TOTAL 2022
BUDGET FOR
PROGRAM
2022 BUDGET
FROM
MANDATORY FEES
TOTAL
EXPENDITURES FOR
PROGRAM 2022
PROJECTIONS
TOTAL
EXPENDITURES FROM
MANDATORY FEES
2022 PROJECTIONS
BUDGETED
STAFFING
ACTUAL
STAFFING
VACANCY
RATE
2020
EXPENDITURES
OF MANDATORY
FEES
2021
EXPENDITURES
OF MANDATORY
FEES
2022
EXPENDITURES
OF MANDATORY
FEES
PROJECTIONS
CHANGE
FROM
20202022
Governance
Ensures that the State Bar achieves the goals and objectives
outlined in the State Bar’s Strategic Plan. The executive director
establishes operating policies, and is responsible for the
leadership and management of the State Bar according to the
strategic direction set by the board.
• 90% of Board of Trustees report a high level of
overall satisfaction with quality of operational
support provided.
• Standardize public comment process (timelines,
submission form and template, and style guides) by
the fourth quarter of 2021.
• 90% of all Office of Research and Institutional
Accountability projects meet project milestones.
• Publish second annual diversity report card in online
interactive dashboard by the second quarter of2021.
$3,912,710 $2,809,246
$3,613,109 $2,809,246 17.90 11.40 36% $2,513,180 $2,046,220 $2,809,246
Trending
Up
Recruitment and Retention
Recruits, hires, and onboards new State Bar staff.
• Reduce average time to hire to 60 days or fewer.
• Stay interviews are conducted for 100% of new hires
within 90 days of hire.
• 90% of participants report a high level of
overall satisfaction with the Training and
DevelopmentProgram.
• 90% of internal customers report a high level
of overall satisfaction with services provided by
Recruitment and Retentionstaff.
1,326,400 1,095,942
1,201,755 1,095,942 5.00 5.00 0 0 1,014,299 1,095,942
Trending
Up
OPEB
OPEB is other post‑employment benefits and provides
post‑retirement health care benefits for eligible StateBaremployees.
The State Bar has no metrics related to this area.
3,649,000 3,014,990 3,649,000 3,014,990 – – – 0 3,023,806 3,014,990 Even
Building Improvement/ Property Related
Debt‑related capital improvements on the State Bar’s
SanFranciscobuilding.
Metrics for this area are listed above in the row for
General Services. 1,736,600 1,179,489 1,736,600 1,179,489 – – – 426,640 0 1,179,489
Trending
Up
TOTALS $42,500,639 $34,572,133 $42,363,870 $34,572,133 141 111 21% $30,223,332 $31,968,615 $34,572,133
Trending
Up
Source: State Bar budgets, financial statements, and performance metrics report, and State Auditor analysis of State Bar accounting records, cost allocation
plans, and personnel rosters.
Notes: We used the State Bar’s projections of 2022 expenditures from its 2023 budget because the State Bar had not finalized its year-end accounting records
through December 2022 or its 2022 financial audit during our audit period. These 2022 projections therefore do not reflect the State Bar’s final 2022 expenditures.
There were two other administrative areas, communications and nondepartmental, that the State Bar spent nearly $750,000 total on in 2020. However, it did not
spend on these areas in 2021 or 2022; therefore, we did not include them in the table. The State Bar also did not spend on OPEB or Recruitment and Retention in 2020.
The totals for the programs include both the direct costs for operating the programs and the indirect costs allocated to each program to pay for the
administrative offices. Accordingly, the costs for administrative offices are included both under the administrative offices and within the programs as
indirect costs.
As we discuss in the report, the State Bar allocates its costs based on its annual budget. This means that the actual amounts its administrative offices receive in
indirect cost allocation are the same as the amount budgeted for the programs. We calculated the budget and actual expenditures from mandatory fees for the
administrative offices by totaling the amounts that each administrative office received in funding from mandatory fee-funded programs, excluding allocation
from other programs not funded by mandatory fees.
* Although Member Billing is an administrative office, its metrics are tracked and reported by the Attorney Regulation and Consumer Resources program.
44 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
PROGRAM/OFFICE
PERFORMANCE METRICS IN AREA
Text is green if a program/office successfully met a target for the entireyear.
Text is red if a program/office did not meet a target for the entire year.
TOTAL 2022
BUDGET FOR
PROGRAM
2022 BUDGET
FROM
MANDATORY FEES
TOTAL
EXPENDITURES FOR
PROGRAM 2022
PROJECTIONS
TOTAL
EXPENDITURES FROM
MANDATORY FEES
2022 PROJECTIONS
BUDGETED
STAFFING
ACTUAL
STAFFING
VACANCY
RATE
2020
EXPENDITURES
OF MANDATORY
FEES
2021
EXPENDITURES
OF MANDATORY
FEES
2022
EXPENDITURES
OF MANDATORY
FEES
PROJECTIONS
CHANGE
FROM
20202022
Governance
Ensures that the State Bar achieves the goals and objectives
outlined in the State Bar’s Strategic Plan. The executive director
establishes operating policies, and is responsible for the
leadership and management of the State Bar according to the
strategic direction set by the board.
• 90% of Board of Trustees report a high level of
overall satisfaction with quality of operational
support provided.
• Standardize public comment process (timelines,
submission form and template, and style guides) by
the fourth quarter of 2021.
• 90% of all Office of Research and Institutional
Accountability projects meet project milestones.
• Publish second annual diversity report card in online
interactive dashboard by the second quarter of2021.
$3,912,710 $2,809,246
$3,613,109 $2,809,246 17.90 11.40 36% $2,513,180 $2,046,220 $2,809,246
Trending
Up
Recruitment and Retention
Recruits, hires, and onboards new State Bar staff.
• Reduce average time to hire to 60 days or fewer.
• Stay interviews are conducted for 100% of new hires
within 90 days of hire.
• 90% of participants report a high level of
overall satisfaction with the Training and
DevelopmentProgram.
• 90% of internal customers report a high level
of overall satisfaction with services provided by
Recruitment and Retentionstaff.
1,326,400 1,095,942
1,201,755 1,095,942 5.00 5.00 0 0 1,014,299 1,095,942
Trending
Up
OPEB
OPEB is other post‑employment benefits and provides
post‑retirement health care benefits for eligible StateBaremployees.
The State Bar has no metrics related to this area.
3,649,000 3,014,990 3,649,000 3,014,990 – – – 0 3,023,806 3,014,990 Even
Building Improvement/ Property Related
Debt‑related capital improvements on the State Bar’s
SanFranciscobuilding.
Metrics for this area are listed above in the row for
General Services. 1,736,600 1,179,489 1,736,600 1,179,489 – – – 426,640 0 1,179,489
Trending
Up
TOTALS $42,500,639 $34,572,133 $42,363,870 $34,572,133 141 111 21% $30,223,332 $31,968,615 $34,572,133
Trending
Up
Source: State Bar budgets, financial statements, and performance metrics report, and State Auditor analysis of State Bar accounting records, cost allocation
plans, and personnel rosters.
Notes: We used the State Bar’s projections of 2022 expenditures from its 2023 budget because the State Bar had not finalized its year-end accounting records
through December 2022 or its 2022 financial audit during our audit period. These 2022 projections therefore do not reflect the State Bar’s final 2022 expenditures.
There were two other administrative areas, communications and nondepartmental, that the State Bar spent nearly $750,000 total on in 2020. However, it did not
spend on these areas in 2021 or 2022; therefore, we did not include them in the table. The State Bar also did not spend on OPEB or Recruitment and Retention in 2020.
The totals for the programs include both the direct costs for operating the programs and the indirect costs allocated to each program to pay for the
administrative offices. Accordingly, the costs for administrative offices are included both under the administrative offices and within the programs as
indirect costs.
As we discuss in the report, the State Bar allocates its costs based on its annual budget. This means that the actual amounts its administrative offices receive in
indirect cost allocation are the same as the amount budgeted for the programs. We calculated the budget and actual expenditures from mandatory fees for the
administrative offices by totaling the amounts that each administrative office received in funding from mandatory fee-funded programs, excluding allocation
from other programs not funded by mandatory fees.
* Although Member Billing is an administrative office, its metrics are tracked and reported by the Attorney Regulation and Consumer Resources program.
45CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Blank page inserted for reproduction purposes only.
46 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Appendix B
Scope and Methodology
We conducted this audit pursuant to the audit requirements contained in Business
and Professions Code section 6145. Specifically, state law required our office to
conduct a performance audit of the StateBar that included an evaluation of each
of its programs or offices receiving support from mandatory licensing fees and, for
each of those programs or offices, an assessment of the StateBar’s fee revenue, staff,
and resources currently budgeted and subsequently expended to perform its existing
tasks and responsibilities. e audit was also required to include, among other
things, an assessment of any real property sold by the StateBar and its performance
metrics for each program or division receiving support from mandatory licensing
fees. e audit was also required to include an evaluation of the efficacy, including
the cost-effectiveness and timeliness, of its administration of discipline cases that
require an external investigator. TableB lists the objectives required by statute and
the methods we used to address them.
TableB
Audit Objectives and the Methods Used to Address Them
AUDIT OBJECTIVE METHOD
1
Review and evaluate the laws, rules, and
regulations significant to the audit objectives.
Reviewed the laws and regulations pertinent to audit objectives.
2
Evaluate each program or office of the StateBar
receiving support from the annual StateBar
licensing fees and other fees required of active
and inactive licensees.
a. For each program or office, assess how
much fee revenue, staff, and resources
are currently budgeted and subsequently
expended to perform existing tasks and
responsibilities.
• Reviewed the StateBar’s budgets for 2019 through 2023, its audited financial
statements for 2019 through 2021, and its unaudited projections for 2022 to
identify the projected and actual amounts of its expenditures.
• Interviewed the StateBar’s executive director and CFO for perspective on its
reserve level.
b. For each program or office, assess whether
the StateBar has appropriate program
performance metrics in place and how these
metrics are used for budgeting purposes.
• Obtained and reviewed files relevant to the StateBar’s performance metrics,
including its annual performance metrics report, its five-year strategic plan, and
guidance from the GFOA and the federal Office of Personnel Management.
• Evaluated the StateBar’s five-year strategic plan and performance metrics by
comparing them to best practices and program purpose. We also determined
whether the StateBar had met each metric.
• Interviewed the executive director to determine how performance metrics have
affected each program’s budget.
c. For each program or office, assess the usage
of any real property sold by the StateBar.
• Reviewed the StateBar’s financial statements and budgets to identify current and
projected costs and revenue associated with its ownership of its San Francisco
and Los Angeles buildings. The StateBar did not sell any real estate during our
audit period.
• Identified and documented the possible financial impacts of the StateBar’s
proposal to sell its San Francisco building and obtain new space.
continued on next page …
47CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
AUDIT OBJECTIVE METHOD
d. For each program or office, review the
StateBar’s cost allocation plan used to
allocate administrativecosts.
• Reviewed the StateBar’s cost allocation plan and other relevant documentation,
including cost allocation worksheets from 2019 through 2022. We also assessed
internal StateBar and consultant reviews of the cost allocation plan.
• Interviewed StateBar officials to gain an understanding of the StateBar’s
development and review of its cost allocation plan.
• Attempted to assess the reasonableness of the StateBar’s administrative costs
by reviewing its audited financial statements and budgets and comparing its
administrative costs to the levels identified in best practices, but we were unable
to find a comparable practice.
e. For each program or office, review any
proposals for additional funding or
resources requested by the StateBar to
determine whether these proposals are
necessary to meet the StateBar’s public
protection function as well as the accuracy
of identified associated funding needs, after
reviewing how existing resources are used.
• Obtained the StateBar’s 2022 and 2023 legislative priorities and reviewed them in
light of the legal criteria for the StateBar’s public protection mission.
• Compared each of the StateBar’s 2023 legislative priorities as of late
February2023 against the StateBar’s public protection mission as defined in
state law and analyzed whether they would affect the mandatory licensing fees.
We found that the 2023 priorities did not contain sufficient detail to evaluate
their potential costs or impact on the mandatory licensing fees. As a result,
we did not assess the accuracy of the proposed funding needs. The StateBar
intends to continue developing its 2023 legislative priorities in conversation with
legislativestaff.
• Interviewed StateBar staff to gain perspective on the necessity of the funding
needs in the 2022 and 2023 proposals.
f. For each program or office, calculate how
much fee revenue would be needed from
each StateBar active and inactive licensee
to fully offset StateBar costs to perform
existing tasks and responsibilities and to
support additional proposed expenditures
determined to be necessary to meet the
StateBar’s public protection function. This
calculation shall take into account any
proposed business process reengineering,
reallocations, or efficiencies identified by
the California StateAuditor.
• Through fieldwork conducted on Objectives 2a–2e and 3, identified areas for
potential cost savings or additional revenue.
• Using that information, calculated the additional licensing fee revenue necessary
for the StateBar to meet its existing responsibilities. We performed this
calculation at a global level for the general fund because the StateBar pays for
most of its programs using its general fund and because the annual licensing fee
goes to the general fund. We performed the calculation for 2024 as follows:
• Identified the total additional revenue needed for the StateBar’s general fund.
• Identified the number of active and inactive licensees.
• Using the same ratio as currently in state law, calculated the amount of fee
increase required for active and inactive licensees necessary to generate the
additional revenue.
• Obtained perspective from the StateBar’s CFO, chief administrative officer, and
executive director on these findings.
3
Evaluate how the StateBar administers
discipline cases that require an outside
investigator or prosecutor and how that
process can be improved, including the
cost-effectiveness and timeliness of such
investigations and prosecutions.
• Reviewed documents relevant to the structural relationship between the
StateBar and the administrator’s office.
• Reviewed the StateBar’s decision to increase the external investigators’
hourly rate and interviewed StateBar staff to identify its plans to measure the
cost-effectiveness of the Rule2201 program.
• Reviewed case management records to document the number of annual
Rule2201 program cases and their current status.
• Reviewed Odyssey data and a judgmental selection of 10 cases handled by
external investigators to determine how long completing each stage of each
casetook.
48 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
AUDIT OBJECTIVE METHOD
4
Review and assess any other issues that are
significant to the audit.
• Reviewed our office’s three most recent audits to identify the recommendations
we made to the StateBar and the Legislature, including those our office assessed
as fully implemented, and we determined which recommendations were related
to the scope of this audit.
• Reviewed the StateBar’s responses to our office’s recommendations and the
supporting documentation it provided to determine whether it should take
any additional action in those areas. We did not identify any recommendations
to the StateBar relevant to our scope that required repeating, except for the
recommendation that the StateBar reinstitute long-term financial forecasting
forits general fund.
• Reviewed our past recommendations to the Legislature where it did not take
action to determine if those recommendations should be redirected to the
StateBar. We did not identify any recommendations to the Legislature relevant to
our scope that should be redirected to the StateBar.
• Interviewed StateBar staff to confirm implementation status of prior
recommendations. We found that the StateBar no longer prepared the long-term
financial forecasts we recommended it perform in audit 2018-030. We describe
this concern in the report.
Source: Audit workpapers.
Assessment of Data Reliability
e U.S. Government Accountability Office, whose standards we are statutorily
obligated to follow, requires us to assess the sufficiency and appropriateness of
computer-processed information we use to support our findings, conclusions, or
recommendations. In performing this audit, we relied on electronic data from the
StateBar’s Odyssey system. We performed dataset verification procedures and
electronic testing of key data elements and identified various problems with the
dataset verification. erefore, to determine the timeliness of external investigations,
we relied on a selection of 10 case files. We performed accuracy testing of the 10 case
files selected for review by tracing key data elements to supporting documentation.
We were unable to complete accuracy testing for three of the 10 case files because
the StateBar was unable to provide us with complete files. We encountered various
problems in our accuracy testing of the remaining seven files. We describe in the
report the problems we identified, beginning on page 24. We did not perform
completeness testing of these data because the source documents required for this
testing are stored in multiple locations throughout the State, making such testing
cost-prohibitive. Consequently, we found that the Odyssey system data were not
sufficiently reliable for the purposes of determining the number of annual external
disciplinary cases, the status of completion for each case, and the time frame to close
each case. Nonetheless, we present numbers from Odyssey in the report because
it is the only source of global case-processing data. Although we recognize that the
data limitations we describe in this report may affect the precision of the numbers
we present, there is sufficient evidence in total to support our audit findings,
conclusions, and recommendations.
49CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Blank page inserted for reproduction purposes only.
50 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Los Angeles Office
845 South Figueroa Street
Los Angeles, CA 90017
www.calbar.ca.gov
San Francisco Office
180 Howard Street
San Francisco, CA 94105
March 27, 2023
Grant Parks, California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
RE: State Bar of California Response to Audit Report No. 2022-031
Dear Mr. Parks:
We appreciate the State Auditor’s careful review of the State Bar’s financial position and 2201
(conflicts) Program and are pleased to agree with each of the recommendations outlined in the
report. The recognition of the need for a licensing fee increase to sustain State Bar operations
reinforces a message that the Board of Trustees and State Bar leadership have relayed in recent
months. As reflected in the audit report, the pending sale of the State Bar’s headquarters at 180
Howard Street injects an element of uncertainty in the fee assessment analysis; the
recommendation that the State Bar provide updated data to the Legislature later this year, when
the question of the building sale has been resolved, is sensible and appreciated.
Formal responses to each recommendation follow. Where relevant, contextual information is added
to the “support” position associated with each recommendation below. We look forward to working
with the Legislature to implement all of the recommendations outlined in this audit report.
State Bar Responses to Audit Recommendations
1. Recommendation: The Legislature should set the maximum annual mandatory licensing fee that
the State Bar may charge for 2024 to $414 for actively licensed attorneys and $103.40 for
inactive licensees. However, before the Legislature finalizes the maximum annual licensing fee
amounts for 2024, it should request the State Bar to provide it with the following information:
4a. An itemized listing of the mandatory licensing fee revenue that the State Bar will need
to fund its operations in 2024 program-by-program. This breakdown should identify any
BOARD OF TRUSTEES
180 Howard Street, San Francisco, CA 94105
[email protected]
*
* California State Auditor’s comments begin on page 57.
51CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Grant Parks
March 27, 2023
Page 2
changes in the State Bar’s financial situation following the release of this audit, such as
the sale of its San Francisco building or the State Bar choosing not to increase some of
its service fees to fully recoup its costs as we recommend below. The State Bar will need
to identify the affect that any changes to its financial situation will have on the
mandatory licensing fee amounts we have identified as necessary.
4b. A list of any programs funded by mandatory licensing fees that need additional funding
beyond the program-by-program breakdown to operate effectively and to meet related
performance metrics. The list should specify the State Bar’s understanding of the
amount of funding needed per program.
4c. The Legislature should require the State Bar to provide the above information each year
when submitting its annual budget for legislative review and approval or should
otherwise specify the format and level of detail needed through statutory change.
4d. For 2024 the Legislature should maintain the Lawyer Assistance fee at $10 for active
licensees and $5 for inactive licensees; the Client Security Fund fee at $40 for active
licensees and $10 for inactive licensees; and the discipline fee at $25 for all licensees.
Response: The State Bar agrees with the recommendation, including the recommendations
outlining information the State Bar should provide to the Legislature to support finalization of
the 2024 licensing fee.
The State Bar does wish to clarify that the recommended increases of $24 (active) and $6
(inactive) assume a continuation of the 15 percent personnel vacancy rate currently
reflected in the organization’s 2023 and projected 2024 budgets as austerity measures.
Given the report’s observations about the relationship between staffing levels and the ability
to meet performance metrics, this may be unwise. A more modest vacancy rate of 5 percent,
aligned with that assumed by many government agencies, might be a more appropriate
target. The additional amount needed to achieve this staffing level totals $35 (active) and $9
(inactive).
We must also point out that the recommended increases will not fully fund the State Bar
reserve in a single year, nor do they account for the possibility that the State Bar is unable to
both sell 180 Howard Street and use loan proceeds to address future lease costs.
Additional clarification is also needed on the revenue side of the equation. The Auditor
assumes that the State Bar will increase all discretionary General Fund fees to the extent
required to achieve full cost recovery. While this recommendation is sensible, the State Bar
is unlikely to increase Lawyer Referral Service and Mandatory Fee Arbitration fees to the
extent contemplated by the report, in the near term. In addition to the reasons for not doing
1
2
3
4
52 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Grant Parks
March 27, 2023
Page 3
so outlined in the report, both programs are undergoing much needed operational review
and improvement; significant fee increases would be premature at this time.
Lastly, and also related to revenue, the report highlights the State Bar’s voluntary decision to
charge an inactive fee $5 less than that technically authorized by statute and assumes a
reversal of this decision effective 2024. As outlined in the report, we believe that the
Legislature intended to effectuate that $5 reduction; we hope to confirm this assumption
with the Legislature prior to the State Bar’s implementation of this particular report
assumption.
The State Bar looks forward to revisiting these issues as part of the recommended legislative
update to occur in the fall.
2. Recommendation: To ensure that it appropriately plans for its upcoming funding needs and
takes all steps possible to maintain an adequate reserve level, the State Bar should reinstitute its
practice of producing and posting on its public website forecasts for its general fund starting
with its 2024 budget. These forecasts should encompass at least the following three years.
Response: The State Bar agrees with the recommendation.
3. Recommendation: By October 2023, the State Bar should identify any service fees that do not
fully cover the costs of providing the services. The State Bar should increase the fees it has
identified to the level necessary to recoup its costs unless it determines doing so would limit the
public’s access to services or the Supreme Court does not provide any required approval for the
increase. It should also identify any service fees that have not been updated in five years or
more and assess whether they should be updated. The State Bar should then determine the
effect that the increased service fees will have on the amount of mandatory licensing fee
revenue that it needs.
Response: The State Bar agrees with the recommendation.
4. Recommendation: To ensure that it can correctly calculate the timeliness of its administration of
external disciplinary cases, the State Bar should immediately review the accuracy of the data in
its case management system for these cases and should correct any errors. Unless required, it
should not report data from the system to the public and the Legislature until it verifies the
data’s accuracy.
Response: The State Bar agrees with the recommendation.
5
53CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Grant Parks
March 27, 2023
Page 4
There is no dispute as to the need for accurate data. What is unclear however, is the
magnitude of the effort to review the accuracy of all data in the case management system
related to conflicts matters. The State Bar will determine the scope prior to the conclusion of
the second quarter of 2023; depending on the results, a phased approach to data review
may be initiated. At a minimum, all publicly reported data, including that reflected in the
newly developed 2201 program quarterly dashboards, will be reviewed for accuracy prior to
publication.
5. Recommendation: To ensure the impartiality of the processing of external disciplinary cases, the
State Bar should, by October 2023, formalize the administrator’s process for identifying her own
and any external investigators’ conflicts of interest related to these cases.
Response: The State Bar agrees with the recommendation.
As the audit report acknowledges, conflicts checks do routinely occur in the 2201 program
pursuant to a process that has recently been codified as a policy directive authored by the
program administrator and disseminated to all 2201 counsel. The documentation of this
historical practice is just one indication of the significant progress that has been made in the
administration of the State Bar’s conflicts program since 2016, when it transitioned from
being volunteer- to compensation-based; however, more remains to be done. In hiring the
first full-time conflicts administrator last year, the State Bar took an important step in
accelerating improved functioning of the 2201 program. The administrator has been
engaged in a careful review of the Office of Chief Trial Counsel’s new and expanded conflicts
policies and procedures to determine how best to modify and apply to the 2201 setting. That
process will be completed within the second quarter of 2023. Pursuant to the auditor’s
recommendations, the final set of policies/procedures, which will stipulate that conflicts
checks must occur at time of case assignment, before the filing of charges, and/or before
case closure, will be formally issued by the State Bar.
Additionally, the State Bar has revised various conflict of interest provisions in 2201 counsel
contracts; new contracts were sent to counsel on March 8, 2023. The revisions include
modifications to the Conflict of Interest (COI) disclosure questionnaire that heighten
disclosure requirements, new provisions making 2201 counsel subject to the State Bar’s
Incompatible Activities Policy, and new provisions adding requirements that counsel comply
with all applicable federal, state, and local laws and regulations pertaining to conflicts of
interest. Specifically, the COI disclosure questionnaire now requires 2201 counsel to identify
any California attorney with whom they have, or recently had, a relationship involving
6
54 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Grant Parks
March 27, 2023
Page 5
financial transactions of $500 or more, investments of $2,000 or more, gifts totaling $50 or
more, loans totaling $500 or more, and the provision of legal services or other
representation. The State Bar continues to evaluate these disclosure requirements.
Additional updates are anticipated in the near term.
6. Recommendation: To ensure the cost-effectiveness of its external investigation process, the
State Bar should, by October 2023, conduct in-depth audits for a selection of the external
investigators’ billing statements to ensure their billed amounts are reasonable. In addition, by
September 2023, it should complete its fiscal analysis to determine how much money and time
is spent on external disciplinary cases from the time cases first open to when they close.
Response: The State Bar agrees with the recommendation.
In closing, we would like to thank the audit team that conducted the review. We appreciate the
thoughtful analysis and conclusions drawn and look forward to advancing all of the report’s
recommendations in the coming months to further advance the State Bar’s primary mission of
public protection.
Sincerely,
Ruben Duran Leah T. Wilson
Chair, Board of Trustees Executive Director, The State Bar of California
55CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Blank page inserted for reproduction purposes only.
56 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM
THE STATE BAR OF CALIFORNIA
To provide clarity and perspective, we are commenting on the response to our audit
from the State Bar. e numbers below correspond to the numbers we have placed in
the margin of its response.
As we describe on page 13, the State Bar’s 2023 budget projections assume a
15percent vacancy rate across the organization. Before submitting its response
letter, the State Bar had not shared its belief that a 5percent vacancy rate may be
a more appropriate target around which to plan its mandatory licensing fees than
the 15 percent it assumes in its budget. As a result, our report does not discuss
the reasonableness of a 15percent assumed vacancy rate. Nonetheless, during our
review we compared the 15percent assumed vacancy rate to the state government’s
vacancy rate overall, and to a selection of other state agencies, and found that the
vacancy rate was generally comparable. Further, rather than continuing to assume
a standard vacancy rate across the organization, we recommend on page21 that
the State Bar identify, by program, the additional funding each program needs
to operate effectively and to meet its performance metrics. us, we stand by
ourrecommendation.
As we note in Figure4 on page 15, we estimated that the State Bar needs to increase
its general fund reserve by $1.6million annually over a five-year period to achieve its
minimum reserve level of 17 percent. e pace at which we projected the State Bar
to rebuild its reserve aligns with the State Bar’s own reserve policy, which states that
it should strive to restore reserves to the minimum level within five years. For clarity,
we added language to Figure4 to indicate our analysis was based on the State Bar’s
own reserve policy.
We acknowledge the uncertainty around the State Bar’s sale of its San Francisco
building on pages 18 and 19. We used the State Bar’s most recent financial
information from its 2023 budget as the basis of our projections. As we describe on
page 18, the State Bar’s 2023 budget assumes that it will sell the building in the first
half of 2023, and therefore does not budget for any building-related expenses or lease
revenue after the first half of 2023. Accordingly, our projections in Figure4 do not
include those expenses or revenue for 2024. Our recommendation on page 20 that
the State Bar update the Legislature on any changes to its financial situation takes this
uncertainty into consideration.
We acknowledge on page 17 that the State Bar may decide not to raise fees for these
programs if it determines that increases would reduce public participation. Our
recommendation on page 21 that the State Bar identify and increase service fees
incorporates the possibility that the State Bar may decide not to raise certain fees. We
look forward to reviewing the State Bar’s decisions regarding its service fees as part
of our regular audit follow-up process.
1
2
3
4
57CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031
As is our standard practice, we communicated with the State Bar while it was
reviewing the draft report to discuss any concerns it may have. During these
conversations, we informed the State Bar that we would make minor edits to this
recommendation that are not reflected in the State Bar’s response letter. Please refer
to page 21 for the text of our recommendation.
As we describe on page 29 of the report, in response to our concern, the
administrator developed her own policy directive and distributed it to the external
investigators in March 2023. However, as we further explain on page 29, the
StateBar has not established a formal process for ensuring the Rule 2201 program’s
current and future administrators will consistently ensure that they do not assign
external investigators to cases in which conflicts of interest may exist. erefore, we
stand by our recommendation on page 31 that the State Bar should formalize the
administrator’sprocess.
5
6
58 CALIFORNIA STATE AUDITOR
April 2023
|
Report 2022-031