Our audit of the State Bar of California (State Bar), highlighted the following:
- While in 2011 the State Bar drastically reduced its backlog of disciplinary cases, the severity of the discipline it imposed on attorneys who failed to fulfill their professional responsibilities decreased.
- The State Bar continues to report fewer cases than the law permits in its backlog—a concern similar to one we raised in our 2009 audit of the State Bar’s discipline system.
- The State Bar has not made adequate efforts to align its staffing with its mission of public protection, and its backlog of disciplinary cases has grown by 25 percent since 2011.
- The State Bar did not perform a cost‑benefit analysis before receiving board approval to purchase a building in Los Angeles.
- The State Bar spent $76.6 million to purchase and renovate the building—$50 million more than it estimated.
- Over the last six years the State Bar’s fund balances indicate that revenues collected from membership fees far exceed its operational costs.
Results in Brief
The California Constitution established the State Bar of California (State Bar) as a public corporation within the judicial branch of California. With the exception of certain judges, every person licensed to practice law in California must belong to the State Bar. Overseen by a 19‑member Board of Trustees (board), the State Bar regulates the professional and ethical conduct of its 226,000 members through an attorney discipline system. The State Bar’s Office of the Chief Trial Counsel receives complaints, investigates attorneys, and prepares cases for prosecution, while the State Bar Court adjudicates disciplinary and regulatory matters involving attorneys in the State. The State Bar’s spending for its discipline system totaled $38 million in 2014.
Although state law defines the State Bar’s highest priority as the protection of the public, it has struggled historically to promptly resolve all the complaints it receives, potentially delaying the timely discipline of attorneys who engage in misconduct. One of the primary measurements of the effectiveness of the State Bar’s discipline system is the number of complaints it fails to resolve within six months of their receipt, which it refers to as its backlog. Based on our calculations, in 2010 the State Bar’s backlog peaked at 5,174 cases, a 21 percent increase over the prior year. In response to its escalating backlog, the former executive director issued a zero‑backlog goal. This goal quickly resulted in a drastic reduction in the State Bar’s overall backlog of 66 percent, from 5,174 cases in 2010 to 1,742 cases in 2011.
However, we found that as the State Bar reduced its excessive backlog of disciplinary cases, the severity of the discipline it imposed on attorneys who failed to fulfill their professional responsibilities decreased. In other words, to reduce its backlog, the State Bar allowed some attorneys whom it otherwise might have disciplined more severely—or even disbarred—to continue practicing law, at significant risk to the public. In particular, in 2010 and 2011, the years the State Bar focused its efforts on decreasing the backlog, the State Bar settled a total of 1,569 cases, more cases were settled in each of those years than in any of the other four years in our audit period. The level of discipline that the State Bar recommended as part of these settlements was, in some cases, inadequate. For example, the Supreme Court of California returned for further examination 27 cases that the State Bar settled in 2011 due to the appearance of insufficient levels of discipline. Upon further consideration by the State Bar, 21 of the 27 cases resulted in greater discipline recommendations including five disbarments. The chief trial counsel confirmed that she believes the volume and speed in processing the backlog in 2011 caused the State Bar to lower the quality of its case settlements, and believed that insufficient quality control was a key factor that enabled the State Bar to decrease its backlog.
The State Bar has also not been transparent in reporting the performance of its discipline system to its stakeholders. State law requires the State Bar to prepare an Annual Discipline Report (discipline report), a public document that it must present to the governor, the chief justice, and the Legislature to assist them in evaluating the performance of its attorney discipline system. Because the discipline report is the only report that the State Bar submits to the Legislature that describes the performance of its discipline system as a whole, it is critical that this report contain comprehensive, consistent, and useful information. However, our review found a number of significant problems with the information that the State Bar submitted.
State law defines the backlog as the number of cases within the discipline system, including, but not limited to, the number of unresolved complaints as of December 31 that the State Bar had received more than six months earlier. However, even though the State Bar has met the law’s minimum requirements related to reporting its backlog, it continues to report fewer cases than the law permits—a concern similar to one we raised in our 2009 audit of the State Bar’s discipline system.1 In particular, because state law defines the State Bar’s highest priority as protecting the public, we believe the appropriate method of calculating the State Bar’s backlog would be to include every case that affects public protection—a method that the State Bar does not currently use. In addition, over the past six years the State Bar has changed the types of discipline cases that it includes in the backlog it reports without fully disclosing these changes. In all years we reviewed except for one, the changes the State Bar made in its methodology resulted in an increase in the backlog it had previously reported for the prior year. Although the State Bar told us that it made these changes in order to present the backlog in a more complete manner, additional steps are necessary to ensure that its discipline reports contain useful and consistent information.
At the time of our 2009 audit, we believed that the State Bar’s stakeholders, including the Legislature, would benefit from having more complete and clear measures of the backlog, and we recommended that the State Bar disclose the composition of the backlog and include an explanation for the cases it excludes. Although the State Bar implemented our recommendation for the two years following our audit, it stopped fully describing the methodology it used to calculate its backlog beginning in its 2011 discipline report and for each year thereafter.
Part of the reason the State Bar has struggled to maintain a reasonable backlog may be that it has not made adequate efforts to align its staffing with its mission of public protection. To meet its zero‑backlog goal in 2011, the State Bar shifted staffing resources, employed contractors, and authorized a significant amount of overtime. As previously discussed, this effort often came at the expense of delivering appropriate discipline. However, after decreasing its backlog in 2011, the State Bar generally discontinued its operational changes; subsequently, its backlog began to increase again, and it has grown by 25 percent since 2011. The State Bar’s ability to decrease its backlog after making operational changes, and the increase in the backlog after abandoning those changes, suggests that it may need additional staff within its discipline system. However, the State Bar has not conducted any workforce planning to support or refute this supposition.
Further, at a time when we would have expected the State Bar to focus its efforts and resources on its mission of public protection by taking steps such as improving its discipline system, it instead purchased a $76.6 million building in Los Angeles in 2012. The Legislature approved a temporary five‑year $10 special annual assessment charged to members between 2009 and 2013 as a means to partially pay for the financing, leasing, construction, or purchase of a new facility in Southern California. The special assessment generated $10.3 million—more than $66 million short of the final cost of the Los Angeles building. To finance the remaining cost of the building, the State Bar secured a $25.5 million loan, sold a parking lot in Los Angeles for $29 million, and transferred $12 million between its various funds, some of which its board had set aside for other purposes. For example, the State Bar paid for renovations, including information technology (IT) upgrades, to the Los Angeles building in part by using funds its board had designated in its strategic plan for new IT systems, intended to benefit the entire State Bar, not just those working in Los Angeles.
The State Bar might have been able to justify the purchase of its Los Angeles building by performing a thorough cost‑benefit analysis to demonstrate that purchasing the building was more financially beneficial than continuing to lease space. However, the State Bar did not perform a cost‑benefit analysis before receiving board approval to purchase the building. Further, in its April 2012 report to the Legislature—four months before it ultimately purchased the building—the State Bar underestimated the total cost of the building purchase and renovation by more than $50 million. Moreover, the State Bar did not adequately consider whether the purchased building would meet its long‑term staffing needs and never presented the board with a cost‑benefit analysis that compared the actual costs of leasing space versus purchasing a building.
The State Bar’s fund balances over the last six years indicate that the revenues from annual membership fees exceed the State Bar’s operational costs—which in part gave the State Bar the flexibility to purchase the Los Angeles building. Although the purchase of the building decreased the State Bar’s available fund balances, we found that they are again beginning to increase. Maintaining a reasonable fund balance would allow the State Bar to ensure that it charges its members appropriately for the services that they receive. A general best practice is that an appropriate fund balance would be no more than the amount needed to cover two months of operations. Our analysis showed that the State Bar’s 2014 available and unrestricted fund balances equated to between four and nine months’ worth of operations and, in total, exceeded this best practice by about $32 million. Based on our analysis, we believe the State Bar needs to evaluate the revenue it receives and the services it provides. For example, the State Bar could work with the Legislature to reassess its annual membership fee to better align with the State Bar’s actual operating costs so that the fund balances do not continue to increase.
Even though our analysis suggests otherwise, the State Bar does not believe that it has excess available revenue. However, the State Bar needs to conduct thorough analyses of its revenues, operating costs, and future operational needs to support this belief. Because the Legislature must authorize the State Bar to collect membership fees on an annual basis, every year the State Bar risks losing its ability to collect the revenue that will fund more than one‑half of its general operating activities, which makes long‑term planning difficult. According to the acting executive director, the reality of the State Bar’s funding creates problems for long‑term planning, staff stability, and staff recruiting because the State Bar has no assurance of future annual revenues beyond the existing year, which in turn demands that the State Bar have funds on hand to cover a loss or decrease in funding. Thus, a funding cycle that gives the State Bar greater certainty—for example, a biennial funding cycle—might enhance the State Bar’s ability to engage in long‑term planning.
The State Bar should adhere to its quality control processes to ensure that the discipline it imposes on attorneys is consistent, regardless of the size of the case‑processing backlog, and it should take steps to prevent its management or staff from circumventing those processes.
The State Bar and the Legislature should work together to determine what cases the State Bar should report in the backlog. For example, one method of calculating the backlog would be to include every case that affects public protection that the State Bar does not resolve within six months from the time it receives a complaint. The Legislature should then amend the state law that defines how the State Bar should present the backlog in its discipline report.
The State Bar should implement policies and procedures to restrict its ability to transfer money between funds that its board or state law has designated for specific purposes.
To justify future expenditures that exceed a certain dollar level, such as capital or IT projects that cost more than $2 million, the State Bar should implement a policy to present accurate cost-benefit analyses to the board to ensure that it has the information necessary to make appropriate and cost‑effective decisions.
The Legislature should consider putting a restriction in place to limit the State Bar’s fund balances, such as a limit of two months of the State Bar’s average annual expenditures.
To provide the State Bar with the opportunity to ensure that its revenues align with its operating costs, the Legislature should consider amending state law to establish, for example, a biennial approval process for the State Bar’s membership fees, rather than the current annual process.
To determine a reasonable and justified annual membership fee that better reflects its actual costs, the State Bar should conduct a thorough analysis of its operating costs and develop a biennial spending plan. It should work with the Legislature to set an appropriate annual membership fee based upon its analysis. The first biennial spending plan should also include an analysis of the State Bar’s plans to spend its current fund balances.
The State Bar of California generally agreed with all of the recommendations in our report except for the recommendation related to the organizational structure of the audit and review unit. The State Bar also indicated that it has already begun implementing some of the recommendations.
1 State Bar of California: It Can Do More to Manage Its Disciplinary System and Probation Processes Effectively and to Control Costs, Report 2009‑030. Go back to text