Report 2005-030 Summary - April 2005
State Bar of California:
It Should Continue Strengthening Its Monitoring of Disciplinary Case Processing and Assess the Financial Benefits of Its New Collection Enforcement Authority
Our review revealed that the State Bar of California:
- Continued to monitor its backlog of disciplinary cases and reported 402 cases in the backlog at the end of 2004.
- Continued to conduct semiannual reviews of disciplinary case files; however, it noted deficiencies similar to those found in its 2002 reviews.
- Developed a checklist for case files and adopted a policy to spot check active cases as we recommended, but the checklist is not comprehensive and staff have not consistently performed the spot checks.
- Obtained additional legal authority to collect money related to disciplinary cases, but needs approval of administrative procedures before it can implement the new authority.
- Is pursuing an increase in revenues from membership fees to help reduce projected deficits.
RESULTS IN BRIEF
The State Bar of California (State Bar), established by the California State Constitution, is a public corporation with a mission to preserve and improve the justice system. California's Business and Professions Code guides the State Bar in its efforts to fulfill this mission and to protect the public from the unethical or unauthorized practice of law. A 23-member board of governors establishes policy and guides the State Bar's functions, such as licensing attorneys and providing programs to promote the professional growth of its members.
Various sources, including our May 1996 audit titled State Bar of California: Opportunities Exist to Reduce Fees, Better Control Administration and Planning, and Strengthen an Improved Discipline Process, had indicated that the State Bar was not managing its resources effectively. In 1997 the governor vetoed legislation that would have authorized the State Bar to continue assessing a base annual membership fee, which it used to support its disciplinary function and other operations the State Bar pays for from its general fund. With its membership fees drastically reduced, the State Bar was forced to find ways to cut costs and significantly curtail its activities, which led to a backlog of 2,217 disciplinary cases in 1998. Subsequent statutes passed in 1999 and later years allow the State Bar to charge a base annual membership fee until January 2006.
In our April 2003 audit, State Bar of California: Although It Reasonably Sets and Manages Mandatory Fees, It Faces Potential Deficits in the Future and Needs to More Strictly Enforce Disciplinary Policies and Procedures, we reported on the State Bar's efforts to address the backlog of disciplinary cases, such as reorganizing its staff, creating a backlog team, and adopting a policy of 60-day case resolution. As it continued to monitor its backlog, the State Bar reported 402 cases in the backlog at the end of 2004 compared with 401 cases at the end of 2002 and 1,340 cases at the end of 2000. In addition, it processed almost the same number of disciplinary cases in 2004 as in 2002.
The State Bar also continued to conduct semiannual reviews of randomly chosen disciplinary case files to ensure that staff actions are appropriate and consistent with case law and with the State Bar's policies, standards, and priorities. The two reviews conducted in 2004 disclosed deficiencies similar to those found in the State Bar's 2002 random reviews. In 2004 the State Bar established an audit and review unit that reports directly to the chief trial counsel and is independent of the groups that process disciplinary cases. Among its various tasks, the audit and review unit conducted the second review of randomly chosen cases in 2004.
One of the recommendations in our April 2003 audit report stated that the State Bar should use a checklist to guide staff in processing disciplinary cases, perform spot checks of active case files, and require staff to resolve any issues noted in the spot checks to ensure that they consistently follow policies and procedures for processing disciplinary cases. Although the State Bar developed a brief checklist, which it calls an investigation file reminder (file reminder), it has not established a written policy requiring staff to use it. We also found that State Bar staff have not used the file reminder consistently. Moreover, the file reminder is not an effective tool because it is not sufficiently comprehensive. In 2004 the State Bar also adopted a spot-check policy. However, we found that its staff did not always comply with this policy. In particular, we found that staff did not consistently perform the requisite number of spot checks and sometimes failed to document the results. Therefore, the State Bar has less assurance that its staff are following policies and procedures when completing and maintaining disciplinary case files.
The State Bar still has trouble collecting money related to disciplinary cases. Because its cost recoveries remain low, the State Bar must subsidize its Client Security Fund and pay disciplinary costs using a larger portion of the membership fees it collects than it would if its recovery rates were higher. A law effective January 2004 improved the State Bar's ability to recover not only future costs but also some portion of the $64 million in billed costs that remain unrecovered as of December 2004. However, the State Bar has not yet been able to use this new authority because it is waiting for approval of certain administrative procedures by the California Supreme Court.
Based on the State Bar's financial forecast, the combined balance of its general fund, which accounts for activities related to the disciplinary system, and its Public Protection Reserve Fund, which was established to ensure the continuity of the disciplinary system, will sink into a deficit of $13.8 million by the end of 2008 unless revenues from membership fees increase. The forecast assumes a significant increase in staff salaries and wages beginning in 2006 and no change in membership fees. For its general fund the State Bar predicts that expenses will exceed revenues starting in 2005, which will eventually use up the surplus in the general fund. The State Bar also predicts that its Client Security Fund, which it uses to help alleviate the financial losses suffered by clients of dishonest attorneys, will have a deficit by the end of 2006. To avoid projected deficits, the State Bar has proposed a bill that would increase its membership fees by $5 for active members and $95 for inactive members and would change the criteria for active members to qualify for a partial fee waiver. If approved, these changes would become effective on January 1, 2006.
The State Bar should continue its efforts to control its backlog of disciplinary cases.
To ensure that employees follow procedures for processing disciplinary cases, the State Bar should:
- Establish a written policy requiring staff to maintain a checklist of the important steps involved in processing disciplinary cases and include all necessary documents in every case file.
- Develop a more comprehensive checklist and require supervisors to ensure that each case file includes a checklist and that staff use it.
- Enforce its policy of spot checking the files of active disciplinary cases.
To ensure that it maximizes the benefits of its new collection enforcement authority, the State Bar should prioritize its cost recovery efforts to focus on attorneys who owe substantial amounts related to disciplinary costs and payments from the Client Security Fund.
To ensure that its fees are set at reasonable levels, the State Bar should continue to update its forecast for key revenues and expenses as new information becomes available.
The State Bar does not dispute any of the report's findings or conclusions. In addition, the State Bar agrees with the recommendations and plans to address them promptly.