CSA
Summary
Read the report at California State Auditor ↗
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
April 2005
2005-030
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April 28, 2005 2005-030
The 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 Chapter 342, Statutes of 1999, the Bureau of State Audits presents its audit report concerning the
State Bar of California’s (State Bar) disciplinary process, cost recovery efforts, and financial outlook.
This report concludes that the State Bar continued to monitor its backlog of disciplinary cases that resulted from
its virtual shutdown in 1998. At the end of 2004, it reported 402 cases in the backlog compared with 401 cases at
the end of 2002 and 1,340 cases at the end of 2000. In addition, the State Bar’s semiannual reviews of randomly
chosen disciplinary cases in 2004 disclosed deficiencies similar to those found in its 2002 random reviews, such
as missing or inadequate explanations of case dispositions. To address these deficiencies and in response to our
2003 audit recommendations, the State Bar developed a brief checklist to guide staff in processing disciplinary
cases. However, its staff did not always use the checklist and it is not sufficiently comprehensive. The State Bar
also adopted a policy to spot check open disciplinary cases to ensure that staff are maintaining files properly and
handling complaints correctly. However, we found that staff did not consistently perform the requisite number of
spot checks and sometimes failed to document the results. Further, the State Bar’s recoveries of disciplinary costs
and Client Security Fund payments remained low. Therefore, to subsidize these costs, it used a larger portion of
the membership fees it collected than it would have if its recovery rates were higher. Although a law effective in
January 2004 improved its ability to recover past and future costs, 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. Finally, the State Bar is pursuing a revenue increase to help reduce projected deficits in its general fund
and Client Security Fund.
Respectfully submitted,
ELAINE M. HOWLE
State Auditor
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CONTENTS
Summary 1
Introduction 5
Audit Results
The California State Bar Continued to Monitor Its
Case Backlog While Seeing Little Change in the
Number of Disciplinary Cases It Processed 9
The State Bar Needs to Fully Implement Its
Procedures and Policies for Monitoring
Disciplinary Case Processing 11
Changes in State Law May Improve the State Bar’s
Recovery of Disciplinary Costs and Client Security
Fund Payments 14
The State Bar Is Pursuing a Revenue Increase to
Help Reduce Projected Deficits 17
Recommendations 23
Response to the Audit
The State Bar of California 25
SUMMARY
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.
Audit Highlights . . . California’s Business and Professions Code guides the State Bar
in its efforts to fulfill this mission and to protect the public from
Our review revealed that the the unethical or unauthorized practice of law. A 23-member
State Bar of California: board of governors establishes policy and guides the State Bar’s
functions, such as licensing attorneys and providing programs to
þ Continued to monitor its
backlog of disciplinary promote the professional growth of its members.
cases and reported
402 cases in the backlog
Various sources, including our May 1996 audit titled State Bar
at the end of 2004.
of California: Opportunities Exist to Reduce Fees, Better Control
þ Continued to conduct Administration and Planning, and Strengthen an Improved Discipline
semiannual reviews Process, had indicated that the State Bar was not managing its
of disciplinary case
resources effectively. In 1997 the governor vetoed legislation
files; however, it noted
that would have authorized the State Bar to continue assessing
deficiencies similar to those
found in its 2002 reviews. a base annual membership fee, which it used to support its
disciplinary function and other operations the State Bar pays
þ Developed a checklist for
for from its general fund. With its membership fees drastically
case files and adopted a
policy to spot check active reduced, the State Bar was forced to find ways to cut costs and
cases as we recommended, significantly curtail its activities, which led to a backlog of
but the checklist is not
2,217 disciplinary cases in 1998. Subsequent statutes passed in
comprehensive and staff
1999 and later years allow the State Bar to charge a base annual
have not consistently
performed the spot checks. membership fee until January 2006.
þ Obtained additional legal
In our April 2003 audit, State Bar of California: Although It
authority to collect money
Reasonably Sets and Manages Mandatory Fees, It Faces Potential
related to disciplinary cases,
but needs approval of Deficits in the Future and Needs to More Strictly Enforce Disciplinary
administrative procedures Policies and Procedures, we reported on the State Bar’s efforts to
before it can implement the
address the backlog of disciplinary cases, such as reorganizing its
new authority.
staff, creating a backlog team, and adopting a policy of 60-day
þ Is pursuing an increase in case resolution. As it continued to monitor its backlog, the
revenues from membership
State Bar reported 402 cases in the backlog at the end of 2004
fees to help reduce
compared with 401 cases at the end of 2002 and 1,340 cases
projected deficits.
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
California State Auditor Report 2005-030 11
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.
22 California State Auditor Report 2005-030 California State Auditor Report 2005-030 33
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.
RECOMMENDATIONS
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.
22 California State Auditor Report 2005-030 California State Auditor Report 2005-030 33
AGENCY COMMENTS
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. n
44 California State Auditor Report 2005-030 California State Auditor Report 2005-030 55
INTRODUCTION
BACKGROUND
The California State Constitution established the State
Bar of California (State Bar) as a public corporation. It
requires every person admitted and licensed to practice
law in California to be a member unless the individual serves as
a judge in a court of record. Chapter 4 of California’s Business
and Professions Code, commonly referred to as the State Bar
Act, guides and directs the State Bar in fulfilling its mission and
carrying out its responsibilities. A 23-member board of governors
establishes policy and guides such functions as licensing attorneys
and providing programs to promote the professional growth of
its members.
The State Bar performs the functions of admissions, discipline
and adjudication, administration of justice, administration of the
profession, governance, program development, communications,
and administration and support. To pay for these functions, the
State Bar collects an annual fee from each member. Members can
voluntarily pay an additional amount to participate in various
activities that relate to specific segments of the legal profession,
such as the family law section.
In 1997 the governor vetoed the bill that would have authorized
the State Bar to continue to assess 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.
Thus, the State Bar could only charge certain fees that were
authorized in statute. Subsequently, Chapter 342, Statutes of
1999 (Chapter 342), authorized the State Bar to assess a base
annual fee of up to $318 per member until January 1, 2001.
Currently Chapter 384, Statutes of 2004, authorizes the State Bar
to charge a base annual fee of up to $310 per member until
January 1, 2006. In combination with other fees specified in
existing statutes, this brought the total fee to $390 per member
for 2004. Additionally, Chapter 342 requires the State Bar
to contract with an independent public accounting firm to
conduct an audit of its financial statements for each fiscal
year after December 31, 1998. The legislation also directs the
State Bar to contract with the Bureau of State Audits to conduct a
performance audit every two years. We issued the first performance
audit report in April 2001 and the second in April 2003.
44 California State Auditor Report 2005-030 California State Auditor Report 2005-030 55
SCOPE AND METHODOLOGY
As directed by Chapter 342, our audit is of the State Bar’s operations
from January 1, 2004, through December 31, 2004. This legislation
does not state specific topics the audit should address. In
planning the current audit we reviewed the recommendations
we made in our 2003 audit. During the 2003 audit we identified
three principal areas: the State Bar’s processing of disciplinary
cases; cost recovery as part of processing disciplinary cases; and
the use of mandatory and discretionary funds to support State
Bar functions, including legislative activities.
To review its processing of disciplinary cases, we obtained
and reviewed the State Bar’s policies, training bulletins, case
backlog and processing statistics, and documentation of the
2004 semiannual reviews of randomly chosen case files. We
also reviewed a sample of case files to assess staff compliance
with the policies and procedures of the State Bar and to
evaluate whether it had implemented the recommendations
in our 2003 report. To determine the status of its cost recovery
efforts, we obtained and reviewed key statistics and reports
summarizing amounts the State Bar billed and recovered related
to its processing of disciplinary cases. We also interviewed State
Bar officials to determine whether there were any changes in its
cost recovery process. In addition, we reviewed pertinent laws
related to its collection enforcement authority. To determine
whether the State Bar continued to monitor the necessity of
a fee increase, we assessed key fund balances and reviewed its
financial forecasts for 2005 through 2008.
In our 2003 audit we determined that the State Bar had a system
in place to account for mandatory and discretionary funds. The
State Bar has since changed its indirect cost allocation process.
In the past it used a step-down process to allocate its indirect
costs. Since 2003 it allocates the indirect costs only to program
areas that are responsible for those costs. To facilitate the new
allocation process, it created a new fund. We limited our efforts
to understanding this new process, which we found to be
reasonable. Therefore, we did not further test the propriety of
the allocation process. Moreover, we inquired about the balance
in the Discipline Fund, which we reported in our 2003 audit as
having $2.6 million available for spending. At the end of 2004
the fund balance was $1.5 million. We determined that the
State Bar plans to use most of the remaining balance for a case-
tracking system.
66 California State Auditor Report 2005-030 California State Auditor Report 2005-030 77
Finally, we inquired whether the State Bar has finalized its
operational plan, which contains desired outcomes and
performance indicators for gauging the results achieved under
its strategic plan. We determined that the State Bar’s board of
governors approved the operational plan in September 2004.
The State Bar indicated that it is now identifying ways to collect
and track data related to the new performance indicators but
does not expect to issue its first review on program measures
until after 2006. As a result, we did not assess the strategic plan
or the operational plan as part of this audit. n
66 California State Auditor Report 2005-030 California State Auditor Report 2005-030 77
Blank page inserted for reproduction purposes only.
88 California State Auditor Report 2005-030 California State Auditor Report 2005-030 99
AUDIT RESULTS
THE CALIFORNIA STATE BAR CONTINUED TO MONITOR
ITS CASE BACKLOG WHILE SEEING LITTLE CHANGE IN
THE NUMBER OF DISCIPLINARY CASES IT PROCESSED
The State Bar of California (State Bar) processed almost the
same number of cases through its intake and enforcement
units in 2004 as it did in 2002. In addition, although
it reported that its backlog of disciplinary cases increased in
2003, the backlog it reported at the end of 2004 was 402 cases,
which is almost identical to the backlog at the end of 2002.
The State Bar reported a Even though the State Bar maintains an “aspirational goal”
backlog of 402 cases at of reducing the backlog to 250 cases, it believes that having a
the end of 2004, which backlog of about 400 cases may reflect the norm.
is almost identical to the
backlog at the end of 2002. Through its intake and enforcement units, under the direction
of the chief trial counsel and the State Bar Court, the State Bar
operates a disciplinary process to investigate California attorneys
who violate their clients’ trust. The State Bar prioritizes inquiries
about attorneys to focus its resources and efforts on those that
are most critical and to address the less serious inquiries to
the extent that resources are available. This approach has not
significantly changed since our last review. The intake unit
receives allegations of improper conduct by attorneys from the
general public and referrals from other sources such as courts,
insurers, and law enforcement agencies. Inquiries that the intake
unit determines warrant an investigation are forwarded to the
enforcement unit. As a result of its investigation of complaints,
the enforcement unit may either close a case or forward it
to the State Bar Court to initiate formal disciplinary proceedings
against the accused attorney. Table 1 on the following page
provides a comparison of the number of inquiries and
complaints processed by the intake and enforcement units in
2002 and 2004.
88 California State Auditor Report 2005-030 California State Auditor Report 2005-030 99
TABLE 1
Summary of Inquiries and Complaints Processed by the Office of Chief Trial Counsel
2002 and 2004
2002 2004
Inquiries and Inquiries and
Complaints Percentage Complaints Percentage
Disciplinary Process Processed of Total Processed of Total
Intake Unit
Total inquiries in intake closed or advanced 14,491 14,247
Closed without discipline 8,938 62% 8,883 62%
Closed with alternative resolutions or
resignations of attorneys pending 1,897 13 1,594 11
Advanced to investigation 3,656 25 3,770 27
Enforcement Unit*
Total complaints resolved 4,465 4,703
Closed without discipline 2,700 60 2,656 57
Closed with alternative resolutions or
resignations of attorneys pending 794 18 912 19
Cases filed in State Bar Court 971 22 1,135 24
Source: State Bar’s disciplinary computer tracking system.
*The enforcement unit includes the San Francisco and Los Angeles investigations and trial units.
The total number of inquiries that the intake unit closed or
advanced to investigation in 2004 slightly decreased from 2002;
however, the percentage of inquiries closed without discipline
remained the same at 62 percent. In addition, the drop in
cases that the intake unit closed with alternative resolutions
or resignations of attorneys pending—from 13 percent in 2002
to 11 percent in 2004—was offset by an increase in inquiries
the intake unit advanced to investigation—from 25 percent
in 2002 to 27 percent in 2004. The 2004 data also indicate that
the enforcement unit resolved more complaints overall and
closed fewer complaints without discipline than it did in 2002.
Further, the drop in complaints closed without discipline by the
enforcement unit—from 60 percent in 2002 to 57 percent
in 2004—was offset by an increase in the percentage of complaints
the enforcement unit closed with alternative resolutions or
attorney resignations pending and cases filed with the State Bar
Court. Finally, in 2004 the enforcement unit filed 164 more
cases in the State Bar Court than it did in 2002, which represents
an increase of almost 17 percent.
1100 California State Auditor Report 2005-030 California State Auditor Report 2005-030 1111
As we indicated in our 2003 audit report, the State Bar’s loss of
revenue in 1998, caused by the suspension of its authorization
to collect a base annual membership fee, prompted signifi cant
layoffs in the offi ce of the chief trial counsel. As a result, the
State Bar faced 2,217 disciplinary cases in its backlog by the end
of that year. Backlog cases are investigations that are uncompleted
at the year’s end and remain pending in the system for more than
six months or one year, depending on case complexity. Since
1998, the State Bar has made signifi cant progress in reducing
its backlog by implementing a series of initiatives to address
its inventory of pending cases. It developed a
system for prioritizing work, reorganized staff into
specialized teams, adopted a policy of 60-day case
State Bar’s Backlog Status at Year-End
resolution in its intake unit, and created a backlog
2000 1,340 team composed of experienced investigators in
its enforcement unit. Further, the State Bar set an
2001 809
overall goal of no more than 400 backlog cases for
2002 401
2002 and an “aspirational goal” of reducing the
2003 540 backlog to 250 cases by the end of 2003. As the text
box shows, the actual number of cases the State Bar
2004 402
has reported in its backlog has decreased each year
since 2000, except in 2003.
When we inquired about the cause for the spike in 2003, the
State Bar’s chief trial counsel told us that the increase was due to
an unusual series of investigations and prosecutions that related
to a particular law group and involved 21 investigators, seven
paralegals, and two attorneys from his offi ce. As a result, he
views 2003 as an anomaly as it relates to the size of the backlog
and that the year-end backlog numbers of 401 in 2002 and 402
in 2004 suggest the norm.
THE STATE BAR NEEDS TO FULLY IMPLEMENT ITS
PROCEDURES AND POLICIES FOR MONITORING
DISCIPLINARY CASE PROCESSING
The State Bar’s random reviews of its disciplinary case fi les
indicate that staff still have not consistently followed policies
and procedures when processing complaints fi led against its
members. In particular, in its 2004 semiannual reviews of
randomly chosen case fi les, the State Bar identifi ed some of the
same defi ciencies as it identifi ed in its 2002 reviews. To address
some of these issues, and in response to the recommendation
we made in our 2003 report, the State Bar developed a checklist
to ensure that staff complete important steps in processing
complaints and include all necessary documents in every case
1100 California State Auditor Report 2005-030 California State Auditor Report 2005-030 1111
file. Further, in 2004 the State Bar instituted a policy requiring
team leaders to periodically spot check active files. However, we
found that staff have not consistently used the checklist and it is
not sufficiently detailed. In addition, we found little evidence of
compliance with the spot-check policy.
Periodic Reviews of Randomly Chosen Case Files Revealed That
Staff Did Not Always Follow State Bar Policies and Procedures
In September 2000 the State Bar established a policy that
directed management to conduct periodic reviews of randomly
chosen files of disciplinary cases to ensure that the staff’s
actions are appropriate and consistent with case law and
the State Bar’s policies, standards, and priorities. According
to the September 2000 policy, after completing the reviews
each manager would prepare a summary of findings, and the
summaries would be consolidated into a final report for the
chief trial counsel. The State Bar conducts reviews semiannually.
In 2004 the San Francisco and Los Angeles Trial units conducted
The semiannual reviews the first review. The second review was performed by the audit
the State Bar conducted and review unit, which the State Bar created in August 2004.
in 2004 revealed case Reporting to the chief trial counsel, the new unit consists of
file deficiencies similar to experienced attorneys who are responsible for conducting the
those it found in 2002. semiannual reviews that were previously done by assistant
chief trial counsels and supervising trial counsels in the intake,
investigations, and trial units.
The first random review included a total of 84 files for the period
of September 2003 through March 2004. The second review
included a total of 283 inquires, investigation files, and trial
files closed between February and September 2004 by various
units in San Francisco and Los Angeles. Both reviews disclosed
some deficiencies similar to those found in the State Bar’s 2002
random reviews. Specifically noted were staff’s failure to enter
information into the computer database and send closing letters
to complainants, poor record keeping and file maintenance, and
missing or inadequate explanations of case dispositions.
The Checklist Created by the State Bar Is Not Used
Consistently and Is Not an Effective Tool
To help address deficiencies in how its staff process complaints
filed against its members, the State Bar reported in its one-year
response to our 2003 audit that it created a checklist for staff to
use to ensure that they complete important steps in processing
complaints and include all necessary documents in every case
1122 California State Auditor Report 2005-030 California State Auditor Report 2005-030 1133
file. In our current review we found that the State Bar has
instructed its investigators to use an investigation file reminder
Although the State Bar (file reminder) as a checklist. However, it has not established
reported that it had a written policy to require staff to use the file reminder. In
implemented a checklist, addition, in reviewing 13 case files, we found that eight files did
staff have not used the not include file reminders, and one file contained a blank copy
checklist consistently of the form. Although the remaining four case files did contain
and it does not include completed file reminders, we saw no evidence that a supervisor
sufficient detail. had reviewed any of the 13 case files to ensure that staff were
using the file reminders. As a result, although the State Bar
reported that it had implemented a checklist, staff have not used
the checklists consistently.
Moreover, in our view the State Bar’s file reminder does not
include sufficient detail to ensure that employees follow proper
procedures for processing complaints and completing case files
and that problems revealed in the semiannual reviews do not
recur. Specifically, the file reminder contains only five tasks.
However, processing a complaint and completing a file might
require many other documents and steps beyond those five
tasks. For example, the tool the State Bar’s audit and review unit
uses to conduct its semiannual reviews contains 49 tasks related
to documents and steps that may be necessary to properly
complete a case file. Although each of the 49 tasks may not
apply to every case file, we believe such thoroughness is required
if a tool is to be effective.
Staff Have Not Always Complied With the New Spot-Check Policy
In October 2004 the State Bar adopted a policy to spot check open
disciplinary cases to ensure that staff are maintaining files properly
and handling the complaints correctly. The policy requires each
team leader to randomly check one currently active file each month
for each investigator on his or her team. However, we found little
evidence of compliance with the new policy.
For example, the Los Angeles units could not provide any
evidence that they had conducted the spot checks as required.
According to the chief trial counsel, although the team leaders
in Los Angeles conducted the spot checks, it was an informal
process and they did not complete any documents to record
the results. At the San Francisco unit we found evidence that
staff conducted only 12 spot checks. The team leader in the
San Francisco unit supervises 12 investigators. Therefore, to
comply with the State Bar’s new policy, the team leader should
have conducted 36 spot checks during the three-month period
1122 California State Auditor Report 2005-030 California State Auditor Report 2005-030 1133
from October through December 2004. The team leader told us
that he obtained permission from his supervisor to spot check
the case files of six investigators one month and those of the
other six investigators the following month. Because the spot-
check policy has not been fully implemented, the State Bar has
less assurance that its staff are following policies and procedures
when completing and maintaining disciplinary case files.
CHANGES IN STATE LAW MAY IMPROVE THE STATE BAR’S
RECOVERY OF DISCIPLINARY COSTS AND CLIENT
SECURITY FUND PAYMENTS
Disciplining attorneys, the State Bar’s primary function, protects
the public, the court, and the legal profession from lawyers who
fail to fulfill their professional responsibilities. According to the
State Bar’s unaudited financial statements for 2004, roughly
$40 million (82 percent) of its $49 million in general fund
expenses were associated with its disciplinary process. Its billing
system showed that the State Bar billed attorneys $1.1 million
for costs related to processing their disciplinary cases. To at
least partly alleviate the financial losses suffered by the clients
of dishonest attorneys, the State Bar makes payments to those
clients from the Client Security Fund and seeks reimbursement
from the attorneys whose conduct gave rise to the payments.
In 2004 the State Bar billed attorneys $4.9 million for costs
incurred by the Client Security Fund.
The State Bar’s cost recovery rates in 2004 were comparable to its
recovery rates in 2002; however, they remained low compared
with the total amounts billed. Therefore, the State Bar used a
larger portion of its membership fees to subsidize its disciplinary
Because its cost recovery activities and the Client Security Fund than it would have with
rates remained low, the a higher recovery rate. In the past the State Bar had little success
State Bar used a larger in recovering costs from disbarred attorneys or attorneys who
portion of its membership resigned, in part because it lacked specific authority to pursue
fees to subsidize its recovery of debts under the Enforcement of Judgments Law.
disciplinary activities and However, based on legislation effective in January 2004, the
the Client Security Fund. State Bar now has the requisite legal authority, which may
improve its ability to recover not only future costs but also
some portion of the $64 million in billed costs that remain
unrecovered since 1990.
As described in our 2003 audit report, the State Bar can recover
from individual attorneys some of its costs for disciplinary
activities. Sections 6140.5 and 6086.10 of the Business and
Professions Code require the State Bar to charge attorneys it has
1144 California State Auditor Report 2005-030 California State Auditor Report 2005-030 1155
disciplined for certain costs related to its Client Security Fund
and disciplinary proceedings. An attorney whose actions caused
the State Bar to use the Client Security Fund to pay a claimant
must reimburse the fund, and any action to publicly reprove or
discipline an attorney requires the member to pay certain costs.
Although the State Bar does bill attorneys it has disciplined,
the amount collected is substantially lower than the amount it
spends on processing disciplinary cases. One reason is that the
Business and Professions Code limits the amount of recovery by
excluding the costs for services of attorneys or expert witnesses.
Further, the State Bar has the authority to collect costs from
attorneys only when the State Bar Court publicly imposes
discipline. As shown in Table 1 on page 10, only 24 percent
of the complaints the enforcement unit resolved in 2004 were
ultimately filed in State Bar Court. The State Bar is unable to
recover costs when it closes a case without discipline or imposes
alternative resolutions, or when the State Bar Court imposes
discipline privately.
Table 2 indicates that the State Bar’s cost recovery rates in 2004
were comparable to 2002 and continued to show improvement
over the rates achieved in 2000. In 2004 the State Bar’s cost
recovery rate for discipline was 40.5 percent, an increase from
the 36.4 percent rate in 2002. The cost recovery rate for the
Client Security Fund declined slightly from 10.9 percent in 2002
to 10.7 percent in 2004. According to the chief trial counsel, the
State Bar used the same billing practices related to disciplinary
costs and payments from the Client Security Fund in 2004 as it
used in 2002.
TABLE 2
Billed and Recovered Costs Related to the Client Security Fund and Disciplinary Activities
Client Security Fund Disciplinary Activities
Costs Percent Costs Percent
Year Costs Billed Recovered Recovered Costs Billed Recovered Recovered
2000 $4,812,990 $119,400 2.5% $1,079,922 $311,061 28.8%
2002 4,475,737 489,909 10.9 1,010,668 367,881 36.4
2004 4,921,700 527,289 10.7 1,105,829 447,436 40.5
Source: State Bar’s membership billing services.
1144 California State Auditor Report 2005-030 California State Auditor Report 2005-030 1155
According to the chief trial counsel, the reason the recovery
rates for payments from the Client Security Fund are lower
than for disciplinary costs is that the Client Security Fund only
pays for the financial losses of clients whose attorneys acted
dishonestly—by stealing clients’ money, for instance. The chief
trial counsel indicated that most of these attorneys have serious
financial problems and rarely have any funds or assets that can
be used to reimburse the Client Security Fund. The recovery
rate for disciplinary costs related to attorneys who have been
disbarred or who resign with disciplinary charges pending
against them is not much different from the recovery rate for
Client Security Fund payments. On the other hand, the chief
trial counsel indicated that the cost recovery rate for disciplining
attorneys who have been publicly reproved or suspended is
much higher. He stated that most of these attorneys want to
return to the practice of law and must pay the disciplinary costs
to do so. Moreover, a significantly higher percentage of attorneys
who owe disciplinary costs have the financial ability to pay
compared with the percentage of attorneys who owe the Client
Security Fund. In fact, according to the State Bar’s billing data,
more than 98 percent of the Client Security Fund billings in
2004 were related to attorneys who resigned or were disbarred.
Of the discipline billings in 2004, only 36 percent related to
such attorneys.
Although the State Bar’s cost recovery rates in 2004 remained
low, statutory changes that became effective in January 2004
If the supreme court may help the State Bar recover a larger portion of costs in the
approves proposed future. Amendments to sections 6086.10 and 6140.5 of the
amendments to the Business and Professions Code passed by the Legislature allow
California Rules of Court, the State Bar to enforce payment of disciplinary costs and Client
after obtaining a money Security Fund payments as money judgments. In addition, the
judgment, the State Bar State Bar has proposed to the California Supreme Court that
would be able to garnish the California Rules of Court be amended to enable it to carry
wages or obtain judgment out the statute. The proposed amendments, which the State Bar
liens on real property the submitted to the supreme court in February 2005, would require
attorney owns. the superior court clerk of the relevant county to immediately
enter a judgment against an attorney for the amount the State
Bar certifies the attorney owes for disciplinary costs or Client
Security Fund payments. After obtaining the money judgment,
the State Bar would be able to garnish wages or obtain judgment
liens on real property the attorney owns. Until the supreme
court approves the proposed procedures, the State Bar cannot
exercise the money judgment authority.
1166 California State Auditor Report 2005-030 California State Auditor Report 2005-030 1177
It is also important to note that the amendments to the Business
and Professions Code allow the State Bar to pursue money
judgments for costs that were assessed before the effective date
of the legislation. According to data from the State Bar’s member
billing system as of December 2004, about 2,500 individuals
owe $55 million for Client Security Fund payments and
about 4,500 individuals owe $9 million for disciplinary
costs. In addition, some of these individuals owe substantial
As of December 2004 amounts. For example, the 100 individuals with the largest
about 2,500 individuals unpaid amounts related to the Client Security Fund owe about
owe $55 million for 54 percent of the total unrecovered payments. For disciplinary
Client Security Fund costs, the top 100 individuals account for 20 percent of the total
payments and about amount the State Bar has not recovered. Currently, the State
4,500 individuals Bar has no estimate of how much it might be able to recover on
owe $9 million in amounts previously billed or how much its future recovery rates
disciplinary costs. might improve once it begins pursuing money judgments. The
chief trial counsel told us that the State Bar needs to perform
some cost-benefit analyses to determine the likelihood of recovery
on money judgments.
Finally, the State Bar is working on a legislative amendment that
would allow it to settle for partial collection of its Client Security
Fund payments. Existing law authorizes the State Bar to reach an
agreement with an attorney for partial recovery of disciplinary
costs. However, for the Client Security Fund payments, the State
Bar is not allowed to accept anything less than the full amount.
In certain cases the State Bar believes that attorneys who have
provoked disciplinary actions and do not have enough assets to
fully reimburse the Client Security Fund might wish to resolve
their delinquent accounts by paying less than the full amounts
they owe.
THE STATE BAR IS PURSUING A REVENUE INCREASE TO
HELP REDUCE PROJECTED DEFICITS
The State Bar predicts that deficits in its general fund and Client
Security Fund will occur soon unless revenues from membership
fees increase. According to its financial forecast, the general fund
and Public Protection Reserve Fund will have a combined balance
of only $874,000 by the end of 2006. The State Bar also predicts
a rapid decline in its Client Security Fund reserves, resulting
in a negative fund balance of $264,000 by the end of 2006.
Assumptions made in its forecasts exclude the impact its new
collection enforcement authority might have on cost recoveries.
To avoid projected deficits, the State Bar has proposed a bill that
would increase fees by $5 for active members and $95 for inactive
1166 California State Auditor Report 2005-030 California State Auditor Report 2005-030 1177
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.
To Help Cover Projected Deficits in its General Fund, the
State Bar Has Proposed a Fee Increase and Changes in the
Fee Waiver Criteria
The State Bar’s 2004 unaudited financial statements indicate
that the general fund’s revenue of $50.8 million exceeded
expenses and transfers to other funds by $2.2 million, resulting
The State Bar’s financial in a $2.8 million fund balance at the end of 2004. However, its
forecast shows that financial forecast shows that expenses will exceed revenues each
general fund expenses year from 2005 through 2008 unless membership fees increase
will exceed revenues each and the fee waiver criteria change. With support from its Public
year from 2005 through Protection Reserve Fund, the State Bar could forestall a deficit
2008 unless membership until 2007 if membership fees and the fee waiver criteria remain
fees increase and the fee unchanged. The State Bar established the Public Protection
waiver criteria change. Reserve Fund to ensure the continuity of its disciplinary system
and its other essential public protection programs in the event
of unexpected emergencies, such as occurred in 1997 when the
State Bar was unable to obtain timely statutory authorization
to assess and collect annual fees. According to the State Bar’s
executive director, the fund should not be used to offset
anticipated deficits given the ongoing financial instability
caused by the requirement that it seek statutory authority to
collect member fees, typically on an annual basis. Nevertheless,
balances in the fund represent available resources that the State
Bar could use to reduce the impact of projected deficits.
As of December 2004 the Public Protection Reserve Fund had
$5.4 million available that, when combined with the balance
in the general fund, resulted in a fund balance of $8.2 million.
However, as the Figure shows, the State Bar predicts that the
combined balance of $5.8 million in the general fund and the
Public Protection Reserve Fund at the end of 2005 will sink into
a deficit of $13.8 million by the end of 2008 unless membership
fees increase and the fee waiver criteria change.
1188 California State Auditor Report 2005-030 California State Auditor Report 2005-030 1199
FIGURE
Effects of Proposed Increase in Revenues From Membership Fees
and Anticipated Increase in Salaries and Benefits on the Combined Balance
of the General Fund and Public Protection Reserve Fund
(in Millions)
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Sources: 2003 fund balances based on the State Bar’s 2003 audited financial statements; 2004 fund balances based on the
State Bar’s 2004 unaudited financial statements; all other fund balances based on the State Bar’s financial outlook for 2005 through 2008.
The State Bar developed its forecast using two different scenarios.
Both scenarios presume that membership fees and the criteria
for active members to qualify for a partial waiver of the
base annual membership fee will remain unchanged until
January 2006, and the assumptions related to expenses are the
same under each scenario throughout the forecast period. As a
result, the top and bottom lines in the Figure begin diverging
after 2005 because of the difference in revenue projections.
1188 California State Auditor Report 2005-030 California State Auditor Report 2005-030 1199
Although the State Bar’s financial forecast is based on various
assumptions, revenues from membership fees drive the revenue
forecasts, and staff salaries and wages are the primary factor
affecting the expense forecasts. In the absence of a fee increase
and changes in the fee waiver criteria, the State Bar predicts
The primary driver of that its general fund revenue will increase at a steady rate of
the growth in projected approximately $1.2 million a year from 2006 through 2008
general fund expenses based on membership growth of between 2 percent and
is the assumption that 2.4 percent per year during the period. On the other hand,
salaries and wages will the primary driver of the growth in projected general fund
increase 5 percent per year expenses is the assumption that salaries and wages will increase
from 2006 through 2008. 5 percent per year from 2006 through 2008. According to the
State Bar’s chief financial officer, this assumption is based on
recent negotiations with employee bargaining units, which have
indicated that among their highest priorities are maintaining
5 percent step increases and negotiating a 5 percent increase
in all the salary ranges. In addition, the chief financial officer
indicated that the State Bar wants to maintain comparability
with public employers in its salary ranges.
Including its effect on payroll taxes, fringe benefits, and
salary savings, the 5 percent annual salary increase adds a net
$1.8 million, $3.6 million, and $5.6 million to projected general
fund expenses for 2006, 2007, and 2008, respectively. As shown
by the middle line in the Figure, if the effects of the salary
increases were removed from the forecast scenario that assumes
no increase in membership fees and no change in the fee waiver
criteria, the deficit would drop by $11 million to $2.8 million at
the end of 2008.
To offset the large impact of expected salary growth, the State Bar
has requested a fee increase and a change in the fee waiver criteria
that, if approved, would become effective on January 1, 2006. As
introduced, Assembly Bill 1529 (AB 1529) of the 2005–06 legislative
session would increase the total fees for inactive members from
$50 to $145 and for active members from $390 to $395, as shown
in Table 3. However, in its financial forecast, the State Bar has
assumed that the total fee for inactive members will be $135
instead of $145 because it proposed a base annual fee for inactive
members of $80 rather than the $90 reflected in the version of
AB 1529 introduced to the Legislature. Although AB 1529 would
provide an additional $75 in fees from inactive members to support
the general fund, the State Bar estimates that a fee increase of $65
would generate approximately $2.2 million in additional general
fund revenue in 2006 and $2.3 million in both 2007 and 2008.
2200 California State Auditor Report 2005-030 California State Auditor Report 2005-030 2211
TABLE 3
Changes in Annual Membership Fees
Current Fees Proposed Fees Difference
Inactive Member
Base annual fee $40* $ 90* $50*
Client Security Fund 0 10 10
Disciplinary system 0 25* 25*
Other 10 20 10
Totals $50 $145 $95
Active Member
Base annual fee $310* $310* $0
Client Security Fund 35 40 5
Disciplinary system 25* 25* 0
Other 20 20 0
Totals $390 $395 $5
Sources: Chapter 384, Statutes of 2004, and Assembly Bill 1529 (Introduced) of the
2005–06 Regular Session.
* Supports the general fund.
In addition to increasing fees for each member, AB 1529
would change the fee waiver criteria. Existing law provides a
waiver of 25 percent of the base annual membership fee for
active members who earn less than $40,000 annually from the
practice of law and a waiver of 50 percent for active members
with less than $30,000 total annual earned income. AB 1529
would provide only a single waiver of 25 percent of the base
annual membership fee for active members with total annual
gross income from all sources of less than $40,000. The State
Bar estimates that the change in the fee waiver criteria would
provide increased general fund revenues of $2.3 million in 2006
and $2.4 million in both 2007 and 2008. As the top line in the
Figure on page 19 shows, the State Bar predicts the additional
revenue from the fee increase and changes in the fee waiver
criteria would help prevent a deficit in the combined general
fund and Public Protection Reserve Fund balance through 2008.
As described earlier, changes in state law might improve the
State Bar’s ability to recover disciplinary costs and Client
Security Fund payments from attorneys. However, the State
Bar’s financial forecast does not incorporate any increased cost
recoveries that might help reduce projected deficits. According
2200 California State Auditor Report 2005-030 California State Auditor Report 2005-030 2211
to the chief trial counsel, it avoided doing so because the
State Bar has no experience with the enforcement of money
judgments that would enable it to make an educated forecast.
The chief trial counsel also told us that, due to the steps
involved in obtaining money judgments and then collecting
on them, the State Bar did not expect significant collections in
the first year of the program. Finally, according to the chief trial
counsel, the State Bar’s ability to collect from attorneys it has
disciplined depends on the attorneys’ ability to pay. However,
attorneys who owe the most are those who have resigned or
been disbarred and have few if any assets that the State Bar can
immediately garnish.
The State Bar Predicts That Its Client Security Fund Reserve
Will Be Depleted by 2006 Unless Membership Fees Increase
The State Bar’s 2004 unaudited financial statements indicate that
Client Security Fund expenses exceeded revenues by $2.1 million,
resulting in a decrease in the fund balance from $4.3 million to
$2.2 million at the end of 2004. The Client Security Fund balance
has declined each year since 2002, when the annual assessment
the State Bar charged its active members in support of the fund
was reduced from $40 to $35. The State Bar reduced fees in 2002
because of the dramatic increase in the fund balance and the
two-year decrease in the number of claims filed that resulted
when the State Bar lost its authorization to assess a base annual
membership fee and had to significantly curtail its activities.
State Bar records indicate that in 2004 it processed 1,209 claims
asserting financial losses related to the dishonest conduct of
attorneys and paid $5.7 million from its Client Security Fund
for 746 of those claims. According to the State Bar’s unaudited
financial statements, the revenue generated through membership
fees totaled $4.8 million in 2004, an increase of $215,000 from
2003. The State Bar expects to pay about $4.4 million for claims
still outstanding at the end of 2004. Conceivably, it could
receive additional claims for losses incurred in 2002 and
The State Bar estimates 2003 because claimants generally have four years to file claims
that it will face deficits for reimbursement.
in the Client Security
Fund by 2006 if the fees The State Bar estimates that it will face deficits in the fund by
supporting the fund do 2006 if the fees supporting the Client Security Fund do not
not increase. increase. According to the State Bar’s financial forecast, the
Client Security Fund will be able to absorb an operating loss
for only one more year if the fees supporting the fund remain
unchanged. The Client Security Fund’s major source of revenue
2222 California State Auditor Report 2005-030 California State Auditor Report 2005-030 2233
is the $35 annual fee imposed on active members. Like its
general fund revenue forecast, the State Bar’s expectation for
Client Security Fund revenue is an increase due to a growing
active membership and rising investment income. In the
absence of a fee increase, the State Bar predicts revenues of
$5.1 million in 2005 and $5.3 million in 2006. As with the
general fund, the forecast assumptions do not incorporate any
potential increase in cost recoveries that might result from the
State Bar’s new money judgment authority.
According to the forecast, Client Security Fund expenses will
exceed revenues by $1.1 million by the end of 2005. As a result,
the 2004 fund balance of $2.2 million is projected to decrease
to $1.1 million in 2005, which will not be sufficient to cover
the projected operating loss of $1.4 million in 2006. The State
Bar’s forecast for expenses assumes that the claims payout ratio
for 2005 and 2006 will stay at 45 percent, which is slightly
higher than the average of the last three years ending in 2004,
according to the State Bar’s 10-year comparison of the fund’s
activity. The State Bar projects that the fund will have a deficit
balance of $264,000 at the end of 2006.
To prevent future deficits in the Client Security Fund, the State
Bar has proposed a fee increase totaling $15 from active and
inactive members in support of the fund. As shown in Table 3
on page 21, fees would increase by $5 for active members,
and inactive members would begin paying $10 to support the
fund. The State Bar estimates the increases in fees will generate
approximately $1.1 million in additional Client Security Fund
revenue each year from 2006 through 2008.
RECOMMENDATIONS
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, rather than relying on an informal instruction
that the checklist be used.
2222 California State Auditor Report 2005-030 California State Auditor Report 2005-030 2233
• Develop a checklist that is more comprehensive than the
current investigation file reminder, such as the tool that
the audit and review unit uses when it randomly reviews
disciplinary case files.
• Make supervisors responsible for ensuring that each case file
includes a checklist and that staff use it.
• Enforce its policy of spot checking the files of active
disciplinary cases and require team leaders to document the
results of their spot checks.
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 forecasts for key revenues and
expenses as new information becomes available. For example,
the State Bar should closely monitor the results of its enhanced
collection enforcement authority and the benefits it may have on
recovery of disciplinary costs and Client Security Fund payments.
We conducted this review under the authority vested in the California State Auditor by
Section 8543 et seq. of the California Government Code and according to generally accepted
government auditing standards. We limited our review to those areas specified in the audit
scope section of this report.
Respectfully submitted,
ELAINE M. HOWLE
State Auditor
Date: April 28, 2005
Staff: John F. Collins II, CPA, Audit Principal
Nasir A. Ahmadi, CPA
Barbara Henderson, CPA
Sheryl Liu-Philo, CPA
2244 California State Auditor Report 2005-030 California State Auditor Report 2005-030 2255
Agency’s comments provided as text only.
The State Bar of California
Judy Johnson, Executive Director
180 Howard Street, Floor 10, San Francisco, CA 94105
April 18, 2005
Elaine M. Howle, State Auditor
555 Capitol Mall, Suite 300
Sacramento, CA 95814
Re: State Bar of California Response to State Audit Report of April, 2005
Dear Ms. Howle:
Please find enclosed the response of the State Bar of California to the State Audit Report, entitled
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.
Consistent with your request, we have submitted this written response in the envelope provided,
and the entire response, including this cover letter, has been reproduced on the enclosed diskette,
using a PC-compatible file.
I wish to extend my personal thanks to the audit team of: John F. Collins II, Nasir A. Ahmadi, Sheryl
Liu-Philo and Barbara Henderson, and fully appreciate their hard work and professionalism in
preparing the report.
We look forward to working with you and your staff as this process continues.
Very truly yours,
(Signed by: Judy Johnson)
Judy Johnson
Executive Director
2244 California State Auditor Report 2005-030 California State Auditor Report 2005-030 2255
Response to State Audit Report
Agency Comments:
The review of the operations and performance of the State Bar of California by the Bureau of State
Audits for the period January 1, 2004 through December 31, 2004, is informative and helpful. The
recommendations will help the State Bar further optimize the operational efficiency of its discipline
system and enhance its cost recovery strategies to ensure that mandatory fees are kept at a
reasonable level.
The State Bar of California does not dispute any of the findings or conclusions of the Bureau of
State Audits. We agree with the recommendations contained in the report and will develop plans to
address them promptly. As required, we will periodically update the Bureau of State Audits on our
progress in implementing the recommendations.
Recommendation 1
The State Bar should continue its efforts to control its backlog of disciplinary cases.
Response
We agree. The State Bar will continue to make every effort to keep the statutory backlog at or
below 400 cases. The backlog increased significantly in 2003 (i.e., to 540 cases on December 31,
2003), primarily as a result of the investigative resources required for the State Bar’s investigation
of the multitude of complaints and subsequent involuntary inactive enrollment proceeding pursuant
to Business and Professions Code section 6007, subdivision (c)(3) against the attorneys practicing
law as The Trevor Law Group. However, by the end of 2004, the statutory backlog was reduced to
402 cases, virtually identical to the backlog of 401 reported by the State Auditor in 2002.
Notwithstanding fluctuations in the size of the backlog in 2003 and 2004, the average age of all
State Bar disciplinary investigations has declined significantly. In 2002, 32.5% of investigation
cases were more than six months old, while in 2004, only 21.9% of investigation cases were over
six months old.
2266 California State Auditor Report 2005-030 California State Auditor Report 2005-030 2277
Recommendation 2
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 rather than relying on an informal instruction that the checklist be used.
• Develop a checklist that is more comprehensive than the current investigation file
reminder, such as the tool that the audit and review unit uses when it randomly reviews
disciplinary case files.
• Make supervisors responsible for ensuring that each case file includes a checklist and
that staff use it.
• Enforce its policy of spot-checking the files of active disciplinary cases and require team
leaders to document the results of their spot checks.
Response
We agree. With the commencement of the term of the new Chief Trial Counsel, Scott Drexel
(effective 4/11/05), a specific policy directive regarding the use of a single comprehensive checklist
in all cases will be issued. This will replace the current practice of employing multiple documents
for the same purpose, including the intake sheet, the investigation reminder and other documents.
It is anticipated that the comprehensive checklist will be similar to the checklist currently used by
the audit and review unit for its random audit of closed files. Further, the policy directive will require
that the appropriate supervisor (e.g., lead attorney or team leader) ensure that a copy of the
checklist is contained in each file and that it is utilized by staff.
Finally, the Office of the Chief Trial Counsel will make its policy of spot-checking active disciplinary
cases more specific and will require team leaders or others conducting the spot checks to
document the results of their reviews.
Recommendation 3
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.
Response
The State Bar agrees with this recommendation and has initiated two pilot projects to test its
collection efforts. One began in 2003, before the availability of the money judgment amendment.
The State Bar authorized its outside collection counsel to initiate civil actions against a list
of attorneys owing moneys to CSF, including 54 of the top 100 individuals owing the most in
disciplinary costs.
2266 California State Auditor Report 2005-030 California State Auditor Report 2005-030 2277
The second project involved disciplinary costs under the money judgment statute, targeting those
with the most recent awards of disciplinary costs. Demand letters have been sent and when
the proposed procedures in the California Rule of Court are approved, money judgments will
be entered. This second pilot project includes 9 of the top 100 individuals with the most unpaid
disciplinary costs. The State Bar is in the process of sending demand letters to the remaining
individuals owing the most in disciplinary costs, to gather additional comparative data.
The State Bar will use information and data from the pilot projects to conduct a cost-benefit analysis
and to target and prioritize its future efforts.
Recommendation 4
To ensure that fees are set at reasonable levels, the State Bar should continue to update its
forecasts for key revenues and expenses as new information becomes available. For example, the
State Bar should closely monitor the results of its enhanced collection enforcement authority and
the benefits it may have on the recovery of disciplinary costs and Client Security Fund payments.
Response
We agree. The State Bar will continue its efforts to minimize fee increases through the prudent
and efficient management of its resources. While the State Bar is proposing a fee increase for
2006, this is the first proposed increase in almost six years. Additionally, the State Bar will monitor
the results of its enhanced collection enforcement authority and the benefits it may have on the
collections of disciplinary costs.
2288 California State Auditor Report 2005-030 California State Auditor Report 2005-030 2299
cc: Members of the Legislature
Office of the Lieutenant Governor
Milton Marks Commission on California State
Government Organization and Economy
Department of Finance
Attorney General
State Controller
State Treasurer
Legislative Analyst
Senate Office of Research
California Research Bureau
Capitol Press
2288 California State Auditor Report 2005-030 California State Auditor Report 2005-030 2299