Report 2022-031 All Recommendation Responses

Report 2022-031: The State Bar of California: It Will Need a Mandatory Licensing Fee Increase in 2024 to Support Its Operations (Release Date: April 2023)

Recommendation for Legislative Action

The 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. This 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. The 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.

-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. The list should specify the State Bar's understanding of the amount of funding needed per program.

Recommendation for Legislative Action

The 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.

Recommendation for Legislative Action

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.

Recommendation #4 To: Bar of California, State

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 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. 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.

6-Month Agency Response

After a fee assessment in March 2023 for all Admissions and General Fund service fees, the Board of Trustees approved the State Bar's final proposal for General Fund service fee increases in its May 2023 meeting (see the sixty-day update regarding agenda item 709). The Board approved the fee increases for different programs and directed staff to implement them as soon as practicable.

In August 2023, the State Bar completed its analysis of service fees and their expected effect on mandatory licensing fee revenue. The State Bar sent an update to the Legislature (please see the document "August 2023 State Bar Financial update"). The proposed mandatory licensing fee increase is needed to ensure the public's access to the State Bar's services.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

Although the State Bar completed an analysis of most of its service fees and their expected effect on mandatory licensing fee revenue, it indicated that for two of its fee-for-service programs, the Lawyer Referral Service and Mandatory Fee Arbitration Program, it was not considering raising the fees because both programs are currently undergoing operational review by the State Bar which could impact the fees for each program. We will continue to assess this recommendation as partially implemented until the State Bar completes its operational review and determines whether the fees for each program need to be adjusted.

60-Day Agency Response

The State Bar began a fee assessment in March 2022 for all Admissions and General Fund (GF) service fees. At the May 2023 Board of Trustees meeting, the final proposal for GF service fee increases was presented as agenda item 709. The Board approved the fee increases for different programs and directed staff to implement them as soon as practicable. Please refer to attachment B of the board agenda item 709 containing the State Bar's "General Fund Fee Adjustments."

The fee increases adopted in May 2023 did not include fees for the Lawyer Referral Services and the Mandatory Fee Arbitration. Staff believes it is appropriate to postpone consideration of fee adjustments for these programs as the programs are undergoing operational review and improvement that will meaningfully impact the fee-for-service assessment.

The next step is for the staff to conduct an analysis to determine the effect that the increased service fees will have on the amount of mandatory licensing fee revenue that it needs. It will be completed by October 2023.

California State Auditor's Assessment of 60-Day Status: Pending

In its update to this recommendation, the State Bar indicated that it postponed making a decision on fee adjustments for the Lawyer Referral Services or the Mandatory Fee Arbitration Programs because these programs are undergoing operational review. We have assessed this recommendation as pending until the State Bar completes its review and makes its determination about the appropriate fee level for these programs. After it does so, the State Bar still needs to identify the effect that any increase in service fees will have on the amount of the mandatory licensing fee revenue it needs.

Recommendation #5 To: Bar of California, State

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.

6-Month Agency Response

The State Bar remains on track to fully implement this recommendation by March 2024.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The State Bar plans to post on its public website forecasts for its General Fund starting with the 2024 budget. The State Bar will submit the 2024 budget in February 2024.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #6 To: Bar of California, State

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.

6-Month Agency Response

The State Bar finished auditing for Odyssey data, including 186 conflict cases. The audit covered cases closed in the first half of 2022 and, pending cases. In total, 353 cases were examined, including pending cases and those closed between January 1, 2022, and June 30, 2023. Staff verified opening and closing dates for each case with the corresponding complaint and closing documents. Additionally, they verified that each case had a date entry indicating its assignment to SDTC.

Of all cases reviewed, 188 (or 53%) required no corrections. The most common errors were inaccurate case opening dates 126 cases, (36% of the total) had opening dates that were off by 1-3 days. Closing dates were corrected for 17 case (5% of the audited sample). Staff were unable to confirm closing dates for four cases due to missing closing documents. Dates indicating assignment to SDTC were corrected for three cases. Another 31 cases (or 9%) required corrections unrelated to opening, closing or assigned dates. For example, some cases had multiple corrections. Please see the document "Rule 2201 full audit case log with notes for corrections made."

California State Auditor's Assessment of 6-Month Status: Fully Implemented

60-Day Agency Response

The State Bar is auditing Odyssey data for the 168 conflict cases closed between July 1, 2022, and April 30, 2023. This initial phase of the data audit project will be completed by the end of July 2023, and any necessary changes will be made in Odyssey. The next step is to audit the data for pending cases and cases closed between January 1, 2022, and June 30, 2023 (135 cases). The State Bar plans to complete this second phase of data validation by September 2023. Once validated, the data from January 2022 onwards will be used to create and publish the 2201 program quarterly dashboards.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #7 To: Bar of California, State

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.

6-Month Agency Response

The status of this recommendation has been updated to "not fully implemented" following communication between the State Bar, the independent SDTC administrator, and the State Auditor's office. The current Rule 2201 conflict of interest policy is under evaluation by the State Bar to ensure its thoughtfulness and consistency with other conflict of interest policies within the State Bar. The 2201 program's conflict checks will be formalized in a State Bar policy directive by December 2023.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

In April 2023, the Administrator issued an updated policy directive regarding conflict check procedures for the Administrator and individual Special Deputy Trial Counsels (SDTCs). The new directive closely mirrors the definitions of conflicts and the procedures for documenting conflict checks set by the Office of Chief Trial Counsel (OCTC) with some additional adjustments tailored for SDTCs who work in firm settings.

Consistent with OCTC policies and practices, conflict checks are conducted at multiple stages of a case, including at the time of assignment, before filing charges or reaching a settlement, and before closing. For the Administrator and SDTCs who use Odyssey, the conflict check is documented using the "SDTC Conflict Check" event in the system. However, for SDTCs working on files outside the Odyssey system, they complete a certification form that contains the same screening prompts as the event in the Odyssey system. The form is then returned to the Administrator and uploaded to the system to document the conflict check.

California State Auditor's Assessment of 60-Day Status: Partially Implemented

Although the Administrator issued an updated policy directive, the State Bar has not yet formalized this policy directive. Until it does so, we will assess the status of this recommendation as not fully implemented.

Recommendation #8 To: Bar of California, State

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.

6-Month Agency Response

The State Bar completed its analysis of billing data for special deputy trial counsel (SDTC) contractors. The mixed-method analysis involved triangulating case, invoice, and contract data to examine data quality across the three sources; calculating average time and cost for closed cases; assessing the reasonableness of costs for a subset of invoices by analyzing line items; and comparing SDTC time on cases to prior analyses of Office of Chief Trial Counsel time spent on closed cases.

Staff analyzed 244 cases with matched SDTC invoices for the period February 2020 through June 2023 Results of the analysis, as well as recommendations for improvement, will be shared with the SDTC administrator to continuously monitor improve the cost- and time-effectiveness of the SDTC program. Please reference the document "SDTC Time and Cost Analysis State Audit Memo" for additional detail.

California State Auditor's Assessment of 6-Month Status: Fully Implemented

60-Day Agency Response

The State Bar is in the process of organizing and analyzing the billing data for Special Deputy Trial Counsel (SDTC) services over the past few years. The initial focus is to gather and organize invoices and payments related to SDTCs and then- aggregate the payment amounts by individual STDCs. This aggregate payment data will then be compared with the caseload assigned to each STDC, allowing for an analysis of the time and associated costs processing each case. The data regarding costs and time per case as handled by STDCs will be compared to corresponding figures for the Office of Chief Trial Counsel. This comparison, along with other pertinent data on workload and costs, will allow for an assessment of the reasonableness of SDTC costs. The project is expected to take a few months, with preliminary results expected by the end of September.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2022-031

Agency responses received are posted verbatim.