According to a new audit released this week by California State Auditor Grant Park, the State Bar of California must act to protect the integrity of its attorney investigations and slow a spending deficit that could cripple its operations.

The State Bar’s Office of the Chief Trial Counsel is responsible for investigating and prosecuting complaints against attorneys. However, if a conflict of interest related to a complaint could raise concerns about the Office of the Chief Trial Counsel’s impartiality, the chief trial counsel must refer that complaint to a special deputy trial counsel administrator (administrator) – an independent contractor who has all the powers and duties of the chief trial counsel.

A team of about 20 special deputy trial counsels (external investigators), who are also independent contractors, support the administrator in investigating and prosecuting external disciplinary cases.

Although the State Bar tracks centralized data related to such cases through its case management system, the audit found multiple errors and omissions in these data, impeding its ability to effectively monitor external investigations. The audit also found that external investigators did not consistently conclude their investigations within six months.

Finally, the State Bar has not formalized its process to ensure that its external investigators are free from conflicts of interest.

With regard to budgetary issues, the Auditor said that in recent years, the State Bar has often spent more from its general fund than it has received in revenue.

The State Bar deposits the majority of its mandatory licensing fee revenue into its general fund, and it then uses this fund to pay for its administrative offices and nine of its 11 public protection programs. The State Bar’s personnel costs have recently increased and will continue to increase in the coming years.

Further, none of the State Bar’s administrative offices are fully meeting their performance measures, likely in part because some have high staff vacancy rates.

The State Bar operates 16 major programs. These programs address different aspects of its mission, such as investigating and prosecuting attorneys for rules violations, administering the California bar exam, and promoting diversity and inclusion in the legal system. In addition to its 16 major programs, the State Bar also has 10 administrative offices that provide support to all State Bar activities.

Although the State Bar will need a mandatory fee increase in 2024, it can minimize this increase and other future increases by raising other fees it charges for providing certain services to fully cover the associated costs and updating other out-of-date fees.

The State Bar is considering whether some programs serve a public protection function that supersedes the need for them to be self-sufficient, meaning that it may decide not to raise all of these fees. In particular, according to the chief financial officer (CFO), the State Bar believes that increasing fees for its Mandatory Fee Arbitration program and Lawyer Referral Service program (both service fees) could result in the public using these programs less.

State Bar staff recommended changes to the LLPs program’s fees that would generate from $500,000 to more than $700,000 annually and changes to the Law Corporations program’s fees that would generate more than $300,000 annually in addition to the current fee revenues generated by the programs. The State Bar is in the process of soliciting feedback from impacted parties on the appropriate fee level for LLPs.

The State Bar owns two buildings – one in San Francisco and the other in Los Angeles. Based on recent estimates, the State Bar occupies about 60 percent of its San Francisco space and about 80 percent of its Los Angeles space. It leases out the remaining space in both buildings.

The State Bar is in the process of trying to sell its San Francisco building. If it is able to do so, it could realize significant savings, particularly given that the ownership costs for the building have increased in recent years.

In 2021 the State Bar spent nearly $5.7 million on both capital improvements and building operations for its San Francisco building, and estimates its 2022 costs were nearly $5.6 million. The State Bar projects that it could save an average of more than $4 million annually in building operating expenses alone if it sells the building.

The State Bar intends to present all of its recommended fee increases to its board in May 2023. If it is able to raise these fees, it could make improvements to these programs and to other disciplinary or regulatory programs without needing to spend mandatory licensing fee revenue to do so.

The State Bar agreed with all of the Auditor’s recommendations, but included what it referred to as additional contextual information in its response. The State Bar also indicated its willingness to work with the Legislature to implement all of the recommendations.