Bar receives long-awaited audit

by NANCY McCARTHY
Staff Writer

The State Bar has not taken advantage of opportunities to reduce dues but there is no evidence of bloated bureaucracy or wasteful management, according to the state auditor.

"Members of the State Bar may be paying higher fees than they should, and they may be paying for services from which they receive no benefit," auditor Kurt R. Sjoberg concluded.

While criticizing certain lapses in administrative oversight, the auditor also credits the bar with downsizing and achieving efficiencies, particularly in its discipline system.

"No fair reading of this report can support abolishing the bar," said President Jim Towery.

But Sen. Quentin Kopp, whose legislation required the review of the bar's books and who is leading the campaign to abolish the mandatory bar, called the audit "a damning indictment of the fiscal practices of the State Bar. There's plenty of bloat."

In addition to recommending that the bar find new revenue to reduce members' fees, the audit also concludes that the bar should increase recovery costs from disciplined attorneys and strengthen controls over travel expenses and contracting.

It questions both the bar's method of calculating the so-called "Hudson" deduction and the practice of using dues money to support the 17 voluntary sections.

But bar officials pronounced themselves pleased with the report, saying it offers critics little ammunition because it found no bloated bureaucracy or evidence lawyers would save money if the bar is abolished.

Auditors agreed that the bar needs to maintain offices in both northern and southern California and said recent reforms in the discipline system "have increased the efficiency, effectiveness and reliability of the discipline process."

It also did not criticize the size of the staff or pay levels.

More important than what it found, Towery said, was what the report did not find. It revealed "no bloated bureaucracy . . . no management characterized by fraud and waste," and no evidence attorneys would save any money if the bar were replaced by another agency.

In fact, he said, the auditor found that only $38 of the bar's $478 dues is used for discretionary spending, meaning 92 percent of the bar's expenditures pay for mandatory functions.

Acknowledging that lawyers are "looking for a recipe for reducing dues," vice president John McGuckin said the Board of Governors has promised a $20 dues reduction next year, the first decrease in bar history.

McGuckin said a finding that the bar overpaid per diem expenses was misleading because the audit's conclusion was based on a non-random sample. He said only expenditures of $1,083 in a $3 million budget were questionable.

"This is not the tip of the iceberg," McGuckin said. "This is an iceberg the size of an ice cube." However, he said administrative controls on contracts, travel and meal reimbursements will be tightened.

Auditors also calculated that only 48 percent of bar money is spent on discipline, as opposed to the roughly 70 percent bar officials say is spent on errant attorneys.

Chief Trial Counsel Judy Johnson explained that auditors arrived at that figure by examining total bar income. However, she explained that much of that income is restricted to particular programs, such as admissions. "We account for 70 percent of the general fund," she said, adding that reforms have saved $1.5 million in the past year.

Johnson called many of the report's criticisms of the discipline system "hypertechnical" and "very minor."

Auditors said recovering costs from disciplined attorneys could reduce dues. They recommended more public reprovals, and they criticized the legislatively approved decision to eliminate the appeals panel which reviewed dismissed cases.

But Johnson said the bar's cost recovery rate of 35 percent compares favorably with other regulatory agencies and suggested it is "probably unrealistic to think there's a chance of substantial recovery" from attorneys who, because of their legal problems, are frequently insolvent.

She rejected a suggestion that more public reprovals be imposed because "the level of discipline must be pegged to the misconduct."

The elimination of the Complainants' Grievance Panel -- approved by the legislature and signed by the governor -- followed a recommendation by the Discipline Evaluation Commission, which Johnson said "found no evidence consumers are treated unfairly."

She added that the commission was "in a better position to judge fairness" than the auditor.

In its formal response to the audit, the bar said it agrees with 15 recommendations, will study six others, and rejected seven because of policy disagreements.

"Some of the recommendations may make good business sense," said McGuckin, "but the bar is a complex organization which has a mission and a mandate to protect the public as well as serve our members."