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Business Law Blog

Coming to the End of Fiscal Year 2022

September 27, 2022 By Bryn Peterson

First and foremost, I would like to publicly recognize WSBA Advancement Department Director Kevin Plachy for serving as the interim Executive Leadership Team liaison to the Budget and Audit Committee for most of this fiscal year. Director Plachy not only kept the WSBA’s fiscal ship afloat, but he has helped us make the ship more seaworthy. He has been a pleasure to work with and made my job easier. I would also be remiss if I did not thank former Budget and Finance Manager Liz Wick and Interim Director of Finance Maggie Yu for all the great work they did to support Director Plachy and the Budget and Audit Committee. It is also important to mention that the WSBA just hired a new director of finance, Tiffany Lynch, and we are very excited to have her join the WSBA—again! Lynch is a licensed Certified Public Accountant and previously worked for the WSBA as controller and associate director of finance. Before returning to the WSBA, Lynch served in an executive leadership role at a nonprofit as chief finance and operations officer, overseeing finance, human resources, information technology, and facilities.

As we come to the end of FY 2022 it is important to look back at the challenges and accomplishments over the course of the fiscal year. Over this last year we held our first ever full-day Budget and Audit Committee retreat to ensure that everyone on the Budget and Audit Committee understood the basics of WSBA finances and budgeting. In addition, a fiscal policy subcommittee recommended substantial revisions to the WSBA Fiscal Policies; these recommended revisions have been forwarded to the WSBA Board of Governors for its review and approval. The investment subcommittee has made progress to determine ways to invest WSBA reserve funds in a safe and prudent manner, while also earning a reasonable return. We continue to try to sublease some of the WSBA’s downtown office space, but the supply and demand make this a challenging endeavor. If you know anyone who would like office space in downtown Seattle, please tell us!

One of the things that I have been most proud of this last year is that members of the Budget and Audit Committee have done an excellent job of expressing their views and opinions in a respectful manner. I have encouraged diverse and differing opinions, while asking that we disagree with each other in a respectful manner.
This is in line with the Budget and Audit Committee’s motto of “Do good and have fun.” All the Budget and Audit Committee members have contributed something of significance to the betterment of the whole and I would like to thank them for their hard work over this last year: Governor Francis Adewale, President-Elect Dan Clark, Governor Matthew Dresden, Governor Carla Higginson, Governor Alec Stephens, Governor Brett Purtzer, and Governor Tom McBride.

Through June 2021 (the latest final financial figures available at the time of this column’s publication), the WSBA is operating favorable to budget. In the original FY 22 budget we anticipated an approximate $89,000 loss to the general fund, which would have come out of the reserves. The latest forecast indicates that the WSBA should end FY 22 in September with a net gain of approximately $400,000. If so, the WSBA will start the new fiscal year with an estimated $7.4 million in total reserves, which includes $1.05 million in our facilities reserve fund, and $1.5 million in a restricted operating reserve fund. Overall, we have performed better than projected this fiscal year, because of increased revenues and cost savings from remote meetings and events, which have continued under COVID-19 restrictions.

The Budget and Audit Committee is in the process of reviewing the FY 23 budget. The committee had two meetings in July, and the FY 23 budget was also submitted to the WSBA Board of Governors for its review and comment at the July Board of Governors meeting. The Board of Governors gave the Budget and Audit Committee several comments and recommendations which the committee is taking into account. The Budget and Audit Committee will have another meeting in August where we will continue to work with WSBA staff to finalize the FY 23 budget and send it to the Board of Governors for its final review and approval.

Another piece of good news is that license fees for all license types will not increase for the 2023 license year. Additionally, the Budget and Audit Committee recommended that license fees for WSBA members remain the same for the 2024 licensing year and that we lower the Client Protection Fund’s fees by $5 for the 2024 license year. The recommendation for 2024 license fees still must be reviewed and approved by the Board of Governors and the Washington Supreme Court. If this recommendation is approved, the net result will be that WSBA members will pay $5 less in the 2024 license year. As an attorney who pays for my own WSBA license fee every year, this makes me happy and hopefully it makes some of you happy as well.

This is my last Treasurer’s Report, as I pass the torch to newly elected Treasurer Francis Adewale (District 5 governor). I have no doubt that Treasurer Adewale will do a great job in this role.

If you would like more information about the meeting times and materials for the WSBA Budget and Audit Committee, please go to our website at: www.wsba.org/connect-serve/committees-board-other-groups/budget-audit.

In addition, you can find our annual report and the monthly financial information for the WSBA at: www.wsba.org/connect-serve/committees-boards-other-groups/budget-audit.

Budget Season: Looking Forward to Summer and Fiscal Year 2023

July 14, 2022 By Bryn Peterson

With summer upon us and while we are all enjoying the best weather of the year, it is time for the Budget and Audit Committee to get to work and prepare the 2023 fiscal year (FY 23) budget for the full Board of Governors to review and approve. The budget for FY 23 starts with the WSBA staff doing the heavy lift and preparing it for review by the Budget and Audit Committee. The Budget and Audit Committee will use its July and August meetings to review and comment on the FY 23 budget. Once the Budget and Audit Committee and WSBA staff have finalized the FY 23 budget, the Board of Governors will first consider said budget in late summer and will approve the final version of the FY 23 budget at the September Board of Governors meeting.

This time of year is always very busy for the Budget and Audit Committee and gives us the opportunity and pleasure to work with WSBA staff to prepare the FY 23 budget for the Board of Governors’ review and approval. While this process is very interesting, it is also challenging, because the WSBA, much like a retired person, is on a fixed budget and the consumer price index (CPI) continues to increase along with the cost of doing business. The need to meet the mission of the WSBA is balanced with the challenge of keeping member license fees flat. The WSBA mission states:

“The mission of the Washington State Bar Association is to serve the public and the members of the Bar, to ensure the integrity of the legal profession, and to champion justice.”

So how do we take our limited and fixed income and serve the public, the members, ensure the integrity of the legal profession, champion justice, deal with an increased CPI and the cost to do business, while keeping the members’ license fees flat? For the last few years, we have been able to pull off this daunting feat and I believe that we can pull it off again this year.

I am also happy to report that we have made amazing progress on revising and updating all of our fiscal policies through the diligent effort of Governor Francis Adewale and Advancement Department Director Kevin Plachy. This is a thankless and a time-consuming project and Governor Adewale and Director Plachy have done a tremendous job. It has been a while since the WSBA has comprehensively revised its fiscal policies and we are overdue to have this revision completed. It is very important to keep our fiscal policies up to date. This current iteration was done with an eye toward making our policies more workable for volunteers who contribute their valuable time to the furtherance of the WSBA mission.

We have closed the books through April—more than halfway through the fiscal year, which runs October through September—with a net increase to the unrestricted General Fund of $1,700,586. Our original FY 22 budget called for $89,563 in reserve spending by year’s end, which means we are actually at a $1,790,149 YTD positive variance from that projection. We will have several expenses in the remaining months, which we anticipate will lower the overall ending fund balance for FY 22, but we will continue to monitor this and update you accordingly.

I hope that you are all able to enjoy the wonderful weather here in the Pacific Northwest as we enter into the summer season! It has been and continues to be a pleasure to be your treasurer for this fiscal year. Please contact me if you have any questions or concerns regarding the WSBA budget.

If you would like more information about the meeting times and materials for the WSBA Budget and Audit Committee, please visit http://www.wsba.org/connect-serve/committees-boards-other-groups/budget-audit. In addition, you can find our annual report and the monthly financial information for the WSBA at www.wsba.org/connect-serve/committees-boards-other-groups/budget-audit.

A Positive Reforecast and Looking Ahead

June 21, 2022 By Bryn Peterson

First, I hope that everyone is starting to enjoy life in a way that somewhat resembles what our lives used to be. My family just took a short trip to Portland, and it was wonderful to stay at a hotel without having to wear a mask. Hopefully, you and your families are also enjoying similar experiences.

It’s a busy time of year, at least in terms of WSBA budgeting. We have just wrapped up our reforecast for the current fiscal year while launching into planning for the next. I have good news to report on both efforts.

CURRENT AND FUTURE BUDGETS

The “reforecast” is what we do mid-fiscal year to compare budgeted revenues and expenditures in each cost center with actual revenues and expenditures for the fiscal year. The reforecast shows us how accurate we were as to our original budgeting, while also accounting for expenses and revenues that were not expected at the time the annual budget was finished for FY 2022.

The reforecast shows a positive variance of $324,716. At a high level, this positive variance is due to the fact that we are forecasting that our revenue at the end of the year will be $94,623 more than originally budgeted and our expenses will be $230,093 less than originally budgeted. This reforecast includes a project that is forecasted to cost $75,000, to reduce, consolidate, and remodel existing WSBA office space to accommodate the significantly reduced number of staff who continue to work in the office. It also includes an estimated $3,300 expense to list for sublease part of the WSBA office space that is no longer needed in light of the number of staff who will continue to work remotely either full or part time. Given the fact that our annual budget is almost $25 million, a positive variance of $324,716 shows that our original budget was very accurate, at least to the midpoint of our fiscal year.

The positive variance in the General Fund is the result of purposeful and vigilant shifts in expenditures as we have navigated many unknowns during the pandemic. This positive variance should be credited to the Board of Governors and WSBA staff working hard together to be fiscally responsible for our members.

Of course, budgeting never stops! Just as we completed the reforecast, we launched into the heavy work of building the WSBA’s FY 2023 budget. The Board has already set steady license fees (no increases) for all license types, and we are in good financial stead to maintain and carefully grow operations while keeping reserve funds in a prudent range. Looking ahead, however, one of the Budget and Audit Committee’s challenges will be to prioritize and fund long-range goals and robust member services/benefits, all while trying to keep attorney member license fees from increasing.

NUTS & BOLTS: FINANCES AS OF MARCH 1

We have closed the books through February (five months into the fiscal year) with a net increase to the unrestricted General Fund of $1,383,823. This positive variance is primarily driven by higher-than-anticipated license fees, Pro Hac Vice application fees, and MCLE fees. Part of this positive variance is also due to the timing of those payments, which cannot be expected to continue through the end of this fiscal year. It should be noted that revenues are currently well ahead of expenditures for the fiscal year. This is consistent with the WSBA’s typical budget cycle. We are always revenue-heavy the first half (license season) and expense-heavy the second half (when many service contracts and expenses come due) of each fiscal year. That is an expected pattern; we expect to see expenses outpace revenue in the final months of the fiscal year. At this time, we forecast a positive variance of $250,000 by the end of this fiscal year.

If you would like more information about the meeting times and materials for the WSBA Budget and Audit Committee, please visit www.wsba.org/connect-serve/committees-boards-other-groups/budget-audit. In addition, you can find the WSBA’s annual report and the monthly financial information at www.wsba.org/connect-serve/committees-boards-other-groups/budget-audit.

Overall, I am proud of what we have accomplished, and what we are projected to accomplish, this fiscal year. As I write this, we are expecting to finish the year with revenues and expenses close to neutral, all while navigating a pandemic, still finding ways to expand member services, and without any increase in lawyer license fees. It’s my hope that as the year progresses we will do better than expected and beat our reforecast in terms of reserve spending. My goal is for the WSBA to have another year of net increases to the unrestricted General Fund. I would like to thank the Budget and Audit Committee members, WSBA staff, and various stakeholders for their hard work and input.

Looking Back at Fiscal Year ’21

January 2, 2022 By Bryn Peterson

It feels good to now have the final numbers for FY 21 and to be able to start looking forward to FY 22. Before moving forward to discuss FY 22, let’s look back at FY 21.

For FY 21, WSBA revenue was $23,691,045 and FY 21 WSBA expenses were $22,106,482. The ending fund balances for FY 21 (Oct. 1, 2020 through Sept. 30, 2021) are as follows:

• General Fund. For FY 21, the WSBA General Fund balance ended at $7,076,440, or $1,548,206 over the FY 20 ending balance of $5,528,234.
• Client Protection Fund. For FY 21, the Client Protection Fund balance ended at $4,046,283, or $146,847 below the FY 20 ending balance of $4,193,130.
• CLE Fund. For FY 21, the CLE Fund balance ended at $635,784, or $166,500 above the FY 20 ending balance of $469,241.
• Section Fund. For FY 21, the Section Fund balance ended at $1,406,760, or $196,551 above the FY 20 ending balance of $1,210,209.

LOOKING FORWARD TO FY 22
In October we had our first Budget and Audit Committee meeting to look forward to the FY 23 budget process. Our Budget and Audit Committee meeting started with a discussion of what went well as to the FY 22 budget and what can potentially be done better as to the FY 23 budget. This is my third year on the Budget and Audit Committee, and I can assure you that we are always looking for ways to improve the WSBA budget process. The Budget and Audit Committee is committed to continuous improvement for the benefit of WSBA members.

In the spirit of continuous improvement, we had several governors volunteer their time on several exciting Budget and Audit Committee projects. I would like to thank Governor Francis Adewale for volunteering his time to work with WSBA CFO Jorge Perez to review and revise the WSBA fiscal policies. While our WSBA fiscal policies are currently in a good place, this project will further improve them for the benefit of the WSBA and its members.

I would also like to thank Governor Alec Stephens for volunteering his time to work with CFO Perez to look for ways to improve the budget process for FY 23. During the latter part of each year, the budgeting process becomes very time intensive for CFO Perez, his team, and the Budget and Audit Committee. While this is generally the way it works for organizations and businesses, it is great to be looking at this process with an eye for improvement. Governor Stephens and CFO Perez will review the budgeting process to determine if there is a way to tackle some of the budgeting processes earlier in the year to hopefully decrease the workload on CFO Perez, his team, and the Budget and Audit Committee later in the year.

Last but not least, I would like to thank Governor Dan Clark and Governor Brett Purtzer for volunteering their time to work with CFO Perez to examine our current investment strategy and determine if there is a better way to invest our cash reserve. Governors Clark and Purtzer will also monitor and keep the Budget and Audit Committee updated on the efforts to sublease part of the WSBA office space in an effort to decrease our per-month lease rent amount. These two projects are very exciting to me because they give us the opportunity to grow our investments and cut our expenses, which would be a win for WSBA members and the organization! The Budget and Audit Committee is already a huge time commitment for all of its members, so I am especially grateful to these governors for their willingness to spend even more of their time on these very important tasks.

In closing, please know that we continue to rigorously analyze how to operate as efficiently as possible while maintaining essential member supports and services, and also to look at all areas of the budget to increase revenue opportunities and improve overall efficient use of our license fee revenue and other revenue for the WSBA. It continues to be an honor to serve as WSBA treasurer. Please let me know if you have any comments or questions. Member feedback is always important to me and the Budget and Audit Committee.

The Year Ahead: Stability Even in a Time of Challenge

November 19, 2021 By Bryn Peterson

As we leave the 2021 WSBA fiscal year behind us and look forward to the 2022 fiscal year (FY 22), I want to honor the hard work and dedication of the 2020-21 Budget and Audit Committee members: Governors Brett Purtzer, Tom McBride, Carla Higginson, Matthew Dresden, Lauren Boyd, and P.J. Grabicki. I would also like to give special thanks to past Treasurer Dan Clark, who has done a remarkable job over the past two years and has been very generous with his time over the last year to prepare me for this role as WSBA treasurer. It is also very important to honor the hard work and dedication of CFO Jorge Perez, Executive Director Terra Nevitt, and everyone who works at the WSBA. Over the last two years, the WSBA reserves have grown approximately $3.6 million, even in the face of the pandemic. It really does take everyone at the WSBA to achieve such an amazing result.

I would also like to thank all the governors willing to serve on the Budget and Audit Committee for FY 22. The Budget and Audit Committee is a huge time commitment and a challenge, but also very satisfying. During FY 22, we expect to face many challenges due to the uncertainty of the post-COVID-19 world. What will the coming year look like for the WSBA and how will it affect the financial future of our organization? How many of the WSBA’s staff will continue to work remotely, or at the office full-time, or in some combination of the two? Will the WSBA be able to sublet some of its office space to defray the cost of rent through the remainder of the current lease (which expires in 2026)? This and many other questions will be answered this year, and the answers to these questions will help to determine the financial future of the WSBA. Through out the year, we will work together to meet these challenges in a way that produces the best result for you, the WSBA members.

A LOOK FORWARD: COMPLETION OF THE 2022 BUDGET

The Board of Governors passed the final version of the FY 22 budget at its September meeting. Here is a quick snapshot: The general fund portion of the FY 22 WSBA budget (see chart on the next page) calls for $21,526,859 in expenditures and $21,437,297 in revenue. While this means there is an anticipated deficit of $89,562, we are confident that we have budgeted conservatively—especially considering the uncertainty created by the pandemic. The WSBA will closely monitor revenue and expenditures over the year and work hard to cap any deficit at the budgeted number or reduce it. It should be noted that over the last two fiscal years, the WSBA budgets have projected deficits but the actuals at year-end put it in the black.

2022 LICENSE FEES, KELLER DEDUCTION, AND PER-MEMBER SECTION CHARGE

The WSBA Board of Governors voted to keep member license fees flat for FY 22. Lawyer license fees have remained flat for the last four years, even though WSBA expenses have increased each and every year. If you think of the WSBA like a retired person on a fixed income, with expenses continuing to increase each and every year, it is truly remarkable that we have been able to keep license fees flat for the last four years. Once again, an amazing accomplishment that must be credited to the hard work of everyone at the WSBA. This does not happen by accident!

The WSBA Board of Governors set the 2022 Keller deduction1 at $9.02 for active lawyers, as compared to $3.85 for 2021 and $1.55 for 2020. Upon the recommendation of WSBA staff, the Board also voted to set the per-member section reimbursement charge2 at $18.75, as compared to $18.23 for 2021. The ability to set this per-mem ber section reimbursement charge at the $18.75 amount is in large part due to WSBA Advancement Department Director Kevin Plachy and his team’s hard work to reduce costs and make changes to increase the efficiency within this department.

In closing, it is very important to me that we continue to put members front and center, which means demonstrating value and responsibility in all that we do at the WSBA. I look forward to being your treasurer this next year and facing the many challenges that FY 22 will present.

Treasurer’s Report NOTES

1. In Keller v. State Bar of California, 496 U.S. 1 (1990), the Court ruled that a bar association may not use mandatory member fees to support political or ideological activities that are not reasonably related to the regulation of the legal profession or improving the quality of legal services.

2. This charge is the amount that sections reimburse the WSBA for the cost of supporting sections.

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