2006-2005 June 30 The Florida Bar Financial Statements

The Florida Bar and Subsidiaries
Financial Statements and

Supplemental Information
June 30, 2006 and 2005
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Table of Contents
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June 30, 2006 and 2005
Independent Auditors' Report 1 - 2
Management's Discussion and Analysis 3-7
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Financial Statements
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Consolidated Statements of Net Assets 8
Consolidated Statements of Revenues, Expenses, and Changes in Net Assets 9
I Consolidated Statements of Cash Flows 10 - 11
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Notes to Consolidated Financial Statements 12 - 24
Supplementary Information
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Consolidating Schedule of Statement of Net Assets as of June 30, 2006 25 - 26
Consolidating Schedule of Statement of Revenues, Expense and Changes
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in Net Assets for the year ended June 30, 2006. 27
Consolidating Schedule of Statement of Cash Flows for the year ended
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June 30, 2006. 28 - 29
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General Fund Schedule of Budgeted and Actual Revenues and Expenses
for the year ended June 30, 2006. 30 - 38
General Fund Reconciliation of Revenues and Expenses on a Budgetary Basis to
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Totals Per the Consolidating Schedule of Statement of Revenues, Expenses
and Changes in Net Assets for the year ended June 30, 2006. 39
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Clients' Security Fund Schedule of Budgeted and Actual Revenues and
Expenses for the year ended June 30, 2006. 40
Certification Fund Schedule of Budgeted and Actual Revenues and Expenses
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for the year ended June 30, 2006. 41
Sections Fund Schedule of Budget and Actual Revenues and Expenses for the
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year ended June 30, 2006. 42 - 43
Other Reports
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I Report on Internal Control Over Financial Reporting and On Compliance and
Other Matters Based on an Audit of Financial Statements Performed in
Accordance with Government Auditing Standards 44 -45
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ARR' RIGGS &INGRAM, LLC
1713 Mahan Drive
Tallahassee, FL 32308
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p I 850 878 8777
F I 850 878 2344
www.cricpa.com
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American Institute of
I Certified Public Accountants
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Alabama Society of
Certified Public Accountants
Florida Institute of
Georgia Society of
Mississippi Society of
AICPA Alliance for CPA Firms
Center for Publ ic
Company Audit Firms
! l ~ CRI
CAR R
RIGGS &
INGRAM
INDEPENDENT AUDITORS' REPORT
Board of Governors
The Florida Bar
Tallahassee, Florida
We have audited the accompanying consolidated statements of net assets of The
Florida Bar and Subsidiaries as of June 30, 2006 and 2005, and the related consolidated
statements of revenues, expenses and changes in net assets, and cash flows for the
years then ended. These consolidated financial statements are the responsibility of The
Florida Bar's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of The Florida Bar and Subsidiaries as
of June 30, 2006 and 2005, and the consolidated results of their operations and their cash
'nows for the years then ended in conformity with accounting principles generally accepted
in the United States of America.
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Board of Governors
The Florida Bar
Page 2
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Our audits were conducted for the purposes of forming an opinion on the consolidated financial
statements taken as a whole. Management's discussion and analysis as listed in the table of
contents, is not a required part of the consolidated 'financial statements but is supplementary
information required by the Government Accounting Standards Board. We have applied certain
limited procedures. which consisted principally of inquiries of management regarding the methods
of measurement and presentation of the supplementary information. However, we did not audit the
information and express no opinion on it.
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Our audits were performed for the purpose of forming an opinion on the basic consolidated
financial statements of the Florida Bar and Subsidiaries taken as a whole. The supplementary
information as listed in the table of contents, is presented for the purposes of additional analysis
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and is not a required part of the basic consolidated financial statements. Such information has
been subjected to the auditing procedures applied in the audit of the basic consolidated financial
statements and. in our opinion. is fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.
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August 18, 2006
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I Management's Discussion and Analysis
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Management's Discussion and Analysis
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The Florida Bar is the statewide professional and regulatory organization for lawyers with more
than 79,000 members. Headquartered in Tallahassee, the Bar is a unified state bar by rule of the
Supreme Court of Florida. Membership in the Florida Bar is a necessary component of Supreme
Court of Florida regulation of all lawyers licensed to practice law in Florida (Article IV, Section 15,
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Florida Constitution). The foundation for the organization is built on a philosophy of equity and
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ethics. Through its programs and services, the Bar supports this philosophy with four pillars that
function as the mission of The Florida Bar: providing public service, protecting rights, promoting
professionalism and pursuing justice.
Overview of the Financial Statements
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I This annual report consists of three parts - management's discussion and analysis, the basic
consolidated financial statements, and an optional section that presents supplementary
information. The supplementary information includes consolidating statements and comparisons of
actual results to budgeted results. The basic consolidated financial statements present the
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consolidated financial position, results of operations, and cash flows of the Florida Bar and its
subsidiaries. The Florida Bar performs one overall activity as the statewide professional
association of lawyers. Its activity is accounted for as a proprietary type enterprise fund because it
charges fees to provide its services similar to a business enterprise.
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The Statement of Net Assets includes all of The Florida Bar's assets and liabilities. The net assets
are the difference between The Florida Bar's assets and liabilities. The Statement of Revenues,
Expenses, and Changes in Net Assets include all of The Florida Bar's revenues and expenses
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regardless of when the cash is received or paid. The change in net assets is one way- to measure
The Florida Bar's financial health or position. A Statement of Cash Flows provides additional
information regarding the change in The Florida Bar's cash position.
I Summary of Operations
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At June 30, 2006 and 2005, The Florida Bar had $52,906,350 and $45, 133,643, respectively in
total assets. Of this amount $46,034,465 and $38,038,574 was held in cash and investments and
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$5,904,229 and $6,220,716 was invested in capital assets at June 30, 2006 and 2005,
respectively. The primary liability at June 30, 2006 and 2005 was deferred revenue of $9,659,687
and $7,605,414, respectively, resulting 'from advance collection of member fees and prepayments
for Continuing Legal Education registrations. Our net assets were $36,311,836 and $31,112,407
at June 30, 2006 and 2005, respectively.
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These amounts are in line with the prior year's balances given the current changes in net assets.
The original operating budgets for the General Fund for the years ended June 30, 2006 and 2005,
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approved by the Florida Supreme Court, planned on an increase in net assets of $482,000 and
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$454,000, respectively. After Board of Governor amendments, the planned increase became
$726,000 and $105,000, respectively. General Fund actual operations resulted in an increase in
net assets of $2,616,000 and $2,967,000, respectively. This improved performance resulted
primarily from better than planned investment returns, midyear implementation of the multi
jurisdictional practice rule in 2006, and efficiencies in operations of the various departments of The
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Florida Bar. Included in the supplemental information is an actual to budget comparison for each
department.
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For the year ended June 30, 2006 and 2005, The Florida Bar's budget funded most departments at
a continuation level. No significant increased activity was implemented or planned. However,
detailed program reviews of the Lawyer Regulation and Lawyer Advertising Departments continued
during the years.
The final report of the Lawyer Advertising rule has been received and was filed with The Supreme
Court of Florida. No significant financial changes are expected to occur from these requested rule
changes. The review of the Lawyer Regulation Department was completed in late 2005-06. Its
recommendation to centralize all complaint intake in Tallahassee will be implemented during the
2006-07 fiscal year. The other recommendations have been referred to various committees.
These committees are charged with reporting to the Board of Governors ways to implement the
study commission recommendation or provide alternatives.
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF NET ASSETS
Assets
Current assets
Capital assets, net
Total assets
Liabilities
Current liabilities
Other liabilities
Total liabilities
Net assets
Invested in capital assets, net of related debt
Restricted for scholarships
Unrestricted
Total net assets
Total liabilities and net assets
2006
$ 47,002,121
5,904,229
$ 52,906,350
$ 12,556,535
4,037,979
16,594,514
3,854,686
25,248
32,431,902
36,311,836
$ 52,906,350
2005 Change
$ 38,912,927
6,220,716
$ 45, 133,643
$
$
8,089,194
(316,487)
7,772,707
$ 9,943,975
4,077,261
14,021,236
$ 2,612,560
(39,282)
2,573,278
3,999,660
25,792
27,086,955
31,112,407
(144,974)
(544)
5,344,947
5,199,429
$ 45, 133,643 $ 7,772,707
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CONDENSED CONSOLIDATED STATEMENTS OF NET ASSETS
2005 2004 Change
Assets
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Current assets $ 38,912,927 $ 37,266,131 $ 1,646,796
Capital assets, net 6,220,716 6,655,068 (434,352)
Total assets $ 45, 133,643 $ 43,921,199 $ 1,212,444
Liabilities
Current liabilities 9,943,975 $ 12,764,256 (2,820,281)
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$ $
Other liabilities 4,077,261 4,089,167 (11,906)
Total liabilities 14,021,236 16,853,423 (2,832,187)
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Net assets
Invested in capital assets, net of related debt 3,999,660 4,274,760 (275,100)
Restricted for scholarships 25,792 22,542 3,250
Unrestricted 27,086,955 22,770,474 4,316,481
Total net assets 31,112,407 27,067,776 4,044,631
I Total liabilities and net assets $ 45,133,643 $ 43,921,199 $ 1,212,444
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For more detailed information, see the accompanying Consolidated Statements of Net Assets.
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CONDENSED CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES
AND CHANGES IN NET ASSETS
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2006 2005 Change
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Operating revenues $ 36,834,025 $ 35,118,962 $ 1,715,063
Operating expenses (33,968,523) (32,417,175) (1 ,551,348)
Net operating revenues 2,865,502 2,701,787 163,715
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Non-operating revenues 2,505,173 1,520,124 985,049
Non-operating expenses (171,246) (177,280) 6,034
Net non-operating revenues 2,333,927 1,342,844 991,083
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Increase in net assets 5,199,429 4,044,631 1,154,798
Net assets, beginning 31,112,407 27,067,776 4,044,631
Net assets, ending $ 36,311,836 $ 31,112,407 $ 5,199,429
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CONDENSED CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES
AND CHANGES IN NET ASSETS
2005 2004 Change
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Operating revenues $ 35,118,962 $ 33,184,744 $ 1,934,218
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Operating expenses (32,417,175) (30,980,283) (1 ,436,892)
Net operating revenues 2,701,787 2,204,461 497,326
Non-operating revenues 1,520,124 2,287,232 (767,108)
Non-operating expenses (177,280) (231,482) 54,202
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Net non-operating revenues 1,342,844 2,055,750 (712,906)
Increase in net assets 4,044,631 4,260,211 (215,580)
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Net assets, beginning 27,067,776 22,807,565 4,260,211
Net assets, ending $ 31,112,407 $ 27,067,776 $ 4,044,631
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For more detailed information, see the accompanying Consolidated Statements of Revenues,
Expenses, and Changes in Net Assets.
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CAPITAL ASSETS
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The Florida Bar had invested the following in Capital Assets:
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June 30, 2006 2005 Change
Land $ 1,103,060 $ 1,103,060 $
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Building and improvements 7,902,973 7,877,915 25,058
Lanscaping and parking 120,318 120,318
Equipment and furnishings 4,456,519 4,651,072 (194,553)
Total, prior to depreciation 13,582,870 13,752,365 (169,495)
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Accumulated depreciation (7,678,641 ) (7,531,649) (146,992)
Net capital assets $ 5,904,229 $ 6,220,716 $ (316,487)
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June 30, 2005 2004 Change
Land $ 1,103,060 $ 1,103,060 $
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Building and improvements 7,877,915 7,873,249 4,666
Lanscaping and parking 120,318 120,318
Equipment and furnishings 4,651,072 4,398,353 252,719
Total, prior to depreciation 13,752,365 13,494,980 257,385
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Accumulated depreciation (7,531 ,649) (6,839,912) (691,737)
Net capital assets $ 6,220,716 $ 6,655,068 $ (434,352)
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Presently The Florida Bar has no plans to significantly alter its investment in capital assets.
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DEBT
At June 30, 2006 and 2005, The Florida Bar had $2,049,543 and $2,221,056, respectively
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outstanding in a mortgage loan. The mortgage loan is scheduled to balloon on October 15,
2009. Management is evaluating its options for when the mortgage loan balloons.
Management will decide to either pay the loan or refinance the balloon.
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Future Financial Plan
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The Florida Bar was created by the Supreme Court of Florida to assist it in regulating the
practice of law in Florida. It is primarily funded through lawyer payments of their required
annual fee, sale of continuing education programs to lawyers and other revenue from its
business partners and affiliates. There is no plan to materially change these revenue streams
for the next two years. Accordingly, there are no present plans to materially increase the scope
or nature of the services provided to the citizens of Florida and the lawyers authorized to serve
them.
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Financial Statements
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Consolidated Statements of Net Assets
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June 30,
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Assets
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Current assets
Cash and cash equivalents
Short-term investments
Accounts receivable, net
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Prepaid expenses and other assets
Total current assets
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Capital assets, net
Land
Buildings and improvements
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Landscaping and parking
Equipment and 'furnishings
Accumulated depreciation
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Total capital assets, net
Total assets
I Liabilities and Net Assets
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Current liabilities
Current portion of long-term debt
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Accounts payable
Claims payable
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Accrued expenses
Deferred revenues
Security deposits
Total current liabilities
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Non-current liabilities
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Long-term debt, less current portion
Compensated absences payable
Total non-current liabilities
Total liabilities
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Net assets
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Unrestricted
Total net assets
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Total liabilities and net assets
2006 2005
$ 13,917,754 $ 12,271,874
32,116,711 25,766,700
405,324 672,405
562,332 201,948
47,002,121 38,912,927
1,103,060 1,103,060
7,902,972 7,877,915
120,318 120,318
4,456,519 4,651,072
(7,678,640) (7,531,649)
5,904,229 6,220,716
$ 52,906,350 $ 45,133,643
$ 184,718 $ 161,760
1,413,949 1,302,959
478,858 139,192
773,537 690,219
9,659,687 7,605,414
45,786 44,431
12,556,535 9,943,975
1,864,825 2,059,296
2,173,154 2,017,965
4,037,979 4,077,261
16,594,514 14,021,236
3,854,686 3,999,660
25,248 25,792
32,431,902 27,086,955
36,311,836 31,112,407
$ 52,906,350 $ 45,133,643
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See accompanying notes to the consolidated financial statements.
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Consolidated Statements of Revenues, Expenses and Changes in Net Assets
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Years ended June 30, 2006 2005
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Operating revenues
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Annual fees $ 20,284,163 $ 19,708,324
Other fees 'from members 5,356,003 4,923,961
Sales of products and services 7,560,103 6,956,958
Advertising 2,223,308 2,069,821
Young lawyers 532,811 503,845
Grants and other 877,637 956,053
Total operating revenues 36,834,025 35,118,962
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I Operating expenses
Regulation of the practice of law 13,318,143 12,947,699
Cost of products and services provided to members 9,338,041 8,755,709
Unauthorized practice of law 1,248,161 1,301,659
Public service programs 1,999,453 1,755,396
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Communications with members and the public 3,550,705 3,290,697
Administration 2,399,971 1,937,906
Legislation 417,473 688,306
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Young lawyers 426,265 457,308
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Depreciation and amortization 667,743 766,365
Other programs and costs 602,568 516,130
Total operating expenses 33,968,523 32,417,175
Operating income 2,865,502 2,701,787
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Non-operating revenues (expenses)
Investment earnings 2,505,173 1,520,124
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Interest expense (164,679) (177,099)
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Loss on disposal of capital assets (6,567) (181)
Total non-operating revenues (expenses) 2,333,927 1,342,844
Change in net assets 5,199,429 4,044,631
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Total net assets, beginning of year 31,112,407 27,067,776
Total net assets, end of year $ 36,311,836 $ 31,112,407
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Consolidated Statements of Cash Flows
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Years ended June 30,
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Cash flows from operating activities:
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Receipts from members, customers and other sources
Payments to employees, suppliers and other vendors
Net cash provided by operating activities
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Cash flows from non-capital and related financing activities:
Reduction of debt
Interest paid
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Net cash (used in) non-capital and related financing activities
Cash flows from capital and related financing activities:
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Acquisition of capital assets
Net cash (used in) capital and related financing activities
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Cash flows from investing activities:
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Net change in repurchase agreement
Redemption of investments
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Purchase of investments, net of decrease in fair value
Investment income
Net cash (used in) provided by investing activities
Increase in cash and cash equivalents:
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Cash and cash equivalents, beginning of year
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Cash and cash equivalents, end of year
2006 2005
$ 39,683,779 $ 32,672,668
(33,499,046) (31,972,454)
6,184,733 700,214
(171,513) (159,252)
(164,679) (177,099)
(336,192) (336,351)
(357,823) (332,194)
(357,823) (332,194)
(52,760) 936,658
11,850,573 12,681,278
(18,147,824) (14,408,587)
2,505,173 1,520,124
(3,844,838) 729,473
1,645,880 761,142
12,271,874 11,510,732
$ 13,917,754 $12,271,874
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Consolidated Statements of Cash Flows (Continued)
Years ended June 30, 2006 2005
I Reconciliation of operating income to net cash provided by
operating activities:
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Operating income $ 2,865,502 $ 2,701,787
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Adjustments to reconcile operating income to net cash
provided by operating activities:
Depreciation and amortization 667,743 766,365
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(Increase) decrease in:
Accounts receivable, net 267,081 (150,765)
Prepaid expenses and other assets (360,384) 55,762
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Increase (decrease) in:
Accounts payable 110,990 (30,914)
Claims payable 339,666 (17,612)
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Accrued expenses
Security deposits
83,318
1,355
(41,424)
2,177
Deferred revenues 2,054,273 (2,741,184)
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Net cash provided by operating activities
Compensated absenses payable
$
155,189
6,184,733
156,022
$ 700,214
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Non-cash investing, capital, and financing acitivities
Change in the fair value of investments $ 310,344 $ 113,680
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Loss on disposal of assets
Supplemental information
Cash paid for interest
$
$
6,567
164,679
$
$
181
177,099
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Notes to Consolidated Financial Statements
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NOTE 1 - NATURE OF BUSINESS
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The Florida Bar and Subsidiaries (The Florida Bar) is the statewide professional organization of
lawyers. It serves as an advocate and intermediary for attorneys, the court and the public. The
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Florida Bar was established as a unified state bar by rule of the Supreme Court of Florida. The
Florida Bar regulates lawyers in Florida, investigates the unauthorized practice of law, offers
continuing legal education, publishes law journals and offers other member services.
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reporting Entity
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The Florida Bar is a uni'fied state bar organized as an arm of the Supreme Court of the State of
Florida. It is considered a governmental entity because it was established by, and has the
potential to be dissolved by, the Supreme Court of Florida. Therefore, The Florida Bar adopted the
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provisions of Statement No. 34 ("Statement No. 34") of the Governmental Accounting Standards
Board IIBasic Financial Statements - and Management's Discussion and Analysis - for State and
Local Governments," as amended by Statement No. 37.
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In evaluating The Florida Bar as a reporting entity, management has considered all potential
component units for which The Florida Bar may be financially accountable and if found to be
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financially accountable, be required to be included in The Florida Bar's financial statements. The
Florida Bar is financially accountable if it appoints a voting majority of an organization's governing
board and (1) it is able to impose its will on an organization or (2) there is a potential for an
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organization to provide specific financial benefit to or impose specific financial burden on The
Florida Bar. Additionally, the primary government is required to. consider other organizations for
which the nature and significance of their relationship with the primary government are such that
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exclusion would cause the reporting entity's financial statements to be misleading or incomplete.
Management's analysis has disclosed no component units that should be included in The Florida
Bar's financial statements.
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Basis of Presentation
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The Florida Bar is accounted for as a proprietary type enterprise fund. Enterprise funds are used
to account for activities that are financed and operated in a manner similar to private business
enterprises: (1) where the costs of providing goods and services to the general public on a
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continuing basis are to be financed through user charges; or (2) where the periodic determination
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of net income is considered appropriate. Proprietary funds distinguish operating revenues and
expenses from non-operating items. Operating revenues and expenses generally result from
providing goods and services in connection with a proprietary fund's ongoing operations.
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Operating expenses for The Florida Bar include the costs of personnel, contractual services,
supplies, utilities, repairs and maintenance, and depreciation on capital assets. All revenues and
expenses not meeting this definition are reported as non-operating revenues and expenses.
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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Basis ofAccounting
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Basis of accounting refers to when revenues and expenses are recognized in the accounts and
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reported in the financial statements. The financial statements are prepared on the accrual basis of
accounting in accordance with accounting principles generally accepted in the United States of
America. Under this method, revenues are recognized when they are earned and expenses are
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recognized when they are incurred. The measurement focus of proprietary fund types is on a flow
of economic resources method, which emphasizes the determination of net income, financial
position, and cash flow. All fund assets and liabilities, current and non-current, are accounted for in
the Consolidated Statements of Net Assets.
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Cash and Cash Equivalents
All demand deposit accounts, daily repurchase agreements and short-term highly liquid
investments with original maturities of three months or less are reported as cash equivalents.
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Investments
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Investments are reported at fair value, which are based on quoted market prices. The
determination of realized gains and losses is independent of the determination of the net change in
the fair value of investments. Realized gains and losses on investments held in a previous fiscal
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year and sold in the current period were used to compute the change in fair value for the previous
year and the current year.
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Capital Assets
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Capital assets are stated at cost less accumulated depreciation. The cost of capital assets is
depreciated over the estimated useful lives of the related assets, ranging from 5 to 40 years, using
the straight-line method. When capital assets are retired or otherwise disposed of, the costs and
related accumulated depreciation are removed from the accounts and any resulting gain or loss is
reflected in the Consolidated Statements of Revenues, Expenses and Changes in Net Assets, in
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the period of disposal.
Claims Payable
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The Florida Bar created the Clients' Security Fund (the Fund) to compensate people who have
suffered financial losses due to misappropriation of funds by errant Florida Bar members. The
Fund is financed by $20 of each Florida Bar member's annual fees. Claims payable represent
amounts payable from the Fund.
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Deferred Revenues
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Deferred revenues consist primarily of membership fees collected in advance, prepaid advertising
and prepaid legal education courses.
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Allocation of Expenses
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The costs of providing the various programs, services, and other activities have been summarized
on a functional basis in the Consolidated Statement of Revenues, Expenses and Changes in Net
Assets. Accordingly, certain costs have been allocated among the programs and supporting
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services benefited.
Principles of Consolidation
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The accompanying consolidated financial statements include the accounts of The Florida Bar and
its wholly-owned subsidiary, The Florida Bar Building Corporation, and its other controlled entities,
Florida Lawyers Association for the Maintenance of Excellence, Inc., and The Florida Attorneys
Charitable Trust. All significant intercompany transactions and accounts have been eliminated in
consolidation.
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Income Taxes
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The Florida Bar is an administrative agency of the Supreme Court and is not subject to federal or
state income tax. The Florida Bar Building Corporation, Florida Lawyers Association for the
Maintenance of Excellence, Inc., and The Florida Attorneys Charitable Trust have been granted
exemption from federal and state income taxes except on unrelated business income under
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Sections 501 (c)(25), 501 (c)(6), and 501 (c)(3), respectively, of the Internal Revenue Code.
Accordingly, no liability for income taxes is reflected in these financial statements.
I
Estimates
I
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
I
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
Concentration
I
The Florida Bar receives the majority of its revenue from lawyers licensed to practice in the State of
Florida.
I
Net Assets
Net assets are categorized as invested in capital assets, restricted for scholarships, and
undesignated. Invested in capital assets is intended to reflect the portion of net assets that are
I
associated with non-liquid, capital assets. Restricted for scholarships consists of monies restricted
for the annual G. Kirk Haas fund scholarships. Undesignated assets consist of all other assets not
included in the previous categories.
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- 14
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Derivative Financial Instruments
I
The Florida Bar follows the provisions of Governmental Accounting Standards Board (GASB)
Technical Bulletin No. 2003-1, Disclosure Requirements for Derivatives Not Reported at Fair Value
on the Statement of Net Assets, an amendment to GASB Technical Bulletin 94-1. GASB Technical
I
Bulletin No. 2003-1 provides an updated definition of derivatives and requires certain disclosures
regarding the government's objective for entering into derivative transactions and the derivative's
terms, fair value, and risk exposures.
I
Recent Accounting Pronouncements
I
In March 2003, the Governmental Accounting Standards Board issued Statement No. 40 (GASB
40), Deposit and Investment Risk Disclosure, an amendment of Statement No.3. GASB 40
addresses common deposit and investment risks related to credit risk, concentration of credit risk,
interest rate risk, and foreign currency risk. GASB 40 requires certain disclosures of investments
I
that have fair values that are highly sensitive to changes in interest rates. Deposit and investment
I
policies related to the risks identified are also required to be disclosed. The provisions of GASB 40
are effective for financial statements for perio'ds beginning after June 15, 2004. The Florida Bar
implemented the provisions of GASB 40 during the year ended June 30, 2005.
Reclassifications
I
Certain immaterial 2005 amounts have been reclassified to conform to the 2006 presentation.
I
NOTE 3 - CASH AND CASH EQUIVALENTS
I
Cash and cash equivalents are subject to custodial risk. Custodial risk is the risk that in the event
of a bank or other counterparty failure, The Florida Bar's cash and cash equivalents may not be
returned. The Florida Bar's policy with respect to custodial risk is that The Florida Bar will only
maintain demand deposit accounts with financial institutions in which management believes that
I
the risk is limited because the financial institutions are large with strong financial positions.
I
Cash and cash equivalents are held at two financial institutions. Operating cash is held at a
financial institution insured by the Federal Deposit Insurance Corporation up to $100,000 each for
the parent and subsidiary accounts. Operating cash balances were $2,021,114 and $1,176,200 at
June 30, 2006 and 2005, respectively. Additional cash and money market funds are held at a
financial institution insured by the Securities Investor Protection Corporation up to $100,000.
I
Additional cash and money market funds were $11,896,640 and $11,095,674 at June 30,2006
and 2005, respectively.
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- 15
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NOTE 4 - INVESTMENTS
Investment Objectives and Policies
I
Investments will be made for the sole interest and exclusive purpose of providing investment
I
returns for The Florida Bar. The Florida Bar's investment objectives and policies are achieved
through a short-term account portfolio and a long-term account portfolio. The ultimate
responsibility for the proper supervision of The Florida Bar's investment portfolio rests with the
Board of Directors and the Investment Committee.
The purpose of the short-term portfolio is to provide for The Florida Bar's short-term working capital
I
needs. The short-term portfolio possesses a short-term time horizon (one to three years) and
I
within this horizon, the primary objectives of the short-term portfolio are to preserve capital for
short-term cash flow needs, to provide liquidity, and to achieve attractive short-term yields
consistent with the preservation of capital.
I
The purpose of the long-term investment portfolio is to provide for The Florida Bar's operating
needs and to fund The Florida Bar's programs both today and into the future. The long-term
I
portfolio possesses an intermediate to long-term horizon (five to seven years) and within this
horizon, the primary objectives of the long-term portfolio are to provide long-term growth of
capital and income.
The asset allocation guidelines with regard to acceptable asset classes, the overall target asset
mix, and the representative indices of each asset class are as follows:
I
Short-Term
I
Asset Classes
Short-Term Fixed Income
Cash and Equivalents
I
Long-Term
Asset Classes
I
Large Cap Equity
I
Mid Cap Equity
Small Cap EqUity
Intemational and Emerging
Market Equity
Fixed Income Mutual Funds
Cash and Equivalents
I
I
I
I
I
Target
Minimum Mix Maximum
35.0% 50.0% 65.00/0
35.00/0 50.0% 65.00/0
Target
Minimum Mix Maximum
13.3% 19.0% 24.7%
6.3%
9.0J'o 11.7%
6.3J'o 9.0J'o 11.7%
12.6% 18.0% 23.40/0
28.00/0 40.00/0 52.0%
3.5% 5.00/0 6.5%
-16
Representative
Index
Lehman Brothers 1-3 year Govt Bond Index
Citigroup U.S. gO-Day Treasury Bills
Representative
Index
Standard & Poor's 500 Index
Russell Mid Cap Index
Russell 2000 Index
MSCI EAFE Index & MSCI Emerging Markets Free Index
Lehman Brothers Intermediate Govt I Corp Bond Index
Citigroup U.S. 90-Day Treasury Bills
I
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NOTE 4 - INVESTMENTS (CONTINUED)
Investments
I
At June 30, The Florida Bar's investment balances were as follows:
2006 2005
I
June 30, Fair Value Maturity Rating Fair Value
I
Repurchase agreement $ 674,488 Daily N/A $ 621,728
Mutual funds - debt securities (5T) * 9,548,510 2 year average ** B to Aaa 9,253,730
Mutual funds - debt securities (LT) * 7,429,690 3 year average ** B to Aaa 5,288,041
Mutual funds - equity securities 1,701,705 N/A N/A 1,261,058
Stocks 12,762,318 N/A N/A 9,342,143
Total investments $ 32,116,711 $ 25,766,700
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* The Florida Bar invests in mutual funds, which consist of debt securities (Le. fixed income securities). The Florida
Bar-does not invest directly in fixed income debt securities. The Florida Bar is able to sell their interest in these
mutual funds at will (SUbject to potential redemption fees).
** Represents the average maturity of debt securities held by mutual funds invested in by The Florida Bar.
I
Credit Risk
Investments in fixed income debt securities through mutual funds must adhere to the policy of
I
meeting an average quality rating of A or higher for the long-term portfolio and AA or higher for
the short-term portfolio by either Standards & Poor's, Moody's or Fitch Investors Service at the
time of purchase. Investments in corporate holdings must be rated investment grade or better
I
Concentration of Credit Risk
I
Investments in equity securities are subject to a maximum 5% commitment at cost and 10%
weighting at market of the account's total market value for any individual security or single
issuer. Investment in fixed income securities are subject to no more than 5% of the account's
I
market value invested in a single issue or 10
0
k with a single issuer with the exception of the
U.S. Government and its agencies so long as any such government or agency issue shall be
backed with the full faith and credit of the U.S. Government.
I
Interest Rate Risk
Interest rate risk arises from investments in debt instruments and is defined as the risk that
I
changes in interest rates will adversely affect the fair value of an investment. The Florida Bar is
I
not directly subject to the interest rate risk of debt instruments as investments in debt securities
are entered into through mutual funds and The Florida Bar is able to sell their interest in these
mutual funds at will (subject to potential redemption fees). Additionally, The Florida Bar has
I
elected to participate in mutual funds with target durations of one to five years (low and
moderated funds). However, investments in mutual funds are with the understanding that the
investment policies stated in the mutual fund's prospectus supersedes the guidelines
established by The Florida Bar.
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- 17
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NOTE 4 - INVESTMENTS (CONTINUED)
Custodial Credit Risk
I
Custodial risk is the risk that in the event of bankruptcy of the custodial entity, The Florida Bar's
I
deposits may not be returned to it. The Florida Bar's policy regarding custodial risk is that
deposits subject to overnight repurchase agreements shall only be invested in securities backed
by the United States government. Additionally, The Florida Bar will only hold investment
I
securities that are insured or registered and held by The Florida Bar, or its designated agent, in
the name of The Florida Bar. The repurchase agreement is exposed to uninsured and
uncollateralized custodial credit risk with Bank of America. Investments held through Morgan
I
Stanley have Securities Investor Protection Corporation coverage up to $500,000 per customer
for cash and securities and excess protection provided by the Customer Asset Protection
Company for up to the net equity value of cash and securities in Morgan Stanley's account.
Investments held through PIMCO are held by a third party trust company.
Foreign Currency Risk
I
I
Investments in international securities are limited to SEC-Registered, U.S. exchange listed, U.S.
dollar-denominated securities of foreign domiciled issuers. Securities of foreign companies
traded on foreign stock exchanges may be purchased only with the written permission of the
I
Investment Committee. Additionally, the investment policy approves the use of mutual funds,
which may include foreign securities, with the understanding that the investment policies stated
in the mutual fund's prospectus supersede the guidelines set forth in The Florida Bar's
investment policy.
Derivative Instruments
I
I
The Florida Bar's investment policy states that investments in options, derivatives and financial
futures are prohibited in separately managed accounts. Additionally, the investment policy
approves the use of mutual funds, which may include derivative instruments, with the
understanding that the investment policies stated in the mutual fund's prospectus supersede the
guidelines set forth in "The Florida Bar's investment policy.
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NOTE 5 - ACCOUNTS RECEIVABLE, NET
I
The following is a summary of accounts receivable, net:
I
June 3D, 2006 2005
Accounts receivable $ 430,224 $ 697,305
Allowance for doubtful accounts (24,900) (24,900)
I
Accounts receivable, net $ 405,324 $ 672,405
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-18
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NOTE 6 - CAPITAL ASSETS, NET
July 1,2005 Additions Deletions June 30, 2006
I
Capital assets not being depreciated:
Land $ 1,103,060 $ - $ - $ 1,103,060
Total capital assets not depreciated $ 1,103,060 $ - $ - $ 1,103,060
I
Capital assets being depreciated:
Buildings and improvements $ 7,877,915 $ 25,057 $ - $ 7,902,972
I
Landscaping and parking 120,318 120,318
Equipment and furnishings 4,651,072 332,766 (527,319) 4,456,519
Total capital assets being depreciated 12,649,305 357,823 (527,319) 12,479,809
I
Less accumulated depreciation for:
Buildings and improvements (3,973,957) (295,993) (4,269,950)
Landscaping and parking (120,318) (120,318)
Equipment and furnishings (3,437,374) (371,750) 520,752 (3,288,372)
I
Total accumulated depreciation (7,531,649) (667,743) 520,752 (7,678,640)
Total capital assets being depreciated, net $ 5,117,656 $ (309,920) $ (6,567) $ 4,801,169
I
Total capital assets, net $ 6,220,716 $ (309,920) $ (6,567) $ 5,904,229
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Depreciation expense for the year ended June 30, 2006 and 2005 was $667,743 and $766,365,
I
respectively.
NOTE 7 - LONG-TERM LIABILITIES
Long-Term Debt
I
The following is a summary of long-term debt:
June 30, 2006 2005
I
I
Renewal mortgage note payable to Bank of America in the amount
of $2,986,384 due on October 15, 2009. Monthly payments of
principal began on November 15, 1999 at $9,383 with annual
increases of $723 per month each November 15th based on a 15
year amortization with a balloon payment of $1,396,760 at maturity.
Interest is payable monthly based on a contract rate equal to the
I
London Interbank Offering Rate (LIBOR) (6.7k at June 30, 2006)
I
plus 47 basis points. However, the interest rate was swapped in a
hedge transaction. See Note 8 below. The mortgage is
collateralized by real estate owned by The Florida Bar Building
Corporation and guaranteed by The Florida Bar.
Current portion
$ 2,049,543 $ 2,221,056
(184,718) (161,760)
I
Long-term debt, less current portion $ 1,864,825 $ 2,059,296
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- 19
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NOTE 7 - LONG-TERM LIABILITIES (CONTINUED)
Long-Term Debt (Continued)
I
I
I
The following are maturities ,of long-term debt:
Years ended June 30,
Total
2007
2008
2009
2010
Amount
$ 184,718
198,939
214,255
1,451,631
$ 2,049,543
I
Compensated Absences Payable
I
I
Total compensated absences
Accrued vacation
Accrued sick leave
Compensated absences payable consisted of the following:
June 30, 2006
$1,289,710
883,444
$ 2,173,154
2005
$ 1,203,980
813,985
$ 2,017,965
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Changes in Long-Term Liabilities
I
Changes in long-term liabilities are summarized as follows:
Balance Balance
I
Long-term debt
Compensated absences
July 1,2005
$ 2,221,056
2,017,965
Additions
$ -.
1,628,896
Reductions
$ (171,513)
(1,473,707)
June 30,2006
$ 2,049,543
2,173,154
Total long-term liabilities $ 4,239,021 $ 1,628,896 $ (1 ,645,220) $ 4,222,697
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NOTE 8 - DERIVATIVE DISCLOSURE -INTEREST RATE SWAP
Objective of the interest rate swap. In October 1999, The Florida Bar refinanced an 81/2
%
fixed rate mortgage to a variable rate mortgage based on the LIBOR rate plus .47%. To
I
manage its interest rate exposure under the variable rate renewal mortgage note payable to
Bank of America, The Florida Bar entered into a hedge transaction on October 13, 1999 to swap
its floating rate for a fixed rate through a 120 month interest rate swap provided by Bank of
I
America.
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- 20
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NOTE 8 - DERIVATIVE DISCLOSURE -INTEREST RATE SWAP (CONTINUED)
I
Terms. The swap was for the notional amount of $2,986,384 which was equal to the principal
amount of the underlying variable rate debt. The notional amount declines each year as the
principal amount of the associated debt declines. At June 30, 2006 and 2005, the notional
amount was $2,049,543 and $2,221,056, respectively. The swap was entered into at the same
time that the debt was refinanced (October 1999). Under the swap, The Florida Bar pays the
I
Bank of America a contracted interest rate of LIBOR plus .47A, and receives a payment from
Bank of America based on the coupon rate of the swap which is 6.97A,. The net effect of the
two contractual rates is an effective fixed rate of 7.44A,. The swap matures on October 15,
I
2009.
I
Fair value. Due to the difference between the two rates, the swap had a negative fair value of
$80,999 and $233,202 as of June 30, 2006 and 2005, respectively. The fair value was
I
estimated by the Bank of America as identified in the Schedule to the International Swap
Dealers Association Master Agreement (ISDA) using the mid-market level method. This method
is in accordance with market conventions, which take into consideration estimates about
relevant present and future market conditions, as well as size and liquidity of the position and
related actual or potential hedging transactions.
I
Basis risk. The swap exposes The Florida Bar to basis risk should the LIBOR rates decrease
I
significantly. If a change occurs that results in a significant decrease in LIBOR rates, the
expected cost savings may not be realized.
Termination risk. The Florida Bar or the Bank of America may terminate the swap if the other
party fails to perform under terms of the agreement. If at the time of termination the swap has a
I
negative fair value, The Florida Bar would be liable to the Bank of America for a payment equal
to the swap's fair value.
I
Swap payments and associated debt. Using rates as of June 30, 2006, debt service
requirements of the renewal mortgage note payable and the swap payments, assuming current
interest rates remain the same for their term, were as follows. As rates vary, the variable-rate
interest payments and swap payments will vary.
I
I
Year ending
June 30 Principal
2007 $ 184,718 $
2008 198,939
I
2009 214,255
2010 1,451,631
I
Total $ 2,049,543 $
I
I
I
Interest rate Net debt
Interest Total
140,990
127,286
112,528
25,693
$ 325,708
326,225
326,783
1,477,324
$
406,497 $ 2,456,040 $
- 21
swap, net service
(3,933)
(3,551)
(3,139)
(717)
(11,340)
$
$
321,775
322,674
323,644
1,476,607
2,444,700
I
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NOTE 9 - REVENUE AND EXPENSE CLASSIFICATION
The significant revenue and expense accounts presented in the consolidated financial
statements are described as follows:
I
Other Fees from Members
Includes revenues from members other than annual dues such as advertising approval fees,
I
certification fees and section dues.
Sales of Products and Services
I
Includes revenues from sources such as Continuing Legal Education (CLE) registrations, sales
of publications and meeting revenues.
I
Grants and Other
I
Includes grants received from The Florida Bar Foundation, cost recoveries from discipline
cases, rents received in The Bar Center Building Fund and other sources of revenue.
Regulation of the Practice of Law
I
Includes expenses incurred for Lawyer Regulation, Lawyer Advertising, Ethics, Continuing Legal
Education Rules (CLER), Membership Records and Certification.
I
Cost of Products and Services Provided to Members
Includes expenses such as the cost of CLE courses and publications, Legal Office Management
I
Advisory Services (LOMAS), voluntary member assistance programs, meetings, committee
activity and section activity.
I
Communication with Members and the Public
I
Includes the expenses of the Public Information Department and The Florida Bar Journal and
News.
Administration
I
Includes board and officer expenses, the cost of the Executive Director's office, General
Counsel, Research, Planning and Evaluation, and liability and property insurance.
I
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- 22
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NOTE 10 - RETIREMENT PLANS
The Florida Bar sponsors a defined contribution pension plan, The Florida Bar Employees'
Pension Plan (the Plan), which is available to all salaried personnel having completed six
I
months of service. The Plan is administered by The Florida Bar Retirement Committee. The
I
Plan may be amended at any time by The Florida Bar. Employer contributions are discretionary
and are currently made for all eligible employees based on a formula which was 11 0A of covered
compensation and 4.3% on covered compensation exceeding 80% of the Social Security wage
I
base for the years ended June 30, 2006 and 2005. The employer contributions are allocated to
separate participant accounts and invested by the Trustee in the funds selected by the
employee from those offered by the Plan Administrator. Participant accounts vest based on the
following schedule:
I
< 3 years 0%
3 - 4 years 40%
I
4 - 5 years 60
0
k
5 - 6 years 80
0
k
> 6 years 100%
Forfeited contributions are held in a separate account and can be used to reduce future
I
employer contributions. The plan has been amended to comply with all applicable Federal tax
laws. The pension contribution made equaled the contribution required during the years ended
June 30, 2006 and 2005 for the Plan years ended December 31, 2005 and 2004 and was
I
$1,275,351 and $1,314,625, respectively.
I
The Florida Bar also has a deferred com.pensation plan. The plan is for the benefit of all eligible
employees who elect to participate.
I
NOTE 11 - LEASES
I
The Florida Bar is the lessee of office space under operating leases expiring in various years
through the year 2010, with escalation clauses.
The Florida Bar leases office space from its wholly-owned subsidiary, The Florida Bar Building
Corporation. The intercompany rental income and rental expense have been eliminated in
I
consolidation.
Future minimum rental payments are as follows:
I
Years ending June 30, Amount
2007 $ 682,915
2008 488,820
I
2009 442,631
2010 327,082
I
I
Total rental expense for the fiscal year ended June 30, 2006 and 2005 was
$732,146, respectively.
Total minimum future rental payments
$757,530 and
$ 1,941,448
I
- 23
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NOTE 11 - LEASES (CONTINUED)
I
The Florida Bar is also the lessor of certain office space in a building owned by The Florida Bar.
The space is rented to unrelated entities under operating leases expiring in various years
through the year 2009. Rental income for the fiscal years ended June 30, 2006 and 2005 were
$499,561 and $485,011, respectively.
I
Future minimum rental receipts are as follows:
Years ending June 30, Amount
2007 $ 258,244
I
2008 265,991
2009 66,986
Total minimum future rental payments $ 591,221
I
NOTE 12 - CONTINGENCIES
I
The Florida Bar is involved in several actions as defendant and/or co-defendant. The majority
of the actions are expected to be settled with little or no financial impact to The Florida Bar. An
I
accurate assessment of any sig,ni'ficant liability is not determinable although management of The
Florida Bar believes that the possibility of any significant liability arising from current litigation is
extremely remote.
I
NOTE 13 - DESIGNATED FUND BALANCES
I
I
The Florida Bar has designated certain net assets to be used for specific program purposes. As
of June 30, 2006 and 2005, the designated net assets were $12,073,656 and $9,455,921,
respectively.
NOTE 14 - RISK MANAGEMENT PROGRAMS
I
The Florida Bar is exposed to various risks of loss related to torts; theft of, damage to, and
destruction of assets; errors and omissions; injuries to employees; and natural disasters.
I
Workers' compensation, property, and general liability coverage are provided through
commercial insurance carriers. Management continuously reviews the limits of coverage and
believes that current coverage is adequate. There were no significant reductions in insurance
I
coverage from the previous year.
I
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I
- 24
Supplementary Information
------------------
Consolidating Schedule of Statement of Net Assets
June 30, 2006
General
Fund
Bar Center
Fund
Clients'
Security
Fund
Certification
Fund
Sections
Fund
Eliminating
Entries
Total
All Funds
Assets
Current assets
Cash and cash equivalents
Short-term investments
Accounts receivable. net
Due from other funds
Prepaid expenses and other assets
Total current assets
$ 13,098,375
32,116,711
373,012
-
587.449
46,175,547
$ 819,379
-
-
5.360,424
-
6,179,803
$ -
-
-
4,195,220
-
4,195,220
$ -
-
-
597.479
-
597,479
$ -
-
-
2,973,995
-
2,973,995
$ -
-
32,312
(13,127,118)
(25.117)
(13,119,923)
$ 13,917,754
32,116.711
405,324
562,332
47,002,121
Restricted assets
Investment in The Florida Bar
Building Corporation
Total restricted assets
1,611,647
1,611,647
-
-
-
-
-
-
-
-
(1,611,647)
(1.611,647)
Capital assets, net
Land
Buildings and improvements
Landscaping and parking
Equipment and furnishings
Accumulated depreciation
Total capital assets, net
-
-
-
-
-
-
1.103.060
7.902.972
120.318
4.456.519
(7,678,640)
5.904,229
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,103,060
7,902,972
120,318
4,456,519
(7.678,640)
5,904,229
Total assets $ 47,787,194 12.084,032 $ 4,195,220 $ 597,479 $ 2,973.995 $ (14,731,570) $ 52,906,350
See Independent Auditors' Report.
- 25
- - - - - - - - - - - - - - - - - - -
Consolidating Schedule of Statement of Net Assets
(Continued)
June 30, 2006
General
Fund
Bar Center
Fund
Clients'
Security
Fund
Certification
Fund
Sections
Fund
Eliminating
Entries
Total
All Funds
Liabilities and Net Assets
Current liabilities
Current portion of long-term debt
Accounts payable
Claims payable
Accrued expenses
Due to other funds
Deferred revenues
Security deposits
Total current liabilities
$ -
2,626,560
-
773,537
11,843,009
9,659,687
-
24,902,793
$ 184,718
39,186
-
-
-
-
70,903
294,807
$ -
-
478,858
-
-
-
-
478,858
$ -
-
-
-
-
-
-
-
$ -
-
-
-
-
-
-
-
$ -
(1,251,797)
-
-
(11,843,009)
-
(25,117)
(13,119,923)
$ 184,718
1,413,949
478,858
773,537
9,659,687
45,786
12,556,535
Non-current liabilities
Long-term debt, less current portion
Compensated absences payable
Total non-current liablities
-
2,173,154
2,173,154
1,864,825
-
1,864,825
-
-
-
-
-
-
-
-
-
-
-
-
1,864,825
2,173,154
4,037,979
Total liabilities 27,075,947 2,159,632 478,858 - - (13,119,923) 16,594,514
Net assets
Unrestricted
Designated
Undesignated
Contributed capital
Total net assets
-
25,248
512,064
20,173,935
-
20,711,247
3,854,686
-
4,458,067
-
1,611,647
9,924,400
-
-
3,716,362
-
-
3,716,362
-
-
597,479
-
-
597,479
-
-
2,973,995
-
-
2,973,995
-
-
-
-
(1,611,647)
(1,611,647)
3,854,686
25,248
12,257,967
20,173,935
36,311,836
Total liabilities and net assets $ 47,787,194 $ 12,084,032 $ 4,195,220 $ 597,479 $ 2,973,995 $ (14,731 ,570) $ 52,906,350
- 26
- - - - - - - - - - - - - - - - - - -
Consolidating Schedule of Statement of Revenues, Expenses and Changes in Net Assets
Clients'
General Bar Center Security Certification Sections Eliminating Total
Year ended June 30, 2006 Fund Fund Fund Fund Fund Entries All Funds
Operating revenues
Annual fees $ 20,284, 163 $ - $ - $ - $ - $ - $ 20,284,163
Other fees from members 3,228,745
- - 943,597 1,183,661 - 5,356,003
Sales of products and services 5,817,128 - - 6,784 1,736,191
-
7,560,103
Advertising 2.223,308 - - - - - 2,223,308
Young lawyers 532,811 - - - - - 532,811
Grants and other 429,885 957,813 18,339 - - (528,400) 877.637
Total operating revenues 32,516,040 957,813 18,339 950,381 2,919,852 (528,400) 36,834,025
Operating expenses
Regulation of the practice of law 12,645,082 - - 872,694
-
(199,633) 13,318,143
Cost of products and services provided to members 6,934,437
- - - 2,512,596 (108,992) 9,338,041
Unauthorized practice of law 1,268,066 - - - - (19,905) 1,248,161
Public service programs 911,883 - 1,101,860 - - (14,290) 1,999,453
Communication with members and the public 3,607,261 - - - -
(56,556) 3,550.705
Administration 2,438,273 - - - - (38,302) 2,399,971
Legislation 424,111 - - - - (6,638) 417,473
Young lawyers 433,043 - - - -
(6,778) 426,265
Depreciation and amortization - 667,743 - - - - 667,743
Other programs and costs 212,561 467,313 - - - (77,306) 602,568
Total operating expenses 28,874,717 1,135,056 1,101,860 872,694 2,512,596 (528.400) 33,968.523
Operating income (loss) _ (1,083,-521) 77,687 407,256 - 2,865,502
Non-operating revenues (expenses)
Investment earnings 1,779,324 294,170 221,768 22,653 187,258 - 2,505,173
Interest expense - (164,679)
- - - - (164.679)
Loss on disposal of capital assets - (6,567) - - - - (6,567)
Total non-operating revenues (expenses) 1,779,324 122,924 221,768 22,653 187,258 - 2,333,927
Change in net assets 5,420,647 (54,319) (861,753) 100,340 594,514 - 5,199,429
Net assets, beginning of year 18,211,352 8,556,587 3,079,495 497,139 2,379,481 (1,611,647) 31.112.407
Transfers (to) from other funds (2,920,752) 1,422,132 1,498,620
Net assets, end of year $ 20,711,247 $ 9,924,400 $ 3,716,362 $ 597,479 $ 2,973,995 $ (1,611,647) $ 36,311,836
- 27
- - - - - - - - - - - -
- - - - - -
_.
Consolidating Schedule of Statement of Cash Flows
Clients'
Year ended June 30,2006 Fund Fund Fund Fund Fund Entries All Funds
Cash flows from operating activities:
Receipts from members, customers and other sources $ 34,826,387 $ 957,813 $ 18,339 $ 950,381 $ 2,919,852 $ 11,007 $ 39,683,779
Payments to e l ! 1 p l o ~ , suppliers and other vendors (28,901,727) (266,061) (240,107) (973,034) (3,107,110) (11,007) (33,499,046)
Net cash provided by (used in) operating activities _ 5,924,660 691,752 (221,768) (22,653) (187,258) 6,184,733
Cash flows from non-capital and related financing activities:
Reduction of debt (171,513) (171,513)
Interest paid (164,679) (164,679}
Net cash (used in) non-capital and related financing
activities (336,192) {336,192)
Cash flows from capital and related financing activities:
Acquisition of capital assets - (357,823) - - - - (357,823)
Net cash (used in) capital and related financing activities - (357,823) - - - - (357,823)
Cash flows from Investing activities:
Net change in repurchase agreement (52,760) (52,760)
Redemption of investments 11,850,573 11,850,573
Purchase of investments, net of change in fair value (18,147,824) (18,147,824)
Investment income 1,779,324 294,170 221,768 22,653 187,258 2,505,173
Net cash provided by investing activities (4,570,687) 294,170 221,768 22,653 187,258 (3,844,838)
Increase (decrease) In cash and cash equivalents 1,353,973 291,907 1,645,880
Cash and cash equivalents, beginning of year 11,744,402 527,472 12,271,874
Cash and cash equivalents, end of year $ 13,098,375 $ 819,379 $ - $ - $ - $ $13,917,754
- 28
- - - - - - - - - - - - - - - - - - -
Consolidating Schedule of Statement of Cash Flows
(Continued)
Clients'
Year ended June 30, 2006 Fund Fund Fund Fund Fund Entries All Funds
Reconciliation of operating Income to net cash provided
by (used In) operating activities:
Operating income (loss) $ 3,641,323 $ (177,243) $ (1,083,521) $ 77,687 $ 407,256 $ - $ 2,865,502
Adjustments to reconcile operating income (loss) to
net cash provided by (used in) operating activities
Depreciation and amortization - 667,743 - - - - 667,743
Transfers (to) from other funds (2,920,752) 1,422,132 1,498,620
(Increase) decrease in:
Accounts receivable, net 256,074 - - - - 11,007 267,081
Due from other funds - (1,255,119) (976,533) (100,340) (594,514) 2,926,506
Prepaid expense and other assets (360,384) - - - - - (360,384)
Increase (decrease) in:
Accounts payable 149,609 32,884 - - - (71,503) 110,990
Claims payable - - 339,666 - - - 339,666
Accrued expenses 238,507 - - - - - 238,507
Security deposits - 1,355 - - - - 1,355
Due to other funds 2,866,010 - - - - (2,866,010)
Deferred revenues 2,054,273 - - - - - 2,054,273
Net cash provided by (used in) operating activities $ 5,924,660 $ 691,752 $ (221,768) $ (22,653) $ (187,258) $ - $ 6,184,733
Non-cash Investing, capital and financing activities:
Change in the fair value of investments $ 310,344 $ $ $ $ $ $ 310,344
Loss on disposal of assets $ - $ $ $ $ $ $
Supplemental Information:
Cash paid for interest $ $ 164,679 $ $ $ $ $ 164,679
- 29
I
I
I
Variance
Favorable
Year ended June 30, 2006 Actual Budgeted (Unfavorable)
I
Revenues - budgetary basis
Annual fees $ 20,284,163 $
I
Investments
Authorized house counsel
1,763,633
256,902
Lawyer regulation 704,410
I
Professional enhancement program
Unlicensed practice of law
78,446
4,951
Ethics
I
Lawyer advertising
Professionalism
321,676
78,018
Multijurisdictional practice 156,250
I
Meetings and conventions
Addressing services
506,408
226,437
Continuing legal education program 3,386,947
I
Continuing legal education rule
Course approval center
514,965
80,874
I
Public service programs
Foreign legal consultants
Law office management advisory services
746,742
4,140
147,271
I
Member benefits program
Legal publications
Section administration
592,378
946,243
599,036
I
Young lawyers division
Committtee expenses
Public information
532,811
3,185
70,480
I
Journal
News
Directory
446,680
1,549,133
227,495
I
Research, planning and evaluation
Building and grounds
346
45,941
Other revenue (6,411)
I
G. Kirk Haas Fund (restricted revenue)
Total revenues - bUdgetary basis
4,456
34,274,006
I
I
I
- 30
I
20,007,328 $ 276,835
550,000 1,213,633
188,150 68,752
539,550 164,860
88,500 (10,054)
6,045 (1,094)
50 (50)
255,220 66,456
61,352 16,666
250,000 (93,750)
450,964 55,444
200,000 26,437
3,442,040 (55,093)
394,132 120,833
90,117 (9,243)
986,850 (240,108)
13,075 (8,935)
188,995 (41,724)
586,211 6,167
1,094,400 (148,157)
780,400 (181,364)
571,302 (38,491)
7,562 (4,377)
107,289 (36,809)
409,910 36,770
1,222,854 326,279
247,755 (20,260)
346
47,250 (1,309)
10,000 (16,411)
4,456
32,797,301 1,476,705
I
I
(Continued)
I
Variance
Favorable
Expenses - budgetary basis
I
I General administration
Staff and office expense 556,361 745,398 189,037
Travel 60,821 56,452 (4,369)
Internal service and administration 6,768 4,409 (2,359)
Member service project 15,000 15,000
Other operating expenses 6,804 16,656 9,852
I
Total general administration 630,754 837,915 207,161
I
Board and officer
I
Travel 30,501 23,421 (7,080)
Other operating expenses 383,792 380,523 (3,269)
Total board and officer 704,231 721,992 17,761
Legislation
I
Staff and office expense 124,521 117,914 (6,607)
I
Contract services 249,060 308,500 59,440
Travel 4,908 4,611 (297)
Internal service and administration 42,906 47,620 4,714
Total legislation 424,111 487,526 63,415
I
Authorized house counsel
I
Staff and office expense 9,011 9,878 867
Other operating expenses 1,255 620 (635)
Total authorized house counsel 52,127 44,479 (7,648)
I
General counsel
I
Contract services 715,183 160,515 (554,668)
Travel 3,306 4,099 793
Other operating expenses 849 1,527 678
Total general counsel 921 ,997 368,983 (553,014)
I
I Division director - legal
Staff and office expense (23,365) (29,259) (5,894)
Travel 14,910 20,888 5,978
Internal service and administration 8,460 8,324 (136)
Other operating expenses 47 47
Total division director - legal 5 (5)
I
I
I
- 31
I
I
(Continued)
I
Variance
Favorable
I
I Lawyer regulation
Staff and office expense 8,209,587 8,558,047 348,460
Travel 113,794 144,145 30,351
Internal service and administration 1,143,989 1,264,997 121,008
I
Total lawyer regulation 9,820,765 10,328,907 508,142
Professional enhancement program
I
Travel 4,278 12,000 7,722
I
Total professional enhancement program 34,398 71,028 36,630
I
Division director - ethics, UPL and professionalism
Staff and office expense (8,364) (5,495) 2,869
Travel 8,368 5,470 (2,898)
Internal service and administration 25 25
I
Total division director - ethics, UPL and professionalism
Unlicensed practice of law
4 (4)
I
Staff and office expense
Travel
Internal service and administration
1,105,335
33,997
92,363
1,159,595
39,579
158,092
54,260
5,582
65,729
I
Total unlicensed practice of law 1,271,693 1,411,054 139,361
I
Lawyer assistance program/substance abuse
Other operating expenses 375,000 375,000
Total lawyer assistance program/substance abuse 413,657 413,417 (240)
I
I
Advertising task force
Staff and office expense 23,659
Travel 202
Internal service and administration 1,950
Other operating expenses 661
21,957
2,102
544
(1,702)
(202)
(117)
I
Total advertising task force 26,472 24,603 (1,869)
I
I
I See Independent Auditors' Report.
- 32
152
I
I
(Continued)
Variance
I
Favorable
I
I
Ethics
Travel 4,289 3,673 (616)
I
Total ethics 603,025 638,343 35,318
Lawyer advertising
I
Travel 4,619 7,459 2,840
I
Total lawyer advertising 588,833 564,757 (24,076)
Ethics/advertising staff pool
I
Travel 27,580 31,691 4,111
Total ethics/advertsising pool (8) 8
I
Professionalism
Contract services 3,600 3,670 70
Travel 18,956 18,731 (225)
I
Total professionalism 519,744 563,982 44,238
I
Multijurisdictional practice
I
Other operating expenses 1 855 854
Total multijurisdictional practice 47,322 26,652 (20,670)
I
Shipping and receiving
I
Internal service and administration 1,596 (1,596)
Other operating expenses 46 34 (12)
Less cost distribution (135,658) (184,829) (49.171)
Total shipping and receiving
I
Building and grounds
I
Travel 2,710 2,400 (310)
Internal service and administration 838 449 (389)
I
Less cost distribution (1 ,086,293) (1 ,093,251) (6,958)
Total building and grounds 45,942 47,250 1,308
I
- 33
I
I
(Continued)
I
Variance
Favorable
I
Meetings and conventions
Contract services 600 600
I
Travel 19,050 24.402 5,352
I
Less cost distribution (20,453) (25,045) (4,592)
Total meetings and conventions 770,192 782,920 12,728
I
Information systems
I
Contract services 224,811 194,000 (30,811)
Travel 9,057 18.970 9,913
Less cost distribution (3.276,556) (3,400,503) (123,947)
Total information systems (2) 2
I
Human resource management
I
Staff and office expense 185,845 184.214 (1,631 )
Contract services 23,291 23,291
Travel 35 719 684
I
Less cost distribution (269.491) (263,862) 5,629
Total human resource management
Division director - programs
I
I
Travel 2,945 6.070 3,125
Total division director - programs
I
Continuing legal education programs
I
Travel 49,789 49.138 (651)
Other operating expenses 1,312,296 1.133,413 (178,883)
Total continuing legal education programs 3,091,560 2,755,102 (336,458)
I
Continuing legal education rule
I
Travel 443 1.678 1,235
Total continuing legal education rule 260,148 353,634 93,486
I
- 34
I
I
(Continued)
Variance
I
Favorable
I
I
Course approval center
Staff and office expense 71,766 71,433 (333)
Total course approval center 80,874 92,960 12,086
I
Legal education and specialization pool
I
Total legal education and specialization pool 5 (78,102) (78,107)
I
Professional development pool
Staff and office expense (42,076) (32,289) 9,787
Other operating expenses 708 1,084 376
I
Total professional development pool
I
Public service programs
Contract services 175 2,840 2,665
I
Travel 4,647 4,375 (272)
Total public service programs 912,964 1,039,912 126,948
I
Foreign legal consultants
I
Staff and office expense 3,354 461 (2,893)
Internal service and administration 302 78 (224)
Total foreign legal consultants 3,662 913 (2,749)
I
Print shop
I
Travel 1 (1 )
Internal service and administration 25 35 10
Other operating expenses 72,637 71,717 (920)
Total print shop (3) 3
I
Law office management advisory services
I
Travel 40,681 25,070 (15,611)
Total law office management advisory services 375,720 401,110 25,390
I
I
- 35
I
I
(Continued)
Variance
I
Favorable
I
Member benefits program
I
'nternal service and administration 18,328 20,459 2,131
Total member bene'fits program 250,028 238,806 (11,222)
I
Legal publications
I
Travel 12,848 16,230 3,382
Total legal pUblications 1,122,170 1,220,665 98,495
I
Section administration
I
Travel
Sections internal service
1,963
281,960
707,559
994
347,646
775,853
(969)
65,686
68,294
Other operating expenses 446 4,994 4,548
I
Total section administration 1,096,064 1,132,917 36,853
Young lawyers division
I
Travel
50,483
7,214
(8,732)
37,285
6,066
(45,811)
(13,198)
(1,148)
(37,079)
I
Total young lawyers division 433,043 347,937 (85,106)
Committee
I
Travel
68,679
9,325
55,167
55,867
6,912
47,729
(12,812)
(2,413)
(7,438)
I
Other operating expenses
Total committee
42,827
175,998
51,666
162,174
8,839
(13,824)
Public information
I
Contract services
Travel
614,679
22,960
36,697
644,334
24,668
38,709
29,655
1,708
2,012
I
Total public information
388,707
118,262
1,181,305
311,324
150,067
1,169,102
(77,383)
31,805
(12,203)
I
I
I
- 36
I
I
(Continued)
Variance
I
Favorable
I
I
Office systems
I
Total office systems 598 (598)
"Journal" - "News" staff pool
I
Travel 2,157 3,062 905
I
Total "Journal" - "News" staff pool (3) (130) (127)
"Journal"
I
Travel 845 2,759 1,914
I
Less cost distribution (11,694) (4,250) 7,444
Total "Journal" 748,193 786,357 38,164
I
"News"
I
Travel 9,964 10,221 257
Less cost distribution (186,468) (182,983) 3,485
Total "News" 1,352,999 1,343,551 (9,448)
I
Directory
I
Total Directory 330,830 331,416 586
I
Finance and records
I
Travel 5,506 8,017 2,511
I
Internal service and administration 1,010,349 1,005,878 (4,471)
Less cost distribution (1,740,927) (1,818,634) (77,707)
Total finance and records 802,458 839,211 36,753
I
I
- 37
I
I
(Continued)
Variance
I
Favorable
I
I
Research, planning and evaluation
Travel 3,630 3,641 11
Internal service and administration 927 1,151 224
I
Total research, planning and evaluation 144,154 151,524 7,370
I
Division directors - administration
I
Travel 759 519 (240)
Total division directors - administration
I
G. Kirk Haas Fund (restricted fund) 5,000 2,000 (3,000)
Total expenses 29,243,029 29,624,867 381,838
I
Excess of revenues over expenses - budgetary basis $ 5,030,977 $ 3,172,434 $ 1,858,543
I
I
I
I
I
I
I
I
I
- 38
I
I
I
I
I
I
I
I
Year ended June 30, 2006
General Fund Reconciliation of Revenues and Expenses on a
BUdgetary Basis to Totals Per the Consolidating Scheduleof
Statement of Revenues, Expenses and Changes in Net Assets
Excess of
Revenues
Operating Over(Under)
Revenues Expenses Expenses
Totals on budgetary basis
Add:
Subsidiary operations
Florida Lawyers Association for the Maintenance of
Excellence, Inc.
The Florida Attorneys Charitable Trust
Less:
Adjustments for financial statement presentation purposes
Net change in the fair value of investments
Budgeted items treated as interfund transfers for basic
financial statement purposes
Depreciation
$ 34,274,006 $ 29,243,029 $ 5,030,977
15,691 100,831 (85,140)
5,667 2,989 2,678
(1,779,324) (1,779,324)
(472,132) 472,132
I
Total operating revenues, expenses and income per Consolidating
Schedule of Statement of Revenues, Expenses and Changes in
Net Assets $ 32,516,040 $ 28,874,717 $ 3,641,323
I
I
I
I
I
I
I
I
I
- 39
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
Clients' Security Fund Schedule of Budgeted and Actual Revenues and Expenses
Year ended June 30, 2006
Operating revenues
Annual contribution 11:
Recoveries
Total operating revenues
Operating expenses
Contract services
Travel
Claims paid
Total operating expenses
Operating income (loss)
Non-operating revenues
Investment earnings
Total non-operating revenues
Change in net assets
Actual Budget
Variance
Favorable
(Unfavorable)
$ 1,498,620
18,339
1,516,959
$ 1,498,620
55,245
1,553,865
$
(36,906)
(36,906)
104,787
94,606
2,353
40,110
857,292
2,712
1,101,860
114,587
6,593
67,345
1,498,620
3,727
1,690,872
9,800
(94,606)
4,240
27,235
641,328
1,015
589,012
415,099 (137,007) 552,106
221,768
221,768
168,000
168,000
53,768
53,768
$ 636,867 $ 30,993 $ 605,874
11: The annual contribution from the general fund is treated as a bUdgeted revenue item on this
statement. However, it is treated as an interfund transfer in the basic financial statements section
of this report. The difference between the budget basis statement and the basic financial statement
is reconciled as follows:
Change in net assets - budgetary basis $ 636,867
Less: annual contribution treated as an interfund
transfer on the basic financial statements (1,498,620)
Change in net assets per Consolidating Schedule of
Statement of Revenues, Expenses and Changes in
Net Assets $ (861,753)
-40
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
Certification Fund Schedule of Budgeted and Actual Revenues and Expenses
Variance
Favorable
Year ended June 30, 2006 Actual Budget (Unfavorable)
Operating revenues
Member Fees $ 943,597 $ 932,201 $ 11,396
Sales 6,784 11,750 (4,966)
Total operating revenues 950,381 943,951 6,430
Operating expenses
Contract services
Travel
583,780
12,213
36,429
83,952
156,320
Total operating expenses 872,694
Operating income (loss) 77,687
642,644 58,864
18,306 6,093
31,870 (4,559)
128,257 44,305
176,118 19,798
997,195 124,501
(53,244) 130,931
Non-operating revenues
Investment earnings
Total non-operating revenues
22,653
22,653
31,500
31,500
(8,847)
(8,847)
Change in net assets per Consolidating Schedule of
Statement of Revenues, Expenses and Changes in
Net Assets $ 100,340 $ (21,744) $ 122,084
- 41
I
Sections Fund Schedule of Budgeted and Actual Revenues and Expenses
I
I
Variance
Favorable
Year ended June 3D, 2006 Actual Budgeted (Unfavorable)
Revenues - budgetary basis
I
I
Real property, probate and trust law $ 1,055,727 $ 793,852 $ 261,875
Trial lawyers 258,999 298,037 (39,038)
Business law 247,625 216,595 31,030
I
I
General practice 85,821 80,500 5,321
Family law 264,472 184,177 80,295
City, county, and local government 48,526 60,758 (12,232)
Workers' compensation 88,730 103,640 (14,910)
Tax law 439,808 259,694 180,114
Criminal law 62,663 66,409 (3,746)
I
Administrative law 32,235 40,038 (7,803)
Environmental and land use law 114,104 87,246 26,858
Practice management and technology 16,820 18,473 (1,653)
Labor and employment law 51,911 71,787 (19,876)
I
International law 94,119 116,013 (21,894)
Entertainment, arts and sports law 13,082 40,402 (27,320)
Health law 45,770 40,478 5,292
I
Public interest law 8,134 8,416 (282)
Government lawyers 17,914 24,840 (6,926)
Elder law 78,835 112,153 (33,318)
I
Out-of-state practice 24,082 35,957 (11,875)
Appellate practice and advocacy 40,994 44,077 (3,083)
Equal opportunity law 9,677 21,026 (11,349)
Council of sections 7,062 6,524 538
I
Total revenues - budgetary basis 3,107,110 2,731,092 376,018
I
I
I
I
I
I
- 42
I
I
I
Sections Fund Schedule of Budgeted and Actual Revenues and Expenses
(Continued)
I
Variance
Favorable
Year ended June 30,2006 Actual Budgeted (Unfavorable)
I Operating expenses - budgetary basis
Real property, probate and trust law $ 867,970 $ 798,433 $ (69,537)
I
Trial lawyers 134,531 187,714 53,183
Business law 181,394 230,475 49,081
General practice 70,728 96,566 25,838
I
Family law 272,167 184,376 (87,791)
City, county, and local government 52,355 90,796 38,441
Workers' compensation 92,236 123,151 30,915
I
Tax law 334,421 292,249 (42,172)
Criminal law 42,188 74,762 32,574
Administrative law 11,682 54,607 42,925
I
Environmental and land use law 70,742 124,852 54,110
Practice management and technology 9,873 21,145 11,272
Labor and employment law 42,395 113,429 71,034
I
International law 56,736 168,346 111,610
Entertainment, arts and sports law 24,258 57,785 33,527
Health law 34,301 60,552 26,251
I
Public interest law 8,662 13,001 4,339
I
Government lawyers 13,890 22,272 8,382
Elder law 84,088 94,285 10,197
Out-ot-state practice 30,009 33,198 3,189
I
Appellate practice and advocacy 64,094 65,780 1,686
Equal opportunity law 9,216 19,578 10,362
Council of sections 4,660 . 5,182 522
Total expenses - bUdgetary basis 2,512,596 2,932,534 419,938
I
Change in net assets per the Consolidating Schedule of
Statement ot Revenues, Expenses and Changes in Net
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Assets $ 594,514 $ (201,442) $ (43,920)
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CARR, RIGGS & INGRAM, LLC
1713 Mahan Drive
Tallahassee, FL 32308
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p I 850 878 8777
F18508782344
www.cricpa.com
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American Institute of
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Alabama Society of
Florida Institute of
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Mississippi Society of
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AICPA Alliance for CPA Firms
Center for Public
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Company Audit Firms
RIGGS &
INGRAM
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENTAUDITING STANDARDS
Board of Directors
The Florida Bar
We have audited the consolidated financial statements of The Florida Bar and Subsidiaries
as of and for the year ended June 30, 2006, and have issued our report thereon dated
August 18, 2006. We conducted our audit in accordance with auditing standards generally
accepted in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of the
United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered The Florida Bar and Subsidiaries'
internal control over financial reporting in order to determine our auditing procedures for the
purpose of expressing our opinion on the financial statements and not to provide an opinion
on the internal control over financial reporting. Our consideration of the internal control over
financial reporting would not necessarily disclose all matters in the internal control that
might be material weaknesses. A material weakness is a reportable condition in which the
design or operation of one or more of the internal control components does not reduce to a
relatively low level the risk that misstatements caused by error or fraud in amounts that
would be material in relation to the financial statements being audited may occur and not be
detected within a timely period by employees in the normal course of performing their
assigned functions. We noted no matters involving the internal control over financial
reporting and its operation that we consider to be material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether The Florida Bar and Subsidiaries'
consolidated financial statements are free of material misstatement, we performed tests of
its compliance with certain provisions of laws, regulations, contracts and grant agreements,
noncompliance with which could have a direct and material effect on the determination of
financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not express such an
opinion. The results of our tests disclosed no instances of noncompliance or other matters
that are required to be reported under Government Auditing Standards.
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Board of Directors
The Florida Bar
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This report is intended solely for the information and use of the audit committee, Board of Directors
and management and is not intended to be and should not be used by anyone other than these
speci'fied parties.
~ ~ P ~ ~ A w < -
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August 18, 2006
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2006-2005 June 30 The Florida Bar Financial Statements

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