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BY FRANCIS A. ADEWALE
During the first meeting of the year for the WSBA Budget & Audit Committee, we were presented with the first-quarter fiscal outlook. The report bodes well for your Bar Association. To understand why this first-quarter fiscal report is so positive, I asked WSBA’s finance director, Tiffany Lynch, to provide an overview. We hope this information helps members understand and appreciate the diligent efforts WSBA staff and the Board of Governors put into the fiscal health of our Bar Association. This interview has been edited and condensed for clarity.
Q. Could you explain why the first quarter of the WSBA’s fiscal year 2024 ends in December and not March?
A. The WSBA fiscal year begins Oct. 1, which is different from organizations that operate on a calendar year where the fiscal year begins Jan. 1. Therefore, Dec. 31, 2023, marks the end of the first quarter (October – December) of fiscal year 2024.
Q. What is the state of the general fund?
A. With 25 percent of the year complete, the general fund is outperforming against budget, with revenue and indirect expenses on target and direct expenses under budget. The general fund net income is $308,063 as of Dec. 31, 2023. Through the remainder of this column, we can highlight the major variances and estimates moving forward.
Q. Let’s start with revenue. How are we holding up?
A. Total revenue is on budget at 25 percent (+$110,311) with major variances in licensing, bar exam, and Mandatory Continuing Legal Education (MCLE) fees due to timing of collection caused by seasonality. For example, licensing fees are under budget at the end of the first quarter. The majority of licensing fees are collected in January and pro-rated on a monthly basis, and the budget assumes an even timing distribution of revenue between each month. The budget also includes revenue from late fees (assessed after Feb. 1) and newly admitted members, which are not earned until after February, so revenue will increase and level out closer to budget later in the year. Meanwhile, bar exam fees and MCLE fees are ahead of budget because the timing of collection of fees for the winter exam and MCLE reporting deadlines cause higher revenue to be collected in the first quarter.
Two areas where we are tracking ahead of budget and are likely to come in over budget at the end of the year are interest income and new member product sales. In both instances the budget was conservative, and we expect revenue collection to continue through the year. Interest income is generated from the investment of the WSBA’s available cash based on the Board-approved investment policy, and it has been impacted by higher market interest rates. New member product sales are impacted by the timing of when products become available, the popularity of the topics, and how they align with MCLE reporting deadlines.
Q. Let’s talk about expenses; this is usually an area our members are more interested in. Are we able to control expenses given the inflationary trends in the economy?
A. Total expenses are under budget by $454,821 (-2 percent), primarily due to lower directexpenses, which include program costs such as board/council/task force meetings, event expenses, supplies, staff travel, etc. These vary depending on the timing of activities. It is normal for the WSBA’s direct expenses to run under budget in the first half of the year. We expect spending in these areas to pick up as we move into the second half of the fiscal year.
Indirect expenses, which are comprised of staffing and overhead costs, are on budget at 25 percent with minimal variance attributed to salary savings from open positions (including corresponding benefits for payroll taxes, retirement, and unemployment insurance) and lower YTD costs for rent and legal fees. These savings are offset by areas trending above budget, which include temporary staffing salaries (timing due to use of seasonal employees assisting with licensing renewals), medical insurance (employee coverage changes resulted in higher-than-expected budget), and IT direct expenses (higher due to timing of annual payments).
Q. What is the Continuing Legal Education (CLE) fiscal outlook in the first quarter?
A. The CLE fund includes CLE seminars, CLE products, and Deskbook cost centers, which collectively have budgeted a surplus of $157,341 for FY 24. Actual results as of Dec. 31, 2023, reflect a surplus of $426,877. Revenue is higher than budget by $352,540 (+20 percent) due to higher product sales and seminar registrations. This is a seasonal trend caused by year-end CLE reporting requirements. Expenses overall are under budget by $35,002 (-2 percent), mostly due to lower expenses from timing of direct expenses that have not been incurred yet for seminars held later in the fiscal year, and higher indirect expenses, mainly for medical benefits.
Q. What about the Client Protection Fund?
A. The Client Protection Fund (CPF) budgeted a use of reserves of ($92,700) for FY 24. Actual results as of Dec. 31, 2023, reflect a surplus of $194,830. Revenue is ahead of budget by $94,670 (+16 percent) due to increased revenue for all sources, the highest of which is interest income. As noted under the general fund, interest income was budgeted conservatively, and we have been able to lock in higher interest rates for investments through FY 24. Additionally, member assessments are running higher than budget by $28,013, which is to be expected because revenue is recognized upon collection of license fees, which are primarily collected between November and January each year. Overall expenses are under budget by $123,335 (-18 percent), mainly due to direct expenses for gifts to injured clients, which are paid out toward the end of the fiscal year.
Q. Now to the Sections operation cost center. What is the financial outlook?
A. The Sections operation cost center represents the collective total of financial activity for all 29 Sections. Sections budgeted a loss of ($328,603) for FY 24. Actual results as of Dec. 31, 2023, reflect a surplus of $26,440, mainly related to timing of programming and Section activities which are planned throughout the year at different times.
My thanks to Director Lynch for this overview. I hope we can maintain this sound financial outlook as we continue through the rest of the fiscal year. In the online version of this article, there will be a link to the first-quarter report as outlined in the March Board meeting materials.
About the authoRS
Francis Adewale is the WSBA treasurer and can be reached at:
Tiffany Lynch is the WSBA Director of Finance and can be reached at: