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The Florida Bar and Subsidiaries
Financial Statements andSupplemental Information
June 30, 2014 and 2013
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The Florida Bar and SubsidiariesTable of Contents
June 30, 2014 and 2013
Independent Auditors’ Report 1 - 2
Management’s Discussion and Analysis 3 - 7
Financial Statements
Consolidated Statements of Net Position 8
Consolidated Statements of Revenues, Expenses, and Changes in Net Position 9
Consolidated Statements of Cash Flows 10 - 11
Notes to Consolidated Financial Statements 12 - 28
Supplementary Information
Consolidating Statement of Net Position as of June 30, 2014 29 - 30
Consolidating Statement of Revenues, Expenses and Changesin Net Position for the year ended June 30, 2014 31
Consolidating Statement of Cash Flows for the year endedJune 30, 2014 32 - 33
General Fund Schedule of Budgeted and Actual Revenues and Expensesfor the year ended June 30, 2014 34 - 43
General Fund Reconciliation of Revenues and Expenses on a Budgetary Basis toTotals Per the Consolidating Statement of Revenues, Expensesand Changes in Net Position for the year ended June 30, 2014 44
Clients’ Security Fund Schedule of Budgeted and Actual Revenues andExpenses for the year ended June 30, 2014 45
Certification Fund Schedule of Budgeted and Actual Revenues and Expensesfor the year ended June 30, 2014 46
Sections Fund Schedule of Budgeted and Actual Revenues and Expenses for theyear ended June 30, 2014 47 - 48
Other Reports
Report on Internal Control Over Financial Reporting and On Compliance andOther Matters Based on an Audit of Financial Statements Performed in
Accordance with Government Auditing Standards 49 - 50
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Independent Auditors’ Report
Board of GovernorsThe Florida BarTallahassee, Florida
We have audited the accompanying consolidated financial statements of the business-typeactivities of The Florida Bar and Subsidiaries (The Florida Bar), as of and for the years endedJune 30, 2014 and 2013, and the related notes to the financial statements, which collectivelycomprise The Florida Bar’s basic consolidated financial statements as listed in the table ofcontents.
Management’s Respons ibil ity for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidatedfinancial statements in accordance with accounting principles generally accepted in the UnitedStates of America; this includes the design, implementation, and maintenance of internal controlrelevant to the preparation and fair presentation of financial statements that are free frommaterial misstatement, whether due to fraud or error.
Audi tor’s Respons ib il it y
Our responsibility is to express opinions on these consolidated financial statements based onour audits. We conducted our audits in accordance with auditing standards generally acceptedin the United States of America. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the consolidated financial statements are free frommaterial misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the consolidated financial statements. The procedures selected depend on theauditor’s judgment, including the assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity’s preparation and fairpresentation of the consolidated financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. Accordingly, we express no such opinion. An auditalso includes evaluating the appropriateness of accounting policies used and thereasonableness of significant accounting estimates made by management, as well asevaluating the overall presentation of the financial statements.
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We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects,the respective financial position of the business-type activities of The Florida Bar, as of June 30,2014 and 2013, and the respective changes in financial position and cash flows thereof for theyears then ended in accordance with accounting principles generally accepted in the UnitedStates of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that themanagement’s discussion and analysis on pages 3 through 7 is presented to supplement the
basic financial statements. Such information, although not a part of the basic financialstatements, is required by the Governmental Accounting Standards Board, who considers it tobe an essential part of financial reporting for placing the basic consolidated financial statementsin an appropriate operational, economic, or historical context. We have applied certain limitedprocedures to the required supplementary information in accordance with auditing standardsgenerally accepted in the United States of America, which consisted of inquiries of managementabout the methods of preparing the information and comparing the information for consistencywith management’s responses to our inquiries, the basic consolidated financial statements, andother knowledge we obtained during our audit of the basic consolidated financial statements.We do not express an opinion or provide any assurance on the information because the limitedprocedures do not provide us with sufficient evidence to express an opinion or provide anyassurance.
Other Information
Our audits were conducted for the purpose of forming opinions on the consolidated financialstatements that collectively comprise The Florida Bar’s basic consolidated financial statements.The supplementary information is presented for purposes of additional analysis and is not arequired part of the basic financial statements.
The supplementary information is the responsibility of management and was derived from andrelate directly to the underlying accounting and other records used to prepare the basicconsolidated financial statements. Such information has been subjected to the auditingprocedures applied in the audit of the basic consolidated financial statements and certain
additional procedures, including comparing and reconciling such information directly to theunderlying accounting and other records used to prepare the basic financial statements or to thebasic financial statements themselves, and other additional procedures in accordance withauditing standards generally accepted in the United States of America. In our opinion, thesupplementary information is fairly stated, in all material respects, in relation to the basicconsolidated financial statements as a whole.
December 12, 2014
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Management’s Discussion and Analysis
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The Florida Bar and SubsidiariesManagement’s Discussion and Analysis
See the Independent Auditors’ Report.- 3 -
With more than 98,000 members, The Florida Bar is the statewide professional and regulatoryorganization for lawyers. Headquartered in Tallahassee, The Florida Bar is a unified state bar byrule of the Supreme Court of Florida. Membership in The Florida Bar is a necessary component ofThe Supreme Court of Florida’s regulation of all lawyers licensed to practice law in Florida (Article
V, Section 15, Florida Constitution). The foundation for the organization is built on a philosophy ofequity and ethics. Through its programs and services, the Bar supports this philosophy with fourpillars that function as the mission of The Florida Bar: providing public service, protecting rights,promoting professionalism and pursuing justice. The following management’s discussion andanalysis is intended to provide the readers of The Florida Bar’s financial statements a generaloverview of the financial activities during the last two fiscal years (FY) that ended on June 30,2014 and 2013.
Financial Highlights
• The Florida Bar’s total net position increased approximately $6.1 million (or 10.8%) and $3.2million (or 6.0%) over the course of FY14 and FY13, respectively. In both years, this was
generated primarily from the favorable investment environment which produced investmentincome of $5.4 million in FY14 and $2.5 million in FY13 from the Florida Bar’s cash andinvestments.
• Total operating revenues for FY14 increased from FY13 by $1.4 million (or 3.4%) and remainedvirtually unchanged in FY13 as compared to FY12. The increase in FY14 resulted from thenormal growth in membership supplemented by a pick-up in collection of court ordereddisciplinary costs. In FY13, the increase from growth in membership was offset by a reduction incourt-ordered restitution and advertising revenue. Total operating expenses increasedapproximately $1.4 million (or 3.4%) in FY14 and $1.6 million (or 4.0%) in FY13. The increase inoperating expenses in FY14 came about as a result of new programs undertaken and necessarybuilding repairs. The increase in operating expenses in FY13 came primarily as a result of
increasing health care and other employment related costs.
• The resources available to spend for the General Fund of The Florida Bar were approximately$2.6 million more than budgeted for FY14 and were approximately $330,000 more than budgetedfor FY13. These results were primarily attributable to the actual gains and losses incurred by theGeneral Fund’s share of The Florida Bar’s investment income which was budgeted at $1.5 millionand experienced an actual gain of $3.9 million for FY14 and was budgeted at $1.4 million andexperienced an actual gain of $1.8 million for FY13. The Florida Bar was able to keep expenseswithin budgeted limits in both years.
Overview of the Financial Statements
This annual report consists of three parts – management’s discussion and analysis, the basicconsolidated financial statements, and an optional section that presents supplementaryinformation. The supplementary information includes consolidating statements and comparisons ofactual results to budgeted results. The basic consolidated financial statements present theconsolidated financial position, results of operations, and cash flows of the Florida Bar and itssubsidiaries. The Florida Bar performs two overall activities which are to serve as the statewideregulator of the practice of law and the professional association of lawyers. Its activities areaccounted for as a proprietary type enterprise fund because it charges fees to provide its servicessimilar to a business enterprise.
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The Florida Bar and SubsidiariesManagement’s Discussion and Analysis
See the Independent Auditors’ Report.- 4 -
The Statement of Net Position includes all of The Florida Bar’s assets and liabilities. The netposition is the difference between The Florida Bar’s assets and liabilities. The Statement ofRevenues, Expenses, and Changes in Net Position include all of The Florida Bar’s revenues andexpenses regardless of when the cash is received or paid. A Statement of Cash Flows provides
additional information regarding the change in The Florida Bar’s cash position. The notes(beginning on page 12) are an integral part in providing a full understanding of The Florida Bar’sfinancial statements.
Summary of Operations and Condensed Consol idated Financial Information
CONDENSED CONSOLIDATED STATEMENTS OF NET POSITION
% Change % ChangeJune 30, 2014 2013 2012 2013 - 2014 2012- 2013
AssetsCurrent and other assets $ 73,302,786 $ 66,124,233 $ 61,931,808 10.9% 6.8%Capital assets, net 10,363,930 10,734,193 10,411,528 -3.4% 3.1%
Total assets 83,666,716 76,858,426 72,343,336 8.9% 6.2%
LiabilitiesCurrent liabilities 18,549,400 17,771,868 16,452,056 4.4% 8.0%Other liabilities 2,439,156 2,519,415 2,522,588 -3.2% -0.1%
Total liabilities 20,988,556 20,291,283 18,974,644 3.4% 6.9%
Net positionInvested in capital assets,
net of related debt 10,363,930 10,734,193 10,411,528 -3.4% 3.1%Restricted for scholarships 58,967 50,008 46,334 17.9% 7.9%Unrestricted 52,255,263 45,782,942 42,910,830 14.1% 6.7%
Total net position $ 62,678,160 $ 56,567,143 $ 53,368,692 10.8% 6.0%
The Florida Bar’s cash and investments increased from $64.6 million in FY13 to $71.8 million inFY14 and from $60.2 million in FY12 to $64.6 million in FY13 despite a loss in the market value ofthe investment portfolio for FY13 of $104,437. The increases reflect the addition of cash providedby operations of $2.8 million and $3.1 million in FY14 and FY13, respectively, and the cashearnings on the investment portfolio of $4.4 million and $1.3 million in FY14 and FY13,respectively. The increase in capital assets from June 30, 2012 to June 30, 2013 has been afunction of the internal development of software programs.
The primary liability of The Florida Bar is unearned revenue resulting from advance collection ofmember fees and prepayments for Continuing Legal Education registrations. Unearned revenue
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The Florida Bar and SubsidiariesManagement’s Discussion and Analysis
See the Independent Auditors’ Report.- 5 -
increased $1.4 million (or 11%) from FY14 to FY13 and $1.5 million (or 13%) from FY12 to FY13.This was primarily due to operational changes which resulted in earlier collections of member fees.
Total net position of the Florida Bar increased from $56.5 million in FY13 to $62.6 million in FY14,
an increase of $6.1 million or 10.8%. The largest portion of the Florida Bar’s net position reflects itssubstantial investment portfolio of $53.3 million. This portfolio allows the Florida Bar to continue todelay increasing the required annual fees charged to its members to regulate the practice of law inFlorida. The last fee increase was over 13 years ago.
The remaining balance of net position reflects the Florida Bar’s investment in capital assets (e.g.land, buildings, and equipment). The Florida Bar uses these capital assets to provide services to itsmembers; consequently these assets are unavailable for future spending.
For more detailed information, see the accompanying Consolidated Statements of Net Position.
CONDENSED CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION% Change % Change
June 30, 2014 2013 2012 2013 - 2014 2012- 2013Operating revenues $ 44,175,611 $ 42,708,054 $ 42,692,524 3.4% 0.0%Operating expenses (43,451,727) (42,032,019) (40,407,950) 3.4% 4.0%
Net operating income 723,884 676,035 2,284,574 7.1% -70.4%
Non-operating revenues 5,394,950 2,528,194 - 113.4% 100.0%Non-operating expenses (7,817) (5,778) (699,189) 35.3% -99.2%
Net non-operating revenues 5,387,133 2,522,416 (699,189) 113.6% -460.8%
Change in net position 6,111,017 3,198,451 1,585,385 91.1% 101.7%Net position, beginning 56,567,143 53,368,692 51,783,307 6.0% 3.1%
Net position, ending $ 62,678,160 $ 56,567,143 $ 53,368,692 10.8% 6.0%
The Florida Bar operated without an increase in its Annual Fees required by its members over thepast three years. The increases in Annual Fees received by The Florida Bar have consistentlybeen approximately 2% to 3% per year commensurate with the membership growth rate. This wassupplemented by additional collections for court ordered disciplinary costs as well as sales ofcontinuing education products and other membership services. The growth in fees in FY13 wasoffset by drops in other revenue sources such as court ordered restitutions and advertisingrevenue.
Operating expenses increased 3.4% in FY14 which reflects the addition of several new programareas including a Leadership Academy and a program to study the future practice of law as well asnecessary repairs required to the headquarters building in Tallahassee. The 4.0% increase inoperating expenses in FY13 was a result of increased staffing costs directly related to theimplementations of recommendations made in a newly completed compensation study.
The increase in net position for FY14 and FY13 was primarily attributable to the favorableinvestment climate.
For more detailed information, see the accompanying Consolidated Statements of Revenues,Expenses, and Changes in Net Position.
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The Florida Bar and SubsidiariesManagement’s Discussion and Analysis
See the Independent Auditors’ Report.- 6 -
Budgetary Highlights For the years ended June 30, 2014 and 2013, The Florida Bar’s budgetfunded most departments at a continuation level. The original operating budgets for the GeneralFund (excluding the wholly-owned subsidiary and controlled entities) for the years ended June 30,2014 and 2013 approved by the Florida Supreme Court, planned on an increase in net assets of
$1,910,380 and $2,291,818, respectively before transfers to other funds. After Board of Governoramendments, the planned increase became $1,445,714 and $1,727,704 for FY14 and FY13,respectively.
For FY14, significant budget amendments included the implementation of a new website platformand layout, the creation of a new program to study the future of the practice of law, and specialfunding to educate the general public about law related topics. For FY13, significant budgetamendments included the continuation of a public education program to educate the general publicabout judicial merit retention, the addition of a leadership program, assistance with e-filingrequirements, and a contribution to the Florida Bar Foundation.
Included in the supplemental information is an actual to budget comparison for each department for
FY14.
CAPITAL ASSETS
The Florida Bar invested the following in Capital Assets:
% Change % ChangeJune 30, 2014 2013 2012 2013 - 2014 2012- 2013Land $ 1,306,690 $ 1,306,690 $ 1,306,690 0.0% 0.0%Building and improvements 11,346,008 11,349,427 11,352,944 0.0% 0.0%Landscaping and parking 120,318 120,318 120,318 0.0% 0.0%Equipment and furnishings 4,874,529 4,831,457 4,802,272 0.9% 0.6%Software 5,108,938 4,431,345 2,433,713 15.3% 82.1%Software in development 393,822 280,310 1,113,841 40.5% -74.8%
Construction in progress - 11,220 18,615 -100.0% -39.7%Total, prior to depreciation andamortization 23,150,305 22,330,767 21,148,393 3.7% 5.6%
Accumulated depreciationand amortization (12,786,375) (11,596,574) (10,736,865) 10.3% 8.0%
Net capital assets $ 10,363,930 $ 10,734,193 $ 10,411,528 -3.4% 3.1%
Additions to software and software in development account for the majority of the increases incapital assets and included costs of developing new programs or significantly updating onesalready in use. These included updates to The Florida Bar’s website, a program to track
continuing education requirements and allow members to access their status on-line, andupdates to allow the public to use the Florida Bar’s website to obtain a lawyer referral.Presently, The Florida Bar has no plans to significantly alter its investment in capital assetsother than to continue to add to costs of developed software.
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The Florida Bar and SubsidiariesManagement’s Discussion and Analysis
See the Independent Auditors’ Report.- 7 -
Future Financial Plan
The Florida Bar was created by the Supreme Court of Florida to assist the Supreme Court inregulating the practice of law in Florida. The Florida Bar is primarily funded through required
annual fee payments by lawyers, sales of continuing education programs to lawyers, and otherfees for the regulation of attorneys or sales of legal related products and services. There is noplan to materially change these revenue streams for the next two years. Accordingly, there areno present plans to materially increase the scope or nature of the services provided to thecitizens of Florida and the lawyers authorized to serve them.
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Financial Statements
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June 30, 2014 2013 Assets
Current assetsCash and cash equivalents 18,517,501$ 19,053,441$Short-term investments 53,331,083 45,558,555
Accounts receivable, net 731,293 644,103 Prepaid expenses and other assets 722,909 868,134
Total current assets 73,302,786 66,124,233
Capital assets, netLand 1,306,690 1,306,690 Buildings and improvements 11,346,008 11,349,427 Landscaping and parking 120,318 120,318 Equipment and furnishings 4,874,529 4,831,457 Software 5,108,938 4,431,345
Software development in progress 393,822 280,310 Construction in progress - 11,220 Accumulated depreciation (12,786,375) (11,596,574)
Total capital assets, net 10,363,930 10,734,193
Total assets 83,666,716 76,858,426
Liabilities
Current liabilities Accounts payable 1,806,666 1,742,490 Client Security Fund claims payable 1,332,838 2,068,347
Accrued expenses 1,263,803 1,215,887
Unearned revenues 14,097,164 12,696,218 Security deposits 48,929 48,926
Total current liabilities 18,549,400 17,771,868
Non-current liabilitiesCompensated absences payable 2,439,156 2,519,415
Total non-current liabilities 2,439,156 2,522,588
Total liabilities 20,988,556 20,291,283
Net PositionInvested in capital assets, net of related debt 10,363,930 10,734,193
Restricted for scholarships 58,967 50,008 Unrestricted 52,255,263 45,782,942
Total net position 62,678,160$ 56,567,143$
The Florida Bar and SubsidiariesConsolidated Statements of Net Position
See accompanying notes to the consolidated financial statements.
- 8 -
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Years ended June 30, 2014 2013
Operating revenues Annual fees 25,061,587$ 24,445,469$Other fees from members 6,817,452 6,409,900 Sales of products and services 9,166,020 8,720,280 Communication with members and the public 1,523,156 1,605,274 Young lawyers 1,058,690 923,673 Grants and other 548,706 603,156
Total operating revenues 44,175,611 42,707,752
Operating expensesRegulation of the practice of law 17,758,333 17,164,503 Cost of products and services provided to members 10,578,827 10,166,579 Unauthorized practice of law 1,671,903 1,692,286
Public service programs 2,261,160 2,999,116 Communications with members and the public 3,982,243 3,964,099
Administration 2,666,458 2,332,342 Legislation 571,916 469,431 Young lawyers 832,757 746,646 Depreciation and amortization 1,324,280 1,191,505 Other programs and costs 1,803,850 1,305,210
Total operating expenses 43,451,727 42,031,717
Operating income 723,884 676,035
Non-operating revenues (expenses)
Investment earnings 5,394,950 2,528,194 Loss on disposal of capital assets (7,817) (5,778) Total non-operating revenues (expenses) 5,387,133 2,522,416
Change in net position 6,111,017 3,198,451
Total net position, beginning of year 56,567,143 53,368,692
Total net position, end of year 62,678,160$ 56,567,143$
The Florida Bar and SubsidiariesConsol idated Statements of Revenues, Expenses and Changes in Net Posi tion
See accompanying notes to the consolidated financial statements.
- 9 -
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Years ended June 30, 2014 2013
Cash flows from operating activities:Receipts from members, customers and other sources 48,371,137$ 46,098,220$Payments to employees, suppliers and other vendors (45,604,319) (42,945,801)
Net cash provided by operating activities 2,766,818 3,152,419
Cash flows from capital and related financing activities: Acquisition of capital assets (925,180) (1,496,508)
Net cash (used in) capital and related financing activities (925,180) (1,496,508)
Cash flows from investing activities:Redemption of investments 25,870,733 30,839,459 Purchase of investments (32,679,170) (32,710,677) Investment income, net 4,430,859 1,310,338
Net cash (used in) investing activities (2,377,578) (560,880)
(Decrease) Increase in cash and cash equivalents: (535,940) 1,095,031
Cash and cash equivalents, beginning of year 19,053,441 17,958,410
Cash and cash equivalents, end of year 18,517,501$ 19,053,441$
The Florida Bar and SubsidiariesConsolidated Statements of Cash Flows
See accompanying notes to the consolidated financial statements.
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Years ended June 30, 2014 2013
Reconciliation of operating income to net cashprovided by operating activities:
Operating income 723,884$ 676,035$ Adjustments to reconcile operating income to net cash
provided by operating activities:Depreciation and amortization 1,324,280 1,191,505 (Increase) decrease in: Accounts receivable, net (87,190) (131,622) Prepaid expenses and other assets 145,225 123,302
Increase (decrease) in:
Accounts payable 27,522 (51,717) Claims payable (735,509) (173,728) Accrued expenses 47,916 38,990 Unearned revenues 1,400,946 1,482,823 Security deposits 3 4 Compensated absenses payable (80,259) (3,173)
Net cash provided by operating activities 2,766,818$ 3,152,419$
Non-cash investing, capital, and financing acitivitiesChange in the fair value of investments 3,739,662$ (2,046,563)$
Loss on disposal of assets (7,817)$ (30,006)$
The Florida Bar and SubsidiariesConsolidated Statements of Cash Flows (Continued)
See accompanying notes to the consolidated financial statements.
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The Florida Bar and SubsidiariesNotes to Consolidated Financial Statements
- 12 -
NOTE 1 – NATURE OF BUSINESS
The Florida Bar and Subsidiaries (The Florida Bar) is the statewide professional organization oflawyers. It serves as an advocate and intermediary for attorneys, the court and the public. TheFlorida Bar was established as a unified state bar by rule of the Supreme Court of Florida. TheFlorida Bar regulates lawyers in Florida, investigates the unauthorized practice of law, offerscontinuing legal education, publishes law journals and offers other member services.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reporting Entity
The Florida Bar is a unified state bar organized as an arm of the Supreme Court of the State ofFlorida. 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 theprovisions of Statement No. 34 (“Statement No. 34”) of the Governmental Accounting StandardsBoard (GASB) “Basic Financial Statements – and Management’s Discussion and Analysis – forState and Local Governments,” as amended by Statement No. 37.
In evaluating The Florida Bar as a reporting entity, management has considered all potentialcomponent units for which The Florida Bar may be financially accountable and if found to befinancially accountable, be required to be included in The Florida Bar’s financial statements. TheFlorida Bar is financially accountable if it appoints a voting majority of an organization’s governingboard and (1) it is able to impose its will on an organization or (2) there is a potential for anorganization to provide specific financial benefit to or impose specific financial burden on TheFlorida Bar. Additionally, The Florida Bar is required to consider other organizations for which the
nature and significance of their relationship with The Florida Bar are such that exclusion wouldcause the reporting entity’s financial statements to be misleading or incomplete. Management’sanalysis has disclosed no component units that should be included in The Florida Bar’s financialstatements.
Basis of Presentation
The Florida Bar is accounted for as a proprietary type enterprise fund. The Florida Bar applies allapplicable pronouncements of the Financial Accounting Standards Board (FASB) issued on orbefore November 30, 1989 that are not in conflict with applicable GASB pronouncements.Enterprise funds are used to account for activities that are financed and operated in a mannersimilar to private business enterprises: (1) where the costs of providing goods and services to the
general public on a continuing basis are to be financed through user charges; or (2) where theperiodic determination of net income is considered appropriate. Proprietary funds distinguishoperating revenues and expenses from non-operating items. Operating revenues and expensesgenerally result from providing goods and services in connection with a proprietary fund’s ongoingoperations. Operating expenses for The Florida Bar include the costs of personnel, contractualservices, supplies, utilities, repairs and maintenance, and depreciation and amortization of capitalassets. All revenues and expenses not meeting this definition are reported as non-operatingrevenues and expenses.
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The Florida Bar and SubsidiariesNotes to Consolidated Financial Statements
- 13 -
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Accounting
Basis of accounting refers to when revenues and expenses are recognized in the accounts andreported in the financial statements. These financial statements have been prepared on theaccrual basis of accounting in accordance with accounting principles generally accepted in theUnited States of America. Under this method, revenues are recognized when they are earned andexpenses are recognized when they are incurred. The measurement focus of proprietary fundtypes is on a flow of economic resources method, which emphasizes the determination of netincome, financial position, and cash flow. All fund assets and liabilities, current and non-current,are accounted for in the Consolidated Statements of Net Assets.
Cash and Cash Equivalents
All demand deposit accounts and short-term highly liquid investments with original maturities of
three months or less are reported as cash equivalents.
Investments
Investments are reported at fair values. Fair values for securities traded on national or internationalexchanges or over-the-counter are valued at quoted market prices. Fair values of securities nottraded on an exchange or over-the-counter are estimated based on the net asset values providedby the investee calculated in accordance with FASB Topic 946.
Capital Assets
Capital assets are stated at cost less accumulated depreciation and amortization. The value of
software developed for The Florida Bar’s use includes all direct and indirect costs that are relatedto development activities. The costs of capital assets are depreciated or amortized over theestimated useful lives of the related assets, ranging from 3 to 40 years, using the straight-linemethod. When capital assets are retired or otherwise disposed of, the costs and relatedaccumulated depreciation or amortization are removed from the accounts and any resulting gain orloss is reflected in the Consolidated Statements of Revenues, Expenses and Changes in NetPosition, in the period of disposal.
Claims Payable
The Florida Bar voluntarily created the Clients’ Security Fund (the Fund) to provide possiblecompensation to people who have suffered financial losses due to misappropriation of funds byerrant Florida Bar members. The Fund is financed by $25 of the annual fees due from each Florida
Bar member who is in good-standing (including inactive members). Claims payable representamounts that have been approved for payment from the Fund.
Unearned Revenues
Unearned revenues consist primarily of membership fees collected in advance, prepaid advertisingand prepaid legal education courses.
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The Florida Bar and SubsidiariesNotes to Consolidated Financial Statements
- 14 -
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Al location of Expenses
The costs of providing the various programs, services, and other activities have been summarizedon a functional basis in the Consolidated Statement of Revenues, Expenses and Changes in NetPosition. Accordingly, certain costs have been allocated among the programs and supportingservices benefited.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of The Florida Bar andits 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 AttorneysCharitable Trust. All significant intercompany transactions and accounts have been eliminated inconsolidation.
Income Taxes
The Florida Bar is an administrative agency of the Supreme Court of Florida and is not subject tofederal or state income tax. The Florida Bar Building Corporation, Florida Lawyers Association forthe Maintenance of Excellence, Inc. and The Florida Attorneys Charitable Trust have been grantedexemption from federal and state income taxes except on unrelated business income underSections 501(c)(25), 501(c)(6), and 501(c)(3), respectively, of the Internal Revenue Code. Theincome tax returns are open for review by the Internal Revenue Service, generally for 3 years. Thereturns for 2013, 2012 and 2011 are available, as applicable.
Estimates
The preparation of financial statements in conformity with accounting principles generally acceptedin 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 andliabilities at the date of the financial statements and the reported amounts of revenues andexpenses during the reporting period. Actual results could differ from those estimates.
Concentration
The Florida Bar receives the majority of its revenue from lawyers licensed to practice in the State ofFlorida.
Net Position
Net position is categorized as invested in capital assets, restricted for scholarships, andundesignated. Invested in capital assets is intended to reflect the portion of net position that isassociated with non-liquid, capital assets. Restricted for scholarships consists of monies restrictedfor the annual G. Kirk Haas fund scholarships. Undesignated assets consist of all other assets notincluded in the previous categories.
Effective as of the start of the fiscal year ending June 30, 2013, The Florida Bar implementedGASB 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources,and Net Position which required a change in terminology. This change in accounting principal didnot result in a change in the amount of the beginning or ending net position.
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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reclassifications
Certain revenue and expense categories for the year ended June 30, 2013 were reclassified toconform to the current year presentation.
NOTE 3 – CASH AND CASH EQUIVALENTS
Cash and cash equivalents are subject to custodial credit risk. Custodial credit risk is the risk thatin the event of a bank or other counterparty failure, The Florida Bar’s cash and cash equivalentsmay not be returned. The Florida Bar’s policy with respect to custodial credit risk is that The FloridaBar will only maintain demand deposit accounts with financial institutions in which managementbelieves the risk to be limited because the financial institutions are large with strong financialpositions.
Cash and cash equivalents are held at three financial institutions. The cash held in demand depositaccounts was $8,136,007 and additional cash and money market funds was $10,381,494 at June30, 2014. Cash in the amount of $1,233,731 was insured by the Federal Deposit InsuranceCorporation (FDIC) as of June 30, 2014. The additional cash and money market funds are held ata financial institution insured by the Securities Investor Protection Corporation (SIPC). As of June30, 2014, the SIPC provides up to $250,000 in coverage for uninvested cash and money marketfunds not otherwise covered by the FDIC.
NOTE 4 – INVESTMENTS
Investment Objectives and Policies
Investments are made for the sole interest and exclusive purpose of providing investmentreturns for The Florida Bar. The Florida Bar’s investment objectives and policies are achievedthrough a short-term account portfolio and a long-term account portfolio.
Investment guidelines are defined by a written Investment Policy (the Policy) approved by theFlorida Bar’s Board of Governors. The Policy establishes diversified investment strategies, bothby types of investment and by manager, minimum credit qualities, and duration limits. AnInvestment Committee has oversight, within Policy limits, to implement and direct theinvestment strategies. The policies are reviewed at least annually for any adjustments requireddue to changes or developments within the investment markets that may provide enhancedinvestment and/or risk management opportunities, and recommendations for changes aresubmitted for approval by the Board of Governors.
The purpose of the short-term portfolio is to provide for The Florida Bar’s short-term workingcapital needs. The short-term portfolio possesses a short-term time horizon (one to three years)and within this horizon, the primary objectives are to preserve capital and provide liquidity forshort-term cash flow needs and to achieve attractive short-term yields consistent withpreservation of capital.
The purpose of the long-term investment portfolio is to provide for The Florida Bar’s operatingneeds and to fund The Florida Bar’s programs both today and into the future. The long-term
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NOTE 4 – INVESTMENTS (CONTINUED)
Investment Objectives and Policies (Continued)
portfolio possesses an intermediate to long-term horizon (five to seven years) that correlates tothe primary objectives of providing long-term growth of capital and income. The secondaryobjectives are high current income and liquidity.
The Policy requires the risk adjusted returns of an investment over a full market cycle to rank inthe top 50% of universal comparisons with similar objectives and the investment shouldoutperform the target policy index. The Policy establishes asset allocation guidelines withregard to acceptable asset classes and prohibited investments, the overall targeted asset mix,and the representative indices for each asset class. The asset allocation guidelines ascompared to actual investment balances were as follows as of June 30, 2014:
Short-Term
Target Representative Ass et Classes Minimum Mix Maximum Act ual Index
Short-Term Fixed income 35.0% 50.0% 65.0% 35.1% Barclay's 1 -3 Year Government/Credit Bond IndexCash and Equivalents 35.0% 50.0% 65.0% 65.0% Citigroup U.S. 90-Day Treasury Bills Index
Long-Term
Target Representative
Ass et Classes Minimum Mix Maximum Act ual Index
U.S. Large Cap Equity 7.0% 12.0% 17.0% 12.3% Standard & Poor's 500 Index
U.S. Mid Cap Equity 0.0% 4.0% 9.0% 4.3% Russell Mid Cap Index
U.S. Small Cap Equity 0.0% 2.0% 7.0% 2.1% Russell 2000 Index
International Equity 10.0% 15.0% 20.0% 19.1% MSCI EAFE Index
Int'l Small/Mid Cap Equity 0.0% 2.0% 7.0% 2.0% MSCI EAFE Small Cap Index or MSCI EAFESmall/Mid Cap Index
Emerging Markets Equity 5.0% 10.0% 15.0% 8.9% MSCI Emerging Markets Index
Commodities 1.0% 6.0% 11.0% 7.9% Dow Jones UBS Commodity Index
REITs 0.0% 3.0% 8.0% 2.2%NAREIT Equity Index or Dow Jones Global SelectREIT
Inflation-linked Securities 0.0% 2.0% 7.0% 0.0% Barclays Capital U.S. TIPS Index
Emerging Market FixedIncome 0.0% 2.0% 7.0% 0.0%
JP Morgan Emerging Markets Bond Index or JPMorgan Emerging Market Bond Index (unhedged)
U.S. Fixed Income 15.0% 22.0% 29.0% 17.8% Barclay's Capital Intermediate Gov't/Credit Bond Index
U.S. High Yield FixedIncome 0.0% 4.0% 9.0% 3.9% Barclay's Capital U.S. Corporate High Yield Index
Hedged Funds 0.0% 6.0% 9.0% 8.2%HFRI Conservative Index or Hedge Fund of FundsComposite Index
Liquid Alternatives 0.0% 3.0% 6.0% 5.9% 60% MSCI ACWI/40% Barclays Capital Global Aggregate
Managed Futures 0.0% 2.0% 5.0% 1.9% Barclay's CTA Index
Cash & Equivalents 0.0% 5.0% 10.0% 3.5% Citigroup U.S. 90-Day Treasury Bills
Performance and compliance reports are submitted to the Investment Committee quarterly. TheFlorida Bar employs an investment consultant who provides performance and compliancereporting at both the portfolio level and by individual investment manager.
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NOTE 4 – INVESTMENTS (CONTINUED)
Investments
At June 30, The Florida Bar’s investment balances were as follows:
June 30, 2014 2013US Treasuries $ 438,980 $ 501,769Federal Agencies 2,828,060 3,706,223Municipal Bonds 651,546 800,667Corporate Bonds & Other Fixed Income 4,807,847 4,486,676Mutual Funds - debt securities (ST) 7,549,186 12,396,453Mutual Funds - equity securities 1,521,635 1,166,462Mutual Funds - commodities 3,938,845 2,187,847Equities 23,551,459 16,025,654Managed Futures 946,113 787,864
Liquid Alternatives 2,967,934 1,142,260Hedge Funds 4,129,478 2,356,680
Total investments $ 53,331,083 $ 45,558,555
The Florida Bar’s investment securities are exposed to various risks, such as custodial creditrisk, interest rate risk, credit quality risk, foreign currency risk, concentration of credit risk, andmarket conditions. Due to the level of risk associated with certain investment securities, it is atleast reasonably possible that changes in the value of investment securities will occur in thenear term and those changes could materially affect investment balances.
Custodial Credit Risk
Custodial credit risk is the risk that in the event of the failure of the custodial entity, The FloridaBar’s deposits may not be returned to it. The Policies state that The Florida Bar will only holdinvestment securities that are insured or registered and held by The Florida Bar, or itsdesignated agent, in the name of The Florida Bar. Investments held through its agent, MorganStanley Smith Barney, LLC have Securities Investor Protection Corporation (SIPC) coverage upto $500,000 per customer for cash and securities as of June 30, 2014 of which $250,000 maybe in uninvested cash. Morgan Stanley Smith Barney, LLC also has purchased “Excess SIPC”protection above the SIPC limits. This excess coverage is subject to a firmwide cap for MorganStanley of $1 billion with no per-client limit for securities and a $1.9 million per-client limit for thecash portion of any remaining shortfall. Investments in PIMCO mutual funds are held by a thirdparty trust company.
Interest Rate Risk
Interest rate risk arises from investments in debt instruments and is defined as the risk thatchanges in interest rates will adversely affect the fair value of an investment. The Florida Bar’sinvestments in U.S. Treasuries, federal agencies, municipal bonds, corporate bonds, and otherbonds are directly subject to interest rate risk. The interest rate risk is managed by requiring theduration of the fixed income portfolio to average between plus or minus 20% of the duration ofthe representative benchmark for the investment.
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NOTE 4 – INVESTMENTS (CONTINUED)
Interest Rate Risk (Continued)
As of June 30, 2014, The Florida Bar’s debt investments had the following maturities:
Investment Maturities (In Years)
June 30, Fair ValueLess than 1
Year 1 - 5 Years 6 - 10 Years Over 10 Years
US Treasuries $ 438,980 $ - $ 123,138 $ 315,842 $ -
Federal Agencies 2,828,060 - 530,850 482,255 1,814,955
Municipal Bonds 651,546 46,860 275,772 313,780 15,134
Corporate Bonds & Other
Fixed Income 4,807,847 183,875 2,089,710 1,125,868 1,408,394
Total investments $ 8,726,433 $ 230,735 $ 3,019,470 $ 2,237,745 $ 3,238,483
The Florida Bar is not directly subject to interest rate risk for its investment in mutual funds thatpurchase debt instruments, as The Florida Bar is able to sell their interest in these mutual fundsat will (subject to potential redemption fees). At June 30, 2014, the weighted average lifereported by the mutual fund managers for the mutual funds invested in debt instruments was4.23 to 7.45 years.
Credit Quality Risk
The Policy requires investments in fixed income debt securities to meet an average quality
rating of A or higher for the long-term portfolio and AA or higher for the short-term portfolio byeither Standard & Poor’s, Moody’s or Fitch Investors Service at the time of purchase.Investments in corporate holdings must be rated investment grade or better by either Standard& Poor’s, Moody’s or Fitch Investors Service at the time of purchase. In the event a bond’scredit rating is downgraded to a level below investment grade by two of the three ratingsagencies, the Investment Manager must notify the Investment Committee and provide theCommittee with the Manager’s outlook on the investment. The Investment Committee mustapprove continuing to hold the downgraded investment. The Manager must regularly update thecommittee on the downgraded investment’s status.
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NOTE 4 – INVESTMENTS (CONTINUED)
Credit Quality Risk (continued)
The Florida Bar’s debt investments by rating at June 30, 2014 are presented below:
Quality RatingU.S.
TreasuriesFederal
AgenciesMunicipal
Bonds
CorporateBonds &
Other FixedIncome
Mutual Funds- Debt
Securities Total
U.S. Government Agencies $ - $ 2,828,060 $ - $ 701,422 $ - $ 3,529,482
Aaa 438,980 - 194,516 1,689,049 - 2,322,545
Aa1 - - 205,699 118,843 - 324,542
Aa2 - - 186,327 123,017 - 309,344
Aa3 - - 39,980 70,223 - 110,203
A1 - - 25,024 341,818 - 366,842
A2 - - - 445,588 - 445,588
A3 - - - 348,824 - 348,824
Baa1 - - - 508,439 - 508,439
Baa2 - - - 434,653 - 434,653
Baa3 - - - 25,971 - 25,971Below investment
grade - - - - - -
Unrated - - - - 7,549,186 7,549,186
Total investments $ 438,980 $ 2,828,060 $ 651,546 $ 4,807,847 $ 7,549,186 $ 16,275,619
Because mutual funds are listed and valued as a whole, not individual holdings, informationabout specific ratings cannot be obtained however the mutual funds do have exposure to non-investment grade securities. Investments in mutual funds are with the understanding that theinvestment policies stated in the mutual fund’s prospectus supersedes the guidelinesestablished by The Florida Bar.
Foreign Currency Risk
Investments in international equity securities are limited to SEC-Registered, U.S. exchangelisted, U.S. dollar-denominated securities in foreign domiciled issuers. Investments ininternational debt securities are limited to SEC-registered, U.S. dollar-denominated, U.S.government backed securities issued by foreign governments. The Florida Bar invests ininternational securities through American Depository Receipts (ADRs). ADRs representinvestments in shares of foreign companies traded on the U.S. financial markets and aredenominated in U.S. dollars and, thus, are not exposed to foreign currency risk. Investments inforeign currency-denominated government bonds, any type of foreign corporate bond, or any
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NOTE 4 – INVESTMENTS (CONTINUED)
Foreign Currency Risk (continued)
other type of foreign currency are not allowed. Securities of foreign companies traded onforeign stock exchanges may be purchased only with the written permission of The Florida Bar’sInvestment Committee. Additionally, the investment policies approve the use of mutual funds,which may include foreign securities, with the understanding that the investment policies statedin the mutual fund’s prospectus supersede the guidelines set forth in The Florida Bar’sinvestment policy.
Concentration of Credit Risk
The Policy requires investments to be diversified such that there is not an undue concentrationin a single industry sector except for its Concentrated Portfolios. Investments in equitysecurities 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.Investments in fixed income securities are subject to no more than 5% of the account’s marketvalue invested in a single issue (at cost) or in direct obligations of a single issuer (at market)with the exception of the U.S. Government and its agencies so long as any such government oragency issue shall be backed with the full faith and credit of the U.S. Government. In addition,no more than 15% of the fixed income securities may be invested in mortgage backed or assetbacked securities of a single issuer, with the exception of those issued by the U.S. Government,its agencies, or its sponsored agencies.
Investments in cash and cash equivalents are limited to no more than 10% of the account’smarket value in a single issue (at cost), with the exception of issues backed by the U.S.Government and its agencies and diversified money market funds.
Derivative Instruments
As of June 30, 2014, the Florida Bar’s investment policy states that investments in options,derivatives and financial futures are prohibited in separately managed accounts other than its
Alternative Investment assets. Additionally, the investment policy approves the use of mutualfunds, which may include derivative instruments, with the understanding that the investmentpolicies stated in the mutual fund’s prospectus supersede the guidelines set forth in The FloridaBar’s investment policy.
NOTE 5 – ACCOUNTS RECEIVABLE, NET
The following is a summary of accounts receivable, net:
June 30, 2014 2013
Accounts receivable $ 746,293 $ 659,103
Allowance for doubtful accounts (15,000) (15,000)
Accounts receivable, net $ 731,293 $ 644,103
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NOTE 6 – CAPITAL ASSETS, NET
July 1, 2013 Additions Deletions Transfers June 30, 2014
Capital assets not being depreciated oramortized:
Land $ 1,306,690 $ - $ - $ - $ 1,306,690
Software development in progress 280,310 798,454 - (684,942) 393,822
Construction in progress 11,220 - (11,220) - -
Total capital assets not depreciated oramortized 1,598,220 798,454 (11,220) (684,942) 1,700,512
Capital assets being depreciated oramortized:
Buildings and improvements 11,349,427 53,694 (57,113) 11,346,008
Landscaping and parking 120,318 - - - 120,318
Equipment and furnishings 4,831,457 127,685 (99,425) 14,811 4,874,528Software 4,431,345 7,463 670,131 5,108,939
Total capital assets being depreciated oramortized 20,732,547 188,842 (156,538) 684,942 21,449,793
Less accumulated depreciation oramortization for:
Buildings and improvements (6,576,525) (384,787) 44,501 - (6,916,811)
Landscaping and parking (120,318) - - (120,318)
Equipment and furnishings (3,662,297) (344,641) 85,217 (6,074) (3,927,795)
Software (1,237,434) (594,852) 4,761 6,074 (1,821,451)
Total accumulated depreciation oramortization (11,596,574) (1,324,280) 134,479 - (12,786,375)
Total capital assets being depreciated oramortized, net 9,135,973 (1,135,438) (22,059) 684,942 8,663,418
Total capital assets, net $ 10,734,193 $ (336,984) $ (33,279) $ - $ 10,363,930
Depreciation and amortization expense for the years ended June 30, 2014 and 2013 was$1,324,280 and $1,191,505, respectively.
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NOTE 7 – NON-CURRENT LIABILITIES
Compensated Absences Payable & Changes in Non-Current Liabili ties
The non-current liabilities are comprised of only the Total Compensated absences payable.
Compensated absences payable consisted of the following:
June 30, 2014 2013
Accrued vacation $ 1,417,274 $ 1,476,155
Accrued sick leave 1,021,882 1,043,260
Total compensated absences $ 2,439,156 $ 2,519,415
Changes in non-current liabilities are summarized as follows:
Balance BalanceJuly 1, 2013 Additions Reductions June 30, 2014
Accrued vacation $ 1,476,155 $ 1,111,685 $ (1,170,566) $ 1,417,274
Accrued sick leave 1,043,260 220,933 (242,311) 1,021,882
Total non-current liabilities $ 2,519,415 $ 1,332,618 $ (1,412,877) $ 2,439,156
NOTE 8 – REVENUE AND EXPENSE CLASSIFICATION
The significant revenue and expense accounts presented in the consolidated financialstatements are described as follows:
Other Fees from Members
Includes revenues from members other than annual fees such as advertising approval fees,certification fees and section dues.
Sales of Products and Services
Includes revenues from sources such as Continuing Legal Education (CLE) registrations, andmeeting revenues.
Grants and Other
Includes grants received from The Florida Bar Foundation, cost recoveries from disciplinecases, rents received in The Bar Center Building Fund and other sources of revenue.
Regulation of the Practice of Law
Includes expenses incurred for Lawyer Regulation, Lawyer Advertising, Ethics, Continuing LegalEducation Rules (CLER), Membership Records and Certification.
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NOTE 8 – REVENUE AND EXPENSE CLASSIFICATION (CONTINUED)
Cost of Products and Services Provided to Members
Includes expenses such as the cost of CLE courses and publications, Legal Office Management Advisory Services (LOMAS), voluntary member assistance programs, meetings, committeeactivity and section activity.
Communication with Members and the Public
Includes the revenue and expenses of the Public Information Department and The Florida BarJournal and News.
Administ rat ion
Includes board and officer expenses, the cost of the Executive Director’s office, General
Counsel, Research, Planning and Evaluation, and liability and property insurance.
NOTE 9 – 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 sixmonths of service. The Plan is administered by The Florida Bar Retirement Committee. ThePlan may be amended at any time by The Florida Bar. Employer contributions are discretionaryand are currently made for all eligible employees employed on December 31 based on aformula which was 15% of covered compensation for the years ended June 30, 2014 and 2013,respectively, and 4.3% on covered compensation exceeding 80% of the Social Security wage
base. The employer contributions are allocated to separate participant accounts and invested bythe Trustee in the funds selected by the employee from those offered by the Plan Administrator.Participant accounts vest based on the following schedule:
Less than 3 years 0%3 – 4 years 40%4 – 5 years 60%5 – 6 years 80%Greater than 6 years 100%
Forfeited contributions are held in a separate account and are used to reduce future employercontributions. 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 30,2014 and 2013 for the Plan years ended December 31, 2013 and 2012 and was $ 2,300,355and $ 2,185,851, respectively.
The Florida Bar also has a deferred compensation plan. The plan is for the benefit of all eligibleemployees who elect to participate.
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NOTE 10 – RETIREE POSTEMPLOYMENT HEALTH BENEFITS
Plan Description. The Florida Bar Retiree Health Plan (TFBRHP) is a single-employer definedbenefit healthcare plan administered by The Florida Bar. TFBRHP provides health insurance
benefits to eligible employees at early retirement, disability or full retirement. The Florida Barhas the authority to establish and amend benefit provisions of TFBRHP. TFBRHP issues astand-alone financial report that includes the financial statements and required disclosures.
This report may be obtained by writing to The Florida Bar, 651 East Jefferson Street,Tallahassee, Florida 32399-2300.
Funding Policy. TFBRHP is funded through contributions made by The Florida Bar. Thecontribution requirements are established and may be amended by The Florida Bar. Currently,there are no required contributions by active or retired employees. The required contributionfrom the Florida Bar is based on an actuarially determined percentage of total active payroll. Forfiscal years ended June 30, 2014 and 2013, The Florida Bar contributed $87,269 and $90,190,
respectively, to the plan for the annual required contributions.
Annual OPEB Cost and Net OPEB Obligation. The Florida Bar’s annual other postemploymentbenefit (OPEB) cost (expense) is calculated based on the annual required contribution of theemployer (ARC), an amount actuarially determined in accordance with the parameters of GASBStatement 45. The ARC represents a level of funding that, if paid on an ongoing basis, isprojected to cover normal costs each year and amortize any unfunded actuarial liabilities (orfunding excess) over a period not to exceed thirty years. Based on the January 1, 2014,actuarial valuation, the ARC is .53% of active payroll payable for the calendar years 2014through 2015. The following table shows the components of The Florida Bar’s annual OPEBcost for the year, the amount actually contributed to the plan, and changes in The Florida Bar’snet OPEB obligation to TFBRHP:
Annual required contribution $ 87,269
Interest on net OPEB obligation -
Adjustments to annual required contribution -
Annual OPEB cost (expense) $ 87,269
Net OPEB obligation - July 1, 2013 $ -
Annual OPEB cost (expense) for 2014 (87,269)
Contributions made during FY 2014 87,269
Net OPEB obligation - June 30, 2014 $ -
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NOTE 10 – RETIREE POSTEMPLOYMENT HEALTH BENEFITS (CONTINUED)
The Florida Bar’s annual OPEB cost, the percentage of annual OPEB cost contributed to theplan, and the net OPEB obligation for 2014 and the preceding three years were as follows:
Fiscal Year Ended Annual OPEB
CostPercentage of Annual OPEB Cost
ContributedNet OPEBObligation
6/30/2010 $ 268,980 100% $ -
6/30/2011 85,511 100% -
6/30/2012 87,777 100% -
6/30/2013 90,190 100% -
6/30/2014 87,269 100% -
Funded Status and Funding Progress. As of January 1, 2014, the most recent actuarialvaluation date, the plan was 100% funded. The actuarial accrued liability for benefits wascalculated to be $2,448,563 and the actuarial value of the assets was $2,455,763, resulting in afunding overage of ($7,200). The covered payroll (annual payroll of active employees coveredby the plan) was $15,749,749, and the ratio of the unfunded actuarial accrued liability (UAAL) tothe covered payroll was (0.05) %.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts andassumptions about the probability of occurrence of events far into the future. Examples includeassumptions about future employment, mortality, and the healthcare cost trend. Amountsdetermined regarding the funded status of the plan and the annual required contributions of the
employer are subject to continual revision as actual results are compared with past expectationsand new estimates are made about the future.
Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes arebased on the substantive plan (the plan as understood by the employer and the plan members)and include the types of benefits provided at the time of each valuation and the historical patternof sharing of benefit costs between the employer and plan members to that point. The actuarialmethods and assumptions used include techniques that are designed to reduce the effects ofshort-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistentwith the long-term perspective of the calculations.
The projected unit credit actuarial cost method was used for the January 1, 2014 actuarial
valuation. The actuarial assumptions included a 7.0% investment rate of return, which is the rateof the expected long-term investment returns on plan assets and an annual healthcare costtrend rate of 7.5% initially, reduced by decrements to an ultimate rate of 5.0% in the year 2018and beyond. Both rates included a 3.0% inflation assumption. TFBRHP holds plan assets intrust solely to provide benefits to retirees and their beneficiaries. The UAAL is being amortizedas a level percentage of projected payroll on a closed basis. The remaining amortization periodat January 1, 2014 was 28 years.
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NOTE 10 – RETIREE POSTEMPLOYMENT HEALTH BENEFITS (CONTINUED)
REQUIRED SUPPLEMENTARY INFORMATIONSchedule of Funding Progress
Actuarial
Accrued
Liability UAAL as a
Actuarial (AAL)- Unfunded Percentage
Actuarial Value Projected AAL Funded Covered of Covered
Valuation of Assets Unit Credit (UAAL) Ratio Payroll Payroll
Date (a) (b) (b - a) (a/b) (c) (b - a) / c)
1/1/06 $ - $ 1,203,784 $ 1,203,784 0.00% $ 12,946,872 9.30%
1/1/08 1,288,476 1,216,209 (72,267) 105.94% 14,296,752 -0.51%
1/1/10 1,293,906 1,584,797 290,891 81.64% 14,557,008 2.00%1/1/12 1,712,944 1,886,227 173,283 90.81% 14,402,420 1.20%
1/1/14 2,455,763 2,448,563 (7,200) 100.29% 15,749,749 -0.05%
NOTE 11 – LEASES
The Florida Bar is the lessee of office space under operating leases expiring in various yearsthrough the year 2020, with escalation clauses.
The Florida Bar also leases office space from its wholly-owned subsidiary, The Florida BarBuilding Corporation. The intercompany rental income and rental expense have been eliminated
in consolidation.
Future minimum rental payments to unrelated entities are as follows:
Years ending June 30, Amount
2015 $ 760,227
2016 794,017
2017 791,952
2018 371,104
2019 178,687
Thereafter 277,429
Total minimum future rental payments $ 3,173,416
Total rental expense for the fiscal year ended June 30, 2014 and 2013 was $737,095 and$714,702, respectively.
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 yearsthrough the year 2018. Rental income for the fiscal years ended June 30, 2014 and 2013 was$295,576 and $293,818, respectively.
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NOTE 11 – LEASES (CONTINUED)
Future minimum rental receipts are as follows:
Years ending June 30, Amount
2015 $ 295,576
2016 295,576
2017 295,576
2018 295,576
2019 73,894
Total minimum future rental receipts $ 1,256,198
NOTE 12 – CONTINGENCIES
The Florida Bar is involved in several actions as defendant and/or co-defendant. The majorityof the actions are expected to be settled with little or no financial impact to The Florida Bar. Anaccurate assessment of any significant liability is not determinable although management of TheFlorida Bar believes that the possibility of any significant liability arising from current litigation isextremely remote.
NOTE 13 – COMMITMENTS
The Florida Bar has contracted with various hotels or convention centers to reserve facilities,rooms, and food and beverage services for various meetings and seminars to be held through
fiscal year 2020. If The Florida Bar should choose to cancel the contracts, liquidating damageswould be due to the hotels or convention centers. Generally, liquidating damages are graduatedbased on the time between cancellation and the scheduled arrival date of the meeting and arecalculated based on a percentage of anticipated revenues by the particular hotel or conventioncenter.
The following is a schedule of estimated liquidating damages that The Florida Bar would incurshould they cancel all the contracts as of June 30, 2014:
Event
Estimatedliquidatingdamages
Annual Meeting $ 894,163
Board of Governors Meetings 104,984
Winter Meeting 135,210
Fall Meeting 37,984
Section and Division Meetings 866,471
Continuing Legal Education Seminars and Other Meetings 140,575
Total commitment $ 2,179,387
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The Florida Bar and SubsidiariesNotes to Consolidated Financial Statements
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NOTE 14 – DESIGNATED NET POSITION
The Florida Bar has designated certain components of net position to be used for specificprogram purposes. As of June 30, 2014 and 2013, the designated components of net position
were $20,188,679 and $17,227,035, respectively.
NOTE 15 – RISK MANAGEMENT PROGRAMS
The Florida Bar is exposed to various risks of loss related to torts; theft of, damage to, anddestruction of assets; errors and omissions; injuries to employees; and natural disasters.Workers’ compensation, property, and general liability coverage are provided throughcommercial insurance carriers. Management continuously reviews the limits of coverage andbelieves that current coverage is adequate. There were no significant reductions in insurancecoverage from the previous year.
NOTE 16 – SUBSEQUENT EVENT
Subsequent to June 30, 2014, the Florida Bar approved in substance the terms of an agreementto provide a $6.0 million loan to The Florida Bar Foundation (the Foundation) for the purpose ofaccomplishing The Foundation’s mission of access to justice. The terms of the agreementprovide that the loan will be advanced in two (2) installments of up to $3.0 million each and noearlier than 1 year apart. The loan will bear interest at a rate equal to the Mid-Term ApplicableFederal Rate adjusted annually but no less than .75% per annum. Interest on the outstandingbalance of the loan will be paid annually and all principal and interest will be repaid within seven(7) years.
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.
Supplementary Information
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The FCons
Clients'
General Bar Center Security Certification SYear ended June 30, 2014 Fund Fund Fund Fund
Cash flows fro m operating activities:
Receipts from members, customers and other sources 39,078,758$ 1,293,004$ 2,485,436$ 1,347,774$ 5$ Payments to employees, suppliers and other vendors (35,638,077) (983,461) (2,896,429) (1,426,463) (5 Net cash provided by (used in) operating activities 3,440,681 309,543 (410,993) (78,689)
Cash flows f rom capital and related financing activities: Acquisition of capital assets (765,030) (160,150) - -
Net cash (used in) capital and related financing activities (765,030) (160,150) - -
Cash flows fro m investing activities:Redemption of investments 25,870,733 - - - Purchase of investments (32,679,170) - - - Investment income, net 2,904,583 542,870 410,993 78,689
Net cash (used in) provided by investing activities (3,903,854) 542,870 410,993 78,689
(Decrease) increase in cash and cash equivalents (1,228,203) 692,263 - -
Cash and c ash equivalents, beginning of year 17,585,842 1,467,599 - -
Cash and c ash equivalents, end of year 16,357,639$ 2,159,862$ -$ -$ $
See Independent Auditors' Report.
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The Flor ida Bar and Subsid iariesGeneral Fund Schedule of Budgeted and Actual Revenues and Expenses
(Continued)
VarianceFavorable
Year ended June 30, 2014 Actual Budgeted (Unfavorable)
Expenses - budgetary basis
Lawyer advertisingStaff and office expense 743,092 766,839 23,747 Travel 4,802 5,341 539 Internal service and administration 98,758 101,115 2,357 Other operating expenses 5,744 7,148 1,404
Total lawyer advertising 852,396 880,443 28,047
RulesStaff and office expense 128,060 107,367 (20,693) Contract services - 112,500 112,500 Travel 713 644 (69) Internal service and administration 6,186 (107,468) (113,654) Other operating expenses - 140 140
Total rules 134,959 113,183 (21,776)
ProfessionalismStaff and office expense 292,208 328,646 36,438 Contract services - 5,217 5,217 Travel 5,827 17,974 12,147 Internal service and administration 38,581 52,568 13,987 Other operating expenses 1,641 25,032 23,391
Total professionalism 338,257 429,437 91,180
Finance and recordsStaff and office expense 1,653,375 1,929,676 276,301 Contract services 49,096 66,400 17,304
Travel 2,156 2,285 129 Internal service and administration 314,344 167,991 (146,353) Other operating expenses 353,461 326,956 (26,505) Less cost distribution (1,218,737) (1,452,591) (233,854)
Total finance and records 1,153,695 1,040,717 (112,978)
Course approval center Staff and office expense 191,415 201,207 9,792 Internal service and administration 28,672 30,553 1,881 Other operating expenses - 4,966 4,966
Total course approval center 220,087 236,726 16,639
Continuing legal education ruleStaff and office expense 310,878 292,898 (17,980) Travel 1,606 1,504 (102) Internal service and administration 66,196 65,368 (828) Other operating expenses 21,707 24,217 2,510
Total continuing legal education rule 400,387 383,987 (16,400)
See Independent Auditors' Report.
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The Florida Bar and Subsid iariesGeneral Fund Schedule of Budgeted and Actual Revenues and Expenses
(Continued)
VarianceFavorable
Year ended June 30, 2014 Actual Budgeted (Unfavorable)
Expenses - budgetary basis
Professional development staff poolStaff and office expense (11,372) 11,873 23,245 Internal service and administration 10,450 1,176 (9,274) Other operating expenses 917 1,139 222
Total professional development staff pool (5) 14,188 14,193
Unauthorized practice of law:
Unlicensed practice of lawStaff and office expense 1,474,515 1,483,493 8,978 Travel 30,282 39,020 8,738 Internal service and administration 214,233 278,158 63,925 Other operating expenses 20,811 38,455 17,644
Total unlicensed practice of law 1,739,841 1,839,126 99,285
Division director - ethics, UPL and professionalismStaff and office expense (8,001) 3,431 11,432 Travel 7,101 7,539 438 Internal service and administration 885 1,603 718 Other operating expenses 16 79 63
Total division director - ethics, UPL and professionalism 1 12,652 12,651
Public service programs:
Public service programsStaff and office expense 363,710 371,897 8,187 Travel 1,051 1,037 (14) Internal service and administration 69,683 91,959 22,276
Other operating expenses 181,759 198,200 16,441 Total public service programs 616,203 663,093 46,890
Communication with members and the public:
"Journal"Staff and office expense 278,437 282,324 3,887 Travel 1,106 1,936 830 Internal service and administration 80,263 93,057 12,794 Other operating expenses 460,946 498,369 37,423
Total "Journal" 820,752 875,686 54,934
"News"Staff and office expense 528,534 515,699 (12,835)
Travel 9,153 12,053 2,900 Internal service and administration 187,728 217,622 29,894 Other operating expenses 1,244,683 1,325,040 80,357 Less cost distribution (115,073) (140,436) (25,363)
Total "News" 1,855,025 1,929,978 74,953
See Independent Auditors' Report.
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The Florida Bar and SubsidiariesGeneral Fund Schedule of Budgeted and Actual Revenues and Expenses
(Continued)
VarianceFavorable
Year ended June 30, 2014 Actual Budgeted (Unfavorable)
Expenses - budgetary basis
"Journal" - "News" staff poolStaff and office expense (3,811) 11,721 15,532 Travel 2,584 4,197 1,613 Internal service and administration 549 6,457 5,908 Other operating expenses 690 1,728 1,038
Total "Journal" - "News" staff pool 12 24,103 24,091
Public informationStaff and office expense 820,575 821,285 710 Contract services 101,129 107,910 6,781 Travel 47,408 63,571 16,163 Internal service and administration 403,923 329,777 (74,146) Other operating expenses 132,075 130,659 (1,416)
Total public information 1,505,110 1,453,202 (51,908)
Administrat ion:
General administrationStaff and office expense 768,896 990,066 221,170 Travel 69,304 61,298 (8,006)
Internal service and administration 6,761 7,617 856 Other operating expenses 196,539 219,170 22,631
Total general administration 1,041,500 1,278,151 236,651
Board and officer Staff and office expense 230,438 254,429 23,991 Travel 31,449 25,784 (5,665) Internal service and administration 5,824 16,216 10,392 Other operating expenses 355,444 373,635 18,191
Total board and officer 623,155 670,064 46,909
General counselStaff and office expense 150,966 183,793 32,827 Contract services 330,644 350,576 19,932 Travel 2,282 3,032 750 Internal service and administration 32,618 14,627 (17,991) Other operating expenses 375 870 495
Total general counsel 516,885 552,898 36,013
Records managementStaff and office expense 301,681 513,174 211,493
Contract services - 58,800 58,800 Travel 225 5,858 5,633 Internal service and administration 52,425 11,079 (41,346) Other operating expenses 3,306 853 (2,453)
Total records management 357,637 589,764 232,127
See Independent Auditors' Report.
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The Florida Bar and SubsidiariesGeneral Fund Schedule of Budgeted and Actual Revenues and Expenses
(Continued)
VarianceFavorable
Year ended June 30, 2014 Actual Budgeted (Unfavorable)
Expenses - budgetary basis
Human resource managementStaff and office expense 344,058 353,485 9,427 Travel 1,395 3,522 2,127 Internal service and administration 56,550 18,906 (37,644) Other operating expenses 14,547 18,827 4,280 Less cost distribution (416,550) (393,603) 22,947
Total human resource management - 1,137 1,137
Information systemsStaff and office expense 3,819,852 4,136,006 316,154 Contract services 592,186 1,038,000 445,814 Travel 5,621 15,974 10,353 Internal service and administration 391 768 377
Other operating expenses 1,568 2,681 1,113 Less cost distribution (4,250,761) (5,150,765) (900,004)
Total information systems 168,857 42,664 (126,193)
Research, planning and evaluationStaff and office expense 183,199 204,618 21,419 Contract services 10,417 25,850 15,433 Travel 5,063 5,346 283
Internal service and administration 3,758 2,055 (1,703) Other operating expenses 8,491 10,640 2,149
Total research, planning and evaluation 210,928 248,509 37,581
Building and groundsStaff and office expense 1,868,251 1,922,938 54,687
Travel 2,656 3,725 1,069 Internal service and administration 251 281 30 Other operating expenses 23 2 (21) Less cost distribution (1,791,753) (1,821,447) (29,694)
Total building and grounds 79,428 105,499 26,071
Shipping and receivingStaff and office expense 130,171 151,845 21,674 Internal service and administration (3,147) (4,000) (853) Other operating expenses 126 87 (39) Less cost distribution (113,413) (149,532) (36,119)
Total shipping and receiving 13,737 (1,600) (15,337)
See Independent Auditors' Report.
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The Florida Bar and Subsid iariesGeneral Fund Schedule of Budgeted and Actual Revenues and Expenses
(Continued)
VarianceFavorable
Year ended June 30, 2014 Actual Budgeted (Unfavorable)
Expenses - budgetary basis
Print shop
Staff and office expense 197,814 246,906 49,092 Internal service and administration 74 - (74) Other operating expenses 20,292 - (20,292) Less cost distribution (179,574) (246,906) (67,332)
Total print shop 38,606 - (38,606)
Office systems
Staff and office expense 449,043 511,081 62,038 Internal service and administration 3,364 1,198 (2,166) Other operating expenses - 155 155 Less cost distribution (452,396) (509,269) (56,873)
Total office systems 11 3,165 3,154
Division director - administrationStaff and office expense 103,417 170,775 67,358 Travel 2,668 2,826 158 Internal service and administration 99 1,840 1,741 Other operating expenses 16 268 252 Less cost distribution (106,200) (171,203) (65,003)
Total division director - administration - 4,506 4,506
Legislation:
LegislationStaff and office expense 155,126 136,091 (19,035) Contract services 367,448 302,680 (64,768) Travel 2,208 3,032 824 Internal service and administration 65,027 68,125 3,098 Other operating expenses 1,297 1,238 (59)
Total legislation 591,106 511,166 (79,940)
Young Lawyers:
Young Lawyers DivisionStaff and office expense 62,786 68,421 5,635 Travel 14,938 11,384 (3,554) Internal service and administration 103,924 113,591 9,667 Other operating expenses 710,058 772,415 62,357
Total young lawyers division 891,706 965,811 74,105
See Independent Auditors' Report.
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The Florida Bar and SubsidiariesGeneral Fund Reconcili ation of Revenues and Expenses on a
Budgetary Basis to Totals Per the Consolidating Statement
of Revenues, Expenses and Changes in Net Position
Excess of Revenues
Operating Over (Under)Year ended June 30, 2014 Revenues Expenses Expenses
Totals on budgetary basis 41,628,598$ 35,507,416$ 6,121,182$
Add:
Subsidiary operationsFlorida Lawyers Association for the Maintenance of
Excellence, Inc. 17,526 947 16,579 The Florida Attorneys Charitable Trust 49,308 1,129 48,179
Less: Adjustments for financial statement presentation purposes
Net change in the fair value of investments (3,868,430) - (3,868,430) Dividend from The Florida bar Building Corportaion (350,000) (350,000)
Budgeted items treated as interfund transfers for basic
financial statement purposesDepreciation - (571,977) 571,977 Contributions (12,000) - (12,000)
Total operating revenues, expenses and income per Consolidating
Schedule of Statement of Revenues, Expenses and Changes in
Net Position 37,465,002$ 34,937,515$ 2,527,487$
See Independent Auditors' Report.
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The Florida Bar and Subsid iariesClients' Security Fund Schedule of Budgeted and Actual Revenues and Expenses
VarianceFavorable
Year ended June 30, 2014 Actual Budget (Unfavorable)
Operating revenues Annual contribution * 2,354,500$ 2,302,825$ 51,675$
Recoveries 130,936 79,400 51,536 Total operating revenues 2,485,436 2,382,225 103,211
Operating expensesStaff and office expense 161,375 179,264 17,889 Travel 5,324 8,590 3,266 Internal service and administration 57,940 98,614 40,674 Claims paid 1,523,188 2,302,825 779,637 Other operating expenses (45,262) (9,426) 35,836
Total operating expenses 1,702,565 2,579,867 877,302
Operating income (loss) 782,871 (197,642) 980,513
Non-operating revenuesInvestment earnings (loss) 410,993 130,000 280,993
Total non-operating revenues 410,993 130,000 280,993
Change in net position 1,193,864$ (67,642)$ 1,261,506$
* 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 position - budgetary basis 1,193,864$
Less: annual contribution treated as an interfundtransfer on the basic financial statements (2,354,500)
Change in net assets per Consolidating Schedule of Statement of Revenues, Expenses and Changes inNet Position (1,160,636)$
See Independent Auditors' Report.
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The Florida Bar and Subsid iariesCertification Fund Schedule of Budgeted and Actual Revenues and Expenses
VarianceFavorable
Year ended June 30, 2014 Actual Budget (Unfavorable)
Operating revenuesMember Fees 1,347,774$ 1,382,824$ (35,050)$
Sales - 4,950 (4,950) Total operating revenues 1,347,774 1,387,774 (40,000)
Operating expensesStaff and office expense 957,151 1,007,595 50,444 Contract services 55,449 43,500 (11,949) Travel 44,534 61,251 16,717 Internal service and administration 171,193 192,157 20,964 Other operating expenses 75,640 154,614 78,974
Total operating expenses 1,303,967 1,459,117 155,150
Operating income (loss) 43,807 (71,343) 115,150
Non-operating revenues
Investment earnings (loss) 78,689 20,000 58,689 Total non-operating revenues 78,689 20,000 58,689
Change in net assets per Consolidating Schedule of
Statement of Revenues, Expenses and Changes inNet Position 122,496$ (51,343)$ 173,839$
See Independent Auditors' Report.
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The Florida Bar and SubsidiariesSections Fund Schedule of Budgeted and Actual Revenues and Expenses
VarianceFavorable
Year ended June 30, 2014 Actual Budgeted (Unfavorable)
Revenues - budgetary basis
Administr