2015-2014 June 30 The Florida Bar Financial Statements

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The Florida Bar and Subsidiaries

Financial Statements

June 30, 2015 and 2014


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The Florida Bar and SubsidiariesTable of Contents

June 30, 2015 and 2014

Independent Auditors’ Report 1 - 2

Management’s Discuss ion and Analysis 3 - 7

Consolidated 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

Other Report

Independent Auditors’ Report on Internal Control Over Financial Reporting andOn Compliance and Other Matters Based on an Audit of Financial StatementsPerformed in Accordance with Government Auditing Standards 29- 30


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Independent Auditors’ Report

Board of GovernorsThe Florida Bar

Tallahassee, 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, 2015 and 2014, 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 Responsib ility for the Consolidated 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 tors ’ Responsib il ity

Our responsibility is to express an opinion 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 and

disclosures in the consolidated financial statements. The procedures selected depend on theauditors’ 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 consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the respective financial position of the business-type activities of The FloridaBar, as of June 30, 2015 and 2014, and the respective changes in financial position and cashflows thereof for the years then ended in accordance with accounting principles generallyaccepted in the United States of America.


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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 consolidated financial statements. Such information, although not a part of the basicconsolidated financial statements, is required by the Governmental Accounting StandardsBoard, who considers it to be an essential part of financial reporting for placing the basicconsolidated financial statements in an appropriate operational, economic, or historical context.We have applied certain limited procedures to the required supplementary information inaccordance with auditing standards generally accepted in the United States of America, whichconsisted of inquiries of management about the methods of preparing the information andcomparing the information for consistency with management’s responses to our inquiries, thebasic consolidated financial statements, and other knowledge we obtained during our audit ofthe basic consolidated financial statements. We do not express an opinion or provide anyassurance on the information because the limited procedures do not provide us with sufficientevidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming an opinion 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 consolidated 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 certainadditional procedures, including comparing and reconciling such information directly to the

underlying 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.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated

December 4, 2015 on our consideration of The Florida Bar’s internal control over financial

reporting and on our tests of its compliance with certain provisions of law, regulations,

contracts, and grant agreements and other matters. The purpose of that report is to describe

the scope of our testing of internal control over financial reporting and compliance and the

results of that testing, and not to provide an opinion on internal control over financial reportingor on compliance. That report is an integral part of an audit performed in accordance withGovernment Auditing Standards in considering The Florida Bar’s internal control over financial

reporting and compliance.

CARR, RIGGS & INGRAM, LLC

Tallahassee, FLDecember 4, 2015


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Management’s Discussion and Analysis


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The Florida Bar and SubsidiariesManagement’s Discussion and Analysis

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With more than 100,000 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 30,2015 and 2014.

Financial Highlights

• The Florida Bar’s total net position decreased approximately $1.3 million (or -2.1%) in FY15 ascompared to FY14 as a result of an operating loss of almost $1.3 million and an investment lossof $183,294. In FY14, the Florida Bar’s total net position increased $6.1 million (or 10.8%) as

compared to FY13 resulting from a combination of operating income of $723,880 and aninvestment gain of $5.4 million.

• Total operating revenues for FY15 increased by $673,496 (or 1.5%) as compared to FY14 andincreased $1.4 million (or 3.4%) in FY14 as compared to FY13. The increase in FY15 wascomprised of an increase in membership and other fees from members as well as growth in salesof products and services. The increase in operating revenue in FY14 consisted of growth inmembership supplemented by a pick-up in court ordered restitution and advertising revenue.Total operating expenses increased approximately $2.7 million (or 6.1%) in FY15 and $1.4 million(or 3.4%) in FY14. The increase in operating expenses in FY15 included a combination of acomplex disciplinary case in South Florida that necessitated the use of outside counsel, anincrease in claims paid by the Client Security Fund, and necessary improvements to the

technology infrastructure. The increase in operating expenses in FY14 came primarily as a resultof increasing health care and other employment related costs.

• The resources available to spend for the General Fund of The Florida Bar were approximately$1.4 million less than budgeted for FY15 and were approximately $2.6 million more thanbudgeted for FY14. These results were primarily attributable to the actual gains and lossesincurred by the General Fund’s share of The Florida Bar’s investment income which wasbudgeted at $1.5 million for both years and experienced an actual loss for the General Fund of$127,560 for FY15 and an actual gain of $3.9 million for FY14. The Florida Bar was able to keepexpenses within 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 schedules 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 Consolidated Statement of Net Position includes all of The Florida Bar’s assets and liabilities.The net position is the difference between The Florida Bar’s assets and liabilities. TheConsolidated Statement of Revenues, Expenses, and Changes in Net Position include all of TheFlorida Bar’s revenues and expenses regardless of when the cash is received or paid. A

Consolidated Statement of Cash Flows provides additional information regarding the change inThe Florida Bar’s cash position. The notes (beginning on page 12) are an integral part in providinga full understanding of The Florida Bar’s financial statements.

Summary of Operations and Condensed Consolidated Financial Information

CONDENSED CONSOLIDATED STATEMENTS OF NET POSITION

% Change % Change

June 30, 2015 2014 2013 2014-2015 2013-2014

Assets

Current assets 70,770,430$ 73,302,786$ 66,124,233$ -3.5% 10.9%

Capital assets, net 10,239,598 10,363,930 10,734,193 -1.2% -3.4%

Other non-current assets 3,000,000 - - 100.0% 0.0%

Total assets 84,010,028 83,666,716 76,858,426 0.4% 8.9%

Liabilities

Current liabilities 20,112,428 18,549,400 17,771,868 8.4% 4.4%

Non-current liabilities 2,565,462 2,439,156 2,519,415 5.2% -3.2%

Total liabilities 22,677,890 20,988,556 20,291,283 8.0% 3.4%

Net position

Invested in capital assets,

net of related debt 10,239,598 10,363,930 10,734,193 -1.2% -3.4%

Restricted for permanentendowment 99,978 - - 100.0% 0.0%

Restricted for expendable

scholarships 63,803 58,967 50,008 8.2% 17.9%

Unrestricted 50,928,759 52,255,263 45,782,942 -2.5% 14.1%

Total net position 61,332,138$ 62,678,160$ 56,567,143$ -2.1% 10.8%

The Florida Bar’s cash and investments decreased to $68.8 million in FY15 from $71.8 million inFY14 and increased to $71.8 million in FY14 from $64.4 million in FY13. The decrease in cashand investments in FY15 was largely due to a $3.0 million loan to the Florida Bar Foundation toassist with programs to improve access to justice for all Florida citizens. The increase in FY14reflected the addition of cash provided by operations of $2.8 million and the cash earnings on theinvestment portfolio of $4.4 million. The decrease in capital assets to June 30, 2015 from June 30,2013 has been a function of the aging of The Florida Bar’s investment in its building,improvements, and internally developed software which is reflected as depreciation andamortization.


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Total net position of the Florida Bar decreased to $61.3 million in FY15 from $62.7 million in FY14,a decrease of $1.4 million or 2.1%. The largest portion of the Florida Bar’s net position reflects itssubstantial investment portfolio of $54.6 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 in

Florida. The last membership fee increase was over 14 years ago.

The remaining balance of net position reflects the Florida Bar’s investment in capital assets (e.g.land, buildings, and equipment) as well as assets restricted by donors. The Florida Bar uses thecapital assets to provide services to its members, and the restricted assets may only be used forthe donor-specified purposes; consequently these assets are unavailable for future operationalspending.

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, 2015 2014 2013 2014-2015 2013-2014

Operating revenues 44,849,107$ 44,175,611$ 42,708,054$ 1.5% 3.4%

Operating expenses (46,110,311) (43,451,727) (42,032,019) 6.1% 3.4%

Net operating income (1,261,204) 723,884 676,035 -274.2% 7.1%

Non-operating revenues 100,000 5,394,950 2,528,194 -98.1% 113.4%

Non-operating expenses (184,818) (7,817) (5,778) 2264.3% 35.3%

Net non-operating revenues (84,818) 5,387,133 2,522,416 -101.6% 113.6%

Change in net position (1,346,022) 6,111,017 3,198,451 -122.0% 91.1%

Net position, beginning 62,678,160 56,567,143 53,368,692 10.8% 6.0%

Net position, ending 61,332,138$ 62,678,160$ 56,567,143$ -2.1% 10.8%

While the Florida Bar has not increased the annual fee required by its members, the revenue fromannual fees received by The Florida Bar have consistently increased by approximately 2% peryear, commensurate with the membership growth rate. This was supplemented by additionalcollections for court ordered disciplinary costs as well as sales of continuing education productsand other membership services. The growth in fees in FY15 was offset by reductions in otherrevenue sources such as income from advertising in The Bar News and Journal and proceeds fromevents and programs sponsored by the Young Lawyers division.

Operating expenses increased 6.1% in FY15 which reflects the addition of several new programssuch as Vision 2016, the Access to Justice Commission, and continuing upgrades to The FloridaBar’s technology infrastructure. The 3.4% increase in operating expenses in FY14 was related inpart to the start-up of the Vision 2016 program, the Leadership Academy program, and requiredrepairs on the headquarters building.

Non-operating revenues decreased in FY15 because of the unfavorable investment climate.

For more detailed information, see the accompanying Consolidated Statements of Revenues,Expenses, and Changes in Net Position.


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Future Financial Plan

The Florida Bar was created by the Supreme Court of Florida to assist the Supreme Court in

regulating the practice of law in Florida. The Florida Bar is primarily funded through requiredannual 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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ConsolidatedFinancial Statements


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See accompanying notes to the consolidated financial statements.

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June 30, 2015 2014

Assets

Current assets

Cash and cash equivalents 14,186,122$ 18,517,501$Short-term investments 54,646,328 53,331,083

Accounts receivable, net 953,486 731,293

Prepaid expenses and other assets 984,494 722,909

Total current assets 70,770,430 73,302,786

Noncurrent assets

Capital assets, net:

Land and improvements 17,809,608 17,647,545

Software and software development in process 6,420,532 5,502,760

Accumulated depreciation and amortization (13,990,542) (12,786,375)

Total capital assets, net 10,239,598 10,363,930

Other non-current assets

Note receivable due in more than one year 3,000,000 -

Total other non-current assets 3,000,000 -

Total assets 84,010,028 83,666,716

Liabilities

Current liabilities

Accounts payable 2,049,500 1,806,666

Client Security Fund claims payable 1,001,043 1,332,838

Accrued expenses 1,278,010 1,263,803 Unearned revenues 15,734,941 14,097,164

Security deposits 48,934 48,929

Total current liabilities 20,112,428 18,549,400

Non-current liabilities

Compensated absences payable 2,565,462 2,439,156

Total non-current liabilities 2,565,462 2,439,156

Total liabilities 22,677,890 20,988,556

Net Position

Net investment in capital assets 10,239,598 10,363,930 Restricted for permanent endowment 99,978 - Restricted for expendable scholarships 63,803 58,967

Unrestricted 50,928,759 52,255,263 Total net position 61,332,138$ 62,678,160$

The Florida Bar and SubsidiariesConsolidated Statements of Net Position


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Years ended June 30, 2015 2014

Operating revenues Annual fees 25,586,032$ 25,061,587$Other fees from members 7,024,507 6,817,452 Sales of products and services 9,240,309 9,166,020 Communication with members and the public 1,435,030 1,523,156 Young lawyers 1,010,177 1,058,690 Other revenue 553,052 548,706

Total operating revenues 44,849,107 44,175,611

Operating expensesRegulation of the practice of law 18,657,818 17,758,333 Cost of products and services provided to members 10,333,661 10,578,827 Unauthorized practice of law 1,684,219 1,671,903

Public service programs 3,306,055 2,261,160 Communications with members and the public 4,081,577 3,982,243

Administration 3,324,911 2,666,458 Legislation 581,926 571,916 Young lawyers 961,875 832,757 Depreciation and amortization 1,409,854 1,324,280 Other programs and costs 1,768,415 1,803,850

Total operating expenses 46,110,311 43,451,727

Operating (loss) income (1,261,204) 723,884

Non-operating (expenses) revenues

Investment (loss) earnings (183,294) 5,394,950 Additions to permanent endowment 100,000 - Loss on disposal of capital assets (1,524) (7,817)

Total non-operating (expenses) revenues (84,818) 5,387,133

Change in net position (1,346,022) 6,111,017

Total net position, beginning of year 62,678,160 56,567,143

Total net position, end of year 61,332,138$ 62,678,160$

The Florida Bar and SubsidiariesConsol idated Statements of Revenues, Expenses and Changes in Net Position


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Years ended June 30, 2015 2014

Reconciliation of operating (loss) income to net cashflows f rom operating activities:

Operating (loss) income (1,261,204)$ 723,884$

Adjustments to reconcile operating (loss) income to net cash

provided by operating activities:Depreciation and amortization 1,409,854 1,324,280 (Increase) decrease in: Accounts receivable, net (222,193) (87,190) Prepaid expenses and other assets (261,585) 145,225

Increase (decrease) in:

Accounts payable 242,834 27,522 Claims payable (331,795) (735,509)

Accrued expenses 14,207 47,916 Unearned revenues 1,637,755 1,400,946 Security deposits 5 3 Compensated absences payable 126,306 (80,259)

Net cash flows from operating activities 1,354,184$ 2,766,818$

Non-cash investing, capital, and other financing acitivitiesChange in the fair value of investments (2,266,294)$ 3,739,662$

Loss on disposal of assets (1,524)$ (7,817)$

The Florida Bar and SubsidiariesConsolidated Statements of Cash Flows (Continued)


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The Florida Bar and SubsidiariesNotes to Consol idated Financial Statements

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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. Enterprise funds are used toaccount for activities that are financed and operated in a manner similar to private businessenterprises: (1) where the costs of providing goods and services to the general public on acontinuing basis are to be financed through user charges; or (2) where the periodic determinationof net income is considered appropriate. Proprietary funds distinguish operating revenues and

expenses from non-operating items. Operating revenues and expenses generally result fromproviding goods and services in connection with a proprietary fund’s ongoing operations.Operating expenses for The Florida Bar include the costs of personnel, contractual services,supplies, utilities, repairs and maintenance, and depreciation and amortization of capital assets. Allrevenues and expenses not meeting this definition are reported as non-operating revenues andexpenses.


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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 consolidated financial statements have been preparedon the accrual basis of accounting in accordance with accounting principles generally accepted inthe United States of America. Under this method, revenues are recognized when they are earnedand expenses 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 assets and liabilities, current and non-current, areaccounted for in the Consolidated Statements of Net Position.

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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Allocation 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 TaxesThe 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.

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 thataffect the reported amounts of assets and liabilities and disclosure of contingent assets and

liabilities 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 permanent endowments,restricted for expendable scholarships, and unrestricted. Invested in capital assets represents thecost of capital assets net of accumulated depreciation and amortization and is unavailable forfuture spending. Restricted for permanent endowment includes donations in which the donor has

stipulated, as a condition of the gift, that the principal be held and invested and only the investmentearnings may be spent. Restricted for expendable scholarships consists of donations received thatmust be used to fund the annual G. Kirk Haas scholarships. Unrestricted assets consist of all otherassets not included in the previous categories and are available for any lawful purpose.

Subsequent Events

Subsequent events have been evaluated through the date of the independent auditors’ report,which is the date the financial statements were available to be issued.


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Reclassifications

Certain revenue and expense categories for the year ended June 30, 2014 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 that inthe event of a bank or other counterparty failure, The Florida Bar’s cash and cash equivalents maynot be returned. The Florida Bar’s policy with respect to custodial credit risk is that The Florida Barwill 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 $7,728,154 and additional cash and money market funds was $6,457,968 at June30, 2015. Cash in the amount of $1,247,152 was insured by the Federal Deposit InsuranceCorporation (FDIC) as of June 30, 2015. The additional cash and money market funds are held ata financial institution insured by the Securities Investor Protection Corporation (SIPC). As of June30, 2015, 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, however, allinvestments are available for sale if necessary and are classified as a current asset in theconsolidated statements of net position.

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 required

due 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.


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NOTE 4 – INVESTMENTS (CONTINUED)

Investment Objectives and Policies (Continued)

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-termportfolio 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 with regardto acceptable asset classes and prohibited investments, the overall targeted asset mix, and therepresentative indices for each asset class. The asset allocation guidelines as compared toactual investment balances were as follows as of June 30, 2015:

Short-Term

Target Representative

Asset Classes Minimum Mix Maximum Actual Index

Short-Term Fixed income 35.0% 50.0% 65.0% 35.0%

Index

Cash and Equivalents 35.0% 50.0% 65.0% 65.0% Citigroup U.S. 90-Day Treasury Bills Index

Long-Term

Target Representative

Asset Classes Min imu m Mix Maximum Actual Index

U.S. Large Cap Equity 12.0% 17.0% 22.0% 15.8% Standard & Poor's 500 Index

U.S. Mid Cap Equity 0.0% 4.0% 9.0% 4.5% Russell Mid Cap Index

U.S. Small Cap Equity 0.0% 2.0% 7.0% 2.2% Russell 2000 Index

International Equity 10.0% 15.0% 20.0% 19.0% MSCI EAFE Index

Int'l Small/Mid Cap Equity 0.0% 2.0% 7.0% 2.0%

MSCI EAFE Small Cap Index or MSCI EAFE Small/Mid

Cap Index

Emerging Markets Equity 0.0% 5.0% 10.0% 5.1% MSCI Emerging Markets Index

Commodities 1.0% 6.0% 11.0% 6.1% Dow Jones UBS Commodity Index

REITs 0.0% 3.0% 8.0% 0.9% NAREIT Equity Index or Dow Jones Global Select REIT

Inflation-linked Securities 0.0% 2.0% 7.0% 1.0% Barclays Capital U.S. TIPS Index

Emerging Market Fixed Income 0.0% 2.0% 7.0% 0.0%

JP Morgan Emerging Markets Bond Index or JP Morgan

Emerging Market Bond Index (unhedged)

U.S. Fixed Income 15.0% 22.0% 29.0% 18.3% Barclay's Capital Intermediate Gov't/Credit Bond Index

U.S. High Yield Fixed Income 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% 9.3%HFRI Conservative Index or Hedge Fund of FundsComposite Index

Liquid Alternatives 0.0% 3.0% 8.0% 7.2%

60% MSCI ACWI/40% Barclays Capital Global

Aggregate

Managed Futures 0.0% 2.0% 5.0% 2.4% Barclay's CTA Index

Cash & Equivalents 0.0% 5.0% 10.0% 2.3% 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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Interest Rate Risk (Continued)

bonds 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.

As of June 30, 2015, The Florida Bar’s debt investments had the following maturities:

June 30, Fair Value

Less than 1

Year 1 - 5 Years 6 - 10 Years Over 10 Years

U.S. Treasuries 1,036,636$ -$ 621,715$ 414,921$ -$

Federal Agencies 2,327,071 - 635,925 301,506 1,389,640

Municipal Bonds 731,414 25,000 356,158 287,916 62,340 Corporate Bonds & Other Fixed

Income 4,803,960 141,053 2,056,777 1,376,223 1,229,907

Total investments 8,899,081$ 166,053$ 3,670,575$ 2,380,566$ 2,681,887$

Investment Maturities (In Years)

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, 2015, the weighted average lifereported by the mutual fund managers for the mutual funds invested in debt instruments was2.51 to 2.8 years.

Credit Quality Risk

The Policy requires investments in fixed income debt securities to meet an average qualityrating 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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Credit Quality Risk (continued)

The Florida Bar’s debt investments by rating at June 30, 2015 are presented below:

Quality Rating

U.S.

Treasuries Federal Agencies

Municipal

Bonds

Corporate

Bonds & Other

Fixed Income

Mutual Funds -

Debt Securities Total

Agencies -$ 2,327,071$ -$ 573,800$ -$ 2,900,871$

Aaa 1,036,636 - 333,221 1,779,654 - 3,149,511

Aa1 - - 221,024 127,548 - 348,572

Aa2 - - 141,770 3,344 - 145,114

Aa3 - - 30,430 143,626 - 174,056

A1 - - - 301,525 - 301,525

A2 - - 4,969 401,427 - 406,396

A3 - - - 403,203 - 403,203

Baa1 - - - 590,766 - 590,766

Baa2 - - - 428,896 - 428,896

Baa3 - - - 50,171 - 50,171

Unrated - - - - 8,378,474 8,378,474

Total investments 1,036,636$ 2,327,071$ 731,414$ 4,803,960$ 8,378,474$ 17,277,555$

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 in

foreign currency-denominated government bonds, any type of foreign corporate bond, or any


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Foreign Currency Risk (continued)

other type of foreign currency are not allowed. Securities of foreign companies traded on foreignstock 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 equity securitiesare 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, 2015, 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, 2015 2014

Accounts receivable 968,486$ 746,293$

Allowance for doubtful accounts (15,000) (15,000)

Accounts receivable, net 953,486$ 731,293$


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NOTE 6 – CAPITAL ASSETS, NET

July 1, 2014 Additions Deletions Transfers June 30, 2015

Capital assets not being depreciated or amortized:

Land 1,306,690$ -$ -$ -$ 1,306,690$

Software development in progress 393,822 898,244 - (368,763) 923,303 Construction in progress - - - - -

Total capital assets not depreciated or amortized 1,700,512 898,244 - (368,763) 2,229,993

Capital assets being depreciated or amortized:

Buildings and improvements 11,346,008 87,714 - 11,433,722

Landscaping and parking 120,318 - - - 120,318

Equipment and furnishings 4,874,528 281,383 (207,033) - 4,948,878

Software 5,108,939 79,679 - 308,611 5,497,229

Total capital assets being depreciated or amortized 21,449,793 448,776 (207,033) 308,611 22,000,147

Less accumulated depreciation or amortization for:

Buildings and improvements (6,916,811) (371,944) - - (7,288,755)

Landscaping and parking (120,318) - - (120,318)

Equipment and furnishings (3,927,795) (296,112) 205,509 - (4,018,398)

Software (1,821,451) (741,620) - - (2,563,071)

Total accumulated depreciation oramortization (12,786,375) (1,409,676) 205,509 - (13,990,542)

Total capital assets being depreciated oramortized, net 8,663,418 (960,900) (1,524) 308,611 8,009,605

Total capital assets, net 10,363,930$ (62,656)$ (1,524)$ (60,152)$ 10,239,598$

July 1, 2013 Additions Deletions Transfers June 30, 2014Capital assets not being depreciated or amortized:

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 or amortized 1,598,220 798,454 (11,220) (684,942) 1,700,512

Capital assets being depreciated or amortized:

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 4,874,528

Software 4,431,345 7,463 670,131 5,108,939

Total capital assets being depreciated or amortized 20,732,547 188,842 (156,538) 684,942 21,449,793

Less accumulated depreciation or amortization 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 or

amortization (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, 2015 and 2014 was$1,409,854 and $1,324,280, respectively.


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NOTE 11 – RETIREE POSTEMPLOYMENT HEALTH BENEFITS (CONTINUED)

of 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 of

short-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 actuarialvaluation. 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.

The schedule of funding progress follows:

Actuarial

Accrued

Liability UAAL as a

Actuarial (AAL)- Unfunded Percentage

Actuari al 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)

1/1/10 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 12 – 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 eliminatedin consolidation.

Future minimum rental payments to unrelated entities are as follows:

Years ending June 30, Amount

2016 810,407$

2017 798,855

2018 370,938

2019 178,515

2020 183,870

Thereafter 93,294

Total minimum future rental payments 2,435,879$


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NOTE 12 – LEASES (CONTINUED)

Total rental expense for the fiscal years ended June 30, 2015 and 2014 was $787,276 and$779,485, 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, 2015 and 2014 was$295,576 for both years.

Future minimum rental receipts are as follows:

Years ending June 30, Amount

2016 295,576$

2017 295,576

2018 295,576

2019 73,894

Total minimum future rental receipts 960,622$

NOTE 13 – CONTINGENCIES

The Florida Bar is involved in several actions as defendant and/or co-defendant. The majority ofthe 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 14 – 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 throughfiscal 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.


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NOTE 14 – COMMITMENTS (CONTINUED)

The following is a schedule of estimated liquidating damages that The Florida Bar would incurshould they cancel all the contracts as of June 30, 2015:

Event

Estimatedliquidating

damages

Annual Meeting 695,508$

Board of Governors Meetings 228,920

Winter Meeting 76,700

Fall Meeting 35,112

Section and Division Meetings 989,609

Continuing Legal Education Seminars and Other Meetings 166,591

Total commitment 2,192,440$

NOTE 15 – DESIGNATED NET POSITION

The Florida Bar has designated certain components of net position to be used for specificprogram purposes. As of June 30, 2015 and 2014, the designated components of unrestrictednet position were $20,650,772 and $20,188,679 respectively.

NOTE 16 – 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 17 – PERMANENT ENDOWMENT

On May 28, 2015, The Florida Bar entered into an agreement with Florida Lawyer’s MutualInsurance Company (FLMIC) to establish an endowment fund for the purpose of defraying thecosts of any and all programs and activities that promote the professionalism, civility, ethicalconduct, and legal practice competency of Florida lawyers. The initial gift of $100,000 and any

additional gifts must be held for growth for ten years. After the first ten years, The Florida Barwith the approval of FLMIC may direct distributions of the earnings for the purpose for which theendowment was established. However, at no time, may the distributions be allowed to reducethe principal to an amount lower than the initial gift and any additional gifts received. Should thepurpose for which the endowment was created cease to exist or the endowment become tooimpractical to administer, The Florida Bar and FLMIC have the power to redirect the funds for apurpose as similar as possible to the original intent.


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Other Report


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INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVERFINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED

ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITHGOVERNMENT AUDITING STANDARDS

Board of GovernorsThe Florida BarTallahassee, Florida

We have audited, in accordance with the auditing standards generally accepted in the UnitedStates of America and the standards applicable to financial audits contained in Government

Auditing Standards issued by the Comptroller General of the United States, the financialstatements of the business-type activities of The Florida Bar and Subsidiaries, as of and for theyear ended June 30, 2015 and 2014, and the related notes to the financial statements, whichcollectively comprise The Florida Bar and Subsidiaries’ basic financial statements, and haveissued our report thereon dated December 4, 2015.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered The FloridaBar and Subsidiaries’ internal control over financial reporting (internal control) to determine theaudit procedures that are appropriate in the circumstances for the purpose of expressing ouropinions on the financial statements, but not for the purpose of expressing an opinion on theeffectiveness of The Florida Bar and Subsidiaries’ internal control. Accordingly, we do not

express an opinion on the effectiveness of The Florida Bar and Subsidiaries’ internal control.

A deficiency in internal control exists when the design or operation of a control does not allowmanagement or employees, in the normal course of performing their assigned functions, toprevent, or detect and correct, misstatements on a timely basis. A material weakness is adeficiency, or a combination of deficiencies, in internal control, such that there is a reasonablepossibility that a material misstatement of the entity’s financial statements will not beprevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency,or a combination of deficiencies, in internal control that is less severe than a materialweakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first

paragraph of this section and was not designed to identify all deficiencies in internal controlthat might be material weaknesses or, significant deficiencies. Given these limitations, duringour audit we did not identify any deficiencies in internal control that we consider to be materialweaknesses. However, material weaknesses may exist that have not been identified.


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Compliance and Other Matters

As part of obtaining reasonable assurance about whether The Florida Bar and Subsidiaries’financial statements are free from material misstatement, we performed tests of its compliance

with certain provisions of laws, regulations, contracts, and grant agreements, noncompliancewith which could have a direct and material effect on the determination of financial statementamounts. However, providing an opinion on compliance with those provisions was not anobjective of our audit, and accordingly, we do not express such an opinion. The results of ourtests disclosed no instances of noncompliance or other matters that are required to be reportedunder Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control andcompliance and the results of that testing, and not to provide an opinion on the effectiveness ofthe entity’s internal control or on compliance. This report is an integral part of an audit

performed in accordance with Government Auditing Standards in considering the entity’sinternal control and compliance. Accordingly, this communication is not suitable for any otherpurpose.

CARR, RIGGS & INGRAM, LLC

Tallahassee, FL

December 4, 2015

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2015-2014 June 30 The Florida Bar Financial Statements

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