Senate Judiciary hears bill to audit State Bar after questions on scope and authority

The Montana Senate Judiciary Committee opened a hearing on House Bill 65, a measure that would authorize a one-time audit of the State Bar of Montana. The sponsor described the proposal as a "common sense" review of an organization that performs functions closely tied to the judicial branch, but opponents and the Legislative Audit Division said the bill as amended raises practical and constitutional problems.

The sponsor (listed in the committee record as the bill’s sponsor) told the committee, "I think this is just really a common sense bill. Take a look at what the state bar does since it is, so closely aligned with the judicial branch." The bill as introduced sought a performance audit; amendments in the House changed the request to a financial audit and added limits on the audit work.

Why it matters: HB 65 touches on the separation between the Legislature’s auditing authority and the judiciary’s constitutional role overseeing attorneys. Witnesses said the bill, as amended, would require different auditing standards and could raise legal questions about whether the State Bar should be treated as a state agency solely for audit purposes.

Supporters and opponents

Lisa Bennett of Carbon County, a signatory to the hearing record, said she supported the bill and argued local attorneys' dual role as a lobbying entity and a body involved in admission rules created potential conflicts. "The Bar Association is both a lobbyist organization and also an organization that, puts together the criteria for who becomes a lawyer. It seems to me that both of those functions of the same organization are in conflict and so I am in full support of this bill," Lisa Bennett said.

Representing the State Bar of Montana, Bruce Spencer told the committee the bar collects the $25 annual license tax for attorneys under contract with the clerk of the Supreme Court and that the bar is an independent nonprofit that already undergoes annual financial audits by nationally recognized accounting firms. "Because the state bar is an independent entity, because it is not an entity of the government, it has to have a contract with the clerk of the Supreme Court to do this," Spencer said, adding that the bar receives $7,500 a year to collect and remit the license tax.

The Montana Trial Lawyers Association's Al Smith opposed the measure as written, warning that it would set a precedent for broad audits of private organizations that contract with the state. "Just imagine if every independent organization or company that has a contract with the state — how do you think they would feel if we're told we're going to come in and audit your entire financials?" Smith said.

Legislative Audit Division concerns

Angus McKeever, director of the Legislative Audit Division, told the committee the bill originally asked for a performance audit and that the House amendments converted it to a financial audit and added restrictions that would impair auditors' independence. "When you change it to a financial audit, you're putting this into a different realm," McKeever said. He explained that generally accepted government auditing standards for financial audits differ from performance audits, that the audit division has limited experience auditing nonprofits, and that the bill's request for 10 years of work and restrictions on access would create practical and legal problems.

McKeever said, "I couldn't accept this. I couldn't do this work on this basis," while urging that a return to a performance-audit approach would be workable for his office.

Committee action and next steps

Committee members pressed witnesses on points including the difference between bar dues and the $25 license tax, the annual private audits the bar already obtains, and whether a return to a performance-audit request would be an acceptable compromise. The sponsor told the committee she would work with the legislative auditor on amended language and the committee asked staff to draft an amendment to revert the bill to a performance audit standard.

The hearing record contains testimony from bar representatives, trial lawyers, a citizen proponent, and the Legislative Audit Division; no formal vote on HB 65 was recorded in the transcript provided here.

Ending: The committee closed the hearing on House Bill 65 after members requested a draft amendment to restore a performance-audit approach and to address constitutional and practical concerns raised by the Legislative Audit Division.