Focus On
Teresa Donnelly, LSO treasurer

LSO highlights strategic objectives for regulation, financial strength at annual meeting

Thursday, May 12, 2022 @ 2:32 PM | By Amanda Jerome

The Law Society of Ontario’s (LSO) annual general meeting (AGM), held virtually on May 11, provided a review of the organization’s strategic objectives and financial statements, noting that despite the global pandemic and market volatility, the LSO is in a “financially strong position” and is “well-placed for the remainder of this year.”

“Despite the global pandemic that has impacted on us in all aspects of our lives for the past two years, the law society has continued its mandate to regulate the professions in the public interest. The rapid pace of change has compelled us to be nimble, flexible and resilient,” said treasurer Teresa Donnelly before presenting key components of the LSO’s 2021 annual report

Donnelly noted that as of Dec. 31, 2021, the LSO’s “membership includes almost 58,000 lawyers and close to 11,000 paralegals.”

LSO treasurer Teresa Donnelly

LSO treasurer Teresa Donnelly

She stressed that the organization has “been guided by the four key objectives of our strategic plan: proportionate regulation, scope of regulation, competence and quality of service, and access to justice.”

“With respect to competence, the Competence Taskforce was launched in 2020. They continued their work over 2021, including doing a public call for comment that was very successful. We received, in total, 77 responses from individual licensees, legal organizations and from non-licensees. We also completed 10 focus groups. We’re hopeful that the report on competence will come to Convocation in the near future,” she said, noting that the LSO has also “examined scope of regulation, as a self-regulator of legal services in Ontario and the legal professionals who provide them.”

“Ensuring effectiveness of regulation requires that we periodically confirm the scope of what and how the law society regulates. Particularly in an environment where accessibility of affordable legal services is an issue and significant advances in technology and related innovations are taking place,” she added.

Turning to access to justice, the treasurer noted that “recognizing the difficulty experienced by many Ontarians in accessing affordable legal services, the law society’s statutory obligation to regulate so as to facilitate access to justice and advance confidence in our commitment to the public interest is of strategic significance.”

“We continue to consider how paralegals can provide certain family law services. This is a complex issue involving the regulatory obligation to protect the public balanced with the need for more flexible legal service options in support of family law clients. We’ve been engaging with our justice sector partners to determine how best to move forward in this important area in a way that is realistic and achievable,” she explained.

Donnelly also highlighted priorities for her as the treasurer, mainly “equality, diversity and inclusion (EDI)” and “mental health.”

“As treasurer, I continue to be inspired and guided by our equity partners. Their perspectives and experiences have enriched my comprehension of the continuing impact of racism and colonialism on our institutions, including the institutions of our justice system. Our equity partners help me understand the work we still need to do,” she said, noting that some of the LSO’s EDI work “this year has included promoting more French-language services and rights, reconciliation, continued work with our equity partners” and there’s been “real growth in the equity legal education series events.”

The treasurer also stressed the importance of reducing the “stigma around mental health.”

“In order to serve the public well and to facilitate access to justice we need to ensure that members of the legal professions are healthy and supported. We need to look after ourselves. We need to look out for, and after, each other. We cannot continue our important work in the justice system without self-care and being mindful of the impacts on our mental health,” she said, reminding attendees of the Member Assistance Program which offers “a full range of confidential services, including counselling, online resources, peer-to-peer supports, [and] crisis management services …”

Although many events, such as the AGM, remain virtual, Donnelly was “thrilled” to announce that “we will be going back to live in-person calls to the bar in June.”

Joseph Groia, chair of the Audit & Finance Committee

Joseph Groia, chair of the Audit & Finance Committee

Joseph Groia, chair of the Audit & Finance Committee, presented the organization’s financial statements.

“The continuing pandemic caused an uncertain environment for the law society and the legal professions, and it presented many unique challenges. However, it also provided us with many opportunities for reflection and change as the financial storm we thought might hit the law society failed to materialize,” he explained, noting that “over the last two years, management and benchers have worked together effectively to implement measures to maintain and indeed improve the financial stability of the law society.”

“Today we are in a strong financial position that will allow us to improve our ability to assist our members and their needs as well as to continue with our important work to regulate in the public interest,” he added, noting that “LawPRO has also weathered the COVID financial storm with solid financial results, and it has become a significant financial asset for the law society over the last several years.”

“While we appear to finally be coming out of the COVID pandemic, the law society still faces financial challenges, especially those caused by the significant market volatility we are all now seeing. The law society will need to pay careful attention to our investments and our finances as we move through the next several months and to adapt, as needed, to these changing market conditions,” Groia said.

Turning to the statement of revenue and expenses, Groia said “the law society’s general funds, which account for the program delivery and administrative activities we carry out, are reporting combined in-year gains of $9 million.”

“Once again, we did not need to use the contingency fund of $1 million, which we set aside for unforeseen circumstances,” he explained, adding that the “restricted funds are also reporting combined in-year gains of $3.2 million in 2021.”

“When we look at our revenues, they increased by approximately $14 million attributable to several areas of our operations,” Groia said, explaining that the “annual fee revenues for 2021 were $90.7 million compared to $95.3 million in the previous year.”

“A decline in fee revenue was planned as part of the 2021 budget which included a fee reduction of $193 for lawyers and $42 for paralegals. This reduction was partially offset by the increase in the number of licensees we supported in 2021. I also want to remind everyone that in the 2022 budget, Convocation approved a further fee reduction of $60 for lawyers and $9 for paralegals. These two fee reductions total over $14 million in savings for the legal professions in Ontario,” he noted.  

Groia also noted that “insurance premiums and levies were up notably from 2020 with the key contributor being an increase in transaction levies with civil litigation and real estate transaction volumes rising.”

“Our professional development and competence revenue, which includes licensing fees and continuing professional development fees, increased this year to $22.6 million in comparison to $20 million in 2020. The main reasons for this were higher revenues resulting from many licensing candidates who had deferred their 2020 examinations to 2021, an increase in the number of articling positions in 2021 compared to 2020 were severally impacted by the pandemic,” he added, noting that the LSO has also “successfully pivoted CPD program delivery and content to virtual platforms with a growth in attendance compared to 2020.”

“While revenues exceeded budget expectations, we have still not returned to pre-pandemic levels of attendance,” he said.

According to Groia, “the last major component” of the LSO’s revenues “was the change in the fair value of our investments.”

“The $6.2 million we recognized was the result of the positive financial markets in 2021. As I’ve mentioned, however, this changed in the first quarter of 2022 with a new financial market volatility that we are all seeing. As a result, the law society has experienced some unrealized losses for the first quarter of 2022 to a degree similar to most other similar organizations,” he explained.

However, he noted, the LSO’s “expenses in 2021 were down significantly.”

“Expenses related to our operations were $97.9 million in 2021 compared to $97.6 million in the previous year. However, those expenses were almost $10 million below the budget that we had developed for the 2021 financial year. That budget had planned for a return to more normal operations, but instead we continued with many pandemic restrictions on our activities. This resulted in notable savings across the organization arising out of virtual activities impacting travel, reduced in-person meetings and fewer events,” he said.  

In looking at LSO expenses in specific areas, Groia noted that “in professional regulation, the tribunal and compliance budget ended the year comparable to 2020, but again, under budget as we had planned. Professional regulation saw less spending on external counsel fees as the number of matters using outside lawyers declined.”

“Although there were notable savings in corporate services last year related to building operations, some of these savings were offset by increased costs for rising insurance premiums, additional IT cloud service subscriptions and investments being made to support a hybrid work environment,” he added.

Groia also noted that “Convocation, policy and outreach expenses in 2021 were comparable to 2020,” so the organization “again came in under budget by about $4 million.”

“These savings were largely related to travel, meetings and events, with activities such as meetings of Convocation and committees remaining virtual all last year,” he explained.

The LSO’s “restricted funds show in-year gains of $3.3 million,” he reported, noting “this gain is primarily related to a notable increase in insurance premiums and transaction levies within our E & O [Errors & Omissions Insurance] fund.”

“Those law society funds will be available when needed for law society general purposes,” he added.

Breaking down the statement of financial position, Groia said the LSO’s “fund balances for the various funds are all in a very good position and comply with all of the applicable law society fund balance management policies.”

“With in-year gains of $8.1 million in the lawyer general fund, the fund balance at the end of 2021 was $38.3 million. The paralegal general fund added $863,000, ending the year with a fund balance of $2.7 million. In-year gains of the lawyer pool of the compensation fund, were about $500,000, bringing that fund balance at the end of 2021 to $31 million. This gain is attributable to the favourable changes in the fair value of the investments in that fund. But as a result of increased claims activity, we did see the provision for unpaid grant expenses exceeding budget by $2.2 million, which pretty much offsets those unrealized investment gains,” he said, noting that the LSO is “closely monitoring activity within the compensation fund and potential pressures we may see as the result of increased claims activity.”

“The paralegal pool of the compensation fund ended the year relatively unchanged at $964,000. These solid fund balances were considered as part of our 2022 budget and as a result the 2022 budget plans to use $7.5 million of the general fund to support the reduction in the 2022 annual fee I spoke of earlier,” he added.

In summary, Groia noted that “the measures that the law society has taken over the last two years have served the professions well.”

“We ended 2021 in a financially strong position, and we are well-placed for the remainder of this year and following as we focus on transforming the law society and changing it in a post-pandemic world while we also manage any unforeseen developments that may arise,” he concluded.

The treasurer opened the floor for a question-and-answer period but spent a large portion of the time explaining to members that they could not bring a motion from the floor of the AGM.

“We have a number of people who are not asking questions, who are sending me e-mails saying they want to bring a motion. That’s not permitted. That’s not in accordance with our bylaws, so I’m not really sure what’s happening there. Motions are required to relate to the work of the law society pursuant to the bylaws. They have to be brought on notice in advance,” she explained on multiple occasions.

The treasurer also addressed questions regarding a motion that was sent to the LSO but was not on the AGM’s agenda.

“I wrote a letter dated April 14 to the author of the motion setting out why the motion was improper, why it was outside the authorities of licensees to engage in such decisions, it was contrary to bylaw and that it ignored the legislative and fiduciary duties of benchers and Convocation. I noted in the letter that the Law Society Act requires that benchers, not members, govern the affairs of the law society, that putting such a motion to a members meeting usurps the governance authority of Convocation, circumvents the law society’s statutory provisions for governance,” she said, noting, again, that it was “not a proper motion, so it’s not on the agenda.”

Donnelly also noted that she “received no response” to the letter she sent regarding the motion.

“I’m happy to engage in a conversation about it, but the forum of the annual general meeting is set out by the bylaws and the bylaws are very clear on what’s proper and not proper. And it’s not proper to bring motions from the floor,” she explained.

The LSO’s CEO Diana Miles fielded a question regarding when the law society would allow the public to attend in-person Convocation, noting that “until the law society changes its COVID-19 protocols,” it “only permits at the moment benchers who fulfil our policy requirements to attend Convocation.”

“We will certainly let our stakeholders know as soon as we change our policies and protocols,” she added.

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