STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF LABOR & ) EMPLOYMENT SECURITY, DIVISION OF ) EMPLOYMENT & TRAINING, )

)

Petitioner, )

)

vs. ) CASE NO. 81-3044

) THE HOUSING AUTHORITY OF THE ) CITY OF FORT PIERCE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held before the Division of Administrative Hearings by its duly designated Hearing Officer, DONALD R. ALEXANDER, on March 12, 1982, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Sonja P. Mathews, Esquire

Suite 117-Montgomery Bldg.

2562 Executive Center Circle, East Tallahassee, Florida 32301

For Respondent: Sandra J. McCarty

601 Avenue B

Fort Pierce, Florida 33450 BACKGROUND

On November 13, 1981, Petitioner, Department of Labor and Employment Security, Division of Employment & Training, issued its Final Determination concerning certain expenditures of funds by Respondent, The Housing Authority of the City of Fort Pierce, under the Comprehensive Employment and Training Act (CETA). In the Final Determination, Petitioner recommended that $53,914 in expenditures made between October 1, 1978 and September 30, 1979, be disallowed for Respondent's failure to comply with applicable regulations, and that it repay the Division that amount of monies.

Respondent disputed this recommendation and requested a formal hearing pursuant to Subsection 120.57(1), Florida Statutes. The matter was forwarded to the Division of Administrative Hearings on December 2, 1981, with a request that a Hearing Officer be assigned to conduct a hearing. By Notice of Hearing dated January 8, 1982, the final hearing was scheduled for March 12, 1982, in Tallahassee, Florida.

At the final hearing Petitioner presented the testimony of Joseph M. Shore, audit manager for Alexander Grant and Company, and Henry M. Warren, Division internal audit supervisor, and offered Petitioner's Exhibits 1-23, each of which was received into evidence. Respondent presented the testimony of Harland K. Heumann, its executive director, and Sandra J. McCarty, assistant director, and offered Respondent's Exhibit 1 which was received into evidence.

Pursuant to the provisions of Rule 28-5.1055, Florida Administrative Code, the undersigned made a diligent inquiry of Respondent's prospective representative, Sandra J. McCarty, during a non-adversary proceeding, under oath and on the record, to assure that the prospective representative was qualified to appear in this proceeding and capable of representing the rights and interests of Respondent. Such a finding was made and read into the record.

The transcript of hearing was filed on April 14, 1982. Proposed findings of fact and conclusions of law were filed by Petitioner on April 26, 1982, and have been considered by the undersigned in the preparation of this order.

Findings of fact not included in this order were considered irrelevant to the issues, immaterial to the results reached, or not supported by competent and substantial evidence.

At the outset of the hearing, Petitioner and Respondent stipulated that

$28,882 of costs recommended for disallowance were no longer in dispute and that they would be allowed. Remaining at issue is whether Respondent should be required to repay $26,608 in monies allegedly expended in violation of applicable rules and standards. 1/

Based upon all the evidence, the following findings of fact are determined: FINDINGS OF FACT

1. The State of Florida receives financial assistance from the United States Department of Labor under the terms of the Comprehensive Employment and Training Act (CETA). The monies are to be used to provide job training and employment opportunities for economically disadvantaged unemployed or underemployed persons. Petitioner, Department of Labor and Employment Security, Division of Employment and Training (Division), acting on behalf of the State, disburses the federal monies to various units of local government pursuant to contracts entered into by Petitioner and those units. Such contracts require that all monies expended thereunder be in accordance with applicable regulations. As is pertinent here, these regulations include Federal Management Circulars 74-4 and 74-7, and certain portions of Sections 675.5 and 676.75 of Volume 20, Code of Federal Regulations.

   
   

2. The Division, in conjunction with an independent certified public accounting firm, is responsible for auditing CETA contracts to insure compliance with applicable regulations. Any costs found to be in contravention of Federal or State regulations are recommended to be disallowed. After the audit is completed a Final Determination is issued by the Division containing its determination of allowable and non-allowable costs.

   
   

3. As is pertinent here, Petitioner and Respondent, The Housing Authority of the City of Fort Pierce, entered into Contract Nos. 79MP-1B-10-66-20, 79MP- 2U-10-66-02, 79MP-1F-10-66- 20 and 79MP-1F-10-66-20-P4 concerning the expenditure of grant monies between October 1, 1978 and September 30, 1979. These contracts were later audited by an audit team from Alexander Grant & Company, a public accounting firm, to determine whether such expenditures were

   in accordance with applicable regulations. Based upon the firm's audit report, the Division issued a Final Determination recommending that Respondent repay the State $53,914 in grant funds allegedly spent in contravention of regulations.

   By agreement of the parties, the items in dispute have been reduced to thirty- two, and total $26,608.

   
   

4. The audit report and Final Determination reflect the following deficiencies under each of the contracts in issue.

   
   

   A. Contract No. 79MP-1B-10-66-20--(October 1, 1978-

   March 31, 1979)

   
   

   1. Item (1)(a) - Respondent employed E. Hudson and M. McCarty in the positions of bookkeeper and office staff supervisor in October through December, 1978, and January, 1979, respectively, and allocated a part of their salaries ($217) to administrative costs. However, the contract does not authorize these positions, and their funding was contrary to applicable regulations.

      
      

   2. Item (1)(b) - Administrative personnel costs for February and March, 1979, were shown by Respondent in total only and did not include supporting detail. Because of this, the auditors were unable to verify the legitimacy or accuracy of the charges. These costs totaled $1,121 and were properly disallowed.

      
      

   3. Item (1)(c) - In November and December, 1978, H. Frashire was compensated at a rate in excess of that authorized under the contract. The excessive wages ($166) were not authorized, and the payment of same constituted a violation of Department rules.

      
      

   4. Item (1)(d) - When asked to substantiate salaries Paid to participants during the life of the contract, Respondent furnished a detailed listing of participants and total wages paid. However, the documentation did not agree with actual contract expenditures, and $301 in unsubstantiated charges was properly disallowed.

      
      

   5. Items (1)(e) and (g) - While employed in January through March, 1979, Claudine Simon was paid at a rate in excess of that authorized by the contract. The unauthorized excess compensation, including fringe benefits, totaled $489.

   
   

   B. Contract No. 79MP-2U-10-66-20-- (April 1, 1979-

   September 30, 1979)

   
   

   1. Item (2)(a) - Respondent allocated $2,927 in costs to the contract under the category of staff salaries and wages. However, it failed to provide names, time sheets or other documentation to support the charges. Applicable regulations require that supporting documentation be furnished to justify all charges. In the absence of such documentation, the charges were properly disallowed.

      
      

   2. Item (2)(b) - Respondent issued two checks made payable to the City of Fort Pierce ($73) and V. Williams ($8) for a pro rata portion of data processing costs and to reimburse Williams for travel expenses. The former expenditure was arrived at by arbitrarily splitting total data processing costs equally between three grants. This was done despite there being different levels of activity between the grants. The latter payment was for traveling expenses not authorized by the contract. Both were correctly disallowed.

   3. Items (2)(c) and (e) - During July through September, 1978, Respondent compensated Ann Gilmore at a rate in excess of that authorized by the contract. Although the excess pay ($103) was attributable to Respondent's effort to supplement Gilmore's salary by using funds from another contract, the excess pay was not authorized.

      
      

   4. Items (2)(g) and (h) - During the hearing, Respondent agreed that no documentation for these charges ($28) existed, and did not question their recommended disallowance.

   
   

   C. Contract No. 79MP-1F-10-66-20--(October 1, 1978-

   September 30, 1979)

   
   

   1. Item (3)(a) - Respondent allocated a part of the salaries for the positions of bookkeeper and office supervisor to administrative costs. Neither position was authorized by the contract, and the $144 in questioned costs was properly disallowed.

      
      

   2. Item (3)(b) - For the month of February through September, 1979, Respondent charged $2,894 to administrative personnel costs. The Housing Authority simply provided the auditors monthly totals but could not otherwise furnish supporting detail to enable a verification of these charges. The failure to provide supporting documentation was in contravention of applicable regulation and justifies the disallowance of the charges.

      
      

   3. Items (3)(c) and (d) - These charges ($73 and $8) were identical to those discussed in Item (2)(b) above, and were not based upon an approved allocation plan or authorized by contract.

      
      

   4. Item (3)(e) - In November and December, 1978, Respondent paid H. Frashire at a rate in excess of that authorized under the contract. Therefore, the excess wages ($361) were properly disallowed.

      
      

   5. Item (3)(f) - Respondent attempted to reconcile actual wages paid to participants with that amount authorized by the contract. However, the amount actually paid exceeded the contract amount by $298, and it could furnish no documentation to support the difference.

      
      

   6. Items (3)(g) and (k) - On May 22, 1979, Joe Knoble was certified by the Florida State Employment Service (FSES) as being eligible for employment under a Title VI program. Based upon that certification, Respondent enrolled Knoble in the program. However, because the application reflected his last date of employment as March 16, 1979, he was ineligible for participation.

      Therefore, the disallowance of $562 in wages paid to Knoble was correct.

      
      

   7. Items (3)(j) and (m) - After Terry Armstrong filled out an intake form to enroll in the program, he was employed in a non-CETA job. When he later began working for CETA, he failed to submit a statement of his most recent earnings on his application. The omission of this information prevented the auditors from determining whether Armstrong's earnings disqualified him from eligibility as required by applicable regulations. While employed in the program, he received $1,628 in compensation.

   
   

   D. Contract No. 79MP-1F-10-66-20-P4--(October 1, 1978 - September 30, 1979)

   1. Item (4)(a) - Respondent charged to this contract a part of compensation paid to fill the positions of bookkeeper and office staff supervisor. However, these positions were not authorized by the contract, and

      $240 in costs were properly disallowed.

      
      

   2. Item (4)(b) - From February, 1979 through September, 1979, Respondent incurred $7,659 in administrative costs which it charged to the contract. It offered no supporting documentation to verify the charges except monthly totals. Accordingly, these costs were properly disallowed.

      
      

   3. Item (4)(c) - This item is identical to that previously discussed in Items (2)(b) and (3)(c) above and should be disallowed for the same reason set forth therein.

      
      

   4. Item (4)(d) - No documentation was supplied to verify certain funds paid to A. Wins ($8) and a local newspaper ($42). Because of this, the charges were not allowed.

      
      

   5. Item (4)(e) - Between October, 1978 and January, 1979, Respondent compensated A. Dubois at a rate which exceeded that authorized under the contract. Accordingly, the excessive salary ($230) should not be allowed.

      
      

   6. Item (4)(f) - Respondent prepared a detailed listing of participants and total wages paid during the life of the contract. However, the total amount of salaries charged to the contract did not agree with the detailed listing.

      For this reason, the difference between the two amounts ($968) was properly disallowed.

      
      

   7. Items (4)(h) and (m) - An application submitted by Debra Ann Lambert disclosed that she was employed when her application was filed. Such employment made her ineligible for participation in the program. Nonetheless, Lambert was hired by Respondent and received $2,807 in wages during her tenure with the program. The expenditure was improper, and the costs should not be allowed.

      
      

   8. Items (4)(i) and (m) - The application of C. Byron also disclosed that she was employed at the time her application was filed. Even though she was ineligible, she was still enrolled in the program. Therefore, the disallowance of $1,359 in wages paid Byron was correct.

      
      

   9. Item (4)(q) - Respondent planned to train participants in the nursery business. To aid the participants it ordered a greenhouse in early 1979 at a cost of $1,821. It later cancelled the order after learning that special authorization to purchase the item had not been obtained. The chief of the Bureau of the State approved the purchase on May 14, 1979, and it was reordered shortly thereafter. Because the greenhouse was not received until July, and the program ended on September 30, 1979, the greenhouse was never used. On this basis, the costs were recommended for disallowance. It is still in a shipping carton in Fort Pierce but can be returned to the seller for reimbursement.

   
   

5. Through its Assistant Director, Respondent acknowledged that certain positions were not authorized by the contracts, but contended it had received verbal instructions from "CETA officials" to allocate costs for those unauthorized positions. It also pointed out that its bookkeeper had resigned during the middle of the programs, and was the only person familiar with the accounting treatment afforded many items. Respondent contended that it was unaware of and requirement for detailed documentation to support the charges, or that a cost allocation plan had to be used to allocate common costs between

   various programs. In the case of the ineligible participants, Respondent necessarily relied upon Florida State Employment Service (FSES) certifications to determine eligibility since it was unfamiliar with eligibility requirements. Although none of the errors appeared to be intentional or for the purpose of circumventing the rules, many of the deficiencies stemmed from Respondent's lack of knowledge of applicable rules and regulations, and failure to obtain official guidance from the Division as to procedures to be followed.

   
   

   CONCLUSIONS OF LAW

   
   

6. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes.

   
   

7. Pursuant to the provisions of Chapter 17, United State Code Section 801 et seq. the State of Florida received financial assistance from the United States Department of Labor for the purpose of establishing programs to provide comprehensive employment and training services for "economically disadvantaged persons."

   
   

8. Petitioner is responsible for carrying out the duties and responsibilities reposed by the Department of Labor upon recipients of manpower funds received by the State. Subsection 450.55(2), Florida Statutes. These duties include "... (signing) contracts on behalf of the state ... with program operators contracting with the state under the Comprehensive Employment and Training Act..." Subsection 450.55(3), Florida Statutes.

   
   

9. Paragraph (2)(g) of Attachment G, Federal Management Circular 74-7, requires that grantee financial management systems provide for:

   
   

   [a]ccounting records which are supported by source documentation.

   
   

   The findings concerning Items (1)(b) and (d), (2)(a), (g) and (3)(b) and (f), and (4)(b), (d) and (f) of the Final Determination support a conclusion that the above rule was violated, and that the costs associated therewith should not be allowed.

   
   

10. Federal Management Circular 74-4, Attachment A, sets forth the principles for determing costs applicable to grants and contracts with state and local governments. Attachment A provides in part as follows:

    
    

    1. A plan for allocation of costs will be required to support the distribution of any joint costs related to the grant program.

       All costs included in the plan will be supported by formal accounting records which will sub- stantiate the propriety of eventual charges. (Emphasis added)

       
       

       The evidence discloses that Respondent had no approved allocation plan and, therefore, the charges in Items (2)(b), (3)(c) and (4)(c) should not be allowed.

       
       

11. Applicable portions of Sections 675.5 and 676.75 of Volume 20, Code of Federal Regulations, prescribe the eligibility requirements to participate in CETA programs. The evidence reveals that those participants questioned in Items (3)(g), (k), (j) and (m) and (4)(h), (i) and (m) were ineligible for employment

    under the aforesaid regulations and should not have been hired. Accordingly, those costs for ineligible participants should be disallowed. 2/

    
    

12. With the exception of Item (4)(q), the remaining items in dispute involve expenditures which were in direct conflict with the terms of the contracts or were simply unauthorized. See Federal Management Circular 74-4, Attachment G, Paragraphs 2c and 2d; Attachment A, paragraph C.1.c. The evidence supports a conclusion that the costs related to those items should not be allowed.

    
    

13. Item (4)(q) relates to the purchase of a greenhouse which admittedly was never put to use. Petitioner must shoulder some of the blame for the belated purchase since it approved the expenditure on May 14, 1979, presumably with the knowledge that the contract would expire in less than five months. At the final hearing Respondent indicated the greenhouse was in the original shipping carton and might still be returned to the seller in New Jersey. Accordingly, it is recommended that Respondent attempt to return the greenhouse and seek reimbursement for its purchase price ($1,821). Appropriate disposition of the proceeds can then by made by the Division. If Respondent is unsuccessful in returning the item or obtaining a full refund, the remaining costs should be allowed.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that (1) Respondent repay Petitioner $24,787 in grant funds

improperly expended, and (2) Respondent attempt to return its unused greenhouse to the seller for refund and that Petitioner thereafter determine the disposition of the proceeds; if such efforts are unsuccessful, the costs should be allowed.

DONE and ENTERED this 6th day of May, 1982, in Tallahassee, Florida.

DONALD R. ALEXANDER

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 6th day of May, 1982.

ENDNOTES

1/ Respondent did not contest Items (2)(g) and (h) and (3)(d) and (f) of the Final Determination. Those items totaled $344, leaving $53,580 of costs in dispute. The stipulation above resolved over one-half of that amount. However, a part of the stipulation was later found to be incorrect, and the final amount in dispute is $26,608.

2/ Respondent's contention that it relied in good faith upon the FSES certifications as a basis for hiring those persons is unavailing. For one thing, FSES certifications did not relieve subgrantees of liability after March 31, 1979. Further, a subgrantee is required to establish "an eligibility determination system" to insured that certification errors do not occur. See 20 CFR Section 676.75-3(a) and 20 CFR 676.75-3(b)(iv).

COPIES FURNISHED:

Sonja P. Mathews, Esquire Suite 117-Montgomery Building

2562 Executive Center Circle, East Tallahassee, Florida 32301

Ms. Sandra J. McCarty 601 Avenue B

Fort Pierce, Florida 33450

================================================================= AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA DEPARTMENT OF LABOR AND EMPLOYMENT SECURITY, DIVISION OF EMPLOYMENT AND TRAINING,

Petitioner,

vs. CASE NO. 81-3044

THE HOUSING AUTHORITY OF THE CITY OF FORT PIERCE,

Respondent.

/

FINAL ORDER

The undersigned, as Director of the Division of Employment and Training, has reviewed the findings and recommendations of Donald R. Alexander, Hearing Officer, Division of Administrative Hearings, which were based upon the evidence presented at a hearing held in Tallahassee, Florida on March 12, 1982. The findings and recommendations are attached hereto, marked Exhibit "A" an thereby made a part hereof.

Findings of Fact and Law

1. The Division of Employment and Training has alleged that The Housing Authority of the City of Fort Pierce in administering grants under the Comprehensive Employment and Training Act (CETA), failed to comply with the applicable rules and regulations. As a result thereof, a total of $26,608.00 was spent in violation of applicable rules and regulations.

   
   

   The Housing Authority of the City of Fort Pierce alleged that there were no expenditures in violation of CETA or the applicable laws, rules, and regulations.

   
   

2. The findings of fact of the Hearing Officer are hereby adopted and accepted.

   
   

3. The findings of law are accepted and adopted, except as to Item Seven (7). The Respondent did not act reasonably in that after receiving the greenhouse, it made no attempt to use it nor return it.

WHEREFORE, IT IS ORDERED and ADJUDGED:

1. That within thirty (30) days of the date of this Order, The Housing Authority of the City of Fort Pierce shall pay $24,787.00 to the Division of Employment and Training.

   
   

2. That The Housing Authority of the City of Fort Pierce "shall, within ten (10) days of the date of this Order, return the greenhouse to the seller and seek reimbursement of the purchase price ($1,821.00). If the Housing Authority is unable to so dispose of the greenhouse, the Housing Authority shall remit the purchase price ($1,821.00) to the Division within thirty (30) days of the date of this ORDER.

In the event either party disagrees with this determination, an appeal can be filed with Mr. Lawrence Weatherford, Regional Administrator, United States Department of Labor, 1371 Peachtree Street, N.E., Room 405, Atlanta, Georgia 30309. The provisions pertaining to the appeal process, 20 C.F.R. 676.83 et. seq., are attached hereto.

Dated this 29th day of, 1982, in Tallahassee, Leon County, Florida.

CHARLES R. RUSSELL, Director

Division of Employment and Training

CERTIFICATE OF SERVICE

I DO HEREBY CERTIFY that a true and correct foregoing Final Order has been furnished by U.S. Mail to Ms. Sandra J. McCarty, 601 Avenue B, Fort Pierce, Florida 33450 this 29th day of June, 1982.

Gloria Byrd

Docket for Case No: 81-003044

Orders for Case No: 81-003044