STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DISTRICT MENTAL HEALTH )

BOARD NO. 9, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 83-405

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in the above case before the Division of Administrative Hearings by its duly designated Hearing Officer, DONALD R. ALEXANDER, on July 21, 1983, in West Palm Beach, Florida.

APPEARANCES

For Petitioner: Ronald W. Brooks, Esquire

863 East Park Avenue Tallahassee, Florida 32301

For Respondent: Joseph L. Shields, Esquire

Building One, Room 406 1323 Winewood Boulevard

Tallahassee, Florida 32301 BACKGROUND

On September 21, 1982, respondent, Department of Health and Rehabilitative Services, issued an audit report containing the results of an audit of petitioner, District Mental Health Board No. 9, Inc., for fiscal years ending June 30, 1979 and 1980. The audit dealt with petitioner's participation in the Baker Act Program during that period of time and determined that petitioner should repay respondent $160,265 in disallowed costs.

Petitioner disputed the audit findings and requested a formal hearing pursuant to Subsection 120.57(1), Florida Statutes. The matter was referred to the Division of Administrative Hearings by respondent on February 4, 1983, with a request that a Hearing Officer be assigned to conduct a hearing.

By notice of hearing dated March 16, 1983, the final hearing was scheduled for May 16, 1983, in West Palm Beach, Florida. At the request of respondent, the matter was rescheduled to June 23, rescheduled again to July 5, and finally to July 21, 1983, at the same location.

At the final hearing, petitioner presented the testimony of Terry H. Allen, executive director of the 45th Street Community Mental Health Center, K. Howard

Wiener, administrator of South County Mental Health Center, and Dr. Benny B. Toole, executive director of South County Mental Health Center, and offered petitioner's exhibits 1-6; all were received in evidence. Respondent presented the testimony of John C. Hodnette, a Department audit evaluation and review analyst.

Neither party requested that a transcript of hearing be prepared. Proposed findings of fact and conclusions of law were filed by petitioner 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 were not supported by competent and substantial evidence.

At the outset of the hearing, petitioner conceded that it was liable for

$11,294 in disputed costs. At issue is whether petitioner (and its subcontractors) are liable for the $118,799 in questioned costs remaining in dispute. 1/

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

FINDINGS OF FACT

1. Petitioner, District Mental Health Board No. 9, Inc., is the recipient of funds from the State of Florida under the Baker Act Program. Such funds are received pursuant to a contract between petitioner and respondent, Department of Health and Rehabilitative Services (HRS). Petitioner is also the recipient of grant funds from the federal government under the Community Mental Health Centers Amendment Act of 1975.

   
   

2. After receiving such funds, petitioner contracted with South County Mental Health Center (SCMHC), Palm Beach County Comprehensive Community Mental Health Center (PBCCCMHC) and Indian River Community Mental Health Center to provide certain mental health services.

   
   

3. As a result of an audit performed by respondent for fiscal years ending June 30, 1979, and June 30, 1980, respondent determined that $130,093 in costs incurred by SCMHC and PBCCCMHC should be disallowed on the ground the District and its subcontractors failed to maintain records capable of audit. More specifically, it contended that state and federal funds were comingled in a single operating account, and that the auditors could not precisely determine how the various grant funds were allocated among the programs. It alleged that these deficiencies constituted a violation of Rule 10E-4.12(8)(d)2.e, Florida Administrative Code. At the conclusion of the hearing, respondent stated that it had relied upon an incorrect rule to support the disallowance of the expenditures and moved to amend its pleadings or to continue the hearing. Both requests were denied.

   
   

4. The field auditor who conducted the Department audit is no longer employed by HRS and was not present at the final hearing. Although a Department representative testified, he was not familiar with the specific deficiencies in the records, the actual records examined, the field auditor's understanding of the various grants and programs in question, and what additional information, if any, had been requested from the subcontractors when the audit was made. It was also not disclosed which rule, if any, prohibited the maintenance of a single operating account for multiple types of grant funds as long as a clear audit trail was present.

5. Petitioner produced records to demonstrate how the grants funds were allocated even though a single operating account had been used. It also pointed out specific errors made by the field auditor when he conducted the audit. Although petitioner admitted its records were not perfect, it contended they were in such sufficient detail and clarity as to provide a clear audit, trail for the Department auditor. This contention was not controverted.

   
   

   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. Although the Department is reflected as the respondent in this proceeding, at the outset of the hearing the undersigned ruled it had the burden of proof of establishing that the records were not capable of audit as claimed in the proposed, agency action which disallowed the costs in question. This ruling is consistent with prior decisions involving audits of mental health board units. See, for example, Department of Health and Rehabilitative Services

   v. Mental Health District Board II-B, Division of Administrative Hearings Case No. 82-3027, Recommended Order dated 3/31/83. Accordingly, the Department must establish by a preponderance of evidence that its allegations are correct.

   J.W.C. Co., Inc. v. Department of Transportation, 396 So.2d 778 (Fla. 1st DCA 1981).

   
   

8. The Department's claim for reimbursement of grant funds totaling

   $118,799 must fail for two reasons. First, it failed to establish that the records in question were incapable of audit. The actual auditor was not present, and the Department representative who testified was vague and inconclusive as to specific deficiencies in the records and any alleged difficulties encountered in the audit trail. Moreover, the prohibition against using a single operating account was never shown. Second, the Department conceded at the conclusion of the hearing that it relied upon an, incorrect rule to support its claim. 2/ Although it requested leave to amend its pleadings to reflect the proper rule, this request was denied on the ground it deprived respondent of the opportunity to adequately prepare and respond to this material change in the Department's position.

   
   

9. Because the evidence fails to support the allegations that the records were incapable of audit, that a single operating account was impermissible, and that a clear audit trail was not present, it is concluded that the funds in question were properly expended. In the case at bar, respondent has already recovered the controverted funds; therefore, it should repay that amount to petitioner and its subcontractors.

   
   

10. Petitioner also claims that because the Department has wrongfully held its funds throughout the controversy, it is entitled to prejudgment interest on that amount until repayment is made. In so doing, it relies upon Bergen Brunswig Corporation v. Department of Health and Rehabilitative Services, 415 So.2d 765 (Fla. 1st DCA 1982), which holds that the award of prejudgment interest is proper in conversion and ex contractu actions. But those types of actions must he pursued in a judicial vis a vis administrative setting, and therefore the Bergen case is distinguishable. Accordingly, the request for prejudgment interest is denied.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent repay petitioner $118,799 in grant funds

previously taken from petitioner prior to the commencement of this proceeding. DONE and ENTERED this 11th day of August, 1983, in Tallahassee, Florida.

DONALD R. ALEXANDER

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 11th day of August, 1983.

ENDNOTE

1/ Prior to the hearing the parties reduced the amount of costs in dispute from

$160,265 to $130,093. This settlement involved one of the three subcontractors (Indian River Community Mental Health Center) who operated under the auspices of petitioner.

2/ Respondent initially relied upon Rule 10E-4.12(8)(d)2.e. That rule relates generally to situations where the provider utilizes NIHM federal funds for staffing or operation of an inpatient unit. It later contended Rule 10E- 4.12(8)(d)3.c was applicable. This rule requires the "reporting" of monthly calculations by a provider that uses NIHM funds in the staffing or operation of an inpatient unit. However, the applicability of either rule to the instant case is not apparent in the record.

COPIES FURNISHED:

Ronald W. Brooks, Esquire 863 East Park Avenue Tallahassee, Florida 32301

Joseph L. Shields, Esquire Building One, Room 406 1323 Winewood Boulevard

Tallahassee, Florida 32301

David H. Pingree, Secretary Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

Docket for Case No: 83-000405

Orders for Case No: 83-000405