STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CLARK, ROUMELIS & ASSOCIATES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 93-1306

)

STATE OF FLORIDA, DEPARTMENT )

OF COMMUNITY AFFAIRS, )

)

Respondent. )

)

RECOMMENDED ORDER

Notice was provided and on May 27, 1993, a formal hearing was held in this case. Authority for conducting the hearing is set forth in Section 120.57(1), Florida Statutes. The hearing location was the Office of the Division of Administrative Hearings, Tallahassee, Florida. Charles C. Adams was the Hearing Officer.

APPEARANCES

For Petitioner: Stephen Marc Slepin, Esquire

Slepin & Slepin

1114 East Park Avenue Tallahassee, Florida 32301

For Respondent: Alfred O. Bragg, III, Esquire

Assistant General Counsel Department of Community Affairs 2740 Centerview Drive

Tallahassee, Florida 32399-2100 STATEMENT OF ISSUES

The issues concern Petitioner's claim for monetary reimbursement related to administrative services provided to Okaloosa County, Florida. Those services were associated with a Community Development Block Grant (CDBG).

PRELIMINARY STATEMENT

Petitioner filed a petition with Respondent to recover money for services rendered in the CDBG. The Division of Administrative Hearings received that petition with a request from the Respondent to provide a Section 120.57(1), Florida Statutes hearing. The case was assigned and the hearing conducted on the aforementioned date.

Respondent moved for summary recommended order. That motion was denied.

The hearing was limited in its scope in the manner described in the May 13, 1993 order denying the motion for summary recommended order.

Petitioner's Exhibit Nos. 1-22 were admitted. Petitioner presented Dobarah Baier Roumelis, Marie Dingman and Thomas Pierce as witnesses. Respondent's Exhibit Nos. 2-16 were admitted. Ruling was reserved on the admission of Respondent's Exhibit No. 1. Upon consideration Respondent's Exhibit No. 1 is admitted. The testimony of Judith Jerrett Foxworth was proffered. Upon consideration the Foxworth testimony is admitted.

The hearing transcript was filed on June 14, 1993. The parties by agreement asked that time for filing proposed recommended orders be extended until August 6, 1993. That request was granted. The parties met the filing deadline. In view of the extension of time for filing proposed recommended orders, the requirement for preparing a recommended order within 30 days from the date upon which the transcript was filed was waived. See Rules 28-5.402 and 60Q-2.031, Florida Administrative Code. The fact finding suggested by the proposed recommended orders is addressed in an appendix attached to this recommended order.

Petitioner moved to reopen the record post hearing to submit additional evidence. That motion was denied.

FINDINGS OF FACT

1. Petitioner is a Florida corporation located in Leon County, Florida.

   It prepares applications for CDBG funding for cities and counties. If those cities and counties are awarded grant funds, Petitioner administers the projects for the cities and counties.

   
   

2. Having investigated the possibility for obtaining a grant to revitalize a water/sewer system in a neighborhood in Okaloosa County, and having rejected that project as infeasible, Petitioner made application for Okaloosa County for the project which is at issue here.

   
   

3. The application was submitted to the Respondent on November 29, 1990, for grant award in the small cities CDBG housing category. The application stated that Okaloosa County had adopted a fair housing ordinance prior to the submission deadline date for applications that was consistent with state and federal housing laws. That feature in the application allowed Okaloosa County to receive 35 points in the scoring system in competition with other grant applicants. That 35 point score for the fair housing ordinance was crucial to the applicant's success in obtaining the grant funds.

   
   

4. The record does not reveal that the Petitioner had any responsibility to assure itself that Okaloosa County had enacted a fair housing ordinance prior to the application submission deadline, although Petitioner does render advice to local governments concerning adoption of ordinances and other necessary policies in support of CDBG programs. Petitioner also estimates costs of projects, participates in public hearings to get comments from the public concerning the projects that Petitioner is involved with in connection with CDBG grants. The support role by Petitioner includes preparing needed documentation and advising local governments about associated activities within the grant programs.

   
   

5. Those grants are in association with the United States Housing and Urban Development Agency and are known as Block Grants. The grants are to provide funding for the housing category at issue here, as well as neighborhood revitalization, commercial revitalization and economic development program

   categories. Here use of the term "CDBG" refers to the Florida Small Cities Community Development Block Grant Program. Respondent administers that program consistent with federal guidelines.

   
   

6. In addition Respondent establishes applicant eligibility, application criteria, application procedures, a competitive scoring system for comparing applicants and specific program requirements for the various categories within the CDBG program, together with grant administration requirements for the various CDBG grant categories.

   
   

7. On the same day that Okaloosa County, through Petitioner, submitted its application for CDBG funding in the housing category, it established procurement policies and procedures for CDBG programs and projects. That document pertains to the purchase or procurement of personal property, supplies, equipment and services, to be accomplished in accordance with applicable state and federal law. That document established a requirement for records keeping that basically indicated that appropriate arrangements would be made for generation and maintenance of all files, records and documentation that would be needed to evidence compliance with requirements delineated in the document itself. The document set forth procurement standards, procurement administration, procurement classification, solicitation and contract awards pursuant to invitations to bid and requests for proposals. The document spoke to the need for compliance with affirmative action/equal opportunity goals, contracts related to the provision of housing and the means to resolve protests over contracting procedures. The document was not designed to address the arrangements between Petitioner and Okaloosa County for administrative services provided to the county associated with the CDBG grant at issue.

   
   

8. The agreement between Okaloosa County and the Petitioner by which Petitioner would provide administrative services was as set forth in a November 19, 1990 contract between those parties. Its effective date was contingent upon Okaloosa County receiving the applied for CDBG funding under an award agreement with Respondent. Subject to that award Petitioner agreed to provide services consistent with Section III to the contract with Okaloosa County which stated:

   
   

   III. Scope of Services

   
   

   1. Intent of the Contract

      
      

      CRA agrees, under the terms and conditions of this Contract and the applicable federal, state and local laws and regulations, to undertake, perform, and complete the necessary Administration Services required to implement and complete the County's CDBG project in

      compliance with applicable laws and regulations.

      
      

   2. Scope of Services

   
   

   The scope of services relevant to the CDBG project is included as Attachment "C" to this agreement.

   
   

   If the Agreement between the County and the Agency is amended, the scope of work for the project shall be amended to be consistent with the Agreement.

9. The amount of consideration and the method of payment was as described in Section IV which stated:

   
   

   Consideration and Method of Payment

   
   

   1. Amount of Consideration

      
      

      CRA shall be paid by the County for Administrative Services the sum specified in the Scope of Work and Payment, attachment "C".

      
      

   2. Method of Payment

      
      

      CRA will submit a monthly (or other appropriate periodic) invoice specifying accomplishments toward meeting the Administration Services as specified in the Work Order. The invoice

      shall be submitted to the County for the County's review and approval. Payment will be issued within two days of approval of the invoice, subject to availability of project funds.

      
      

10. Any intent to modify the terms of the contract between Okaloosa County and Petitioner had to comply with Section VII which stated:

    
    

    Modification of Contract

    
    

    Modifications of the provisions of this Contract shall only be valid when they have been reduced to writing, duly signed by the parties hereto, and attached top the original of this Contract. CRA hereby agrees to amend the Work Order pertaining to each project to remain consistent with the County/Agency Agreement if said Agreement is amended.

    
    

    The amount of compensation to be paid to CRA will not be amended without mutual agreement of the County and CRA, formally executed in writing, subject to availability of funds from the Agency.

    
    

11. The fee and payment schedule between Okaloosa County and Petitioner was set forth in attachment "C". It stated:

    
    

    Fee and Payment Schedule

    
    

    For Administrative Services, the County will pay CRA the sum of 15 percent of the grant award. No more than $5,000 shall be obligated by the County for CRA's services under Phase

    I. Upon the Department's Release of Funds, Phase II shall be initiated by CRA and the County.

    The fee amount shall be issued by the County to CRA in 24 equal monthly payments. If the project is completed before the 24 month grant period expires, the balance of the administrative fee will be paid to Clark, Roumelis and Associates, Inc., by the tenth calendar day of the month after completion

    and submission of the close-out report to DCA.

    
    

12. Okaloosa County obtained the CDBG grant funding which it applied for and entered into an award agreement with Respondent as executed on June 28, 1991. The grant was subject to Sections 290.041 through 290.049, Florida Statutes, as amended; Public Law 93-383, as amended; 24 C.F.R. Part 570; Chapter 9B-43, Florida Administrative Code; OMB Circulars and 25 C.F.R., Part 85.

    
    

13. The agreement between Okaloosa County and Respondent was for a period of 24 months after signature unless terminated earlier in accordance with Clause (14).

    
    

14. Clause (14) dealt with suspension or termination and it stated: SUSPENSION OR TERMINATION.

    1. The Department reserves the right to suspend payments to a Recipient when the reports required in Section (9) of this Agreement are delinquent.

       
       

    2. The Department may terminate this Agreement for cause upon such written notice as is reasonable under the circumstances. Cause shall include, but not be limited to, misuse of funds; fraud; lack of compliance with applicable rules, laws and regulations; failure to perform in a timely manner; and refusal by the Recipient to permit public

       access to any document, paper, letter, or other material subject to disclosure under Chapter 119, Fla. Stat. as amended.

       
       

    3. Suspension or termination is an appealable action under Chapter 120, Fla. Stat. as amended. Notification of suspension or termination shall include notice of appeal rights and time frames.

       
       

    4. The Department reserves the right to exercise corrective remedial actions including, but not limited to, requesting additional information from the Recipient to determine

       the reasons for, or extent of non-compliance or lack of performance; issuing a written warning advising that the Agreement may be suspended or terminated if the situation is not remedied; advising the Recipient to suspend, discontinue or not incur costs for

       activities in question; or requiring the Recipient to reimburse the Department for the amount of costs.

       
       

    5. The Recipient shall return grant funds to the Department if found in noncompliance with laws, rules, regulations governing the use of CDBG funds or this Agreement.

       
       

    6. If at any time after the effective date of this Agreement, the Department determines that an activity to be funded is not eligible pursuant to 24 C.F.R. Part 570 or any subsequent federal regulation which supersedes it, the Department may unilaterally amend this Agreement to delete the ineligible activity and deobligate any unencumbered funds attributable to the ineligible activity.

    
    

15. The funding for the grant was in an amount not to exceed $650,000 for Respondent's share subject to the availability of federal funds to support that amount. Requests for disbursement of funds were to be made in accordance with Clause (4)(d) to the agreement which stated:

    
    

    Each request for funds shall be for an amount of not less than $5,000 unless it is the final request for funds and shall be on a form approved by the Department and shall be certified by an agent of the Department and shall be certified by an agent of the Recipient who has been identified as having signatory power on the signature form received by the Department. The Recipient shall immediately notify the Department in writing of any

    change in agents.

    
    

16. The reporting requirements of Okaloosa County under the terms of the agreement were as set forth in Clause (10) which stated in pertinent part:

    
    

    (a) At a minimum, the Recipient shall provide the Department with quarterly reports, and with a close-out report, on forms provided by the Department. If program income is produced, a semi-annual program income report shall be provided.

    
    

    * * *

    
    

    (c) The close-out report is due 45 days after termination of this Agreement or upon completion of the activities contained in this Agreement.

    
    

17. Under the terms of the agreement Respondent was required to make periodic review of the performance of Okaloosa County in completing the program contemplated by the CDBG grant.

18. Clause (13) to the agreement sets forth Okaloosa County's liability in its dealings with other entities, to include Petitioner and holds Respondent harmless against claims by those third parties that arise from performance of the work under the terms of the agreement.

    
    

19. The validity of the agreement between Okaloosa County and Respondent was contingent upon the truth and accuracy of information in the application, as required by Clause (18) (b) to the agreement. In the event that the application was not found to be truthful and accurate, Respondent upon 30 days written notice to Okaloosa County could cause the termination of the agreement and the release of the Respondent from obligations to Okaloosa County.

    
    

20. Should Okaloosa County fail to honor its agreement with Respondent, Petitioner in its obligation to Okaloosa County could suspend or terminate services which were affected by the breach of the agreement between Okaloosa County and Respondent. This was in accordance Section VIII (D) to the contract between Okaloosa County and Petitioner. Section VIII (D) stated:

    
    

    If the County shall fail to fulfill in a timely manner its obligations under this Contract or its Agreement with the Agency, CRA may, at its option and without liability, suspend afforded services until such time the County remedies the breach. CRA may also, without liability, terminate the affected portion of this

    Contract for breach within 10 days of giving written notice to the County of such termination and the reason(s) therefore.

    Neither of these options shall operate to deprive CRA of entitlement to remuneration for services rendered in accordance with this Contract.

    
    

21. As Grant Administrator Petitioner was entitled to $97,500 should the full $650,000 grant funding be disbursed. If the full amount was disbursed over the 24-month life of the grant then Petitioner would receive $4,062.50 for each monthly installment.

    
    

22. Commencing September 12, 1991, and ending on May 5, 1992, Petitioner submitted monthly invoices for reimbursement of costs associated with administrative services. Those invoices in the total amount of $40,625.00 were honored by Respondent. This approximated the monthly disbursement contemplated by the agreement between Petitioner and Okaloosa County. The arrangement was one in which the invoices had been approved by Okaloosa County and provided to the Respondent for reimbursement through Requests for Funds. The invoices described were for administrative services provided through April, 1992. The overall reimbursement in the project through Requests for Funds, to include the January 7, 1992 period, was $208,816.00. Those cost reimbursements pertain to housing rehabilitation, temporary relocation and administration. That overall amount also reflected the circumstance on May 13, 1992.

    
    

23. On April 23, 1992, Judith J. Foxworth, a grants administrator for Petitioner and Robert J. Rase, an employee for the Respondent, were performing a monitoring visit concerning the grant program at issue. At that time Ms. Foxworth had been assigned as administrator to the Okaloosa County grant

    program. The purpose of the monitoring visit was to insure program compliance with requirements of state and federal law. Janice A. Mack attended the monitoring visit as representative for Okaloosa County.

    
    

24. During the monitoring visit Mr. Rase raised the question of whether the fair housing ordinance that has been referred to before had been passed on November 20, 1990, which would have indicated that the fair housing ordinance was in effect at the time the application was made for grant funding. To assure himself concerning this topic Mr. Rase asked Okaloosa County to provide the minutes of the meeting at which the fair housing ordinance is said to have been passed. While the passage of a fair housing ordinance had been discussed, as noted in the November 20, 1990 minutes, the ordinance was not shown to have been passed on that date. With this revelation through the minutes of the meeting, Ms. Foxworth became aware of this fact as did Mr. Rase. Someone in this conversation between the representatives of the Petitioner, Respondent and Okaloosa County suggested the possibility that tapes of the November 20, 1990 meeting might reveal the passage of the fair housing ordinance and the possibility that it was an oversight that the passage of the fair housing ordinance had not been noted in the minutes, given the busy agenda being considered by the Okaloosa County Board of County Commissioners on that date. Ms. Mack also referred Foxworth and Rase to Bob McQuire, a deputy clerk for Okaloosa County, to see if McQuire had some recollection of the passage of the fair housing ordinance on November 20, 1990. Mr. McQuire was unable to assist in the inquiry. Some other discussion was held with the clerk to the Board of County Commissioners about the possible transcription of tapes associated with the November 20, 1990 meeting. Ms. Mack indicated that they could possibly transcribe the tapes and listen to them; however, it was indicated that the county had some priority items to attend to and it probably would be several days or even a week before these arrangements could be made. No indication was given in the present record that tapes of the meeting of November 20, 1990 were prepared for consideration by the Petitioner or Respondent beyond April 23, 1992 or what the tapes of the meeting of November 20, 1990 may have revealed concerning the passage of the fair housing ordinance.

    
    

25. However, based upon the record in this case, it has been established that the fair housing ordinance was passed upon a date subsequent to the time of the application for grant funding. This caused Respondent to revise the scores received by Okaloosa County. As a consequence Okaloosa County's application dropped below the fundable range in that inadequate points were received to allow the project to be funded.

    
    

26. After April 23, 1993, neither Ms. Foxworth nor any other person affiliated with Petitioner took action to confirm that the fair housing ordinance had been passed on November 20, 1990. By contrast Respondent wrote to the Okaloosa County chairperson on May 20, 1992. The correspondence mentioned that Respondent had reviewed information received from the Deputy Clerk of Okaloosa County in response to a request to verify information in the application for funding. That review by Respondent's staff revealed that the fair housing ordinance had not been adopted until January 15, 1991, in a setting in which the deadline for submission of applications was November 29, 1990. As a consequence the 35 points were deducted from the application reducing the score from 824.18 to 789.18, hence the Okaloosa County application was outside the fundable range.

27. The May 20, 1992 correspondence to the chairperson in Okaloosa County reminded the county that the Respondent believed that there had been a violation of Section 290.0475(7), Florida Statutes, which would allow rejection of the application based upon a misrepresentation in the application. Respondent was persuaded that the failure to pass a fair housing ordinance until January 15, 1991, in a setting in which Okaloosa County had reported the date of passage as November 20, 1990, specifically on March 1, 1991, in response to a completeness letter requested by Respondent on February 22, 1991, evidenced the misrepresentation by Okaloosa County.

    
    

28. As a consequence, through the May 20, 1992 correspondence, Okaloosa County was given the following instructions by Respondent concerning the future of the CDBG award agreement:

    
    

    Based upon these findings, the Department is hereby providing the County with notice, pursuant to Section (18)(b) of your grant agreement, that the award agreement will be terminated in thirty (30) days from receipt of this letter. The validity of the award agreement was subject to the truth and accuracy of all the information, representations, and materials submitted or provided by the County in the application, in any subsequent submission, or response to a Department request. The lack of accuracy thereof or any material change shall, at the option of the Department and with thirty

    (30) days written notice to the County, cause the termination of the agreement and release of the Department from all its obligations to the County under the agreement.

    
    

    The County should incur no additional costs from the date of receipt of this letter.

    While the Department has the ability to recover any costs incurred under this grant contract, due to the fact that the grant funds were spent on eligible activities to assist low and moderate income persons, the Department will not seek to recover monies already expended. However, no additional funds shall be disbursed from the contract.

    
    

29. The correspondence offered Okaloosa County the right to contest the preliminary agency action concerning termination of the grant agreement by resort to a formal hearing in accordance with Section 120.57(1), Florida Statutes, or an informal hearing in accordance with Section 120.57(2), Florida Statutes. In the end Okaloosa County accepted the termination upon the grounds stated in the May 20, 1992 correspondence.

    
    

30. Okaloosa County received the notification of termination on May 26, 1992.

    
    

31. Petitioner received a copy of the May 20, 1992 correspondence directed to Okaloosa County.

32. The May 20, 1992 correspondence constituted notice to the county not to incur additional costs as well as notification of termination.

    
    

33. Between April 23, 1992 and May 26, 1992, the dates when Petitioner first was made aware that there was a problem with passage of the fair housing ordinance and project fundability and the date upon which Respondent officially confirmed the significance of those problems, housing improvements contracts were entered into between home owners and contractors. A significant number of those contracts were entered into commencing April 28, 1992 and ending May 12, 1992.

    
    

34. As project administrator Petitioner had been acting in the interest of the home owners in soliciting competitive bids from contractors who would do the home improvement work associated with the grant activities.

    
    

35. Following the correspondence of May 20, 1992, Petitioner and Okaloosa County directed a number of inquiries to Respondent concerning proper use of remaining grant funds.

    
    

36. As of May 20, 1992, when Respondent gave the termination notice, it had effectively informed Petitioner and Okaloosa County concerning Respondent's intention not to recover the $208,816.00 already disbursed, but had withheld details about the amount of money it might disburse in the future from what remained of the $650,000.00 award. Associated with the balance of the funds, what was known was that Respondent considered the agreement between itself and Okaloosa County terminated effective June 25, 1992.

    
    

37. Respondent did not immediately honor a May 21, 1992 Request for Funds, which it mistakenly believed had been submitted subsequent to the May 20, 1992 notification to Okaloosa County that the agreement was terminated effective 30 days from receipt of notice of termination. Again the County did not receive that notice of termination until May 26, 1992, subsequent to its submission of the Request for Funds. One member of the Respondent's staff considered the submission of the May 21, 1992 Request for Funds to be a blatant attempt to obligate the balance of the grant monies with the "suspension pending". That was not the intention by Okaloosa County when submitting the May 21, 1992 Request for Funds. Suspension of funding is a consequence of the termination.

    
    

38. By correspondence of June 17, 1992, directed to the chairperson of the Okaloosa County Commission, with a copy to Petitioner, Respondent replied to the inquiries from Petitioner and Okaloosa County concerning whether any additional costs could and would be reimbursed subsequent to the notice of suspension of funds and termination dated May 20, 1992.

    
    

39. On June 17, 1992, Respondent informed Okaloosa County, and indirectly informed Petitioner, concerning the basis for determining cost reimbursement above the cost amounts already drawn and paid. Again, this is taken to mean that Okaloosa County and Petitioner were being told that $208,816.00 would not be reclaimed by Respondent and that the basis for deciding the issue of payment of other funds sought by Okaloosa County would be in accordance with guidelines set forth in 24 C.F.R., Part 85. In particular, Respondent had this to say concerning the basis for reimbursing any other costs:

    
    

    To aid the County, the Department offers the following guidelines which will be followed

    in determining which costs shall be reimbursed from the CDBG contract, beyond those already

    drawn and paid. The federal regulations in

    24 CFR Part 85, Administrative Requirements for Grant to Sates and Local Governments, outlines the guidelines in the event of suspension and termination. Specifically, Section 85.43(c) states the following standards.

    
    

    1. Costs resulting from obligations incurred during a suspension or after termination of an award are not allowable without express authorization from the awarding agency, which in this case is the Department.

       
       

    2. Other costs during suspension or after termination which are necessary and not reasonably avoidable are allowable, provided the following tests are met.

       
       

       1. The costs result from obligations which were (1) properly incurred before the effective date of suspension or termination,

          (2) are not in anticipation of the suspension or termination, and (3) in the case of termination, whether the obligations are noncancellable; and

          
          

       2. The costs would have been allowable if the award had not be suspended or the contract had expired normally at the end of the funding period.

    
    

40. Okaloosa County was further instructed in the June 17, 1992 correspondence as follows:

    
    

    The County should evaluate each cost that it seeks to have reimbursed from the grant and certify to the Department that the costs meet the above outlined standards. In addition, you should provide copies of all contracts obligating the costs, notices to proceed, and invoices for costs incurred to support each cost item requested for reimbursement. The Department will evaluate all costs on a

    case-by-case basis and make its determination applying the standards contained in 24 CFR Part 85.43(c). Once the determination is made, you will be notified in writing of the Department's final action.

    
    

41. Consistent with the instructions set forth in the June 17, 1992 correspondence Okaloosa County through Petitioner submitted detailed documentation of costs incurred over and above the $208,816.00. The amounts claimed are discussed in Respondent's September 22, 1992 interoffice memorandum from Thomas Pierce, Planning CDBG Program to Pat Pepper, Director of the

    Division of Housing and Community Development. The memorandum describes the following costs claimed:

    
    

    Temporary relocation $ 1,600.00 Housing rehabilitation 214,967.36

    Permanent relocation 88,063.00

    Demolition 3,000.00

    Administration 43,274.92

    
    

42. The memorandum sets out the position of the Respondent concerning payment of those costs where it says:

    
    

    Based on the review of the contracts submitted, the notices to proceed, and invoices, it appears that the direct assistance activity costs under temporary relocation, housing rehab, permanent relocation and demolition are justified for reimbursement. These costs were clearly obligated prior to our termination, and the contracts do not provide for costs avoidance in the event of grant cancellation.

    Therefore, the $307,630.36 for these direct assistance costs are recommended to be reimbursed by the grant to avoid undue hardship on the low and moderate income clients assisted.

    
    

    With regard to the payment of administrative costs, the review did not find adequate documentation to support reimbursement. The invoice submitted sought payment for preparation of the June 30, 1992 quarterly status report, attending a June 12, 1992 County Commission meeting and preparing request for funds and closeout reports. All of these are activities performed after the May 20 termination date, and therefore are not eligible for reimbursement, even though there was a contract executed for administrative services prior to the termination date. Therefore, we recommend that the administrative costs of $43,274.92 not be reimbursed by the CDBG Program. These costs are an obligation of County and would have to be paid by non-CDBG funds.

    
    

    Prior to this memorandum Respondent had received a July 8, 1992 Request for Funds and a July 23, 1992 status report which addressed the $43,279.92 claim for administrative costs.

    
    

43. In addition, on July 1, 1992, Petitioner had prepared an Amended Administrative Services Invoice #15. On September 30, 1992, Okaloosa County wrote to Petitioner to inform Petitioner that the invoice was approved by Okaloosa County contingent upon receipt of funds from Respondent. On October 8, 1992, Petitioner transmitted this invoice to Respondent.

44. Amended Administrative Services Invoice #15 gave the following account concerning claims for payment:

    
    

    DUE UPON RECEIPT

    
    

    Please issue payment to Clark, Roumelis and Associates, Inc., for services performed from May, 1992 through June 24, 1992, in accordance with out contract.

    • Prepared and coordinated the signing of the final two rehab contracts.

    • Prepared Notices to Proceed on the 3 demo/ relos and the final 12 rehabs.

    • Monitored construction progress with inspections at least weekly on all the final units (3 demo/relos and 17 rehabs).

    • Change Orders were prepared on three rehab units.

    • Prepared and coordinated the necessary paperwork for pay request for the contractors, homeowners, rental unit and recording fees.

    • Provided County Commission with project status report.

    • Liaisoned with local financial record keeper to update and verify monthly financial transactions.

    • Prepared Quarterly Status Report by compiling data on accomplishments and beneficiaries and thorough update of financial records on June 22, 1992.

    • Discussed final Request for Funds and financial reimbursements by County for CDBG expenditure with Mike Arciola, Jan Mack and CRA housing Specialist.

    • Prepared final Request for Funds on June 22, 1992, for signature by the County.

    • Attended County Commission meeting June 16, 1992, to discuss alternatives associated with timely closeout of the grant contract.

    Presented an issue paper and pros/cons of various actions Attorney. Administrative Services	discussed the with the County
    Contract amount	$97,500.00
    Previously Billed	40,625.00
    Total billed to date including this invoice	83,899.92
    Total Received to date	40,625.00
    Total Due Upon Receipt	43,274.92

45. Later, when Respondent arrived at its proposed agency action concerning cost reimbursement it wrote to the chairman of the Okaloosa County Commission, with a copy to Petitioner. This correspondence was dated January 28, 1993. In its operative terms it stated:

    
    

    The Department of Community Affairs has reviewed the documentation submitted on the costs incurred under the above referenced Community Development Block Grant (CDBG)

    which was terminated by the Department in June 1992. Based on the provisions of 24 CFR

    85.43 and our review of the documentation submitted, the Department finds that the following direct assistance costs were properly incurred before the effective date of the termination, were not incurred in anticipation of the termination, and were not cancellable. Further, the costs would otherwise have been eligible for grant

    reimbursement. These costs will be reimbursed by the Department immediately upon receipt of a Request for Funds form, signed by the County.

    
    

    Line Item Amount

    
    

    Temporary Relocation	$ 1,600.00
    Housing Rehabilitation	214,967.36
    Permanent Relocation	88,063.00
    Demolition	3,000.00
    TOTAL	$307,630.36

    
    

    With regard to invoice #15 for administrative costs, the Department does not find adequate contract authority in your agreement with the grant consultant to make a payment for

    $43,274.92. As your contract was a lump sum contract, payable in equal monthly installments, the Department finds that the only authorized payments would be the monthly payment for May, given receipt by the County on May 26, 1992 of the Department's notice of termination of your grant and notice to incur no additional costs from that date. Further, the Department reads Section IV (B) of the contract for administrative services to condition payments upon the availability of grant funds by the County. Given the notice of termination, the Department finds that the County did not have funding available beyond May 26, 1992 upon which to make payments.

    Therefore, the Department finds that the administrative costs were cancellable and as such would not be allowable under the federal guidelines contained in 24 CFR Part 85.43 (c) (1). The Department will, however, process a revised invoice that covers the monthly fee

    for May, as that cost was allowable and eligible prior to the notice of termination and notice to incur no additional costs.

    
    

46. On May 5, 1992, $4,062.50 in administrative services costs was approved by Okaloosa County through invoice #1501. This amount was in addition to the $40,625 already paid for administrative services. It is included within the $43,274.92 in dispute. As described in the January 28, 1993 proposed agency action it is an amount that Respondent would pay, notwithstanding that the invoice was not submitted to it. However, the $4,062.50 from May 1992 has not been paid to Petitioner.

    
    

47. Okaloosa County did not proceed to contest the determination concerning disbursement of funds as described in the January 28, 1993 correspondence. While Petitioner was not specifically noticed of its rights to administrative relief it sought and was granted the opportunity to contest the refusal to pay $43,274.92 in administrative costs set forth in Amended Administrative Services Invoice #15.

    
    

48. Under the circumstances wherein Respondent terminated its agreement with Okaloosa County prior to the normally anticipated concluding date, Petitioner did not prepare a close-out report. Petitioner did provide a status report dated July 23, 1992, which sets out its administrative claim of

    $43,274.92. Petitioner believes that it has performed its obligations pursuant to the agreement with Okaloosa County and is entitled to receive the disputed

    $43,274.92.

    
    

    CONCLUSIONS OF LAW

    
    

49. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action pursuant to Section 120.57(1), Florida Statutes.

    
    

50. Official recognition is made of Title I, Housing and Community Development Act of 1974, as amended 42 U.S.C. 5301 et seq. (1990); Small Cities Community Development Act, as amended, Section 290.0401 et seq., Florida Statutes (1991); 24 C.F.R., Part 85 (1992) and Chapter 9B-43, Florida Administrative Code (1993).

    
    

51. Section 290.047(3), Florida Statutes, authorizes Okaloosa County to pay 15 per cent of the block grant funds received as administrative costs. In accordance with that statute Okaloosa County and Petitioner entered into a contract calling for the payment of 15 per cent of the grant award for administrative costs contingent upon performance by the Petitioner consistent with terms set forth in their agreement. If the project lasted the entire 24 month period anticipated under the terms set forth in the agreement between Respondent and Okaloosa County, then pursuant to the agreement between Petitioner and Okaloosa County Petitioner would have been paid 24 equal monthly payments of $4,062.50. Otherwise, the agreement between Petitioner and Okaloosa County contemplated that those monies that had not been advanced as equal monthly payments would upon the completion of the project be paid to Petitioner by the tenth calendar day of the month following completion and submission of a close-out report to Respondent. There is also a reference within the agreement between Petitioner and Okaloosa County to the effect that no more than $5,000.00 should be obligated by Okaloosa County for services under the first phase of the project. That reference has no relevance here.

52. Because the project was terminated prior to the normally anticipated

    24 month period the Petitioner could not receive its administrative fees in 24 equal monthly payments as contemplated by its agreement with Okaloosa County. Although the project has not been completed in the sense that all grant funds have been expended, the project has been concluded between Okaloosa County and Respondent based upon its termination due to a misrepresentation by Okaloosa County when applying for grant funds. When Okaloosa County breached its agreement with Respondent, a breach which Petitioner did not cause and could not remedy, the basis for concluding or completing the project fell to the Respondent under the terms set forth in the agreement between Respondent and Okaloosa County. At its option Respondent chose to provide written notice of termination to take place 30 days from Okaloosa County's receipt of that notice. When notice was given and upon its effective date Petitioner was no longer allowed to preform administrative services pursuant to its agreement with Okaloosa County beyond those administrative acts necessary to support the overall project concerning obligations incurred to that point.

    
    

53. Nothing in the agreement between Respondent and Okaloosa County or in the agreement between Petitioner and Okaloosa County contemplated the necessity for Petitioner to anticipate Respondent's exercise of its option to terminate or to continue to abide by the agreement with Okaloosa County following discovery of the county's misrepresentation as to the date upon which the fair housing ordinance had been passed. After discovering the problems related to the date upon which the fair housing ordinance had passed, such discovery being made on April 23, 1992, Petitioner was not in a position to refuse to perform its administrative services in the project. Only after the May 20, 1992 correspondence when Respondent gave notice of its termination of the agreement with Okaloosa County and following receipt of that notice was Petitioner aware that Respondent had exercised its option to terminate Respondent's agreement with Okaloosa County. At that juncture and in accordance with the instructions from Respondent concerning the termination Petitioner was in a position to give notice to Okaloosa County that it did not intend to continue performing its obligations pursuant to its agreement with Okaloosa County. Following the May 20, 1992 notification of termination letter, Petitioner did not exercise its option under the agreement with Okaloosa County to suspend its administrative services. Instead it deferred to the terms established by Respondent through its notice of termination where Respondent described the costs that would be honored for reimbursement after the notice provided in the May 20, 1992 correspondence.

    
    

54. Petitioner and Okaloosa County were told not to incur additional costs beyond the time the County received the notification on May 26, 1992. Also Okaloosa County and Petitioner were informed in effect that $208,816.00 had been disbursed to that date and would not be reclaimed given the purposes of the grant money, that is to say assistance to low and moderate income persons. On May 20, 1992, Respondent went on to say that no additional funds would be disbursed from the contract. However, on June 17, 1992, Okaloosa County and Petitioner were further advised upon their inquiry that Respondent would consider additional disbursement consistent with certain guidelines set forth in that correspondence. The principal criteria established for determining which if any additional costs would be reimbursed through disbursement of grant funds

    from Respondent were in accordance with 24 C.F.R., Part 85, Section 85.43(c). The June 17, 1992 correspondence paraphrased that reference to the CFR. The actual reference states:

    
    

    1. Effects of suspension and termination. Costs of grantee or subgrantee resulting from obligations incurred by the grantee or subgrantee during a suspension or after termination of an award are not allowable

       unless the awarding agency expressly authorizes them in the notice of suspension or termination or subsequently. Other grantee or subgrantee costs during suspension or after termination which are necessary and not reasonably avoidable are allowable if:

       
       

       1. The costs result from obligations which were properly incurred by the grantee or subgrantee before the effective date of suspension or termination, are not in anticipation of it, and, in the case of a termination, are non-cancellable, and,

       2. The costs would be allowable if the award were not suspended or expired normally at the end of the funding period in which the termination takes effect.

    
    

55. As contemplated by those instructions given on June 17, 1993, Petitioner submitted costs for reimbursement. As referred to before $307,630.36 of those costs not associated with administration were honored on the theory that those, so called direct assistance costs, were properly incurred before the effective date of the termination, were not incurred in anticipation of the termination and were not cancellable. To be reimbursed these costs Okaloosa County need only provide a Request for Funds form signed by the County. This decision concerning reimbursement of the $307,630.36 was in accordance with the statement of intent found in the January 28, 1993 correspondence.

    
    

56. Respondent solicitated the information contained in Amended Administrative Services Invoice #15. Respondent took no issue with the format for submitting that information, but expressed the position that the agreement between Petitioner and Okaloosa County did not allow for the payment of

    $43,274.92, in that only monthly installments could be made and the only installment available for payment was May, 1992, given the county's receipt of the termination notice on May 26, 1992. The statement of intent by Respondent also alluded to Section IV (b) in the agreement between Okaloosa County and Petitioner which conditioned payment to the Petitioner on the availability of project funds. Ergo because the county no longer had funds available beyond May 26, 1992, it could cancel the agreement with Petitioner, and with the cancellation and in accordance with 24 C.F.R., Part 85, Respondent was not obligated to honor the reimbursement request by Petitioner. Respondent went on to describe its willingness to process the monthly payment for May, 1992, upon provision of a revised invoice for that period.

    
    

57. The costs sought for administrative services in the amount of

    $43,274.92 were not contrary to nor inconsistent with the criteria set forth in the June 17, 1992 correspondence by Respondent and 24 CFR, Part 85, Section 85.43(c). The administrative costs were properly associated with the direct

    assistance costs in the amount $307,630.36 already paid. Having made the

    $307,630.36 available for reimbursement on receipt of a Request for Funds form signed by Okaloosa County, no support can be found for the policy choice to refuse to pay the $43,274.92 sought by the Petitioner based upon the contention that in accordance with the agreement between Okaloosa County and Petitioner, Okaloosa County having no funds available to pay the Petitioner its claims, beyond May 26, 1992, Okaloosa County was entitled to cancel the administrative costs and those costs should be disallowed under the authority set forth in 24 C.F.R., Part 85, Section 85.43(c)(1). Funds are available for reasons established through the de novo hearing. To deny reimbursement of administrative costs is an illogical and inconsistent outcome when comparing treatment of those claims to claims in the direct assistance costs category. It is the entitlement to reimbursement of costs when considered on the merits that matters, not the unavailability of funds to the county after May 26, 1992.

    Under that latter theory direct assistance costs would have also been disallowed because the county did not have them available by May 26, 1992. However, in consideration of the merits they were made available.

    
    

58. The apparatus which Respondent put in place for considering reimbursement requests superseded the usual means of concluding the project through submission of the close out report. For this reason the second contingency for payment set forth in the agreement between Petitioner and Okaloosa County no longer pertains. In substitution the method contemplated by the June 17, 1992 and January 28, 1993 correspondence establishes the means for reimbursement. That means should be modified to the extent that a record basis has now been established for reimbursing Petitioner the $43,274.92. In accordance with the authority granted the Respondent to decide this case based upon the record in these proceedings, Respondent should do so without having Okaloosa County submit a Request for Funds form for the $43,274.92.

RECOMMENDATION

Based upon consideration of the findings of facts found and the conclusions of law reached, it is,

RECOMMENDED:

That the final order be entered directing the payment of administrative costs in the amount of $43,274.92.

DONE and ENTERED this 29th day of September, 1993, in Tallahassee, Florida.

CHARLES C. ADAMS

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 29th day of September, 1993.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-1306

The following discussion is given concerning the proposed findings of fact submitted by the parties:

Petitioner's Facts:

Paragraphs 1 through 6 are subordinate to facts found. Paragraph 7 is contrary to facts found.

Paragraphs 8 through 14 are subordinate to facts found. Paragraph 15 is not necessary to the resolution of the dispute. Paragraph 16 is subordinate to facts found.

Paragraphs 17 and 18 are not necessary to the resolution of the dispute. Paragraph 19 is subordinate to facts found.

Paragraphs 20 through 22 are not necessary to the resolution of the dispute. Paragraph 23 is subordinate to facts found.

Paragraph 24 is not necessary to the resolution of the dispute. Paragraph 25 is subordinate to facts found.

Paragraphs 26 through 28 are not necessary to the resolution of the dispute. Paragraphs 29 through 31 are subordinate to facts found.

Paragraphs 32 and 33 are not necessary to the resolution of the dispute. Paragraphs 34 through 37 are subordinate to facts found.

Paragraph 38 is not necessary to the resolution of the dispute. Paragraph 39 is subordinate to facts found.

Paragraph 40 is not necessary to the resolution of the dispute. Paragraphs 41 and 42 are subordinate to facts found.

Paragraphs 43 through 46 are not necessary to the resolution of the dispute. Paragraph 47 is subordinate to facts found.

Paragraph 48 is not necessary to the resolution of the dispute. Paragraphs 49 and 50 are subordinate to facts found.

Paragraphs 51 and 52 are not necessary to the resolution of the dispute. Paragraph 53 is subordinate to facts found.

Paragraph 54 constitutes a conclusion of law. Paragraph 55 is subordinate to facts found.

Paragraphs 56 through 59 are not necessary to the resolution of the dispute. Paragraph 60 is subordinate to facts found.

Paragraph 61 is not necessary to the resolution of the dispute. Respondent's Facts:

Paragraphs 1 through 7 are subordinate to facts found.

Paragraph 8 with the exception of the second sentence is subordinate to facts found. The second sentence is contrary to facts found.

Paragraphs 9 and 10 are subordinate to facts found.

The Second Paragraph 10 is not necessary to the resolution of the dispute. Paragraphs 12 through 15 are subordinate to facts found.

Paragraph 16 is not accepted in its suggestion that Petitioner as opposed to Respondent had some obligation to decide the point at which the agreement between Respondent and Okaloosa County would be terminated and the consequences that would pertain upon that termination.

Paragraph 17 is subordinate to facts found. Paragraph 18 see discussion concerning Paragraph 16. Paragraph 19 is subordinate to facts found.

The first two sentences to Paragraph 20 are subordinate to facts found. The remaining sentences within that paragraph are not necessary to the resolution of the dispute.

Paragraphs 22 and 23 are subordinate to facts found with the exception that the date set forth in Paragraph 23 as September 19, 1992 should be September 20, 1992.

Paragraphs 24 through 27 are subordinate to facts found. Paragraph 28 see discussion as to Paragraph 16.

Paragraph 29 is not necessary to the resolution of the dispute.

COPIES FURNISHED:

Stephen Marc Slepin, Esquire 1114 East Park Avenue Tallahassee, Florida 32301

Alfred O. Bragg, Esquire Department of Community Affairs 2740 Centerview Drive

Tallahassee, Florida 32399-2100

Linda Loomis Shelley, Secretary Department of Community Affairs 2740 Centerview Drive

Tallahassee, Florida 32399-2100

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 93-001306

Orders for Case No: 93-001306