STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 82-243

) SUNCOAST BUSINESS DEVELOPMENT, ) INC. )

)

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 April 5, 1982, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Chad J. Motes, Esquire

Montgomery Building, Suite 131 2562 Executive Center Circle, East Tallahassee, Florida 32301

For Respondent: Noble L. Sissle, Jr.

Suncoast Business Development, Inc. 1981 West Cass Street

Tampa, Florida 33606 BACKGROUND

On January 7, 1982, Petitioner, Department of Labor and Employment Security, Division of Employment and Training, is sued its Final Determination as to the expenditure of funds by Respondent, Suncoast Business Development, Inc., under the Comprehensive Employment and Training Act (CETA). In the Final Determination, Petitioner recommended that $8,712 in expenditures be disallowed for Respondent's failure to comply with applicable regulations, and that it repay the Department that amount of monies. 1/

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 January 28, 1982, with a request that a Hearing Officer be assigned to conduct a hearing. By Notice of Hearing dated March 3, 1982, the final hearing was scheduled for April 5, 1982, in Tallahassee, Florida.

At the final hearing Petitioner presented the testimony of James Harris, Division Internal Auditor, and offered Petitioner's Exhibits 1-4, each of which

was received into evidence. Respondent presented the testimony of its Executive Director, Noble L. Sissle, Jr.

Pursuant to the provisions of Rule 28-5.1055, Florida Administrative Code, the undersigned made a diligent inquiry of Respondent's prospective representative, Noble L. Sissle, Jr., during a non-adversary proceeding on the record to assure that Sissle 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 parties were given the opportunity to file proposed findings of fact and conclusions of law; however, they waived their right to do so. At issue herein is whether Respondent should be required to repay $5,053 in monies allegedly expended in violation of applicable rules and standards.

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

1. The State of Florida receives grant monies 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 a portion of Section 676 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 Department containing its determination of allowable and non-allowable costs.

   
   

3. As is pertinent here, Petitioner and Respondent, Suncoast Business Development, Inc., entered into Contract No. 80ET-93-12-00-08-025 to expend

   $300,000 in grant funds between October 1, 1979 and September 30, 1980. The purpose of the program was to train qualified participants to be hydroponic technicians.

   
   

4. A subsequent audit by Alexander Grant & Company, an independent accounting firm, questioned the propriety of $20,674 in expenditures. The Department's Final Determination recommended that $8,712 of that amount be disallowed. Of that total, Respondent questions $5,053 in disallowed costs. The questioned costs fall into two broad categories: (a) six ineligible participants ($3,127), and (b) the rental of office equipment from a related company ($1,926).

   
   

5. In early 1980, Respondent hired Betty S. Sunnycalb, Hubert S. Crane, Idell E.N. Hurst, Rose G. McClelland, Ernest Cooper and Claudia M. Kellain as participants in the program. Their respective educational levels were the eighth, fifth, sixth, ninth and ninth grades. Under the terms of the contract between Respondent and the State, participants must have finished the tenth

   grade. Accordingly, they were ineligible to be participants and the costs associated with them were properly disallowed. While employed by Respondent, the participants received $3,127 in compensation.

   
   

6. In late 1979, Respondent rented a calculator, three desks and three chairs from International Business Management, Inc. (IBMI) , a for-profit firm created to manage federal programs. At the time the leasing arrangement was entered into by the parties, the same individual served as executive director. of both corporations, and was responsible for negotiating contracts for both. Applicable regulations prohibit procurement activities by a subgrantee when either a real or apparent conflict of interest exists. Therefore, the disallowance of $1,926 in costs was correct.

   
   

7. Respondent acknowledged that the six participants in question were ineligible from an educational standpoint. However, it contended that they were mature (all over 30 years of age), and well suited for the program. Its executive director sought a modification of the contract in 1980 to lower the educational requirement to the sixth grade, but through oversight failed to actually obtain one. It also admitted the relationship between the principals of IBMI and Respondent, but denied that a conflict of interest existed.

   
   

   CONCLUSIONS OF LAW

   
   

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

   
   

9. Pursuant to the provisions of Chapter 17, United States 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."

   
   

10. 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.

    
    

11. A subgrantee is required to conform with all provisions in its contract. This includes, inter alia, the requirement that all individuals selected for enrollment in the program "... [m]ust have finished the tenth (10th) grade." (Paragraph 3.2.1 of contract). The evidence discloses that six participants did not meet this requirement. Although Respondent could have obtained a modification of its contract to revise the educational requirement (see Federal Office of Management and Budget Circular No. A-102, Attachment K), through oversight it failed to do so. Accordingly, it is concluded that a violation of the contract has occurred, and Respondent should repay $3,127 in contract funds expended for ineligible participants.

    
    

12. The remaining item in dispute involves the recommended disallowance of

$1,926 in costs expended for office equipment on the ground it "... was rented from a related party at an excessive rate." (Finding (1)(a), Final Determination) There was no evidence presented to support the charge that an excessive rate was paid. However, the record does reveal that the office equipment was rented from International Business Management, Inc. (IBMI), an

organization which shared quarters with Respondent, and which had the same executive director. Under this arrangement, the same individual was responsible for negotiating contracts on behalf of both corporations, and actually negotiated the lease of office equipment from IBMI to Respondent. Section 676.62(b) of Volume 20, Code of Federal Regulations, provides in part as follows:

(b) Each recipient and subrecipient shall avoid organizational conflict of interest, and their personnel shall avoid personal con- flict of interest and appearance of conflict of interest in ... the conduct of procurement activities involving funds under the Act...

While there may not have been a real conflict of interest in the transaction, nonetheless the appearance of a conflict of interest was present. Accordingly, the procurement of equipment was in contravention of applicable regulations and the costs associated therewith should be disallowed.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Respondent repay Petitioner $5,053 in disallowed costs: DONE and ENTERED this 13th day of April, 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 13th day of April, 1982.

ENDNOTE

1/ Of the total amount recommended for disallowance, Respondent did not contest

$2,171.

COPIES FURNISHED:

Chad J. Motes, Esquire

Suite 131-Montgomery Building

2562 Executive Center Circle, East Tallahassee, Florida 32301

Noble L. Sissle, Jr.

Suncoast Business Development, Inc. 1981 West Cass Street

Tampa, Florida 33606

Docket for Case No: 82-000243

Orders for Case No: 82-000243