STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BASIC ASPHALT AND CONSTRUCTION ) CORPORATION, )

)

Petitioner, )

)

vs. ) CASE NO. 84-3563BID

)

FLORIDA DEPARTMENT OF )

TRANSPORTATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on December 19, 1985, before the Division of Administrative Hearings by its duly designated Hearing Officer, Diane K. Kiesling.

APPEARANCES

For Petitioner: John P. Horan

Attorney at Law

Post Office Box 2193 Orlando, Florida 32802

For Respondent: Larry D. Scott

Attorney at Law

Department of Transportation

Haydon Burns Building, Mail Station 58 Tallahassee, Florida 32301

The issue in this case is whether Basic Asphalt and Construction Corporation's financial statement or statements complied with the requirements of Section 337.14, Florida Statutes (Supp 1984), and Chapter 14-22, Florida Administrative Code.

The Petitioner, Basic Asphalt and Construction Corporation (hereafter Basic), presented the testimony of two witnesses, Scott R. Carlson and William Michael Galloway. Basic also introduced five exhibits. Respondent, Florida Department of Transportation (hereafter DOT), presented the testimony of two witnesses, Lawrence Walls and James E. Richards.

The parties filed proposed findings of fact and conclusions of law as permitted by law. All proposed findings of fact and conclusions of law have been considered. To the extent that the proposed findings and conclusions submitted are in accordance with the Findings, Conclusions and views submitted herein, they have been accepted and adopted in substance. Those findings not adopted are considered to be subordinate, cumulative, immaterial, unnecessary, or not Supported by the competent or credible evidence. 1/

FINDINGS OF FACT

1. Basic is a general contractor specializing in asphalt resurfacing and related construction activities. Its principal offices are in Orlando, Florida.

   
   

2. Basic is not currently qualified to bid on construction projects to be let by DOT. Its certificate of qualification expired on June 30, 1984. Until the expiration, Basic had been continuously qualified by DOT to bid on such jobs since 1975. During the time it was qualified, Basic successfully performed approximately fifty state jobs.

   
   

3. In early September, 1984, Basic received its annual audited financial statement from its accountants, Fox and Company (Fox), which reflected Basic's financial condition for the year ending on March 31, 1984.

   
   

4. On or about September 14, 1984, Basic filed its application for renewal of its certificate of qualification. With the application, Basic filed the audited financial statement prepared by Fox and Company and an additional financial statement prepared by Basic's new accountants, Colley, Trumbower and Howell (Colley). This Colley financial statement was merely a compilation and covered the period April 1, 1984 through June 30, 1984. The audited statement of Fox contained the opinion of a certified public accountant; the compilation of Colley contained no opinion. The audited statement preceded the date of filing by approximately 170 days.

   
   

5. DOT reviewed the application and denied it on the ground that the financial statements submitted were of a date more than 120 days prior to the application DOT did not perform a fiscal analysis or further review of the application after it determined that the application did not contain what it believed to be the necessary financial statements.

   
   

6. In response to the denial, Basic had Colley prepare an additional financial statement which reflected its financial condition through September 30, 1984. This financial statement was a review and did not contain an opinion of a certified public accountant (See transcript p 47, lines 22 and 23). DOT declined to accept this review.

   
   

7. An "audited" financial statement is a financial statement that has been subjected to full audit scrutiny and verification. A compiled financial statement is merely a compilation of financial information as supplied by the client. A reviewed financial statement consists of inquiries and compilation of financial data with application of analytical procedures and is less in scope than an audited financial statement.

   
   

8. An "opinion" is a term of art in the field of accounting and refers to an opinion that the basic financial information taken as a whole is fairly stated in all material respects and is in accordance with generally accepted accounting principals. A qualified opinion is subject to the same definition and level of scrutiny, but is qualified as it relates to one or more items in the financial statement.

   
   

9. DOT only accepts audited financial statements which express an opinion.

   
   

10. The financial information in the reviewed financial statement, when read in conjunction with the audited financial statement reflects that Basic is in an adequate financial situation with positive current rates and a substantial adjusted net worth. Basic is making a profit.

    CONCLUSIONS OF LAW

    
    

11. The Division of Administrative Hearings has jurisdiction of the parties to and the subject matter of these proceedings. Section 120.57(1), Florida Statutes.

    
    

12. Section 337.14(1), Florida Statutes (Supp. 1984), states in pertinent part:

    
    

    1. Any person desiring to bid for the performance of any construction contract in excess of $150,000 which the department proposes to let must first be certified by the department as qualified pursuant to this section and rules of the department. . . . Each applicant seeking qualification to bid on construction contracts in excess of

       $150,000 shall furnish the department a statement under oath, on such forms as the department may prescribe, setting forth detailed information as required on the application. Each application for certification shall be accompanied by the latest annual financial statement of the applicant completed within the last 12 months and the opinion of a certified public accountant or public accountant approved by the department.

       If such statement reflects the financial condition of the applicant more than 120 days prior to the application date, then an interim financial statement reflecting conditions no more than 120 days prior to application shall also be submitted. . . .

       
       

13. Rule 14-22.02(2), Florida Administrative Code, further defines the requirements for financial statements.

    
    

    1. Financial Statements.

       1. The financial statements included in the application shall be prepared in accordance with Generally Accepted Accounting Principles (GAAP) or Other Comprehensive Basis of Accounting (OCBA), provided, however, if OCBA is used, deviations from GAAP shall be disclosed and assigned a monetary value. The financial statements shall reflect the financial condition of the applicant as of a date not more than 120 days prior to the date of filing the application, and shall contain the opinion of a Certified Public Accountant licensed in any State of the United

          States. An adverse opinion or a disclaimer of an opinion shall result in disapproval of the application. A qualified opinion may result in disapproval of the application if such qualification arises because of the use of an accounting principle at variance with Generally Accepted Accounting Principles (GAAP) or the qualification is of such magnitude as to materially affect the current ratio, liabilities, or the adjusted net worth. For purpose of this provision, "filing" is defined as receipt of the application by the Department.

       2. The financial data shall include, but shall not be restricted to:

    1. a balance sheet;

    2. an income statement;

    3. a statement of retained earnings; and

    4. any other financial information deemed necessary to determine financial adequacy of the applicant.

    
    

14. In the present case, the audited financial statement contained the requisite opinion, but reflected the financial condition of Basic more than 120 days prior to the filing of the application. The compiled financial statement brought the financial information current, but did not contain an opinion. In fact no opinion could be expressed on such a compilation.

    
    

15. The reviewed financial statement again brought the financial information current as of September 30, 1984, but, by Basic's own accountant's testimony, it did not contain an opinion as that term of art is used. This was not a situation involving a qualified opinion.

    
    

16. By statute, the application must be accompanied by the latest annual financial statement and an opinion and it must be completed no more than 120 days prior to the application. An interim financial statement may be included if the annual financial statement reflects the financial condition more than 120 days prior to the application date. However, the rule makes it clear that all the financial statements, whether annual or interim must contain the opinion of a certified public accountant. Here, no such opinion was expressed as to either interim financial statement.

    
    

17. Accordingly, it is concluded that the financial statements submitted and tendered by Basic do not fulfill the requirements of Section 337.14(1) and Rule 14-22.02(2). Basic has not carried its burden of showing that it is entitled to a certificate of qualification to bid.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered denying the application of Basic

for a certificate of qualification.

DONE and ORDERED this 8th day of February, 1985, in Tallahassee, Florida.

DIANE K. KIESLING

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 8th day of February, 1985.

ENDNOTE

1/ Petitioner's proposed findings 1, 3, and 10, and Respondent's 1,3,4, and 5

are adopted in substance. Petitioner's 2, 4, 5, 6,7, 8, and 9, and Respondent's

2 are modified; Petitioner's 11 and Respondent's 7 are rejected as not supported by the competent evidence; Petitioner's 12 and 13 and Respondent's 6 are immaterial.

COPIES FURNISHED:

John P. Horan Attorney at Law

Post Office Box 2193 Orlando, Florida 32802

Larry D. Scott Attorney at Law

Department of Transportation Haydon Burns Building, MS-58 Tallahassee, Florida 32301

Paul A. Pappas, Secretary Department of Transportation

562 Haydon Burns Building, MS-58 Tallahassee, Florida 32301

Docket for Case No: 84-003563

Orders for Case No: 84-003563