STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

EMPLOYMENT AND TRAINING, )

)

Petitioner, )

)

vs. ) CASE NO. 88-6061

)

HEARTLAND PRIVATE INDUSTRY )

COUNCIL, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on February 21, 1989, in Lakeland, Florida.

APPEARANCES

For Petitioner: David J. Busch, Esquire

The Montgomery Bldg., Suite 131 2562 Executive Center Circle, East Tallahassee, Florida 32399-0657

For Respondent: Larry R. Jackson, Esquire

300 Parkview Place Lakeland, Florida 33805

BACKGROUND

This matter arose on January 4, 1988, when petitioner, Department of Labor and Employment Security, Division of Labor, Employment and Training (Division), advised respondent, Heartland Private Industry Council, that an audit of respondent's Job Training Partnership Act (JTPA) grant funds for the period ending June 30, 1986 revealed that $252 in costs should be disallowed.

Thereafter, respondent requested a formal hearing under Subsection 120.57(1), Florida statutes (1987) to contest the agency's decision. The matter was referred by petitioner to the Division of Administrative Hearings on December 7, 1988 with a request that a hearing officer be assigned to conduct a hearing.

By notice of hearing dated December 13, 1988 a final hearing was scheduled on December 28, 1988 in Lakeland, Florida. At respondent's request, the matter was rescheduled to February 21, 1989 at the same location.

At final hearing, petitioner presented the testimony of Curtis Vaughn, a Division senior management analyst. Respondent presented the testimony of Marlene Dell, an account technician, Mary Pope, director of monitoring and oversight, Deborah Girard, a CPA, and Clifton Thomas, Jr., executive director.

Also, it offered respondent's exhibits 1 and. Both exhibits were received in evidence.

At the beginning of hearing, respondent filed a motion to estop agency disallowance of costs, imposition of collection procedures and/or sanctions. A ruling on the motion was reserved.

There is no transcript of hearing. Proposed findings of fact and conclusions of law were due on March 8, 1989. None were filed.

The issue is whether respondent should be required to repay $252 in JTPA funds to petitioner.

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

FINDINGS OF FACT

1. Respondent, Heartland Private Industry Council (Council), is a thirty- four member council established under an interlocal agreement by five area counties in Central Florida. The counties are Polk, DeSoto, Hardee, Highlands and Okeechobee. The Council's office is located at 300 Parkview Place, Lakeland, Florida. The Council has entered into a contract with petitioner, Department of Labor and Employment Security, Division of Labor, Employment and Training (Division), under which it receives federal grant monies provided by the Job Training Partnership Act (JTPA). As is pertinent here, the Council used the funds to provide summer job training for disadvantaged youths. The Division is charged with the responsibility of ensuring that all grant moneys are properly expended.

   
   

2. Under federal regulations, the Council was required to engage the services of an independent public accounting firm to perform a financial and compliance audit on its contract expenditures made during the fiscal period July 1, 1985 through June 30, 1986. During the period in question, the Council had total expenditures of approximately $7.9 million.

   
   

3. Under the audit program developed by the accounting firm, the firm sampled and reviewed at random various expenditures. Among those reviewed were two checks dated August 23 and October 10, 1985 in the amount of $239 each payable to one Joyce Barber, a JTPA participant from the City of Auburndale. The expenditure was questioned, but not disallowed, on the ground the first check written to Joyce Barber had apparently been stolen and cashed by another person. A second check in the same amount was then issued to Barber. The auditors questioned whether, under these circumstances, the first expenditure was appropriate. In addition, the auditors noted a $13 mathematical error and recommended that amount be disallowed. Other than these two items, which totaled $252, there were no other proposed adjustments in the audit report.

   
   

4. The audit report was forwarded by the Council to the Division on or about June 29, 1987. The report itself is not in evidence. The Division then reviewed the audit report and preliminarily concluded that both expenditures ($239 and $13) should be disallowed. After the matter could not be resolved informally, the Division issued proposed agency action in the form of a "Final Determination" on January 4, 1988. That prompted the Council to request a hearing to contest the action.

5. Barber was one of approximately fourteen hundred youth participants during the summer of 1985 who received job training sponsored by the Council. In addition to their training, these youths were compensated by the Council for their services. There were several hundred employers in the five county area who were involved in the project. Because of the sheer number of participants and employers, the Council mailed its checks directly to the participants, including Barber. According to the Council's in-house certified public accountant (CPA), this was a reasonable manner of disbursing the payroll. The CPA also concluded that the Council's internal controls were adequate. After

   the checks had been mailed, the Council received a complaint that Barber did not receive her $239 check. It then requested that the Sheriff's office investigate the matter. Based upon that investigation, the Council concluded that the check had been stolen and cashed by another person, and it sent a second check to Barber. From this factual setting, it can be reasonably inferred that the money was either stolen or was not received by Barber.

   
   

6. The Council could have obtained insurance to cover this type of loss. However, it would not be economically prudent to do so when comparing the money lost to the cost of a policy.

   
   

7. The Council did not deny that a $13 mathematical error was made on one expenditure. Therefore, it is found that such an error occurred, and an adjustment in favor of the Division is appropriate.

   
   

8. There are no Division or federal regulations governing the loss of grant monies under the circumstances that occurred here. However, the Division bases its disallowance on the theory that the contractor (Council) received no benefit from the first $239 check sent to Barber. The specific regulation which supports this theory was not cited or offered in evidence. Even so, the Council did not show what benefits, if any, it received from the lost moneys.

   
   

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida statutes (1987).

   
   

10. According to the proposed agency action, the Council had $252 in expenditures during the fiscal year ending June 30, 1986 that were inappropriate and should be disallowed. As the party seeking to recover the moneys, the Division is obliged to prove its entitlement to such funds by a preponderance of the evidence.

    
    

11. As to the $13 item, respondent did not contravene the Division's contention that a mathematical error occurred on one expenditure. Therefore, this amount should be repaid by respondent.

    
    

12. The $239 item presents a much closer question since, according to the parties, there is no federal or state regulation dealing with the treatment of lost or stolen funds. Although the Division suggests that there is insufficient evidence to establish that the check was stolen and cashed by an unknown party, it may be inferred from the more persuasive evidence that this occurred. Even so, there was no showing that the lost moneys produced any benefits to the contractor or state. Therefore, it is concluded that the Council should repay the Division for this expenditure.

13. Finally, by motion filed at final hearing, respondent contended the Division was estopped from collecting the $252 because it violated its own policy and federal regulations when it took more than six months after receipt of the audit report to issue its Final Determination. Under the facts of this case, if any doctrine would bar collection, laches would come closest. While it is true that the Division took slightly more than six months to issue its proposed agency action, 1/ the Council offered no proof as to how it was prejudiced by the few days' delay. Therefore, the motion is denied.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a Final Order be entered requiring respondent to repay

$252 in JTPA funds to petitioner.

DONE and ENTERED this 16th day of March, 1989, in Tallahassee, Leon County, Florida.

DONALD R. ALEXANDER

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 16th day of March, 1989.

ENDNOTE

1/ The audit report was filed with the Division on June 29, 1987 and proposed agency action was issued on January 4, 1988.

COPIES FURNISHED:

Larry R. Jackson, Esquire

300 Parkview Place Lakeland, Florida 33805

David J. Busch, Esquire

The Montgomery Bldg., Suite 131 2562 Executive Center Circle, East Tallahassee, Florida 32399-0657

Hugo Menendez, Secretary Department of Labor

and Employment security

206 Berkeley Building

2590 Executive Center Circle, East Tallahassee, Florida 32399-2152

Docket for Case No: 88-006061

Orders for Case No: 88-006061