The Issue The issue for determination is whether Respondent committed an unlawful employment act by discriminating against Petitioner on the basis of race in violation of the Florida Civil Rights Act of 1992, as amended.
Findings Of Fact Ms. Westbrooks is an African-American female. In 2000, Ms. Westbrooks began her employment with the City in a billing position in Customer Service as an Account Clerk. She performed very well in that position and received an above satisfactory rating. In 2002, a Junior Accountant position became available, and Ms. Westbrooks applied for the position. The position description for a Junior Accountant indicates that the position’s duties included “Professional accounting work covering all fixed assets accounting and reporting.” Further, the position description indicates that the minimum qualifications consisted of the following: Associate’s degree in Accounting or related field, with some work experience in an accounting environment OR An equivalent combination of training and experience which provides the required knowledge, skills and abilities. Carlos Perez, the City’s Finance Director and a Certified Public Accountant (CPA), performed the hiring for the Junior Accountant position. He hired Ms. Westbrooks for the Junior Accountant position. Mr. Perez considered Ms. Westbrooks’ performance in the Junior Accountant position as excellent. She consistently received performance ratings of above satisfactory and merit increases. In 2006, an Accountant position became available. The City advertised the position. The announcement for the position indicated that the position’s duties included “complex technical work performing professional accounting work covering all phases of account maintenance, classification, analysis, and expenditure control of all phases of City wide fiscal transactions.” Further, the announcement indicated that the minimum requirements for the position were: Bachelors degree in Accounting, Finance or a closely related field with major coursework in accounting . . . plus one to two years experience in accounting. OR An equivalent combination of training and experience which provides the required knowledge, skills, and abilities. Moreover, the announcement provided that “Only those applicants who most closely meet the specific requirements for the position will be contacted for an interview.” Ms. Westbrooks applied for the Accountant position. No dispute exists that Ms. Westbrooks does not possess a bachelor’s degree in accounting. She has an Associates in Arts (AA) degree in Business Administration, which she obtained in 1993. At all times material hereto, the City had a tuition reimbursement program, wherein an employee of the City could obtain a degree and receive tuition reimbursement for obtaining the degree. Ms. Westbrooks was aware of the reimbursement program but chose not to avail herself of it in order to obtain a bachelor’s degree in accounting. However, she did avail herself of the program to obtain certifications associated with her position as a Junior Accountant. No dispute exists that Ms. Westbrooks met the minimum requirements for the Accountant position, satisfying the alternative requirement of equivalent combination of training and experience. Ms. Westbrooks was provided an interview. An interview panel conducted the interviews and rated the applicants, who were interviewed, on a scale of 0 through 5. The interview panel consisted of the City’s Chief Accountant, Budget Administrator, and Pension Administrator. Only the applicants who had an overall rating of 3.0 or higher on the interview were submitted by the City’s Personnel Administration Director, Rebecca Jones, to Mr. Perez. Ms. Jones is an African American and is female. Mr. Perez makes the final decision as to who is hired for accounting positions. He was the final decision-maker for this Accounting position. Mr. Perez is not African American. Only three persons received an overall interview rating of 3.0 or higher. Ms. Westbrooks was one of the three persons, and she received the highest interview score. On December 6, 2006, Ms. Jones submitted to Mr. Perez the names of the three persons, with their interview scores: Laura Westbrooks 4.0 Ronald Castrillo 3.4 Bayard Louis 3.3 Mr. Perez had never hired an accountant who did not have a four-year college degree, i.e., a bachelor’s degree, regardless of race. His position was that the person hired for the Accountant position, and all of his accountants, needed a four-year college degree because that person, as all of his accountants, would be fourth in line to head the Finance Department, as Acting Finance Director, behind himself, the Assistant Finance Director, and the Chief Accountant—at least once a year he (Mr. Perez), the Assistant Finance Director, and the Chief Accountant all attend a conference together; and that a person with a four-year college degree has the technical ability needed to perform in the position, whereas, a person without a four-year degree would not have the technical ability needed. Further, as to the accounting focus of a junior accountant position versus an accountant position, a junior accountant’s focus is fixed assets, whereas, accountants are involved with all aspects of accounting, which includes and goes beyond fixed assets. Mr. Perez had made Ms. Westbrooks aware of his position, regarding accountants, during her tenure in the Junior Accountant position. Ms. Jones did not consider Mr. Perez’s position and action, regarding the hiring of accountants, as being discriminatory. Mr. Perez’s final requirement of a four-year college degree in order to be hired by him as an accountant became the City’s requirement. Mr. Perez offered the Accountant position to Mr. Castrillo who had an AA degree in Business Administration, a Bachelor’s degree in Accounting and who was scheduled to graduate the following semester with a Master’s degree in Accounting. However, Mr. Castrillo did not accept the position due to the failure to agree on a salary. The Accountant position was re-advertised. Ms. Westbrooks remained eligible for the Accountant position and was, therefore, in the pool of applicants to be considered; but was not re-interviewed because the interview questions did not change On March 8, 2007, Ms. Jones submitted to Mr. Perez the names of the applicants who had an overall rating of 3.0 or higher on the interview, together with their interview scores: Tricia Beerom 4.0 Sampson Okeke 3.4 Mirtha Servat 3.3 Mr. Perez hired Ms. Beerom for the Accountant position. Ms. Beerom had a Bachelor of Science degree in Accounting and Management and was an African-American female. Ms. Westbrooks believed that she was not afforded an opportunity to advance because of Mr. Perez’s position regarding accountants possessing a four-year degree and that, therefore, she was discriminated against. However, even though the City had a policy against discrimination and a procedure to file discrimination complaints, she chose not to proceed through the City’s discrimination process because she had no faith in the City. Ms. Westbrooks believed that she was not going to be treated fairly by the City in any attempt by her to achieve upward mobility, which caused her to continuously experience stress, which negatively impacted her health. She eventually resigned from the City. Ms. Westbrooks’ resignation was effective May 4, 2007. At the time of her resignation, Ms. Westbrooks’ salary was $40,000. After her resignation, she received her contributions to the City’s retirement system in the amount of approximately $13,000. In September 2008, over a year after her resignation from the City, Ms. Westbrooks obtained employment with the University of Miami, School of Medicine, as a Grant and Contracts Specialist, with a salary of $41,500. Ms. Westbrooks did not identify any employees who were in classified positions as herself, who were or were not African American and who had upward mobility in positions, and who did not have four-year college degrees. Classified positions are protected by the City’s Civil Service rules and must be advertised. Ms. Westbrooks did identify City employees who were in unclassified positions, not a classified position like herself, i.e., directors and city manager, who did not have four-year college degrees, and who were and were not African American. Unclassified positions are not protected by the City’s Civil Service rules and need not be advertised. The city manager hires all department directors. No dispute exists that, at all times material hereto, a former Director of Purchasing was a white female and a long term employee, who had an AA, not a four-year degree, and who was promoted through the ranks; a Director of Public Works was a white male and a long-term employee, who had an AA, not a four- year degree, and who was promoted through the ranks. No dispute exists that the City’s City Manager is an African-American male who does not have a four-year college degree. No dispute exists that, at all times material hereto, all of the City’s Department Directors, who are African American, have four-year college degrees. The EEOC instituted an “E-RACE Initiative (Eradicating Racism and Colorism from Employment)” and developed a “set of detailed E-RACE goals and objectives to be achieved within a five-year timeframe from FY [fiscal year] 2008 to FY [fiscal year] 2013.” Included in the E-RACE Initiative, were “Best Practices for Employers and Human Resources/EEO Professionals,” which included best practices for recruitment, hiring and promotion. The E-RACE Initiative was implemented by the EEOC subsequent to the action complained of by Ms. Westbrooks and was not demonstrated to be federal law, rule, or regulation; and was, therefore, not shown to have the force or impact of law. The E-RACE Initiative is not applicable to the instant case.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Commission on Human Relations enter a final order finding that the City of North Miami did not commit a discriminating employment practice against Laura A. Westbrooks in violation of the Florida Civil Rights Act of 1992, as amended, by failing to hire her for an accounting position. DONE AND ENTERED this 1st day of September, 2009, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of September, 2009.
Findings Of Fact The Petitioners have filed an application with the Respondent to organize a new bank in Ocala, Marion County, Florida. The name of the proposed bank would be the Citizens First Bank of Ocala. The Petitioners are the organizers and proposed directors of the bank. Each of the Petitioners is of good moral character, and each enjoys an outstanding reputation. None of the Petitioners have been convicted of any crimes involving breach of trust, and none have filed for bankruptcy, or have any history of being bad credit risks. Together the Petitioners constitute a diverse group with very broad and successful business experiences. The Petitioner William R. Kidd is a registered professional engineer and realtor who has lived and worked in Ocala since 1950. Mr. Kidd has broad experience in evaluating various aspects of real estate transactions, and he has extensive experience in arranging financing of construction projects. Mr. Kidd owns a pollution control company which has a net worth of approximately $25,000 and a real estate business with sales since 1975 in excess of $10,000,000. He also manages and operates a successful consulting engineering firm. Mr. Kidd plans to invest $40,000 in the new bank, and he has sufficient funds readily availably to make that investment. Mr. Kidd is willing to invest more money in the enterprise if additional capitalization is required. Mr. Kidd is interested in working with the bank, particularly in relation to financing of real estate transactions, and construction projects. The Petitioner Ralph Murphy was born in Marion County and has spent most of his life there. Mr. Murphy owns a linen service company which does approximately $18,500 to $19,000 in business weekly. The linen service, which Mr. Murphy has managed since it was a small entity doing less than $2,500 in business weekly, has a net worth of approximately $900,000. Mr. Murphy serves on the Boards of Directors of several other corporations. Mr. Murphy intends to purchase $40,000 of stock in the proposed new bank, and he has funds readily available with which he can do that. Mr. Murphy is willing to devote as much time as is necessary to organize the bank. The Petitioner Milton L. Copeland manages an insurance firm which writes commercial insurance policies for businesses in Florida and in Georgia. His company has offices in Ocala and Jacksonville. The Ocala office writes approximately $2,000,000 in insurance policies annually. The Jacksonville office writes approximately $15,000 in policies weekly. Mr. Copeland has a personal net worth of approximately $800,000. Mr. Copeland intends to buy $40,000 worth of stock in the proposed new bank, and he has funds readily available for that purpose. Mr. Copeland wishes to take an active part in soliciting new accounts for the bank, and he could devote as much as two full days per week to bank activities. If further capitalization of the proposed bank were considered necessary, Mr. Copeland is willing to increase his investment in the bank. The Petitioner James Cunningham owns and operates a funeral home business in Ocala. He has lived in Ocala most of his life. The dollar volume of Mr. Cunningham's business during 1976 was approximately $250,000. Mr. Cunningham is a City Councilman in Ocala. He is a black man. It has only been in recent years that blacks have even been employed at local banks, and no blacks presently serve on the Boards of Directors of any banks operating in Ocala or Marion County. Mr. Cunningham intends to purchase $40,000 worth of stock in the new bank. He will need to borrow no more than 25 percent of that amount in order to make the investment. Mr. Cunningham desires to take an active part in soliciting accounts and customers for the new bank, and he is willing to devote whatever time would be required for that purpose. The Petitioner Marjorie Renfroe owns and operates a boat, motor and trailer sales and service business in Marion County. Her business had gross sales during 1976 of approximately $350,000. Ms. Renfroe serves on the Board of Directors of the United Way in Marion County, and on the Board of Directors of the Central Florida Community College. Ms. Renfroe plans to buy $40,000 worth of stock in the new bank, and if further capitalization were found necessary, she is willing to increase her investment, and is able to do so. Ms. Renfroe is willing to devote as much time as necessary to managing the new bank, and she is particularly interested in providing services to employees and students of the local community college, especially instructional sorts of courses for students. No women presently serve on the Boards of Directors of any banks in Marion County. One woman serves on the Board of Directors of a savings and loan institution in Marion County. The Petitioner Van G. Staton manages a Belk-Lindsey Department Store in Ocala, Florida. He has lived in Ocala and managed the department store since 1956. The store employs 48 persons and had gross sales during 1976 of approximately $3,000,000. The annual payroll of the store is $400,000 to $500,000. The Petitioner serves on the Board of Directors of a local automobile sales and service corporation, and from 1970 through 1975 he served on the Marion County School Board. Mr. Staton plans to purchase $40,000 of stock in the new bank, and he would not need to borrow more than 50 percent of that amount. Mr. Staton would favor additional capitalization, and would be willing to increase his investment. Mr. Staton is particularly interested in having extended business hours in the new bank beyond the hours presently served by banks operating in Marion County, and Saturday openings. He is willing to spend as much time as is necessary with banking activities. The Petitioner Owen C. Shelton owns and manages two corporations which operate fifteen convenience stores. The total sales for the two corporations was approximately $17,000,000 during 1976. Mr. Shelton has lived in Ocala for 15 years. His personal net worth is in excess of $1,000,000. Mr. Shelton has been in the grocery business for twenty-five years. He started with one small store. His corporations employ approximately 185 persons. Mr. Shelton plans to purchase $40,000 worth of stock in the new bank, and he is willing to increase his investment if further capitalization is required. The Petitioner Terry Trexler is President and Chairman of the Board of Nobility Homes, a mobile home manufacturing business. The company does business in 29 states, and does from 5.1 to 5.2 million dollars worth of business on a quarterly basis. Mr. Trexler has lived in Ocala for 15 years. Mr. Trexler plans to invest $40,000 in purchasing stock in the new bank, and he intends to be active in soliciting new accounts and customers for the bank. The Petitioner Sam Kinlaw is a resident of Orlando, Florida. He has a Bachelor's Degree in Business Administration from the University of Florida, and attended the Banking School of the South at Louisiana State University. Mr. Kinlaw has been active in the banking business, or in similar financial businesses since approximately 1958. He has served as the head of installment loan departments and commercial lending departments of banks in Florida. Beginning in 1972, he became the Chief Executive Officer of the Semoran Bank, which was a new Federally chartered bank. He was responsible for setting up the bank, hiring personnel, establishing policies, and carrying on the day-to-day operations of the bank. He served in that capacity from near the end of 1972 until September, 1975. He has not been involved in the banking business since then. Mr. Kinlaw intends to purchase a "qualifying share" of stock in the bank. He intends to serve on the Board of Directors during the time that the bank is being organized, until other persons with direct banking experience are named to the Board of Directors. The Petitioner Braxton Jones owns and operates several convenience stores and two supermarkets. He has lived in Ocala nearly all of his life. He is prepared to purchase between $20,000 and $30,000 of stock in the new bank, and he is willing to devote whatever time would be necessary to organize and operate the bank. The Petitioner Clarence Woodrow Hicks has lived in Marion County for approximately 30 years. He formerly owned and operated Hicks News Agency, which was involved in the wholesale distribution of magazines, books, postcards and sundry items. He also owned two retail book stores. Mr. Hicks has sold his business and is now semi-retired. He serves as a consultant to the new owners of his business. During the time that he operated the businesses, they did approximately three million dollars of business per year. Mr. Hicks' net worth is in excess of one million dollars. Mr. Hicks has time available to devote to the new bank. The proposed Citizens First Bank of Ocala would, if the instant application were granted, be located at the northwest corner of the intersection of State Road 200 and Southwest 16th Avenue in Ocala. The location is approximately one mile west of Pine Street (Federal Highways 441, 27, and 301), which is the primary north/south artery through Ocala. The proposed bank would be located just over three miles east of Interstate Highway 75. State Road 200 is presently a four lane highway which serves as one of the primary routes from the Interstate Highway into Ocala. Southwest 16th Avenue is presently two- laned, but all right of ways have been acquired and construction will shortly commence to four-lane the road. All of the banks and the savings and loans associations which presently operate in the Ocala area are located east of Pine Street. There are no banking facilities in the Ocala area which are located to the west of Pine Street. Location of a banking facility to the west of Pine Street would serve the convenience of persons in Ocala who live or work on the west side of Pine Street. Pine Street is a very busy highway, which has not been properly designed so that it can be easily crossed. Furthermore, a railroad track runs parallel to Pine Street to the West, and presents an additional barrier. While it is not impossible for persons who live or work on the west side of Pine Street to bank on the east side, the testimony is unrebutted that it is inconvenient to do so due to traffic congestion, and the railroad. There are many persons who reside on the west side, of Pine Street. The area to the north of the proposed bank site is a residential area. There are many low income residences, and trailer park type residential facilities in that area. There are also many moderate income residences to the south and the west of the proposed site all on the west side of Pine Street. The total population of the primary service area, which is designated to be west of Pine Street, is estimated to be 14,300, as of July, 1977. This represents more than a 35 percent increase from 1970 population figures. Many more residences are planned in the area. Over 1,200 new homes have recently been completed, and more than 500 are under construction. Larger residential developments are in the planning stages. There is considerable commercial activity in the areas surrounding the proposed site. The Ocala Industrial Park is located immediately across State Road 200 from the proposed site, and the South 40 Industrial Park is also nearby. Thirty-eight firms presently occupy space in the Ocala Industrial Park, employing more than 1,500 persons and occupying more than one million square feet of building space. Fourteen firms are presently located at the South 40 Industrial Park, employing nearly 350 persons and utilizing more than 300,000 square feet of building space. Both Industrial Parks have experienced steady growth. Many businesses, including several automobile sales and service businesses, have located on State Road 200. Construction is scheduled to begin on a major shopping mall in January, 1978, by the Edward J. DeBartolo Corporation. The mall will be located on State Road 200 just east of Interstate Highway 75. Construction will take approximately 12 months. More than 900 persons will be employed at the mall. In addition, most of the horse farms which surround the Ocala area are located west of Pine Street. There are six banking institutions located in Marion County. The two banks located out of the Ocala area have no particular relevance to this matter. Four banks are located in Ocala. Only one of these banks is an independent bank. The others are parts of larger bank holding companies which are not centered in Ocala. Total bank deposits in Marion County have increased steadily from a total of $176,586,000 in 1973 to $236,336,000 in June, 1977. Although estimates vary, it is evident that the population of Marion County has increased from a 1970 total of approximately 69,000 to a 1977 total of from 104,000 to 127,000. It appears that existing banks in Marion County are in a healthy financial position and are experiencing steady growth. There are many interlocking relationships on the Boards of Directors of the existing banks. None of the Petitioners presently serve on the Boards of any of the existing banks, and this can only promote more lively competition among the banks. Petitioners have proposed to keep their bank open for longer hours than existing banks, and for additional banking days. Petitioners propose to provide specialized counselling for new business people, and education courses for students who attend the nearby Central Florida Community College. It appears that local banks have frequently acted adversely on loan applications from local developers, who have been able to borrow money at favorable rates outside of Marion County. The presently existing banks have not adequately served the very large and active horse farming industry that is located in Ocala, and several horse farmers have needed to go to Gainesville to obtain adequate farm businesses. Banks in Marion County have shown a deposit gain of nearly sixteen percent during the year 1976, as compared to a State of Florida average of approximately 7.4 percent. Of the sixteen counties in which new bank charters were granted in the period from January, 1975, through March, 1977, only two counties had a total deposit growth greater than was experienced in Marion County. A savings and loan association was chartered and opened in Marion County in January, 1975. The association has achieved very good success, and has not proved harmful to other financial institutions, which have also shown steady growth during this same period. Petitioners have projected a net profit at the end of the third year of their operation of $163,300 based on deposits of $10,000,000. A more conservative estimate of a net profit of $61,350, based on $8,000,000 in deposits after three years was estimated by Examiner Howze, a bank examiner who conducted an investigation of the instant application for the Respondent. George Lewis, II, the former Director of the Division of Banking, prepared a proposed budget which showed that the bank would be operating at a loss after three years. George Lewis' estimates are not credible. He estimated that the return on commercial loans would be at a rate of from 7 and 1/4 to 8 percent during the first, second and third years. Nine percent is a more realistic figure, and is itself conservative. The Respondent approved the charter of the Shores Bank of Lake Wier in Marion County which indicated a nine percent return on loans. George Lewis furthermore showed a three percent cost on all demand deposits. This cost is not justified by any factors currently accepted in the banking business. George Lewis apparently based the additional cost on his feeling that the legislature may pass a law requiring banks to pay such a return on all demand deposits. Such speculation has not been shown to be justifiable, and cannot serve as a reasonable factor to be used in predicting a proposed bank's profits. Petitioners propose to issue capital stock in the amount of $1,000,000, and thus to capitalize the new bank in that amount. This is adequate capital to serve the needs of the proposed bank during the first three years of its operation. George Lewis, II, testified that additional, capitalization would be required, but he gave no reason for his opinion. To the extent that additional capital is required, the Petitioners are in a position to raise it, and are willing to do so. Only one of the Petitioners who would serve on the first Board of Directors of the proposed bank has any direct banking experience. All of the Petitioners have engaged in considerable banking activities, but only Sam Kinlaw has served in an active capacity with a bank. The Petitioners propose to hire experienced persons to serve as the bank's Chief Executive Officer and Chief Operations Officer. These persons would also serve on the Board of Directors. The Petitioners do represent a good cross-section of successful business people. Their varied business experiences within Marion County would be very helpful to the new bank. In order to properly operate the bank, however, they will require experienced officers. Consistent with the Respondent's policy, the Petitioners have not yet named their officers. To do so, the Petitioners would place the persons they propose to hire in an untenable position in their present capacities. The Respondent has, in the past, approved bank charter applications for further processing under similar circumstances, so as to allow applicants an opportunity to recruit acceptable, experienced individuals to serve as officers. The Board of the proposed bank, as presently constituted, does not have adequate banking experience so as to assure a reasonable prospect of success. If, however, experienced, competent officers, who will also serve on the Board, are hired, the Board would be such as to assure a reasonable promise of success. The parties have stipulated that the name of the proposed bank, the Citizens First Bank of Ocala, is not so similar to any existing bank as to cause confusion with the name of the existing bank. The property which the Petitioners have obtained for the proposed bank is an excellent location. Petitioners plan to utilize a structure which is already on the land to commence operations. The structure has approximately 3,000 square feet of floor space, is aesthetically appropriate, and can be fairly easily modified to serve as a banking facility. The structure, when modified to increase the size of the lobby and to provide appropriate security measures, should prove adequate during the first three years of the bank's operation. There is sufficient land for additions to be made, and the structure is physically sound so that a second floor could be added. The Petitioners are prepared to increase the size of the facility as required.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED: That the Petitioners' application for authority to organize and operate the Citizens First Bank of Ocala be approved for further processing, and that the application be finally approved when the Petitioners have satisfied the Respondent that they have retained appropriate individuals to serve as the bank's principal officers, and that these persons will also serve on the Board of Directors. RECOMMENDED this 30th day of December, 1977, in Tallahassee, Florida. G. STEVEN PFEIFFER 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 30th day of December, 1977. COPIES FURNISHED: C. Gary Williams, Esquire AUSLEY, McMULLEN, McGEHEE, CAROTHERS & PROCTOR Post Office Box 391 Tallahassee, Florida 32302 S. Craig Kiser, Esquire Assistant General Counsel Office of the Comptroller Legal Annex Tallahassee, Florida 32304 Joseph C. Jacobs, Esquire Post Office Box 1170 Tallahassee, Florida 32302 Willard Ayres, Esquire Post Office Box 1148 Ocala, Florida 32670 Appendix
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty of violating Chapter 473 and rules promulgated thereunder as set forth in the Conclusions of Law portion of this Order. His license should be suspended for one year with probation thereafter for a period of two years. He should also be required to take such additional continuing education courses as the Board deems appropriate. DONE and ORDERED this 15th day of April, 1986, in Tallahassee, Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of April, 1986.
Findings Of Fact The Petitioner completed an academic program in accounting at the University of South Florida in March, 1976. She applied to sit for the May, 1976 Certified Public Accountant's examination, and paid her fee. There are four sections to the examination: Auditing, Law, Theory, and Practice. At the May, 1976 examination the Petitioner passed the Law section, but failed the sections on Auditing, Theory and Practice. Accordingly, under the Board's rules, the Petitioner was not credited with having passed any sections of the examination, and needed to take the entire test again. She applied to sit for the November, 1976 examination, paid her application fee, and sat for the examination. On this occasion she passed the Theory and Practice sections of the examination but failed the Auditing and Law sections. Under the Board's rules the Petitioner at this juncture was credited with having passed the Theory and Practice sections, and would be allowed to sit for the next three consecutive examinations in order to pass the remaining two sections. She applied to sit for the May, 1977 examination, paid her fee and sat for the examination. She passed the Law section and failed Auditing. At this juncture she needed to pass only the Auditing section, and had two examinations within which to accomplish that. She applied to sit for the November, 1977 examination. The deadline for making application was September 1, 1977. The Petitioner, through her own mistake, was lake in making application, and her application was rejected. She was not permitted to sit for the November examination. She did timely apply for the May, 1978 examination. She again failed the Auditing section with a score of 69. Under the Board's rule her application for certification as a CPA was considered she would need to being again the testing process, without being credited with having passed any sections. She applied for a regrading of the May, 1978 examination. The examination was regraded, but her score was not changed. The Petitioner is seeking, through this proceeding, an opportunity to retake the Auditing section of the examination, while continuing to receive credit for having passed the Law, Theory, and Practice sections. Under the Board's interpretation of its rules, she would not receive credit for having passed the sections, but would need to begin the testing procedure as a new applicant.
Findings Of Fact Dwight S. Cenac, Respondent, holds certificate No. 3639 as a Certified Public Accountant in the State of Florida. On 2 September 1977 he requested an exemption from the continuing education program required of public accountants to retain their certificate (Exhibit 2). Therein he stated he was not practicing public accounting, the exemption was granted and Respondent's registration card has been endorsed with a statement that Respondent's certificate to practice public accounting in Florida is inoperative. Following his graduation from college in 1970 Respondent worked for the accounting firm of Ernst and Ernst for two years and attained his certificate in 1973. He was employed with Blue Cross of Florida from 1973 until 1977 when he was employed by a health care provider in Puerto Rico to help set up their procedures to improve Medicare and Medicaid payments for services they provided. His understanding of the Medicare regulations and procedures acquired while working at Blue Cross, coupled with the conditions he found in Puerto Rico, led Respondent to believe that many health care providers had need for special consulting in conjunction with their financial record keeping. Health Care Management Consulting, Inc. (HCMC) was formed in 1977 with Respondent as the sole shareholder. In order to acquaint providers with the services he proposed, Respondent prepared a proposal (Exhibit 1) which was sent to health care providers. As a certified public accountant he could not do this without violating the laws and regulations proscribing solicitation by Florida practitioners. In order to overcome this potential problem, Respondent, on 2 September 1977, (by Exhibit 2), notified Petitioner that he was no longer performing public accounting. As the owner and principal operator of HCMC, Respondent does not hold himself out as a CPA, such information is not included in his letterhead or business cards, office or telephone directory or in any public place. His certificates as a Certified Public Accountant are hanging on the wall of his office, but none of his clients ever visit his office. In addition to Respondent, HCMC employs two other consultants who previously worked for Blue Cross, as well as a secretary. Neither of the other two consultants is a certified public accountant, but both perform services for clients similar to those services performed by Respondent. They, as well as Respondent, obtained the special expertise they offer to health care providers while working in the intermediary field between the government and the provider. HCMC provides specialized services not provided by public accountants such as setting up books and records for health care providers, preparing cost reports, providing assistance in setting rates and general familiarity with Medicare rules and regulations. Many of the services provided by HCMC, inasmuch as they involve financial records, are the same type services provided by Florida practitioners. Respondent, by submitting the HCMC Proposal to hospitals, nursing homes and other health care providers is both advertising and soliciting business. HCMC has submitted copies of its Proposal (Exhibit 1) to over 300 hospitals in Florida, and has obtained business previously performed by Florida practitioners. In the Proposal (Exhibit 1) HCMC offers services on a contingent fee basis. These services offered include reimbursement and recoupment of Medicare funds, and the fee paid HCMC is a percentage of the additional funds obtained as a result of the services provided by HCMC. Many of HCMC's services involve increasing reimbursement to the health care provider from Medicare and Medicaid sources. No audits unrelated to Medicare or Medicaid are performed, and financial statements prepared by HCMC do not refer to generally accepted accounting principles and generally accepted auditing standards, nor do they purport to express or disclaim an opinion as to the fairness of the presentation. The work performed by Respondent as an employee of HCMC would not constitute the practice of public accounting if performed by a non-certified person. The other employees of HCMC providing consulting services to health care providers similar to that provided by Respondent, are not in violation of Chapter 473, Florida Statutes.
The Issue The issue in this case is whether Respondent, David McQuay, Jr., committed the violations alleged in a four-count Amended Administrative Complaint issued by Petitioner, Department of Business and Professional Regulation, Board of Accountancy, on February 6, 2008, and, if so, what penalty should be imposed.
Findings Of Fact Petitioner, the Department of Business and Professional Regulation, Board of Accountancy (hereinafter referred to as the "Department"), is the state agency charged with the duty to regulate the practice of certified public accountants in Florida and to prosecute administrative complaints pursuant to Section 20.165, and Chapters 120, 455, and 473, Florida Statutes. At all times relevant to the allegations of the Complaint, Respondent David McQuay, Jr., has been licensed in Florida as a certified public accountant. Mr. McQuay's license number is R 1736, and his address of record is 110 North Lincoln Avenue, Tampa, Florida 33609-2908. Thomas Reilly, an expert in public accounting and auditing, reviewed an audit that Mr. McQuay performed for the Mid-Florida Center, a non-profit organization, for the financial year ending September 30, 2002. The audit was completed on July 18, 2003. Mr. Reilly prepared a report of his findings, dated September 5, 2005. He filed a subsequent report dated June 25, 2007, to include copies of various accounting standards and reference materials that were cited in the original report. In preparing his original report, Mr. Reilly met with Mr. McQuay and reviewed Mr. McQuay's complete set of working papers. Mr. Reilly testified that he billed the Department $3,444.00 for his services. No billing statements, invoices, or other documents were entered into evidence to support the amount of Mr. Reilly's fee. No expert testimony was offered to establish the reasonableness of the fee. As indicated in the Preliminary Statement above, Mr. Reilly identified four issues relating to the financial statements. First, Mr. Reilly found that the audit did not include certain statements that are required by government auditing standards. The "Yellow Book" contains the authoritative auditing standards issued by the federal Governmental Accountability Office ("GAO"). Amendment No. 2 to the auditing standards, adopted in July 1999, requires that certain language be included in the auditor's report on the financial statement. In particular, Section 5.16.1 of Amendment No. 2 provides: When auditors report separately (including separate reports bound in the same document) on compliance with laws and regulations and internal control over financial reporting, the report on the financial statements should also state that they are issuing those additional reports. The report on the financial statements should also state that the reports on compliance with laws and regulations and internal control over financial reporting are an integral part of a GAGAS [Generally Accepted Government Accounting Principles] audit, and, in considering the results of the audit, these reports should be read along with the auditor's report on the financial statements. Mr. McQuay's report on the financial statements did not contain a statement calling the reader's attention to the fact that a separate report on internal control and compliance is included elsewhere in the audit report. Mr. Reilly stated that the quoted language from the Yellow Book is mandatory, and that the GAO felt that the issue was important enough to call for the issuance of Amendment No. 2 to emphasize the revised mandate. In response, Mr. McQuay pointed to his reliance on a commercially produced practice guide that did not include the revised language of Amendment No. 2. While conceding the error, Mr. McQuay continued to contend that the practice guide's position was reasonable: that the statement is required only when the reports on compliance with laws and regulations and internal control over financial reporting are issued separately from the report on financial statements. In Mr. McQuay's case, the reports were issued under a single cover. Given that the express language of Amendment No. 2 references "separate reports bound in the same document," Mr. McQuay's response to the charge is insufficient. The Department has demonstrated that Mr. McQuay's audit report deviated from professional standards as to its failure to include the mandatory Yellow Book language. The deviation is ameliorated by the fact that all of the reports referenced in Amendment No. 2 were in fact contained in Mr. McQuay's audit report. There was no indication that Mr. McQuay's failure to include the mandatory statement was intended to mislead a reader of the audit report, or that his failure to comply with the strict language of Amendment No. 2 had any practical effect on the soundness of the audit report. The second allegation as to the financial statements is that necessary disclosures were missing in the notes to the financial statements. Mr. Reilly stated that the notes to the financial statements did not disclose the entity's capitalization policy for capital assets. The American Institute of Certified Public Accountants ("AICPA") Audit and Accounting Guide for Not-for-Profit Organizations requires disclosure of the entity's capitalization policy. Mr. Reilly testified that it is important for a reader of the audit to understand the dollar threshold at which the entity has decided to capitalize fixed assets, and that the professional standards require the disclosure in the audit report. In response, Mr. McQuay contended that the audit report did disclose the capitalization policy, citing to the following paragraph: Property donated to the Center is stated at its estimated fair market value. Depreciation expense is computed by use of the straight-line method of the estimated economic life of the respective assets. Maintenance and repairs are expensed as incurred. Extraordinary repairs that significantly extend the useful lives of the related assets are capitalized and depreciated over the assets' remaining economic useful life. This response is insufficient because the quoted language does not address the dollar threshold for capitalizing fixed assets, which is required under the standards for audits of nonprofit organizations. Mr. Reilly stated that the notes also failed to include a required statement as to lease commitments. Where the entity has operating leases that commit the entity for more than one year, professional standards require disclosure of the amount of the future commitments for each of the first five years subsequent to the date of the statement of financial position. Mr. McQuay's audit notes indicate that Mid-Florida Center had leases ranging as far as three years into the future, but do not disclose the amount of those lease commitments. Mr. McQuay responded that audit standards provide that immaterial items need not be disclosed, and that it was his professional judgment that the leases in question were not material. Mr. Reilly replied that the audit report gives the reader no basis for making an independent judgment as to the materiality of the leases. Mr. Reilly's view is more consistent with the specific standard regarding lease disclosure, though Mr. McQuay's exercise of independent professional judgment in this instance was not so unreasonable as to constitute a violation of professional standards. Mr. Reilly stated that the notes to the financial statements also omitted a statement of cash flows. However, Mr. McQuay's audit report properly identified this omission as a departure from generally accepted accounting principles ("GAAP"), rendering irrelevant any further discussion of the definition of cash equivalents. In summary, as to the second allegation, the evidence proved that Mr. McQuay violated the standards by failing to address the dollar threshold for capitalizing fixed assets, but did not prove any other violations of the disclosure requirements. The third allegation as to the financial statements was that the Statement of Activities and Statement of Functional Expenses should not contain captions of "Memorandum Only" for their "total" columns. Mr. Reilly contended that the "Memorandum Only" caption was inaccurate and misleading. Historically, the term "memorandum only" was used frequently on local government financial statements, where the auditor must give an opinion on different types of columns. Some of the columns were on a modified accrual basis and others on an accrual basis. Because these are two different bases of accounting, the "total" column was irrelevant. Mr. Reilly pointed out that the only time an auditor would use the "memorandum only" terminology as to a nonprofit organization's audit would be in presenting comparative financial statements, or where the prior year's audit included a summary total that was not in accordance with GAAP. In those situations, an auditor would use the "memorandum only" caption, as well as other disclosures, in the notice of the financial statements and the auditor's report. However, the Mid-Florida Center audit involved a single year's financial statement. Mr. Reilly opined that the total column on these financial statements was extremely significant, and that the "memorandum only" caption was extremely misleading. Mr. McQuay responded that the decision was made to use the "memorandum only" caption because this was the initial audit for Mid-Florida Center, and that the caption does not materially change any substantive aspect of the financial statement and is therefore not misleading. Mr. Reilly's position that the inclusion of the "memorandum only" caption was misleading and a violation of the standards cited in his report was correct, and Mr. McQuay's response was insufficient. The fourth allegation as to the financial statements was that donations of long-lived depreciable assets should not be reported as "Permanently Restricted Net Assets." Mr. Reilly conceded that this was a very complicated issue for which Mr. McQuay had "quite a bit of support." Mid-Florida Center purchased land and some equipment from the Highlands County School Board. The fair value of the property exceeded the price paid by Mid-Florida Center. Under GAAP, the difference between the price paid and the value would be recorded as a donated asset. The dollar amount recorded in the financial statement was $330,000, but there was no documentation showing how that number was arrived at, and no documentation showing the breakout between the land and the equipment. Mr. Reilly testified that when he looked at the fixed assets, he found a $280,000 item for land but could not be certain whether the item was part of this land or another piece of property referenced elsewhere in the notes. However, $330,000 was shown in a column called "permanently restricted." Mr. Reilly did not take issue with placing the land in that column. However, he thought that the equipment, i.e., the depreciable portion of that asset, should not be placed in the "permanently restricted" column. Mr. Reilly testified that an item such as an endowment fund is the only thing that should be placed in a "permanently restricted" column. Once an asset is placed in service and begins depreciating, it must be placed in the "unrestricted" column. In his response, Mr. McQuay referenced a reversionary clause in the purchase agreement, whereby if Mid-Florida Center gave up its 501(c)(3) nonprofit status, the property would revert to the School Board. Mr. Reilly testified that this is a standard clause in government contracts, and is not a reason to classify the item as permanently or temporarily restricted. While his report took issue with the placement of depreciable assets in the "permanently restricted" column, Mr. Reilly conceded that the relevant Statement of Financial Accounting Standards is not crystal clear and that he used non- authoritative practice guides to arrive at his conclusion. Mr. Reilly believed that it was misleading to label equipment in operation as "permanently restricted," but also conceded that the notes to the financial statement fully disclosed the issue. Mr. McQuay insisted that his audit did distinguish between the land and equipment in the fixed assets and depreciation schedules. While his treatment of the item was subject to dispute, Mr. McQuay cannot be found to have violated professional standards as to this issue. As indicated in the Preliminary Statement above, Mr. Reilly identified six issues relating to the working papers. The first allegation is that there was no evidence of a reporting and disclosure checklist for not-for-profit organizations. Mr. Reilly opined that it is common practice to include such a checklist, and that Mr. McQuay should have used one on this audit because nonprofits have unique disclosure requirements and Mid-Florida Center was the only nonprofit organization that Mr. McQuay was auditing at the time. Mr. Reilly noted that failure to use a checklist does not violate a particular auditing standard, but could be held to violate the more general professional standard of due care. Mr. Reilly believed that due professional care mandates that a CPA use a checklist when auditing a nonprofit organization, and that a CPA "would be a fool" not to use one. A typical checklist is 70 pages long, and an accountant needs the list to jog his memory as to the many unique requirements of nonprofits. Mr. Reilly thought that Mr. McQuay might have avoided some of the cited deficiencies if he had used a checklist. Mr. McQuay responded that professional standards do not require the use of a checklist. Moreover, he asserted that his auditing software contains the functional equivalent of a disclosure checklist. While conceding that this was the only nonprofit he audited during the year in question, Mr. McQuay testified that he has been auditing nonprofit organizations for over 36 years and that his previous firm conducted 35 to 40 such audits annually. A checklist would be of no assistance out in the field, where the auditor is examining the client's working papers. Mr. McQuay stated that he does use a checklist when he is reviewing the work of a staff auditor, but that he did not need a checklist here because he was performing the audit himself. Even after hearing Mr. McQuay's response, Mr. Reilly continued to hold that it was foolish not to complete a disclosure checklist. The fact that Mr. McQuay was the only person working on the audit provided all the more reason for the use of a checklist. Accepting Mr. McQuay's testimony that his auditing software contained the equivalent of a checklist, it is found that his failure to use a paper checklist was not a violation of auditing standards or of due professional care. The second allegation relating to the working papers was a lack of audit evidence for fraud risk factors or planning materiality. Statement on Auditing Standards No. 82 states that the auditor "should specifically assess the risk of material misstatement of the financial statements due to fraud and should consider that assessment in designing the audit procedures to be performed." The auditor should consider fraud risk factors relating to misstatements arising from fraudulent financial reporting and from misappropriation of assets. Statement on Auditing Standards No. 47 provides that the auditor should consider audit risk and materiality in planning the audit and designing auditing procedures and in evaluating whether the financial statements "taken as a whole are presented fairly, in all material respects, in conformity with generally accepted accounting principles." Mr. Reilly found nothing in Mr. McQuay's working papers documenting that an assessment in conformance with Statement on Auditing Standards No. 82 was made, or that an audit risk and materiality assessment was made in accordance with Statement on Auditing Standards No. 47. Mr. McQuay responded that a separate section in his work papers dealt with fraud risk factors and materiality. He testified that his firm is careful in selecting clients and looks carefully at management capabilities and the risks involved in the representation. Mr. Reilly reviewed Mr. McQuay's response and concluded that it did not come close to meeting professional standards. As to this issue, it is found that Mr. McQuay did violate professional standards as to documentation, though he may well have performed the assessments in question. The third allegation relating to the working papers was that the management representation letter omitted the specific representations relative to the single audit and the referenced schedule of uncorrected misstatements in the management representation letter. The "single audit" is an Office of Management and Budget ("OMB") A-133 audit of an entity that has received $500,000 or more of Federal assistance for its operations. Mr. Reilly found the omissions in the management representation letter constituted a violation of professional standards. Mr. Reilly testified that the standards require that on every audit, the auditor obtain a management representation letter signed by the appropriate levels of management. Statement on Auditing Standards No. 85 contains the basic requirements for management representations. Mr. McQuay obtained a management representation letter from Mid-Florida Center in compliance with this basic requirement. However, because this was a single audit, additional representations were required in the management representation letter over and above those found in a generic audit. AICPA's Statement of Position 98-3, "Audits of States, Local Governments, and Not-for-Profit Organizations Receiving Federal Awards," paragraph 6.68 requires the auditor conducting an OMB A-133 audit to obtain written representations from management about matters related to federal awards. Paragraph 6.69 of the same document lists 22 items for which the auditor should consider obtaining written representations in a single audit. Mr. Reilly testified that most of these items were applicable in this case, but that none of them were included in the Mid-Florida Center's management representation letter. In response, Mr. McQuay pointed to his engagement letter with the client. The engagement letter states that this would be an OMB A-133 audit, and that Mr. McQuay has explained to the client and the client has understood that management is responsible for compliance with the OMB A-133 audit requirements. Mr. McQuay did not think he needed to include the detailed representations of paragraph 6.69 when he already had an extensive engagement letter that covered these areas of management responsibility. Mr. Reilly replied that the engagement letter and the management representation letter are two entirely different things. The engagement letter spells out the scope of representation to the client at the outset of the engagement; completely different standards require the auditor to obtain written representations from management regarding elements spelled out in the standards, at the conclusion of the engagement. The engagement letter is irrelevant for purposes of the single audit's requirement that representations be obtained from management about matters related to federal awards. None of the specific statements referenced by Mr. McQuay in his engagement letter dealt with the specifics of federal awards. As to this issue, it is found that Mr. McQuay violated professional standards. The fourth allegation relating to the working papers was that no documentation was evident regarding a consideration of a going concern with the entity's financial position. Mr. Reilly testified that it was apparent from a glance at the financial statements that the entity had severe financial problems. It had an adverse current ratio, with assets of $33,000 and liabilities of $138,000, not considering the issue of liability for back pay owed to the executive director. Under Statement on Auditing Standards No. 59, an auditor has the responsibility to evaluate and document any causes for doubt about the continuing viability of the entity, and further to evaluate and document management's plans to turn around the entity. Mr. Reilly saw nothing that came close to meeting this standard. The only items of substance he found were a statement that the Mid-Florida Center was creating a new charter school and that fundraising activities were "ongoing." There were no specifics as to the charter school or the fundraising. Mr. Reilly found these statements "grossly inadequate" to comply with professional standards. Statement on Auditing Standards No. 59 includes specific items that an auditor should evaluate, such as management's specific plans to curb expenditures and increase revenue. Mr. McQuay supplied a document titled "Going Concern Evaluation," but the document provided no specifics as to the evaluation that was performed. Mr. McQuay responded that any startup organization such as the Mid-Florida Center will have poor current ratios. However, the entity had the management wherewithal to raise money and a committed, competent board of directors. The proposed charter school had already received funding for building renovation for the 2003-2004 school year. Mr. McQuay believed that his field work and evaluation of the management plans was sufficient to satisfy the standard. As to this issue, it is found that Mr. McQuay violated professional standards, at least insofar as he failed adequately to document his consideration of a going concern with the entity's financial position in accordance with Statement on Auditing Standards No. 59. The fifth allegation relating to the working papers was that the management representation letter addressed the $158,429 liability owed to the executive director, which was reversed off the books, but failed to justify the removal of the liability from the financial statements by specifically finalizing the matter. Mr. Reilly explained that, as of the balance sheet date, Mid-Florida Center owed several years' salary to its executive director, Dr. Arthur Cox, a significant liability that would make Mid-Florida's poor current ratio even worse. Mid-Florida removed the liability for Dr. Cox' salary from its books. Mr. Reilly did not have a problem with removing the salary, in the amount of $158,429 from the books, provided Mid-Florida had secured a separate, standalone confirmation from Dr. Cox that he was totally relinquishing any rights to those funds. However, the relinquishment issue was addressed in a management representation letter by way of what Mr. Reilly termed "squirrely wording." Rather than completely extinguish any rights Mr. Cox had to the salary, the Mid-Florida Center's board voted to change the liability from deferred compensation to amounts owed for future salary increases. Essentially, the board took the liability off the books at the present time, but left open the possibility of reinstating it when Mid-Florida Center's finances permitted it to pay Dr. Cox the amount he was owed. Mr. McQuay responded that the Form 990 for the year in question had been completed by another CPA and filed prior to his retention. Form 990 is the tax return for organizations exempt from income tax. The working trial balance prepared by the other CPA indicated that the liability for the back pay had been removed, and the Form 990 had been filed with the Internal Revenue Service without including the liability. In reconciling the Form 990 with the working trial balance for purposes of his audit, Mr. McQuay obtained the management representation letter referenced by Mr. Reilly. Mr. McQuay testified that he viewed the letter as firming up the matter that the previous CPA had dropped in his lap. Selvin McGahee, a member of the Mid-Florida Center's board of directors, testified that Dr. Cox founded the Mid- Florida Center, writing the initial grants that got the entity started. Dr. Cox' focus on providing services led him to forego some of the salary that was budgeted for his position, in order to spend the funds on other positions. Mr. McGahee testified that this situation persisted for a couple of years, with Dr. Cox supplementing the organization's revenues by not paying himself. The board ultimately decided to remove the back pay from its books, but had the intention of paying Dr. Cox his back salary if and when the organization generated sufficient unrestricted revenue to do so. As to this issue, it is found that that Mr. McQuay violated professional standards and departed from generally accepted accounting principles. Removing the liability for back salary payments to the executive director should have been accompanied by an unequivocal renunciation of those funds by the executive director. As matters were allowed to stand by Mr. McQuay, Mid-Florida Center's balance sheet was significantly improved in a manner that did not finalize the issue of the possible reinstatement of the back pay liability in the future. The sixth allegation as to the working papers was that, relative to compliance testing, the working papers contained evidence of testing only one monthly invoice/progress report. Mr. Reilly testified that the problem here was a lack of documentation. Though the auditor's judgment is paramount as to compliance testing, there are stated requirements that the auditor must meet. Because this was a single audit, OMB Circular A-133 Compliance Supplement was used. This Circular lists fourteen specific items of testing, each of which should be addressed by the auditor at least to the point of indicating that the auditor has determined the item to be inapplicable to the audit at hand. Mr. Reilly testified that one of the specific issues he was called to investigate involved the lack of documentation regarding a grant that the Mid-Florida Center had obtained from the City of Bartow. The grant required the submission of a monthly invoice/progress report. Mr. Reilly could find evidence that Mr. McQuay had tested only one such invoice. Mr. Reilly conceded that it was "tough to say" what professional judgment demanded in this situation because he was not there when the audit was conducted. Mr. Reilly stated that he would probably have tested more than one invoice, but he could not say how many. The usual practice is to expand the testing if a problem is found with the first invoice. Mr. McQuay found no problems with the one invoice and progress report that he tested, and made the judgment that his examination was adequate. Mr. Reilly believed that, based on the overall scope of problems with Mid- Florida Center's documentation, Mr. Reilly concluded that the entity's invoices and progress reports were "lightly tested." As to this issue, it is found that Mr. McQuay did not violate professional standards or generally accepted accounting principles. Mr. Reilly testified that he might have conducted the compliance testing more strenuously than did Mr. McQuay, but he could not state that Mr. McQuay's actions were outside the boundaries of his professional judgment. Petitioner offered the testimony of Allan Nast, an expert in accounting and auditing. Mr. Nast reviewed the audit performed by Mr. McQuay, and also reviewed the reports prepared by Mr. Reilly. Mr. Nast agreed with Mr. Reilly's opinions in every particular. Mr. Nast's opinion has been considered and is respected by the undersigned, but does not change the findings of fact made above. Mr. Nast testified that he billed Department $1,365.00 for his services. No billing statements, invoices, or other documents were entered into evidence to support the amount of Mr. Nast's fee. No expert testimony was offered to establish the reasonableness of the fee. Mr. McQuay testified that he believes he has been singled out for disciplinary action based on business reasons. Mr. McQuay pointed out that the initial complaint in this matter was filed by a competitor who was also the father of an accountant whose firm Mr. McQuay had rejected for work in his role as director of quality assurance for WorkNet Pinellas, Inc. Mr. McQuay, an African-American, also testified as to incidents of racism as he pursued his career in a profession dominated by white men. The undersigned has considered this testimony by Mr. McQuay, but cannot find that these matters had any bearing on the merits of the allegations lodged by the Department in the Complaint after its thorough investigation of the initial complaint. In summary, as to the four allegations regarding the financial statements recited in the Preliminary Statement above, it was found that the first allegation as to missing statements in the audit was proven, though ameliorated by the fact that all of the reports referenced by the missing statements were included in the audit report. As to the second allegation as to missing disclosures, it was found that Mr. McQuay violated professional standards as to only one of several of the alleged omissions. As to the third allegation regarding the "Memorandum Only" statement in the "total" columns, it was found that Mr. McQuay violated the relevant standards. As to the fourth allegation regarding the categorization of long-lived depreciable assets, it was found that Mr. McQuay did not violate professional standards. There were six allegations regarding the working papers recited in the Preliminary Statement above. As to the first allegation regarding the disclosure checklist, it was found that Mr. McQuay did not violate auditing standards or the duty of professional care. As to the second allegation regarding lack of evidence for fraud risk factors or planning materiality, it was found that Mr. McQuay violated professional standards as to documenting his work, though he may have performed the assessments in question. As to the third allegation regarding omissions in the management representation letter, it was found that Mr. McQuay violated professional standards. As to the fourth allegation regarding going concern considerations, it was found that Mr. McQuay violated professional standards. As to the fifth allegation regarding removal of liabilities owed to the executive director, it was found that Mr. McQuay violated professional standards. As to the sixth allegation regarding the sufficiency of compliance testing, it was found that Mr. McQuay did not violate professional standards.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that A final order be entered finding that David McQuay, Jr. committed the violations alleged in Counts One, Two, and Four of the Amended Administrative Complaint and requiring Mr. McQuay to take sixteen hours of Continuing Professional Education beyond the regular requirement, including eight hours related to nonprofit organizations, and placing Mr. McQuay on probation for a period of two years. During the first year of probation, all audits (including financial statements and working papers) will be reviewed by a consultant selected by the Board, at Mr. McQuay's expense. If any audit is deemed deficient upon review by the Board, review of all audits will continue through the second year of Mr. McQuay's probation. DONE AND ENTERED this 27th day of October, 2008, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of October, 2008. COPIES FURNISHED: Eric R. Hurst, Esquire Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202 David McQuay, Jr. 110 North Lincoln Avenue Tampa, Florida 33609-2908 Veloria A. Kelly, Director Department of Business and Professional Regulations, Board of Accountancy 240 NW 76th Drive, Suite A Gainesville, Florida 32607 Ned Luczynski, General Counsel Department of Business and Professional Regulations Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0793
The Issue Whether the certificate of Respondent to practice public accounting in Florida should be revoked, annulled, withdrawn or suspended as indicated in the administrative complaint.
Findings Of Fact The parties stipulated to certain facts, as follow: That the Certificate Holder received an undergraduate degree in accounting from the University of Cincinnati in August of 1968. That the Certificate Holder was employed by major CPA firms from August of 1968 to September of 1970 as an accountant. That the Certificate Holder passed the uniform CPA exam in California in 1969, and was granted a CPA license by California upon completion of the necessary experience requirements in May of 1971. That the Certificate Holder attended law school at the Ohio State University from September 1970 through December 1972. In December 1972 he was awarded a Juris Doctor Degree from that institution. That prior to graduating from law school, the Certificate Holder made application to secure a position in accounting. He secured a position with the certified public accounting firm of Arthur Young and Co. in Cincinnati, Ohio, which position commenced on January 1, 1973. That while employed as a certified public accountant by Arthur Young and Co., the Certificate Holder, in the summer of 1973, was offered a position with a certified public accounting firm in Miami, Florida. That in July 1973 the Certificate Holder accepted that position with McClain and Co., CPA's of Miami, Florida, which position was to begin in August 1973. That during the summer of 1973, the Certificate Holder requested the Florida State Board of Accountancy to forward him an application to apply for a reciprocal CPA certificate and the Board responded that an application would not be sent to anyone who was not a resident of the State of Florida. That during the summer of 1973, the Certificate Holder made an application with the Florida Bar to become a member of the Florida Bar. That the Certificate Holder moved his family from Cincinnati, Ohio, to Fort Lauderdale, Florida, in July 1973 and began working on a full-time basis for the Florida CPA firm of McClain and Co. in August of 1973. At that time he again requested an application for a reciprocal CPA certificate; said application being received by the Certificate Holder in late September of 1973. That the Certificate Holder completed the application for a reciprocal CPA certificate and submitted the same to the Florida State Board of Accountancy in October 1973. That in November 1973 the Certificate Holder took the Florida Bar examination in Tampa, Florida. That the Certificate Holder was admitted to the Florida Bar in December 1973 and was granted a reciprocal CPA certificate by the Florida State Board of Accountancy in January 1974. That the Certificate Holder was discharged by the Florida certified public accounting firm of McClain and Co. in may 1974. That the Certificate Holder taught part-time in the Accounting Department of Florida International University beginning in January 1974 thru 1976. After his discharge from the public accounting firm of McClain and Co., he continued at Florida International University on a substantially full-time basis thru the summer of 1974 and into the fall of 1974. That in August 1974 the Certificate Holder opened an office for the practice of law in Fort Lauderdale, Florida, but this office was staffed only on a part-time basis as the Certificate Holder was devoting the great bulk of his time to his teaching activities at Florida International University in Miami, Florida. That in February, 1975, the Certificate Holder opened an office for the practice of law in Fort Lauderdale, Florida, (200 SE 6th Street, Suite 100- B), which office was from that time staffed on a full-time basis by the Certificate Holder. That since February 1975 the Certificate Holder has been actively engaged in the full-time practice of law in the city of Fort Lauderdale, Florida; and That the Certificate Holder has been a resident of and domiciled in the State of Florida from August 1973 thru and including the date of the Stipulation." (Exhibit 1). The parties stipulated at the hearing that the respondent joined the Florida Institute of Certified Practicing Accountants on Jun 17, 1974, as an active member, and changed his status to that of a non-practicing member of the institute on August 22, 1975. Respondent testified at the hearing that his purpose in attending law school in 1970 and eventually obtaining a law degree was predicated upon his desire to advance more rapidly in the tax department of an accounting firm. He had noted that most of the accountants doing tax work in accounting firms generally held law degrees and received higher salaries. Since he was interested in taxation, he did not obtain a master's degree in accounting which involves primarily audit work or preparation of financial statements. Respondent did tax work for an accounting firm in Cincinnati, Ohio, after graduation from law school in 1972 and secured a similar position with an accounting firm in Florida, McClain and Company, in the summer of 1973. He applied for admission to the Florida Bar the same summer because he believed his failure to do so might cause an adverse reaction by prospective employers in the accounting field. Prior to the Florida move, respondent did not seek employment with a law firm because he felt that the opportunities were much better in public accounting and he enjoyed that type of work. After passing the Florida Bar examination in October 1973, respondent did not seek employment in a law firm because he was well satisfied with his accounting position. After he was involuntarily discharged from his job with McClain and Company in May 1974, he sought employment with both accountant firms and law firms in the tax area. Although he began a graduate law program in taxation in January 1974, his purpose was to acquire greater knowledge and ability concerning tax matters for his work in accounting. Respondent testified that at the time he had applied for the Florida reciprocal license as a certified public accountant, he intended to practice public accounting in the State of Florida on a full-time year-round basis. He conceded that he has not been engaged in the full-time practice of accountancy since his termination with the accounting firm in the spring of 1974. (Testimony of Respondent, Exhibits 2, 3). On December 30, 1975, respondent advised the petitioner by means of a "CPA information card" that he was not engaged in the practice of public accounting. By letter of June 21, 1976, petitioner requested respondent to return his certificate along with a stipulation and waiver of hearing. The practice of petitioner in such cases is to request that a registrant waive his right to a hearing on the question of whether or not his certificate should be revoked on the ground that he is not engaged in the full-time year-round practice of public accounting in Florida. In the event the registrant does not agree to waive such a hearing, petitioner normally proceeds to file an administrative complaint seeking revocation of the certificate. (Testimony of Respondent, Composite Exhibit 4).
Recommendation That petitioner's administrative complaint against respondent Thomas F. Luken be dismissed. DONE AND ENTERED this 16th day of November 1977 in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of November 1977. COPIES FURNISHED: James S. Quincey, Esquire Post Office Box 1090 Gainesville, Florida 32602 David Hoines, Esquire First National Bank Building Fort Lauderdale, Florida 33394
Findings Of Fact At all times material to this proceeding, Respondent Favret held public accounting license number 0001424 with the State of Florida. Respondent's license to practice public accounting reverted to inactive status by operation of law on January 1, 1980, due to his failure to demonstrate to the Department of Professional Regulation and the Board of Accountancy compliance with the continuing education requirements imposed on licensed public accountants pursuant to Section 473.312, Florida Statutes, and Chapter 21A-33, Florida Administrative Code. The Respondent was aware that his license reverted to inactive status on January 1, 1980, due to his failure to meet professional continuing education requirements. Respondent chose not to comply with the continuing education requirements because he did not wish to maintain an active license and did not feel that formal continuing education was of benefit to him. Between January 1, 1980, and August, 1981, Respondent continued to perform tax advisory services for approximately twenty-five (25 ) clients. His services included the preparation of personal federal income tax returns and all necessary supporting tax schedules. Respondent explained the tax services he provided as including the accumulation of raw data brought in by a client in categories, summarizing the information and then preparing the necessary tax forms. Although the Respondent signed all the tax forms as the preparer, he ceased using the professional designation, "C.P.A." when he received formal notice of the inactive status of his license. To prepare the income tax returns for his clients, knowledge of the present tax laws and regulations, tax accounting and arithmetic were utilized by the Respondent in the tax advisory and preparation services for which he received compensation. The preparation of personal income tax returns involves the use of accounting skills which includes the ability to make a determination of what items need to be recognized and included7 the reasonableness of the items, the proper categorization of the items and whether to apply certain accounting functions such as allocation to the items. 1/
