The Issue The issue is whether Respondent properly awarded a contract for automated payment options to E-Commerce Group, a non-party.
Findings Of Fact Respondent is a local governmental body, corporate and politic, organized pursuant to Chapter 2001-324, Laws of Florida. Respondent is responsible for providing certain water, wastewater, and sanitation services in Escambia County, Florida. Petitioner is a Florida for-profit corporation. It is organized and authorized to do business under Florida Law. Currently, Respondent offers its utility customers several different types of payment options, including the following: (a) over-the-counter payments; (b) drive-in payment; (c) mail-in payments; (d) automatic bank drafts; and (e) in-person payments. In May 2002, Respondent released Request for Proposal (RFP) 2002-36. Through the RFP, Respondent was seeking the lowest and most responsible proposal for automated payment options for Respondent's utility customers. According to the RFP, the vendors needed to be capable of providing Internet and telephone payment options so that Respondent's customers could use their credit cards to pay their utility bills. The RFP stated that the sealed bids would be opened on June 27, 2002. Section 1, the administrative section of the RFP, provides the following information regarding Respondent's operations as of September 30, 2001: (a) Respondent served 85,000 water customers; (b) Respondent served 55,800 sewage collection and treatment system customers; (c) Respondent served 59,900 solid waste customers; (d) Respondent generates approximately $64,000,000 in revenue per year; and Respondent's average residential bill is $60. Section 2 of the RFP discusses Respondent's current management information system. This section states that Respondent needed to "know about and understand all the costs and changes necessary to implement the solution proposed." Section 3 of the RFP requests information about the vendor. This section includes a vendor questionnaire and request for information about the vendor's prior customers. Section 4 of the RFP sets forth the project requirements. Of particular note is the following reference to a convenience fee in Section 4.1: Convenience Fee Since the convenience fee is the method the vendor will [use to] generate compensation for this service, ECUA requires the rate (fixed or sliding) to be fixed for the duration of the contract. You may propose a sliding scale for lowering or raising the fee based upon use of the solution once a preliminary period has expired (the preliminary period to be set in vendor's contract). Section 4.3 of the RFP sets forth the project considerations. A cost-effective and timely solution is listed as one of six considerations. Section 5 of the RFP sets forth the requirements for vendor responses. Section 5.3 includes the following evaluation criteria: These criteria are to be utilized in the evaluation of qualifications for development of the shortlist of those vendors to be considered by interviews and/or potential negotiations. Individual criteria may in all probability be assigned varying weights at the ECUA's discretion to reflect relative importance. Vendors are required to address each evaluation criteria in the order listed and to be specific in presenting their qualifications. (Emphasis added) Experience/qualifications of Vendor. Vendors (sic) proposed staff, experience with contracts for services similar in scope. Capabilities, features, etc. of the proposed services and the degree to which the proposed services meet the needs of the ECUA. References of only similar contracts. The Vendor must have a demonstrative history of professional, reliable and dependable service. Demonstrated quality assurance procedures and schedule to insure a timely, effective and professional provision of services. Costs. Section 5.4 of the RFP discusses the process for scoring responses. It provides as follows in relevant part: Selection Procedure Selection shall be made of two or more vendors deemed to be fully qualified and best suited among those submitting proposals. The selection will be made on the basis of the factors involved in the Request for Proposal, including price if so stated in the Request for Proposal. Selected vendors will then conduct a presentation to the selection committee. After all presentations are made the selection committee will select the vendor which, in its opinion has made the best proposal and make a recommendation to ECUA's Board. ECUA's Board will award a contract to that vendor. Should the ECUA determine that only one vendor is fully qualified or that one vendor is clearly more highly qualified than the others under consideration, the presentation phase may be skipped. (Emphasis added) * * * Basis for Award Information and/or factors gathered during the interviews and any reference checks, in addition to the evaluation criteria stated in the RFP, and any other information or factors deemed relevant by the ECUA, shall be utilized in the final award. Section 6 of the RFP sets forth the functional requirements. This section is not at issue here. Section 7 of the RFP is entitled "Cost Summary." Section 7.1 includes the proposal form, which states as follows in relevant part: ITEM A - Customer Convenience Fee: ITEM B - Set Up Cost: ITEM C - Other (explain): The RFP does not have a section for definitions. It does not define the term "cost" other than as set forth above. The following four vendors submitted timely proposals to Respondent: (a) E-Commerce Group; (b) Petitioner; (c) Link2Gov Corp.; and (d) BillMatrix. The proposals were as follows: Vendor Name Customer Convenience Fee Setup Cost Other E-Commerce Group $2.95* for $1-$500 pymt. None N/A Optional E Bills fee $.35 per bill** Petitioner $2.50* per I/O, IVR & Web Trans. $3,750 Development hourly rate-- $75** $125 per unit swipe device Link2Gov Corp. $2.49 Internet/$2.89 IVR None $95.00 hosting fee per month BillMatrix $3.95 Per Credit Card Trans. None N/A E-Commerce Group: *If average payment more than $60, or if American Express payments to be accepted in addition to other major credit card associations, the convenience fee would be higher; no costs to ECUA for software use. **No other costs for using software, but if ECUA would like billing services, the fee per bill presented would be $0.35. Petitioner: *Will request review of convenience fee if average payment is more than $60 for three consecutive months. **To be charged only upon request from ECUA for specialized development tasks or if implementation requirements exceed est. setup costs, but only upon negotiation between parties. The proposals were initially reviewed by Respondent's finance department. In reviewing them, the director of finance recognized that the number of users of the automated payment option was unknown. However, Respondent's experience with other alternate payment options had generated very limited customer participation. Therefore, the director of finance concluded that it would be best if Respondent did not absorb a high set-up cost for a service that might have very limited use. Additionally, the director of finance believed it was in Respondent's best interest if the customers electing to use the automated payment option bore the fees and costs associated with those services, rather than having all ratepayers absorb this expense regardless of whether they were using it. Accordingly, the director of finance decided to recommend that Respondent select E-Commerce Group's proposal, as it was the lowest bid with no cost to Respondent. The director of finance's recommendation was presented to Respondent's finance advisory committee on July 16, 2002. The finance advisory committee is composed of members who are not Respondent's employees. After receiving the director of finance's recommendation, the committee members discussed which of the proposals were best for Respondent. Respondent's finance advisory committee decided to recommend that Respondent "select E-Commerce Group, the lowest bidder when considering there is no set-up cost to ECUA, as the vendor to provide these automated payment solutions, and enter into a one-year contract with an optional one-year extension." On July 25, 2002, Respondent considered the finance advisory committee's recommendation. During the meeting, Respondent's director of finance stated that approximately 13,000 people per year used credit card payment services to pay the Escambia County tax collector. There is no evidence that the director of finance had sufficient additional information to calculate the percent of the tax collector's customers that used credit cards. One of Petitioner's employees, John Parkin, also spoke at Respondent's July 25, 2002, meeting. He confirmed the number of people that pay the Escambia County tax collector using a credit card payment option provided pursuant to a contract between the tax collector and Petitioner. However, Mr. Parkin did not provide Respondent with any information about the percentage of taxpayers who availed themselves of this service. He provided no information to show how bills paid to Respondent and the tax collector were similar or dissimilar. During the meeting, Mr. Parkin stated that Petitioner would waive its $3,750 set-up costs. He did not otherwise attempt to explain how Petitioner's set-up costs could be amortized or recaptured over the first year of operation. Respondent did not allow Petitioner to amend its proposal to eliminate the $3,750 set-up costs. Instead, Respondent accepted the finance advisory committee's recommendation, awarding the contract to E-Commerce Group. Petitioner filed a timely protest. The finance advisory committee considered the protest in an informal hearing. During this proceeding, Petitioner had an opportunity to demonstrate why it should have been considered the lowest bidder. Respondent considered Petitioner's protest on October 24, 2002, in a regularly scheduled meeting. During the meeting, Respondent voted to refer the case to the Division of Administrative Hearings. Respondent acted within the requirements of the RFP when it determined that E-Commerce Group was the lowest responsible bidder primarily because there was no cost to Respondent to start the program. Respondent's RFP clearly indicated that set-up costs would be considered as one of the evaluation criteria. The RFP did not require Petitioner to designate any part of its proposed costs as set-up costs. Petitioner's set-up cost amortized over the estimated first year's transactions is approximately $2.63 per transaction. Additionally, it would take Respondent approximately 108 days (and over 8,000 transactions) to recapture the set-up costs by passing them along to the ratepayers. However, the RFP did not require Respondent to recalculate Petitioner's proposed costs using projected customer usage to amortize or recapture Petitioner's set-up costs before making a decision. In fact, Petitioner's proposal on its face did not indicate that Petitioner intended for Respondent to make such recalculations.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Respondent enter a final order awarding the contract to E-Commerce Group. DONE AND ENTERED this 17th day of December, 2002, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 17th day of December, 2002. COPIES FURNISHED: Archibald Hovanesian, Jr., Esquire 21 East Garden Street, Suite 201 Pensacola, Florida 32501 Bradley S. Odom, Esquire Stephen G. West, Esquire Kievet, Kelly & Odom 15 West Main Street Pensacola, Florida 32501 Linda Iverson, Board Secretary Escambia County Utilities Authority Post Office Box 15311 Pensacola, Florida 32514
Conclusions Having reviewed the Administrative Complaint, and all other matters of record, the Agency for Health Care Administration finds and concludes as follows: 1. The Agency has jurisdiction over the above-named Respondent pursuant to Chapter 408, Part II, Florida Statutes, and the applicable authorizing statutes and administrative code provisions. 2. The Agency issued the attached Administrative Complaint and Election of Rights form to the Respondent. (Ex. 1) The Election of Rights form advised of the right to an administrative hearing. 3. The parties have since entered into the attached Settlement Agreement. (Ex. 2) Based upon the foregoing, it is ORDERED: 1. The Settlement Agreement is adopted and incorporated by reference into this Final Order. The parties shall comply with the terms of the Settlement Agreement. 2. The Agency’s claim for license revocation is voluntarily withdrawn. The Respondent shall pay the Agency $2,500.00. If full payment has been made, the cancelled check acts as receipt of payment and no further payment is required. If full payment has not been made, payment is due within 30 days of the Final Order. Overdue amounts are subject to statutory interest and may be referred to collections. A check made payable to the “Agency for Health Care Administration” and containing the AHCA ten-digit case number should be sent to: Office of Finance and Accounting Revenue Management Unit Agency for Health Care Administration 2727 Mahan Drive, MS 14 Tallahassee, Florida 32308 aT Filed May 22, 2012 9:19 AM Division of Administrative Hearings ORDERED at Tallahassee, Florida, on this / a day of 7 dae} , 2012. Agency for Health)Care Administration NOTICE OF RIGHT TO JUDICIAL REVIEW. A party who is adversely affected by this Final Order is entitled to judicial review, which shall be instituted by filing one copy of a notice of appeal with the Agency Clerk of AHCA, and a second copy, along with filing fee as prescribed by law, with the District Court of Appeal in the appellate district where the Agency maintains its headquarters or where a party resides. Review of proceedings shall be conducted in accordance with the Florida appellate rules. The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed. CERTIFICATE OF SERVICE I CERTIFY that a true and correc’ of this wy Order was served on the below-named persons by the method designated on this iy of Atay , 2012. Richard Shoop, Agency Cte Agency for Health Care Administration 2727 Mahan Drive, Bldg. #3, Mail Stop #3 Tallahassee, Florida 32308-5403 Telephone: (850) 412-3630 Jan Mills Finance & Accounting Facilities Intake Unit Revenue Management Unit (Electronic Mail) (Electronic Mail) Douglas J. Lomonico Office of the General Counsel Agency for Health Care Administration (Electronic Mail) rn a : Gus Suarez, Esquire The Health and Business Law Group 1110 Brickell Avenue, Suite 407 Miami, Florida 33131-3135 (U.S. Mail) Anne Menard, Unit Manager Home Care Unit Agency for Health Care Administration (Electronic Mail) The Division of Administrative Hearings (Electronic Mail)
The Issue Whether WKDR II, Inc. (WKDR), is jurisdictionally time-barred from bringing the challenges in Case Nos. 21-0844 and 21-0845 to contest the Department of Revenue's (Department) tax assessment and subsequent freeze of WKDR's bank account to attempt to collect on the assessment.
Findings Of Fact The Department administers Florida's sales tax statutes and performs audits to ensure compliance with sales tax laws. WKDR is a Ford franchise car dealership operating as LaBelle Ford. WKDR is organized as an "S" corporation and is wholly owned by Douglas Plattner (Mr. Plattner). WKDR's address is 851 South Main Street, LaBelle, Florida 33935 (851 South Main Street). Mark Smith (Mr. Smith) is a self-employed certified public accountant (CPA) at the firm of Smith and Waggoner CPAs. He is the CPA for Mr. Plattner and WKDR. Mr. Smith's business mailing address is 115 Tamiami Trail North, Suite 7, Nokomis, Florida 34275 (115 Tamiami Trail). On or about March 21, 2019, the Department began a sales tax audit of WKDR for the period of March 1, 2016, through February 28, 2019 (audit period). WKDR was notified of the audit through a Notice of Intent to Audit Books and Records, dated March 21, 2019. Jeff Barnard (Mr. Barnard) was a tax auditor for the Department. Mr. Barnard was responsible for examining the books and records of various taxpayers for compliance with Florida tax laws. Mr. Barnard retired from the Department in May 2021. He was employed by the Department for 30 years. He spent the last 15 years with the Department as a Tax Auditor IV—the most senior tax auditor position at the Department. Mr. Barnard was responsible for the tax audit of WKDR for the audit period. On or about July 30, 2019, Mr. Smith sent the Department a fully executed Power of Attorney/Declaration of Representative form (POA form) to appear as WKDR's representative in connection with the Department's audit. The POA form was completed and signed by WKDR's owner (Mr. Plattner) and its CPA (Mr. Smith). The POA form gave Mr. Smith authority to speak and act on WKDR's behalf for the Department's audit. The POA form correctly states the mailing addresses of both WKDR and its CPA/representative, Mr. Smith. It also correctly states the e-mail address and fax number for Mr. Smith. Mr. Smith entered WKDR's address in section 1 of the POA form. The POA form included spaces for a contact person's name, telephone number, and fax number at WKDR, but those spaces were left blank in the form signed by Mr. Smith and Mr. Plattner. The POA form signed by both Mr. Smith and Mr. Plattner set forth the name, address, telephone number, and fax number of Mr. Smith’s CPA firm in section 2 of the POA form. Section 6 of the POA form provides as follows: Notices and Communication. Do not complete Section 6 if completing Section 4. Notices and other written communications will be sent to the first representative listed in Part I, Section 2, unless the taxpayer selects one of the options below. Receipt by either the representative or the taxpayer will be considered receipt by both. If you want notices and communications sent to both you and your representative, check this box. If you want notices or communications sent to you and not your representative, check this box. Mr. Smith completed section 6 by checking option "a," indicating that they wished to have notices and communication sent to both the taxpayer (WKDR) and the representative (Mr. Smith). Mr. Smith's e-mail address was added on the POA form by the Department's employee, Lisa Weems, after she called Mr. Smith's telephone number to obtain his e-mail address. All other information was added by Mr. Smith after consultation with Mr. Plattner, before they both signed the form. Throughout the audit, the Department's auditor, Mr. Barnard, primarily communicated with WKDR through its designated representative—Mr. Smith—at his mailing address and e-mail address. This included multiple requests for documents. At times, Mr. Barnard communicated directly with Mr. Plattner while copying Mr. Smith on the correspondence. Mr. Barnard sent a letter dated November 14, 2019, by regular mail, to WKDR at 851 South Main Street, with a copy to Mr. Smith at 115 Tamiami Trail. Mr. Smith testified that he received and read this letter. The November 14 letter provided WKDR and Mr. Smith with notice that, as things stood on that date, a NOPA was imminent. The letter stated, in pertinent part: On September 20th, we wrote you a letter requesting the information needed to complete the audit of WKDR II Inc. and the DR54 Formal Notice of Demand to Produce Certain Records. The letter stated that your failure to provide the information be [sic] September 27, 2019 may result in an assessment. That is, the implementation of alternative audit procedures to estimate a liability based on the best available information. As of the date of this letter you have not complied with our request. Therefore, enclosed is the Notice of Intent to Make Audit Changes (DR1215) and the audit work papers, which are an estimate based upon the best information available as provided in Section 212.12(5)(b), Florida Statutes. You have 30 days to review the audit adjustments, which expires on December 16, 2019. * * * If we do not hear from you by December 16, 2019, the audit file will be sent to Tallahassee so that the Notice of Proposed Assessment (NOPA) can be issued to you. The NOPA is the formal notice of the amount due. The NOPA will also provide the procedures for filing informal and formal protests. The Notice of Intent to Make Audit Changes, which was included with the November 14 letter, listed a "balance due through 11/14/2019" of $1,157,025.16. This sum included taxes of $801,967.01, a penalty of $200,491.75, and interest of $154,566.40. The notice also explicitly laid out WKDR's opportunities to informally protest this preliminary sum through a conference with the auditor or the auditor's supervisor. It provided that after the 30-day informal conference period expired, a NOPA would be issued. On December 20, 2019, Mr. Barnard sent an e-mail to Mr. Plattner with a copy to Mr. Smith. Attached to the e-mail was a letter of the same date. The letter provided as follows: On November 14, 2019, a Notice of Intent to Make Tax Audit Changes (DR-1215) was issued with additional tax due of $801,967.00. The 30 day informal protest period with the Service Center was up December 13, 2019.[2] Although your representative, Mark Smith, did provide some sales invoices after issuance of the DR-1215 they did not represent a full month of invoices as requested. Please be advised all sales invoices for December 2018 must be provided by January 3, 2020 for any changes in the assessment to be considered. These invoices should consist of same for all new and used vehicle sales, parts sales, service invoices/tickets, and autobody invoices for December 2018. As indicated in the December 20 letter, one month before the NOPA was issued, Mr. Barnard notified Mr. Smith and Mr. Plattner that the 30-day informal protest period expired on December 13, 2019. Mr. Smith's testimony on this matter was evasive. At first, he acknowledged that he received the December 20 letter. However, after objection from WKDR's counsel, Mr. Smith backtracked and denied receipt. His attempted denial was not credible and is not credited. The undersigned finds that Mr. Smith received the December 20 letter. Mr. Barnard sent another letter, dated January 7, 2020, by regular mail to Mr. Plattner, and by e-mail to both Mr. Plattner and Mr. Smith, which stated as follows: Please be advised the information necessary to make an adjustment to the audit results issued on November 14, 2019 has not been provided. As stated in our December 20, 2019 letter this information was sales invoices for all new and used vehicle sales, parts sales, service invoices/tickets, and autobody invoices for the entire month of December 2018. 2 The Notice of Intent to Make Tax Audit Changes sent on November 14 provided a deadline of December 13 for the 30-day informal conference period, while the e-mail sent on December 20 referenced a deadline of December 16. The discrepancy in the December 20 letter is immaterial as both deadlines (December 13 and 16) had passed by the date of the December 20 letter. The audit will be closed and a Notice of Proposed Assessment will be issued shortly. Once again, Mr. Smith’s testimony was evasive. After seemingly admitting he received and read the January 7 letter, Mr. Smith testified that he did not receive the January 7 letter. The undersigned found Mr. Smith's testimony on this point wholly untruthful. At the hearing, during cross-examination, the Department's counsel asked Mr. Smith about his actions and impressions after receipt of the January 7 letter in the following exchange: Q. Let's go to Exhibit 22, which is Bates Number 00081. This is another e-mail sent to you on January 7th, 2020 to Mr. Plattner showing a carbon copy to Mr. Mark Smith CPA POA. The third sentence states; "The audit will be closed and a notice of proposed assessment will be issued shortly." Does that mean that the audit is still open or the audit is closed? A. That, like I said, I mean, I've -- I've dealt with audits where they say they're going to do this and do that and it's taken them two years to send anything. Q. This letter dated January 7th, 2020 does not give a new deadline, does it? A. It does not appear to but -- yeah, it does not appear to. Q. In fact, it says the audit is closed. That means that it's done, right? A. No. I don't -- I -- not necessarily. Q. It also says that the notice of proposed assessment will be issued shortly. So you knew at this time, the NOPA was imminent, right? A. Not necessarily. Q. Is there any language in this letter indicating that WKDR has any more time to provide additional documents? A. I've worked with the State before and they've provided us additional time quite often. Q. In fact, the auditor did provide you a deal -- a great deal of additional time to have the audit, didn't he? A. Well, we provided him so many documents that we thought he needed more time too. The whole tenor of Mr. Smith's testimony was to acknowledge that he read and understood the January 7 letter to say the NOPA was imminent, but that he knew from his experience the NOPA was "not necessarily" imminent. Notably, when asked if he knew at that time that the NOPA was imminent, Mr. Smith did not say that he did not know that because he did not receive or read the January 7 letter when it was sent to him by e-mail. Mr. Smith provided answers to these and several other questions about what he did or did not do in response to the January 7 letter. It was not until after an objection by WKDR's counsel that, as before, Mr. Smith backtracked to say that he did not receive the letter. In making the finding that Mr. Smith was untruthful when he testified that he had not received the January 7 letter, the undersigned had the distinct opportunity to observe the demeanor of Mr. Smith during testimony on this issue. He was not credible and his belated denial is not credited. The undersigned finds that Mr. Smith received the January 7 letter, reviewed it, and hoped that he could buy more time as he had thought he might be able to. Testimony of Lisa Weems Ms. Weems is a Revenue Specialist III for the Department. She has worked for the Department, in its Compliance Standards Section, for over 15 years. In addition to other tasks, Ms. Weems is responsible for printing NOPAs to send out to taxpayers and their representatives. Ms. Weems testified in great detail about the process she uses to send out NOPAs. When a NOPA is issued, it is uploaded to the Department's system overnight and cannot be printed until the following morning. Because of this, Ms. Weems sends out NOPAs only four days a week—Tuesdays, Wednesdays, Thursdays, and Fridays. Ms. Weems prints and mails out approximately 400 NOPAs per week. On the day of the final hearing, she had mailed out 88 NOPAs. Ms. Weems has a system in place to keep track of the NOPAs she sends out. Ms. Weems clearly and credibly testified about the process she used to send out NOPAs and when and by what means she used to send the NOPA to WKDR and its representative in this case. Each NOPA is mailed out in a packet that includes four documents: the NOPA, NOPA Remittance Coupon, Tax Audit Satisfaction Survey, and a document titled How to Pay Your Audit Assessment and Notice of Taxpayer Rights. The packets are sent by USPS first-class mail. WKDR's NOPA was issued on January 13, 2020. It had to load in the Department's system overnight, so it was printed on January 14, 2020. WKDR's NOPA assessed taxes of $801,967.01, a penalty of $200,491.75, and interest of $166,431.12, for a total due by WKDR of $1,168,889.88 following the audit.3 3 The amount of the taxes assessed and penalty remained the same as was listed in the Notice of Intent to Make Audit Changes. The amount of the interest had increased. The interest listed in the Notice of Intent to Make Audit Changes was for the period up to November 14, 2019. The NOPA specified that the deadline to request a formal hearing before DOAH was May 12, 2020, or 60 days from the date the assessment becomes a final assessment. The Notice of Taxpayer Rights provided detailed instructions on how to contest the assessment and provided further details on the timelines and deadlines to do so. Ms. Weems sent WKDR and Mr. Smith copies of the NOPA by USPS first-class mail on January 14, 2020. On January 14, 2020 (the day after the NOPA was uploaded), Ms. Weems printed an original and copy of WKDR's NOPA. She placed the original NOPA and the other three documents in a window envelope, addressed to WKDR at 851 South Main Street. A copy of the NOPA, along with the three other documents, were placed in another envelope, addressed to Mark Smith, CPA, at his business mailing address, 115 Tamiami Trail. Ms. Weems testified that she created a mail log sheet, wrapped the log sheet around the envelopes, and placed both of these NOPA envelopes in the outgoing mail basket. After placing the items in the outgoing mail basket, a Department employee from Building L picks up the outgoing mail and mails it out. Ms. Weems testified that she has mailed NOPAs this way for over 10 years. Ms. Weems testified that it was her practice, and what she was taught by the Department, to send NOPAs that had assessments for over $100,000.00 by fax and e-mail, in addition to regular mail.4 WKDR's assessment was for an amount greater than $100,000.00. On January 16, 2020, Ms. Weems sent a copy of the NOPA to Mr. Smith by fax transmission. 4 It must be noted that the Department's internal policy to send NOPAs with assessments over $100,000.00 by e-mail and fax is an unadopted rule; however, it is not necessary to rely on it as the basis for the determination in this matter. See § 120.57(1)(e)1., Fla. Stat. Ms. Weems sent the fax to Mr. Smith's fax number, which was provided on the POA form. Ms. Weems used a fax coversheet when sending the fax. The coversheet recorded several important pieces of information. It provided the case number and the taxpayer's name (WKDR). Two boxes on the fax coversheet were checked—a box indicating there was a "POA" (Power of Attorney) in the file and a box indicating the NOPA was to be sent to the "POA." Ms. Weems also made some notes on the fax coversheet. She wrote: "original notice mailed 1/14/20," "email: mark@swagcpa.com," and "(8) pages." Ms. Weems testified that the reference to eight pages represented the amount of pages she faxed. These pages included the four documents sent by USPS first-class mail mentioned above. After faxing the documents to Mr. Smith's fax number, Ms. Weems received a fax transmission report. The report indicated "Results OK." The term "OK" on a fax transmission report is generally accepted as meaning that the transmission was completed successfully. On January 16, 2020, Ms. Weems also sent a copy of the NOPA and Notice of Taxpayer Rights to Mr. Smith by e-mail. Ms. Weems sent the e-mail to Mr. Smith at mark@swagcpa.com—the e-mail address she obtained from Mr. Smith's office, and which he confirmed was his through testimony at the hearing. The e-mail's subject line stated "Audit Number 200262550-010 WKDR II, INC." The e-mail stated as follows: Please respond back to me by e-mail letting me know you did receive the Notice of Proposed Assessment (Nopa) and Taxpayer Rights by Email and Fax please. Good afternoon, Mr. Smith. I'm e-mailing you the Notice of Proposed Assessment (Nopa) & Taxpayer Rights. I also faxed you the Notice of Proposed Assessment (Nopa) & Taxpayer Rights to fax number 941-866-7691. The Original Notice of Proposed Assessment (Nopa) & Taxpayer Rights was mailed out on 1/14/2020. Any questions call the Nopa Line at 850-617-8565. Thanks, Lisa Weems. The e-mail included an attachment labeled "3125_001.pdf." Ms. Weems testified that the attachment was a copy of the NOPA and Taxpayer Rights. Ms. Weems requested a "delivery receipt" and "read receipt" through her e-mail platform for the e-mail she sent to Mr. Smith. This was her customary practice when sending e-mails. A few seconds after sending her e-mail, she received a "delivery receipt" confirmation that the e-mail was delivered to mark@swagcpa.com. Shortly thereafter, Ms. Weems received a "read receipt" confirmation that her e-mail was received by Mr. Smith and was "read." The use of delivery and read receipts are not novel practices. Delivery and read receipts are used by a sender of an e-mail to confirm that the e-mail sent has been delivered to the addressee and, subsequently "read," that is, opened by the recipient. Ms. Weems keeps a monthly log of the NOPAs she sends out by fax and e-mail. Ms. Weems's monthly log for January 2020 includes entries that confirm she sent the WKDR NOPA by e-mail and fax to Mr. Smith at the contact information he provided. In addition to her personal monthly log, Ms. Weems also used SAP—a Department computer system that employees work in every day—to document her activities. On January 16, 2020, Ms. Weems made a notation in SAP that stated as follows: "I faxed the Notice of Proposed Assessment (NOPA) & taxpayer rights to Mark Smith on 1/16/20 to fax number 941-866- 7691. I e-mailed the Notice of Proposed Assessment (NOPA) and taxpayer rights to Mark Smith on 1/16/20 to e-mail address (mark@swagcpa.com). See attachments and notes." Testimony of Mark Smith Mr. Smith testified that he did not receive the NOPA by USPS first- class mail, fax, or e-mail. If the undersigned took Mr. Smith's testimony as true, all three of the Department's avenues of sending the NOPA failed. Mr. Smith testified that the NOPA, sent by USPS first-class mail, in the same fashion used for several other letters that he had received from the Department, was not received. Other than Mr. Smith's denial, WKDR provided no evidence that the NOPA and accompanying documents Ms. Weems mailed in separate packages to WKDR at its address and to WKDR's representative's address were not received. Mr. Smith testified that during the time the NOPA was sent, his business utilized an electronic faxing service called MyFax.com. Through this service, he received faxes in e-mail format, with the contents of the fax attached to the e-mail as a PDF document. Mr. Smith testified that he did not receive the fax from Ms. Weems. Mr. Smith also testified that he rarely read faxes because "90 plus percent of our faxes are payroll-related" and belonged to his business partner. Mr. Smith did not credibly explain how he comes to know about the ten percent of faxes directed to him. While perhaps his business partner screens faxes, it is inconceivable that a business firm would not ensure that incoming faxes are directed to the person to whom they are sent. That is particularly true where, as here, Mr. Smith has provided his business fax number as a means to give him notices regarding WKDR's audit. Although the Department provided documentation of a delivery and read receipt of the NOPA sent by e-mail to Mr. Smith, Mr. Smith testified that he did not receive it. Mr. Smith offered no credible explanation for the delivery and read receipts. Once again, it is not credible that a CPA who serves as the POA for taxpayer WKDR would not be reviewing e-mails delivered to his e-mail address, when his office has provided that e-mail address to the Department. Notably, he acknowledged reviewing other e-mail communications from the Department with regard to WKDR's audit. Mr. Smith's feigned ignorance of an e-mail delivered to him and opened by him is not credible and is not credited. The competent substantial evidence establishes that the Department mailed the NOPA to both Mr. Smith and WKDR at the addresses provided on the POA form. The testimony that Mr. Smith did not receive the NOPA is not credible. WKDR did not deny that it received the NOPA mailed to it; WKDR offered no testimony on the subject.5 The NOPA was mailed to the same addresses provided by Mr. Smith and Mr. Plattner on the POA form and used by the Department to successfully communicate with Mr. Smith during the audit. WKDR and Mr. Smith were on notice that a NOPA was forthcoming. The Department advised WKDR and Mr. Smith by letter through regular mail and e-mail, on at least two occasions, that a NOPA was going to be issued and that the Department anticipated an assessment of additional taxes of approximately $801,967.00. The Department provided notice of the NOPA in a manner reasonably calculated to inform WKDR and its representative of WKDR's rights and of the deadlines to take action to protect those rights. WKDR and the Department communicated frequently during the audit, but after issuance of the NOPA, communications with WKDR and Mr. Smith ceased for several months. Mr. Smith did not reach out to the Department to find out why communications ceased. The reasonable inference is that Mr. Smith was fully aware of why the previous communications during the audit stopped: because the audit had culminated 5 In its post-hearing submittal, WKDR argued that the NOPA mail should have been sent to Mr. Plattner. But the NOPA package was addressed to WKDR, the taxpayer, at the mailing address given on the NOPA. WKDR had the opportunity in the POA form to designate Mr. Plattner as the taxpayer contact person but chose not to do so. in the NOPA and it was up to WKDR to contest the NOPA in a timely hearing request. On or around February 18, 2021, the Department issued an NIL against WKDR, by which it notified WKDR that it intended to freeze funds from WKDR's bank account in the amount of $999,999.99. The NIL provided that WKDR had 21 days from the date of receipt of the NIL to dispute the matter. On February 19, 2021, WKDR submitted a petition for a chapter 120 administrative hearing to challenge the NOPA. WKDR's petition challenging the Department's NOPA was filed with the Department 403 days after the date on the NOPA (January 13, 2020) and 286 days after the deadline for filing a petition to request an administrative hearing had passed. On February 23, 2021, WKDR timely filed a petition for an administrative hearing to dispute the NIL. WKDR's dispute of the NIL is solely based on its challenge to the NOPA, and its claim that it did not receive the NOPA when issued the year before. WKDR failed to timely exercise its opportunity to protest the amount of the Department's assessment, the underlying audit findings, and the methods the Department used to reach the amount in the assessment. There is no claim by WKDR in this case that the content of the Notice of Taxpayer Rights was unclear regarding the deadline to request a hearing or the manner in which a hearing must be requested; its claim is solely that it did not receive the NOPA and the accompanying Notice of Taxpayer Rights, a claim which is not credible. In sum, the persuasive and credible evidence adduced at hearing demonstrates that the Department sent the NOPA to WKDR's representative by USPS first-class mail, e-mail, and fax, and to WKDR directly by USPS first-class mail; and that Mr. Smith received the NOPA by USPS first-class mail, e-mail, and fax, and that WKDR received the NOPA by USPS first-class mail. WKDR did not submit a timely request for hearing to dispute the NOPA.
Conclusions For Petitioner: Michael J. Bowen, Esquire Akerman LLP 50 North Laura Street, Suite 3100 Jacksonville, Florida 32202 For Respondent: J. Clifton Cox, Esquire John G. Savoca, Esquire Office of the Attorney General Revenue Litigation Bureau The Capitol, Plaza Level 01 Tallahassee, Florida 32399
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order dismissing DOAH Case Nos. 21-0844 and 21-0845. DONE AND ENTERED this 30th day of November, 2021, in Tallahassee, Leon County, Florida. COPIES FURNISHED: S JODI-ANN V. LIVINGSTONE Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of November, 2021. Mark S. Hamilton, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Kristian Oldham, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Jacek Stramski, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Doug Plattner 3118 Walter Travis Drive Sarasota, Florida 34240 James H. Sutton, Esquire Moffa, Sutton & Donnini, PA 8875 Hidden River Pkwy, Suite 230 Tampa, Florida 33637-2087 J. Clifton Cox, Esquire Office of the Attorney General Revenue Litigation Bureau The Capitol, Plaza Level 01 Tallahassee, Florida 32399 Allison M. Dudley, Esquire Office of the Attorney General Revenue Litigation Bureau The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 John G. Savoca, Assistant Attorney General Office of the Attorney General Revenue Litigation Bureau The Capitol, Plaza Level 01 Tallahassee, Florida 32399 Michael J. Bowen, Esquire Akerman LLP 50 North Laura Street, Suite 3100 Jacksonville, Florida 32202 James A. Zingale, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
Conclusions Having reviewed the Administrative Complaint, and all other matters of record, the Agency for Health Care Administration finds and concludes as follows: 1. The Agency has jurisdiction over the above-named Respondent pursuant to Chapter 408, Part II, Florida Statutes, and the applicable authorizing statutes and administrative code provisions. 2. The Agency issued the attached Administrative Complaint and Election of Rights form to the Respondent. (Ex. 1) The Election of Rights form advised of the right to an administrative hearing. 3. The parties have since entered into the attached Settlement Agreement. (Ex. 2) Based upon the foregoing, it is ORDERED: 1. The Settlement Agreement is adopted and incorporated by reference into this Final Order. The parties shall comply with the terms of the Settlement Agreement. 2. The Respondent shall pay the Agency $1,500.00. If full payment has been made, the cancelled check acts as receipt of payment and no further payment is required. If full payment has not been made, payment is due within 30 days of the Final Order. Overdue amounts are subject to statutory interest and may be referred to collections. A check made payable to the “Agency for Health Care Administration” and containing the AHCA ten-digit case number should be sent to: Office of Finance and Accounting Revenue Management Unit Agency for Health Care Administration 2727 Mahan Drive, MS 14 Tallahassee, Florida 32308 Filed May 13, 2014 11:25 AM Division of Administrative Hearings ORDERED at Tallahassee, Florida, on this_ 42 day of A dicey , 2014.
Other Judicial Opinions A party who is adversely affected by this Final Order is entitled to judicial review, which shall be instituted by filing one copy of a notice of appeal with the Agency Clerk of AHCA, and a second copy, along with filing fee as prescribed by law, with the District Court of Appeal in the appellate district where the Agency maintains its headquarters or where a party resides. Review of proceedings shall be conducted in accordance with the Florida appellate rules. The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed. CERTIFICATE OF SERVICE I CERTIFY that a true and corre y of this Final Qrder was served on the below-named persons by the method designated on this 2b iy of , 2014. Richard Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Bldg. #3, Mail Stop #3 Tallahassee, Florida 32308-5403 Telephone: (850) 412-3630 Jan Mills Finance & Accounting Facilities Intake Unit Revenue Management Unit (Electronic Mail) (Electronic Mail) Alba M. Rodriguez Ricki Kaneti, Administrator Office of the General Counsel City Walk Active Living Agency for Health Care Administration 534 Datura Street (Electronic Mail) West Palm Beach, FL 33401 (U.S. Mail) Mary Li Creasy John F. Gilroy III, Esq. Administrative Law Judge Attorney for Respondent Division of Administrative Hearings 1695 Metropolitan Circle, Suite 2 (Electronic Mail) Tallahassee, Florida 32308
The Issue The issue in this case is whether Respondent’s intended award of a contract for telephone systems maintenance and installation services pursuant to Bid #09-005/LH is contrary to Respondent’s governing statutes, Respondent’s rules or policies, or the solicitation specifications.
Findings Of Fact On June 17, 2008, the School Board issued an ITB for telephone systems maintenance and installation services. The ITB was identified as Bid #09-005/LH. Section 2.2 of the ITB described the scope of work as follows: Bids will be requested for the following types of work from the qualified and awarded Contractors: Upgrades and installation of various types of Telephone Systems, including but not necessarily limited to the following: wiring, cabinet, control, and conduit installation and upgrades to existing system components, programming panels/switches, testing telephone systems, installation, replacement of devices and system components, power supplies, all other projects directly related to telephone systems, including new installations (material and labor), at any designated SBBC [School Board] site and certification of various telephone systems. The School Board of Brevard County will have salvage rights if requested for all parts and material that is [sic] removed from each project. All work/materials shall be in accordance with State Requirements for Educational Facilities (SREF), the Florida Building Code, SBBC Facilities Standards and Guide Specifications. Section 2.4 of the ITB set forth the qualifications of the contractor and required the following: 2.4.1 The successful “Telephone System Contractor” shall be a person whose business includes the execution of contracts requiring the ability, experience, science and knowledge, and skill to lay out, fabricate, install, maintain, alter, repair, monitor, inspect, replace, or service telephone systems for compensation, including all types of telephone systems, for all purposes. The business shall be self-proprietary, will provide service with company employees, company owned and insured vehicles and company owned equipment. Subcontracting of Telephone System Services will not be allowed. * * * The bid will be awarded only to responsible bidders that are factory authorized dealers of the systems bid and qualified to do the work specified with manufacturer trained and certified technicians. The successful “Telephone System Contractor” shall have a minimum of two certified/trained technicians for each of the installed system [sic] bid. For systems that are manufacturer discontinued, contractor shall have a minimum of tow [sic] trained technicians, with five or more years of experience in maintaining such systems. Awarded bidder(s) shall be capable of and responsible for testing each wire, landing all wire, mounting all devices, programming panels, trouble shooting and certifying telephone system installations. In addition, the successful bidder(s) must be certified to provide support for existing structured cabling system (SCS) infrastructure. If the SCS has an existing warranty, the successful bidder(s) shall provide warranty coverage on the SCS as defined by the manufacturer. The School Board has existing SCS warranties from either Molex or Siemens[1] certified solutions. The successful bidder(s) must also be qualified and authorized by a manufacturer to design, configure, and maintain an IP telephony multiservice network solution using QoS, Call Control clustering, H.323, MGCP, or SIP signaling protocols and shall be able to integrate legacy TDM Telephone Systems and voice mail systems into an existing data network. Awarded bidder(s) must install telephone systems to meet all State of Florida Department of Education (SREF), NFPA and NEC requirements. The bidder shall submit the following information in ‘Envelope B’: Experience record and proof that bidder is a certified factory trained dealer for the system(s) being bid with at least five (5) years experience in telephone service work. Evidence that all field supervisory employees are certified manufacturer and SCS technicians. List and a brief description of similar work satisfactorily completed with location, dates of contracts, names, phone numbers and addresses of owners. List of equipment and facilities available to do the work. Names and evidence of level of competency of all personnel who will be used in District projects. The District must recognize competency certification and employees (names must appear on invoices with number of hours worked). Name(s) of project manager(s) and evidence of current “Certificate of Factory Training” of system(s) bid. Provide resume of Project Managers. Evidence that bidder’s support team is located within a 75 mile radius of Brevard County. Evidence of ability to supply as-built drawings as needed. Evidence of occupational license (business tax receipt) and State of Florida Low voltage license. Letter from manufacturer stating that you are an authorized dealer/service provider for systems bid. Failure to submit the above requested information (in Envelope ”B” with Price Sheet and Questionnaire) may be cause for rejection of the proposal. (Emphasis in original) The Contractor must complete the enclosed questionnaire which will be used to evaluate capabilities to perform the work during the contract period. The questionnaire must be completed and contain sufficient and specific information which directly responds to the request. The School Board reserves the right to reject bids which do not provide sufficient information to evaluate the qualifications of the Contractor and where information provided does not demonstrate a proven past record (such as negative references, failure to complete projects, etc.). Section 1.2 of the ITB stated: THE INTENT of this bid is to establish a contract for a period of one year from date of award during which time; the successful bidder(s) shall guarantee firm-fixed pricing for telephone system maintenance and materials and firm-fixed labor, equipment and material prices for minor and major installation of the District’s Telephone systems as awarded to him/her as specified in this bid. The bid shall be based on an ‘All-Or-None” format per system manufacturer. This bid will be awarded to a minimum of one contractor for each manufacturer of systems used by the District. In the best interest of the District two or more contractors may be awarded a specified system. The “lowest and best” bid will be the primary contractor and the next “lowest and best” bids will be alternate or secondary contractors. The primary contractor may be requested to perform the maintenance and work required for minor upgrades and installation projects with an estimated cost of $6,000.00 or less. Each project estimated to be over $6,000.00 will be given to all contractors awarded the specific system to quote as specified. At the discretion of The School Board of Brevard County, Florida the contractor providing the lowest quote meeting specifications will be awarded the project. Section 8.1 of the ITB clarified the meaning of “lowest and best bid” as follows: SCHOOL BOARD intends to accept the “lowest” and “best” bid(s) submitted to it. The term “lowest” aforesaid shall be interpreted to mean the lowest “ALL OR NONE” Total Net Bid Price for all required tasks for each system manufacturer. In determining which is the “lowest” and “best” bid received, the SCHOOL BOARD shall also consider and weigh (a) the experience, qualifications and reputation of each BIDDER, and (b) the quality of products and services proposed by each BIDDER. SCHOOL BOARD reserves the right to: reject any and all bids received by it, waive minor informalities in any bid, accept any bid or part thereof that in its judgment will be for the best interest of the School Board of Brevard County, Florida. The ITB listed the following telephone systems for which bids were to be submitted: Hitachi, IWATSU, NEC, Nortel- BCM, Premier, Prostar, Starplus, and Toshiba. Nortel-BCM and IWATSU are systems that are currently supported by the manufacturer. Xeta Technologies had acquired the distribution rights for Hitachi and was providing support for the Hitachi systems. The School Board considered the following systems to be discontinued systems, which were not currently supported by the manufacturer: NEC, Premier, Prostar, Starplus, and Toshiba, collectively referred to as the discontinued systems. Morse and BBTS were among the bidders which submitted bids in response to the ITB. BBTS bid all systems. Morse bid all systems with the exception of Nortel-BCM. Morse was not an authorized/certified dealer for Nortel-BCM systems. BBTS was the low bidder for the IWATSU system. Morse was the low bidder for the discontinued systems and Hitachi. In its bid, BBTS stated that it was a factory- authorized dealer for Hitachi, Nortel Networks, and IWATSU Voice Networks. BBTS submitted a letter from IWATSU stating that BBTS was an authorized IWATSU distributor in good standing. Contrary to the ITB specification 2.4.4J, BBTS did not submit a letter from Nortel stating that BBTS was an authorized dealer/service provider for Nortel. Instead, BBTS advised the School Board to contact Jon Gain, a field channel manager for Nortel, for information regarding the Nortel networks. BBTS provided Mr. Gain’s mailing and e-mail addresses and his telephone number. BBTS submitted a letter from XETA Technologies, which stated: Please be advised that XETA Technologies, Inc., acquired the distribution relationships of Hitachi Telecom (USA), Inc. for the HCX5000/HCX5000® product line, effective May 5, 2006. Per correspondence dated May 11, 2006, Orlando Business Systems was notified of XETA’s assumption of Hitachi’s obligations under their Authorized Distributor Agreement, and Orlando Business Systems remains an Authorized Hitachi Distributor. Kathyrn Arvonio, a telecommunication specialist employed by the School Board for over four years, helped to evaluate the bids submitted in response to the ITB. Ms. Arvonio spoke with a field channel manager from Nortel on July 23, 2008. She was advised by the field channel manager that BBTS could service, maintain, and buy parts necessary for all repairs on Nortel-BCM products. Based on the information provided by Nortel, Morse was authorized by Nortel to service and maintain a Nortel system. Prior to making a recommendation for contract award, Ms. Arvonio called personnel at XETA and was advised that BBTS was also an authorized distributor of Hitachi. Morse included with its bid a letter from IWATSU stating that Morse was an authorized dealer for IWATSU. Morse did not include a letter from either Hitachi or XETA that Morse was an authorized dealer for Hitachi or XETA. BBTS stated in its bid that it had trained/certified technicians for the discontinued systems and had maintained the discontinued systems for 20 years. In its bid, BBTS identified Arthur Love as a technician who had been employed with BBTS since 1992. The bid stated that Mr. Love “has certifications on the Hitachi PBX, Iwatsu Adix, Nortel BCM 1648 and many more. He is trained on the Premier NC616, Prostar Plus, and the Starplus Key Systems.” Included with the bid were certificates from Hitachi, IWATSU, and NEC. In its bid, BBTS identified Doug Chamberlin, who had been employed by BBTS as a technician since 1994, and stated that Mr. Chamberlin “has certifications on the Hitachi PBX, Iwatsu Adix, Iwatsu Enterprise CS (IP System), Nortel BCM, Mitel SX2000 PBX and the Mitel 3300 ICP (IP System), Starplus 616, Prostar and the Toshiba DK280 and many more. He is trained on the Premier NC616, and the NEC 16/48.” The bid included certificates for Mr. Chamberlin from Hitachi, IWATSU, Toshiba, and Starplus. BBTS identified Troy Gaskins in its bid as being employed, as having 11 years' experience as a technician, and as having “certifications on the Iwatsu Adix, Prostar and the Norstar Key Systems.” BBTS stated that Mr. Gaskins was trained on the Iwatsu ZTD, Premier NC616, Starplus, and the NEC 16/48 Key Systems. A certificate from IWATSU was included with the bid. In its bid, BBTS identified Gustavo Beltran as having 12 years' experience in the telecommunications industry. BBTS stated that Mr. Beltran was “certified on the Mitel SX-200ICP (IP PBX).” The bid also stated that Mr. Beltran was trained on the Iwatsu Adix, Prostar, Premier NC616, Starplus, and the NEC 16/48. In its bid, BBTS identified Kevin Krise as having over 28 years' experience in the telecommunications industry. BBTS stated that Mr. Krise was “certified on the Mitel SX-2000, Mitel SX-3300 ICP (IP PBX), Siemens, Telrad, Macro Voice and many others” and that he was “trained on the Iwatsu Adix, Toshiba DK280, Iwatsu ZTD, Prostar, Premier NC616, Starplus and NEC 16/48 Key Systems.” Morse indicated in its bid that Kevin Joyce, Dale Koehler, and Jeff Pitt had successfully completed technical training through IWATSU. Morse stated in its bid that Gary Gage had in-depth knowledge of the Toshiba telephone system. Morse did not establish in its bid that it had two trained technicians with five years' or more experience in maintaining Hitachi, Prostar, Premier, Starplus, Toshiba, or NEC systems. The School Board has eight to ten portable classrooms that have Siemon structured cabling. The remainder of the structured cabling used by the School Board is manufactured by Molex. Molex is the standard for the School Board, and, when the portable classrooms with Siemon structured cabling are moved, the structured cabling will be switched to the Molex brand. The ITB required the bidders to be certified to provide support for existing structured cabling system (SCS) infrastructure and to provide warranty coverage on the SCS for systems under warranty. Clearly based on the ITB, the contractor awarded the contract was to be able to and expected to provide work on the SCS infrastructure when warranty work was involved. Ms. Arvonio interpreted the ITB to mean that the bidder awarded the contract was not to work on the structured cabling, but was to be able to test the SCS and notify the School Board if there was a problem. She also was of the opinion that the ITB did not require the bidders to be certified by Molex or Siemon. According to Ms. Arvonio, if there was a problem with the structured cabling, the manufacturer would be contacted if warranty work was involved, and, if the system was not under warranty, the work would be done by separate contract. No explanation was given why the language requiring certification was included in the bid specifications. In response to the ITB requirement that the contractor be certified to provide support for the School Board’s existing SCS, BBTS stated in its bid: BBTS has been a structured cabling system contractor for 20 years and currently holds installer certifications for the following manufacturers. See attached Installer Certifications. Molex Hubbel Siemons BBTS is not a “Certified Installer” through Siemons, but we do maintain current individual designer/installer certifications for Siemons. BBTS commits to providing the manufacturer’s warranty per the manufacturer’s specifications. BBTS included a certificate with its bid, certifying that BBTS was a certified installer for Molex. Also included with the bid were certificates for four individuals showing that they were certified Molex installers. As part of its bid, BBTS submitted certificates showing that one employee of BBTS had “satisfactorily completed the recertification requirements as a Siemon Cabling System Authorized Designer/Installer” and that another BBTS employee had “completed the required training and satisfactorily met all requirements to become a Siemon Cabling System® Authorized Installer.” Based on BBTS’s response, BBTS had employees who could perform warranty work on the SCS, if required to do so. Morse included with its bid a certificate from Molex certifying that Morse was a Molex-certified installer. Morse also included with its bid a certificate from the Siemon Company that Morse was a certified installer for the design, installation, and administration of Siemon Cabling Systems. Section 3.1.3 of the ITB required the bidders to include a catastrophic failure plan with each bid. The plan was to “provide interim service for totally replacing any system(s) to be maintained if a catastrophe should occur during any applicable maintenance period.” BBTS provided a catastrophic failure plan in its bid, which stated, in part: In the event of a Catastrophic Failure, Brevard Business Telephone Systems, Inc. (BBTS), and Orlando Business Telephone Systems, Inc. (OBTS) are in a position to assist the Brevard County Public Schools in its telecommunications requirements. We currently maintain a system capable of 100 stations and 24 trunks that could be installed in the event of a catastrophic failure. * * * Brevard County Public Schools would identify the sites that are priorities for continued operation of their telephone systems. BBTS would work with Bell South in restoring service to these facilities. All supplies necessary for replacement would be moved inland to OBTS should the need arise in order to maintain the serviceability of the parts. Orlando Business Telephone Systems, Inc. (Orlando Business Systems), and BBTS are separate business entities. Orlando Business Systems did not submit a bid in response to the ITB, and the bid submitted by BBTS was not a joint bid of BBTS and Orlando Business Systems. In its bid, BBTS identified Orlando Telephone Company/Orlando Business Systems as an affiliate of BBTS. In her evaluation of BBTS’s bid, Ms. Arvonio did not consider Orlando Business Systems as part of the bid and made her evaluation on the services which were to be provided by BBTS. BBTS is the current contractor providing telephone maintenance services to the School Board. Based on Ms. Arvonio’s previous experience with BBTS, she was aware that BBTS could maintain a telephone system consisting of 100 stations and 24 trunks during a catastrophic event. On July 31, 2008, the School Board posted an intended award of all systems to BBTS as the primary contractor and an intended award of the IWATSU system to Morse as the secondary contractor. BBTS was the lowest, conforming bidder for all systems. Ms. Arvonio received an e-mail dated August 19, 2008, from Jason Harrison from Nortel. The e-mail concerned the relationship between Nortel and BBTS and stated: Brevard Business Telephone Systems, Inc. is a contracted Nortel Authorized Reseller. They have a long standing relationship with Nortel in [the] Brevard County, FL area with a dedicated Nortel Field and Inside Support Team. When the BCM was launched BBTS was one of the first reseller’s to get fully accredited. As the platform has evolved, Nortel has modified the Accreditation requirements. BBTS is in the process of completing the latest requirements and will be finished with them by August 22nd 2008. If service is required before the completion of the exams, Nortel Support Services may be implemented by BBTS. Nortel Support Services are available to BBTS as part of their contract with Nortel. After the intended award was posted, staff from the School Board met with personnel from Morse to discuss Morse’s protest to the intended award. Personnel from Morse were asked if Morse had trained technicians for any of the discontinued systems. They responded that Morse had trained technicians for Hitachi, but did not provide any support for their claim. At the meeting, Steven Koller, a project manager for Morse, indicated that Morse did have trained technicians for some of the discontinued systems. He did not identify the systems nor did he identify the technicians. At the final hearing, Mr. Koller testified that he had more than five years' experience with systems manufactured by Toshiba, NEC, and Hitachi. He could not identify other technicians at Morse who had more than five years' experience with the discontinued systems and deferred to Michael Costello, the owner of Morse, for that information. At the final hearing, Mr. Costello, who controlled all aspects of the technician side of Morse, testified that he had over five years’ experience with some of the discontinued systems and that he had two or more technicians with over five years’ experience with the discontinued systems with the exception of Hitachi. Mr. Costello further testified that he could not identify the technicians without looking at their resumes. No resumes were produced at the final hearing. Finally, Mr. Costello said that Gary Gage, a long-time employee of Morse, had experience with the discontinued systems. Mr. Costello’s testimony is not credible. As the person in charge of the technician side of Morse, he had very little knowledge of exactly what experience his staff had in working with the discontinued systems at issue. If he had staff with the requisite experience, it would have been very simple for him to submit resumes of those employees in its bid or to attach certificates of training as did BBTS. Morse chose not to do that. Additionally, after the intended award was posted, Morse was given an opportunity at meetings with the School Board to identify personnel with the experience with the discontinued systems, and it failed to take advantage of that opportunity. Petitioner has argued that the School Board and Ms. Arvonio, in particular, were biased toward BBTS. Ms. Arvonio had worked for BBTS for seven years prior to becoming employed by the School Board. No evidence established that either Ms. Arvonio or the School Board was biased in favor of Morse. Ms. Arvonio called companies listed by other bidders to verify the bidders’ credentials. Within the last two years, the School Board has awarded a bid to Morse for structured cabling for over $200,000.00. The School Board staff gave Morse an opportunity after the bids were opened to provide information which would establish that Morse had sufficient trained staff to service the discontinued systems.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered dismissing the bid protest filed by Morse. DONE AND ENTERED this 10th day of February, 2009, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of February, 2009.
Findings Of Fact The parties stipulated as follows: On October 15, 1985, Petitioner filed with Respondent a Certificate of Need (CON) application to construct a 100-bed acute care hospital to be located in Brevard County. Petitioner's application was assigned CON Action Number 4302. By letter dated January 8, 1986, Petitioner received written notice from Respondent that his application was being withdrawn from consideration for his alleged failure to respond satisfactorily to the written omissions request served by Respondent on him. On March 24, 1986, Petitioner timely filed his petition for formal administrative hearing to contest the preliminary decision of Respondent to withdraw his CON application from consideration. The following findings of fact are based on the evidence presented, after considering the credibility and demeanor of the witnesses: After receiving Petitioner's application on October 15, 1985, Respondent's health planning consultant supervisor, Reid Jaffe, sent Petitioner a letter on or about November 14, 1985, advising him of omissions in his application. Jaffe's letter required a response from Petitioner by December 30, 1985. Of particular significance were Jaffe's requests that Petitioner provide evidence of interest in the project by lending institutions, and also provide a pro forma projection of income and expense for the first two years of operation. Petitioner's response to the omissions letter was timely received by Respondent. In response to the requested information about lending institution interest in the project, Petitioner wrote: There is not only interest in our project by lending institutions, attached is a letter from Hospital Corporation of America, who has been seeking a joint venture with our group. As you know, they represent the ability of our project to be well funded. Other institutions showing interest are: Sun Bank, Southeast Bank, Barnett Bank. In response to the requested pro forma, Petitioner provided a cash flow projection for the first two years of operation showing net income, depreciation and amortization, principal payments and ending balance for each quarter. In his CON application, Petitioner had indicated that the proposed cost of the project was $14,984,650 and the immediate financial feasibility of the project was to be met with fifteen physician stockholders, all with financial statements in excess of one million dollars. Further, it was indicated that the project would be financed by "debt financing" from the various financial institutions in the local area, guaranteed by the major stockholders. The application also indicated that funds were being sought from Sun Bank, Southeast Bank, First Florida and Barnett Bank. However, neither the application nor the omissions response included letters or other evidence of interest in the project from lending institutions. Reid Jaffe testified that CON applicants are not required to, and in fact do not, submit firm letters of commitment from lending institutions when they file their applications. Usually a preliminary letter of interest from such institution is included, but such letters are always conditioned on the applicant obtaining a CON before a financial commitment is given. There is no statutory or rule guidance to applicants to explain what was meant by Jaffe's omissions letter requesting "evidence of interest in the project by lending institutions". This is not an express requirement of Section 381.494(4), Florida Statutes. Applicants are expected to call Respondent if they have questions about the application or the omissions letter. In fact, Petitioner did seek assistance from his local health council in the application process. Similarly there is no statutory or rule guidance to applicants to explain what was meant by Jaffe's omissions letter requesting a pro forma projection of income and expense for the first two years of operation. Jaffe testified that in a pro forma he looks for an indication that the applicant has an idea of what will be generated in the first two years of operation from revenues, and also what expenses will be. Further, if the applicant can demonstrate cognizance of these projections in some manner other than a pro forma, he would find it acceptable. In his omissions response, Petitioner did project revenues for the first two years of operations, as well as salaries, fringe benefits, depreciation and amortization which represent 75 percent of a hospital's operating costs. Petitioner's application, as well as his response to the omissions letter, does provide a statement of financial resources available to the applicant for the proposed project, and also does provide a statement of the financial feasibility of the project, although not by way of a pro forma. Respondent withdrew Petitioners' application from Robert E. Maryanski, Administrator of Community Medical Facilities, by letter dated January 8, 1986. In his letter, Maryanski cited Petitioner's failure to provide "a statement of financial resources available to the applicant for accomplishment of the proposed project" and also his failure to provide a "pro forma projection of income and expense for the first two years of operation". These are the sole reasons for withdrawal. It is extremely rare for a CON application to be deemed incomplete and therefore withdrawn from consideration. Jaffe could only recall one other instance. Walter Eugene Nelson, Maryanski's predecessor with Respondent who was accepted as an expert in health planning, CON review and program administration, agreed that withdrawal of an application is an extraordinary action, and he further testified that Petitioner's application meets the requirements of Section 381.494, Florida Statutes, and, thus, should have been deemed complete. Evidence was received of other applications which were deemed complete, and which provided substantially the same information as Petitioner in his application. The Respondent acted unreasonably and arbitrarily in withdrawing Petitioner's application when the record indicates that other applications providing substantially the same information as Petitioner's were not withdrawn. Respondent does allow applicants to supplement the application after they are deemed complete. It is typical, according to Jeff, for applicants to revise and update financial information and their pro forma, while their applications are in the Section 120.57, Florida Statutes, hearing process.
Recommendation Based on the foregoing, it is recommended that Respondent enter a Final Order reversing its prior decision and deeming Petitioner's application for CON 4302 complete so that it can be comparatively reviewed with other applications filed in the same batching cycle. DONE AND ENTERED this 23rd day of October, 1986, in Tallahassee, Florida. DONALD D. CONN 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 23rd day of October, 1986. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 86-1471 Rulings on Petitioner's Proposed Findings of Fact: Adopted in Finding of Fact 1. Adopted in Finding of Fact 4. Adopted in Finding of Fact 5. 4,5. Rejected as irrelevant 6-9. Adopted in part in Findings of Fact 2, 11 but otherwise rejected as irrelevant. 10,11. Rejected as cumulative and irrelevant. Adopted in Finding of Fact 8. Rejected as irrelevant. Adopted in Finding of Fact 9. Rejected as irrelevant. 16-23. Adopted in part in Findings of Fact 12, 23 but otherwise rejected as irrelevant or cumulative. Adopted in Finding of Fact 7. Adopted in Findings of Fact 7, 14. 26,27. Rejected as irrelevant and cumulative. 28. Adopted in Finding of Fact 13. 29-33. Adopted in Finding of Fact 1. 34-42. Rejected as cumulative and irrelevant. 43. Rejected as not a proper proposed Finding of Fact. 44-53. Rejected as cumulative and irrelevant. 54-58. Adopted in part in Finding of Fact 4 but otherwise rejected as irrelevant and cumulative. 59,60. Adopted in Finding of Fact 8. 61. Rejected as irrelevant. 62. Adopted in Finding of Fact 7. 63,64. Rejected as irrelevant. 65. Adopted in Finding of Fact 14. 66,67. Adopted in Finding of Fact 9. Not a proposed Finding of Fact. Rejected as cumulative and unnecessary. Rulings on Respondent's Proposed Findings of Fact. Adopted in Finding of Fact 1. Adopted in Finding of Fact 4. Adopted in Findings of Fact 2, 11. Adopted in Finding of Fact 8. COPIES FURNISHED: William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 W. David Watkins, Esquire Post Office Box 9507 Tallahassee, Florida 32314 John Rodriguez 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32301
The Issue The issue in this case is whether Rule 25-4.113(1)(f), Florida Administrative Code, is a valid exercise of delegated legislative authority.
Findings Of Fact History of the Rule The Commission first adopted a rule setting out its policy on disconnection and refusal of service in August of 1955. In re: Adoption of rules and regulations governing telephone companies, Order No. 2195 (June 24, 1955) (O.R. E). (Prehearing stipulation p. 10) Rule 20 provided that: “Service may be denied to any subscriber or applicant for failure to comply with these rules, the telephone company’s tariff, municipal ordinances or state laws.” Id. Effective December 1, 1968, the Commission revised its disconnect rule to specifically provide that a company could disconnect telephone service for nonpayment. In re: Proposed revision of rules and regulations governing telephone companies, Order No. 4439 (October 17, 1968) (O.R. F). (Prehearing stipulation p. 10) Since adoption of Rule 310-4.66(1) in 1968, the Commission’s disconnect rule has been revised seven times: In re: Proposed revision of Chapter 2-4 relating to telephone companies and radio common carriers, Order No. 7132 (March 1, 1976) (O.R. G); In re: Amendment of Rules 25-4.113 and 25-10.74 - Relating to Refusal or Discontinuance of Service, Order No. 13787, 84 F.P.S.C. 10:208 (1984) (O.R. J); In re: Amendment of Rules 25-4.109 - Customer Deposits, 25-4.110 - Customer Billing, and 25-4.113 - Refusal or Discontinuance of Service, Order No. 16727, 86 F.P.S.C. 10:157 (1986) (O.R. K); In re: Amendment of Rule 25-4.113 - F.A.C., pertaining to Refusal or Discontinuance of Service by Company, Order No. 23721, 90 F.P.S.C. 11:75 (1990) (O.R. M); In re: Adoption of Rule 25-4.160, F.A.C., Operation of Telecommunications Relay Service and Amendment of Rules 25-4.113, F.A.C., Refusal or Discontinuance of Service by Company; 25- 4.150, F.A.C., The Administrator; 25-24.475, F.A.C., Company Operations; Rules Incorporated, Order No. PSC-92-0950-FOF-TP, 92 F.P.S.C. 9:208 (1992) (O.R. N); In re: Proposed Amendment of Rule 25-4.113, F.A.C., Prohibiting Refusal or Discontinuance of Service for Nonpayment of a Dishonored Check Service Charge Imposed by the Utility, Order No. PSC-92-1483-FOF-PU, 92 F.P.S.C. 12:543 (1992) (O.R. P); In re: Proposed Amendment to Rule 25- 4.113 F.A.C., Refusal or Discontinuance of Service by Company, Order No. PSC-95-0028-FOF-TL, 95 F.P.S.C. 1:50 (1995) (O.R. T). (Prehearing stipulation p.11) By Order No. 12765, issued December 9, 1983, the Commission expanded its disconnect policy to allow local exchange companies (LECs) that bill for interexchange carriers (IXCs) to disconnect local service for nonpayment of the long distance portion of the bill. In re: Intrastate telephone access charges for toll use of local exchange services, Order No. 12765, 83 F.P.S.C. 12:100, 125 (1983) (O.R. H). (Tr 118-119) The Commission believed that “by granting LECs disconnect authority bad debts for toll charges will be less than without this authority.” Order No. 12765 at 12:125. (Tr 120) In addition, the Commission found that if the IXCs encounter excessive bad debt expense, the IXCs may increase their toll charges to recoup expenses, which would cause Florida subscribers to pay higher toll rates. Order No. 12765 at 12:125. (Tr 120) The disconnect authority for nonpayment for IXC toll charges was limited only to LECs who performed billing and collection services for IXCs. Order No. 12765 at 12:125. (Tr 120) By Order No. 13429, issued June 18, 1984, the Commission ordered Florida’s LECs to file a uniform tariff that specified their billing and collection procedures and rates when billing for IXCs. In re: Intrastate telephone access charges for Toll Use of Local Exchange Services, Order No. 13429, 84 F.P.S.C. 6:221 (1984) (O.R. I). The LECs complied with this requirement. (Tr 126-127; Ex 30) Since the Commission first adopted its disconnect policy, the Legislature has never enacted legislation to invalidate the Commission’s policy. (Tr 155) Nor has the Joint Administrative Procedures Committee ever objected to any version of the Commission’s disconnect rule. (Tr 155-156) The Current Version of Rule 25-4.113(1)(f) Today, Rule 25-4.113(1) provides: the company may refuse or discontinue telephone service under the following conditions provided that, unless otherwise stated, the customer shall be given notice and allowed a reasonable time to comply with any rule or remedy any deficiency: * * * (f) For nonpayment of bills for telephone service, including the telecommunications access system surcharge referred to in Rule 25-4.160(3), provided that suspension or termination of service shall not be made without 5 working days’ written notice to the customer, except in extreme cases. The written notice shall be separate and apart from the regular monthly bill for service. A company shall not, however, refuse or discontinue service for nonpayment of a dishonored check service charge imposed by the company. No company shall discontinue service to any customer for the initial nonpayment of the current bill on a day the company’s business office is closed or on a day preceding a day the business office is closed. * * * (O.R. CC) LECs that bill for IXCs can still disconnect for nonpayment of toll calls. (Tr 122, 158) No company, however, can disconnect for nonpayment of unregulated services, such as customer premises services like inside wire maintenance and information services like voice mail. Rule 25-4.113(4)(e), Florida Administrative Code. (Tr 124-125, 130) In addition, the billing and collection tariffs are not uniform today because LECs have individually lowered many of the rates they charge for billing and collection services. (Tr 128-129; Ex 31). Two Separate, Pertinent Service Contracts It is important for understanding the Commission’s rationale for its disconnect rule to recognize that two separate, pertinent service contracts are involved. (Tr 151-152) One is the billing and collection services contract between the LEC and the IXC. (Tr 126, 152) The other is the contract for service between the company providing telephone service and the subscriber. (Tr 152) As discussed above, LECs who perform billing and collection services for IXCs have a tariff on file with the Commission that sets out the terms, conditions, and rates upon which the LECs offer this service. (Tr 126 -129; Ex 31) Pertaining to the contract for telephone service, the Commission has specified by rule the terms and conditions upon which a company may refuse or disconnect service. (Tr 137) Each company has a tariff on file with the Commission that sets out the terms and conditions upon which it will refuse or disconnect service. (Tr 137; Ex 32) The Commission’s Dispute Policy If service is going to be disconnected for any authorized reason, separate notice must first be provided to the customer. Rule 25-4.113, Florida Administrative Code; In re: Complaint of Aristides Day Against BellSouth Telecommunications, Inc. d/b/a Southern Bell Telephone and Telegraph Company regarding interruption of service, Order No. PSC-94-0716-FOF-TL, 94 F.P.S.C. 6:157 (1994) (O.R. R). If a customer has a pending complaint concerning disputed charges, Rule 25-22.032(10), Florida Administrative Code, prohibits disconnection for nonpayment of the disputed charges. (Tr 129) (O.R. FF) The customer, however, is expected to pay the charges not in dispute. In re: Complaint of Ron White against AT&T Communications and GTE Florida Incorporated regarding responsibility for disputed calling card charges, Order No. PSC-92-1321-FOF-TP, 92 F.P.S.C. 11:274 (1992) (O.R. O); In re: Complaint of Leon Plaskett against BellSouth Telecommunications, Inc. d/b/a Southern Bell Telephone and Telegraph Company regarding unpaid long distance bills, Order No. PSC-94-0722-FOF-TL, 94 F.P.S.C. 6:177 (1994) (O.R. S). When a LEC contracts with an IXC to perform an IXC’s billing and collection functions, the Commission acts to resolve disputes over both intra and interstate toll calls. In re: Complaint against AT&T Communications of the Southern States, Inc. and United Telephone Company of Florida by Health Management Systems, Inc., regarding interLATA PIC slamming, Order No. PSC- 97-0203-FOF-TP, 97- F.P.S.C. 2:477, 482 (1997) (O.R. AA). (Tr 55) Rationale for Rule 25-4.113(1)(f) The reasons the Commission gave in 1983 to allow companies to disconnect for nonpayment of toll are still viable today. (Tr 122, 158). If LECs could not disconnect for unpaid IXC bills, the IXCs uncollectible expenses would probably increase. (Tr 122-123, 138, 158) Moreover, if local service was not disconnected, a consumer could run up bad debts with different IXCs without ever paying for a toll call. (Tr 124, 135) This bad debt would have to be passed on to Florida consumers through increased rates to cover the uncollectible expenses. (Tr 122-123, 135, 158) Good paying customers should not have to pay for the fraud created by those who switch from carrier to carrier leaving behind unpaid toll charges. (Tr 124, 135) Additional reasons for the policy also exist because of the 1995 changes to Chapter 364, Florida Statutes (1995). If the Commission prohibited LECs from disconnecting local service for nonpayment of toll, LECs would be economically disadvantaged and alternative local exchange companies (ALECs) would be advantaged. (Tr 123, 147-148) This is because LECs could not disconnect local service for nonpayment of toll, but the ALECs could continue to disconnect due to the Commission’s limited jurisdiction and regulation over ALECs. (Tr 123, 147-148) Moreover, deposit requirements are affected by the disconnect policy. If LECs could not disconnect for nonpayment, deposit requirements would probably increase. (Tr 123-124, 195) Large deposits are a barrier to access to telecommunications services and would have an adverse effect on subscribership. (Tr 124) Finally, the Rule puts costs on the cost causer. (Tr 158) The Rule’s Impact on Universal Service The obligation to provide universal service is the obligation to offer access to basic telephone service at reasonable and affordable rates. Section 364.025(1), Florida Statutes (1995). (Tr 139, 167; Ex 29) As long as a customer pays the nondisputed portion of his bill, service will not be disconnected. (Tr 143) Therefore, Rule 25-4.113(1)(f) does not preclude a subscriber from obtaining basic local service, as long as he pays the undisputed portion of his telephone bill. (Tr 142-143) Basic service includes access to all locally available IXCs. Section 364.02(2), Florida Statutes (1995). (Tr 133-134) Any consumer who pays his bill can have access to any available carrier in the market where he resides. (Tr 133-134, 149) The Rule’s Impact on Competition Today the toll market is reasonably competitive. (Tr 144) In 1995, the Legislature authorized competition in the local market. However, very few providers are actually providing basic local service; therefore, market conditions have not substantially changed since Rule 25-4.113 was last amended. (Tr 144-145) The basic local market is still largely a monopoly despite the legislative changes at the state and federal level. (Tr 145; Ex 28) The Commission is charged with regulating telecommunications companies during the transition from monopoly to competitive services. Section 364.01(3), Florida Statutes (1995). (Tr 156, 197-198) To a certain extent, all rules and regulations restrict competition. (Tr 147) In this case, the benefits of the rule outweigh any negative impact the rule may have on competition, because the rule keeps uncollectible expenses lower than they would otherwise be and it also puts costs on the cost causer.
The Issue The issue is whether respondent's certified public accountant's license should be disciplined for the alleged violations set forth in the administrative complaint.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Respondent, Flanagan & Baker, P. A. (respondent or firm), was a certified public accounting firm having been issued license number AD 0006179 by petitioner, Department of Professional Regulation, Board of Accountancy (Board). When the events herein occurred, the firm's offices were located at 2831 Ringling Boulevard, Suite E-118, Sarasota, Florida, and John R. Flanagan and Michael L. Baker, both certified public accountants (CPA), were partners in the firm. In addition, Thomas A. Menchinger, also a CPA, was a junior partner. The firm has since been dissolved, and Flanagan and Menchinger have now formed a new firm known as Flanagan & Menchinger, P. A., at the same address. It is noted that Flanagan, Baker and Menchinger are not named as individual respondents in this proceeding, and at hearing respondent's representative assumed that only the firm's license was at risk. Whether license number AD 0006179 is still active or valid is not of record. In 1987, respondent, through its partner, Flanagan, accepted an engagement to prepare the 1986 calendar year financial statements for Ballantroe Condominium Association, Inc. (BCA or association), an owners' association for a fifty unit condominium in Sarasota. Financial statements are a historical accounting of what transpired for an entity during a particular period of time as well as the status of its assets, liabilities and equity on a given date. They are prepared for a variety of persons who rely upon them to see what transpired during that time period. If the statements are not properly prepared, the possibility exists that harm or other problems may accrue to the users of the statements. After the statements were prepared and issued, a unit owner made inquiry with respondent in August 1987 concerning two items in the statements. When he did not receive the desired response, the owner wrote the Department in September 1987 and asked for assistance in obtaining an opinion regarding the two items. Eventually, the matter was turned over to a Board consultant, Marlyn D. Felsing, and he reviewed the statements in question. Although Felsing found no problems with the two items raised by the owner, he noted what he perceived to be other errors or irregularities in the statements. This led to the issuance of an administrative complaint on September 29, 1988 charging the firm of Flanagan & Baker, P. A., with negligence in the preparation of the statements and the violation of three Board rules. That precipitated the instant controversy. The engagement in question represented the first occasion that the firm had performed work for BCA. The association's annual financial statements from its inception in 1980 through calendar year 1983 had been prepared by Touche Ross & Company, a national accounting firm, and for the years 1984 and 1985 by Mercurio and Bridgford, P. A., a Sarasota accounting firm. Some of these statements have been received in evidence. As a part of the Board investigation which culminated in the issuance of a complaint, Felsing visited respondent's firm, interviewed its principals, and reviewed the work papers and financial statements. A formal report reflecting the results of his investigation was prepared in June 1988 and has been received in evidence as petitioner's exhibit 1. In preparing his report, Felsing relied upon a number of authoritative pronouncements in the accounting profession which underlie the concept of generally accepted accounting principles (GAAP). These included various opinions issued by the Accounting Principles Board (APB), Statements on Auditing Standards (SAS) issued by the Auditing Standards Board, and Accounting Research Bulletins (ARB) issued by the Committee on Accounting Procedure. The three organizations are a part of the American Institute of Certified Public Accountants (AICPA). With regard to the concept of materiality, which requires an accountant to consider the relative importance of any event, accounting procedure or change in procedure that affects items on the statements, Felsing did not exclude any matters on the ground they were immaterial. Rather, he included all possible irregularities, regardless of their materiality, on the theory that the probable cause panel (for which the report was initially prepared) should consider all items in the aggregate. According to Felsing, a number of irregularities or errors were found in the financial statements prepared by respondent. These are discussed separately in the findings below. The first alleged deficiency noted by Felsing concerned a change by the association from accelerated to the straight-line method of depreciation. According to APB 20, such a change is considered to be significant, and "the cumulative effect of changing to a new accounting principle on the amount of retained earnings at the beginning of the period in which the change is made should be included in net income of the period of the change." In other words, APB 20 requires the cumulative effect of the change to be reported in the net income of the current year. However, respondent accounted for the change as a prior period adjustment on the statement of members' equity. Respondent justified its treatment of the item on the ground the prior year's statements prepared by Mercurio and Bridgford, P. A., did not show any accumulated depreciation. Thus, respondent asserted it was merely correcting an error because the other firm had not reported depreciation on the balance sheet. In addition, respondent noted that the effect on the balance sheet was only $721, deemed the item to be immaterial, and concluded its treatment of the item was appropriate. However, APB 20 requires the auditor to address the cumulative effect of the change ($2,072) rather than the effect of only the current year ($721), and therefore the cumulative effect should have been reported in current income. By failing to do so, respondent deviated from GAAP. The association had designated several cash accounts as being reserve accounts for deferred maintenance and replacements. Under ARB 43, such accounts must be segregated in the balance sheet from other cash accounts that are available for current operations. This would normally be done in a separate classification called "other assets" so that the user of the statements would be aware of the fact that the reserves were not available for current operations. However, the statements reflect that three such reserve accounts were placed under the classification of current assets. It is noted that these accounts totaled $25,514, $18,550 and $30,927, respectively. While respondent recognized the difference between cash available for current operations and reserves for future use, and the requirements of ARB 43, it noted that the association's minute book reflected the association regularly withdrew funds from the accounts throughout the year to cover current operations. Also, the prior year's statements prepared by Mercurio and Bridgford, P. A., had classified the item in the same fashion. Even so, if respondent was justified in classifying the accounts as current assets, it erred by identifying those accounts as "reserves" under the current assets portion of the balance sheet. Therefore, a deviation from GAAP occurred. One of the most important items in a condominium association's financial statements is how it accounts for the accumulation and expenditure of reserves, an item that is typically significant in terms of amount. The accounting profession does not recommend any one methodology but permits an association to choose from a number of alternative methods. In this regard, APB 22 requires that an entity disclose all significant accounting policies, including the choice made for this item. This disclosure is normally made in the footnotes to the financial statements. In this case, no such disclosure was made. Respondent conceded that it failed to include a footnote but pointed out that when the statements were prepared by Touche Ross & Company, one of the world's largest accounting firms, that firm had made no disclosure on the basis of immateriality. However, reliance on a prior year's statements is not justification for a deviation from GAAP. It is accordingly found that APB 22 is controlling, and footnote disclosure should have been made. The financial statements contain a schedule of sources and uses of cash for the current fiscal year. According to APB 19, all transactions in this schedule should be reported at gross amounts irrespective of whether they utilize cash. However, respondent reported all transactions in the schedule at their net amount. In justifying its action, respondent again relied upon the prior years' statements of Touche Ross & Company and Mercurio and Bridgford, P. A., who reported the transactions in the same manner. It also contended the item was immaterial and that a detailed explanation of the item is found in the statement of members' equity. Despite these mitigating factors, it is found that the schedule was inconsistent with APB 19, and a deviation from GAAP occurred. Felsing's next concern involved the language used by respondent in footnote 6 to the statements. That footnote pertained to the unfunded reserve and read as follows: NOTE VI - UNFUNDED RESERVE As of December 31, 1986, the Association reserves amounted to $103,953 consisting of $18,931 as a reserve for depreciation and statutory reserves of $85,022. The amount funded was $95,422 leaving an unfunded balance of $8,531 due to the reserves from the operating funds. Felsing characterized the footnote as "confusing" because it referred to depreciation as a part of a future reserve for replacements. Felsing maintained the footnote contained inappropriate wording since depreciation relates to assets already placed in service and not to their replacements. Respondent agreed that the footnote, taken by itself, might be confusing. However, it contended that if the user read the preceding footnote, which he should, there would be no possible confusion. That footnote read as follows: NOTE V - RESERVE FOR DEPRECIATION The Association funds the reserves for depreciation through its operating budget. These funds are to be used for the replacement of property and equipment as the need arises. As previously noted, the Association changed its method of computing depreciation to conform with generally accepted accounting principles. As of December 31, 1986, the reserve for depreciation totaled $18,931. According to respondent, the above footnote made clear to the user that the firm was not referring to depreciation as a reserve but rather was setting aside funds equal to depreciation in an effort to have sufficient cash to purchase assets in the future. While the deficiency here is highly technical and minute in nature, it is found that the footnote is not sufficiently clear and that the user might be confused. Felsing next observed that the footnotes did not disclose how the association accounted for lawn equipment or other capital assets. According to APB 22, such a choice is considered a significant accounting policy and, whatever policy is utilized, the same must be disclosed in the footnotes to the statements. In response, Flanagan pointed to a footnote in Note I of the statements which read in part as follows: Property and Equipment and Depreciation Property and equipment capitalized by the Association is stated at cost. During 1986, the Association changed its method of depreciation from the accelerated cost recovery method to a straight line method in which property and equipment is depreciated over its estimated useful life in accordance with generally accepted accounting principles. According to respondent, this footnote was adequate in terms of explaining the method of depreciation. Also, a number of other statements were introduced into evidence to show that other entities routinely used a corresponding footnote. Flanagan's testimony is accepted as being the most credible and persuasive evidence on this issue, and the footnote is accordingly deemed to be adequate disclosure on this policy. In the statement of members' equity, there is an item in the amount of $1,730 described as "capitalization of lawn equipment expensed in previous year." Although Felsing did not question the amount shown, he faulted respondent for not properly describing whether the item was a change in accounting principle or an error correction. According to APB 20, the disclosure of an error correction is required in the period in which the error was discovered and corrected. Although respondent considered the footnote described in finding of fact 11 to constitute adequate disclosure, it is found that such disclosure falls short of the requirements of APB 20. Work papers are records and documentary evidence kept by the accountant of the procedures applied, tests performed, information obtained and pertinent conclusions reached in the engagement. They serve the purpose of documenting the work performed and provide verification for the accountant. In addition, another important, required tool is the audit program, a written plan for how the auditor intends to perform the audit. The plan serves the purpose of documenting the accountant's mental process of deciding what procedures are necessary to perform the audit and to communicate those procedures to the persons actually conducting the audit. The audit plan should include in reasonable detail all of the audit procedures necessary for the accountant to perform the audit and express an opinion on the financial statements. Although a variety of checklists have been prepared by the AICPA and other organizations, each audit program must be tailored to fit the needs of a particular client. Felsing noted what he believed to be a number of deficiencies with respect to respondent's work papers, audit program, and engagement planning. In reaching that conclusion, Felsing relied upon various SAS pronouncements which govern that phase of an auditor's work. Those pronouncements have been received in evidence as petitioner's exhibits 7-14. Although the work papers themselves were not introduced into evidence, Felsing stated that his review of them reflected they were "deficient" in several respects. For example, he did not find a planning memorandum, time budget, checklist or other evidence that planning procedures were performed as required by SAS 22. In this regard, Flanagan corroborated the fact that no formal planning memorandum to the file was prepared. Although respondent's audit program was written for a condominium association, Felsing found it "extremely brief" and was not tailored to this particular client. He opined that such a program should have included reasonable detail of all audit procedures necessary to accomplish the audit and to express an opinion on the financial statements. In particular, it was noted that some required procedures were not on the list while some procedures actually used by respondent were not included. Through conversations with respondent's members, Felsing learned that much of the audit work was performed by Menchinger, the junior partner in the firm. In addition, "a few" other work papers were prepared by an unknown assistant. Although Menchinger reviewed all work performed by the assistant, Felsing found no evidence that the papers were reviewed by the supervising partner, Flanagan. Such review, which is a required step in the audit process, is generally evidenced by the supervising partner placing check marks or initials on the individual work papers. Felsing noted further that the decision to rely on the testing of internal controls was not documented in the work papers by respondent. He added that the amount of time budgeted by respondent for this engagement (around thirty hours) was inadequate given the fact that it was the first year the firm had prepared this client's statements. Finally, Felsing concluded that the violations were not peculiar to a condominium association but were applicable to all enterprises. Respondent pointed out that the association was a small client with less than five hundred line items, and the audit program and engagement planning were planned within that context. Respondent introduced into evidence its audit program which contained the steps taken by the firm in planning for the engagement. Testimony that all steps contained therein were followed was not contradicted. Similarly, Flanagan testified without contradiction that he reviewed all work performed by Menchinger but did not evidence his review with tick marks on each page. According to Flanagan, on a small audit such as this, he considered the signing of the tax return and opinion letter evidence that he had reviewed the work papers. However, Flanagan acknowledged that someone examining the papers would not know they had been reviewed by the supervising partner. Based upon the above findings, and after reconciling the conflicting testimony, it is found that respondent violated GAAP by failing to have a planning memorandum, time budget, and evidence of testing of internal controls within its work papers. All other alleged violations are found to without merit. Respondent has continued to represent the association since the Board issued its complaint. Indeed, Flanagan noted that the association is pleased with the firm's work, and this was corroborated by a letter from the association's board of directors attesting to its satisfaction with the firm. There was no evidence that the association or any other third party user of the statements was injured or misled by relying on the statements.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty of the violations discussed in the conclusions of law portion of this Recommended Order, and that license number AD 0006179 be given a reprimand. All other charges should be dismissed. DONE and ENTERED this 30th day of October 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 30th day of October 1989.
Findings Of Fact Under Section 26 of the United States Code Section 125, the federal government allows employers to establish programs that provide a federal income pre-tax benefit to employees. To maintain the pre-tax benefit, the employer is required to administer the program in compliance with applicable federal laws, rules and regulations. Employers participating in the 125 pre-tax program are required to implement a written plan (Cafeteria Plan) and take deductions from an employee’s earned income that are credited to the employee’s flexible spending account (FSA) for the purpose of paying medical and/or dependent care expenses. The State of Florida has developed such a plan. The FSA program is managed by Respondent, Department of Management Services. Petitioner, James D. Wells, Jr., has maintained a FSA daycare reimbursement account since 1994. During the 2005 plan year, Petitioner was an enrolled member of the Daycare Reimbursement program. In 2005, Petitioner contributed $3,000.00 to his account. The reimbursement filing deadline for Plan Year 2005 was April 17, 2006. The deadline for 2005 occurred because the normal deadline day of April 15th fell on a weekend. Therefore, the deadline was moved by rule to the first regular business day following April 15th. Petitioner obtained a receipt for eligible expenses for 2005 totaling $3800.00 from the Immanuel Baptist Church Daycare. On March 27, 2006, he took the receipt to his office. While at work, he filled out the appropriate reimbursement request form. Petitioner placed these documents in an envelope with the correct postage and address on it. He placed the envelope in his inter-office mail receptacle. Mail placed in the inter-office receptacle is picked up by an employee of Petitioner’s agency, taken to the agency mailroom, and there picked up by the U.S. Postal Service. The inter-office mail receptacle is neither owned nor controlled by the U.S. Postal Service. Consequently, personal mail is not postmarked until it is received at the U.S. Postal Service. There is no evidence that Petitioner’s envelope was received by the U.S. Postal Service or that it was postmarked by the U.S. Postal Service. The address on the People First reimbursement form reads: “People First Service Center, Flexible Spending Account, Post Office Box 1800, Tallahassee, Florida 32302-1800.” The address is a post office box of the U.S. Postal Service, owned by Fringe Benefits Management Company (FBMC). FBMC is a private entity that processes benefits for various private and public employees, including the State of Florida’s flexible spending accounts. FBMC does not have access to any information regarding a claimant’s dependents and does not verify the authenticity of the names of the dependents or whether the claimant has dependents. FBMC uses Post Office Box 1800 specifically for FSA reimbursement requests submitted by all employees of FBMS clients. The U.S. Postal Service separates all of the mail addressed to Post Office Box 1800 and places it in bins, which are picked up each day by FBMC mailroom employees. The mailroom employees deliver the mail to the claims area at FBMC. Mail processors open each piece of mail and enter the name and/or social security number of the claim and amount of requested reimbursement in the FBMC computer system. Each claim is labeled as pending in the system. For each batch of 50 reimbursement requests entered into the system, the mail processors print a list of the 50 claims and attach the associated paper work for each claim into a batch. Each batch of 50, the list and actual forms are then delivered to “adjudicators” who again input the name and/or social security number directly from the reimbursement form. The adjudicator also determines whether the attached documentation supports the amount of the claim. Once the adjudicator enters the 50 requests into the system, the adjudicator prints another list of names. If either the mail processor or adjudicator enters incorrect information into the computer system, the adjudicator will produce a list that does not match the mail processor’s list. At that point, the mail processor’s list and the adjudicator’s list are reconciled. During reconciliation, if the adjudicator discovers a claim form that does not appear in the pending computer file, the adjudicator will add the name to the pending file or personally deliver the request to the mail processor to enter into the pending file. If the identification data of the claimant entered by the adjudicator matches the information in the “pending file,” and if the backup documentation in support of the claim is adequate as to amount, FBMC authorizes payment; if not, the claim is denied. The claim information is then sent to Convergys to process the claim. Convergys is a private entity that administers the State of Florida human resources and personnel system. Convergys has subcontracted with FBMC to process the payments of FSA requests for reimbursement. Upon receipt of files from FBMC, Convergys responds to all reimbursement requests it receives from FBMC. It either processes payment for approved requests or provides written notification that the claim has not been approved for payment. In June 2006, Petitioner had not received any information regarding his claim and had not received the documents back from the post office. He called the agency and discovered that it did not have any record of his claim. He explained that he had mailed it prior to April 17, 2006. Both FBMC and Convergys searched their records for Petitioner’s claim. Convergys had no record of receiving Petitioner’s claim from FBMC. FBMC searched every “James Wells” in its database listed for each employer-client to whom reimbursements were paid for the 2005 Plan Year. No payment was processed for any other James Wells. FBMC also physically searched all claims from all employees of all its clients, beginning March 27, 2006, through April 22, 2006. Each claim was pulled and each sheet of paper attached to each claim was reviewed. Petitioner’s claim was not located. Given the mail and claim handling procedures used by FBMC in processing claims, it does not appear that Respondent received Petitioner’s claim by April 17, 2006. Therefore, Petitioner’s claim for reimbursement was not timely filed in 2005, and Petitioner is not entitled to reimbursement. The request for hearing should be dismissed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that the Respondent issue a Final Order finding that Petitioner did not timely file his reimbursement request, is not entitled to reimbursement and dismissing the request for hearing. DONE AND ENTERED this 14th day of December, 2007, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER 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 14th day of December, 2007. COPIES FURNISHED: Linda South, Secretary Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 John Brenneis, Esquire Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 James D. Wells, Jr. Department of Highway Safety and Motor Vehicles 2900 Apalachee Parkway, Mail Stop 47 Tallahassee, Florida 32399 Sonja P. Matthews, Esquire Department of Management Services Office of the General Counsel 4050 Esplanade Way, Suite 260 Tallahassee, FL 32399-0950
Conclusions Having reviewed the Administrative Complaint, and all other matters of record, the Agency for Health Care Administration finds and concludes as follows: 1. The Agency has jurisdiction over the above-named Respondent pursuant to Chapter 408, Part II, Florida Statutes, and the applicable authorizing statutes and administrative code provisions. 2. The Agency issued the attached Administrative Complaint and Election of Rights form to the Respondent. (Ex. 1) The Election of Rights form advised of the right to an administrative hearing. 3. The parties have since entered into the attached Settlement Agreement. (Ex. 2) Based upon the foregoing, it is ORDERED: 1, The Settlement Agreement is adopted and incorporated by reference into this Final Order. The parties shall comply with the terms of the Settlement Agreement. 2. The Respondent shall pay the Agency $10,500.00. If full payment has been made, the cancelled check acts as receipt of payment and no further payment is required. If full payment has not been made, payment is due within 30 days of the Final Order. Overdue amounts are subject to statutory interest and may be referred to collections. A check made payable to the “Agency for Health Care Administration” and containing the AHCA ten-digit case number should be sent to: Office of Finance and Accounting Revenue Management Unit Agency for Health Care Administration 2727 Mahan Drive, MS 14 Tallahassee, Florida 32308 1 Filed March 17, 2014 2:02 PM Division of Administrative Hearings ORDERED at Tallahassee, Florida, on this \J day of Mur , 2014. Dudelg, Secretary for Health Care Administration
Other Judicial Opinions A party who is adversely affected by this Final Order is entitled to judicial review, which shall be instituted by filing one copy of a notice of appeal with the Agency Clerk of AHCA, and a second copy, along with filing fee as prescribed by law, with the District Court of Appeal in the appellate district where the Agency maintains its headquarters or where a party resides. Review of proceedings shall be conducted in accordance with the Florida appellate rules. The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed. CERTIFICATE OF SERVICE I CERTIFY that a true and correct ae of this Final Order was served on the below-named persons by the method designated on this 1 eas ay of / arc, , 2014. Richard Shoop, Agency Agency for Health Care Administration 2727 Mahan Drive, Bldg. #3, Mail Stop #3 Tallahassee, Florida 32308-5403 Telephone: (850) 412-3630 Jan Mills Finance & Accounting Facilities Intake Unit Revenue Management Unit (Electronic Mail) (Electronic Mail) Nelson E. Rodney Office of the General Counsel Agency for Health Care Administration (Electronic Mail) Ada C. Leyva, Administrator Pioneer Adult Residential Facility 2166 SW 14" Terrace Miami, Florida 33145 (U.S. Mail) Darren A. Schwartz Administrative Law Judge Division of Administrative Law (Electronic Mail) Jason B. Pear, Esquire The Bernstein Law Firm 1688 Meridian Avenue, Suite 418 Miami, Beach, Florida 33139 (U.S. Mail)
