Findings Of Fact Edward J. Tooze holds certificate number R-0434 as a certified public accountant in the State of Florida. Tooze's certificate is currently under suspension pursuant to order of the State Board of Accountancy entered under to authority of Section 473.111(5), Florida Statutes. Tooze, although under suspension, is subject to the authority of the Florida State Board of Accountancy for violations of Chapter 473 and the rules contained in Chapter 21A, Florida Administrative Code. Tooze undertook to provide an audited and an unaudited financial statement for Gull-Aire Corporation on September 30, 1976. Said audited and unaudited financial statements were received into evidence as Composite Exhibit #1. Financial statements are representations made by management, and the fairness of a representation of unaudited statements is solely the responsibility of management. See Section 516.01 of Statements on Auditing Standards, No. 1, (hereinafter referred to as SAS) The auditor's report dated October 4, 1976, prepared by Tooze, states as follows: In accordance with your instructions, we submit herewith the balance sheet of Gull-Aire Corporation as of September 30, 1976. This statement was prepared without audit, and accordingly we do not express an opinion thereon. Each page of the unaudited statement bears the language, "Prepared without audit from books of account and information provided by management." Paragraph 516.04 of SAS provides an example of a disclaimer of opinion as follows: The accompanying balance of x company as of December 31, l9XX, and the related statements of income and retained earnings and changes in financial position for the year then ended were not audited by us and accordingly we do not express an opinion on them. (Signature and date) The form of the disclaimer used by Tooze in the financial statement of Gull-Aire quoted in Paragraph 6 is not identical to the example given in Section 516.04, SAS, No. 1. However, Tooze's statement does reflect that the financial statement was not audited and that Tooze did not express any opinion on it. The notes to the audited financial statement of Gull-Aire Corporation do not include a summary of significant accounting policies used by Tooze in the preparation of the financial statement. While only a balance sheet is shown in both of the Gull-Aire financial statements, retained earnings were reported which were the result of the sale of a parcel of real property. No notes were made on either of the reports explaining this sale, and its treatment, although this was a major business transaction and source of income to the corporation for the period covered. Tooze did not disclose the treatment of income taxes in both the financial statements of Gull-Aire, particularly the tax treatment of the retained earnings in the amount of $45,499.64 from the sale of the real property. Although Tooze issued two financial statements for Gull-Aire Corporation as of September 30, 1976, one audited and one unaudited, he did not state on the second financial statement the reason for its preparation and explain the accounting decisions which resulted in the change of various entries on the second statement. Tooze stated to the Board's investigator that he did not obtain a representation letter from the management of Gull-Aire Corporation. Tooze further stated that he did not prepare a written audit program nor obtain and report what internal controls existed within Gull-Aire Corporation. Tooze also prepared a financial report dated April 30, 1977, for Jack Carlson Company, Inc., which was received into evidence as Exhibit 2. The disclaimer prepared by Tooze in the Jack Carlson financial statement contained in the letter to the Board of Directors of the company dated September 15, 1977, stated as follows: We submit herewith our report on the examination of the books and records of Jack Carlson Company, Inc., for the fiscal year ended April 30, 1977, and the following exhibits: (delete) The terms of our engagement did not include those standard auditing procedures instant to the rendition of an opinion by an independent Certified Public Accountant. The limited scope of our examination precludes our expression of an opinion as to the fairness of the over-all representations herein. The attached statements were made the basis for the preparation of the U.S. Corporation Income Tax Return for the fiscal year ended April 30, 1977. Essentially the same statement is contained in the statements for Albeni Corporation and Georgetown Mobile Manor, Inc. No statement of changes in financial position was contained in the financial statement prepared for Jack Carlson Company, Inc. Section 516.08, SAS, No. 1 provides in pertinent part as follows: When financial statement's are issued proporting to present fairly financial position, changes in financial position, the results of operations in accordance with generally accepted accounting procedures, a description of all significant accounting policies of the reporting entity should be reported as an integral part of the financial statement. (Emphasis supplied) Tooze prepared financial statements for Albeni Corporation which were received as Exhibit #3, and financial statements for Georgetown Mobile Manor, Inc., which were received as Exhibit #4. The financial statements of Carlson, Georgetown and Albeni were all unaudited. Tooze did not provide an explanation or note to the financial statements describing significant accounting policies which he applied in preparing the statements. In the financial statement of Albeni Corporation, Tooze indicated that "these interim financial statements are intended primarily for internal management use." The fixed assets in the financial statement of Georgetown Mobile Manor, Inc., constitute $301,642 out of $345,000 of the company's assets. Depreciation and accumulated depreciation are reported as $103,641. The method of computing depreciation was not indicated on the financial statement. In the unaudited financial statements prepared for Carlson and Albeni, the basis of stating inventories and the methods used to determine inventory costs were not disclosed, although inventories constitute a significant percentage of both companys' assets.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law the Bearing Officer recommends that the Board of Accountancy take no action on the violation of Rule 21A-4.02, Florida Administrative Code, and Section 473.251, Florida Statutes. DONE and ORDERED this 3rd day of April, 1979, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 COPIES FURNISHED: Douglas M. Thompson, Jr. Executive Director State Board of Accountancy Post Office Box 13475 Gainesville, Florida 32604 Samuel Hankin, Esquire Post Office Box 1090 Gainesville, Florida 32602 Mr. Edward J. Tooze 464 Patricia Avenue Dunedin, Florida 33528
Findings Of Fact Respondent met Sibley Dennis Carpenter, Jr. (Carpenter) in 1974 or 1975, in connection with a land sale that is not otherwise relevant to this matter. In the summer of 1975, Carpenter asked respondent for assistance in obtaining financing for another, separate land transaction. On that occasion, Carpenter furnished respondent an unaudited, personal financial statement, prepared by an accounting firm, which put the net worth of Carpenter and his wife at slightly less than a half million dollars. On November 19, 1975, respondent became affiliated with Dennis Carpenter Realty, Inc., as a real estate salesman. Because he had other irons in the fire, he only appeared at the office of Dennis Carpenter Realty, Inc., once every month or two. Not until the spring of the following year, after he had been licensed as a real estate broker, did respondent have access to the company's books. In November of 1975, respondent met one Charles W. Van Cura, a hog farmer from Minnesota who expressed an interest in buying land in Florida, and referred Mr. Van Cura to Carpenter. Carpenter, possibly in the company of respondent, showed Mr. Van Cura certain real property belonging to Harvey H. Westphal and Margaret Westphal. Mr. Van Cura made an offer of one hundred fifteen thousand dollars ($115,000.00) for the property and deposited seven thousand five hundred dollars ($7,500.00) with Carpenter towards the purchase price, as evidenced by a binder receipt and deposit, dated December 31, 1975, and signed by Carpenter. Respondent's exhibit No. 1. Carpenter presented the offer to the Westphals, who refused Mr. Van Cura's offer but made a counteroffer of one hundred thirty-five thousand dollars ($135,000.00), by crossing out Mr. Van Cura's figures, substituting their own and signing their names. Both the offer and the counteroffer were "subject to receiving Federal Land Bank Loan of 70 percent of purchase price . . ." Van Cura told Carpenter he was unwilling to accept the Westphals' counteroffer. Carpenter persuaded respondent to buy the property himself, and, on January 6, 1976, Carpenter, respondent and Van Cura met in respondent's office. After some discussion, respondent drew two checks aggregating seventy- five hundred dollars ($7,500.00) to Van Cura's order. Petitioner's composite exhibit No. 6. Van Cura executed a receipt, respondent's exhibit No. 2, reciting that he had received seventy-five hundred dollars ($7,500.00) from respondent. At the time of this transaction, Carpenter could not have refunded Van Cura's deposit from the escrow account of Dennis Carpenter Realty, Inc., because there were insufficient funds in the account. Unbeknownst to respondent, Carpenter had never deposited Van Cura's money in the escrow account. On January 30, 1976, Carpenter drew up a written offer on behalf of respondent to purchase the Westphal property for one hundred thirty-five thousand dollars ($135,000.00). Petitioner's exhibit No. 1. The binder receipt and deposit recited that respondent "and or assigns" had deposited seventy-five hundred dollars ($7,500.00) with Carpenter in earnest money. Although the Westphals accepted this offer, the transaction never closed, for reasons which were not developed in the evidence. The Westphals never made demand for the seventy-five hundred dollar ($7,500.00) deposit, and respondent never got the money back from Carpenter. Respondent has since decided to "treat it . . . as a loan, or write it off." (R119) At no time did respondent relate to the Westphals the history of the earnest money deposit. In May of 1976, respondent was licensed as a real estate broker, and became secretary-treasurer of Dennis Carpenter Realty, Inc. Respondent and Carpenter agreed between themselves that the corporation should open an escrow account on which each could draw individually. This is reflected by a corporate resolution, dated May 4, 1976. Respondent's exhibit No. 7. Such an account was opened. When the first bank statement revealed to respondent that Carpenter had drawn improper checks against the escrow account, however, a second corporate resolution was drafted, dated July 23, 1976, respondent's exhibit No. 9, which authorized respondent, but not Carpenter, to draw against the escrow account.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That the administrative complaint be dismissed. DONE and ENTERED this 15th day of September, 1977, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. Bruce I. Kamelhair, Esquire 2699 Lee Road Winter Park, Florida 32789 Mr. W. O. Birchfield, Esquire 3000 Independent Square Jacksonville, Florida 32201
The Issue The basic issue in this case is whether the Petitioner's application for CON Number 6220 should be withdrawn from consideration or processed to conclusion on the merits. The disposition of this issue turns on the nature of the financial information submitted in support of the application.
Findings Of Fact The Petitioner, Support Systems Services Corporation (hereinafter "SSSC"), is a Florida corporation. It is a subsidiary of, and is wholly owned by, John Knox Village of Florida, Inc. (hereinafter "JKV"). JKV is a regulated continuing care retirement center. SSSC currently provides home health services to non-Medicare residents of John Knox Village. SSSC seeks to become a Medicare-certified provider of such services. On March 23, 1990, SSSC filed a timely application for a certificate of need ("CON") to establish a Medicare certified home health agency. The SSSC application included audited consolidated financial statements for the years ending December 31, 1988, and December 31, 1989, for an entity described in the audit report as "John Knox Village of Florida, Inc., and Subsidiary." The audited consolidated financial statements submitted as part of the application are consolidated financial statements of both JKV and SSSC. The first paragraph of the notes to the consolidated financial statements includes the following: "The consolidated financial statements include the accounts of the subsidiary. All significant intercompany transactions and balances have been eliminated." The independent financial status of SSSC cannot be determined from the consolidated financial statements submitted with the application. On April 12, 1990, the Department of Health and Rehabilitative Services (hereinafter "DHRS") sent a so-called "omissions letter" to SSSC. The letter described four elements of the application that had been omitted from the application. The omitted element relevant to this case was described in the letter of April 12, 1990, as follows: Audited financial statements were not provided for Support System Services, Inc., (the applicant) in accordance with 381.707(3), Florida Statutes. Please submit the correct audited financial statements for the previous two fiscal years. The letter of April 12, 1990, also included the following information: Section 381.709, Florida Statutes, requires that you respond to the above omissions by May 14, 1990. Failure to provide responses by this date will result in your application being deemed incomplete and administratively withdrawn from further consideration. By letter dated May 7, 1990, SSSC submitted its response to the omissions letter. With regard to the financial statements, SSSC responded, in pertinent part: Section 381.707(3): Pursuant to our conversation of April 30, 1990, please find enclosed the excerpted audited financial statements by Coopers & Lybrand for fiscal year 1988 and 1989. Attached to SSSC's letter of May 7, 1990, were six pages of financial information regarding SSSC. The information consisted of balance sheets for December 31, 1988, and December 31, 1989, statements of revenue and expenses for the years ending December 31, 1988, and December 31, 1989, and consolidating statements of cash flow for the years ending December 31, 1988, and December 31, 1989. The financial information submitted with SSSC's letter of May 7, 1990, did not contain any information from which it could be determined whether those financial statements had been examined by an independent certified public accountant. The financial information submitted with SSSC's letter of May 7, 1990, was not accompanied by an opinion of a certified public accountant as to the fairness with which the financial statements presented financial position, results of operations, and cash flows. The financial information submitted with SSSC's letter of May 7, 1990, was not an audited financial statement. At the time SSSC filed its CON application there were no audited financial statements in existence that addressed only the financial status of SSSC. By letter dated May 15, 1990, DHRS advised SSSC, inter alia: In accordance with the provisions of Sections 381.707 and 381.709(3), Florida Statutes, you were given until May 14, 1990, to respond satisfactorily to the omissions noted in the correspondence from this office dated April 12, 1990, relative to your proposal to initiate a Medicare certified home health agency in Broward County. Because of your failure to provide separate and complete audited financial statements for Support Systems Services Corporation (the applicant and license holder) as required by Section 381.707(3), Florida Statutes, your proposal has been withdrawn from further consideration effective May 14, 1990. The letter of May 15, 1990, also advised SSSC of its right to invoke administrative hearing proceedings, which rights were timely invoked by SSSC. In the February 17, 1989, issue of the Florida Administrative Weekly, the DHRS published a "Notice To All Potential Certificate Of Need Applicants." That notice was for the purpose of informing future applicants regarding the need to include an audited financial statement "of the applicant." The DHRS procedure manual for processing certificate of need applications addresses, in Chapter 11, the need for an audited financial statement "of the applicant." Neither the F.A.W. notice of February 17, 1989, nor Chapter 11 of the manual specifically mention consolidated statements, but both emphasize that the required audited financial statement must be that "of the applicant." The purpose for the requirement of an audited financial statement of the applicant is two-fold. First, where there are competing applicants, it assists the DHRS in making its determination with respect to which applicant is the better candidate for a CON. Second, the audited financial statement provides an objective source of evidence (through the independent opinion of the auditor) as to the applicant's financial condition and capabilities. These purposes are not fulfilled by the financial information submitted by SSSC with its application or in its response to the omissions letter.
Recommendation Based on all of the foregoing, it is RECOMMENDED that the Department of Health and Rehabilitative Services issue a final order in this case deeming the Petitioner's application to be incomplete and withdrawing the application from further consideration. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 3rd day of December 1990. MICHAEL M. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of December, 1990. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-4448 The following are my specific rulings on all proposed findings of fact submitted by all parties. Findings proposed by Petitioner: Paragraphs 1, 2, 3, 4, and 5: Accepted in substance. Paragraph 6: First sentence accepted in substance. Second sentence rejected as contrary to the greater weight of the evidence. Paragraph 7: Rejected as subordinate and unnecessary details. Paragraphs 8 and 9: Accepted in substance. Paragraph 10: Rejected as subordinate and unnecessary details. Paragraph 11: First sentence accepted. The remainder is rejected as, for the most part, subordinate and unnecessary details; portions are also contrary to the greater weight of the evidence. Paragraph 12: Rejected as irrelevant. Paragraph 13: Accepted in substance, without the editorial implications. Paragraphs 14 and 15: Accepted in substance. Paragraphs 16, 17, and 18: Rejected as subordinate and unnecessary details. Paragraphs 19 and 20: Rejected as contrary to the greater weight of the evidence. Paragraph 21: Rejected as constituting argument or subordinate and unnecessary details. Paragraph 22: Rejected as constituting argument or conclusions of law, rather than proposed findings. Paragraphs 23, 24, and 25: Rejected as irrelevant. Paragraph 26: Accepted in substance. Paragraph 27: Rejected as contrary to the greater weight of the evidence. Findings proposed by Respondent: Paragraph 1: Rejected as constituting conclusions of law, rather than proposed findings of fact. Paragraphs 2, 3, 4, 5, 6, 7, and 8: Accepted in substance, with some subordinate and unnecessary details omitted. Paragraph 9: Rejected as subordinate and unnecessary details. Paragraph 10: Accepted in substance. Paragraph 11: For the most part rejected as unduly repetitious or as subordinate and unnecessary details. Paragraphs 12, 13, 14, and unnumbered paragraph at end: Rejected as constituting argument, rather than proposed findings of fact. COPIES FURNISHED: Alisa S. Duke, Esquire DYKEMA GOSSETT 790 East Broward Boulevard Suite 400 Fort Lauderdale, Florida 33301 Edward Labrador, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Linda K. Harris, Esquire General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact Respondent, Kye Harris, was president of respondent, University Prep, Inc., at all pertinent times. The corporation was originally organized for profit, as a vehicle for the establishment of a private school in Orlando, Florida. On the advice of a lawyer and an underwriter, however, Dr. Harris caused the corporation to be reorganized on a non-profit basis, so as to qualify bonds respondents proposed to issue for an exemption from certain registration requirements. Thereafter University Prep, Inc. did in fact issue bonds, including series A and B sinking fund revenue bonds dated January 1, 1976, in the aggregate principal amount of one hundred seventy-five thousand dollars ($175,000.00). Accompanying this issue was an offering circular dated December 23, 1975, which stated the corporation's net income for the period August 1, 1975, to September 30, 1975, as seven thousand four hundred seventy dollars ($7,470.00) and valued certain land and improvements at one hundred twenty thousand dollars ($120,000.00). According to the circular, the unaudited statements presented in the circular were "certified by the President/Treasurer and the Secretary. . ." Petitioner's exhibit No. 6, p. 5. According to the minutes of the corporation's board of directors meeting on September 28, 1975, however, the corporation was experiencing "a per month loss of $7,630." Petitioner's exhibit No. 7. Investors purchased some of the bonds dated January 1, 1976. On behalf of the corporation, Dr. Harris contracted for the purchase of an improved, 22 acre tract of real estate on Semoran Boulevard in Orlando, for six hundred fifty thousand dollars ($650,000.00). The transaction, which closed on June 22, 1976, was the result of arm's length negotiations. Respondents gave ten thousand dollars ($10,000.00) and a separate parcel of real estate (variously valued at from $35,000 to $63,000) as a down payment. The improvements on the property respondents acquired consisted of "approximately 52 units. . .in various stages of completion." (T.24) A few days later, G. E. Naumann, the real estate broker who had represented respondents in this acquisition, prepared an "appraisal" of the property assuming, contrary to fact, that most of the buildings were completed. Petitioner's exhibit No. 1. Mrs. Naumann was not compensated for this "appraisal," which set the value of the property at two million one hundred fifty-five thousand dollars ($2,155,000.00). Although she was aware that respondents "had a bond issuance that they were going through" (T.27), Mrs. Naumann did not expressly authorize the use of her "appraisal" in that connection. University Prep, Inc. issued another series of sinking fund revenue bonds dated July 1, 1976, this one in the aggregate principal amount of one hundred thousand dollars ($100,000.00). Accompanying this issue was an offering circular dated July 1, 1976, which included an unaudited balance sheet "as of June 24, 1976." The value of the 22 acre tract of improved real estate on Semoran Boulevard acquired on June 22, 1976, was stated as two million one hundred fifty-five thousand dollars ($2,155,000.00) more than one and one half million dollars in excess of the land's purchase price. This statement was false and misleading and resulted in a grossly exaggerated statement of net worth. Investors also purchased some of the bonds dated July 1, 1976.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That petitioner continue its cease and desist order in force and effect. DONE and ENTERED this 13th day of February, 1979, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Philip J. Snyderburn, Esquire Office of the Comptroller The Capitol Tallahassee, Florida 32304 University Prep, Inc. 2000 North Semoran Boulevard Orlando, Florida 32807 Kye Harris Post Office Box 102 Mountlake Terrace, WA 98043
The Issue Whether the proposed decision of the Department of Children and Family Services to award the contract for Florida Assertive Community Treatment (FACT) Programs in District 4 as set forth in RFP No. 01H02FP5, to Psychotherapeutic Services of Florida, Inc., is contrary to the Agency's governing statutes, the Agency's rules or policies, or the specifications of the RFP?
Findings Of Fact Background On or about February 18, 2002, DCF issued RFP No. 01H02FP5 for the implementation of Florida Assertive Community Treatment (FACT) Programs for persons with severe and persistent mental illnesses in DCF Districts 4, 7, and 11. The review in this case is limited to DCF's proposal to award a FACT contract in District 4. Four vendors submitted proposals for District 4, including Petitioner and Intervenor. Section 5.2 of the RFP requires that each proposal include a title page as page two of the proposal and include the RFP number; title of proposal; prospective offeror's name; organization to which the proposal is submitted; name, title, phone number and address of person who can respond to inquiries regarding the proposal; and name of project director, if known. The proposal submitted by Intervenor contained a title page identifying the offeror as Psychotherapeutic Services of Florida, Inc., with a mailing address in Chesterfield, Maryland. Further, every page of Intervenor's proposal had the name Psychotherapeutic Services of Florida, Inc., printed on the bottom left corner. Section 6.1 of the RFP describes two phases of DCF's review of the proposals. The first is an initial screening of all proposals for what the RFP describes as "Fatal Criteria." The second is the qualitative review of each proposal using criteria set out in the RFP by an evaluation team. Fatal Criteria Section 5.4 of the RFP reads as follows: 5.4 RESPONSE TO INITIAL SCREENING REQUIREMENTS The initial screening requirements are described as FATAL CRITERIA on the RFP Rating Sheet (see section 6.1). Failure to comply with all initial screening requirements will render a proposal non-responsive and ineligible for further evaluations. The fatal criteria are: Was the proposal received by the date, time and location as specified in the Request for Proposal (section 2.4)? Was one (1) original and eight (8) copies of the proposal submitted and sealed separately? (section 5.12)? Did the provider include a Proposal Guarantee payable to the department in the amount of $1,000.00 (section 2.11)? Did the application include the signed State of Florida Request for Proposal Contractual Services Acknowledgement Form, PUR 7033 for each proposal submitted? Did the provider submit the Notice of Intent to Submit form contained in Appendix 2 by the required due date? Did the provider register and attend the offeror's conference? Did the proposal include the signed Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion Contracts/Subcontracts (Appendix 6)? Did the proposal include the signed Statement of No Involvement(Appendix 7)? Did the proposal include the signed Acceptance of Contract Terms and Conditions indicating that the offeror agrees to all department requirements, terms and conditions in the Request for Proposal and in the Department's Standard Contract (Appendix 8)? Did the proposal include a signed lobbying form (Appendix 9)? Did the proposal include an audited financial statement for fiscal years 1999- 2000 and 2000-2001? Did the proposal include a certification of the offeror's good standing (Appendix 1)? Did the proposal contain evidence the minimum staffing levels in section 3.11 will be hired and employed? Did the proposal contain a signed Certification of a Drug-Free Workplace program (Appendix 10)? Did the proposal contain a certification regarding electronic mailing capability as referenced in section 3.20 (Appendix 5)? (emphasis in original) Section 6.1 of the RFP includes a Fatal Criteria rating sheet requiring "yes" or "no" responses by the reviewer, which included, among other provisions, the following: 4. Did the proposal include a signed Form PUR 7033? * * * 11. Did the proposal include independent audited financial statement from a CPA firm for fiscal years 1999-2000 and 2000-2001? Form PUR 7033 Section 5.1 of the RFP, entitled, STATE OF FLORIDA REQUEST FOR PROPOSAL CONTRACTUAL SERVICES ACKNOWLEDGMENT FORM, PUR 7033, requires proposers to manually sign an original Form 7033 on the appropriate signature line. The signed form 7033 must appear as the first page of the proposal. Form PUR 7033 is not a form generated by DCF but is generated by the Department of Management Services. The RFP did not set forth any fatal criteria in connection with this form other than it be signed. The proposal of Intervenor, PSFI, contained form PUR 7033 with the signature of its Chief Executive Officer, D. Cherry Jones, within the signature block designated as "authorized signature." The name Psychotherapeutic Services appears on Intervenor's form 7033 in the block entitled "vendor name." The address which appears in the block designated as "vendor's mailing address" on Intervenor's form PUR 7033 is the same mailing address in Chesterfield, Maryland, that appears on the title page of Intervenor's proposal. The block designated on as "state purchasing subsystem (SPURS) vendor number" on Intervenor's form PUR 7033 is blank. In completing the RFP forms designated as Appendix 1, Offeror Certification of Good Standing; Appendix 5, Certification of Electronic Mail Capability; Appendix 7, Statement of No Involvement; Appendix 8, Acceptance of Contract Terms and Conditions; and Appendix 10, Certification of a Drug-Free Workplace Program, Psychotherapeutic Services appears in the blank designated for the name of the vendor or offeror. These appendices were all signed by D. Cherry Jones. Petitioner contends that the use by Intervenor of Psychotherapeutic Services or other shortened version of its full name instead of Psychotherapeutic Services of Florida, Inc., on Form PUR 7033 and the required appendices renders Intervenor's proposal non-responsive, creates confusion as to what entity was responding to the RFP, is misleading and, therefore, is contrary to competition. Petitioner notes that the Proposal Tabulation prepared by DCF referenced Intervenor as Psychotherapeutic Services, Inc., rather then Psychotherapeutic Services of Florida, Inc. In Appendix 8 to Intervenor's proposal, the corporate documents from the Florida Department of State were for Psychotherapeutic Services of Florida, Inc. As to the SPURS vendor number, the RFP did not require the provision of a vendor number on the PUR 7033 as a preliminary screening requirement of fatal criteria. The RFP does not contain a requirement that a proposer have an existing SPURS vendor number. According to Mr. Poole, there were no restrictions on who could submit a proposal. In response to a written inquiry, which asked whether local mental health agencies be given preference in the bidding process over out of state companies, DCF responded: No. We want as many entities as possible to compete for these teams. The competition is fair and open to all who meet the requirements outlined in the RFP. Thus, DCF encouraged all interested providers to submit proposals, not just those who had previously contracted with DCF. Accordingly, an offeror may not have an existing vendor number when submitting a proposal. Although Intervenor had previously contracted with DCF, the vendor number was not a specified requirement of the RFP. Timothy Griffith is Deputy Executive Director of Psychotherapeutic Services of Florida, Inc. Mr. Griffith describes their use of Psychotherapeutic Services as similar to the use of a trademark or servicemark. The parent company of all Psychotherapeutic Services affiliates, including Psychotherapeutic Services of Florida, Inc., is Associated Service Specialists, Inc. The relationship between Psycho- therapeutic Services of Florida, Inc., and Associated Service Specialists, Inc., as well as other affiliates, was set forth in sufficient detail in Intervenor's proposal. Other than the assertions of Petitioner's President and Chief Executive Officer, Robert Sommers, as to his perception, there is no evidence that anyone in DCF or its evaluators were confused as to what entity was identified in the proposal submitted by Intervenor. Stephen Poole is a Senior Management Analyst II with DCF, and is the procurement manager for the RFP. According to Mr. Poole, DCF looks within a proposal for the identity of the proposer on the title or cover page of the proposal. There was never any confusion in his mind as to what entity was making the offer to DCF. He understood Psychotherapeutic Services to be a "tradename." When asked what entity he was talking about when he refers to Psychotherapeutic Services, he replied: I'm talking about Psychotherapeutic Services, Psychotherapeutic Services of Florida, or Psychotherapeutic Services, Inc. To me, they are one in the same. We have been under contract with Psychotherapeutic Services of Florida for other programs, FACT programs. And I, early on, got accustomed, as a matter of convenience and expediency, to refer to them as PSI. Consistent with his testimony, Mr. Poole's reference to Psychotherapeutic Services, Inc., on the bid tabulation sheet was simply shorthand for Psychotherapeutic Services of Florida, Inc. Similarly, the bid tabulation sheet references Petitioner as Mental Health Resource Center even though it's full name is Mental Health Resource Center, Inc. There is no evidence that the evaluators were confused or misled as to Intervenor's identity or corporate affiliations. Evaluator Robert Miles was not confused and considered Psychotherapeutic Services and Psychotherapeutic Services of Florida, Inc. to be one and the same. Evaluator Jan Holder was not confused as to Intervenor's identity: Q And we have been calling that company alternatively Psychotherapeutic and several other shortened versions of the name. Has that created any confusion in your mind as to what entity we're talking about? A No. Petitioner's assertion that Intervenor's proposal was non-responsive as a result of the use of an abbreviated form of Intervenor's name is not supported by the above findings. Financial Statements Petitioner asserts that Intervenor failed to meet the requirement set forth in Section 5.4k of the RFP, and referenced in paragraph 11 of the Fatal Criteria checklist, that proposers include independent audited financial statements for fiscal years 1999-2000 and 2000-2001. The RFP did not provide any definition, standard, guidelines or mandatory requirement for the format or content of financial statements, audits, or audited financial statements. The RFP simply required that they be included. Intervenor's proposal contained audited financial statements for fiscal years 1999-2000 and 2000-2001. Intervenor's 2000-2001 audited financial statements consisted of an independent auditor's report from Nardone, Pridgeon & Company, P.A., Certified Public Accountants, dated August 10, 2001; balance sheets; statements of cash flow; statements of operations and retained earnings (deficit); and personnel and operating expenses. However, four pages, consisting of the Notes to Financial Statements, were omitted. There is no dispute regarding the contents of the audited financial statements for 1999-2000 submitted by Intervenor. The independent auditor's report for fiscal years 2000- 2001 stated in pertinent part: We have audited the accompanying balance sheets of Psychotherapeutic Services of Florida, Inc. as of June 30, 2001 and 2000, and the related statements of operations and retained earnings (deficit) and cash flows for the years then ended. . . . In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Psychotherapeutic Services of Florida, Inc. as of June 30, 2001 and 2000. We conducted our audits to form an opinion on the 2001 and 2000 basic financial statements taken as a whole. Luther Cox is a certified public accountant and has expertise in accounting, financial statements, and generally accepted accounting principles relative to financial statements. It is Mr. Cox's opinion that the notes to financial statements are a required element of an audited financial statement. According to Mr. Cox, notes to financial statements explain the financial statements to the reader and are, according to generally accepted accounting principals, an essential component to an independent audited financial statement. Mr. Cox acknowledged, however, that there was no negative information which should have been disclosed in the subject auditor's opinion letter and that the letter was a "clean opinion," meaning that no adverse financial information was known to the auditors which otherwise would have been required to be reported. Martin Kurtz is also a certified public accountant. He acknowledged that the omission of the notes is not consistent with the standards of the practice of accountancy in Florida. However, he was of the opinion that, based upon the way the independent auditor's opinion letter is written, the letter relates to a full set of financial statements. "They may not have all been presented in the proposal. But there was a full set of audited financial statements." Thus, the auditor's clean opinion letter included a review of the notes. According to Mr. Kurtz, the text of Intervenor's proposal contains more information about the relationship between the parent company and Psychotherapeutic Services of Florida, Inc., than the notes to the financial statements. With the above-competing opinions by certified public accountants, it is appropriate to examine the agency's use of the audited financial statements in its review of the proposals. According to Mr. Poole, the requirement to have the proposals contain independently audited financial statements was to assure DCF that the offeror possessed sufficient financial sophistication and organizational capacity to perform a FACT contract. In reviewing compliance with the requirement for an audited financial statement, DCF reviewed the submission to determine whether or not it had a letterhead from an independent auditor and whether there were financial statements. The submitted financial statements were not reviewed by a certified public accountant of DCF. According to Mr. Poole, DCF was looking generally for the "strength, administratively of the offeror. If it had the level of management expertise to be able to perform a contract in that amount of money of a million dollars." The independent auditor's letter represents that Invervenor's financial statements for fiscal years 2000-2001 were indeed audited. Petitioner's assertion that Intervenor's proposal is non-responsive because of the omission of the notes to the financial statements is not supported by the above findings. In further support for its assertion that Intervenor's omission of the notes to the financial statements renders Intervenor's proposal non-responsive, Petitioner asserts that the requirement for the inclusion of audited financial statements was not only considered within the fatal criteria of the RFP, but also was a "key consideration" for scoring criterion 36 of the RFP. Organizational capacity is set forth in section 5.5(4) of the RFP which states in pertinent part: To assist in the determination of the offeror's organizational capacity, please provide, as part of this section, the following: 4. A copy of the financial statements or audits for state fiscal years 1999-2000 and 2000-2001. 6. Evidence that the offeror has met its financial obligations in a timely and consistent manner without the need to incur loans or a line of credit to routinely meet its expenses. (emphasis in original) Section 6.3.6 of the RFP contains certain criteria for the evaluators to score with regard to the organizational capacity of the proposers. Criterion 36 reads as follows: 36. What evidence did the proposal provide that the offeror has not had to obtain loans or a line of credit to routinely meet its financial obligations and expenses in a timely and consistent manner as referenced in section 5.5(4)? Key considerations for scoring: Its independently audited financial statements for fiscal years 1999-2000 and 2000-2001 support response. Offeror's independently audited financial statements for the last two years give evidence of ability to start a new program without benefit of start-up funds. (emphasis in original) Each of the evaluation criteria contained references to key considerations for scoring. The key considerations were to assist the evaluators in assessing the merits of the proposal. In evaluating criterion 36 pertaining to lines of credit, it was the role of the individual evaluator to interpret the degree of routine reliance and assign accordingly a particular score from zero to three. Intervenor directly addressed loans and lines of credit in the text of its proposal in response to criterion 36. As with the other criteria, evaluators could score this criterion from zero to three. The Department deferred to the evaluators regarding how they interpreted offerors' responses to the requirements of 5.5(4). Thus, the omission of the auditor's notes in regard to criterion 36 goes to the weight of the information in the proposal, not whether fatal criteria were met. Evaluation Committee Process At the outset, all evaluators were to meet in Tallahassee to receive copies of the proposals they were to score at an initial meeting of the evaluators. One of the evaluators, Mr. Costlow, became ill before he arrived in Tallahassee to attend this meeting. Ms. Holder, the District 4 substitute for Mr. Costlow, did not attend the meeting and did not receive her copies of the proposals she was assigned to score until April 12, 2002. The rest of the evaluators received their copies on April 9, 2002, as scheduled. Petitioner alleges that Ms. Holder had insufficient time to review the three proposals for District According to Ms. Holder, however, she did have sufficient time to adequately review them. At the initial meeting of evaluators on April 9, 2002, Stephen Poole, the Department's procurement manager for this RFP, gave all the evaluators except Ms. Holder instructions as to how the evaluation was to be accomplished. Ms. Holder was not present at that meeting because she had not yet been appointed to serve in Mr. Costlow's place. Because of Ms. Holder's absence from this initial meeting, Petitioner alleges that she was unqualified to accomplish the task of evaluation having missed Poole's instructions, therefore rendering her scoring of its proposal not fair and contrary to the agency's procedures. However, Mr. Poole gave Ms. Holder instructions over the telephone and those instructions were essentially the same as those given to the other evaluators. Ms. Holder was experienced in evaluating proposals and was not a novice to the process. Nevertheless, she was given Mr. Poole's home telephone number and told to contact him if any questions should arise. Ms. Holder was only required to evaluate the three proposals which pertained to District 4, not all of the proposals for all three districts covered by the RFP. Petitioner also alleged that Ms. Holder was not qualified by training or experience to serve of the evaluation team. During Ms. Holder's twenty-year tenure with the Alcohol, Drug Abuse and Mental Health Program Office, she served as an evaluator between 15 and 20 times for RFP's for Mental Health and Substance Abuse. Ms. Holder was the program director for Mental Health and Substance programs in District 4, with responsibility for developing contracts for substance abuse and mental services for adults and children. She is familiar with the PACT manual and the model developed by the National Association for the Mentally Ill. She has a bachelor's degree in psychology and sociology and a master's degree in rehabilitative counseling from the University of Florida. The only evidence offered by Petitioner that Ms. Holder was not competent to perform her duties as an evaluator was testimony by Mr. Sommers, Petitioner's president and chief executive officer, that she does not answer her telephone messages as promptly as he would wish; that she did not correspond with him as quickly as he wanted her to; and other similar promptness issues. Richard Warfel is a former DCF employee with extensive experience in the area of mental health services in District 4. He has been personally acquainted with Ms. Holder for many years and did not have any reason to question Ms. Holder's competence to perform her duties. The evidence does not support Petitioner's assertion that Ms. Holder was unqualified to be an evaluator or was not sufficiently prepared to conduct the evaluation. Petitioner contends that the evaluation committee did not perform its duties in an objective and fair manner consistent with the Rating Methodology specified in Section 6.3 of the RFP. Specifically, the members of the evaluation committee reviewed the proposals for each of the three districts in random order and did not compare competing proposals to one another within each district. The members of the Evaluation Committee were given specific instruction by Mr. Poole as to how to conduct the evaluation. The evaluators were not required to go through each district's proposals before going through another, and they were to consider the RFP as the beginning and the ending of the universe in terms of the proposal. The evaluators were to read the proposals independently from one another and were to select a proposal at random and to score it based upon that proposal alone. They were not to compare one proposal to another, but evaluate a proposal on its own merit. There was no substantial or material evidence presented by Petitioner to show that any of the members of the evaluation committee's review of the various proposals was not done in an objective and fair manner consistent with the RFP and the instructions given to them by Mr. Poole.1/
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED: That the Department of Children and Families enter a final order dismissing the bid protest filed by Mental Health Resource Center, Inc. DONE AND ENTERED this 27th day of September, 2002, in Tallahassee, Leon County, Florida. BARBARA J. STAROS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of September, 2002.
The Issue Whether the Respondents committed the violations alleged and, if so, what penalty should be imposed.
Findings Of Fact Petitioner is the state agency charged with the responsibility of regulating real estate licensees. At all times material to the allegations of this case, Respondent, Harold E. Hicks, was licensed as a real estate broker, license number 0136248. At all times material to the allegations of this case, Mr. Hicks was the qualifying broker for the Respondent corporation, Service First Realty, Inc. (the corporation), whose address is 9715 N. W. 27th Avenue, Miami, Florida 33147. The Respondent corporation holds license number 0223295. Mr. Hicks was responsible for the day-to-day business operations of the corporation. Mr. Hicks was responsible for the financial records kept and maintained by the corporation. All financial records at issue in this proceedings were in the name of the corporation. In 1996, an investigator employed by the Petitioner, Kenneth G. Rehm, attempted to conduct an audit of the Respondents' financial records. This audit was in response to a complaint not at issue in this proceeding. Mr. Rehm went to the Respondents' place of business and asked for the financial records for all real estate accounts. Mr. Hicks provided the investigator with records which established a negative escrow bank balance of $761.00. Moreover, there was no monthly reconciliation for the escrow account. Based upon the bookkeeping method used, the Respondents' records did not show how much money was being held in trust for individual clients. Respondents pooled money for different rental properties into one escrow account without establishing that they maintained accurate ledger balances per client. When Mr. Rehm was unable to reconcile the accounts, he elected to offer Respondents additional time to gather the records and to prepare for a complete audit. Such audit was assigned to Petitioner's investigator, Roberto Castro. Mr. Castro attempted to complete the follow-up audit of Respondents' financial records on February 13, 1996. Once again, the audit was hampered due to the lack of escrow account records. Based upon the records that were provided by Respondents, Mr. Castro computed that Respondents had $3,922.45 in outstanding checks from the rental distribution trust account but only $2,241.58 in the account. This calculation resulted in a shortage of $1,680.87. Mr. Castro also determined that Respondents were not completing monthly escrow account reconciliations in accordance with the rule promulgated by the Florida Real Estate Commission. On May 3, 1996, Respondents were served with a subpoena to provide Mr. Castro with all escrow records from February 1995 to February 1996. Respondents did not respond to the subpoena. As of the date of hearing, Respondents have not shown monthly escrow account reconciliations in accordance with the rule promulgated by the Florida Real Estate Commission.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Real Estate Commission enter a Final Order finding the Respondents guilty of violating Sections 475.25(1)(b), (e), and (k), Florida Statutes, and imposing an administrative fine in the amount of $1,500.00. It is further recommended that the Commission suspend Respondents' licenses until the Respondent Hicks has completed a seven-hour course in real estate escrow management and that such suspension be followed by a probationary period with monitoring of the Respondents' financial records to assure compliance with all Commission rules. DONE AND ENTERED this 25th day of November, 1997, in Tallahassee, Leon County, Florida. J. D. Parrish Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 25th day of November, 1997. COPIES FURNISHED: Henry M. Solares Division Director Division of Real Estate Post Office Box 1900 Orlando, Florida 32802-1900 Lynda L. Goodgame General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Daniel Villazon, Esquire Department of Business and Professional Regulation Division of Real Estate Post Office Box 1900 Orlando, Florida 32802-1900 Harold E. Hicks, pro se Service First Realty, Inc. 9715 Northwest 27th Avenue Miami, Florida 33147
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.
The Issue Whether Petitioner should be granted the exemption from disqualification from employment that he is seeking.
Findings Of Fact Based upon the evidence adduced at hearing and the record as a whole, the following findings of fact are made: In the early 1980's, when Petitioner was in his late 20's, he owned a retail business in Miami. Anthony Counts managed the business. Although he held the title of Chief Executive Officer and President, Petitioner was not involved in the day-to-day operations of the business. He delegated that responsibility to Mr. Counts. Petitioner, however, did keep the books and do the accounting for the business. Lester Turner was an acquaintance of Petitioner's. Mr. Turner owned a business located near Petitioner's business. Petitioner participated with Mr. Counts and Mr. Turner in a fraudulent scheme involving the deposit of stolen United States Treasury checks (provided by Mr. Turner) in Petitioner's business account at a local bank. Federal authorities found out about the scheme. Although Petitioner, when questioned regarding the matter, initially denied his involvement in the scheme, he later admitted his wrongdoing and cooperated with federal law enforcement authorities. A federal indictment was thereafter issued against Petitioner, Mr. Counts and Mr. Turner (in United States District Court for the Southern District of Florida Case No. 86-356-CR). Petitioner was named in one of three counts of the indictment. This count read as follows: From an unknown date until or about March 31, 1983, at Miami, Dade County, in the Southern District of Florida, the defendants, ANTHONY COUNTS, LLOYD JOHNSON, and LESTER TURNER, did willfully and knowingly combine, conspire, confederate and agree and have a tacit understanding with each other to commit offenses against the United States, that is to willfully and unlawfully posses United States Treasury checks knowing said checks had been stolen from the United States mails, and to utter as true, forged United States Treasury checks with the intent to defraud the United States, knowing said checks to be forged; in violation of Title 18, United States Code, Sections 495 and 1708. In furtherance of the conspiracy and to effect the objects thereof, one or more of the following overt acts were committed by at least one of the conspirators in the Southern District of Florida: OVERT ACTS On or about November 15, 1982, defendant LESTER TURNER met with defendants ANTHONY S. COUNTS and LLOYD JOHNSON in Miami, Florida at which time TURNER handed JOHNSON five (5) stolen United States Treasury checks. At the meeting described in paragraph 1, supra, TURNER suggested that JOHNSON deposit the checks in JOHNSON'S business account and that COUNTS and JOHNSON keep 50 percent of the proceeds when the checks were cashed. On or about November 15, 1982, COUNTS and JOHNSON went to the Inter-American Bank of Miami, and JOHNSON deposited in his business account the five (5) stolen United States Treasury checks described in paragraph 1, supra. On or about November 21, 1982, defendant ANTHONY COUNTS paid defendant LESTER TURNER six hundred dollars ($600.00) representing 50 percent of the proceeds from the five (5) stolen United States Treasury checks. Between December, 1982 and March 15, 1983, defendant LESTER TURNER gave defendant ANTHONY COUNTS several more stolen United States Treasury checks which defendant LLOYD JOHNSON deposited in JOHNSON's business account at Inter-American Bank of Miami. Sometime in February or March 1983, the exact date unknown, defendant ANTHONY COUNTS received from defendant LESTER TURNER two (2) stolen United States Treasury checks, No. 84,968,071, dated February 25, 1983, payable to J. Jeffrey Stives in the amount of $643.76 and No. 12,818,775, dated February 28, 1983, payable to John R. Perry in the amount of $684.56. On or about March 18, 1983, defendant ANTHONY COUNTS forged the signature of J. Jeffrey Stives to stolen United States Treasury Check No. 84,968,071 described in paragraph 6, supra, and deposited said check in his (COUNTS') business account at the Peoples National Bank of Commerce, Miami, Florida. On or about the same date described in paragraph 7, supra, defendant ANTHONY COUNTS forged the signature of John R. Perry to stolen United States Treasury Check No. 12,818,775 and deposited said check in his (COUNTS') business account at the Peoples National Bank of Commerce, Miami, Florida. Sometime between January 1983, and April 1983, the exact date unknown, defendant LLOYD JOHNSON received stolen United States Treasury Check No. 54,926,144, payable to Annie L. Gilchrist, dated January 31, 1983, in the amount of $160.00 from defendant LESTER TURNER. All in violation of Title 18, United States Code, Section 371. On June 30, 1986, Petitioner entered a plea of guilty to this count of the indictment. The court accepted Petitioner's guilty plea and found Petitioner guilty as charged. This was his first (and it has remained his only) criminal conviction. On August 19, 1986, the court placed Petitioner on probation for a period of two years. As a condition of his probation, he was required to "make restitution in the amount of $2,000.00 to be paid during [the] period of probation as directed by the Probation Department." "Imposition of a sentence of confinement" was withheld. Petitioner was discharged from probation on August 17, 1988. Shortly before his discharge, in July of 1988, Petitioner was arrested for allegedly failing to timely make a restitution payment and thus violating a condition of his probation. Petitioner, however, ultimately made the payment and his probation was neither revoked nor extended. At no time subsequent to his discharge from probation has Petitioner been in trouble with the law. Following his apprehension by federal authorities, Petitioner went back to school and received additional degrees in computer science. (He had previously received a Bachelor of Technology degree from Florida A & M University.) Until 1994, Petitioner worked as a computer programmer/analyst. In 1994, motivated by a desire to "give something back to the community" and to help others not make the same mistake that he made, Petitioner left a higher paying position in the computer field to work for the Metro-Miami Action Plan Trust, a state-funded arm of Miami-Dade County government, teaching Kingian non-violence. In his new position, it was Petitioner's responsibility to teach children in the community how to act appropriately, without violence, in the face of negative influences. On March 5, 1997, Petitioner signed a "Consent to Background Screening" form, which provided as follows: I hereby authorize the Department of Juvenile Justice to check any and all records pertaining to criminal history, driver's license history, and abuse registry and delinquency reports pursuant to Section 39.001, 39.076 and Chapter 435, Florida Statutes. I further authorize any law enforcement agency to release to the Department of Juvenile Justice information regarding convictions under Florida Statutes or statutes of other jurisdictions. I understand that as a criminal justice agency, the Department of Juvenile Justice has access to all criminal records, even those which have been sealed. On April 1, 1997, Petitioner executed an "Affidavit of Good Moral Character" form, which provided, in pertinent part, as follows: As an applicant for employment as a caretaker with Metro-Miami Action Plan Trust1 I affirm that I meet the moral requirements for employment as caretaker, as required by the Florida Statutes and rules, in that: . . . I have not been found guilty regardless of whether adjudication was imposed or withheld, of any of the offenses listed below, or to any similar offense in another jurisdiction, regardless of whether record is sealed or expunged; I have not entered a plea of guilty or nolo contendre (no contest) or had the court enter such a plea, to any of the offenses listed below, or to any similar offense in another jurisdiction regardless of whether the record is sealed or expunged. . . . I understand that I am obligated to notify my employer of any possible disqualifying offenses which may occur while employed in a caretaker's position. The offenses referenced above are the following sections and chapters of the Florida Statutes: . . . . 812 relating to theft, robbery and related crimes, if the offense was a felony. . . . Under the penalty of perjury, I attest that I have read the foregoing carefully and state that my attestation here is true and correct. SIGNATURE OF AFFIANT OR To the best of my knowledge and belief, my record contains one or more of the foregoing disqualifying acts or offenses. (If you have previously been granted an exemption for this disqualifying offense please attach a copy of letter granting exemption. SIGNATURE OF AFFIANT In an apparent effort to conceal his criminal record, Petitioner placed his signature on the first signature line, thereby attesting, untruthfully, that he had never pled guilty to any of the disqualifying offenses enumerated on the form.2 A background screening investigation conducted by the Department, however, revealed that he was not qualified to serve in his "caretaker" position with the Metro-Miami Action Plan Trust. Petitioner thereafter requested from the Department an exemption from such disqualification. Petitioner's request was preliminarily denied by the Department. Because of his disqualification from employment resulting from his 1986 federal felony conviction, Petitioner is no longer employed by the Metro-Miami Action Plan Trust. Based upon Petitioner's history since the criminal conduct that led to his federal indictment and conviction, including, most significantly, his providing to the Department a false "Affidavit of Good Moral Character," it appears that he has not fully rehabilitated himself.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a final order denying the exemption that Petitioner has requested. DONE AND ENTERED this 27th day of Ocotber, 1998, in Tallahassee, Leon County, Florida. STUART M. LERNER 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 Filed with the Clerk of the Division of Administrative Hearings this 27th day of October, 1998.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty of violating Chapter 473 and rules promulgated thereunder as set forth in the Conclusions of Law portion of this Order. His license should be suspended for one year with probation thereafter for a period of two years. He should also be required to take such additional continuing education courses as the Board deems appropriate. DONE and ORDERED this 15th day of April, 1986, in Tallahassee, Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of April, 1986.