The Issue The issues are as follows: (a) whether Respondent Department of Corrections (the Department) properly determined that there were no responsive proposals to the Request for Proposals entitled Mental Healthcare Services in Region IV, RFP #08-DC-8048 (the RFP); (b) whether the Department's intended award of a contract to provide mental healthcare services to inmates in Region IV to Intervenor Correctional Medical Services, Inc. (CMS), pursuant to Section 287.057(6), Florida Statutes (2008), is unlawful; and (c) whether Petitioner MHM Correctional Services, Inc. (MHM), has standing to challenge the Department's intended award of a contract to CMS pursuant to Section 287.057(6), Florida Statutes (2008).
Findings Of Fact The RFP Process The Department issued the RFP on February 5, 2009. Two addendums were issued to the RFP, the first on February 6, 2009, and the second on March 11, 2009. The Department did not receive any protest of the RFP or addendums from MHM or any other proposer within the statutorily set time limit of 72 hours from the issuance of the RFP. At the time of issuance of the RFP, MHM was the incumbent provider of mental health services to inmates in Region IV. At that time, MHM was providing the services at a rate of $77.62 per month/per inmate. MHM's contract to provide mental health services in Region IV was the result of a prior vendor being financially unable to perform the contract at its agreed rate. The RFP sought proposals from vendors to provide comprehensive mental healthcare services for inmates located at 14 correctional institutions located in the southern part of the State beginning on July 1, 2009. The Department’s contract with MHM for those services was set to expire on June 30, 2009. The Department had previously attempted another procurement for replacement of those services in late 2008. Proposals to the RFP were received and opened in a public meeting on March 23, 2009, from CMS, MHM, the University of Miami's Department of Psychiatry and Behavioral Sciences (the University of Miami), and Wexford Health Sources, Inc. (Wexford). The Department’s Bureau of Procurement and Supply (BPS) was responsible for overseeing the RFP. The Procurement Manager for the RFP was Ana Ploch. Ms. Ploch’s duties included drafting the proposal with the assistance of the Office of Health Services, managing the procurement process by coordinating release of documents, conducting related meetings (such as proposers’ conferences, proposal opening, and price opening), conducting site visits, supervising the evaluation process, and keeping records of the process through completion of a summary report of the procurement. Once the Department received the proposals, it began the eight-phased review and evaluation process as set forth in Section 6 of the RFP. Phase 1 of the review and evaluation process began with the public opening of the proposals that took place on March 23, 2009. Phase 1 also included the review of the proposals to determine if they met mandatory responsiveness requirements. Determination of meeting mandatory responsiveness requirements was made by BPS staff. Mandatory Responsiveness Criteria or “fatal criteria” is described in Section 5.1 of the RFP as requirements that must be met by a proposer for the proposal to be considered responsive. A failure to meet any one of the three following criteria would result in an immediate finding of non- responsiveness and the rejection of the proposal: (a) the subject proposal must be received by the Department by the date and time specified in the RFP; (b) the proposal must include a signed and notarized Certification Attestation Page for Mandatory Statements; and (c) the price proposal must be received by the Department by the date and time specified in the RFP and must be in a separate envelope or package in the same box or container as the project proposal. There is no dispute that all four proposals met these mandatory responsiveness/fatal criteria. In addition to the fatal criteria, a proposal could be found to be non-responsive for failing to conform to the solicitation requirements in all material respects. The RFP, Section 1.20, clearly set forth the definition of a “material deviation” and the basis for rejecting a proposal as follows: 1.20 Material Deviations: The Department has established certain requirements with respect to proposals to be submitted by vendors. The use of shall, must or will (except to indicate simple futurity) in this RFP indicates a requirement or condition which may not be waived by the Department except where any deviation therefrom is not material. A deviation is material if, in the Department’s sole discretion, the deficient proposal is not in substantial accord with this RFP’s requirements, provides an advantage to one proposer over other proposers, or has a potentially significant effect on the quantity or quality of items or services proposed, or on the cost to the Department. Material deviations cannot be waived and shall be the basis for rejection of a proposal. (Emphasis in original.) A Responsive Proposal is defined in the RFP Section 1.29 as “[a] proposal, submitted by a responsive and responsible vendor that conforms in all material respects to the solicitation.” A minor irregularity is defined in Section 1.26 of the RFP as: 1.26 Minor Irregularity: A variation from the RFP terms and conditions which does not affect the price proposed or gives the proposer an advantage or benefit not enjoyed by the other proposers or does not adversely impact the interests of the Department. Phase 2 consisted of a review of the business/corporate qualifications and technical proposal/service delivery narratives contained in the proposals. This phase was completed individually by evaluation team members. The evaluation team, which consisted of 5 employees from the Department’s Office of Health Services, met with Ms. Ploch on March 24, 2009, for instruction on how to proceed with the evaluation. The team members were given the evaluation materials on that date. Evaluation and scoring of the proposals was done separately by each individual without discussion among the members. At the March 31, 2009, bid tabulation meeting, which occurred after the team members scored the proposals, Ms. Ploch told the team members that MHM and the University of Miami were non-responsive to the RFP. Then the scores for the different categories were recorded as announced by each member of the evaluation team. All four proposals were scored for the three categories listed in RFP Section 5.3 (business/corporate experience), Section 5.5 (project staff) and Section 5.6 (technical proposal and service delivery narrative). There is no allegation that the scores assigned to the proposals were done in error or that they were not in compliance with Department rules or procedures. Phase 3 of the review and evaluation process was completed at the same time as Phase 2 and 4, by Ms. Ploch and the BPS staff. That review of the proposals included a determination as to whether the proposers were in compliance with Section 5.3 “Business/Corporate Qualifications.” At that point in the review process, BPS determined that the University of Miami’s proposal was non-responsive in that the proposer did not have the necessary business experience. This finding has not been disputed by any party. An independent Certified Public Accountant (CPA) completed Phase 4 of the review and evaluation process. The Department hired the CPA to review the financial requirements of Section 5.4 of the RFP. The CPA, Richard Law, was given all the proposals, including the financial documentation, on March 24, 2009. He conducted his review separately from the Department's reviews in Phases 2 and 3. Mr. Law has been a licensed CPA for over 30 years. His major practice area is conducting audits for state governments, as well as private businesses. With more than 10 years of experience reviewing financial documentation for the Department and assisting on the setting of financial benchmarks for numerous procurements, he is highly qualified to perform the evaluation and assessment of these basic financial criteria. The financial requirements and the financial documentation and information that the proposers had to submit are set out in Section 5.4 of the RFP. That section is entitled “Financial Documentation,” and provides as follows in pertinent part: Tab 4-Financial Documentation The Proposer shall provide financial documentation that is sufficient to demonstrate its financial viability to perform the Contract resulting from this RFP. Three of the following five minimum acceptable standards shall be met, one of which must be either item d, or item e, below. The Proposer shall insert the required information under Tab 4 of the Proposal. Current ratio: = .9:1 or (.9) Computation: Total current assets ÷ total current liabilities Debt to tangible net worth: = 5:1 Computation: Total liabilities ÷ net worth Dun and Bradstreet credit worthiness (credit score): = 3 (on a scale of 1-5) Minimum existing sales: = $50 million Total equity: = $5 million NOTE: The Department acknowledges that privately held corporations and other business entities are not required by law to have audited financial statements. In the event the Proposer is a privately held corporation or other business entity whose financial statements ARE audited, such audited statements shall be provided. If the privately held corporation or other business entity does not have audited financial statements, then unaudited statements or other financial documentation sufficient to provide the same information as is generally contained in an audited statement, and as required below, shall be provided. The Department also acknowledges that a Proposer may be a wholly-owned subsidiary of another corporation or exist in other business relationships where financial data is consolidated. Financial documentation is requested to assist the Department in determining whether the Proposer has the financial capability of performing the contract to be issued pursuant to this RFP. The Proposer MUST provide financial documentation sufficient to demonstrate such capability including wherever possible, financial information specific to the Proposer itself. All documentation provided will be reviewed by an independent CPA and should, therefore, be of the type and detail regularly relied upon by the certified public accounting industry in making a determination or statement of financial capability. To determine the above ratios, the most recent available and applicable financial documentation for the Proposer shall be provided. This financial documentation shall include: The most recently issued audited financial statement (or if unaudited, reviewed in accordance with standards issued by the American Institute of Certified Public Accountant). All statements shall include the following for the most recently audited (immediate past) year. auditors’ reports for financial statements; balance sheet; statement of income; statement of retained earnings; statement of cash flows; notes to financial statements; any written management letter issued by the auditor to the Proposer’s management, its board of directors or the audit committee, or, if no management letter was written, a letter from the auditor, stating that no management letter was issued and that there were no material weaknesses in internal control or other reportable conditions; and a copy of the Dun & Bradstreet creditworthiness report dated on or after February 5, 2009. (Emphasis in original) The RFP provided as follows in Section 5.4.2: If the year end of the most recent completed audit (or review) is earlier than nine (9) months prior to the issuance date of this RFP, then the most recent unaudited financial statement (consisting of items b, c, d and e above) shall also be provided by the Proposer in addition to the audited statement required in Section 5.4.1. The unaudited financial data will be averaged with the most recent fiscal year audited (or reviewed) financial statement to arrive at the given ratios. Throughout Section 5.4 of the RFP, the emphasis is on the need for audited financial statements. The use of unaudited financial statements alone does not apply to MHM pursuant to the terms of the RFP, but they did apply to other proposers. Both audited and unaudited financial statements were averaged to determine ratios for CMS and Wexford, where their audited financial statements were older than 9 months. This was clearly permissible under Section 5.4.2. MHM’s proposal included audited financial statements dated September 30, 2008, and also additional information, including unaudited financial statements and a financial narrative in which it admitted that its current ratio as of September 30, 2008, was 0.82 and that it had a negative equity of $24.8 million dollars. MHM was fully aware that it could have difficulty meeting the financial ratios before the Department issued the RFP. As early as January 2008, MHM was considering a stock repurchase. MHM knew its existing contract would come up for rebid. MHM also knew that the Department sometimes used financial criteria and financial ratios as pass/fail ratios. MHM was concerned that the stock repurchase would trigger one of those ratios, causing them to lose the contract. In January 2008, Susan Ritchey, MHM's Chief Financial Officer, and Steve Wheeler, MHM's President and Chief Operating Officer, contacted Mr. Law. Ms. Ritchey and Mr. Wheeler wanted to discuss their concerns regarding financial ratios that the Department might require in the future. During the hearing, Mr. Wheeler denied that the contact with Mr. Law had anything to do with the instant RFP. There is no persuasive evidence that Mr. Law gave Ms. Ritchey and Mr. Wheeler inappropriate advice. The independent review by Mr. Law of MHM’s financial documentation resulted in the finding that MHM only met two of the minimum acceptable standards required by Section 5.4 of the RFP. Mr. Law set out his conclusions on a Department form entitled “Phase IV, Financial Documentation Review to Be Completed by Independent CPA.” That sheet reflected that MHM had failed the current ratio with a score of .819, when a ratio of = 9:1 or (.9) was required (item a). Likewise, MHM failed the “Debt to tangible net worth” and the “total equity” criteria (items b and e, respectively), since MHM had a negative equity of $22 million dollars. MHM passed the two remaining criteria. First, it met the minimum existing sales (item d) with sales at $217 million (greater than or equal to $50 million). Second, it met the requirement of the Dun & Bradstreet creditworthiness score (item c), which needed to be less than or equal to 3, with a score of The Dun & Bradstreet score was not noted on the Department review form because MHM had already failed three of the financial minimum acceptable financial standards. MHM disputes the finding that it failed the “Debt to tangible net worth” requirement (item b) which was a ratio of = 5:1 or “less than or equal to 5 to 1, a whole number.” Net worth is the same as equity. Following proper accounting practices and a commonsense reading of this mathematical phrase required that both numbers be whole numbers, neither could be a negative. Put simply, a proposer could only have a maximum of five dollars in debt for every one dollar in net worth to pass this minimum acceptable standard. So, for purposes of evaluating this ratio, once it was determined that MHM had a negative equity of $22 million dollars, there was no way for MHM to pass this critical requirement. The “Debt to tangible net worth” criteria, was meant to be “Debt to net worth.” The computation set out below the criteria reflects the proper calculation needed to find debt to net worth, not debt to tangible net worth. Mr. Law performed the computation for debt to net worth as set out in the description of the computation, which was more advantageous to proposers than debt to “tangible net worth,” and resulted in a more favorable ratio. The ratio of “-1.77,” reflected on MHM's financial documentation review sheet is a mistake because Mr. Law used the number he reached averaging the audited and unaudited financial statements. The correct number is “-2.16,” which is based only on MHM's audited financial statement of September 30, 2008. That is, it was a greater negative number, but still negative. Either way, MHM fails this criteria. MHM had no dollars in net worth as of the issuance date of the RFP. Instead, MHM had a negative net worth of $24,785,000.00 as of the end of its fiscal year on September 30, 2008, as reflected in its audited financial statement. As to item “a”, “Current ratio,” a finding of .819 was reached by taking the total current assets ($23,493) and dividing into that number the total current liabilities ($28,692), both reflected on the MHM’s audited financial statement of September 30, 2008. These numbers taken from MHM’s audited financial statements for total current liabilities; total current assets and total equity represent millions, rounded for accounting purposes. MHM reached a similar finding of .82 using its September 30, 2008, audited financial statements. On the date the RFP was issued, February 5, 2009, MHM’s audited financial statement of September 30, 2009, was indisputably less than 9 months old and was the only financial statement under Section 5.4.2 of the RFP that could be used to compute the ratios in Section 5.4.2. Even if the unaudited financial statement submitted by MHM were averaged with the most recent audited financial statement, as demonstrated by Mr. Law’s attempts to do so, MHM would still not have met the current ratio. Nowhere in the RFP does it allow for the use of unaudited financial statements alone when there are existing audited financial statements. Mr. Law’s completed Phase 4 review of the financial documentation. He returned it to the Department on March 30, 2009. The Department conducted Phase 5 of the review and evaluation process, the Public Opening of the price proposals, on April 2, 2009, in a properly noticed meeting. At that time, the Department knew that there were only two responsive proposals (CMS and Wexford). No public announcement regarding the status of the other proposals had been made at that time. The RFP contained a price cap of $70.00 per inmate per month as reflected in Section 5.11.2 of the RFP and the Price Information Sheet. The intent of the price cap of $70 per month was to achieve a price savings for the Department over what it was then paying for mental healthcare services in Region IV, which was nearly $78.00. The goal of $70 was considered to be possibly unrealistic, but the true intent was to keep from exceeding the current rate of $78.00. At the price opening, the following prices were announced: (a) MHM’s price was $70.00 per inmate per month; (b) the University of Miami’s price was $69.49 per inmate per month; (c) CMS’s price was $74.49 per inmate per month; and (d) Wexford’s price was $95.00 per inmate per month. It was later determined that CMS had also submitted an alternative price sheet. However, the alternative price sheet did not affect the responsiveness of CMS's proposal or the Department's subsequent decision. Based on the fact that CMS’s and Wexford’s proposed prices exceeded the amount set by the RFP, their proposals were deemed non-responsive to the RFP. Consequently, as of April 2, 2009, there were no responsive proposers to the RFP. BPS staff prepared a final score and ranking sheet as required by Section 6.2.7 of the RFP. The scoring and ranking included just the two proposals, CMS and Wexford, that were responsive going into the Phase 5 Price Opening. BPS staff did not perform further scoring and ranking of the two proposals that were non-responsive prior to the Price Opening. Department of Corrections’ Procedure 205.002, entitled “Formal Service Contracts,” addresses the Department’s procedures, terms, and conditions for soliciting competitive offers for certain types of services. The Procedure has separate sections for Invitations to Bid, Requests for Proposals, Invitations to Negotiate and general sections that address all three. There is no requirement in the procedure that addresses the specific situation facing the Department in the mental healthcare procurement. The section of Procedure 205.002 that Petitioner points to, Section (5)(r)3., applies only to instances when the Department is seeking to single source a procurement or negotiate with a single responsive bidder. The section reads as follows in pertinent part: (r) Receipt of One or Fewer Responsive Bids, Proposals or Responses: * * * 3. If the department determines that services are available only from a single source or that conditions and circumstances warrant negotiation with the single responsive bidder, proposer, or respondent on the best terms and conditions, the department’s intended decision will be posted in accordance with section 120.57(3), F.S., before it may proceed with procurement. This section of the procedure is clearly inapplicable in the instant case since there were no responsive proposals. Section 287.057(6), Florida Statutes (2008) Faced with no responsive proposers, the Department considered its options. The Department then decided to negotiate for a contract on best terms and conditions pursuant to Section 287.057(6), Florida Statutes (2008), in lieu of going through a third competitive solicitation. The Department’s decision to negotiate was ultimately made by the Assistant Secretary for Health Services in the Department's Office of Health Services. The BPS staff and legal counsel advised Assistant Secretary Dr. Sandeep Rahangdale about the options available to the Department. Dr. Rahangdale had the following three options: (1) to reject all proposals and begin what would be the third competitive procurement for mental healthcare services in less than 8 months; (2) to negotiate a contract on best terms and conditions under Section 287.057(6), Florida Statutes (2008), since there were less than two responsive proposals to the RFP; or (3) to use the statutory exemption for health services under Section 287.057(5)(f), Florida Statutes (2008), and enter into a contract with any vendor the Department selected. Option 1, to begin a new procurement was time-barred because the Department needed a new contract in place by July 1, 2009. Dr. Rahangdale’s primary concern was to insure that the Department provided constitutionally mandated health care, including mental healthcare to all inmates in its custody. In making the decision to negotiate, Dr. Rahangdale reasonably chose to begin negotiations with CMS. He made this decision because, of the two proposers who were responsive except for exceeding the price cap, CMS’s price was closest to the $70.00 per inmate per month goal. Wexford, the other proposer that was responsive except for price, had submitted a price of $95.00 per inmate per month. Thus, the Department had a reasonable belief there was a better chance of reaching its $70 goal through negotiations with CMS. Additionally, CMS was the highest scored technical proposal of the only two responsive proposals prior to the Price Opening. Thus, CMS was a better choice for the Department from a delivery of services standpoint. The Department made a reasoned decision to not abandon all the criteria of the RFP that had to do with qualifications, such as business experience (failed by University of Miami) or financial viability (failed by MHM). Dr. Rahangdale considered and determined that the nature of MHM’s and the University of Miami’s failure to be responsive could not be changed or cured in the negotiation process unless the Department lowered its expectations regarding performance and corporate viability. Negotiations were conducted between April 7, 2009, and April 9, 2009, by Jimmie Smith of the Office of Health Services. Dr. Rahangdale instructed Mr. Smith to undertake negotiations with CMS on best terms and conditions, and to strive to get as close as possible to a price of $70.00 per inmate per month in the negotiations. Mr. Smith is a Registered Nurse working in the Department’s Office of Health Services. His working job title is Assistant Program Administrator/Contracting. He has the responsibility to contact potential vendors for health-related services and commodities and to ensure that formal contracts or purchase orders are issued for the required health-related services and commodities. Mr. Smith typically is charged with making initial contact with vendors, handling negotiations for exempt health service contracts, and coordinating the procurement of the services with BPS. He is also a contract manager for healthcare services and advises other contract managers. Mr. Smith was eminently well qualified to negotiate this contract for mental healthcare services on behalf of the Department. Prior to beginning his negotiations, Mr. Smith obtained a complete copy of CMS’s proposal, including the price proposal. He contacted CMS'S Senior Director of Business Development, Frank Fletcher, by telephone to conduct the negotiations. Emails dated April 9, 2009, between the Department and CMS’s representative reflect an offer by CMS to perform the scope of work described in the RFP at a capitated rate of $70.00 for the first year of service, with a $2.50 escalator per year for a five-year non-renewal contract term. CMS also proposed adding a 30-day period for correction of performance measures, prior to the imposition of liquidated damages. The Department counter-offered with a requirement that any failure to correct the performance measure violation within the 30-day period would result in retroactive imposition of liquidated damages to the day of the violation. These terms and conditions were presented to Dr. Rahangdale who approved them. Dr. Rahangdale considered the $2.50 escalator, but decided he was satisfied with the initial year price of $70, a 10% savings for the Department over its current contract and a savings of three million over the life of the contract. On April 10, 2009, Mr. Smith confirmed the tentative agreement to Mr. Fletcher by email. CMS understood that the agreement was tentative until the Department posted a notice of agency decision. The BPS staff prepared an Agency Action Memo, the Summary Report, and the Notice of Intent to Award. The Agency Action Memo contained a recommendation for award and an option of non-award. The Agency Action Memo stated as follows in part: The Department made the determination that it was in the best interest of the State to proceed with negotiations as authorized by Section 287.057(6), Florida Statutes. The Department negotiated with the highest- ranked Proposer on the best terms and conditions for the resulting Contract. Based upon the results of the negotiation conducted, it is recommended that the Department awards a Contract to Correctional Medical Services, Inc. A Summary Report was attached to the Agency Action Memo. The report explained the RFP process in detail. It explained the reasons for finding MHM and the University of Miami non-responsive. It explained that CMS and Wexford were non-responsive because they exceeded the price cap. 55.. The report charted the results of the Phase 5--Public Opening of Price Proposals as follows in abbreviated form: PROPOSER UNIT PRICE ANNUAL COST FINANCIAL EXPERIENCE CMS $74.59 $16,536,780 Passed Passed Wexford $95.00 $21,090,000 Passed Passed U. of M. $69.49 $15,426,780 Passed Failed MHM $70.00 $15,540,000 Failed Passed The report set forth the Department's reasons for negotiating on best terms and conditions pursuant to Section 287.057(6), Florida Statutes (2008), in pertinent part as follows: Phase 8--Notice of Agency Decision The procurement of Mental Healthcare Services in Region IV was under competitive solicitation for over eight (8) months, via two (2) different solicitations (ITN and RFP). The companies that submitted proposals in response to this RFP also submitted responses to the previous ITN. Pursuant to Section 287.057(6), Florida Statutes, the Department negotiated with the highest-ranking proposer on the best terms and condition and in the best interest of the state, in lieu of resoliciting competitive proposals for a third time. The last page of the report charted the Final Score and Ranking for CMS and Wexford. The first chart showed the actual points received by the proposers, the highest points received by any proposal, and the awarded points. The second chart showed the proposed unit price, the lowest verified price, and the awarded points. The third chart showed the total response points, with CMS having 500 and Wexford having 454.64. MHM and the University of Miami were non-responsive as to RFP requirements that the Department, in its sole discretion, determined were non-negotiable. Therefore, the Department properly determined that CMS was the highest-ranking proposer after the Price Opening. As Bureau Chief, Mr. Staney was ultimately responsible for verifying that the four proposals were non-responsive. He and Dr. Rahangdale signed the Agency Action Memo, recommending an award to CMS. On April 15, 2009, Mr. Staney sent the documents to his supervisor, Director of Administration Millie J. Seay. The BPS staff briefed Ms. Seay regarding the Agency Action Memo. Ms. Seay questioned whether the Department should negotiate with Wexford. The BPS staff explained that Dr. Rahangdale had considered negotiating with Wexford but that he was satisfied with the negotiated rate and the higher technically-scored proposal from CMS. On Monday, April 20, 2009, Ms. Seay signed the Agency Action Memo. The next day the Department posted its intent to award a contract to CMS. The Department's Notice of Agency Decision announced the intent to award a contract for Mental Healthcare Services in Region IV to CMS as follows: DEPARTMENT OF CORRECTIONS NOTICE OF AGENCY DECISION RFP #08-DC-8048 MENTAL HEALTHCARE SERVICES IN REGION IV Pursuant to the provisions of Chapter 287.057(6), Florida Statutes, the Department of Corrections announces its intent to award a contract for MENTAL HEALTHCARE SERVICES IN REGION IV to the following vendor: Correctional Medical Services, Inc. This announcement gave all interested parties notice that the Department was taking some action with regard to the referenced RFP. The Notice also contained the statutorily required language giving all interested parties a point of entry to challenge the Department’s intent to award. Accordingly, no proposers were denied an opportunity to inquire into the details of the process that led to an award under the referenced statute, including the evaluation of the proposals and the Department’s decision to wait until it had completed Section 287.057(6), Florida Statutes (2008), negotiations to post the intended agency decision. 63 MHM timely filed its Formal Bid Protest Petition with the Department on May 4, 2009.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is Recommended: That the Department enter a final order awarding the contract for Mental Healthcare Services in Region IV to CMS and dismissing the protest of MHM. DONE AND ENTERED this 27th day of July, 2009, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD 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 27th day of July, 2009.
The Issue The issue in this case is whether Respondent is guilty of failing to pay Petitioner for the expenses of an examination and, if so, what penalty should be imposed.
Findings Of Fact Respondent is a licensed Florida domestic insurer operating under a current certificate of authority. Prior to the above-styled proceeding, Petitioner and Respondent were involved in another administrative proceeding. Petitioner seeks in the subject case to impose discipline for Respondent's refusal to reimburse Petitioner for audit expenses incurred during and after the prior administrative litigation. In DOAH Case No. 87-4518, Petitioner alleged, by Notice and Order to Show Cause filed September 11, 1987, that Respondent was in unsound financial condition, using methods of business that rendered its further transacting of insurance hazardous to policyholders and the public, in violation of a lawful order or rule of Petitioner, and in a financial condition that endangered the interests of policyholders, especially because its ratio of net premiums written to surplus exceeded 4:1. The Notice and Order to Show Cause alleges that the projected annualized ratio of net premiums written to surplus would exceed 4:1 by year- end; Respondent was not properly reserving for losses and expenses in connection with liability policies; the annual and quarterly statements reflect a continuing serious deficiency in loss reserves; financial deterioration seriously endangered the welfare of policyholders and the public; and major material discrepancies existed between Respondent's 1986 annual statement filed with Petitioner and Respondent's 1986 audited annual financial statements. The major material discrepancies between the financial statements consisted of allegations that the surplus was overstated by $41,327 in the annual statement filed with Petitioner; the loss adjustment expenses and loss reserves were carried at $1.4 million on the annual statement filed with Petitioner, but $2.7 million on the financial statement; and the unearned premiums were carried at $3.5 million on the annual statement filed with Petitioner, but $2.1 million on the financial statement. Three days prior to the filing of the Notice and Order to Show Cause, Petitioner commenced a financial examination of Respondent. The examination, which began on September 8, 1987, was a target examination. The other type of financial examination conducted by Petitioner is a triennial examination, which is performed not less frequently than every three years. Unlike the triennial examination, a target examination focuses on particular matters--in this case discrepancies between financial statements. Because Respondent commenced doing business on April 5, 1985, it had not yet been the subject of a triennial examination. The target examination is also different from an investigation, which focuses on the business practices of individuals rather than financial matters of insurers. Due to a perceived lack of reliability with respect to Respondent's accounting records, the scope of the examination was extended to include an analysis of all of Respondent's accounts. This broadening of scope took place during the first audit examination, which culminated with the Report on Examination for the period ending June 30, 1987. With respect to its examination of Respondent, Petitioner incurred, during the months indicated, the following audit expenses, all of which are reasonable: September, 1987 $7,889.00 October, 1987 10,682.00 November, 1987 10,678.00 December, 1987 8,931.65 January, 1988 10,401.00 February, 1988 2,051.80 March, 1988 645.40 July, 1988 237.70 August, 1988 5,795.80 September, 1988 5,564.40 October, 1988 2,645.40 January, 1989 610.80 TOTAL $66,132.95 10. On April 13, 1988, counsel for Petitioner and Respondent in DOAH Case No. 87-4518 met to discuss a settlement. Memorializing the meeting, Respondent's counsel acknowledged by letter dated April 13 that Petitioner's counsel indicated a desire "to go back into the company for the purpose of bringing forward the audit that was completed earlier this year." Respondent's counsel suggested a date for Petitioner's auditors to commence another audit and advised that he would postpone discovery in the hopes of settling many of the issues. Negotiations proved successful. On July 14, 1988, the final signatures were affixed to a Joint Settlement Stipulation for Agreed Order (Stipulation). The Stipulation recites in material part: [Petitioner] conducted an investigation of [Respondent], and alleged that it was in violation [of] certain provisions of the Florida Insurance Code. These violations included its ratio of net premiums written to surplus as to policyholders and its statutory insurer capital and surplus requirements. [Petitioner] conducted an examination of the company and on March 24, 1988, issued a Report on Examination of [Respondent] as of June 30, 1987. The Stipulation provides that the Insurance Commissioner may enter an order providing, among other things, that the Stipulation shall be incorporated by reference and that "[e]ach party to this case shall bear its costs, expenses and fees, including attorney's fees." The reference to "expenses" was added at the request of Respondent's counsel. The Consent Order, which was filed August 2, 1988, incorporates by reference the Stipulation and provides that "each party to this proceeding shall bear its own costs and attorney's fees." In November or early December, 1988, Respondent received an invoice for audit examination fees incurred from August through October, 1988. As was the case with prior invoices, the invoice recited a past-due amount. A letter dated December 15, 1988, from Respondent's president responds to the invoice by stating that the past-due amount is "apparently for fees and expenses incurred by [Petitioner] in performance of an audit examination done during the months of September, 1987 through April 1988. This obligation has been satisfied by [the] . . . Stipulation . . .." The December 15 letter does not object to the audit fees incurred during August through October, 1988. The December 15 letter notes that Petitioner, immediately after filing the Notice and Order to Show Cause in September, 1987, began a "complete audit . . . to support its allegations that [Respondent] was in financial circumstances justifying the . . . Order to Show Cause." The letter adds that, pursuant to the Stipulation, Respondent bore its accounting expenses in connection with the audit examination, just as Petitioner must bear its audit examination expenses. The audit examinations conducted prior to the settlement of DOAH Case No. 87-4518 served the purpose of discovery for Petitioner. Respondent never sought a protective order as to these fact-finding efforts. Although Petitioner conducted no investigation, the allegations in DOAH Case No. 87- 4518 involved Respondent's financial condition, not the business practices of individuals, so an investigation would have been inappropriate. The early audit examinations culminated in a Report on Examination for the period ending June 30, 1987. The Report on Examination was issued on March 24, 1988. Later audit examinations culminated in a Report of Examination for the period ending June 30, 1988. This Report of Examination, which was issued on February 26, 1988, states: This is the second report on examination of [Respondent] and represents a continuation and follow-up to the report filed as of June 30, 1987. The effect of the Stipulation and ensuing Consent Order is that Petitioner agreed to absorb all audit examination expenses incurred through the preparation of the Report on Examination for the period ending June 30, 1987. These audit examination expenses ended on or about March 24, 1988, when the first Report on Examination was issued. The March, 1988, audit expenses of $645.40 appear to be related to the issuance of the first Report on Examination because all of the activity occurs in the four days prior and two days after March 24. The audit examination expenses incurred through the preparation of the Report on Examination for the period ending June 30, 1987, total $51,278.85. The letter of December 15, 1988, from the president of Respondent disputes the past-due billing of $51,278.85 because "this obligation" was discharged by the Stipulation. This letter ignores the current billing for audit expenses incurred during August through October, 1988, because the writer knew that these fees were not intended to be covered by the Stipulation. The letter of April 13, 1988, from Respondent's counsel acknowledges the hiatus disclosed by the monthly statements. By April 13, 1988, there had been a break in audit examinations. The April 13 letter discusses an "updated audit" beginning perhaps May 9, 1988; covering the March 31, 1988, quarter; and hopefully taking less than the five months expended in the first audit resulting in the Report on Examination for the period ending June 30, 1987. In effect, the April 13 letter seeks a settlement in the near future, so that discovery need not be begun, while recognizing that another audit would not be completed for several months. The author of the April 13 letter claims that he intended to include in a settlement agreement, which he hoped would be finalized in the near-term, future audit expenses to be incurred over a period of months. If so, the burden was on the author to identify explicitly these future expenses in the Stipulation.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Insurance enter a final order suspending the certificate of authority of Respondent until the earlier of: a) six months or b) such time as Respondent complies with prior lawful orders of the Department of Insurance by remitting the sum of $14,854.10 and pays an administrative fine of $2500. ENTERED this 15 day of July, 1992, in Tallahassee, Florida. ROBERT E. MEALE 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 15 day of July, 1992.
The Issue Whether the Respondent, the Health Care Cost Containment Board, should waive the requirement that Golden Glades Regional Medical Center file its audited actual experience or was the Respondent correct in declining to review the Petitioner's fiscal year 1990 proposed budget?
Findings Of Fact On or about September 26, 1989, the Petitioner filed its proposed budget for its fiscal year beginning January 1, 1990, and ending December 31, 1990, with the Respondent. The Petitioner's proposed 1990 budget was submitted pursuant to Section 407.50(3), Florida Statutes. The Respondent determined that the Petitioner's proposed 1990 budget should not be approved. The Respondent proposed in its preliminary findings and recommendations to hold the Petitioner to its 1988 budget levels of gross revenue per adjusted admission of $8,532.00 and net revenue per adjusted admission of $5,835.00. About the same time that the Petitioner filed its proposed 1990 budget, the Petitioner filed unaudited financial statements for its fiscal year ending December 31, 1988, with the Respondent. The financial statements were not accompanied by an audit opinion letter from the Petitioner's certified public accountants. Therefore, the statements did not constitute "audited actual experience" or "audited actual data". The Respondent rejected the Petitioner's proposed 1990 budget because of the Petitioner's failure to file audited actual experience. Hospitals subject to Chapter 407, Florida Statutes, are required to file audited actual experience which is used by the Respondent in reviewing hospital budgets. In February or March, 1989, the Petitioner retained an independent, Florida licensed certified public accountant (hereinafter referred to as the "Auditors"), to prepare audited financial statements for its 1988 fiscal year. The Auditors completed all the field work they could complete in April or May, 1989. An audit opinion letter must be included with an audit report pursuant to generally accepted auditing standards. The Auditors have delayed issuing an audit opinion letter for the Petitioner's 1988 fiscal year, which is required in order to issue audited financial statements. Audit opinion letters typically contain a description of the scope of the work performed by the auditors, a description of the audit process and an opinion concerning whether the financial statements are fairly stated in all material respects in accordance with generally accepted accounting principles. The Auditors have been requested by the Petitioner to withhold issuance of their final audit report for the Petitioner's 1988 fiscal year. As of the date of the formal hearing of this case, the Auditors had not issued an audit opinion letter, and thus an audit report, because they needed to be provided by the Petitioner with information concerning the restructuring of the Petitioner's debt, updated legal letters from the Petitioner's attorneys and a management representation letter from the Petitioner. The Petitioner's source of working capital for its daily operations has been a line of credit with First American Bank. The line of credit expired during 1989. A new source of working capital has not been arranged by the Petitioner. Therefore, the Auditors could not issue an audit opinion letter concluding that the Petitioner is viable as a "going concern." Unless the Petitioner can restructure its debt or find another source of debt-financing, increase its equity capital or achieve profitable operations, the Auditors will not be able to opine that the Petitioner is a going concern. This problem has been in existence almost since the inception of the Petitioner's ownership of the hospital. The Petitioner has requested three extensions of time to file its proposed 1990 budget. It did not inform the Respondent of the debt restructuring problem in any of the extension requests. Without resolving the debt restructuring problem of the Petitioner, the Auditors cannot determine what effect a renegotiation of the Petitioner's debt may have on the Petitioner's financial statements for its 1988 fiscal year. There will be uncertainty concerning the 1988 fiscal year financial statements of the Petitioner until the Auditors issue their final audit report. If the Auditors issued an opinion letter as of the date of the formal hearing, they would have to issue a "disclaimer" letter. In issuing a disclaimer, an auditor declines to render an opinion concerning the financial statements. To avoid a disclaimer opinion letter, the Petitioner requested that the Auditors not issue their final audit report. Whether the Petitioner is a going concern does not impact on the calculation of its operational revenues and expenses as represented in the Petitioner's unaudited 1988 fiscal year financial statements. If the Petitioner is not considered a going concern the Petitioner would be considered on a liquidation basis for purposes of its financial statements. Therefore, the question of whether the Petitioner is a going concern does impact the manner in which its assets would be valued and the determination of the Petitioner's liabilities. A management representation letter, which the Auditors also need to complete their audit of the Petitioner, is a letter from the management of a business, such as a hospital, representing that management has made available all of the books and records of the hospital, that management understands generally accepted accounting principles and the financial statements of the hospital have been prepared in accordance with such principles, that all liabilities have been accrued and that proper disclosures have been made in the financial statements. A management representation letter is required by the American Institute of Certified Public Accountants before an audit opinion letter may be issued. A management representation letter should provide assurances to the auditors that management has made available all financial records and related data, and minutes of the meetings of the stockholders and directors, if a corporation, and that there are no irregularities involving management employees that could have a significant effect on the financial statements. Without a management representation letter there are no assurances that a hospital such as the Petitioner's has engaged in related-party transactions or, if so, the nature and impact on expenses of such transactions. In addition to submitting unaudited financial statements to the Respondent, the Petitioner provided the Respondent with a "comfort letter" from the Petitioner's Auditors. The Respondent needs audited actual experience in order for it to perform a full budget review of a hospital's proposed budget submitted pursuant to Section 407.50(3), Florida Statutes. The financial data contained in the audited actual reports of a hospital is used in the methodologies and formulas utilized by the Respondent in its budget review. The purpose of conducting a budget review is to determine the recommended levels of charges that a hospital may impose upon its patients in the budget year. Audited actual experience provides the starting point for determining whether a hospital's proposed budget is reasonable. A comfort letter merely indicating that the information on the financial statements should not change is not sufficient to provide the reliability the Respondent should demand of a hospital's financial statements. The Respondent's budget review includes an analysis of a hospital's ability to earn a reasonable rate of return. This analysis requires reliance upon the financial data contained in the hospital's balance sheet and income statement. The data must be reliable. Accuracy of the data can only be assured if it is part of an auditor's final report. As part of the audited actual experience of a hospital such as the Petitioner's hospital, it is reasonable for the Respondent to require that an audit opinion letter be provided. Without an audit opinion letter the Respondent cannot determine whether there are any disclaimers, qualifying statements or notes about subsequent events of the hospital. The Respondent does not have the resources necessary to perform its own audit of hospitals. Therefore, it is reasonable for it to require that hospital's provide audited actual experience to the Respondent. The rules of the Respondent allow it to waive the requirement that a hospital file audited financial statements. Rule 10N-1.006, Florida Administrative Code. The Respondent grants waivers pursuant to Rule 10N-1.006, Florida Administrative Code, if it is "impossible" for a hospital to file audited financial statements. The Petitioner did not file a request for such a waiver. The evidence failed to prove that the Respondent was prejudiced by the Petitioner's failure to file a request for a waiver. The Petitioner has failed to prove that the information necessary for it to file audited financial statements for its 1988 fiscal year was "not available at the time nor can be reasonably developed by the hospital " Unaudited financial statements may be relied upon for some purposes. The Respondent relies upon unaudited data for some purposes. But not for full budget review purposes. The weight of the evidence failed to prove that it is unreasonable for the Respondent to refuse to rely upon the Petitioner's 1988 fiscal year unaudited financial statements to complete the budget review the Respondent is required to conduct for 1990.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent issue a Final Order dismissing the Petitioner's Petition for Administrative Hearing. DONE and ENTERED this 31st day of May, 1990, in Tallahassee, Florida. LARRY J. SARTIN 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 31st day of May, 1990. APPENDIX TO RECOMMENDED ORDER The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. The Petitioner's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1-7 and hereby accepted. The last two sentences of proposed finding of fact 6 is not supported by the weight of the evidence. 8 2. 9 1-2. 10 3 and 10. See 29. Not relevant. Hereby accepted. The proposed finding of fact that the data on the financial statements "will not change" and the last sentence are not supported by the weight of the evidence. 11-14. The last sentence is not relevant. See 26. 16 See 27-28. The Respondent's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 2. 3 4. Hereby accepted. 2 and 4. 6 6. 7 6-7 and 9. 8 8. 9 9-11. 10 12. 11-12 15. 13 12. 14 21. 15 3, 22 and 29. 16 21-22. 17 22-23. 18 16-19. 19 25. 20 Not relevant. The Intervenor's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 3. 3 2. 4-8 Hereby accepted. 9-11 10. 12 16. 13 18. 14 16-19. 15 11-12. 16 11 and 13. 17 10, 14-15 and hereby accepted. 18 15. 19 Hereby accepted. 20 11. 21 14. 22 Hereby accepted. 23-26 8 27 20 and 22. 28 Hereby accepted. 29 9 and 14. 30 Hereby accepted. 31 8. 32 Not supported by the weight of the evidence. 33 21 and 24. 34 13. 35 12. 36 9. 37 12. 38 13. 39 29. 40 Hereby accepted. 41 26-27. 42 Hereby accepted. 43 9. 44 8 and hereby accepted. 45 21. 46 23. 47 24. 48 25. 49 22. 50 23 and hereby accepted. COPIES FURNISHED: James M. Barclay, Esquire Suite 500 315 South Calhoun Street Tallahassee, Florida 32301 Robert D. Newell, Jr., Esquire 817 North Gadsden Street Tallahassee, Florida 32303-6313 Jack Shreve Public Counsel David R. Terry Associate Public Counsel Peter Schwarz Associate Public Counsel c/o The Florida Legislature 812 Claude Pepper Building 111 West Madison Street Tallahassee, Florida 32399-1400 Stephen Presnell, General Counsel Health Care Cost Containment Board Woodcrest Office Park 325 John Knox Road Building L, Suite 101 Tallahassee, Florida 32303
The Issue The issue for determination is whether Respondent committed the offenses set forth in the Notice to Show Cause, filed on September 14, 2010, and, if so, what action should be taken.
Findings Of Fact The Department is the state agency charged with regulating condominiums, including condominium associations, pursuant to chapter 718, Florida Statutes. At all times material hereto, Whitehall was a condominium association operating in the State of Florida. At all times material hereto, Whitehall was responsible for managing and operating Whitehall Condominium in West Palm Beach, Florida. Pertinent to the case at hand, regarding a condominium's year-end financial statement, section 718.111, Florida Statutes, provides in pertinent part: (13) Financial reporting. --Within 90 days after the end of the fiscal year, or annually on a date provided in the bylaws, the association shall prepare and complete, or contract for the preparation and completion of, a financial report for the preceding fiscal year. Within 21 days after the final financial report is completed by the association or received from the third party, but not later than 120 days after the end of the fiscal year or other date as provided in the bylaws, the association shall mail to each unit owner at the address last furnished to the association by the unit owner, or hand deliver to each unit owner, a copy of the financial report or a notice that a copy of the financial report will be mailed or hand delivered to the unit owner, without charge, upon receipt of a written request from the unit owner. The division shall adopt rules setting forth uniform accounting principles and standards to be used by all associations and addressing the financial reporting requirements for multicondominium associations. The rules must include, but not be limited to, standards for presenting a summary of association reserves, including a good faith estimate disclosing the annual amount of reserve funds that would be necessary for the association to fully fund reserves for each reserve item based on the straight-line accounting method. This disclosure is not applicable to reserves funded via the pooling method. In adopting such rules, the division shall consider the number of members and annual revenues of an association. Financial reports shall be prepared as follows: (a) An association that meets the criteria of this paragraph shall prepare a complete set of financial statements in accordance with generally accepted accounting principles. The financial statements must be based upon the association's total annual revenues, as follows: * * * An association with total annual revenues of $ 400,000 or more shall prepare audited financial statements. (emphasis added). Whitehall's annual revenue is in excess of $400,000.00. Therefore, Whitehall is required to produce audited year-end financial statements. Whitehall's fiscal year coincided with the calendar year. As a result, Whitehall's 2009 year-end financial statement was due on or before May 1, 2010. On December 11, 2009, Whitehall engaged Hafer Company, LLC (Hafer), a Certified Public Accountant (CPA) firm, to produce its audited 2009 year-end financial statement. Whitehall must rely upon a third-party vendor, such as Hafer, to produce its audited financial statement. Hafer assigned Nicole Johnson as the auditor to produce Whitehall's audited 2009 annual financial statement.4/ Ms. Johnson's process involved, among other things, preparing a draft audit; providing a draft audit to the condominium board, which reviews the draft audit with Ms. Johnson; and then preparing the final audit. Whitehall's engaging Hafer in December 2009 did not contribute to any delay in producing Whitehall's audited financial statement. Ms. Johnson wanted to begin the auditing process early and made a request to Whitehall to begin on or about January 6, 2010, but Whitehall was not prepared to go forward at that time. She was not concerned with beginning at a later date because, among other things, her suggested date was an early date for beginning the auditing process. Whitehall's day-to-day bookkeeping and accounting was performed by a third-party vendor, The Accounting Department, Inc. (Accounting). On February 3, 2010, Ms. Johnson met with Accounting's representative who was handling the day-to-day bookkeeping and accounting. Having the meeting occur in February 2010 was not late or abnormal in the ordinary course of preparing an audited year-end financial statement for a condominium; and did not contribute to any delay in Ms. Johnson's producing Whitehall's audited 2009 year-end financial statement. On February 3, 2010, Ms. Johnson began her field-work and received the primary bulk of the accounting information necessary to complete the audit. From February 3, 2010, Ms. Johnson maintained communication, whether by telephone, email, or other methods of communicating, with Whitehall's directors and officers, and its property manager, Michael Weadock, who is a licensed Community Association Manager (CAM). Ms. Johnson's communications included requesting additional information, asking questions, and obtaining clarifications regarding items for the audited year-end financial statement. One of the items needed by Ms. Johnson to complete the audited year-end financial statement was independent verification from Whitehall's banks regarding Whitehall's certificates of deposit (CDs). Ms. Johnson, as the auditor, was responsible for obtaining the independent verification of the CDs from Whitehall's banks. Due to the economic crisis, which occurred in 2009, banks nationwide were taking an unusual amount of time to respond to auditors' requests associated with the independent verification of bank account information. The banks from which Ms. Johnson was requesting independent verification were no different. She did not receive independent verification of Whitehall's CDs until after the May 1, 2010, due date for Whitehall's audited 2009 financial statement. Whitehall could do nothing to expedite the banks' response to Ms. Johnson's requests. Additionally, on May 28, 2010, Ms. Johnson sent an email to Mr. Weadock requesting additional items that were outstanding. The requested items were non-bank items and were not items that would delay the completion of a draft audit, but were required for the final audit. The next business day, Whitehall provided the requested items. Whitehall had control over these non-bank items, which delayed completion of the final audit. Subsequently, Ms. Johnson received the independent verification of Whitehall's CDs from the banks. On June 23, 2010, Ms. Johnson completed Whitehall's audited 2009 Financial Statement and forwarded a copy to the Department. Even though the final audit was not completed until June 23, 2010, on or about June 10, 2010, Whitehall posted on its bulletin board a notice indicating that copies of the audited 2009 Financial Statement were available in its office. However, subsequently, another notice was posted on the bulletin board indicating, among other things, that copies of the audited 2009 Financial Statement would be available at the Board of Directors Meeting on July 1, 2010, in order to provide for the completion of the audited year-end financial statement. Whitehall does not dispute that neither notice complies with the manner/method of delivery requirement in section 718.111(13). Additionally, Whitehall provided notice to its unit owners as to the availability of the audited 2009 Financial Statement through its community television channel, website, and email blast. This same manner/method of sending the notices to unit owners was used in the past by Whitehall. Whitehall does not dispute that this manner/method of providing notice does not comply with the manner/method of delivery requirement in section 718.111(13). At the time of hearing, Whitehall had not provided its unit owners with a copy of the audited 2009 Financial Statement by mail or hand-delivery. Whitehall has prior disciplinary history regarding its failure timely to prepare and provide its audited year-end financial statements in prior years. On April 1, 2010, Whitehall and the Department entered a Consent Order resolving several statutory violations. One of the violations in the Consent Order was Whitehall's failure timely to prepare and provide its 2005, 2006, 2007, and 2008 audited year-end financial statements. As to this violation, the Consent Order concluded that Whitehall failed timely to prepare and provide the audited year-end financial statements for the four consecutive years. The Consent Order did not include a violation of the manner/method of delivery of notices regarding the year-end financial statements for the four consecutive years. Subsequent to the Consent Order, the Department received a complaint from a one of Whitehall's unit owners regarding Whitehall's failure timely to provide a copy of the 2009 audited year-end financial statement. The Department's usual practice is that, if a repeat violation occurs within a two-year period, administrative action is taken resulting in a consent order or notice to show cause. Considering the recent Consent Order, the Department followed its usual practice and appropriately pursued the complaint. On September 14, 2010, the Department filed a Notice to Show Cause against Whitehall, which is the subject matter of the instant case. Even though the unit owner's complaint did not include the manner/method in which notice was provided, the evidence fails to demonstrate that the Department was restricted to investigate only that which was complained of. The evidence fails to demonstrate that the Department's investigation of a violation of section 718.111(13) by Whitehall was improper. Further, the evidence fails to demonstrate that the Department's enforcement of the requirements of section 718.111(13) was selective enforcement against Whitehall. The evidence demonstrates that the Department participated in this proceeding primarily due to Whitehall having previously, within a short period of time, violated section 718.111(13) regarding Whitehall's failure timely to provide its unit owners a copy of audited year-end financial statements. Additionally, the evidence fails to demonstrate that either the Department or Whitehall needlessly increased the cost of litigation in the instant case.5/ Consequently, the evidence fails to demonstrate that the Department participated in this proceeding for an improper purpose as defined by section 120.595(1)(e)1.6/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Florida Condominiums, Timeshares, and Mobile Homes, enter a final order: Finding that Whitehall Condominiums of the Villages of Palm Beach Lakes Association, Inc., violated section 718.111(13), Florida Statutes, by failing to deliver, in the manner authorized by statute, a copy of its audited 2009 year- end financial statement to all of its unit owners no later than 120 days after the end of the fiscal year, and by failing to make audited 2009 year-end financial statement available in the manner authorized by statute, when it became available; and Imposing a fine in the amount of $5,000.00. DONE AND ENTERED this 21st day of May, 2013, in Tallahassee, Leon County, Florida. S ERROL H. POWELL 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 21st day of May, 2013.
The Issue Whether petitioner should take disciplinary action against respondent for the reasons alleged in the administrative complaint?
Findings Of Fact Respondent Marc M. Harris holds a license to practice certified public accounting in Florida, No. AC 16869. Respondent compiled, permitted his name to be associated with, and issued a balance sheet or statement of financial position, including notes, for MMH Equity Fund, Inc., purporting to represent the company's position as of March 31, 1988. Petitioner's Exhibit No. 1; Petitioner's Request for Admissions Nos. 4, 5 and 6. The body of respondent's letter accompanying the balance sheet or statement of financial position reads: We have compiled the accompanying balance sheet of MMH Equity Fund, Inc., as of March 31, 1988, except as noted in the last paragraph, in accordance with the standards established by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements information that is the representation of the individual. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any form of assurance on them. MMH Equity Fund, Inc., has elected to use the equity method to report its holdings in majority-owned subsidiaries. If the consolidated disclosures were included in the financial statements, they might influence the user's conclusions about the Fund's financial position. Accordingly, these financial statements are not intended for those who are not informed about such matters. Petitioner's Exhibit No. 1 (Emphasis supplied.) Dated April 15, 1988, the letter evinces an intention to qualify the balance sheet or statement of financial position. But the balance sheet or statement of financial position does not contain a reference to the accountant's report or to the notes. Petitioner's Request for Admissions Nos. 32 and 33; Petitioner's Exhibit No. 1; T. 26. While the letter refers to a "balance sheet," the document itself is styled a statement of financial position. Statements on Standards for Accounting and Review Services (SSARS), which have been adopted by Florida's Board of Accountancy, require that the balance sheet contain a reference to the accountant's report and notes to the financial statement, if any. Petitioner's Request for Admission No. 34; T. 26- This is particularly important when the report contains significant qualifications. Lack of Independence Undisclosed Respondent Harris was an officer and/or a director of MMH Equity Fund, Inc. Petitioner's Request for Admission No. 41. A company's officer or director is not independent of the company. In evaluating financial assets, liabilities and equity or net worth, certified public accountants offer three levels of service: audit, review and compilation. Certified public accountants are forbidden to undertake audits or reviews for entities with respect to which they are not independent. In contrast, nothing prohibits a certified public accountant's performing a compilation, despite a lack of independence. But the lack of independence must be disclosed: If the accountant is not independent, he should specifically disclose the lack of independence . . . When the accountant is not independent, he should include the following as the last paragraph of his report: I am . . . not independent with respect to XYZ Company. Statements on Standards for Accounting and Review Services, (SSARS) Section 100.22 (Jan. 1, 1987). The respondent's lack of independence was not disclosed in the accountant's report, on the statement of financial position, or in the notes. Petitioner's Exhibit No. 1; Petitioner's Request for Admission No. 42; T. 30, 31. Accepted Principles Disregarded A provision in SSARS 1 requires the accountant "to read the financial statements and make certain that there are no obvious deviations from generally accepted accounting principles." T. 29. This requirement applies specifically to compilations, to prevent disregard for generally accepted accounting principles. Petitioner's Exhibit No. 7; T. 29. Respondent did not adhere to applicable generally accepted accounting principles or exercise due professional care in compiling and issuing the March 31, 1988, statement of financial position for MMH Equity Fund, Inc. Assets should equal equity plus liabilities. T. 11. On the compiled balance sheet or statement of financial position, total liabilities and stockholders' equity do not add up to the amount stated as total assets. The document reflects a discrepancy of $100,000. Petitioner's Exhibit No. 1; T. 11. The balance sheet or statement of financial position puts total assets at $13,171,000 but, as stated individually, they add to $13,216,000. Petitioner's Exhibit No. 1; Petitioner's Request for Admissions Nos. 9 and 10. The balance sheet or statement of financial position shows investment in operating affiliates in the amount of $6,234,000. But there is no further disclosure as to who or how many those affiliates are; as to how much of the $6,234,000 is invested in any one entity; or as to what percentage of ownership MMH Equity Fund, Inc. has in any one entity. Petitioner's Exhibit No. 1; T. 18. With respect to investments accounted for by the equity method, Accounting Principles Board Statement No. 18 requires that the name of each investee and the percentage of the investor's ownership of common stock, if significant, be disclosed in the notes. Petitioner's Request for Admissions No. 25; Petitioner's Exhibit No. 4; T. 17-20. If the certificates of deposit were held by related parties, they should have been disclosed in the notes. T. 22. Financial Accounting Standards Board Statement No. 57 requires that the name and amount or amounts due to or from related parties be disclosed. Petitioner's Exhibit No. 5; T. 23. The notes do not disclose the balances of major classes of depreciable assets by nature or function. Petitioner's Requests for Admissions Nos. 15 and 16; Petitioner's Exhibit No. 1; T. 15. Accounting Principles Board Statement No. 12 requires that depreciable assets be broken down by class together with the accumulated depreciation thereon. T. 16; Petitioner's Exhibit No. 3. Neither the gross amount of assets in the balance sheet nor the accumulated amortization for the assets recorded under capital leases is disclosed in the notes. Petitioner's Requests for Admission Nos. 26 and 27; Petitioner's Exhibit No. 1; T. 24. The notes do not disclose accumulated depreciation by class nor do the notes disclose total accumulated depreciation. Petitioner's Requests for Admissions Nos. 18 and 19; Petitioner's Exhibit No. 1; T. 15 and 16. Neither the aggregate cost nor the market value of marketable securities is disclosed on the balance sheet or statement of financial position or in the notes. Petitioner's Requests for Admissions Nos. 29 and 30; Petitioner's Exhibit No. 1; T. 25. The requirement is that both the original cost and market value be disclosed. Petitioner's Request for Admissions No. 31; T. 25. No allowance for doubtful accounts is disclosed on the balance sheet or statement of financial position or in the notes, and no explanation is offered why such an allowance might be unnecessary. Petitioner's Request for Admissions No. 21; Petitioner's Exhibit No. 1; T. 16. Accounting Principles Board Statement No. 12 requires either that allowance for doubtful accounts be made or that an explanation as to why one is not needed be included in the notes. Petitioner's Request for Admissions No. 22; Petitioner's Exhibit No. 3; T. 16, 17. Neither the March 31, 1988, compiled balance sheet or statement of financial position for MMH Equity Fund, Inc. nor the notes disclose any maturity schedule for long term notes. But these long term notes represent indebtedness of $11,000, or less than one thousandth of total assets, and the omission of a maturity schedule is immaterial.
Recommendation It is, accordingly, recommended that the Board of Accountancy reprimand respondent; and place him on probation, on condition that he not practice in Florida without supervision by another certified public acountant licensed in Florida, until he has practiced in Florida under the supervision of another certified public accountant licensed in Florida satisfactorily for a year; and completed 24 hours of continuing education in generally accepted accounting principles. RECOMMENDED this 12th day of September, 1990, in Tallahassee, Florida. ROBERT T. BENTON, II 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 12th day of September, 1990. COPIES FURNISHED: Charles F. Tunnicliff, Esquire Tobi C. Pam, Senior Attorney Department of Professional Regulation 1940 North Monroe Street Tallahassee, FL 32399-0792 Marc M. Harris Apartado 6-1097 Estafeta El Dorado Panama, Republica de Panama Kenneth E. Easley, General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, FL 32399-0792 Martha Willis Executive Director Department of Professional Regulation Suite 16 4001 Northwest 43rd Street Gainesville, FL 32606 =================================================================
The Issue The issue to be resolved in this proceeding concerns whether the Respondent has violated Subsection 475.25(1)(b), Florida Statutes; Subsection 475.25(1)(d)1, Florida Statutes; Subsection 475.25(1)(k), Florida Statutes; Subsection 475.42(1)(a), Florida Statutes; Subsection 475.25(1)(e), Florida Statutes; by being guilty of culpable negligence or breach of trust; by allegedly failing to promptly deliver a deposit; by allegedly failing to maintain trust funds in a proper escrow account; by allegedly depositing or intermingling personal funds with trust funds or escrow funds; by operating as a broker without holding a valid, current license; and by failing to preserve and make available to the agency all books, records, and supporting documents and by allegedly failing to keep an accurate account of all trust-fund transactions.
Findings Of Fact The Petitioner is an agency of the State of Florida charged with licensing and regulating the practice of real estate brokers and salespersons licensed in the State of Florida. It has the duty to prosecute with Administrative Complaints any alleged violations of Chapter 475, Florida Statutes, and related laws and rules, involved in the licensure and regulation of real estate brokers and salespersons. The Respondent, Richard Irwin Ray, is now and was, at all times pertinent to this case, a licensed real estate broker in the State of Florida. He was issued license number 0423296, in accordance with Chapter 475, Florida Statutes. The last license issued to him was as a non-active broker, bearing an address of 10013 Calle de Celestino, Navarre, Florida 32566. The Respondent, at times pertinent hereto, was the licensed and qualifying broker for the now-defunct Navarre Shores Realty, Inc. for the period from October 31, 1985 to approximately November 6, 1989. The Respondent and Navarre Shores Realty, Inc. failed to renew their licenses on March 31, 1989, the expiration date. Instead, the licenses were renewed effective April 5, 1989; and the Respondent continued to do business as a real estate brokerage and broker for several months thereafter through and including the time in which the transaction at issue was entered into. On or about July 27, 1989, Richard Walker, a salesman working for the Respondent's brokerage firm, solicited and obtained an executed contract for the sale and purchase of certain real property owned by Myra Lee Philips, the seller, and Charles W. and Pamela S. Brannon, the proposed buyers. The buyers gave the salesman, Mr. Walker, a $500.00 earnest money deposit called for by the terms of the contract, which terms also provided that the earnest money deposit was to be held in escrow by Navarre Shores Realty, Inc., the Respondent's real estate brokerage firm. Mr. Walker maintains that he turned in the check or submitted it to the broker or to one of his representatives or to someone who was "running the office at the time". He does not recall to whom he actually tendered the check when he received it; however, he recalls making a copy of the check and then making a copy of the check and the front page of the contract, with the check copy overlaid on it, which was the procedure in the office required by the Respondent in order that he could keep a record of sales transactions. In addition to Mr. Walker, the salesman, having no recollection of who, if anyone, he might have given the check to with the Respondent's brokerage firm, the Respondent has no recollection of receiving the check, ever seeing the check nor the manner or means by which the check was handled, as, for instance, whether it was deposited in his firm's escrow account or not. Mr. Charles Brannon, the proposed buyer in the subject transaction, testified that he executed a $500.00 earnest money deposit check in accordance with the terms of the contract referenced above and that the $500.00 check did clear his bank account; that is, it was paid upon being tendered to his bank. The Respondent maintains that he does not know the location of any records he might have, if any, related to this transaction and the subject earnest money deposit check. During the time in question immediately following the transaction date of July 27, 1989 and the time in November of 1989 when the Respondent closed his real estate office, the Respondent apparently had some disagreements with salespersons, including Mr. Walker. During this time period, the Respondent and his secretary, Ms. Galfano, learned that some client and sales transactions files were removed from the Respondent's brokerage office by Mr. Walker and others. Apparently, Ms. Galfano was able to retrieve some of the files; however, the Respondent was unable to, or in any event, failed to provide the Department's investigator, Mr. Bratton, with any records related to the subject transaction, including the escrow account records, which might have revealed whether the earnest money deposit check was deposited in the Respondent's escrow account or not, although the Respondent did advise Mr. Bratton by telephone on two occasions that he was endeavoring to have the bank prepare his escrow account records. The escrow account had been closed by Emerald Coast State Bank because service charges had been applied to it which resulted in its having a negative balance. This may mean that no $500.00 earnest money deposit check had been deposited in that account, and the Respondent does not know what happened to the check once the Brannons executed it and presumably gave it to Mr. Walker. He does not feel that it was ever placed in his escrow account, nor that he ever had any possession of it because the account was closed for having a negative balance due to the debiting of monthly service charges. In any event, the Respondent did not obtain and provide to the Petitioner the escrow account records. The Respondent stated in his testimony that if the buyers, the Brannons, could provide their bank records and produce the cancelled check involved, that would show how the check was cashed and, therefore, whether it was processed through his escrow account. The cancelled check was not produced and admitted into evidence at the hearing. Mr. Brannon, one of the buyers, merely testified that the check had cleared his bank and had been debited from his account upon which the check was written. Check number 3642 in evidence is the $500.00 check drawn on the account of Richard I. or Maryanne Ray, which is the check by which the Respondent paid the seller, Ms. Philips, the earnest money deposit funds which she was due because the transaction failed to close. A receipt for that check was issued to the Respondent by witness, Richard Walker, the Respondent's former salesman. The receipt indicates that the funds in question were received from R. Ray Construction, a/k/a Navarre Shores Realty, Inc. Mr. Walker did not adequately explain why he issued a receipt to the Respondent for the check drawn on his personal account and represented it as being from R. Ray Construction, a/k/a Navarre Shores Realty, Inc. He merely testified that he went to Mr. Ray, who "...was operating out of his personal account with his construction company. I did it because that's what he was known as at the time. OK. I did it in good faith." Mr. Walker does not have any knowledge concerning where the earnest money deposit check from the buyer, the Brannons, was actually deposited, nor whether the Respondent ever received it. Ms. Galfano was the secretary for Navarre Shores Realty, Inc., the Respondent's firm, at the time of the transaction in question and thereafter. Ms. Galfano established that Mr. Walker took some files from the office which contained sales contracts when the Respondent closed the office. She went to his home on a Sunday and persuaded him to give her back the records and took them back to the office. Ms. Galfano opined that certain files had been removed from the office by Mr. Walker because Mr. Walker was in a dispute at the time with one of the sales associates in the office. Navarre Shores Realty, Inc. had been experiencing internal problems with the associates disputing among themselves. In fact, the Respondent lost several associates from his firm due to internal dissension, presumably about credit for clients and contracts. It was because of this that the Respondent decided to close his office. At the time of the transaction between the Philips and the Brannons, Navarre Shores Realty, Inc., through Mr. Walker, had the listing on the property. Prior to that time, the Philips' property had been listed with Mr. Lou Jakes, also a sales associate with Navarre Shores Realty, Inc. The seller, Ms. Philips, later turned the listing over to Mr. Walker because she was upset with Mr. Jakes over upkeep not being properly done on the beach house in question. She called the off ice concerning this and happened to talk to Richard Walker, who persuaded her to change the listing from Lou Jakes over to him. Thus, the subject listing and transaction caused a dispute between Mr. Jakes and Mr. Walker, and Mr. Jakes left the firm as, later, did Mr. Walker. One of them apparently removed the subject records from the brokerage office. Since the transaction in question and the internal dissension in his office involving Mr. Walker and the other associate, the Respondent has had difficulty conversing with Mr. Walker because they are not on good terms. In summary, the evidence establishes at most that Mr. Walker received the earnest money deposit check from the buyers, the Brannons. It was not established that the Respondent ever received or became aware of the delivery of the earnest money deposit check to Mr. Walker. It was not established that it was ever deposited in any of the Respondent's or his corporation's accounts. It was established that the Respondent, partly out of a desire to avoid accusation of any illegality by the Petitioner, voluntarily paid the $500.00 to the seller out of his personal account, although he does not know or has no recollection that the money was ever received by him nor deposited in any of his accounts. The earnest money deposit check was not produced and placed into evidence, which could have shown in whose bank and account the check might have been deposited. Mr. Brannon only testified that the $500.00 check cleared and was debited from his account. It was established that the Respondent either has no records of his escrow account transactions with regard to this real estate transaction or is unaware of their location. It was likewise established, however, that upon request by Mr. Bratton, Petitioner's investigator, for copies of those records, the Respondent did not produce them. The Respondent maintains that he had requested that his banks provide a copy of his account records; however, as of the time of the hearing, he had not provided those to Mr. Bratton. It was also established that the Respondent and his brokerage firm were duly licensed at the time the transaction in question occurred and that some months later, in November of 1989, he closed his office and ceased doing business. It was established that his licensure expired on March 31, 1989 and that there was a six-day lapse of his licensure, with it being renewed on April 5, 1989. In November of 1990, on approximately November 6th, the buyers, the seller, and the Respondent signed a release of deposit agreement whereby the Respondent was to disburse $500.00 to the seller with regard to the subject transaction. See Exhibit 2 in evidence. On or about April 18, 1991, the Respondent made and delivered check number 3642, in the amount of $500.00, drawn on his personal checking account number 1322650, maintained at First National Bank of Santa Rosa, Milton, Florida, payable to Myra Lee Philips, who had been the seller in the subject transaction. Thus, in excess of five months elapsed between the time the Respondent agreed to disburse the $500.00 to Ms. Philips and the time he actually paid Ms. Philips the $500.00.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is therefore, RECOMMENDED that a Final Order be entered by the Department of Professional Regulation, Division of Real Estate, finding that the Respondent, Richard Irwin Ray, has violated Subsection 475.25(1)(d)1, Florida Statutes, by failing to promptly deliver a deposit; finding that he is guilty of having failed to preserve and make available to the Petitioner all books, records and supporting documents concerning trust-fund transactions in violation of Rule 21V-14.012(1), Florida Administrative Code, as well as Subsection 475.25(1)(e), Florida Statutes, and that he be accorded the penalty for these violations of a written reprimand and a $250.00 fine. Concerning his violation of Subsection 475.42(1)(a), Florida Statutes, and the consequent derivative violation of Subsection 475.25(1)(e), Florida Statutes, by operating for six days without a license, it is recommended that due to this inadvertent, technical licensure lapse that no penalty be imposed. DONE AND ENTERED this 1st day of July, 1992, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF 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 2nd day of July, 1992. COPIES FURNISHED: Darlene F. Keller, Division Director Division of Real Estate P.O. Box 1900 Orlando, FL 32802-1900 Jack McRay, Esq. General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, FL 32399-0792 James Gillis, Esq. Department of Professional Regulation Division of Real Estate 400 West Robinson Street P.O. Box 1900 Orlando, FL 32802-1900 Richard Irwin Ray 10013 Calle de Celestino Navarre, FL 32566
The Issue The issue in this case is whether Petitioner's application for a certificate of need was complete.
Findings Of Fact Petitioner and Intervenor each filed applications in the same batching cycle for certificates of need to establish Medicaid-certified home health agencies in Collier County, District 8. By letter dated October 6, 1994, Respondent advised Petitioner that its application omitted certain elements. The letter requests, among other things, an "audited financial statement," including a balance sheet and profit-and-loss statement for the previous two years' operation. Petitioner's application contained an unaudited financial statement for the part of the year that it had been operation. Incorporated in 1994, Petitioner had been receiving patients only since September or October 1994. Petitioner's agent contacted a representative of Respondent and discussed the omissions letter. A misunderstanding ensued in which Petitioner's agent thought that Respondent's representative said that Petitioner would not be required to submit an audited financial statement because Petitioner had not been in operation for a full fiscal year. In fact, Respondent's representative did not say that. Respondent's policy is to permit applicants to file audited financial statements for a partial year, if that is how long they have been in business. For example, Intervenor included with its application an audited financial statement covering the six-week period that it had been in existence. In this case, it would have been possible for Petitioner to obtain an audited financial statement for a period of time including at least its first month of operation.
Recommendation It is hereby RECOMMENDED that the Agency for Health Care Administration enter a final order dismissing Petitioner's challenge to the administrative withdrawal of the subject application for a certificate of need. ENTERED on April 24, 1995, in Tallahassee, Florida. ROBERT E. MEALE 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 on April 24, 1995. APPENDIX Rulings on Petitioner's Proposed Findings 1-6: rejected as subordinate. 7-8: rejected as unsupported by the appropriate weight of the evidence. 9: adopted or adopted in substance. 10-11: rejected as not finding of fact. 12-14: rejected as recitation of evidence. 15: rejected as unsupported by the appropriate weight of the evidence. Rulings on Proposed Findings of Respondent and Intervenor All are adopted or adopted in substance. COPIES FURNISHED: Harold D. Lewis, General Counsel Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, FL 32303 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, FL 32303 Attorney Robert E. Senton P.O. Box 963 Tallahassee, FL 32302 Richard A. Patterson Assistant General Counsel Agency for Health Care Administration 325 John Knox Road Suite 301--The Atrium Tallahassee, FL 32303 Attorney Alfred W. Clark 117 South Gadsden Street Suite 201 Tallahassee, FL 32301
The Issue The issue in this case is whether StorageTek or Memorex was the lowest responsive and responsible bidder for the BOR's Invitation to Bid No. K-1178-3, issued as agent for the Northwest Regional Data Center for the purchase of certain data processing equipment.
Findings Of Fact Based on the stipulations of the parties, the testimony of the witnesses, and the exhibits admitted into evidence, I make the following findings of fact: The Florida State University Purchasing Department, acting as agent for the Northwest Regional Data Center ("NWRDC") issued an Invitation to Bid for a contract to supply and service certain computer memory storage equipment to NWRDC. NWRDC is a data processing center under the direct jurisdiction of the BOR. StorageTek and Memorex are both vendors of data processing equipment such as that specified in the BOR's Invitation to Bid No. K-1178-3 ("the ITB"). StorageTek is presently operating --its business as a going concern and a debtor- in-possession under Chapter 11 of the Bankruptcy Code. Memorex is a wholly owned subsidiary of the Burroughs Corporation. In addition to the specification of certain data processing equipment, the ITB required 5 years of maintenance for the equipment to be supplied by the vendor. StorageTek and Memorex both filed timely responses to the ITB which were responsive to the technical portions of the ITB. Both bids contained a warranty of the bidder's ability to perform. The total prices of the StorageTek and Memorex bids were $892,293.00 and $1,026,919.00, respectively. The BOR preliminarily disqualified the StorageTek bid for failure to satisfy the financial capability requirements of the ITB and proposed to award the contract to Memorex. StorageTek timely filed its Notice of Protest and Formal Written Protest, asserting it met the financial capability requirements of the ITB and challenging the responsiveness of the Memorex bid to those same requirements. Section II, Paragraph B, of the ITB provides with regard to financial capability: Financial Capability of Prospective Vendors: The successful vendor must be financially sound and well managed, in accordance with Paragraph I. of this section. Prospective vendors are required to supply certified annual report(s) or statement(s) of their financial position for the last two years as part of their bids. These statements must be certified by an independent auditor's report as to their completeness and accuracy. Any other relevant references or documentation may also be supplied. Paragraph I, which is incorporated by reference in this financial capability provision of the ITB, provides: Vendor Warranty of Ability to Perform: Vendor warrants that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending or, to the best of vendor's knowledge, threatened which would in any way prohibit, restrain or enjoin the execution or delivery of the vendor's obligations or diminish the vendor's financial ability to perform the terms of the proposed contract. In addition, the ITB makes it the responsibility of each vendor to "provide adequate documentation to substantiate all claims for . . . compliance" with the specifications and requirements of the ITB. In response to the request for statements of their financial position in the financial capability portion of the ITB, StorageTek supplied the Form 10- K Annual Reports filed with the Securities and Exchange Commission for the fiscal years ended December 28, 1984, and December 27, 1985, ("the 1984 and 1985 10 K Reports"). Although StorageTek had more current information than that contained in the 1984 and 1985 10-K Reports regarding the status of its Chapter 11 proceeding and other pending legal actions at the time it submitted its bid to the BOR, StorageTek chose not to supply that information in its bid even though such information could have been included pursuant to Section II, B.1, of the ITB. The 1984 and 1985 10-K Reports were prepared by StorageTek management and included consolidated financial statements of StorageTek and its subsidiaries. These financial statements, which were certified by the Denver, Colorado, office of Price Waterhouse, indicate: StorageTek has incurred net losses over the last three fiscal years aggregating $603,758,000. As of December 27, 1985, StorageTek had an accumulated deficit of $318,413,000. StorageTek is presently operating its business as a going concern and a debtor in possession under Chapter 11 of the Bankruptcy Act. StorageTek is involved in a number of legal proceedings, several of which "could have a material adverse effect on the Company's financial position and operations" if the plaintiffs' claims are sustained. The Securities and Exchange Commission is conducting a private investigation to determine whether StorageTek or any of its officers, directors or agents engaged in fraudulent or deceptive acts, practices or courses of business in connection with the issuance of any of its securities, the filing or publication of any of its periodic reports to stockholders or reports filed with the Securities and Exchange Commission or the keeping and maintaining of its books and records. The Internal Revenue Service ("IRS") is examining StorageTek's federal income tax returns for the years 1979 through 1984. If all issues presently under discussion between the IRS and StorageTek were to result in assessments, and if such assessments were ultimately sustained, the resulting liability for additional tax and interest would be substantially higher than the recorded liabilities. Also, any IRS claims that are ultimately sustained would be priority claims pursuant to Section 507 of the Bankruptcy Code. As a result of StorageTek's "financial diffi- culties" and its Chapter 11 proceedings, StorageTek may be subject to additional lawsuits or governmental proceedings, the effect of which cannot be determined at this time. The consolidated financial statements were prepared on the basis of generally accepted accounting principles applicable to a going concern, which assume realization of assets and payment of liabilities in the normal course of business. There are a number of "significant uncertainties" that threaten StorageTek's continued existence and, therefore, its ability to realize its assets and to discharge its liabilities in the ordinary course of business. Using generally accepted auditing standards, Price Waterhouse rendered an opinion on February 28, 1986, which provides in pertinent part: As shown in the consolidated financial state- ments, during the three years ended December 27, 1985 the Company incurred net losses aggregating $603,758,000 and at December 27, 1985 had an accumulated deficit of $318,413,000. These factors, among others including those discussed in the preceding paragraph, indicate that the Company may be unable to continue in existence. In rendering the above-quoted opinion, Price Waterhouse considered all of the information contained in the 1985 10-K Report, including the fact that the information in that report did not reflect the effects of the Chapter 11 proceedings. Price Waterhouse also considered other factors made known to it, such as: Certain financial information regarding StorageTek from its operations in early 1986; StorageTek's 1985 fourth quarter profits; StorageTek's unencumbered cash balance of $202 million at the end of 1985; StorageTek's ability to generate cash from its various operations; The lack of a formulated and confirmed plan for StorageTek's reorganization in its Chapter 11 bankruptcy proceedings; and The fact that it would be fairly difficult for StorageTek to obtain long-term financing given its present financial condition. Although the directors' and officers' liability insurance and partnership liability insurance may diminish the impact on StorageTek of several of the pending legal actions, the existence of those insurance policies is reflected in the 1985 10-K Report and was considered by Price Waterhouse when rendering its opinion that the company may be unable to continue in existence. Also, StorageTek admits that it cannot give an assurance that the pending litigation will not have a material adverse effect on its financial position and operations. The most significant uncertainty which formed a basis for the opinion of Price Waterhouse quoted in paragraph 12 above is that StorageTek's historical information results in uncertainty as to whether StorageTek will be able to return to profitable operations. If StorageTek did not continue to exist, the 5 years of maintenance required by the ITB could not be performed by StorageTek and spare parts for the data processing equipment may not be available. In response to the request for statements of its financial position in the financial capability portion of the ITB, Memorex supplied annual reports of its parent, the Burroughs Corporation, for 1984 and 1985 (the "1984 and 1985 Annual Reports"). The 1984 and 1985 Annual Reports contain consolidated financial statements of Burroughs Corporation, and its subsidiaries, including Memorex. These financial statements, which were certified by the Detroit, Michigan, office of Price Waterhouse, indicate: Burroughs and its subsidiaries have earned net income over the last three fiscal years aggregating $690,000,000. As of December 31, 1985, Burroughs and its subsidiaries had accumulated retained earnings of $1,872,400,000. There are no outstanding legal actions or claims that are material to the consolidated financial position of Burroughs and its subsidiaries. Using generally accepted auditing standards, Price Waterhouse rendered the following opinion on January 20, 1986: In our opinion, the accompanying consolidated financial statements [in the 1985 Annual Report] present fairly the financial position of Burroughs Corporation and subsidiary companies . . . in conformity with generally accepted accounting principles consistently applied. Memorex is a substantial subsidiary of the Burroughs Corporation. If there were any pending or threatened legal actions or claims against Memorex, the outcome of which would threaten Memorex's ability to perform under the contract described in the BOR's Invitation to Bid No. K-1178- 3, Price Waterhouse would have been required by generally accepted auditing standards to ensure that appropriate disclosure was made of that contingency in the consolidated financial statements of the Burroughs Corporation and its subsidiaries, unless the auditors were satisfied that the contingency was provided for otherwise, such as through a guaranty by the parent corporation. Financial statements for Memorex, other than in consolidated form with Burroughs Corporation and its subsidiaries, are usually confidential and not available to the public. The ITB expressly instructs vendors not to submit confidential information since bid responses become public documents after the bid opening. It is a common practice in the industry for a wholly owned subsidiary to submit the consolidated financial statements of its parent when an invitation to bid requests the subsidiary vendor to provide financial information.
Recommendation Based on all of the foregoing, I recommend the entry of a Final Order awarding the contract for BOR Invitation to Bid No. K-1178-3 to Memorex. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-2229BID The following are my specific rulings on each of the proposed findings of fact submitted by each of the parties. Rulings on findings proposed by Petitioner Paragraphs 1, 2, 3, 4, 5, 6, 11, and 16: The findings proposed in these paragraphs have all been accepted. Paragraph 7: Accepted in part and rejected in part. Rejected portions are irrelevant and subordinate details that are unnecessary to the disposition of this case. Paragraph 8: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Unnumbered paragraph between paragraphs 8 and 9: Accepted. Paragraph 9 and the two unnumbered paragraphs between paragraphs 9 and 10: The majority of the findings proposed in this paragraph are rejected as irrelevant and subordinate to the extent they deal with matters not incorporated into Petitioner's bid response. Paragraph 10: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Paragraph 12: Accepted in substance. Paragraph 13: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Paragraphs 14 and 15 and intervening unnumbered paragraph: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Also rejected in large part because it incorporates inferences not warranted by the greater weight of the evidence. Paragraph 17: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Also rejected in large part because it incorporates inferences not warranted by the greater weight of the evidence. Paragraph 18: Rejected as irrelevant and unnecessary. Rulings on findings proposed by Respondent The Respondent adopted the proposed findings of fact submitted by the Intervenor and did not propose any additional findings. Rulings on findings proposed by Intervenor All of the proposed findings of fact submitted by the Intervenor have been accepted with a few minor editorial modifications. DONE AND ORDERED this 4th day of September, 1986, at Tallahassee, Florida. MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of September, 1986. COPIES FURNISHED: F. Perry Odom, Esquire ERVIN, VARN, JACOBS, ODOM & KITCHEN P. O. Drawer 1170 Tallahassee, Florida 32302 Patti A. Jackson, Esquire Assistant General Counsel Board of Regents 107 West Gaines Street Tallahassee, Florida 32301-8033 Carolyn S. Raepple, Esquire HOPPING BOYD GREEN & SAMS Post Office Box 6526 Tallahassee, Florida 32314-6526 Mr. Charles Reed, Chancellor Board of Regents 107 West Gaines Street Tallahassee, Florida 32301-8033 Mr. George Bedell Executive Vice-Chancellor Board of Regents 107 West Gaines Street Tallahassee, Florida 32301-8033 ================================================================= AGENCY FINAL ORDER =================================================================
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
