Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received and the entire record compiled herein, I hereby make the following factual findings. Respondent, at times material hereto, was actively licensed to practice public accounting in the State of Florida, such license issued by the Petitioner, Board of Accountancy, Department of Professional Regulation. (Petitioner's Exhibit 1) Respondent has been issued license number AC 5470. After becoming licensed as a certified public accountant, Respondent met Ronald Demon, another CPA, while both were employed with a national "Big 8" public accounting firm in Miami--Pete, Marwick and Mitchell. Thereafter, they became social friends and worked for each other at various times performing per diem work for each other. (TR 165, 167) Respondent's first contact with the Housing Authority for the City of Dania was in 1981 when he performed the two-year audit for the Authority on behalf of the Department of Housing and Urban Development (HUD), thereafter becoming the fee accountant for that Authority on a monthly retainer. For the succeeding two years as fee accountant, Respondent provided the Authority's monthly accounting information, posting to the general ledger, cash disbursements, bank reconciliations and filing the required reports to HUD. Respondent had limited involvement with classifying bank checks for purposes of posting to the general ledger. In 1983, another two-year audit of the Dania Housing Authority was required to be performed and Respondent submitted a proposal to the Housing Authority to perform same. That proposal was rejected by HUD on the basis of contract and rule provisions that the contracting CPA not have provided accounting or bookkeeping services for the Housing Authority during the period covered by the audit. (Petitioner's Exhibit 1, pages 8, 10) Upon HUD' s rejection of his engagement proposal on behalf of the Housing Authority, Respondent contacted another CPA, Bernard Koon, seeking his submission of an engagement proposal to HUD. Koon's proposal was rejected by HUD based upon the high price quoted for his audit services. (Petitioner's Exhibit 1, pages 8-11) Koon and Respondent had agreed to an arrangement whereby Koon would sign the accountant's report and financial statements of the audit in question, after performance of the work by Respondent and his staff for an agreed fee of $1000. (TR 60; Petitioner's Exhibit 2, pages 11-12) When Koon's engagement proposal was rejected, Respondent contacted Ronald Demon concerning the audit engagement for the Dania Housing Authority. Ronald Demon was then working as a full-time accountant with the City of Miami. At the time, Demon was performing 4 other audit engagements other than his full- time position with the City of Miami, a practice which appears to be fairly common among accountants. Demon was asked by Respondent to contact the Executive Director of the Housing Authority, Frank W. Peterman. Respondent also related to Demon his availability to assist him (Demon) in performing the audit engagement, if Demon needed, which offer was based upon the fact that Respondent knew that Demon was working in a full-time employment relationship. Respondent told Demon that the contract amount would be approximately $4500 which was $500 less than the amount Respondent had proposed, and which proposal had been rejected by HUD. (Petitioner's Exhibit 1, pages 7, 10-15) Respondent advised Demon that to earn a stated portion of that fee, $500 of the $4500, he would merely have to sign the audit report. Respondent would be in charge of conducting all field work, preparation of the audit report and all other related work with Demon having no day to day involvement concerning preparation of the accountant's report and related financial statements. After Demon contacted the Authority's Executive Director, Respondent prepared for his (Demon's) signature, the engagement proposal which was signed in the parking lot of a Denny's Restaurant at 36th Street and Biscayne Boulevard in North Miami and Respondent later either mailed or hand-delivered the engagement proposal to the Housing Authority offices. Respondent admits that he informed the Executive Director of the Authority of Demon's availability, the fact that he was a CPA and that he was black. Unknown to Respondent, Demon was an inactive licensee at that time. Shortly after Demon's contract proposal was submitted to the Authority, it was awarded to him and, at that time, Demon and Respondent had reached an agreement wherein, as stated earlier, the field work in preparation of the audit report and related finances would be prepared by Respondent and his staff for subsequent signature by Demon. Respondent characterized their agreement as one whereby he was the "orchestrator" of the engagement for financial review and approval of the reports by Demon. (TR 170; Petitioner's Exhibit 1, pages 22-24) Respondent's accounting firm employed two accountants, who were not CPAs, to perform the field work for the subject audit report. Respondent's involvement consisted initially of planning the audit with the staffers and providing them a copy of HUD's Audit Guide. These employees of Respondent were not known by Demon nor did he (Demon) engage in any of the initial planning of the field work; provided no written instructions, audit programming or scheduling of the work plans for completion of the field work. Respondent's supervision of his staff for the subject audit was limited, consisting primarily of being available to answer specific questions they had, a visit to the job site and performed the initial review of work papers that were generated by the staff. After his initial review of the work papers, Respondent submitted the work papers and a draft of the financial statements and accountant report to Demon for his approval and signature. After at least a two-week period, Respondent contacted Demon to ask if there were any problems with his submittal to him whereupon Demon signed and returned the papers to Miller with only grammatical changes in the management letter which accompanied the report and finances, and the submittal was typed in final form on Demon's letterhead by Respondent's office staff. Respondent was unaware that Demon did not review the accountant's report or related financial statements. Demon considered that his agreement for the fee with Miller did not entail that duty and he relied upon Respondent's prior knowledge and experience, supervision and review of the work performed to correct any problems with the report. Upon submission of the audit report to HUD, a check was sent payable to Ronald Demon for $2250 or half of the $4500 engagement fee, with the remainder of the fee to be remitted when the audit report was approved by the client. That fee was first obtained by Miller who called Demon and arranged to meet him at Respondent's bank for negotiation of the check. Respondent had already stamped the check payable to Demon with his deposit stamp and Demon signed above the stamp and Respondent thereafter deposited that check into his (Respondent's) account. Respondent then gave Demon a check for $250 which represented half of the agreed fee. (Deposition testimony of Ronald Demon) HUD rejected the audit report signed by Demon and engaged the services of a public accounting firm--Deloitte, Haskins and Sells to perform another audit. Upon rejection of the audit report, but prior to the employment of Deloitte, Haskins and Sells, Respondent, Demon and Executive Director Peterman met to confer on the matter to seek a resolution of the situation. Neither Respondent nor Demon corrected the deficiency cited in the HUD report requiring HUD to employ another public accounting firm to complete the audit. Respondent did not return to HUD the monies received by him. Demon remitted to HUD all the monies paid to either him or Respondent. (TR 49, 51) Marlyn Felsing, CPA, was received as an expert in these proceedings in the areas of public accounting with specific emphasis on audited financial statements and related accountant's reports and work papers. Felsing has had extensive experience in auditing and has been engaged on behalf of the Petitioner and others in numerous peer reviews of accounting firms. Without regard to the arrangement between Respondent and Demon, both individuals, as certified public accountants, are responsible for practicing public accounting in accordance with generally accepted and prevailing standards of accounting. Respondent was required to comply with generally accepted accounting principles and generally accepted accounting standards in preparation of the audit report for Dania Housing Authority. Rules 21A-20.07; 20.08 and 21A-21.02 and 21A-21.03, Florida Administrative Code. (TR 88, 92, and 94) As an assistant to the auditor (Demon), Respondent, as required by the standards on auditing services, was responsible for the work performed. Respondent acknowledged his accountability under published standards and generally accepted and prevailing standards of accounting practice. (TR 204- 206) Felsing completed an investigative report and analysis of the field audit conducted by Respondent's staff and noted specific departures from generally accepted accounting principles and auditing standards and generally accepted and prevailing standards of accounting practice within the questioned audit report. They are, in summary, as follows: Violation of the "independence" requirements; Failure to exercise professional care respecting his review of staff work; Failure to adequately plan and assist staff in completion of field work and the supervision thereof; Failure to maintain safety of the work papers (the work papers have disappeared); Failure to refer to prior years' audit reports demonstrating a lack of consistency; and Failure to delineate footnote disclosures, improper labeling of financial statements, failure to disclose conflicts between the re- quirements of the HUD Audit Guide and generally accepted and prevailing standards of account- ing practice including the published generally accepted accounting principles and auditing standards. Felsing found it especially troublesome and a violation of the HUD requirements on independence based on Respondent's conduct based on his engagement with Demon in performing the auditing services in violation of generally accepted and prevailing standards of accounting and auditing practice. Rule 21A-22.01, Florida Administrative Code. Finally, Felsing noted that the deficiencies and departures from generally accepted and prevailing standards were not simply matters of professional judgment but were deficiencies which were objective and clear-cut in nature. (TR 143, 147, 148, 154, 156, and 158) Respondent's major contention was that his level of responsibility was limited inasmuch as Demon, as signatory of the audit report, owed a greater duty and responsibility for the statements and the report in question. As found herein, and as pointed out by Mr. Felsing, as licensees sharing in the performance of the accounting engagement, both were liable for the deficiencies found in the statement and the audit report for the Dania Housing Authority.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is hereby recommended that the Respondent's licensure as a certified public accountant be suspended for a period of six (6) months, with reinstatement under such probationary terms and conditions as shall be established by the Board of Accountancy, including continuing professional education in the areas of accounting and auditing in monitoring of his professional practice under such terms and conditions as shall be established by the Board. RECOMMENDED this 17th day of July, 1985, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of July, 1985.
The Issue Case No. 56-1336 commenced with the Department's Administrative Charges And Complaint with Notice of Rights, dated February 19, 1986. The Department's charges and complaint informed Structured Shelters Financial Management, Inc., ("SSFM") and Structured Shelters Securities, Inc., ("5551") of the Department's intention to revoke the registrations of these two corporations for various violations of Chapter 517, Florida Statutes, and violations of rules of the Department, which violations were alleged with specificity in the Department's charges and complaint. The two corporations filed a request for hearing in which they assert that there have been no violations, and in which they dispute both factual allegations and legal conclusions set forth in the Department's charges and complaint. Case No. 86-1553 commenced with the Department's Cease and Desist Order and Notice of Rights dated February 19, 1986. The Department's cease and desist order has the effect of ordering Structured Shelters Financial Management, Inc., ("SSFM"), Structured Shelters Securities, Inc., ("5551"), Robert Iles, and Monica Iles to cease and desist from various activities which are alleged to be violations of Chapter 517, Florida Statutes. The two corporations and the two individuals filed a request for hearing in which they assert that there have been no violations, and in which they dispute both factual allegations and legal conclusions set forth in the Department's cease and desist order. Following the hearing in these consolidated cases, a transcript of the proceedings at the hearing was filed on October 20, 1956, and on November 10, 1986, all parties filed proposed recommended orders containing proposed findings of fact and conclusions of law. The parties' proposed recommended orders have been carefully considered in the preparation of this Recommended Order. A specific ruling on each finding of fact proposed by each party is contained in the Appendix which is attached to and incorporated into this Recommended Order.
Findings Of Fact Based on the exhibits received in evidence and on the testimony of the witnesses at the hearing, I make the following findings of fact. SSFM is an investment advisor holding License Number 53839, issued by the Department effective December 13, 1982. SSFM is not registered as a dealer pursuant to Section 517.12, Florida Statutes, to sell securities in Florida. Robert E. Iles, Sr., is the President and Director of SSFM and Monica Iles is the Treasurer and Director of SSFM. Robert Iles, Sr., is a Director of 5551 and Monica Iles is the Secretary and Treasurer of 5551. The Department only reviewed the records and files of SSFM. No review was made of any records of 5551. No formal complaints have ever been filed with the Department against SSFM or 5551. No one has requested that SSFM refund the purchase price of any of the corporate business plans. SSFM's books, records, and financial statements were current through July 31, 1984. SSFM did not provide any investment advisor services subsequent to July 31, 1954. Since July 31, 1954, SSFM has not maintained its books and records in accordance with Department rules. SSFM also did not maintain customer files or copies of advertising materials. SSFM has failed to keep certain records required by applicable rules promulgated by the Department, and certain records that are required have not been kept current, as is also required. Specifically, the cash receipts and disbursements journal, general ledger, and trial balance have not been made current since July 31, 1984. No records have been kept in the following categories: correspondence with clients concerning recommendations, receipts, disbursements, or placing of orders, in the clients' files and advertising and promotional materials. The purpose of these requirements is to assure that the investment adviser can meet its obligations to creditors and customers. The principal reason SSFM has not maintained up-to-date books and records since July 31, 1954, is that it has had no business activity since that date other than some efforts to collect accounts receivable. SSFM does not advertise. SSFN does not maintain customer files because it renders no investment advice. There is no evidence that SSFM has not met all of its obligations to creditors and customers. Capital Requirement Because SSFM did not maintain books and records since July 31, 1984, the Department could not determine whether SSFM maintained net capital of $2,500. The purpose of the net capital requirement is to protect clients of the investment adviser. There have been no formal complaints filed by clients of SSFM. SSFM has suspended its investment adviser operations since July 31, 1984. SSFM has in fact maintained net capital of at least $2,500 since July 31, 1984. Annual Report SSFM did not file its annual financial report due within 90 days of July 31, 1984, as required by Department rules. The purpose of this requirement is to monitor compliance with the net capital requirements since the Department cannot audit all investment advisers each year. SSFM did not provide investment advice during the year for which it did not file the annual report. Since SSFN is inactive, the certified public accountants have given active companies a priority in filing tax returns and making other financial reports. Registered Principal SSFM's registered principal withdrew November 21, 1983, and no new principal has been registered. SSFM has not provided investment advice since that time. Civil, Criminal and Administrative Actions SSFM was incorporated as a Delaware corporation in October of 1982 and is not a successor to any other corporation. SSFM has not reported to the Department any civil, criminal, or administrative charges filed against it relating to its activities as an investment adviser. The states of Idaho, Kansas, Missouri, and Pennsylvania had responded to SSFM's application for an investment adviser license by noticing an intent to deny such permit. None of those states served any complaint of any civil, criminal, or administrative charges against SSFM independently or in connection with those applications. Three civil actions have named SSFM a Defendant. The alleged actions giving rise to the Tax Awareness of New Mexico, Inc., complaint occurred on June 22, 1982. The action filed by Harold J. St. Clair, et al., in Ohio involved alleged actions occurring prior to July 9, 1982. David Elsworth and James Morrison filed a complaint involving alleged actions which occurred between February and July 1982 and in fact does not name SSFM as a Defendant. All of the alleged actions giving rise to the three civil actions occurred prior to SSFM's coming into existence. Those actions do not directly or indirectly relate to SSFM's activities as an investment adviser. The legal actions appear to be frivolous as to SSFM because SSFM was not in existence at the time of the events alleged in the legal actions. Corporate Business Plans At one time SSFM marketed corporate business plans called Super Swirl, Inc., Random Processing Services, Inc., and Children's Classic Cassette Master Recordings. No purchaser of any of these corporate business plans has lost any money or filed any legal actions against SSFM. SSFM, which was originally domiciled in Cincinnati, Ohio, contacted the regional office of the Securities and Exchange Commission prior to marketing the corporate business plans and was told that the plans were not securities. All of the plans were prepared prior to 1984. SSFM has not sold a plan since 1984. SSFM moved to Florida in September 1984. No business plans have been formed in Florida. SSFM sold no business plans in Florida. Changes in tax laws have made the business plans obsolete and they could no longer be offered. One client was invoiced to a Florida address. That client was an Ohio resident who purchased the plan while SSFM was domiciled in Ohio and who in fact picked up the business plan and invoice from SSFM in Ohio. For the convenience of the Ohio resident, SSFM put a Florida billing address on the invoice. Neither the invoice nor the business plan was delivered in Florida by SSFM. There is no evidence that a Mr. Benjamin was a Florida resident when he purchased his business plan. SSFM prepared its corporate business plans at the request of various professionals such as attorneys, accountants, and financial planners who would use them for their clients. No business plan is dependent upon another, although subsequent plans were an outgrowth of the first one. The type of entity to be used is up to the purchaser of the plan. The purchaser does not have to follow the plan and SSFN has no control over modifications. Super Swirl Sales, Inc. In this plan it is made clear that the incorporator (purchaser of the plan) is responsible for its implementation, and the success of the plan is contingent upon his proper administration. Under this plan, the purchaser is to purchase frozen confection machines and lease them to various retail establishments. The corporation established under the business plan would not have to purchase its machines from a particular vendor. The corporation would determine the location for the machines. The corporation would also decide how many machines to purchase. The Super Swirl machines were manufactured by a company unrelated to SSFM. The corporation determines the amount of capital to raise. It is the responsibility of the corporation to determine whether the offering of its stock is a transaction that requires registration. The plans only recommend services of other companies, some of which may be affiliated with SSFM, but do not require them. Random Processing Services Under this plan the purchaser (dealer) would set up a computer based financial management system and would obtain retail clients. The in-house computer would be tied into a larger computer system operated by Random Processing Services, Inc. The purchaser does not have to use Random Processing Services, Inc., and could go to someone else for those services. The dealer determines the amount to charge his clients depending upon what the local market will bear. The efforts of the dealer determine his share of the market, with his knowledge and desire to service clients as the most important aspect for penetrating the market place. The geographical area to be served by dealer is his decision. Dealers do not depend upon leads for clients from any other entity. Children's Classic Cassette Master Recordings Under this plan the purchaser would establish a business to prepare a master recording of a children's classic book (stories that are no longer covered by a copyright) and to lease that recording for retail distribution. The success of the plan is contingent upon proper administration by the corporation. It is the corporation's responsibility to determine if the offering of its stock is regulated. The plan provides: The plan is a guideline and is not intended to be a set of rules or regulations that are not subject to approved changes. Changes are at the discretion of the incorporator and his advisers. They can change or totally eliminate part of the entire plan if they deem it necessary. As such, the incorporator or elected officers are solely responsible for the implementation of the plan. Actual cost of the properties and overhead expenses are determined by the purchaser of the plan, as is the sale price of the stock. The purchaser determines which title to make into the master cassette, picks the script writer, and picks the person to do artwork. All of the business plans require substantial efforts on behalf of the purchaser.
Recommendation Based on all of the foregoing, it is recommended that the Department enter final orders in these cases to the following effect: In Case No. 86-1336, the final order should dismiss the allegations alleged in Counts I, II, VII, and VIII of the Administrative Charges And Complaint; should find SSFM guilty of the violations alleged in Counts III, IV, V, and VI of the Administrative Charges And Complaint; and should suspend the registration of SSFM until such time as SSFM has corrected the deficiencies of which it has been found guilty. In recommending suspension in lieu of revocation, 1 have given great weight to the fact that there is no evidence that any harm has been suffered by any client or customer of SSFM as a result of the violations proved in this case. In Case No. 86-1553, the final order should dismiss the cease and desist order. DONE AND ENTERED this 18th day of December, 1986, at Tallahassee, Florida. MICHAEL M. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of December, 1986. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-1336, 86-1553 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 the Department in Case No. 56-1336 Paragraph 1, including its subparagraphs (a), (b), (c), (d), and (e): Rejected because not supported by competent substantial evidence. As noted in Section 120.57(1)(b)7, Florida Statutes, "Findings of fact shall be based exclusively on the evidence of record and on matters officially recognized." The pleadings in this case were not offered in evidence. Paragraph 2: Accepted. Paragraph 3: Accepted. Paragraph 4: Rejected. The statements in this para- graph are conclusions of law and not proposed findings of fact. Paragraph 5: An essentially true statement, but subordinate and unnecessary as a finding of fact. Paragraph 6: Rejected on several grounds. First, it is a summary of testimony rather than proposed findings. Second, it is a conclusion of law rather than proposed findings of fact. Finally, the conclusion is not warranted by the evidence. Paragraph 7: Rejected as constituting a conclusion of law rather than a proposed finding of fact. Also, to the extent this paragraph might be considered to be an opinion-type ultimate fact, it is rejected as contrary to the greater weight of the evidence. Paragraph 5: The first sentence of this paragraph is rejected as constituting a conclusion of law and not a proposed finding of fact. The second sentence of this paragraph is accepted. Paragraph 9: Accepted. Paragraph 10: Accepted. Paragraph 11: The first sentence is accepted in substance up to the first comma in the sentence. (More extensive findings about litigation involving Structured Shelters Financial Management, Inc., have been made.) The portion of the first sentence following the first comma is rejected as constituting a conclusion of law. The second sentence in this paragraph is rejected as constituting commentary about the nature of the record and not constituting proposed findings of fact. Paragraph 12: Accepted. Paragraph 13: Accepted in substance, with modifi-cations in the interest of accuracy. Paragraph 14: Accepted. Paragraph 15: Rejected in part because it is more in the nature of a conclusion of law than in the nature of a finding of fact and rejected in part because it is based on inference not fully supported by the evidence. Paragraph 16: Rejected in part because it is more in the nature of a conclusion of law than in the nature of a finding of fact and rejected in part because not supported by persuasive competent substantial evidence. Rulings on findings proposed by the Department in Case No. 56-1553 Paragraph 1, including its subparagraphs (a), (b), and (c): Rejected because not supported by competent substantial evidence. The pleadings in this case were not offered in evidence. Paragraph 2: Accepted. Paragraph 3: Accepted. Paragraph 4: Rejected. The statements in this paragraph are conclusions of law and not proposed findings of fact. Paragraph 5: An essentially true statement, but sub- ordinate and unnecessary as a finding of fact. Paragraph 6: Rejected on several grounds. First, it is a summary of testimony rather than proposed findings. Second, it is a conclusion of law rather than proposed findings of fact. Finally, the conclusion is not warranted by the evidence. Paragraph 7: Rejected as constituting a conclusion of law rather than a proposed finding of fact. Also, to the extent this paragraph might be considered to be an opinion-type ultimate fact, it is rejected as contrary to the greater weight of the evidence. Paragraph 8: The first sentence of this paragraph is rejected as constituting a conclusion of law and not a proposed finding of fact. The second sentence of this paragraph is accepted. Paragraph 9: Accepted. Paragraph 10: Rejected in part because it is more in the nature of a conclusion of law than in the nature of a finding of fact and rejected in part because it is based on inference not fully supported by the evidence. Paragraph 11: Rejected in part because it is more in the nature of a conclusion of law than in the nature of a finding of fact and rejected in part because not supported by persuasive competent substantial evidence. Rulings on findings proposed by the corporate and individual parties The vast majority of the findings of fact proposed by the corporate and individual parties have been accepted, some with a few minor editorial changes in the interest of clarity and accuracy. The few that have been rejected are listed below along with the reasons for rejection. Proposal 4: Rejected as irrelevant and unnecessary details. Proposal 5: Rejected as irrelevant and unnecessary details. Proposal 75: Rejected as contrary to the greater weight of the evidence; twenty of the plans were sold. COPIES FURNISHED: Martin S. Friedman, Esquire MYERS, KEVIN, LEVINSON & RICHARDS 2544 Blairstone Pines Drive Tallahassee, Florida 32301 Robert K. Good, Esquire Senior Attorney Office of Comptroller Suite 501 400 West Robinson Street Orlando, Florida 32501 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32301
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 The issue is whether Respondent properly denied Petitioner's application for a certificate of qualification, pursuant to Chapter 337, Florida Statutes, and Rule 14-22, Florida Administrative Code, for failure to timely file the application.
Findings Of Fact Petitioner is a family-owned construction firm located in Hattiesburg, Mississippi. It primarily acts as a contractor on pile driving projects. Petitioner is also involved in property management, oil, pre-stressed concrete, and general construction. Respondent selects its highway and bridge contractors from those who qualify under Section 337.14(1), Florida Statutes, and Rule 14-22.002(2), Florida Administrative Code. Petitioner has been a qualified bidder and construction contractor in Florida for Respondent continuously since the early 1940s. Contractors desiring to bid on state highway construction contracts in excess of $250,000 must apply annually to Respondent for a certificate of qualification. The application must be accompanied by the applicant's most recent annual financial statement, showing its financial condition no more than four months before Respondent receives the application. The application directs applicants to "mail" the completed forms to Respondent's Contracts Administration Office. Respondent sent Petitioner a Notice of Expiration of Qualification on or about February 3, 1999. The notice advised Petitioner of the following: Your qualification with this Department will expire on 04/30/99. Pursuant to Florida Statutes, your pre-qualification application must be 'filed' with the Department within four (4) months of the ending date of your financial statement. Filing is defined as receipt of the application by the Contracts Administration Office. Enclosed are two copies of the application form. Please return an original and one (1) copy of the application and all attachments. Please be advised all information must be filed in duplicate. In preparing your new application, please carefully follow the instructions on the application form and those enclosed with this notice. Additional reference material and a copy of Rule 14-22, F.A.C., are also enclosed for your convenience. Petitioner mailed its 1999 application for qualification, together with its most recent audit report dated December 31, 1998, to Respondent's Contracts Administration Office on April 27, 1999. Petitioner's fiscal year ends on December 31. An independent accounting firm begins preparing Petitioner's audit report shortly thereafter. The accounting firm's field work for Petitioner's 1998 audit was not complete until March 10, 1999, the date of the audit certification. This certification means there were no material changes in Petitioner's financial condition up to that date. There was no material change in Petitioner's financial condition over the holiday weekend from Thursday, December 31, 1998 to Monday, January 4, 1999. Changes in the amount of interest earned by Petitioner or charged against it during this brief interval would not make a difference in anyone's decision process. Any significant change up to March 10, 1999, would have been disclosed by the accounting firm in the December 31, 1998, audited financial statement. The same accounting firm has been auditing Petitioner's books for at least 15 years. Petitioner is in very sound financial condition. The Board of Governors of the United States Postal Service has set no more than three days as the standard for delivery of first class mail between Hattiesburg, Mississippi, and Tallahassee, Florida. This standard is not a guarantee. However, 90-94 percent of the time, the postal service delivers first class mail within two or three days throughout the country, as measured by an internal service measurement standard. The postal service also contracts with Price- Waterhouse to perform an independent external service measurement system called EXFC. Under that system, the postal service scored 100 percent on test mailings, delivered to Tallahassee from Mississippi within three days, over the past three years. The post office in Tallahassee, Florida, provides dedicated carrier service for the delivery of first class mail to state agencies five days a week. The postal service also delivers mail on Saturdays for the agencies that request weekend delivery. The postal service delivers Respondent's mail to its mailroom between 7:30 and 9:00 a.m. on weekdays. Respondent also receives mail on the weekends. Respondent's security guard pushes the weekend mail cart into the building on the weekends. Respondent's mailroom staff sorts incoming mail and places it in various bins for each mail station by 11:00 a.m. each week day. The mail stations send individuals down to the mailroom to pick up the mail from their assigned bin. If a station has not picked up its mail by 2:30 p.m., mailroom personnel deliver it to that station. Occasionally, first class mail is placed in the wrong bin and delivered to the wrong mail station. That mail is retrieved by the mailroom staff sometime after 2:30 p.m. and delivered to the correct office. At the end of the business day, no first class mail remains in the mailroom for delivery within the building. There is no evidence that first class mail intended for the Contracts Administration Office has ever been misdelivered. Bessie White, Administrative Assistant in the Contracts Administration Office, picks up the mail for her office from bin number 55. After she opens the mail, she stamps qualification applications and financial statements using an electric date and time clock. Ms. White saves envelope postal markings by cutting them out and attaching them to the applications. She then distributes the mail to various personnel in her office. The date and time clock that Ms. White uses to stamp incoming mail has to be reset manually when a calendar month ends in less than 31 days. April 30, 1999, was a Friday. Ms. White did not reset the date and time clock at the end of the business day. She did not work on the weekend of May 1-2, 1999. On Monday, May 3, 1999, Ms. White dated and time stamped Petitioner's application and financial statement before she reset the clock on the stamp machine. Consequently, the date and time stamp erroneously reflected that Petitioner's application and financial statement were received on Sunday, May 2, 1999, at 11:42 a.m. Ms. White distributed Petitioner's application and financial statement to the appropriate staff member in her office. Later that day, she reset the date and time clock to reflect the correct date of May 3, 1999. She did not go back to correct the erroneous stamps on mail, including Petitioner's documents, which she had already distributed. Ms. White discovered the error on Petitioner's application and financial statement seven months later, after Petitioner filed its protest in this matter. At that time, she made a handwritten notation on the documents, indicating their receipt on May 3, 1999. Petitioner mailed its 1999 application for qualification and its audited financial statements with a reasonable expectation that Respondent would receive them within three days, on or before April 30, 1999. Petitioner relied upon the postal service standard, and its own experience, in anticipating delivery of the documents within that time frame. Petitioner has an affiliate company located in Monticello, Florida. The Florida affiliate normally receives mail from Petitioner within three days. The record here contains no explanation for the delay by one business day in the receipt of Petitioner's application by Respondent's Contracts Administration Office. Petitioner mailed similar applications to Georgia, Arkansas, Missouri and Louisiana on April 27, 1999. All of these applications were approved. Respondent sent Petitioner a Notice of Intent to Deny Application for Qualification by certified mail on May 24, 1999. Respondent made this decision because the financial statements accompanying the application were dated more than four calendar months prior to the date the application was filed. Respondent counts calendar months in making its decision whether a qualification application is timely. In this case, Respondent took the position that the four-month time period ended on April 30, 1999, 120 days after December 31, 1999. 1./ If Petitioner's fiscal year had ended on June 30, 1999, Respondent would have required Petitioner to file its application within 123 days, on or before October 31, 1999. In determining whether a qualification application is timely, Respondent does not allow the five-day grace period for service by mail as set forth in Rule 28-106.403, Florida Administrative Code, and adopted by Respondent in Rule 14- 22.0011, Florida Administrative Code. Respondent approves over 400 qualification applications a year. It denies an average of 20 applications because they are late. When an application is denied as untimely, the applicant has an opportunity to furnish Respondent with an audited interim financial statement. An interim audit requires the same work and preparation as a regular annual audit. An interim audit would cost Petitioner between $25,000 and $30,000. Performing and filing an interim audit would also cause a three-month delay in the processing of Petitioner's application.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Respondent enter a final order approving Petitioner's application for a certificate of qualification. DONE AND ENTERED this 23rd day of December, 1999, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of December, 1999.
Findings Of Fact Tooze holds certificate number R-0434 as a Certified Public Accountant practicing in the State of Florida and held such certificate in good standing on January 1, 1974. At that time, Tooze was subject to professional certification requirements set forth in Chapter 473, Florida Statutes. The records of the Board reflect that Tooze provided no evidence of the completion of any courses or studies that would give him credits toward the reestablishment of his professional competency in the period between January 1, 1974, and April 2, 1977. On October 15, 1976, Tooze sat for an examination which was approved by the Board and given to practicing Certified Public Accountants pursuant to applicable law requiring re- establishment of professional competency. Tooze received a score of 64 out of a possible score of 100. The established passing grade for the examination is 75. Tooze received nine credit hours for the examination he took. On May 13, 1977, the Board suspended Tooze's certificate R-0434 as a Certified Public Accountant for failing to comply with requirements for the reestablishment of his professional knowledge and competency to practice public accounting. The questions to be answered in the uniform written professional examination administered to Tooze on October 15, 1976, were based upon "Current Authoritative Literature" which included Accounting Principles Board's Opinions, Accounting Research Bulletins, Statements and Interpretations of the Financial Accounting standards Board, Statements on Auditing standards, and the Laws and Rules of the Florida State Board of Accountancy. Tooze challenges sixteen of these one hundred questions on the grounds that the approved answers are incorrect and that the answer selected by Tooze is the proper choice. The questions attacked by Tooze are numbers 13, IS, 18, 51, 56, 61, 63, 67, 72, 74, 78, 80, 82, 95, 96 and 99. The title of the uniform written professional examination is "Examination of Current Authoritative Accounting and Auditing Literature and Rules of the Florida State Board of Accountancy. The approved answer to each of the questions on the examination is that which is mandated by the "Current Authoritative Literature." The examination does not purport to seek answers outside of the requirements of the Current Authoritative Literature. Each of the approved answers in the sixteen questions listed above are consistent with the demands of the Current Authoritative Literature. Each of Tooze's answers is contrary to the provisions of the Current Authoritative Literature. Accordingly, the answers selected by Tooze are not the best answers and were properly graded incorrect on his examination answer sheet.
The Issue Whether the Respondent committed the violations alleged in the Administrative Complaint dated February 5, 1999, and, if so, what penalty should be imposed. The Respondent maintains that the instant action is barred by laches and violates Section 455.225, Florida Statutes.
Findings Of Fact Petitioner is the state agency charged with the responsibility of regulating the practice of certified public accountants licensed within the state. At all times material to the allegations of this case, the Respondent, Robert Jarkow, has been licensed in Florida as a certified public accountant, license number AC0010963. On or about December 1996, the Respondent orally agreed to provide accounting services for an individual named Kasman who was doing business as Traditions Workshop, Inc. (Traditions). Traditions manufactured uniforms and listed the federal government among its clients. Revenues to the company from the sale of uniforms were presumably posted in accordance with written contracts. Although the Respondent participated in the monthly completion of financial records for the company, the exact description of his responsibilities for the company and the individual are not known. It is undisputed that Ms. Kasman asked the Respondent to provide a financial statement for the company as part of an effort to secure a line of credit from a bank in New York. It is also undisputed that Ms. Kasman refused to pay for the statement. According to the Respondent, based upon that refusal, he declined to prepare the instrument. Nevertheless, a document entitled "Financial Statements" was generated with a notation "MANAGEMENT USE ONLY-NOT FOR DISTRIBUTION." The Respondent maintains that the document was not prepared as a financial report and that if generated using his data disk it was done without any intention on his part for the product being used to secure a line of credit. The document did not comply with provisions of accounting practice. The Respondent admitted that when his relationship with the party deteriorated, and payment for services was not rendered, he did not release information to a succeeding accountant. Ms. Kasman needed the information, depreciation schedules, in order to accurately complete tax records for Traditions. The Respondent attempted to locate Ms. Kasman and her bookkeeper for hearing but was unable to do so. Ms. Kasman filed a complaint with the Petitioner against the Respondent that was not investigated until several months after it was filed. The Respondent obtained a civil judgment against Traditions for unpaid accounting fees. The Administrative Complaint filed in this case was submitted over a year after the consumer complaint. Neither party presented testimony from the complainant, her bookkeeper, or her succeeding accountant.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation enter a final order finding the Respondent violated Rule 61H1-23.002, Florida Administrative Code, as set forth in Count II of the Administrative Code; imposing an administrative fine in the amount of $1000; and placing the Respondent on probation for one year subject to terms as may be specified by the Board of Accountancy. DONE AND ENTERED this 4th day of December, 2001, in Tallahassee, Leon County, Florida. ___________________________________ J. D. PARRISH Administrative Law Judge Division of Administrative Hearings 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 this 4th day of December, 2001. COPIES FURNISHED: Charles F. Tunnicliff, Esquire Department of Business and Professional Regulation 1940 North Monroe Street, Suite 60 Tallahassee, Florida 32399-2202 Victor K. Rones, Esquire Law Offices of Rones & Navarro 16105 Northeast 18th Avenue North Miami Beach, Florida 33162 Martha Willis, Division Director Division of Certified Public Accounting Department of Business and Professional Regulation 240 Northwest 76 Drive, Suite A Gainesville, Florida 32607 Hardy L. Roberts, III, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202
Findings Of Fact Edward J. Tooze holds certificate number R-0434 as a certified public accountant in the State of Florida. Tooze's certificate is currently under suspension pursuant to order of the State Board of Accountancy entered under to authority of Section 473.111(5), Florida Statutes. Tooze, although under suspension, is subject to the authority of the Florida State Board of Accountancy for violations of Chapter 473 and the rules contained in Chapter 21A, Florida Administrative Code. Tooze undertook to provide an audited and an unaudited financial statement for Gull-Aire Corporation on September 30, 1976. Said audited and unaudited financial statements were received into evidence as Composite Exhibit #1. Financial statements are representations made by management, and the fairness of a representation of unaudited statements is solely the responsibility of management. See Section 516.01 of Statements on Auditing Standards, No. 1, (hereinafter referred to as SAS) The auditor's report dated October 4, 1976, prepared by Tooze, states as follows: In accordance with your instructions, we submit herewith the balance sheet of Gull-Aire Corporation as of September 30, 1976. This statement was prepared without audit, and accordingly we do not express an opinion thereon. Each page of the unaudited statement bears the language, "Prepared without audit from books of account and information provided by management." Paragraph 516.04 of SAS provides an example of a disclaimer of opinion as follows: The accompanying balance of x company as of December 31, l9XX, and the related statements of income and retained earnings and changes in financial position for the year then ended were not audited by us and accordingly we do not express an opinion on them. (Signature and date) The form of the disclaimer used by Tooze in the financial statement of Gull-Aire quoted in Paragraph 6 is not identical to the example given in Section 516.04, SAS, No. 1. However, Tooze's statement does reflect that the financial statement was not audited and that Tooze did not express any opinion on it. The notes to the audited financial statement of Gull-Aire Corporation do not include a summary of significant accounting policies used by Tooze in the preparation of the financial statement. While only a balance sheet is shown in both of the Gull-Aire financial statements, retained earnings were reported which were the result of the sale of a parcel of real property. No notes were made on either of the reports explaining this sale, and its treatment, although this was a major business transaction and source of income to the corporation for the period covered. Tooze did not disclose the treatment of income taxes in both the financial statements of Gull-Aire, particularly the tax treatment of the retained earnings in the amount of $45,499.64 from the sale of the real property. Although Tooze issued two financial statements for Gull-Aire Corporation as of September 30, 1976, one audited and one unaudited, he did not state on the second financial statement the reason for its preparation and explain the accounting decisions which resulted in the change of various entries on the second statement. Tooze stated to the Board's investigator that he did not obtain a representation letter from the management of Gull-Aire Corporation. Tooze further stated that he did not prepare a written audit program nor obtain and report what internal controls existed within Gull-Aire Corporation. Tooze also prepared a financial report dated April 30, 1977, for Jack Carlson Company, Inc., which was received into evidence as Exhibit 2. The disclaimer prepared by Tooze in the Jack Carlson financial statement contained in the letter to the Board of Directors of the company dated September 15, 1977, stated as follows: We submit herewith our report on the examination of the books and records of Jack Carlson Company, Inc., for the fiscal year ended April 30, 1977, and the following exhibits: (delete) The terms of our engagement did not include those standard auditing procedures instant to the rendition of an opinion by an independent Certified Public Accountant. The limited scope of our examination precludes our expression of an opinion as to the fairness of the over-all representations herein. The attached statements were made the basis for the preparation of the U.S. Corporation Income Tax Return for the fiscal year ended April 30, 1977. Essentially the same statement is contained in the statements for Albeni Corporation and Georgetown Mobile Manor, Inc. No statement of changes in financial position was contained in the financial statement prepared for Jack Carlson Company, Inc. Section 516.08, SAS, No. 1 provides in pertinent part as follows: When financial statement's are issued proporting to present fairly financial position, changes in financial position, the results of operations in accordance with generally accepted accounting procedures, a description of all significant accounting policies of the reporting entity should be reported as an integral part of the financial statement. (Emphasis supplied) Tooze prepared financial statements for Albeni Corporation which were received as Exhibit #3, and financial statements for Georgetown Mobile Manor, Inc., which were received as Exhibit #4. The financial statements of Carlson, Georgetown and Albeni were all unaudited. Tooze did not provide an explanation or note to the financial statements describing significant accounting policies which he applied in preparing the statements. In the financial statement of Albeni Corporation, Tooze indicated that "these interim financial statements are intended primarily for internal management use." The fixed assets in the financial statement of Georgetown Mobile Manor, Inc., constitute $301,642 out of $345,000 of the company's assets. Depreciation and accumulated depreciation are reported as $103,641. The method of computing depreciation was not indicated on the financial statement. In the unaudited financial statements prepared for Carlson and Albeni, the basis of stating inventories and the methods used to determine inventory costs were not disclosed, although inventories constitute a significant percentage of both companys' assets.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law the Bearing Officer recommends that the Board of Accountancy take no action on the violation of Rule 21A-4.02, Florida Administrative Code, and Section 473.251, Florida Statutes. DONE and ORDERED this 3rd day of April, 1979, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 COPIES FURNISHED: Douglas M. Thompson, Jr. Executive Director State Board of Accountancy Post Office Box 13475 Gainesville, Florida 32604 Samuel Hankin, Esquire Post Office Box 1090 Gainesville, Florida 32602 Mr. Edward J. Tooze 464 Patricia Avenue Dunedin, Florida 33528
Findings Of Fact Leslie H. Roth is a licensed CPA in the State of Florida, holding License No. R0004593. He was employed by the CPA firm of Rachlin & Cohen from December 2, 1974, through August 26, 1977. During that period of employment he was paid a salary plus a commission based upon the number of clients he brought to the firm and the fees he generated. The Respondent left that firm on August 26, 1977, and became an employee of Holiday Inn at Calder Race Course in Miami. Upon leaving the firm of Rachlin & Cohen the Respondent signed acknowledgements disclosing the status of the clients' work to which he had been assigned and the related amount of money owed to the firm. When he left that firm, the firm owed him no additional commissions or salaries. The Respondent failed to remit to Rachlin & Cohen the fees collected from their clients for whom he had performed services and when Rachlin & Cohen attempted to collect those fees some of the clients claimed they had already paid the Respondent. Rachlin & Cohen, therefore, filed suit in circuit court and obtained a judgment against the Respondent in the amount of $550 representing the firm's fees collected by the Respondent. In early 1978, while working as a CPA for Holiday Inn at Calder Race Course, the Respondent prepared some unaudited financial statements in order to help the business maintain or keep a loan with a financial institution. These unaudited financial statements are required to comply with applicable generally accepted accounting principles and auditing standards. They contained a technical deficiency because the Respondent failed to disclose an aggregate future minimum lease payment and a potential deficiency in that the notation that the statements were "before final year-end adjustments" did not disclose whether material adjustment needed to be made. The Respondent also was shown to have performed the service of filing a "1120-SK-1 form" for Pro-Management, Inc., while Pro-Management, Inc., was a client of Rachlin & Cohen. Filing s such a form is normally the duty of the regularly retained accounting firm for that company. The Respondent's "reestablishment period" for his CPA license was 1977 through 1979. He was required to file yearly continuing professional education reports related to his reestablishment period. These were due by January 15, of each following year, reporting on his level of compliance with continuing professional education (CPE) requirements for the preceding year. In 1977, when the period started, the CPE requirements were 30 hours per year, with at least 8 hours of accounting and auditing. If not completed the first year and any time during the 3-year period, he would have to completed 120 hours of CPE courses, including at least 32 hours of accounting and auditing. In October, 1977, the law changed and licensees could choose to complete the old requirements or the new ones which were 24 hours per year including at least 64 hours of auditing and accounting, but licensees could not use a combination of those. If a licensee files such a form substantially late it must be accompanied by a verification of attendance at the subject CPE courses. The CPA is also required to maintain documentation of CPE courses attended for 3 years following his reestablishment period. The Respondent filed a CPE education report for 1977 on January 1, 1978. It was reviewed and returned February 1, 1978, with a letter by the Board explaining that the Respondent had reported one course incorrectly for "accounting and auditing" when it was only half-approved for that category. He also was informed by the Board that he reported 7 hours of accounting and auditing credit for Dade County, Florida Institute of CPA Monthly Meetings, but with no dates and no titles of sessions attended. The Respondent returned the 1977 form to the Board's office January 7, 1980, along with the 1978-1979 CPE report forms, approximately 2 years late with regard to the 1977 form and 1 year late with regard to the 1978 reporting period. The forms filed by the Respondent reflected that in 1977 he had obtained 22 hours of accounting and auditing and 34 hours total CPE. He still supplied no dates for the meetings of the Dade County Chapter of FICPA, nor had he apportioned hours properly. He reported 15 hours accounting and auditing and 37 hours total CPE for 1878, but again he included FICPA monthly meetings for 4 hours of his accounting and auditing requirement and 4 hours for "other." Under the category "Accountants for Public Interest," he reported 3 hours accounting and auditing and 10 hours "other," but with no itemization of the programs attended on his 1979 form. The 1979 form was, however, timely filed. The hours reported by the Respondent which were verified still did not fulfill the continuing professional education requirements imposed by the Board for the years involved. The staff of the Board attempted to notify the Respondent of the deficiencies in his reporting and requested verification of his courses attended. The Board received no response from the Respondent. In view of his lack of response and the deficiency in reporting CPE courses attended, the Continuing Education Committee recommended to the Board of Accountancy that the Respondent's license be reverted to inactive status. The Respondent was accordingly notified on March 1, 1980, that his continuing professional education appeared deficient and he was given 30 days to correct the situation. The Respondent did not respond and on May 1, 1980, he was informed by the Continuing Professional Education Committee that it would recommend to the Board that it relegate his license to inactive status. On July 30, 1980, the Respondent was sent another letter with essentially the same information giving him an additional period of time to resolve his difficulty. Finally, at the August, 1980, meeting of the Board of Accountancy the reversion to inactive status was accomplished. The Respondent's license has thus legally been inactive since August 20 of 1980. Since May of 1980, to the date of the hearing, the Respondent has been employed by Gerson, Preston & Co., a CPA firm, where he has utilized his accounting skills and worked as a staff accountant. He has thus practiced as a CPA since August 20, 1980.
Recommendation Having considered the foregoing findings of fact, conclusions of law, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is RECOMMENDED that the Respondent, Leslie H. Roth, be found guilty of the charges in the Administrative Complaint herein and that his License No. ROOO4593 be placed in a suspended status for 3 months from the date of the final order herein; that his licensure then be returned to active status, but that he be placed on probation for 3 years and be required to complete 120 hours of continuing professional education, including at least 32 hours of accounting and auditing and that he be fined the sum of $1,000. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 5th day of October, 1981. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of October, 1981. COPIES FURNISHED: Drucilla E. Bell, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Leslie H. Roth Post Office Box 9174 Pembroke Pines, Florida 33024
