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
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.
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.
Findings Of Fact At all times pertinent to the issues herein, the Petitioner, Board of Accountancy was the state agency responsible for the certification and licensing of public accountants and the regulation of the public accounting profession in Florida. Respondent, Gerald E. Shaw, was licensed as a certified public accountant, (CPA), in Florida and operated a public accounting practice in Florida as Gerald E. Shaw, P.A. During the period between December 31, 1990 and April 20, 1991, Respondent was retained to audit the financial books and records of High Point of Fort Pierce Condominium Association Section I, Inc. His audit report and allied papers were submitted to the membership of the association by letter dated April 20, 1991. In his letter he indicated he had conducted his audit in accordance with generally accepted auditing standards, (GAAS), and he opined therein that the financial statements he prepared, "present fairly, in all material respects, the financial position of the [Association] as of December 31, 1990 and the results of its operations for the year then ended in conformity with generally accepted accounting principles." At some point thereafter, the Department/Board of Accountancy received the financial statements prepared by the Respondent which contained apparent deficiencies on the face, particularly the lack of adequate note disclosure. Thomas F. Reilly, C.P.A., an expert in public accounting and an individual who had, on previous occasions, conducted similar investigations for the Board of Accountancy, was retained to conduct an investigation to ascertain the facts related to the instant financial statements prepared by the Respondent. By letter dated October 4, 1991, the Department notified Respondent that the investigation would take place and the subject matter thereof. Mr. Reilly thereafter met with the Respondent and discussed the financial statements and work papers in issue with him. Though Respondent was initially reluctant to participate in the investigative process unless he was provided, ahead of time, with a list of the reported deficiencies, he later agreed to a review of his work product. When he had completed his investigation, Mr. Reilly prepared a report in which he stated his opinions regarding the sufficiency of the financial statement prepared by Respondent which he determined to be inadequate. His opinion was based on his findings that there were a significant number of departures from the accounting standards called for in Statement of Accounting Standards, (SAS), 58 developed and promulgated by the American Institute of Certified Public Accountants, (AICPA). Mr. Reilly also found there were no references in the Financial Statement prepared by Respondent to footnotes as required by Accounting Principles Board, (APB), Statement 4. There also was no summary of significant accounting policies as required by APB Statement 22. All of this was determined from the hierarchy of accepted auditing principles as found in SAS 5. APB Statement 22 is at the top of the hierarchy and indicates that a failure to follow generally accepted accounting principles is a significant deviation. Among the deviations Mr. Reilly found were included: Cash in reserve funds was incorrectly referred to as a current asset. Reserve funds should not be considered current assets. (See APB Statement 43). Leases should be disclosed and here these were significant. (See FASB 13, Section L-10). Related party disclosures are not mentioned in the notes as they should be. Here there were 3 separate condominium associations and this financial statement related to only one of them. Since the 3 associations were related, however, the statement should have referred to the others within the complex shared by them all. Because of their interrelationship, disclosure was important. There was no allocation of expenses among the three different associations. There were some invoices paid which may have been allocated among the 3 associations and this was not discussed. It could be significant. Rule 7D-23, F.A.C., requires disclosure of common property and the costs of repair thereof. This requires reserves be maintained for future repair, and the method of allocation, or the waiver thereof, should be explained. This can be very significant, and it was not done by Respondent here. Among the work papers submitted some things which should have been shown were not in evidence. These included: A written audit program should have outlined as required by SAS 22 and SAS 41. This is very significant. A client representation letter should have been obtained as called for in SAS 19. Without it, a limitation on the audit is imposed. This is very significant. A review of related party transactions was not shown to have been done as required by SAS 45. Because of the related organi- zations, this was a material deviation. There appeared to be no review of the internal control structure, (policies, pro- ceedings, etc. relating to the accounting practices of the organization). The auditor should look at this and understand it so he can plan his audit, as required by SAS 55. Here, the audit report did not show it was done and this is significant. A preliminary judgement of materiality levels, as required by SAS 47 was not done. There was no showing that planning had been done as required by SAS 22 and 47, or analytical procedures used in planning the nature, timing and extent of other audit procedures, as required by SAS 56. Each of these alone might not be significant, but taken together, they all are significant. There appeared to be no consideration given to applicable assertions in develop- ing audit objectives as required by SAS 31. An attorney's letter was not in the file as required since the books showed an attorney had been used during the year. This is called for by SAS 12 and is used to check on the status of the legal work and any potential liability of the client. No check was made to see if any test- ing had been done to insure the association was in compliance with Rule 7D-23, FAC. No inquiry was made to see if the client was in compliance with the laws and regulations of the state in general, as called for by SAS 63. The work papers contained a lot of unnecessary bills and statements not norm- ally included. These should not have been there in that form without a showing they were used in the audit. (See SAS 41) There was no showing that any tests were done to insure a correct expense all- ocation among the 3 entities. There was no reporting disclosure checklist. While not required, such a list is common practice to insure all required disclosures pertinent to condo associations were made. The failure to do this is, in Reilly's opinion, practice below commonly accepted standards. The checklists are available from many sources readily access- ible to accountants. There is nothing secret or exclusive about them. Accounting competency standards are found in Rule 21A-22.001 - 21A- 22.003, F.A.C. In Mr. Reilly's opinion, based on, among other discrepancies, the matters outlined above, Respondent deviated from these standards to a point below the standard for a reasonably prudent certified public accountant. He defines "generally accepted accounting practices", (GAAP), as a source of knowledge that exists as defined within the parameters of SAS 5. Certified public accountants keep current in literature pertinent to their professional practice by attendance at continuing education courses, conferences, by performing quality and peer reviews, by doing investigations for the Board of Accountancy, and by networking with other CPA's. These are, of course, not the sole methods of maintaining currency but the ones used mostly by active practitioners, to the best of Mr. Reilly's knowledge. In his report of investigation, Mr. Reilly notes that Respondent is not a member of either the Florida Institute of Certified Public Accountants or the American Institute of Certified Public Accountants and does not participate in the peer review or quality review programs of either organization. His continuing professional education, as reported by him, consisted mainly of self study programs published by Accounting Publications, Inc., and though his practice is related, to a substantial degree to condominium associations, he has not attended any recognized continuing professional education course in that area. Mr. Felsing, also a CPA, heard Mr. Reilly's testimony at the hearing and reviewed his report of investigation. He agrees with Mr. Reilly concerning Respondent's report and he also considers Respondent's departure from generally accepted accounting standards to be significant. He notes that the Respondent here expressed a "clean" opinion regarding the status of the association which he should not have done because of the deficiencies in his work. Mr. Felsing did not review Respondent's work papers, but based on his understanding of Reilly's testimony, he identified what he considers to be significant departures from standard. These include: There should have been a work program developed as required by SAS 22. This is very significant. There should have been a client representation letter as required by SAS 19. This is significant because the failure to have it requires a qualification of the report. SAS 45 requires a review of all related parties and this was not done here even though related parties existed. Respondent's failure to document his thought processes on understanding on internal control standards is indicative of Respondent's attitude toward those standards. Felsing generally concurs with the opinions given by Mr. Reilly right down the line. He concludes that the Respondent's demonstrated lack of planning raises a question as to the effectiveness of the audit since one cannot determine if all required tasks were done. Generally accepted accounting standards require the use of analytical procedures as a valuable tool. Failure to use them would be a significant departure from accepted standards since they all relate to the planning of the engagement and without documentation, a reviewer of the audit report cannot tell if the required tasks were performed. The mere inclusion of client documents in the work papers is not acceptable proof that the work was done. The significance of the disclosure checklist lies in the fact that it is the only way to insure that all required items are included in the financial statement. After a review of all the evidence available to him, Mr. Felsing concluded that Respondent failed to use due diligence as a CPA in this audit. In the aggregate, the information available shows Respondent was either not aware of or chose to disregard the applicable professional standards pertinent here. In his defense against the charge of failing to conform to generally accepting accounting standards, Respondent refers to SAS 5 and AU 411.02 and 411.05. These authorities basically outline the standards against which accounting practice is measured. He notes that the term, "generally accepted accounting practices" includes not only pronouncements but also concept statements of the Financial Accounting Standards Board and "broad conventions and rules" which are not pronouncements. Respondent urges that a practitioner has to follow generally accepted accounting practices when performing an audit. There are two subgroups of these practices which pertain to (1) profit and nonprofit organizations, and (2) governmental entities. According to the AICPA interpretation of Conduct Rule #3, there are reasons to depart from GAAP when appropriate. One is the evolution of a new form of business transaction and another is new legislation requiring a departure. In either case, a certified public accountant might legitimately deviate from GAAP. Since, he claims, GAAP is somewhat fluid in application, the auditor has the responsibility and the right not to act as a robot but to see that the audit properly serves the purpose of the entity being audited so as to promote decision making and to identify net income and net worth. Respondent asserts that GAAP are not an end in themselves but a tool in making business decisions. The usefulness of the financial information should be the primary quality to be sought. Usefulness deals with relevance and reliability. In the instant case, Respondent claims that the concept of condominium ownership of realty is so new and so different, and governed by such new legislation that GAAP which have been in use over the past 10 or 15 years and developed to deal with the condominium association are not pertinent. Here, he claims, he had to modify. His position, however, is not well taken. The audit report in issue was to be read by the condominium owners who are interested in the stewardship of the condominium board and the net worth of the association. Respondent contends they are not interested in profit or tradable net worth. A condominium association has a clear and stated purpose which is the management and maintenance of the condominium property. Therefore, an accountant who goes into an audit of a condominium association without having these concepts in his mind is, in his opinion, not doing a good job. Turning to the specifics of the allegations made by Petitioner's witnesses and in the report of investigation, while he accepts some of the comments as valid so far as they allege a particular action, he also claims, in those cases, that the alleged inadequacy has no significant effect on the financial statements. For example, on page C-1 of Mr. Reilly's report, under the heading, Financial Statements, he refers to audits (plural) when only one year is reported on. On the other hand, Respondent disagrees with Reilly's comments regarding an "unorthodox" practice of presenting separate operating statements for the general and reserve funds. Respondent claims there is no definition of "unorthodoxy" for a condominium association and, as evidenced by the 1990 budget of the association, there were more than one reserve account indicated on the financial statement. In his opinion, the accountant should honor that segregation of funds. Respondent agrees that his financial statements do not contain a general reference to the accompanying notes, but he cannot see where any damage was done to a reader of those statements because the footnotes were there without a separate reference. He disagrees that it is generally accepted to record changes in financial position as a basic part of the financial statement when dealing with condominium associations. They are "new animals" and as the accountant, he has the right, he claims, to decide if that information is necessary to the reader of the financial statement. Here, he concluded it was not and, in fact, could be a source of confusion. Respondent also disagrees the Reilly's comment regarding the information regarding reserve funds. He believes that if the financial reporter feels there is a need for segregation of funds, he has to present that segregation in detail. In this case, Respondent believes there is no orthodoxy for condominium reporting and it would be useful to the reader of the statement to see total assessments from all sources so as to determine the justification for his monthly assessment. He also disagrees with Reilly's conclusion that the financial statements do not contain a summary of significant accounting policies. There are, he claims, no alternatives to the way he presented them. Respondent has difficulty responding to Reilly's seventh assertion which is to the effect that cash in reserve funds was inappropriately reflected as a current asset since the reserves are long term. Mr. Shaw believes that if the cash is there, it is available to the board whether it is used or not. This appears to be a matter of semantics and not an issue particularly related to the accounting for condominium associations. While it is true the reserve asset is current and available, it is a dedicated asset and the better accepted accounting practice, as indicated by both experts, is to treat it more as a long term asset. It is so found. Respondent also disagrees with Reilly's conclusion that his terminology in Sections 2 and 3 of the balance sheet is unorthodox. He asserts that those sections do not have to be defined anywhere in the financial statements and are not related to Section 1. He contends that any reader of the audit report would know what is what and be able to understand it. With regard to the "missing" note disclosures, he disagrees with all allegations. He claims that disclosures under FASB #13 and #96 clearly do not apply to condominium associations but relate to investor owned leaseholds. Review of the pertinent bulletin does not necessarily support Respondent's position. He also claims that since there are no related parties none need be disclosed as regards the property management company or the other Sections. The same, he contends, relates to disclosure of potential allocation of expense between the three associations in the same complex. He also does not accept the need to disclose the allocation of interest income between funds utilized by the association. As to disclosures related to reserves and the funding for major repairs and replacements, he contends there is no GAAP that requires this disclosure. Only the state requires it. If a practice is called for in either a statute or rule governing a business activity, whether the profession agrees or not, that requirement must be met and one who fails to do so omits at his peril. In general, those things omitted from his audit, such as a cash flow statement, were not requested by the client, he claims. Had he been asked for them, he would have provided them. Respondent also seeks to rebut some of Mr. Reilly's comments regarding his work papers. He has no complaint with the first two which are not critical of his audit, and he admits he may be in violation of GAAP with regard to Reilly's finding that certain required documentation was not included therewith. However, if, as he alleged, the financial statement conforms to GAAP, there is no harm done when the supporting work papers are not exactly as they should be. He contends, as well, that several, such as SAS #22 which refers to assistants, do not apply. Admitting to a violation of SAS #19 which calls for a client representation letter, he claims to have cured that defect by subsequently getting one and thereafter saw no reason to change the financial statement. Again, as with his response to the complaints regarding the financial statement, he claims any alleged failure regarding related parties is invalid since, he asserts, there are none. With regard to the remaining alleged defects in the supporting documentation to the work papers, he claims there was a search for unrecorded liabilities but because there was no mention made of it, Reilly could not tell this from the documents. Admitting there was no documentation regarding understanding of the internal control structure, as required by SAS #55, Respondent claims he understood it. He alleges he did accomplish an assessment of control risk as required by SAS #55 but admits there is no record of it in the work papers. The preliminary judgement of materiality levels, planning, and analytical procedures in planning the nature, timing and extent of other audit procedures, as required by SAS #'s 22,47 and 56 were all accomplished, he claims, but admits they were not included in the work papers. He also admits he did not get an attorney's letter and that this is a violation. However, he claims he did test to determine if the association was in compliance with pertinent statutes and rules, but it was not written down in the work papers, and he claims that confirmation of accounts receivable was not necessary because there were none except from Sections 2 and 3, which he did verify. In this latter assertion, it appears he was correct. Mr. Shaw refers to allegations 4 - 6 regarding work papers as mere statements of fact with which he takes no issue. A closer look at the report, however, reveals that numerous omissions were noted here as well. He admits that a financial statement reporting checklist was not in evidence but relates he deemed it not necessary. Mr. Reilly disagreed and his opinion is more supportable. There is little to disagree with in Mr. Reilly's item 8 under work papers when he asserts that the omission of an overall index of the work papers made them difficult to review and void of audit methodology. Taken together, the evidence demonstrates that Respondent's audit did not sufficiently conform to GAAP and was less than required under the circumstances.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is recommended that a Final Order be entered in this case placing Respondent, Gerald E. Shaw's, license as a certified public accountant in Florida on probation for a period of three years under such terms and conditions relating to practice and continuing education as are deemed appropriate by the Board of Accountancy. RECOMMENDED this 12th day of October, 1992, in Tallahassee, Florida. ARNOLD H. POLLOCK, 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 12th day of October, 1992. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 92-3420 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of fact submitted by the parties to this case. FOR THE PETITIONER: Accepted and incorporated herein except as they relate to the treatment of reserve accounts as long term assets. FOR THE RESPONDENT: None submitted. COPIES FURNISHED: Charles F. Tunnicliff, Esquire Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Gerald E. Shaw 10780 South US 1 Port St. Lucie, Florida 34952 Jack McRay General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Martha Willis Executive Director Department of Professional Regulation/Board of Accountancy Suite 16 4001 Northwest 43rd Street Gainesville, Florida 32606
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
The Issue The basic issue in this case is whether the Petitioner's application for registration as an associated person in the state of Florida with Value Equities Corporation should be granted or denied. The Department proposes to deny the application on the basis of Section 517.161(1)(h) and (k), Florida Statutes, contending that the Petitioner has demonstrated his unworthiness to transact the business of an associated person and is of bad business repute. The Petitioner has little, if any dispute with the facts relied upon by the Department, but offered evidence in mitigation and asserts that, on the facts in this case, he is entitled to registration. Subsequent to the hearing in this case, a transcript was filed on March 4, 1987, and, pursuant to ruling at the close of the hearing, the parties were allowed until March 16, 1987, within which to file their proposed recommended orders. Both parties filed timely post-hearing documents, containing proposed findings of fact. A specific ruling on all proposed findings of fact is contained in the Appendix attached to and incorporated into this recommended order.
Findings Of Fact Based on the stipulations of the parties, on the testimony of the witnesses at the hearing, and on the exhibits received in evidence, I make the following findings of fact. Petitioner, Kenneth Joseph Whitehead, ("Whitehead") filed a Form U-4 application to be registered as an associated person in the state of Florida with Value Equities Corporation, located at 216 South Fairway Drive, Belleview, Illinois. Said application was received at the Department of Banking and Finance ("Department") in due course on June 21, 1986. By letter dated September 3, 1986, the Department advised the Petitioner that it intended to deny his application for registration for the reasons set forth at length in the letter. Thereafter, the Petitioner filed a timely request for hearing. The National Association of Securities Dealers ("NASD") District Business Conduct Committee, District #4, on July 11, 1978, accepted a "Letter of Admission, Waiver and Consent" against Weinrich, Zitzman & Whitehead, Inc., Kenneth J. Whitehead and others. In said agreement, Whitehead personally consented to a censure, a fine in the amount of $2000, and a ten day suspension from NASD membership. The sanctions imposed by the NASD resulted from violations of Regulation T imposed against Whitehead individually. The State of Missouri issued an order entitled "ORDER TO CEASE AND DESIST" in the matter of: Weinrich, Zitzman and Whitehead, Inc., Kenneth Whitehead, et al., on February 24, 1982, and found Whitehead to have personally made sales of unregistered securities, to have effected Unauthorized transactions, to have distributed promotional materials while not providing a prospectus and to have omitted to purchasers the fact that said securities were unregistered. Further, all respondents in that proceeding, including Whitehead, were found by the State of Missouri to have omitted the fact that unsuccessful attempts were made to register certain stocks, the fact that certain stocks could not justify their offering price, and the fact that the promoter's equity position could not be justified with respect to certain stock. All of the aforementioned were found to have constituted violations of Missouri law. As a result, Whitehead and others were ordered to cease and desist from violating Missouri law. Petitioner was afforded his due process rights to contest said order which was subsequently upheld. On May 31, 1983, the NASD District Business Conduct Committee #4 ("Committee"), entered a "Decision in Complaint No. KC-261" as to Whitehead and others. The Committee found that Whitehead failed to maintain minimum margin equity on certain accounts and failed to deliver securities as required by Article III, Sections 1 and 30, of the NASD Rules of Fair Practice. As a result of said violations, Whitehead was censured, fined $2500 and suspended by the NASD for three days. On September 19, 1985, the Committee issued a second complaint (KC-339) against Whitehead and others alleging violations of Article III of the NASD Rules of Fair Practice by failing to maintain required net capital, proper books, and records. As a result of an offer of settlement, Whitehead was censured and fined $1500. On December 20, 1985, the Committee issued a third Complaint (KC-343) against Whitehead and others for failure to maintain required net capital in violation of SEC Rule 15C3-1 and Article III, Section 1, of the NASD Rules of Fair Practice. The complaint remains pending. In 1982, eleven suits were filed by individual plaintiffs against WZW Financial Services, Inc., Whitehead, and others in the Circuit Court of the City of St. Louis to effect rescission of the sale of unregistered securities in the state of Missouri. The suits were settled for an aggregate of $240,000. The Petitioner was not directly involved in the sales that led to these suits, but he was vicariously liable as an officer of the corporation. In 1984, a suit was filed in the U.S. District Court for the Southern District of Illinois by certain individual plaintiffs against WZW, Inc., Kenneth Whitehead, and others in the sale of limited partnership interests wherein the allegations included violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C 78j(b), Rule 10b-5, involving securities fraud; violations of Section 1964c of the Racketeer Influence and Corrupt Organizations Act ("RICO") of 18 U.S.C. 1962C, 1964c, involving racketeering activity; and violations of 18 U.S.C. 1341, involving mail fraud. The case is currently pending. On January 30, 1986, O. R. Securities, Inc., filed a Form U-5 termination notice in which Whitehead was terminated for violating the firm's policy concerning margin accounts. The termination was investigated by the NASD. Following the investigation, the NASD determined that no further action was warranted.
Recommendation Based on all of the foregoing, it is recommended that the Department of Banking and Finance issue a final order in this case which denies the Petitioner's application for registration as an associated person with Value Equities Corporation. DONE AND ENTERED this 19th day of March 1987, at Tallahassee, Florida. M. 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 19th day of March, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-4055 The following are my specific rulings on each of the proposed findings of fact submitted by both parties. Findings submitted by Petitioner First unnumbered paragraph: Accepted in substance with unnecessary details omitted. Second unnumbered paragraph: First sentence accepted in substance. Second sentence covered in introductory portion of this recommended order. Paragraph 1: All but last sentence is accepted in substance. Last sentence is rejected as irrelevant because there is no persuasive competent substantial evidence that customers were not hurt or jeopardized. Paragraph 2: First sentence accepted. Second sentence rejected as incomplete. Third sentence rejected as irrelevant in light of other evidence. Fourth and fifth sentences rejected as contrary to the greater weight of the evidence. Sixth sentence accepted. Seventh sentence rejected as contrary to the greater weight of the evidence and as not supported by persuasive competent substantial evidence. Paragraph 3: Accepted in substance. Unnumbered paragraph following paragraph 3: First sentence is rejected as irrelevant in light of other evidence. Second and third sentences are rejected as in part contrary to the greater weight of the evidence and in part not supported by persuasive competent substantial evidence. Paragraph 4: Accepted in substance. Paragraph 5: Accepted in substance. Paragraph 6: The first four sentences are rejected as constituting irrelevant and unnecessary details. The fifth sixth, and seventh sentences are rejected as contrary to the greater weight of the evidence and as not supported by credible competent substantial evidence. Paragraph 7: Accepted in substance with unnecessary details omitted. Findings submitted by Respondent Paragraph 1: Accepted. Paragraph 2: Accepted in substance. Paragraph 3: Accepted. Paragraph 4: Accepted. Paragraph 5: Accepted. Paragraph 6: Accepted. Paragraph 7: Accepted. Paragraph 8: Accepted. Paragraph 9: Accepted. Paragraph 10: Accepted with additional facts for clarity and accuracy. Paragraph 11: Rejected as constituting proposed conclusions of law or legal argument regarding what was not proved, and not constituting findings of fact based on evidence. COPIES FURNISHED: James S. McClellan, Esquire 314 North Broadway, Suite 1930 St. Louis, Missouri 63102 Charles E Scarlett, Esquire Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Florida 32399 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0305
The Issue Whether respondent violated Section 112.3142(2)(b), Florida Statutes, with regard to her 1996 financial disclosure obligations, and, if so, what penalty is appropriate.
Findings Of Fact Respondent, Eileen McGuire, is now and at all times material to this proceeding has been a member of the Town Council of the Town of Welaka, Florida. As a public official, Respondent is subject to the applicable requirements of Chapter 112, Florida Statutes. Respondent was first appointed to the Welaka Town Council (Town Council) on October 24, 1995. Subsequently, she was elected to the Town Council in March 1996, and was re-elected in 1998. As an elected public official, Respondent was required to file an annual CE Form 1, Statement of Financial Interests (Statement of Financial Interests), for the year 1996 with the Supervisor of Elections Office of Putnam County, Florida (Putnam County Supervisor of Elections or Supervisor of Elections). The 1996 Statement of Financial Interests was required to be filed by July 1, 1997. On June 23, 1997, Respondent submitted her 1996 Statement of Financial Interests with the Putnam County Supervisor of Elections. However, Respondent failed to sign and date the 1996 Statement of Financial Interests she submitted to the Supervisor of Elections. Respondent's failure to sign and date her 1996 Statement of Financial Interests was inadvertent and unintentional. All the official records of the Putnam County Supervisor of Elections reflect that Respondent's 1996 Statement of Financial Interests was submitted to that office on June 23, 1997. Moreover, on that same day, Respondent's 1996 Statement of Financial Interests was accepted, received, stamped, and deemed filed by the Supervisor of Elections. The Putnam County Supervisor of Elections, deemed Respondent's 1996 Statement of Financial Interests filed on June 23, 1997, notwithstanding the fact that the form was not signed or dated. Respondent was not given any written notice of any alleged defect in or failure to properly file her 1996 Statement of Financial Interests either by the Putnam County Supervisor of Elections or any other government officer or agency. In October 1997, Respondent received a telephone call from an employee of the Putnam County Supervisor of Elections who advised that she needed to sign some documents that she had previously filed. Soon after Respondent received the aforementioned telephone call from the Supervisor of Elections Office, she went to that office and signed the document which was presented to her for her signature. The form that Respondent mistakenly signed was the CE Form 10, Annual Disclosure of Gifts From Governmental Entities and Direct Support Organizations and Honorarium Event Related Expenses (CE Form 10), which was attached to the Form 1 when it was presented for signature. Notwithstanding the voluntary mutual effort of the parties to correct the oversight relative to Respondent's failure to sign her 1996 Statement of Financial Interests, the original form was thereafter filed away unnoticed until the advent of this proceeding.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby: RECOMMENDED that the Florida Commission on Ethics determine that the public interest would not be served by proceeding further against Respondent, and dismiss the complaint. DONE AND ENTERED this 20th day of January, 2000, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD 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 20th day of January, 2000. COPIES FURNISHED: Virlindia Doss, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Allen C.D. Scott, II, Esquire Scott & Scott 101 Orange Street St. Augustine, Florida 32084 Sheri L. Gerety, Complaint Coordinator Florida Commission on Ethics 2822 Remington Green Circle, Suite 101 Post Office Drawer 15709 Tallahassee, Florida 32317-5709 Phil Claypool, General Counsel Florida Commission on Ethics 2822 Remington Green Circle, Suite 101 Post Office Drawer 15709 Tallahassee, Florida 32317-5709
