Conclusions The Office of Financial Regulation ("Office") issued a denial of Petitioner’s application to become licensed as an “associated person”. Petitioner in turn filed a Petition for Administrative Hearing, which the Office referred to the Division of Administrative Hearings ("DOAH"). The assigned Administrative Law Judge ("ALI") held a formal administrative hearing, and entered a Recommended Order thereon. That Recommended Order of November 17, 2604, is attached to this Final Order, and incorporated herein by reference.
The Issue Whether the Respondent, Christina M. Restauri, committed the violations alleged and, if so, what penalty should be imposed.
Findings Of Fact The Petitioner is the state agency charged with the responsibility of regulating licensed community association managers pursuant to Florida law. At all times material to the allegations of this case, the Respondent was licensed as a community association manager, license number CAM 0019553. In May 1998, the Respondent became the community association manager for the Association. As such, the Respondent had duties and responsibilities in connection with the day-to-day management of the Association's business. In exchange for the performance of her manager duties, the Association paid the Respondent a salary, provided her with a condominium unit for her residence, paid her utilities, and covered her local telephone service. The Respondent's managerial duties included all office management for the Association, including the collection of fees owed to the Association, the payment of monies owed to vendors by the Association, and the accounting associated with payroll for salaries owed to employees of the Association. The Respondent and the Association entered into a written management agreement that outlined the terms of her employment. The agreement (Petitioner's Exhibit 1) did not require the Association to pay for the Respondent's family health insurance. Additionally, the agreement did not provide for paid sick leave in excess of four days per year. In connection with her responsibilities for payroll, the Respondent controlled the amount of checks made payable to herself for salary owed during the course of her employment. This authority also allowed her to control the amount of monies withheld from her salary to cover her family medical insurance and for the monies payable for federal withholding taxes and social security. On at least two occasions, the Respondent altered her withholding such that no monies were withheld for federal taxes. The Respondent failed or refused to produce a W-4 form that would have supported the change in withholding. Moreover, the Respondent did not produce a W-2 form that would have supported, after-the-fact, that the withholding forms had been modified to support the altered withholding amount. The Respondent failed or refused to produce documentation to establish that she repaid the Association for family medical benefits she received. Initially, the amount to cover the family health benefit was reportedly withheld from the Respondent's paycheck. The adequacy of the withheld amount came into question. Under the terms of her employment, the Respondent was to remit the monthly family health premium to the Association. She did not do so. In fact, copies of checks that were purportedly offered in support of her claim that she had made the payments were never deposited into the Association's account. When the Respondent was challenged as to the amounts owed for health premiums and the matter was to be further investigated, she tendered her resignation. She never produced any of the financial records requested to document any of the matters contested in this proceeding. In addition to the foregoing payroll discrepancies, the Respondent caused herself to be overpaid $125.00 for sick leave. On or about October 12, 2000, the Respondent took $700.00 from the Association's petty cash and loaned it to Sandy Schwenn. Ms. Schwenn was employed by the Association as a secretary and had agreed to repay the funds. The loan was never repaid. The Respondent was not authorized to loan monies from the Association's petty cash fund and admitted the error during a board of directors' meeting on November 15, 2000. Whether the Respondent made good on her promise to repay the loan herself is unknown. Clearly, at hearing the Respondent did not make such representation.
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 against the Respondent that imposes an administrative fine in the amount of $2500.00, and revokes her license as a community association manager. DONE AND ENTERED this 13th day of November 2003, in Tallahassee, Leon County, Florida. S ___________________________________ J. D. PARRISH 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 13th day of November 2003. COPIES FURNISHED: Julie Malone, Executive Director Regulatory Council of Community Association of Managers Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Nancy Campiglia, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202 Christina Marie Restauri 4640 Northwest 30th Street Coconut Creek, Florida 33063 Jennifer Westermann Qualified Representative Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2022 Charles F. Tunnicliff, Esquire Department of Business and Professional Regulation 1940 North Monroe Street, Suite 60 Tallahassee, Florida 32399-2202
The Issue Whether Respondent committed the offenses alleged in the Administrative Complaint and the penalties, if any, that should be imposed.
Findings Of Fact Petitioner is an agency of the State of Florida charged with the responsibility and duty to administer Chapter 517, Florida Statutes, which is known as the Florida Securities and Investor Protection Act. On August 15, 1997 and September 9, 1997, Petitioner conducted an audit of the branch office of Merit Capital Associates, Inc., located in Boca Raton, Florida, and known as the H. K. Laurence Branch (the branch office). The branch office was an office of supervisory jurisdiction that required the presence of a branch manager. On April 28, 1997, Merit Capital executed a form entitled "Branch Registration Form" that registered the branch office with Petitioner and designated Respondent as the branch manager. Respondent accepted that designation on April 29, 1997. On April 30, 1997, the form was filed with Petitioner. In August and September 1997, Petitioner conducted an examination of the branch office. Michael Ward, whose job title is Senior Financial Investigator, was in charge of the examination. Annette Beresford, whose job title is Financial Specialist, assisted Mr. Ward. Both Mr. Ward and Ms. Beresford are full-time employees of Petitioner with appropriate training and experience. Respondent failed to properly register with the National Association of Securities Dealers (NASD) to act as a branch manager. Respondent was required by NASD rules to register as a principal because he had supervisory responsibilities. His only registration was as a salesperson. NASD Conduct Rule 3010, a rule adopted by NASD, sets forth standards for the supervision of branch offices. Pursuant to Rule 3E-600.013, Florida Administrative Code, Respondent, as the designated branch manager, was required to comply with the minimum supervisory standards set forth in NASD Conduct Rule 3010. Respondent did not meet those minimum supervisory standards while serving as the manager of the branch office. The following establish Respondent’s failure to supervise. Respondent did not provide NASD manuals to the registered representatives (salespersons) at the branch, he did not maintain Merit Capital's supervisory manuals at the branch, and he did not require that salespersons comply with Merit Capital's written policies and procedures. Respondent failed to maintain NASD and Florida registrations of salespersons at his branch. During the period April 29 through July 9, 1997, representatives of Merit Capital under Respondent's supervision at the branch office sold to members of the public shares of stock in a company known as Certified Diabetic Services, Inc., and shares of stock in a company known as Arcoplate Corporation. Respondent had supervisory responsibility for these transactions involving the sale of these two stocks. At the times pertinent to this proceeding, the stock of Certified Diabetic Services, Inc., and the stock of Arcoplate Corporation were not registered as required by Section 517.07(1), Florida Statutes, and they were not exempt from registration. Respondent should not have permitted the salespersons under his supervisory jurisdiction to sell unregistered stock During the period March 11 through July 9, 1997, Respondent was personally responsible for three transactions involving the sale of stock in Certified Diabetic Services, Inc., at a time when the stock was not registered as required by Section 517.07(1), Florida Statutes, and was not exempt from registration.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order finding Respondent guilty of failing to supervise the branch office and of selling unregistered securities. The final order should revoke Respondent’s registration under Section 517.12, Florida Statutes, and order him to cease and desist violations of Chapter 517, and the rules promulgated thereunder. The final order should also impose an Administrative Fine against Respondent in the amount of $5,000 for the failure to supervise. The final order should also impose an Administrative Fine against Respondent in the amount of $1,500 for the three transactions involving the sale of shares of unregistered stock. DONE AND ORDERED this 22nd day of January, 2002, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON 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 22nd day of January, 2002.
Findings Of Fact The Office of the Comptroller, Department of Banking and Finance, Division of Securities and Investor Protection (Department), is an agency of the State of Florida charged with the responsibility to administer and to enforce the provisions of Chapter 517, Florida Statutes (1987), and administrative rules promulgated thereunder, related to regulating the practice of securities dealers, "associated persons" and investment advisors. It regulates sales and other transactions in securities and investments, as those items are defined in that chapter. The Respondent, David John Kury, has been registered with the Department since 1967 as an associated person under Chapter 517, Florida Statutes. Pursuant to that registration, he is authorized to engage in the offer and sale of securities to clients. Since 1967 he has also been registered with the National Association of Securities Dealers (NASD). Since July 21, 1987, Respondent Kury has been registered with the Department as an associated person of American Capital Equities, Inc. (American), and he has also been registered as an associated person with the following broker/dealers: Associated Planner Securities Corporation (Associated); Prudential Bache Securities, Inc.; and E. F. Hutton. These registrations cover the period of time from April 1978 through May 1987. During all times Respondent Kury has been registered with the Department as an associated person of American, he has been simultaneously registered with the NASD as a "principal" of American. American is a corporation incorporated under the laws of the State of Missouri, which has been lawfully registered with the Department as a broker/dealer since approximately August 1984. American operates a branch office at 116 West Government Street, Pensacola, Florida. This office has been lawfully registered with the Department and in continuous operation since approximately August 21, 1987. Respondent Kury has been the branch manager of the office during all the period of time it has been registered with the Department. Kury has been registered with the Department as a principal of the Kury Investment Advisory Corporation (KIAC), pursuant to Chapter 517, Florida Statutes, since approximately March 2, 1988. That corporation is incorporated under the laws of the State of Florida and has been registered itself with the Department as an investment advisor, pursuant to Chapter 517, since approximately March 2, 1988. The Respondent corporation maintains its principal place of business also at 116 West Government Street, Pensacola, Florida, at which address Respondent Kury maintains the branch office of American. Respondent Kury is and has been at all pertinent times the sole owner, officer, director and chief operating officer of the Respondent corporation. Since March 2, 1988, Respondent David Kury has been registered as an investment advisor himself, with KIAC. He is also registered in approximately 15 other states as an associated person, thereby being authorized to offer and sell securities in those states as well. Kury Financial Planning Group, Inc. (Group) is a corporation organized under the laws of the State of Florida on or about October 23, 1985. It maintains its principal place of business at the above-referenced address as well. Respondent David Kury is the registered agent, sole officer and director of Group. Since approximately 1976, Kury has engaged continuously in the business of financial planning for individuals in the Pensacola area. Pursuant to this business, he has recommended various financial products, including securities and insurance products for individuals' personal portfolios. He has also rendered advice to clients concerning matters that are not involved with securities or insurance, although the bulk of his financial planning advice and experience relates to these two areas. During the twenty or more years he has been licensed as an associated person only one minor complaint has been lodged against Kury by a client. He has never been the subject of a complaint or an investigation by the Securities Exchange Commission, the NASD, the State of Florida or any other state securities regulatory agency. Neither has he been the subject of a complaint or investigation by the Florida Department of Insurance. He is a member of the Institute of Certified Financial Planners, a member of the International Association for Financial Planning and is in the Registry of Financial Planning Practitioners, a very select group comprised of only a very small percentage of the total number of certified financial planners in the United States. The Respondent, Mr. Kury, has been highly successful as an associated person dealing in securities and as a financial planner. In 1983, while employed with E. F. Hutton as a salesperson, selling securities and investments, the Respondent earned commissions in excess of $500,000 for that year and was one of the largest producers for E. F. Hutton in the entire nation for that year. He received commendations directly from the Chairman of the Board of E. F. Hutton and other senior management for his sales efforts and his integrity. His personal share of the commissions earned that year amounted to $330,000. It is obvious that the Respondent has substantial earning power due to his knowledge, experience and other capabilities in the field of securities and investment sales and advice and the field of financial planning. The Department, commencing on or about May 20, 1988, conducted an investigation and examination of the affairs of Kury Investment Advisory Corporation and the branch office of American, of which Respondent David Kury was branch manager, located at 116 West Government Street, Pensacola, Florida. It was thus determined (and established by clear and convincing evidence in this proceeding) that David Kury, as well as Kury Financial Planning Group, Inc. ("Group") sold or offered for sale both personal notes of David Kury, as well as corporate promissory notes of the Group, since approximately 1975. At the present time, there are approximately 50 persons holding 83 notes in amounts ranging from $5,000 to $200,000. These notes have maturities ranging from three months to four years, with investment return rates ranging from 9 percent to 13 percent. Some of the note-holders were told by Respondent Kury that certificates of deposit, by comparison, were then available to the note-holders or investors at rates ranging from two to three percent less than the rates offered by Kury and Group for the subject personal and/or corporate promissory notes. The total principal amount outstanding, represented by the corporate and personal promissory notes at issue, is approximately $2.4 million. The total principal and accrued interest as of June 15, 1988 is approximately $2.8 million. The total principal amount with accrued interest at the maturity of the notes in question would amount to approximately $3.1 million. The 50 note- holders are clients of the Respondent's. The notes were offered to them in the context of being investment alternatives to certificates of deposit and other "passive" investments, with the primary inducement being higher rates of return on the notes. Respondent David Kury and/or the Corporation failed to maintain and preserve an adequate record of purchases and sales of equity securities by maintaining a "purchase and sales blotter," as well as a "securities received and delivered blotter" and failed to maintain a current "trial balance." These items were not maintained in the ordinary course of business by Respondent David Kury and the Corporation. (See Section 517.121, Florida Statutes, and Rule 3E- 600.014, Florida Administrative Code). During approximately the last 13 years, Respondent David Kury has utilized the proceeds of the personal and corporate notes to pay business expenses for himself and the corporations he controls, as well as certain personal expenses, including the financing of his home (at a cost of approximately $1,000,000). The Respondents have sold or offered for sale the notes, both personal and corporate, without having them registered with the Department, which is required if they are deemed securities. The Respondents did not provide the purchasers of these notes a prospectus for purposes of Section 517.07, Florida Statutes. Group has engaged in the offer and sale of these notes to the note- holders or investors without being registered with the Department to engage in such activities, as required by law, if it be deemed that these notes indeed are securities. Respondent David Kury, in his individual capacity, and on behalf of Group, has engaged in the offer or sale of the notes without being registered with the Department to engage in such activities, either in his individual capacity or on behalf of Group, if the notes are deemed securities. Kury and the Corporation engaged in the business of "investment advisor" prior to lawful registration of that corporation with the Department to engage in such activity. Kury and the Corporation have rendered investment advice since at least September 18, 1987, notwithstanding the fact that the Corporation did not obtain lawful registration with the Department to engage in such activities until March 2, 1988. David Kury was the branch office manager for the registered branch office of American. He failed to establish, maintain and preserve certain books and records required by Florida law for registered branch offices of brokerage firms. In particular, he failed to establish and maintain the purchase and sales blotter reflecting all equity securities sold by American through Kury's branch office. Additionally, as branch office manager for a registered branch office of American, he failed to maintain and preserve a "securities received and delivered blotter." The Corporation, and Kury acting on its behalf, has failed to maintain a current trial balance indicating proof of current money balances in the corporate accounts. Respondent Kury, in his individual capacity and on behalf of Group, sold securities and/or investments (the notes) without making disclosures as to certain material facts, which disclosures were necessary in order for the purchasers or investors not to be misled. Statements were made in conjunction with the sales to the investors under circumstances, such that the omitted material facts, which were not disclosed, were necessary in order to prevent these investors or purchasers from being misled. See Section 517.081, Florida Statutes. Specifically, Kury and Group omitted to inform the investors of the following material facts: Information about the risks to the purchasers of the notes, including his and the Group's ability or inability to repay the notes generally and provision for repayment in the event of Kury's death. Information as to the use to be made of the proceeds of the notes, which in fact were used to finance business operating losses, business operating expenses and to repay personal debts of Kury, and to assist in the financing of personal living expenses of Respondent Kury. (d) Information concerning approximately $4,000,000 in liabilities and outstanding indebtedness of Respondent Kury individually and/or the Corporation and/or the Group. The $2.3 million negative net worth of Kury and/or the Corporation and/or the Group. The fact that Kury's previous employment with E. F. Hutton and Company had been terminated in 1984, partially because of his borrowing money from investors, in violation of Hutton's internal policies and NASD rules. In fact, Respondent Kury had borrowed an aggregate sum of approximately $327,172 from approximately 17 different clients by the time of his termination by Hutton. The fact that Kury's previous employment with Associated Planners Securities Corporation had been terminated in 1987 due to his borrowing money from investors in violation of that company's internal policies and NASD rules. The fact that Kury's personal and group life insurance policies were inadequate to pay the total indebtedness represented by the subject notes, in the event of Kury's death. The fact that Kury's representations concerning his abilities to borrow from banks and other financial institutions were predicated in part on inaccurate financial statements which under- estimated liabilities and overstated net worth without including on those statements the aggregate indebtedness represented by the outstanding personal and corporate notes. The fact that he had submitted an inaccurate financial statement to the Florida Comptroller's Office in connection with the charter application of American Bank and Trust Company during the Summer and Fall of 1985 in the process of becoming an organizer and founding director of that bank. The fact that he was using the money generated from the sale of the promissory notes, at least in part, to repay principal and interest payments due on other, earlier promissory notes. The fact that Kury failed to relate to the note-holders and investors how the promised rate of interest on the notes was reasonably related, if at all, to the risk associated with the investment involved and how it might be related to any other factor commonly known to influence interest rates. Witnesses Catone, Engelman and Boyd, testifying as Respondent's witnesses, in part established that the appropriate disclosures referenced above were not made. Additionally, Kury's explanation for submitting the false financial statements to lending institutions and to the Comptroller was to the effect that he did not wish to violate the confidentiality of the note sales transactions with the note-holders or investors. This rationale is illogical and self-serving, however, and is not accepted. Disclosing accurate financial information, required by law, to banks would have only required, at most, that Kury list the aggregate indebtedness he owed, the type of indebtedness owed, as well as information concerning principal balances, interest rates and repayment terms. Such information required on these financial statements would not have involved divulging the note-holders names or any confidential information pertaining to the note-holders, including the amounts of their individual notes. Law Professor Stuart Cohn was accepted as an expert in state and federal securities laws and corporate finance. It has thus been established that Kury and the Group sold approximately $2.4 million worth of personal and corporate promissory notes which are established to be securities and investments, as discussed infra., to at least 50 investors. This constituted, in effect, the borrowing of money from clients or customers, which is a prohibited business practice for a registered "associated person," investment advisor and financial planner. See Rule 3E-600.013(2)(a), Florida Administrative Code, and Article III, Section 2, NASD Rules of Fair Practice. Kury also effected securities transactions with customers which were not recorded on the regular books and records at American Capital Equities, for whom he was functioning and registered as an "associated person." In particular, he engaged in, sales and offers to sell securities in his capacity as an associated person of American, the Corporation and the Group and failed to record those transactions on the books of American. This is a prohibited business practice. See Rule 3E-600.13(2)(c), Florida Administrative Code. He engaged in private securities transactions without notifying his principal, American. See also Article III, Section 40, NASD Rules of Fair Practice. The Respondents' activities, largely ongoing at the time of the investigation, posed an immediate, serious threat to investors or potential investors because the Respondent's activities constituted, at least in part, the operation of a "pyramid" or "ponzi" scheme. This occurs when funds from new investors, in this case the more recent purchasers of the notes, are used to satisfy interest and principal obligations coming due to earlier investors or note purchasers. Therefore, as time progresses, and more of such notes or securities are sold, then more and more investors will be subject to losing their investments and suffer financial hardship. This occurred in the instant situation through the practice engaged in by the Respondent of "note rollovers" or renewals when due without paying principal and interest owed, or all of it, as well as by making new note sales and using the proceeds, or some of them, to pay earlier investors in spite of the above-described adverse consequences. The threat to the public welfare, as described above, is also represented by the fact that Kury and the Group have undergone an obligation to the note purchasers in excess of $2.8 million as of June 15, 1988, with ultimate liability on the notes of more than $3.1 million, at the respective maturity dates, in the aggregate. The $2.4 million to $3.1 million liability to these investors vastly exceeds the assets available to the Respondents to satisfy the note obligations. Kury admitted that the Respondents are insolvent and currently unable to meet the total financial obligations represented by the notes.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is, therefore RECOMMENDED that a Final Order be entered by the Department of Banking and Finance finding the, Respondents guilty as charged, and in the above particulars, and that the registrations of the Respondents as associated person and investment advisors be revoked, provided however, that such revocation should be suspended and held in abeyance contingent on the Respondent David John Kury, under the close supervision and direction of the Department, embarking upon a plan whereby, by continued practice under his registrations, he will repay the principal and interest due all the investors involved in this proceeding within a time certain, as directed by the Department. That plan should include creation of an escrow or trust account, managed by an independent escrow agent, such as a bank, into which, pursuant to an approved plan and schedule, a substantial portion of revenues earned by Kury in the practice as an associated person, investment advisor and any other registration pursuant to the regulation of the Department, shall be deposited for the use and benefit of the subject investors. This arrangement should continue until the investors have been fully repaid principal and interest due them. Should the Respondents, David John Kury and Kury Investment Advisory Corporation, refuse to accept such an arrangement or violate its terms and conditions, their registrations should be immediately revoked. DONE and ENTERED this 9th day of January, 1989, in Tallahassee, Florida. P. MICHAEL RUFF 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 9th day of January, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-3419 Petitioner's Proposed Findings of Fact: 1-3. Accepted. 4. Rejected as not constituting a Finding of Fact. 5-19. Accepted. Rejected as subordinate to the Hearing Officer's Findings of Fact on this subject matter and to some extent not supported by the evidence of record. Accepted. Accepted in part but subordinate to the Hearing Officer's Findings of Fact on this subject matter. 23-26. Accepted. Respondent's Proposed Findings of Fact: 1-8. Accepted. 9-14. Constitute statements of issues presented and recitation of evidence presented and are not Proposed Findings of Fact. COPIES FURNISHED: Reginald R. Garcia, Esquire Charles E. Scarlett, Esquire Office of Comptroller The Capitol Tallahassee, Florida 32399-0350 Philip J. Snyderburn, Esquire SNYDERBURN, RISHOI & SWANN Suite 240 280 West Canton Avenue Winter Park, Florida 32789 Donald A. Rett, Esquire MANG, RETT & COLLETTE, P.A. Post Office Box 11127 Tallahassee, Florida, 32302-3127 Honorable Gerald Lewis Comptroller State of Florida The Capitol Tallahassee, Florida 32399-0350 =================================================================
The Issue The issues are whether Respondent’s decision to disqualify Petitioner’s response to an invitation to negotiate was clearly erroneous, contrary to competition, arbitrary, or capricious and whether Respondent’s decision not to disqualify Intervenor’s response to the same invitation to negotiate was clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact On May 26, 2000, Respondent’s Office of the District Administrator, District 1, issued Invitation to Negotiate ITN-00-AJ01 (ITN). The ITN is for a contract under which the successful applicant would become the “community-based lead agency for foster care and related services in Escambia County.” Section 1 of the ITN is the Introduction. Section 1.1 of the ITN states that Section 409.1671, Florida Statutes, “directs [Respondent] to identify and contract with highly qualified community based organizations that are interested in serving as the lead agency for an integrated system of foster care and appropriate related services.” In response to this legislative mandate, District 1 “is planning a system redesign in which community-based organizations will assume the service provision role currently held by the state.” Section 1.2 of the ITN states that the purpose of the ITN is to solicit the community-based agency that will serve as the lead agency in Escambia County for the integrated provision of foster care and related services. Foster care and related services include “protective services, family preservation, independent living, emergency shelter, residential group care, foster care, therapeutic foster care, intensive residential treatment, foster care supervision, case management, post- placement supervision, and family reunification.” Section 1.2 notes that state-employed protective investigators will continue to receive and investigate complaints of child abuse. Section 1.2.A of the ITN describes this project as one of “major scope” and cautions that “[i]t will take a significant period of time for the selected lead agency to fully develop and implement a community-based system of care for this population.” Within the framework of existing laws, the selected agency “will be encouraged to develop innovative child focused intervention protocols and program components.” Section 1.2.A identifies the “minimal design elements” that must be included in any contract, regardless how the selected lead agency structures the project. These elements include: The selected lead agency will be responsible for all aspects of the delivery of foster care and related services. Within the scope of their expertise and resources, the lead agency can directly supply needed services to children and their families. A network of sub-providers will be developed by the lead agency to assure access to services not available through the lead agency. Capacity and financial risk issues will be managed by the lead agency. An automated system will be put in place by the district in collaboration with the selected lead agency that will allow for real-time communication as well as data transfer between [Respondent], the lead agency and the judicial system. This mechanism will allow judges to be quickly apprised of the progress of children and families under the supervision of the court. A comprehensive quality improvement system must be established by the lead agency. The lead agency and provider network will be accredited in accordance with department policy. In addition, the lead agency will identify and meet the training and job skill development needs of all employees of the system. . . . Section 1.2.C of the ITN describes the relationship between District 1 of Respondent and the lead agency. This ITN starts the process by which Respondent will be relieved of responsibility for foster care and related services in Escambia County. Section 1.2.C notes: “The district will shift from performing to technical assistance and quality assurance.” Section 1.2.E of the ITN describes the start-up process. Section 1.2.E states that the most important part of this process of the privatization of foster care and related services is “[m]oving forward in a planned and deliberate manner.” Section 1.2.E warns: “Transitioning from a broad concept to a carefully implemented system of community-based care requires a period of concurrent planning between the district, the alliance [a community group initially comprising the District 1 Health and Human Services Board and the Circuit Court Chief Judge’s Children’s Council] and the selected lead agency.” Section 1.2.E anticipates a “start-up contract” for a term of six to nine months, during which time Section 1.2.E identifies several deliverables that Respondent will require from the lead agency. Among these deliverables is: “The lead agency will develop a plan for the maximization of Medicaid dollars and all other federal funding streams associated with child protective services.” Section 1.2.E states that, during the start-up period, Respondent will continue to assure the safety of children, while the lead agency submits the deliverables. The end of the start-up contract occurs when the lead agency “demonstrates readiness to assume the management of the sub- provider network and the actual delivery of foster care and related services.” Section 1.2.E states that, at this point, Respondent and the lead agency will negotiate a “service contract,” which will “systematically stage the transfer of foster care, protective supervision, adoptions and all related functions from the department to the lead agency.” Section 1.2.E contemplates that the parties will sign the service contract by July 6, 2001. Section 1.3 of the ITN restates that Respondent will enter into a “start-up contract” with the applicant that Respondent chooses as the lead agency. Conflicting somewhat with Section 1.2.E as to the term of the start-up contract, Section 1.3 states that the term may be six to twelve months. More importantly, Section 1.3 restates the purpose of the start-up contract: “At the conclusion of this contract, [Respondent] will make a determination of the readiness of the provider for a service contract. This determination will be made on the basis of a review of the deliverables required under the start-up contract . . ..” The resulting service contract will be for a three-year term. Section 1.4.A of the ITN defines “[a]pplicant” as: “A not for profit community-based agency that successfully submits an application for consideration under this [ITN].” Section 1.4.R defines “[s]elected applicant” as: “The applicant selected for negotiation under the terms and conditions of this [ITN].” Section 1.4.M defines “[l]ead agency” as: “The not for profit community-based provider responsible for coordinating, integrating and managing a local system of supports and services for children who have been abused, abandoned or neglected and their families. The lead agency is also referred in any contract awarded from this [ITN] as the ‘Provider.’” Section 2 of the ITN is the Invitation to Negotiate Information. Section 2.2 of the ITN warns: Failure to have performed any contractual obligations with [Respondent] in a manner satisfactory to [Respondent] will be a sufficient cause for termination. To be disqualified as an applicant under this provision, the applicant must have: 1) previously failed to satisfactorily perform in a contract with [Respondent], been notified by [Respondent] of the unsatisfactory performance, and failed to correct the unsatisfactory performance to the satisfaction of [Respondent] or, 2) had a contract terminated by [Respondent] for cause. Section 2.6 of the ITN states: “Attendance at the applicant’s conference is a prerequisite for acceptance of applications from individuals or firms.” Section 2.9 of the ITN sets a deadline for submitting all applications by 5:00 p.m. local time on August 24, 2000. This section adds: “[Respondent] reserves the right to reject any and all applications or to waive minor irregularities when to do so would be in the best interest of the State of Florida. Minor irregularities are defined as variations from this [ITN] terms and terms and conditions which does [sic] not effect [sic] the price of the application, or give the prospective applicant an advantage or benefit not enjoyed by other prospective applicants, or does not adversely impact the interest of [Respondent].” Section 2.13 of the ITN provides that any person who is adversely affected by Respondent’s decision concerning a procurement solicitation or contract award may file a protest, pursuant to Section 120.57(3), Florida Statutes. Section 2.14 of the ITN sets forth the evaluation procedures. Section 2.14.A states: “Before the district initiates a negotiation with any potential provider, all applications received will be ranked according to the evaluation criteria and score sheet contained in Appendix II of this [ITN]. . . .” Section 2.14.B states: [The evaluation] team will utilize the methods described in Section 7 and the criteria listed in Appendix II of this [ITN] to rank each application received by the district. . . ..” Section 2.14.C adds: “At the conclusion of the evaluation process, the District Administrator will designate a Lead Negotiator and four additional persons to enter into negotiations with the highest ranked applicant for selection of a lead agency. This negotiation for a start-up contract will begin with the highest ranked applicant and continue through the rankings until an award is made. ” Section 3 of the ITN identifies the Minimum Program Requirements. Section 3.1 of the ITN describes Respondent’s expectations of the services to be delivered by the “selected applicant.” Section 3.2 of the ITN adds that the “selected applicant” shall be knowledgeable of all relevant state and federal laws and shall ask Respondent for assistance when necessary. Section 3.2 notes that, at a minimum, the “selected applicant” will be conversant with nine groups of federal and state laws. Among these requirements is Section 3.2.D, which states: “The selected applicant shall ensure compliance with Title IV-B of the Social Security Act, Title IV-E of the Social Security Act, Social Services Block Grant (SSBG), Title XIX (Medicaid), and Temporary Assistance for Needy Families (TANF) requirements.” Section 3.3 of the ITN states: “The purpose and intent of any contract awarded from this [ITN] is to meet the following departmental goals and the principles outlined in Section 1.1 of this [ITN] . . ..” What follows are 13 specific goals to assure the safety and welfare of the children served by the lead agency. Section 3.8 of the ITN states: “District 1 intends to enter into the start-up contract referenced above. The objective of this start-up contract is to prepare the selected lead agency to perform the tasks listed in this section. Written evidence of an organization’s capacity, prior experience and potential to ultimately perform tasks of this scope will be given considerable emphasis and weight when [Respondent] determines with which applicant to enter into negotiations.” Section 3.8.A then details numerous requirements to be imposed by the “selected applicant,” including the submittal, for prior approval, of any new procedures or policies that may affect the State Plan regarding Title IV-E claims or other sources of federal funds. Section 3.9 of the ITN states: Applicants shall include in their application the proposed staffing for technical, administrative, and clerical support. The successful applicant shall maintain an adequate administrative organizational structure and support staff sufficient to discharge its contractual responsibilities. The selected applicant and any subcontractors shall meet, at a minimum, the staff ratios found in Chapter 65C-14, F.A.C., for residential group care. Section 3.10 of the ITN requires the “selected applicant” to ensure that its staff and the staff of its subcontractors meet the qualification requirements of Chapters 65C-14 and 65C-15, F.A.C.; the background screening requirements of Section 435.04, Florida Statutes; and the training and certification requirements of CFOP 175-78, Certification Procedure for Professional Child Protection Employees. Section 3.20 of the ITN identifies the performance measures to be applied to the evaluation of the services provided by the lead agency. Section 3.20.A lists outcomes such as 95 percent of the children served will not be the victims of verified reports of abuse or neglect while receiving services, 85 percent of the children in foster care for less than one year will have had less than two placements, and 100 percent of all judicial reviews will be completed within the statutory deadlines. Section 3.20.B identifies other outcomes whose percentage of achievement will be established in the future; samples of these are the percentage of children who have been in shelter for more than three days who have a family-safety plan upon their release from the shelter and the percentage of children who are placed in out-of-home care and who are later reunited with their families. Section 3.21.C of the ITN warns: “Upon execution of the contract resulting from this [ITN], the successful applicant must meet the standards set forth in Section 3.20 ” Section 3.23 of the ITN provides that the “selected applicant will agree” to coordinate with various other agencies in providing foster care and related services. Section 4 of the ITN covers Financial Specifications. Section 4.2 of the ITN requires the “selected applicant” to submit a “cost allocation plan” that it has been developed in accordance with the Office of Management and Budget (OMB) Circular A-122. The cost allocation plan “must describe the allocation methodologies used by the selected applicant to claim expenditures for reimbursement under any service contract awarded from this [ITN].” Section 4.4 of the ITN requires the “selected applicant” to submit a “financial and service plan” that assures that, among other things, “[s]tate funds in the contract must be spent on child protection activities in ways that allows the state to maximize federal funding.” Section 5 of the ITN addresses Standard Contract Provisions. Section 5.1 of the ITN incorporates the appendix containing model contract provisions to be incorporated into any contract resulting from the ITN. Section 6 of the ITN contains Instructions to Prospective Applicants to the ITN. The flush language under this section states that Respondent “will not . . . consider. . .” applications submitted after the deadline and that applicants must submit one original and nine copies of their applications. Also, an officer of the “selected applicant agency” must sign at least one copy of the application. Another provision covers the typographical presentation of application material. The last sentence of the flush language states: “Each application must follow the document structure listed in Sections 6.1 through 6.9 of this [ITN].” Section 6.1 of the ITN requires the execution of a standard acknowledgement form. Section 6.2 requires that the second page of the application consist of a title page with such information as the ITN number and name of the applicant. Section 6.3 requires a one-page executive summary of the application. Section 6.4 requires a table of contents following the executive summary and, after the table of contents, a cross-reference table covering all of the responses required by Section 6 of the ITN. Section 6.5 requires a demonstration of the applicant’s “comprehensive understanding of the scope of the issues associated with the delivery of child protection services in Escambia County” and a presentation of the applicant’s “perspective regarding community[-]based . . . care with foster care and related services. ” Section 6.6 of the ITN is entitled, “Description of Organizational Capacity.” The flush language in Section 6.6 states: “In this section the applicant will, at a minimum[,] address the following factors ” Section 6.6.A is headed, “Description and Qualifications of the Organization.” Section 6.6.A requires 13 items, including articles of incorporation, services currently provided, and formal and informal connections to Escambia County. Section 6.6.B is headed, “Administrative/Fiscal: The applicant must supply the following information ” Section 6.6.B requires the following nine items: The organization’s annual budget. A three-year history of audited financial statements. An estimate of advance payments (if needed) to support this project. The most recent audit reports complete with the management response. Evidence of compliance with previous correction action plans proposed by [Respondent] through any contract. A documented history of maximizing Medicaid revenues. Provide a discussion of the organization’s system of staff recruitment, screening, pre-service training, in-service training, staff development and employee evaluation. Include a three-year staff retention study. A copy of the organization’s disaster readiness plan(s). [Deleted from ITN] A copy of minority business enterprise certificate issued by the Department of Management Services, if applicable. Section 6.6.C is headed, “Scope of the Organization: The applicant must address the following capacity issues . . ..” Section 6.6.C requires eight items, including Section 6.6.C.2, which states: “Evidence of an infrastructure that includes automated communication and record keeping systems that can be linked to the judicial system and the department.” Section 6.6.D is headed, “Clinical Capacity: The application must address each of the following items ” Section 6.6.D lists six items. Section 6.6.E is headed, “Quality Improvement: The application must address each of the following items ” Section 6.6.E lists seven items, including Section 6.6.E.3, which states: “The ability of the organization and the structure through which the standards found in Section 3.20 of this document will be met.” Section 6.7 of the ITN is entitled, “Proposed Statement of Work.” The flush language explains that the statement of work is “to be general and increase in specification during the period of time covered by a start-up contract.” Section 6.7.G states: “Explain how the applicant will provide for integrated generic and specialized case management.” Section 6.8 of the ITN is entitled, “Proposed Implementation Plan.” This section requires the “applicant’s proposed time-lines for sequencing of all the activities that will lead to full implementation of the items in Section 3.” Section 6.9 of the ITN is entitled, “Mandatory Certifications, Assurances and Statements.” This section lists several executed documents that the application must include. Section 7 of the ITN is entitled, “Application Evaluation Criteria and Rating Sheet.” Section 7.A states that the score sheets “for evaluating the [ITN responses]” are in Appendix II. Section 7.A warns: “The score sheet is the instrument used to assess the degree to which the applicant’s response meets the criteria of this [ITN].” Appendix II of the ITN is entitled, “Evaluation Criteria and Scoring Sheet.” The first section of Appendix II is the “Evaluation Methodology,” which states in its entirety: The evaluation team will score the application using the criteria and scoring procedures found in each domain of this appendix. The score for each criteria will be established by consensus of the evaluation team. The scores assigned to each criteria [sic] will be added to determine the final score for each domain. The scores from each domain will be summed to determine the final score for the application and annotated on the attached score sheet. Domain A (Disqualifying Criterion) contains fatal items that must be present if the application is to be scored. With no disqualification resulting from the review of Domain A, Domains B though E will be scored based on the procedures and standards listed. Appendix II, Domain A is entitled, “Disqualifying Criteria.” The first section under Domain A is “Scoring Procedure,” which states: “Score each criteria [sic] as present or absent. If any of these criteria are scored as absent, the applicant is disqualified.” The second section under Domain B is “Criteria,” which lists 23 items. The 23 items are: Application was received at the time and date specified in Section 2.9 of this [ITN]. One original and 9 copies of the application were received by the department in the manner and location specified in Section 2.9 of this [ITN]. The application included a signed and original State of Florida Invitation to Negotiation Contractual Services Acknowledgement Form, PUR 7105. (See Appendix IX) The application included an original signed Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion Contracts/Subcontracts. (See Appendix X) The application included an original signed Acceptance of Contract Terms and Conditions indicating that the applicant agrees to all department requirements, terms and conditions in the [ITN] and in the department’s Standard Contract. (See Appendix XI) The application included an original signed Statement of No Involvement form. (See Appendix XII) The application included an original signed District 1 Statement of Assurances (See Appendix XIII) The application followed the document structure listed in Section 6.1-6.9 of this [ITN]. All forms submitted included an original signature from an individual authorized to bind the applicant to the terms and conditions of this [ITN]. The application contains the title page, the abstract, the table of contents and cross reference table as required in Sections 6.2-6.4 of this [ITN]. Articles of Incorporation. [deleted from ITN] Certificate of Good Standing from the Secretary of State. Documentation from the U.S. Internal Revenue Service of the organization’s Section 501(c)(3) status. Evidence that the applicant provides for and supports a Drug-free Workplace. Evidence that the applicant is willing to comply with the Environmental Tobacco Smoke Restrictions. Evidence the applicant does not employee unauthorized aliens. Three history of financial statements. A disclosure of any financial difficulties and extraordinary obligations. An estimate of advanced payments if needed to support this project. Documentation of compliance with past departmental or Florida state contracts. Most recent financial audit reports complete with management response including evidence of sound credit rating. A copy of the Application Guarantee. Attendance at all applicant conferences is a pre-requisite for acceptance of applications from individuals or firms. [deleted from the ITN] Appendix II, Domains B through E are score sheets. Domain B covers Section 6.5, Domain C covers Section 6.6, Domain D covers Section 6.7, and Domain E covers Section 6.8. Domain C, Factor B, Item 2 covers Section 6.6.B.2. This item states: 2. Analysis of the three year audited financial statements. (See Section 6.6B.2) Points Standard Poor Average Above Average Excellent NOTE: The analysis of the financial statements by the department will at a minimum include: Calculation of selected financial ratios Review of accounting policies A review of credit history will be included in this analysis No items in Domains B through E cover Section 6.6.B.3 through 6.6.B.5. Domain C, Factor B, Item 3 covers Section 6.6.B.6. This item states: 3. History of maximization of Medicaid revenues. (See Section 6.6B.6) Points Standard No history Some experience Experienced Well documented history Domain C, Factor B, Item 4 covers Section 6.6.B.7. This item states: 4. Organization’s system of staff recruitment, training, evaluation and retention. (See Section 6.6B.7) Points Standard No system Incomplete system System in place Well developed / comprehensive system Domain C, Factor C, Item 2 covers Section 6.6.C.2. This item states: 2. Automated communication and record keeping systems. (See Section 6.6C.2) Points Standard No automated systems Limited automation, internal only Currently automated, limited external applications Comprehensive systems Petitioner and Intervenor attended the applicant’s conference, which was held on June 23, 2000. Respondent duly answered all questions of Petitioner and Intervenor. Petitioner timely submitted a response to the ITN on August 22, 2000, and Intervenor timely submitted a response to the ITN on August 24, 2000. These were the only responses to the ITN. Respondent opened the responses on August 25, 2000. Respondent initially disqualified Petitioner’s response by, letter dated August 29, 2000, on the erroneous ground that Petitioner had not attended the applicant’s conference. Withdrawing the August 29 letter, Respondent disqualified Petitioner’s response on other grounds, as cited in a letter dated September 6, 2000. The September 6 letter disqualifies Petitioner’s response because it omitted several items identified in three criteria contained in Appendix II, Domain A. The September 6 letter cites seven “mandatory elements from Section 6 that were referenced in Criteria [sic] 8,” but Respondent later cited only three omissions under Criterion 8: 6.6, B.2: only the 1998-1999 fiscal year audited financial statement was included. 6.6, B.5: Family Safety Program contract corrective action plans were not included. 6.6, B.7: a three year staff retention study was not included. Relying on Criteria 18 and 21, respectively, the September 6 letter cites the following grounds for disqualification of Petitioner’s response: Only two years of financial statements were included, but three were required. Incomplete documentation was provided. No evidence of compliance with the Family Services Program was found in the proposal. Petitioner timely filed a protest and formal written protest of Respondent’s disqualification of Petitioner’s response. Petitioner contends that the disqualification of its response was clearly erroneous, contrary to competition, arbitrary, and capricious. In particular, Petitioner contends that Respondent applied more stringent standards in its examination of Petitioner’s response than it did in its examination of Intervenor's response. The introduction to Petitioner’s response identifies Bridgeway Center, Inc., as the proposed lead agency, and Foster America, Inc., as its presumably prime subcontractor, although Foster America, Inc., will do business in Florida under the name of Managed Family Services. The title page to Petitioner’s response identifies Bridgeway Center, Inc., and Managed Family Services as the “applicant organization.” Section 2.1.B of Petitioner’s response details the substantial experience of Foster America, Inc., as “the first company established in the United States to address the issues pertaining specifically to the management of foster care.” Considerable portions of the ensuing sections of Petitioner’s response describe the capabilities of Foster America, Inc., to meet the requirements of the ITN. Appendix 16 of Petitioner’s response is entitled “Three-Years of Financial Statements.” Appendix 16 consists of the following financial information for Bridgeway Center, Inc.: statements of financial position for fiscal years ending in 1996-99 and statements of activities for fiscal years ending in 1996-99. At the bottom of each of the four pages containing these statements is the declaration: “The accompanying notes are an integral part of these financial statements.” No notes accompany the financial statements contained in Appendix 16. Nothing in Petitioner’s response indicates that these financial statements were audited. These financial statements do not include a statement of functional expenses and statement of cash flows. The attached financial statements do not contain auditor’s reports describing the scope of the opinion. Appendix 18 of Petitioner’s response is entitled, “Most Recent Audit Reports with Management Response Including Evidence of Sound Credit Rating.” Pertaining to fiscal year ending 1999, this set of documents starts with an “independent auditor’s report, stating, among other things, that the financial statements “present fairly, in all material respects, the financial position of Bridgeway Center, Inc. as of June 30, 1999 and the statement of activities and its cash flows for the year then ended in conformity with generally accepted accounting principles.” Following the main independent auditor’s report, the 1999 financial statements comprise a statement of financial position, statement of activities, statement of functional expenses, and statement of cash flows. Following the four financial statements, twelve pages of notes explain in detail many of the individual items contained in the financial statements. Following a nonrequired schedule of revenues, a schedule of expenditures of federal awards and other contract and grant activity, with accompanying notes, responds to the requirements of OMB Circular A-133. Following these items is another independent auditor’s report, also responding to the requirements of OMB Circular A-133. Next is another independent auditor’s report, responding to the state requirement that it opine as to management’s assertion of its compliance with state law. The final document in this set is a management letter from the auditor identifying deficiencies in internal controls, making recommendations for improving operating efficiency, and recording management’s response to each of these observations and recommendations. Strictly speaking, Appendix 18 of Petitioner’s response contains audited financial statements, including notes, only for the fiscal year ending in 1999. However, the statement of financial position and statement of cash flows contain the identical information for the fiscal years ending 1998 and 1999. The statement of activities contains nearly the same information for both years, adding for 1999 only a breakdown of which revenues are unrestricted and which are restricted. The statement of functional expenses contains considerably more detailed information for 1999. The main independent auditor’s report states: “Information for the year ended June 30, 1998, is presented for comparative purposes only and was extracted from the financial statements from that year, on which we presented an auditor’s report dated [approximately one year earlier].” Thus, Petitioner’s response contains audited financial statements only for the fiscal year ending in 1999, but also contains considerable, but not all, information from the audited financial statements for the preceding fiscal year. Petitioner’s response contains considerably less information for the fiscal year ending in 1997. The adequacy of Petitioner’s response, of course, depends on the determination of the specific requirements of the disqualification provisions. There is little agreement on these specific requirements. Respondent and Intervenor erroneously contend that Criterion 8 of Domain A incorporates by reference all of the requirements of Sections 6.1 through 6.9. However, Criterion 8 requires only that the “application followed the document structure listed” in these sections. Nothing in the record casts much light upon the meaning of “document structure.” At a minimum, though, the requirement that each application “follow” the “document structure” listed in Sections 6.1 through 6.9 would be an odd way of requiring that the application contain all of the items required in these sections. In opposition to this contention of Respondent and Intervenor, Petitioner identifies several scoring matrices that assign zero points to responses showing no evidence in response to a specific requirement within Sections 6.1 through 6.9. Petitioner reasons that the absence of evidence is tantamount to the omission of an item. Petitioner then concludes that it would make little sense if the absence of evidence, or omission of such an item, meant the disqualification of the application. Petitioner makes a good point here. The scoring matrices for items for which an omission explicitly means disqualification, such as financial statements, do not assign zero points for the omission of such items. The scoring matrices assign zero points for the omission of an item only as to items that are not explicitly the subject of disqualification. Petitioner relies upon the common definition of structure as, according to Webster’s III New College Dictionary (1995): “Something made up of a number of parts held or put together in a specific way. The manner in which parts are arranged or combined to form a whole.” This is a good definition of “structure” and helps define the meaning of the somewhat obscure phrase, “document structure.” It suffices for this case to determine that “document structure” does not mean each and every requirement contained in Sections 6.1 through 6.9. Most likely, “document structure” means only that each application has to contain documents corresponding to each of the requirements stated in each of these sections: i.e., a standard acknowledgement, title page, executive summary, table of contents and cross- reference table, organizational perspective, description of organizational capacity, proposed statement of work, proposed implementation plan, and all of the specified mandatory certifications. Thus, an applicant could avoid disqualification under Criterion 8 by, as to Section 6.6, including a document describing its organizational capacity, even though the document may have omitted certain items required under Section 6.6, such as professional affiliations of the applicant. Because “document structure” does not incorporate all of the Section 6 requirements into Criterion 8, Respondent has erroneously relied upon the first three, bulleted grounds for disqualification, which identify omissions of Section 6 requirements. Respondent and Intervenor have never contended that Petitioner’s response fails to satisfy the narrower interpretation given “document structure” in this recommended order. Thus, Criteria 18 and 21 are the only grounds on which Respondent could disqualify Petitioner’s response. Criterion 18 requires a “three [sic] history of financial statements.” This obvious typographical error did not obscure for Petitioner the intended meaning of this criterion: any application omitting three years of financial statements would be disqualified. The key question is exactly what the ITN requires, as to financial statements, to avoid disqualification. The failure of Criterion 6 to incorporate, among other provisions, the specific requirements of Sections 6.6.B.2 for a three-year history of “audited” financial statements is significant. Criterion 18 does not require “audited” financial statements, so, unless Criterion 18 incorporates Section 6.6.B.2 into the disqualifying criteria, the omission of audited financial statements, while possibly a scoring matter, is not a basis for disqualification. The identification of a requirement in Domain A does not equate to the identification of a near counterpart to that requirement in Sections 6.1 through 6.9. For example, Criterion 19, which requires disclosure of “any financial difficulties and extraordinary obligations,” has no counterpart in Section 6, or anywhere else in the ITN. Likewise, the portion of Criterion 22 requiring “evidence of sound credit rating” has no counterpart in Section 6, or anywhere else in the ITN. By adding new requirements for disqualification purposes, Domain A does not serve merely as a collection of references to requirements contained in Section 6 or elsewhere in the ITN. This means that it is not possible to read into or out a specific Domain-A requirement that resembles a specific Section-6 requirement those elements necessary to transform it into the Section-6 requirement. Therefore, except for the uncontroversial correction of the obvious typographical error, Criterion 18 is a complete statement of the disqualification requirement concerning financial statements. And Criterion 18 obviously omits the requirement in Section 6.6.B.2 that the financial statements be “audited.” For a not-for-profit corporation, a set of financial statements comprises four financial statements: a statement of financial position, statement of activities, statement of functional expenses, and statement of cash flows. Petitioner’s response contains a full set of the four, audited financial statements applicable to not-for-profit corporations, but only for the fiscal year ending in 1999. These 1999 financial statements are accompanied by all required independent auditor’s reports and notes. Petitioner’s response also contains the three prior years of two of the four financial statements--the statement of financial position (resembling what was traditionally known as the balance sheet for for-profit corporations) and the statement of activities (resembling what was traditionally known as the income statement for for-profit corporations). However, these additional financial statements are unaccompanied by notes and independent auditor’s reports. Petitioner’s response for 1997 and 1998 includes the two financial statements that provide the most information and for 1998 includes considerable information from one of the two missing financial statements. Criterion 18 does not explicitly require all of the financial statements that constitute a complete set of financial statements, so the omission of the information from the 1997 and 1998 financial statements is not necessarily disqualifying, at least if the information provided is substantially complete. The omission of the notes for 1997 and 1998 merits careful consideration. Petitioner’s auditor warns, on each financial statement, that the accompanying notes are an “integral” part of the financial statements. According to the American Heritage Dictionary (1981), “Integral” means: “Essential for completion; necessary to the whole constituent.” In other words, the financial statements submitted by Petitioner are not whole or complete without the accompanying notes. The notes accompanying the 1999 financial statements add explanatory material. Note 1 discloses that Bridgeway Center, Inc. is an accrual-basis taxpayer; values its inventory on the lower of cost or market basis on a last-in, first-out basis; and capitalizes all equipment expenditures over $500 and depreciates its fixed assets over stated cost-recovery periods. Note 3 schedules the receivables owed Bridgeway Center, Inc. by payor and, in the case of Respondent, program. Note 6 details notes payable and lines of credit with terms, interest rates, and monthly payments. Note 7 describes a bond payable in the amount of nearly $2 million. Note 8 identifies real estate leases and rental payments for which Bridgeway Center, Inc. is obligated. Note 10 itemizes by program the sources of income from the State of Florida. As explained in the Conclusions of Law, the determination of whether Petitioner’s response contains three years of financial statements is governed by the less- deferential standard of a preponderance of the evidence, rather than the more-deferential evidentiary standard of clearly erroneous, contrary to competition, arbitrary, or capricious. Petitioner has proved by a preponderance of the evidence that the omission of two financial statements for 1997 and the omission of some information from the same two financial statements for 1998 does not necessarily preclude its satisfaction of the disqualification requirement of three years of financial statements. However, Petitioner’s omission of the notes for 1997 and 1998 precludes its satisfaction of this disqualification criterion, even by a preponderance of the evidence. Petitioner’s auditor describes the notes as “integral” to those selected financial statements that Petitioner submitted. Absent an integral part of the already-incomplete submission, Petitioner has failed to prove, even by the less deferential preponderance standard, that its response satisfies the requirement of Criterion 18 for three years of financial statements. Criterion 21 requires “[d]ocumentation of compliance with past departmental or Florida state contracts.” Appendix 19 of Petitioner’s response contains, by program type, 171 schedules identifying compliance issues, corrective action plans, responsible persons, and completion dates. Again, Respondent and Intervenor attempt to add elements from Section 6 to this disqualification criterion of documentation of compliance with past agency contracts. Both parties contend that Criterion 21 should be read in conjunction with Section 6.6.B.5, which requires: “Evidence of compliance with previous correction action plans proposed by [Respondent] through any contract.” For the reasons set forth above, it is impossible to engraft onto Criterion 21 the more demanding requirements of Section 6.6.B.5. In this instance, Respondent answered a question posed by Intervenor consistent with Respondent’s present interpretation of Criterion 21, but this answer--absent an accompanying amendment of the ITN--cannot override the clear disqualification requirement imposed by Criterion 21. Petitioner’s response omits corrective action plans related to contracts for the Family Services Program. This omission was inadvertent, occasioned by the death of the sole Bridgeway employee with knowledge of these matters. As for Criterion 21, Petitioner has proved by a preponderance of the evidence that its response contains documentation of compliance with past agency contracts. Even if a substantiality requirement were inferred as to Criterion 21, Petitioner’s substantive response would still, by a preponderance of the evidence, satisfy this disqualification requirement. Criterion 21 does not incorporate the comprehensiveness required by Section 6.6.B.5, which requires information concerning “any contract.” Petitioner raises numerous challenges to Intervenor’s response. Partly, these challenges are intended to show how Respondent evaluated Petitioner’s response more stringently. Partly, these challenges are intended to show that Intervenor’s response should be disqualified, regardless of whether Petitioner prevails on its challenge to the disqualification of its response. The latter purpose of Petitioner’s challenges depends upon a ruling allowing it to amend its petition to raise the issue of whether Intervenor’s response should also be disqualified. In challenging Intervenor’s response, however, Petitioner repeats the same mistaken assumptions made by Respondent and Intervenor about the relationship between Domain A and Section 6. In fact, Petitioner extends these mistaken assumptions one level by faulting Intervenor’s response for failing to satisfy non-Domain A provisions that are not even applicable to responses to the ITN. The ITN imposes very few requirements upon ITN responses outside Section 6 and Domains A through E of Appendix II. The two such requirements are Section 2.2, which disqualifies certain applicants with unsatisfactory histories with Respondent; Section 2.6, which requires attendance at the applicant’s conference; Section 2.9, which sets the deadline for submitting responses; and Section 3.9 (first sentence), which requires that responses include proposed staffing for technical, administrative, and clerical support. Apart from some general background descriptions contained in the introductory sections of the ITN, the remainder of the ITN, apart from Section 6 and Domains A through E, deal with the start-up contract and the ultimate service contract. This orientation is amply revealed by frequent use in these provisions of the future tense and descriptions of the non-agency party as the “successful applicant,” “lead agency,” or “selected applicant.” In its proposed recommended order, Petitioner first challenges Intervenor’s response with respect to Criterion 22, which requires the most recent financial audit reports “complete with management response.” Criterion 22 is in Domain A, so it is a disqualification requirement. However, Petitioner failed to prove by a preponderance of the evidence that such a response is required when, as here, Intervenor’s auditor uncovered no material weaknesses or disagreements to which Intervenor was obligated to respond. In its proposed recommended order, Petitioner challenges Intervenor’s response with respect to Section 6.6.E.3, which addresses the ability of the applicant with respect to federal funding. This is not a Domain-A requirement. In fact, Petitioner’s contentions require application of ITN provisions apart from Section 6 and Domain A that involve the start-up process and are inapplicable to the present stage of this procurement. The deficiency described in the preceding paragraph characterizes the remainder of Petitioner’s challenges to Intervenor’s response, such as with respect to a staff- retention study and demonstration of infrastructure capability. It is thus unnecessary to consider the extent to which Intervenor’s response addresses these items. Based on these findings, Petitioner has failed to prove that Respondent’s proposed determination disqualifying Petitioner’s response is clearly erroneous, contrary to competition, arbitrary, or capricious. Based on these findings, Petitioner has failed to prove that Respondent’s proposed determination failing to disqualify Intervenor’s response is clearly erroneous, contrary to competition, arbitrary, or capricious.
Recommendation It is RECOMMENDED that the Department of Children and Family Services enter a final order dismissing the protest of Petitioner to the disqualification of its response to the ITN and to the failure to disqualify Intervenor’s response to the ITN. DONE AND ENTERED this 2nd day of February, 2001, in Tallahassee, Leon County, Florida. ___________________________________ ROBERT E. MEALE 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 2nd day of February, 2001. COPIES FURNISHED: Virginia A. Daire, Agency Clerk Department of Children and Family Services 1317 winewood Boulevard Building 2, Room 204B Tallahassee, Florida 32399-0700 Josie Tomayo, General Counsel Department of Children and Family Services 1317 Winewood Boulevard Building 2, Room 204B Tallahassee, Florida 32399-0700 Wilbur E. Brewton Kenneth J. Plante Gray, Harris & Robinson, P.A. 225 South Adams Street, Suite 250 Tallahassee, Florida 32301 Katie George Chief Legal Counsel Lori Lee Fehr Legal Counsel Department of Children and Family Services District 1 160 Government Center, Room 601 Pensacola, Florida 32501 Martha Harrell Chumbler Kelly A. Cruz-Brown Carlton Fields Post Office Drawer 190 Tallahassee, Florida 32302
