Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, the following findings of fact are made: The Department is the state agency authorized to pursue disciplinary actions against real estate licensees. At all times material to the allegations of this case, the Respondent is and has been licensed as a real estate salesman having been issued license number 0439005. At all times material to the allegations of this case, the Respondent was employed by Horizon Appraisal Services, Inc. in Fort Myers, Florida, and her primary responsibilities were preparing appraisals for various lending companies that utilized that company's services. On or about October 5, 1989, Clyde and Marie Ward received a commitment letter from Goldome Realty Credit Corp. which informed the Wards that their application for a mortgage loan had been approved subject to several specific conditions. Among those conditions was the submission of a satisfactory appraisal. This loan was to be at a fixed rate in the principal amount of $40,000.00. The purpose of the loan was to allow the Wards to refinance an existing loan on their home which had become due. Subsequently, Goldome contacted Horizon Appraisal, the Respondent's employer, and the Respondent was requested to perform the appraisal on the Wards' property. In connection with that appraisal, the Respondent went to the Wards' home, made a series of measurements regarding its size and dimensions, photographed the property, and searched records for comparable sales in the vicinity. Upon completion of her efforts, Respondent drafted a uniform residential appraisal report which was delivered to Goldome. On the front sheet of the appraisal report prepared by Respondent were three typographical errors. Under the heading "Exterior Description" Respondent had mistakenly typed in the blank next to "Manufactured House" the word "Yes." Additionally, under the heading "Foundation" Respondent had typed "no" in the blank next to "Slab" and "Yes" in the blank next to "Crawl Space." Based upon the pictures submitted with the appraisal report and the other comments submitted by Respondent, this information was clearly erroneous. Ultimately, Goldome rejected the Wards' request for the fixed rate loan. That rejection was not due to the errors described in paragraph 6 above. The Wards' property was denied due to the predominate values and uses in its area, the zoning, and the lender's ability to transfer the loan in the secondary market. Upon being advised that the front page of the appraisal report contained errors, the Respondent submitted a corrected front copy. Those corrections did not alter the appraised value of the Wards' home. Mr. Ward elected to close a variable rate loan with Goldome when the fixed rate option was denied.
Recommendation Based on the foregoing, it is recommended that the Florida Real Estate Commission enter a final order dismissing the administrative complaint against the Respondent. RECOMMENDED this 12th day of December, 1990, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH 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 December, 1990. APPENDIX TO RECOMMENDED ORDER, CASE NO. 90-3588 RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE DEPARTMENT: Paragraphs 1 through 4 are accepted. Paragraph 5 is rejected as irrelevant or hearsay not corroborated by direct evidence. With regard to paragraph 6 it is accepted that the Wards' fixed rate loan was denied; otherwise rejected as irrelevant. With regard to paragraph 7 it is accepted that Mr. Ward sought to determine why the fixed rate loan was denied, sought to obtain a copy of the appraisal report, and that the appraisal referred to information which made the property unacceptable to the lender for a fixed rate loan. Otherwise the paragraph is rejected as argumentative or unsupported by the weight of credible evidence. With regard to paragraph 8 it is accepted that the lender offered a variable rate loan to the Wards which they accepted; otherwise rejected as argumentative or unsupported by the weight of credible evidence. Except as to the exact time the appraisal was received by Ward (which is not clearly established by the record), paragraphs 9 and 10 are accepted. Paragraph 11 is rejected as irrelevant; it is accepted that Respondent issued a corrected front page of the appraisal when she was made aware of the errors. Paragraph 12 is accepted but is irrelevant since Respondent has never denied that the typographical errors were committed. Paragraph 13 is rejected as argument, erroneous supposition on Ward's part, or not supported by the weight of credible evidence. Paragraph 14 is rejected as contrary to the weight of the evidence. RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE RESPONDENT: Paragraphs 1 through 7 are accepted. Paragraph 8 is rejected as irrelevant or argument. Paragraph 9 is accepted. Paragraph 10 is rejected as irrelevant or argument. With regard to paragraph 11 it is accepted that Respondent was employed by Horizon and that the lender contacted Horizon to perform the appraisal for the Wards' property; otherwise rejected as irrelevant, argument, or conclusion of law. COPIES FURNISHED: Steven W. Johnson Senior Attorney Department of Professional Regulation, Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Suzanne D. Lanier GILLETTE, PILON, RICHMAN AND KOWALSKI, P.A. 5801 Pelican Bay Boulevard Suite 405 Naples, Florida 33963-2740 Darlene F. Keller Division Director Department of Professional Regulation, Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Kenneth E. Easley General Counsel Department of Professional Regulation 1940 North Monroe, Suite 60 Tallahassee, Florida 32399-0792
The Issue Whether Respondents committed the offenses set forth in the six-count Administrative Complaint dated October 15, 2003; and, if so, what penalty should be imposed.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: The Department of Business and Professional Regulation, Division of Real Estate (the "Department"), is the state agency charged with enforcing the statutory provisions pertaining to persons holding real estate broker and sales associate's licenses in Florida, pursuant to Section 20.165 and Chapters 455 and 475, Florida Statutes (2003). At all times relevant to this proceeding, Respondent Richard R. Page, was a licensed Florida real estate broker/officer, having been issued broker license no. KB-0148248. He was the qualifying broker for Aztec Realty. At all times relevant to this proceeding, Respondent Aztec Realty, was a corporation registered as a Florida real estate broker, having been issued corporate registration no. CQ-0156640. Aztec Realty's business location was 4456 Tamiami Trail, Charlotte Harbor, Florida 33980. Barbara Kiphart was a 13-year employee of the Department who had performed thousands of audits of broker records. After conducting agent interviews on an unrelated matter in the office of Aztec Realty, she informed Mr. Page that she planned to perform an audit of the corporation's escrow accounts. Ms. Kiphart testified that it was routine for the Department to perform such audits when visiting brokers' offices for other reasons. Ms. Kiphart informed Mr. Page that she would need all documents necessary to complete an audit of Aztec Realty's escrow accounts, including bank statements, account reconciliations, and liability lists. Mr. Page referred Ms. Kiphart to Cheryl Bauer, Aztec Realty's financial manager. With Ms. Bauer's assistance, Ms. Kiphart completed the audit on June 12, 2003. Three accounts were examined: the sales escrow account; the security deposit account; and the property management account. The sales escrow account was found to be in balance, with liabilities equal to the bank balance of $382,300.52. The security deposit account was found to have liabilities of $45,533.29 but only $16,429.84 in its bank balance, a shortage of $29,103.45. The property management account was found to have liabilities of $22,545.54 but only $16,594.71 in its bank balance, a shortage of $5,950.83. Ms. Kiphart testified that the security deposit account had not been reconciled in the year 2003, and she had no way of saying when it was last reconciled. She determined the account's balance from Aztec Realty's bank statements, but had to extrapolate the liabilities from a computer printout of security deposits. Ms. Bauer testified that she handles the finances for all aspects of Aztec Realty's real estate sales business, including the sales escrow account, and that she was able to provide all the information Ms. Kiphart needed to audit that account. However, Ms. Bauer had no responsibility for the other two accounts, both of which related to the rental property management side of Aztec Realty's business. She had to obtain information about those accounts from Jill Strong, her newly- hired counterpart in property management. At the time she provided the computer printout on the property management accounts to Ms. Bauer and Ms. Kiphart, Ms. Strong told them that she knew the numbers were inaccurate. Aztec Realty had purchased Tenant Pro, a new rental management software package, in 2001. In the course of approximately 18 months, Aztec Realty had three different employees in Ms. Strong's position. One of these short-term property managers had misunderstood the software for the security deposit account. Opening balances were entered for accounts that had, in fact, already been closed out with the deposits returned. This had the effect of inflating the apparent liabilities in that account. The previous property manager was also unable to print checks on the printer attached to her computer terminal. Ms. Bauer would print the deposit refund checks on her own printer, with the understanding that the property manager was recording these entries against the security deposit account. Ms. Strong discovered that these entries had not been recorded. Thus, monies that had been paid out to owners, renters, and vendors were never recorded anywhere besides a sheet that Ms. Bauer kept for printing out checks, again inflating the account's apparent liabilities. Ms. Strong had been working for Aztec Realty for about one month at the time of the audit. She was still in the process of sorting out the problems in the security deposit account, hence her statement to Ms. Bauer and Ms. Kiphart that she knew the numbers were inaccurate. Subsequent to the Department's audit, Ms. Bauer and Ms. Strong commenced their own audit of the security deposit and property management accounts. Their efforts were complicated by a storm and tornado that struck the area on June 30, 2003. The offices of Aztec Realty suffered over $100,000 in damage, including water damage to the roof that caused the office to be flooded. Records were soaked and Ms. Strong's computer was destroyed. By mid-July 2003, Ms. Bauer and Ms. Strong had completed their corrected audit of the security deposit account. They concluded that the actual shortfall in the account was $13,764.43. That amount was immediately transferred from the real estate operating account to the security deposit account to bring the latter account into balance. The real estate operating account was essentially Mr. Page's personal funds. As to the property management account, also referred to as a "rental distribution" account, Ms. Bauer and Ms. Strong performed a subsequent audit indicating that the account was out of balance on the positive side. They discovered that there were items paid out of the property management account that should have been paid from escrow and vice versa. When the audit brought the accounts into balance, the property management account was approximately $200 over balance. In an audit response letter to Ms. Kiphart dated July 16, 2003, Mr. Page acknowledged that the property management account had been improperly used to pay occasional expenses, but also stated that the practice had been discontinued. At the hearing, Mr. Page conceded that no reconciliations had been performed on the security deposit account or the property management account from at least January 2003 through May 2003. Mr. Page and Ms. Bauer each testified that the corrective actions taken in response to the audit have been maintained and that there have been no accounting problems since June 2003. Aztec Realty has contracted to sell its property management department. The evidence established that no client of Aztec Realty or other member of the public lost money due to the accounting discrepancies described above. Neither Mr. Page nor Aztec Realty has been subject to prior discipline. Mr. Page has worked in the real estate business in the Port Charlotte area for nearly 30 years and is a past president of the local association of realtors. He credibly expressed remorse and testified that, given his position in the community, he was "mortified" at having allowed his company to be placed in this position. Aztec Realty has operated for nearly 30 years and currently has 20 employees and approximately 65 agents.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Real Estate Commission enter a final order: Dismissing Counts II and III of the Administrative Complaint against Mr. Page; Dismissing Counts V and VI of the Administrative Complaint against Aztec Realty; Imposing an administrative fine against Mr. Page in the amount of $1,000 for the violation established in Count I of the Administrative Complaint; and Imposing an administrative fine against Aztec Realty in the amount of $1,000 for the violation established in Count IV of the Administrative Complaint. DONE AND ENTERED this 27th day of July, 2004, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of July, 2004.
The Issue Whether Respondent Corporation, Southern Insight, Inc., failed to secure payment of workers' compensation coverage as required by Chapter 440, Florida Statutes, and the Florida Insurance Code, and if so, whether the Department of Financial Services, Division of Workers' Compensation (Department) has lawfully assessed the penalty against Respondent in the amount of $27,805.11.
Findings Of Fact The Department is the state agency responsible for enforcing Section 440.107, Florida Statutes, which requires that employers secure the payment of workers' compensation coverage for their employees and otherwise comply with the workers' compensation coverage requirements under Chapter 440, Florida Statutes. Respondent has been a Florida corporation, actively involved in the construction industry providing framing services, during the period of February 16, 2006, through August 17, 2007 (assessed penalty period). At all times material, Respondent has been an "employer," as defined by Chapter 440, Florida Statutes. At all times material, John Cauley has been Respondent's president and sole employee. At no time material did Respondent obtain workers' compensation insurance coverage for John Cauley. On August 17, 2007, Department Investigator Lynise Beckstrom conducted a random workers' compensation compliance check of a new home construction site in Palm Coast, Florida. At that time, Ms. Beckstrom observed four men, including John Cauley, framing a new home. Utilizing the Department's Compliance and Coverage Automated System (CCAS) database, which contains all workers' compensation insurance policy information from the carrier to an insured and which further lists all the workers' compensation exemptions in the State of Florida, Ms. Beckstrom determined that for the assessed penalty period, Respondent did not have in effect either a State of Florida workers' compensation insurance policy or a valid, current exemption for its employee, John Cauley. During the assessed penalty period, Respondent paid remuneration to its employee, John Cauley. John Cauley admitted that during the assessed penalty period he was not an independent contractor, as that term is defined in Section 440.02(15)(d)(1), Florida Statutes. Section 440.05, Florida Statutes, allows a corporate officer to apply for a construction certificate of exemption from workers' compensation benefits. Only the named individual on the application is exempt from workers' compensation insurance coverage. On or about April 15, 2006, John Cauley, as Respondent's President, applied for such an exemption. That application was denied. Mr. Cauley received neither an exemption card nor a denial of exemption from the Department. During the assessed penalty period, Respondent was a subcontractor of the contractor, Mass Builders, Inc. 9. Sections 440.107(3) and 440.107(7)(a), Florida Statutes, authorize the Department to issue stop-work orders to employers unable to provide proof of workers' compensation coverage, including proof of a current, valid workers' compensation exemption. Based on the lack of workers' compensation coverage and lack of a current, valid workers' compensation exemption for Respondent corporation's employee, John Cauley, the Department served on Respondent a stop-work order on August 17, 2007. The stop-work order ordered Respondent to cease all business operation for all worksites in the State of Florida. Immediately upon notification by Investigator Beckstrom of his lack of valid exemption, Mr. Cauley submitted a new exemption application, which was granted, bringing Respondent corporation into compliance. However, in order to have the stop-work order lifted so that he can work as a corporation again, Mr. Cauley must pay a percentage of the penalty assessment and enter into a payment plan with the Agency. In the meantime, Mr. Cauley cannot pay the percentage required by the Department if he cannot find work as someone else's employee, which he had been unable to do as of the date of the hearing. Herein, it is not disputed that Respondent was inadvertently out of compliance. Mr. Cauley seeks merely to reduce the amount of the penalty assessment so that removal of the stop-work order against Respondent corporation can be negotiated. On the day the stop-work order was issued, Investigator Beckstrom also served Respondent with a "Request for Production of Business Records for Penalty Assessment Calculation," in order to determine a penalty under Section 440.107(7), Florida Statutes. Pursuant to Florida Administrative Code Rule 69L-6.015, the Department may request business records for the three years preceding the date of the stop-work order. Logically, however, Ms. Beckstrom only requested business records dating back to February 14, 2006, Respondent's date of incorporation in Florida. The requested records included payroll, bank records, check stubs, invoices, and other related business records. Ms. Beckworth testified that, "Business records requests usually consist of payroll, bank records, taxes, check stubs, invoices, anything relating to that business." This is a fair summation of a much more detailed listing of records required to be kept pursuant to Rule 69L-6.015, Florida Administrative Code, which was in effect at all times material. In response to the Request for Production, Respondent provided Southern Insight Inc.'s corporate bank statements for the assessed penalty period, detailing corporate income and expenses through deposits and bank/debit card purchases. However, Investigator Beckworth did not deem the corporate bank statements produced by Respondent to be an adequate response, and she did not base her calculations for penalty purposes thereon. Mr. Cauley expected that the Department would, and has argued herein that the Department should, have subtracted from the total deposits to Respondent's corporate account (the minuend) the total corporate business expenses (the subtrahend) in order to determine the Respondent's payroll to Mr. Cauley (the difference), upon which difference the Department should have calculated his workers' compensation penalty. In fact, the Department, through its investigator, did not utilize the total amount deposited to Respondent's corporate account, because some deposits "could" have come from a family member of Mr.Cauley. That said, there are no individual names on the account; the account is clearly in the name of the Respondent corporation; and there is no proof herein that any deposits to Respondent's corporate bank account were derived from anyone other than Mr. Cauley, as Respondent's President. Ms. Beckstrom testified that if the Agency had accepted the total of the deposits to this corporate account for the assessed penalty period as Respondent's payroll, the result would have been more than the total amount actually determined by her to constitute Mr. Cauley's payroll, but that statement was not demonstrated with any specificity. The Department also did not use any of the subtracted amounts shown on the corporate bank statements, even though the bank statements listed the same information as would normally be found on a corporate check, including the transaction number, recipient of the money, the date, and the amount for each bank/debit card transaction. All that might be missing is the self-serving declaration of the check writer on the check stub as to what object or service was purchased from the recipient named on the bank statement. Ms. Beckstrom testified that if Mr. Cauley had provided separate receipts for the transactions recorded on the bank statements as bank/debit card entries, she could have deducted those amounts for business expenses from the corporation's income, to arrive at a lesser payroll for Mr. Cauley. In other words, if Mr. Cauley had provided separate receipts as back-up for the transactions memorialized on the corporate bank statements, the Department might have utilized the bank/debit card transactions itemized on Respondent's corporate bank statements as the amount deducted for Respondent corporation's business expenses, so as to obtain the payroll (difference) paid to Mr. Cauley. It is the amount paid to Mr. Cauley as payroll, upon which the Department must calculate the workers' compensation penalty. The reason Ms. Beckworth gave for not using Respondent's bank statements was that without more, the transactions thereon might not be business expenses of the corporation. However, she also suggested that if, instead of submitting bank/debit card statements, Mr. Cauley had submitted checks payable to third parties and if those corporate checks showed an expenditure for a deductible business expense, like motor vehicle fuel, she might have accepted the same expenditures in check form (rather than the statements) in calculating Respondent's payroll. Ultimately, Ms. Beckworth's only reasons for not accepting the bank statements showing recipients, such as fuel companies like Amoco, was "agency policy," and her speculation that Amoco gas could have been put into a non-company truck or car. She also speculated that a prohibition against using bank statements showing deductions might possibly be found in the basic manual of the National Council on Compensation Insurance (NCCI) or in a rule on payrolls (Rule 69L-6.035) which became effective October 10, 2007, after the assessed penalty period. However, the NCCI manual was not offered in evidence; a rule in effect after all times material cannot be utilized here; and no non-rule policy to this effect was proven-up. In addition to not using Respondent's bank statements to calculate a penalty, the Department also did not "impute" the statewide average weekly wage to Respondent for Mr. Cauley. Ms. Beckworth testified that to impute the statewide average weekly wage would have resulted in a higher penalty to Respondent. As to the amount of the statewide average weekly wage, she could only say she thought the statewide average weekly wage was "about $1,000.00". Instead of using Respondent's corporate bank statements or imputing the statewide average weekly wage, Investigator Beckstrom determined that Mass Builders, Inc., was the prime contractor on the jobsite being worked by Respondent, and that Mass Builders, Inc., had not produced proof of securing workers' compensation coverage for Respondent, its sub- contractor. Therefore, she sought, and received, Mass Builders, Inc.'s "payroll records" of amounts paid by the prime contractor, Mass Builders, Inc., to Respondent Southern Insight, Inc., via a separate site-specific stop-work order and business records request directed to Mass Builders, Inc. The only "payroll records" that Mass Builders, Inc., offered in evidence were Mass Builders, Inc.'s check stubs, which Ms. Beckstrom utilized to come up with an income/payroll amount for Respondent Southern Insight, Inc. Mr. Cauley did not know until the hearing that Mass Builders, Inc.'s check stubs had been utilized in this fashion by the Department. However, he ultimately did not dispute the accuracy of the check stubs and did not object to their admission in evidence. In calculating Respondent's total payroll for the assessed penalty period, Investigator Beckstrom considered only the total of the check stubs from Mass Builders, Inc. It is unclear whether or not she reviewed Mass Builders, Inc.'s actual cancelled checks. No one from Mass Builders, Inc., appeared to testify that the stubs represented actual cancelled checks to Respondent or Mr. Cauley. The Department also did not deduct from the total of Mass Builders, Inc.'s check stubs any of the bankcard deductions made by John Cauley from Respondent's corporate bank account, for the same reasons set out above. Mr. Cauley testified, without refutation, that some of the expenses noted on Respondent's bank statements, paid by bank/debit card, most notably expenses for gasoline for his truck, constituted legitimate business expenses of Respondent corporation, which should have been deducted from either the bank statement's total income figure or from the amounts paid by Mass Builders, Inc., to Respondent corporation, before any attempt was made by the Department to calculate the amount paid by Respondent corporation to Mr. Cauley as payroll. Utilizing the SCOPES Manual, which has been adopted by Department rule, Ms. Beckstrom assigned the appropriate class code, 5645, to the type of work (framing) performed by Respondent. In completing the penalty calculation, Ms. Beckstrom multiplied the class code's assigned approved manual rate by the payroll (as she determined it) per one hundred dollars, and then multiplied all by 1.5, arriving at an Amended Order of Penalty Assessment of $27,805.11, served on Respondent on August 22, 2007. Subsequent to the filing of its request for a disputed-fact hearing, in an effort to have the penalty reduced, Respondent provided the Department with additional business records in the form of portions of Southern Insight, Inc.'s 2006 and 2007 U.S. Income Tax Returns for an S Corporation (2006 and 2007 income tax returns). However, neither itemized deductions nor original receipts for Respondent's business expenses were provided to Ms. Beckworth at the same time, and she determined that without itemized deductions, there was no way to calculate Respondent's legitimate business deductions so that they could be deducted from the total of Mass Builders, Inc.'s, check stubs to determine a lesser payroll applicable to Mr. Cauley. Investigator Beckstrom testified that the tax returns, as she received them, did not justify reducing Respondent's payroll used in calculating the penalty. The vague basis for this refusal was to the effect that, "The Internal Revenue Service permits different business deductions than does the Department." Itemization pages (schedules) of Respondent's income tax returns were not provided until the de novo disputed-fact hearing. Confronted with these items at hearing, Ms. Beckworth testified that ordinary business income is not used by the Department to determine payroll, but that automobile and truck expense and legitimate business expenses could be deducted, and that she would probably accept some of the deductions on Respondent's 1020-S returns. Also, if Respondent's bank statement corresponded to the amount on the tax form, she could possibly deduct some items on the bank statements as business expenses before reaching a payroll amount. However, she made no such calculations at hearing. Ms. Beckworth testified that if she had Respondent's checks or "something more" she could possibly deduct the motor fuel amounts. Although Respondent's 2006, and 2007, income tax returns reflected Respondent corporation's income minus several types of business deductions, Ms. Beckstrom testified that the tax deductions were not conclusive of the workers' compensation deductions, because the Internal Revenue Service allows certain deductions not permissible for workers' compensation purposes, but she did not further elaborate upon which tax deductions were, or were not, allowable under any Department rule. She did not "prove up" which deductions were not valid for workers' compensation purposes. Respondent's 2006, tax deductions for "automobile and truck expense" were $2,898.00, and for 2007, were $4,010.00. There was no further itemization by Respondent within these categories for fuel. Other business deductions on the tax returns were also listed in categories, but without any further itemization. The only supporting documentation for the tax returns admitted in evidence was Respondent's bank statements. Respondent believed that the tax returns and possibly other documentation had been submitted before hearing by his accountant. It had not been submitted. The Department never credibly explained why it considered a third party's check stubs (not even the third party's cancelled checks) more reliable than Respondent's bank statements or federal tax returns. Even so, at hearing, the Department declined to utilize the business deductions itemized on Respondent's tax forms or any bank/debit card deductions on its bank statements so as to diminish the amount arrived-at via the Mass Builders, Inc.'s check stubs, and ultimately to arrive at a difference which would show a lesser payroll to Mr. Cauley. Although Mr. Cauley's questions to Ms. Beckstrom suggested that he would like at least all of the fuel company deductions on his bank statements to be considered as business deductions of Respondent Southern Insight, Inc., and for those fuel company expenditures to be subtracted from either the total deposits to the corporate bank account or deducted from the payroll total as calculated by Ms. Beckstrom from Mass Builders, Inc.'s check stub total, he did not testify with clarity as to which particular debits/charges on the bank statements fell in this category. Nor did he relate, with any accuracy, the debits/charges on the bank statements to the corporate tax returns. Upon review by the undersigned of Respondent's bank statements admitted in evidence, it is found that the bulk of Respondent's bank/debit card deductions during the assessed penalty period were cash withdrawals or ATM debits which cannot be identified as being paid to fuel companies or purveyors of construction material. As Investigator Beckstrom legitimately observed, "Big Al's Bait" is not a likely source of motor fuel. "Publix" and "Outback Steak House" are likewise unlikely sources of fuel or construction material, and cannot stand alone, without some other receipt to support them, as a legitimate corporate business entertainment expense. Other debits/charges on the bank statements are similarly non-complying, ambiguous, or defy categorization. However, the undersigned has been able to isolate on the corporate bank statements purchases from the known fuel distributors "Amoco" and "Chevron" on the following dates: 7/09/07, 7/10/07, 6/04/07, 6/04/07, 6/11/07, 5/03/07/ 4/09/07, 4/10/07, 4/13/07, 4/16/07, 3/02/07, 3/05/07, 3/13/07, 3/15/07, 3/20/07, 1/29/07, 5/01/06, 6/02/06, 8/02/06, 11/03/06, totaling $556.98.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, that affirms the stop-work order and concludes that a penalty is owed; that provides for a recalculation of penalty to be completed, on the basis set out herein, within 30 days of the final order; and that guarantees the Respondent Southern Insight, Inc., a window of opportunity to request a Section 120.57 (1) disputed-fact hearing solely upon the recalculation. DONE AND ENTERED this 1st day of July, 2008, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS 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 1st day of July, 2008. COPIES FURNISHED: Anthony B. Miller, Esquire Department of Financial Services Division of Workers' Compensation 200 East Gaines Street Tallahassee, Florida 32399-4229 John Cauley, President Southern Insight, Inc. Post Office Box 2592 Bunnell, Florida 32110 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Sumner, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue Whether the proposed decision of the Department of Children and Family Services to award the contract for Florida Assertive Community Treatment (FACT) Programs for District 11, as set forth in RFP No. 01H02FP5, to Psychotherapeutic Services of Florida, Inc., was contrary to the Agency's governing statutes, the Agency's rules or policies, or the specifications of the RFP?
Findings Of Fact On or about February 18, 2002, DCF issued RFP No. 01H02FP5 for the implementation of Florida Assertive Community Treatment (FACT) Programs for persons with severe and persistent mental illnesses in DCF Districts 4, 7, and 11. The review in this case is limited to DCF's proposal to award a FACT contract in District 11. Three vendors submitted proposals for District 11, including Petitioner and Intervenor. Section 5.2 of the RFP requires that each proposal include a title page as page two of the proposal and include the RFP number; title of proposal; prospective offeror's name; organization to which the proposal is submitted; name, title, phone number and address of person who can respond to inquiries regarding the proposal; and name of project director, if known. The proposal submitted by Intervenor contained a title page identifying the offeror as Psychotherapeutic Services of Florida, Inc., (PSFI) with a mailing address in Chesterfield, Maryland. Further, every page of Intervenor's proposal had the name Psychotherapeutic Services of Florida, Inc. printed on the bottom left corner of every page. Section 6.1 of the RFP describes two phases of DCF's review of the proposals. The first is an initial screening of all proposals for what the RFP describes as "Fatal Criteria." The second is the qualitative review by an evaluation team of each proposal using criteria set out in the RFP. Fatal Criteria Section 5.4 of the RFP reads as follows: 5.4 RESPONSE TO INITIAL SCREENING REQUIREMENTS The initial screening requirements are described as FATAL CRITERIA on the RFP Rating Sheet (see section 6.1). Failure to comply with all initial screening requirements will render a proposal non-responsive and ineligible for further evaluations. The fatal criteria are: Was the proposal received by the date, time and location as specified in the Request for Proposal (section 2.4)? Was one (1) original and eight (8) copies of the proposal submitted and sealed separately? (section 5.12)? Did the provider include a Proposal Guarantee payable to the department in the amount of $1,000.00 (section 2.11)? Did the application include the signed State of Florida Request for Proposal Contractual Services Acknowledgement Form, PUR 7033 for each proposal submitted? Did the provider submit the Notice of Intent to Submit form contained in Appendix 2 by the required due date? Did the provider register and attend the offeror's conference? Did the proposal include the signed Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion Contracts/Subcontracts (Appendix 6)? Did the proposal include the signed Statement of No Involvement(Appendix 7)? Did the proposal include the signed Acceptance of Contract Terms and Conditions indicating that the offeror agrees to all department requirements, terms and conditions in the Request for Proposal and in the Department's Standard Contract (Appendix 8)? Did the proposal include a signed lobbying form (Appendix 9)? Did the proposal include an audited financial statement for fiscal years 1999- 2000 and 2000-2001? Did the proposal include a certification of the offeror's good standing (Appendix 1)? Did the proposal contain evidence the minimum staffing levels in section 3.11 will be hired and employed? Did the proposal contain a signed Certification of a Drug-Free Workplace program (Appendix 10)? Did the proposal contain a certification regarding electronic mailing capability as referenced in section 3.20 (Appendix 5)? (emphasis in original) Section 6.1 of the RFP includes a Fatal Criteria rating sheet requiring "yes" or "no" responses by the reviewer, which included, among other provisions, the following: 4. Did the proposal include a signed Form PUR 7033? * * * 11. Did the proposal include independent audited financial statement from a CPA firm for fiscal years 1999-2000 and 2000-2001? Form PUR 7033 Section 5.1 of the RFP, entitled, STATE OF FLORIDA REQUEST FOR PROPOSAL CONTRACTUAL SERVICES ACKNOWLEDGMENT FORM, PUR 7033, requires proposers to manually sign an original Form 7033 on the appropriate signature line. The signed form 7033 must appear as the first page of the proposal. Form PUR 7033 is not a form generated by DCF but is generated by the Department of Management Services. The RFP did not set forth any fatal criteria in connection with this form other than it be signed. The proposal of Intervenor, PSFI, contained form PUR 7033 with the signature of PSFI's Chief Executive Officer, D. Cherry Jones, within the signature block designated as "authorized signature." The name Psychotherapeutice [sic] Services appears on Intervenor's form 7033 in the block entitled "vendor name." The address which appears in the block designated as "vendor's mailing address" on Intervenor's form PUR 7033 is the same mailing address in Chesterfield, Maryland, that appears on the title page of Intervenor's proposal. In completing the RFP forms designated as Appendix 1, Offeror Certification of Good Standing; Appendix 5, Certification of Electronic Mail Capability; Appendix 7, Statement of No Involvement; Appendix 8, Acceptance of Contract Terms and Conditions; and Appendix 10, Certification of a Drug-Free Workplace Program, Psychotherapeutic Services appears in the blank designated for the name of the vendor or offeror. These appendices were all signed by D. Cherry Jones. No required appendix was omitted or unsigned in Intervenor's proposal. Petitioner contends that the use by Intervenor of Psychotherapeutic Services or a shortened version of its full name instead of Psychotherapeutic Services of Florida, Inc., on Form PUR 7033 and the required appendices renders Intervenor's proposal non-responsive to fatal criteria and caused confusion within DCF as to the corporate status of the actual offeror. In Appendix 8 to Intervenor's proposal, the corporate documents from the Florida Department of State were for Psychotherapeutic Services of Florida, Inc. Timothy Griffith is Deputy Executive Director of Psychotherapeutic Services of Florida, Inc. According to Mr. Griffith, the use of the term Psychotherapeutic Services refers to a group of companies that make up the Psychotherapeutic Services Group. The parent company of all Psychotherapeutic Services affiliates, including Psychotherapeutic Services of Florida, Inc., is Associated Service Specialists, Inc. The relationship between Psychotherapeutic Services of Florida, Inc., and Associated Service Specialists, Inc., was set forth in sufficient detail in Intervenor's proposal. There is no evidence that anyone in DCF or its evaluators were confused as to what entity was identified in the proposal submitted by Intervenor. Stephen Poole is a Senior Management Analyst II with DCF, and is the procurement manager for the RFP. There was never any confusion in his mind as to what entity was making the offer to DCF. He understood Psychotherapeutic Services to refer to Psychotherapeutic Services of Florida, Inc., and had a "common sense" understanding of who the offeror was. Consistent with his testimony, Mr. Poole's reference to Psychotherapeutic Services, Inc., on the bid tabulation sheet was simply shorthand for Psychotherapeutic Services of Florida, Inc. Similarly, the bid tabulation sheet references Petitioner as Bayview Center for Mental Health even though its full name is Bayview Center for Mental Health, Inc. Likewise, his reference to "PSI" on the fatal criteria evaluation sheet "stood for and stands for, in our language, Psychotherapeutic Services of Florida, Inc." Petitioner's assertion that Intervenor's proposal was non-responsive as a result to the use of an abbreviated form of Intervenor's name is not supported by the above findings. Financial Statements Petitioner asserts that Intervenor failed to meet the requirement set forth in Section 5.4k of the RFP and referenced in paragraph 11 of the fatal criteria RFP rating sheet, that proposers include independent audited financial statements for fiscal years 1999-2000 and 2000-2001. The RFP did not provide any definition, standard, guideline, or mandatory requirement for the format or content of financial statements, audits, or audited statements. The RFP simply required that they be included. Intervenor's proposal contained audited financial statements for fiscal years 1999-2000 and 2000-2001. Intervenor's 2000-2001 audited financial statements consisted of an independent auditor's report from Nardone, Pridgeon & Company, P.A., Certified Public Accountants, dated August 10, 2001; balance sheets; statements of cash flow; statements of operations and retained earnings (deficit); and personnel and operating expenses. However, four pages, consisting of the Notes to Financial Statements, were omitted. There is no dispute regarding the contents of the audited financial statements for 1999-2000 submitted by Intervenor. The independent auditor's report stated in pertinent part: We have audited the accompanying balance sheets of Psychotherapeutic Services of Florida, Inc. as of June 30, 2001 and 2000, and their related statements of operations and retained earnings (deficit) and cash flows for the years then ended. . . . In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Psychotherapeutic Services of Florida, Inc. as of June 30, 2001 and 2000 We conducted our audits to form an opinion on the 2001 and 2000 basic financial statements taken as a whole. Luther Cox is a certified public accountant and has expertise in accounting and financial statements. It is Mr. Cox's opinion that the notes to financial statements are a required element of an audited financial statement. Mr. Cox's opinion was based in part on the Florida Board of Accountancy Rules in defining the term, "financial statement." Mr. Cox acknowledged, however, that based upon the representation that the auditors provided in the first paragraph of their letter, the auditors reviewed all of the financial statements. Additionally, Mr. Cox acknowledged that based upon his review of the notes to the financial statements, there was no negative information which should have been disclosed in the subject auditor's opinion letter and that the letter was a "clean opinion", meaning that no adverse financial information was known to the auditors which otherwise would have been required to be reported. Martin Kurtz is also a certified public accountant. He acknowledged that that the omission of the notes is not consistent with the standards of the practice of accountancy in Florida. However, he was of the opinion that, based upon the way the independent auditor's opinion letter is written, the letter relates to a full set of financial statements. "They may not have all been presented in the proposal. But there was a full set of audited financial statements." Thus, the auditor's clean opinion letter included a review of the notes. According to Mr. Kurtz, the text of Intervenor's proposal contains more information about the relationship between the parent company and Psychotherapeutic Services of Florida, Inc., than the notes to the financial statements. With the above competing opinions by certified public accountants, it is appropriate to examine the agency's use of the audited financial statements in their review of the proposals. According to Mr. Poole, the requirement to have the proposals contain independently audited financial statements was to assure DCF that the offeror possessed sufficient financial sophistication and organizational capacity to perform a FACT contract. In reviewing compliance with the requirement for an audited financial statement, DCF reviewed the submission to determine whether or not it had a letterhead from an independent auditor and whether there were financial statements. The submitted financial statements were not reviewed by a certified public accountant of DCF. According to Mr. Poole, DCF was looking generally for the "strength, administratively of the offeror. If it had the level of management expertise to be able to perform a contract in that amount of money of a million dollars." The independent auditor's letter represents that Intervenor's financial statements for fiscal years 2000-2001 were in fact audited. Petitioner's assertion that Intervenor's proposal is non-responsive because of the omission of the notes to the financial statements is not supported by the above findings. In further support for its assertion that Intervenor's omission of the notes to the financial statements renders Intervenor's proposal non-responsive for failure to meet fatal criteria, Petitioner asserts that the requirement for the inclusion of audited financial statements was not only considered within the fatal criteria of the RFP, but also was a "key consideration" for scoring criterion 36 of the RFP. Organizational capacity is set forth in section 5.5(4) of the RFP and states in pertinent part: To assist in the determination of the offeror's organizational capacity, please provide, as part of this section, the following: 4. A copy of the financial statements or audits for state fiscal years 1999-2000 and 2000-2001. 6. Evidence that the offeror has met its financial obligations in a timely and consistent manner without the need to incur loans or a line of credit to routinely meet its expenses. (emphasis in original) Section 6.3.6 of the RFP contains certain criteria for the evaluators to score with regard to organizational capacity of the proposers. Criterion 36 reads as follows: 36. What evidence did the proposal provide that the offeror has not had to obtain loans or a line of credit to routinely meet its financial obligations and expenses in a timely and consistent manner as referenced in section 5.5(4)? Key considerations for scoring: Its independently audited financial statements for fiscal years 1999-2000 and 2000-2001 support response. Offeror's independently audited financial statements for the last two years give evidence of ability to start a new program without benefit of start-up funds. Each of the evaluation criteria contained references to key considerations for scoring. The key considerations were to assist the evaluators in assessing the merits of the proposals. In evaluating criterion 36 pertaining to lines of credit, it was the role of the individual evaluators to interpret the degree of routine reliance and assign, accordingly, a particular score from zero to three. Intervenor directly addressed loans and lines of credit in the text of its proposal in response to criterion 36. As with the other criteria, evaluators could score this criterion from zero to three. The Department deferred to the evaluators regarding how they interpreted offerors' responses to the requirements of 5.5(4). Thus, the omission of the auditor's notes in regard to criterion 36 goes to the weight of the information in the proposal, not as to whether or not fatal criteria were met. Evaluation Committee Process Members of the Evaluation Committee were given instructions by Mr. Poole prior to commencing the qualitative review of each proposal. Each Evaluation Committee member signed a conflict of interest statement indicating they had no conflicts. The members were specifically instructed that the proposals were to be reviewed independently from one another and from each other; that any problem an evaluator may have with a proposer was not to be considered as part of their score; that the universe began and ended within the confines of the proposal; and that they were to use a scoring protocol to affix their score and to report back the following week to give that score, but not to share their results with anyone until the briefing meetings that followed the qualitative review. The Evaluation Committee consisted of employees of DCF, except for Barbara Johanningsmeier, who is a National Alliance for the Mentally Ill (NAMI) representative. Mr. Poole spoke to the executive director of NAMI explaining that the NAMI evaluator should be a person who is knowledgeable either through life experience or work of Florida's community mental health system; who has an understanding of the system of care that is publicly funded; and who has an interest and some knowledge and expertise in the area of programs either through employment or through other factors. NAMI provided Ms. Johanningsmeier as the evaluator requested by DCF. Mr. Poole explained DCF's unquestioned acceptance of Ms. Johanningsmeier as an evaluator: We accepted Mrs. Johanningsmeier as the representative of NAMI because of our relationship with NAMI and our shared vision and mission of a community mental health system of Florida that is responsive to the individual needs with persons with severe and persistent illness and that our goals in some ways are the same, that we want a responsive system to people with a very serious disability . . . . [T]here would be no reason to question the validity or expertise of a representative of NAMI because NAMI has an interest in Florida's publically funded community mental health system. According to Celeste Putman, DCF's Director of Mental Health, the evaluation team included a NAMI representative to make sure that the team had a strong representative who really understood the needs of people with very severe, persistent mental illness, and who has worked closely with that population. Ms. Putnam explained that DCF has always felt that it is important to have a family member, someone who is close, from a personal standpoint, to the service delivery involved. Ms. Johanningsmeier had experience evaluating at least three other similar procurements. Further, Ms. Johanningsmeier was a member of the Board of Directors of NAMI, Florida, at the time she served on the Evaluation Committee and was a member of a local Board of Directors of NAMI. She was familiar with the NAMI PACT manual. Ms. Johanningsmeier gave an extensive description of her personal experiences with the public and private mental health systems in Florida, from her child's experience in those systems. Ms. Johanningsmeier's purpose on the evaluation team was to represent NAMI and not to promote the NAMI viewpoint in the evaluation. She denied scoring any of the criteria out of bias toward or against any of the participants using criteria outside of those that were given to her in the RFP, or attempting to skew the score in any way. Petitioner alleges that many of its responses to subjective questions were better than those of Intervenor and therefore should have been scored higher. Robert Ward, President and chief executive officer of Bayview, believed that Ms. Johanningsmeier scored Petitioner low, and as a result he felt there was either a bias of some kind or that the evaluator did not know what she was doing. Mr. Ward felt that something was wrong, but did know what it was. Petitioner's expert witness, Dr. Susan Kelly, is a senior research consultant with a private company. She works with data analysis and research and has expertise in statistics with a Ph.D. in sociology. She conducted a statistical test of the scoring by all evaluators for the purpose of determining the existence of patterns or any kind of irregularities or differences in scoring. The statistical significance test performed by Dr. Kelly showed variations between the scores of Ms. Johanningsmeier and two of the other reviewers. Dr. Kelly characterized Ms. Johanningsmeier's scores as an "outlier," but did not know the reason why there was a difference in scores between Ms. Johanningsmeier and the other evaluators. Dr. Kelly's analysis did not involve any review of the RFP, the proposals or information regarding Ms. Johanningsmeier's background or position to the Evaluation Committee. There was no substantial or material evidence presented by Petitioner to show that Ms. Johanningsmeier's scoring of the proposals was inconsistent with the scoring methodology in the RFP, clearly erroneous, contrary to competition, arbitrary or capricious.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED: That the Department of Children and Families enter a final order dismissing the bid protest filed by Bayview Center for Mental Health, Inc. DONE AND ENTERED this 27th day of September, 2002, in Tallahassee, Leon County, Florida. BARBARA J. STAROS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of September, 2002. COPIES FURNISHED: Gary J. Clark, Esquire Frank P. Rainer, Esquire Sternstein, Rainer & Clark, P.A. 101 North Gadsden Street Tallahassee, Florida 32301 William A. Frieder, Esquire Department of Children and Family Services 1317 Winewood Boulevard Building Two, Room 204 Tallahassee, Florida 32399-0700 Thomas R. Tatum, Esquire Brinkley, McNerney, Morgan, Soloman & Tatum, LLP. Post Office Box 522 Fort Lauderdale, Florida 33302-0522 Paul F. Flounlacker, Jr., 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 204 Tallahassee, Florida 32399-0700
The Issue Whether Respondents violated the statutes and rules alleged in the Second Amended Administrative Complaint; and, if so, what is the appropriate penalty to be imposed against Respondents.
Findings Of Fact OFR is the state agency charged with administering and enforcing chapter 560, Florida Statutes, including part II related to money services businesses. At all times material hereto, Payservices has been a foreign corporation and part II licensee pursuant to chapter 560, specifically a "money services business," as defined in section 560.102(22), and "money transmitter," as defined in section 560.102(23).4/ At all times material hereto, Mr. Danenberg has been the chief executive officer, compliance officer, and an owner of Payservices. As such, Mr. Danenberg is an "affiliated party" and a "responsible person" as defined in sections 560.103(1) and 560.103(33). Count I Licensees, such as Payservices, are required to annually file a financial audit report within 120 days after the end of the licensee's fiscal year. The financial audit report is prepared by a certified public accountant and is used to demonstrate to OFR that the licensee has the financial health to conduct its business and transmit funds within the State of Florida. Payservices' fiscal year ends December 31st. Respondents were required to provide Payservices' 2016 financial audit report to OFR by no later than May 1, 2017. On December 20, 2017, William C. Morin, Jr., OFR's Chief of the Bureau of Registration, contacted Payservices by email with regard to Payservices' failure to timely file a financial audit report within 120 days after the 2016 fiscal year ended. Mr. Danenberg responded by email that same day, telling Mr. Morin that Payservices' accountant had prepared a financial audit report "many months ago," and that it was his "impression" that it had been uploaded to the REAL system "at some point when we filed the quarterly reports." Mr. Danenberg attached to his December 20, 2017, email what OFR accepted as the financial audit report that same day. Notably, the document indicated it was prepared by a certified public accountant on June 15, 2017, after the May 1, 2017, deadline. In any event, Mr. Morin reviewed the REAL system regarding Payservices and determined there were no problems with the REAL system's ability to accept uploaded documents. Mr. Morin testified that he could see on the REAL system that Payservices successfully uploaded a quarterly report and Security Device Calculation Form on January 26, 2017, which created a transaction number. Mr. Morin also observed that Payservices started to upload its financial audit report, which would create a transaction number, but no financial audit report was actually attached and uploaded to the REAL system on January 26, 2017, under that transaction number. According to Mr. Morin, Payservices may have attempted to start to file a financial audit report on January 26, 2017, but it did not complete the transaction because no financial audit report was attached. At hearing, Mr. Morin acknowledged that: "When I looked at the Financial Audit Report transaction, nothing was attached. And I also know that the functionality of the REAL system will kind of allow for the transaction to be completed and nothing attached." Tr. p. 100. Mr. Morin testified that Mr. Danenberg was cooperative when he was contacted on Decemeber 20, 2017, and submitted the financial audit report. The persuasive and credible evidence adduced at hearing clearly and convincingly establishes that Respondents did not submit their financial audit report to OFR until December 20, 2017, almost eight months after the May 1, 2017, deadline. Count II Licensees, such as Payservices, are required to annually file Form OFR-560-07, Security Device Calculation Form, by January 31st of each calendar year for the preceding calendar year. The Security Device Calculation Form requires licensees to report to OFR the dollar amount of transactions with Florida consumers. The dollar amount of transactions identified in the form is then utilized by OFR to determine if additional collateral is necessary to protect Florida consumers in the event a claim is made against the collateral for monies that were not properly transmitted by the licensee. Andrew Grosmaire, OFR's Chief of Enforcement in the Division of Consumer Finance, acknowledged at hearing that a licensee has 60 days to amend the face value of its surety bond, should an increase be required, and that at all times material hereto, the value of Payservices' surety bond has been correct for the minimum amount required. Nevertheless, Mr. Morin testified that Respondents did not file Form OFR-560-07, Security Device Calculation Form, until February 10, 2018, ten days late. The persuasive and credible evidence adduced at hearing clearly and convincingly establishes that Respondents did not file Form OFR-560-07, Security Device Calculation Form, until February 10, 2018, ten days late. Count III Licensees, such as Payservices, are required to update information contained in an initial application form, or any amendment to such application, within 30 days after the change is effective. In Payservices' initial application dated September 25, 2015, Respondents identified Corporate Access, Inc., as its registered agent with an address for service of process at 236 East 6th Avenue, Tallahassee, Florida 32303. According to the Department of State, Division of Corporation's records, on January 10, 2017, Mr. Danenberg was appointed as Payservices' registered agent with a new address for service of process at 300 West Palmetto Park Road, A210, Boca Raton, Florida 33432. Respondents filed an amended license application with OFR on August 28, 2017, which still listed Corporate Access, Inc., as the registered agent for service of process. On February 26, 2018, Respondents amended their registered agent information with the Department of State listing a new address for Mr. Danenberg at 14061 Pacific Pointe Place, No. 204, Delray Beach, Florida 33484. Mr. Morin testified that at no time have Respondents updated their initial application with OFR to reflect Mr. Danenberg as the registered agent for Payservices and his address as the registered agent.5/ Mr. Morin and Mr. Grosmaire testified that the reason a licensee needs to update a change in the registered agent's name and address is so that OFR may effectuate service of process against the licensee. Yet, Mr. Grosmaire acknowledged that OFR has access to the Division of Corporation's records. Nevertheless, the persuasive and credible evidence adduced at hearing clearly and convincingly establishes that Respondents did not update their initial application with OFR to reflect Mr. Danenberg as the registered agent for Payservices and his address as the registered agent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that OFR impose an administrative fine against Respondents in the amount of $6,000. DONE AND ENTERED this 16th day of December, 2019, in Tallahassee, Leon County, Florida. S DARREN A. SCHWARTZ 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 16th day of December, 2019.
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
The Issue Whether the Respondent, the Health Care Cost Containment Board, should waive the requirement that Golden Glades Regional Medical Center file its audited actual experience or was the Respondent correct in declining to review the Petitioner's fiscal year 1990 proposed budget?
Findings Of Fact On or about September 26, 1989, the Petitioner filed its proposed budget for its fiscal year beginning January 1, 1990, and ending December 31, 1990, with the Respondent. The Petitioner's proposed 1990 budget was submitted pursuant to Section 407.50(3), Florida Statutes. The Respondent determined that the Petitioner's proposed 1990 budget should not be approved. The Respondent proposed in its preliminary findings and recommendations to hold the Petitioner to its 1988 budget levels of gross revenue per adjusted admission of $8,532.00 and net revenue per adjusted admission of $5,835.00. About the same time that the Petitioner filed its proposed 1990 budget, the Petitioner filed unaudited financial statements for its fiscal year ending December 31, 1988, with the Respondent. The financial statements were not accompanied by an audit opinion letter from the Petitioner's certified public accountants. Therefore, the statements did not constitute "audited actual experience" or "audited actual data". The Respondent rejected the Petitioner's proposed 1990 budget because of the Petitioner's failure to file audited actual experience. Hospitals subject to Chapter 407, Florida Statutes, are required to file audited actual experience which is used by the Respondent in reviewing hospital budgets. In February or March, 1989, the Petitioner retained an independent, Florida licensed certified public accountant (hereinafter referred to as the "Auditors"), to prepare audited financial statements for its 1988 fiscal year. The Auditors completed all the field work they could complete in April or May, 1989. An audit opinion letter must be included with an audit report pursuant to generally accepted auditing standards. The Auditors have delayed issuing an audit opinion letter for the Petitioner's 1988 fiscal year, which is required in order to issue audited financial statements. Audit opinion letters typically contain a description of the scope of the work performed by the auditors, a description of the audit process and an opinion concerning whether the financial statements are fairly stated in all material respects in accordance with generally accepted accounting principles. The Auditors have been requested by the Petitioner to withhold issuance of their final audit report for the Petitioner's 1988 fiscal year. As of the date of the formal hearing of this case, the Auditors had not issued an audit opinion letter, and thus an audit report, because they needed to be provided by the Petitioner with information concerning the restructuring of the Petitioner's debt, updated legal letters from the Petitioner's attorneys and a management representation letter from the Petitioner. The Petitioner's source of working capital for its daily operations has been a line of credit with First American Bank. The line of credit expired during 1989. A new source of working capital has not been arranged by the Petitioner. Therefore, the Auditors could not issue an audit opinion letter concluding that the Petitioner is viable as a "going concern." Unless the Petitioner can restructure its debt or find another source of debt-financing, increase its equity capital or achieve profitable operations, the Auditors will not be able to opine that the Petitioner is a going concern. This problem has been in existence almost since the inception of the Petitioner's ownership of the hospital. The Petitioner has requested three extensions of time to file its proposed 1990 budget. It did not inform the Respondent of the debt restructuring problem in any of the extension requests. Without resolving the debt restructuring problem of the Petitioner, the Auditors cannot determine what effect a renegotiation of the Petitioner's debt may have on the Petitioner's financial statements for its 1988 fiscal year. There will be uncertainty concerning the 1988 fiscal year financial statements of the Petitioner until the Auditors issue their final audit report. If the Auditors issued an opinion letter as of the date of the formal hearing, they would have to issue a "disclaimer" letter. In issuing a disclaimer, an auditor declines to render an opinion concerning the financial statements. To avoid a disclaimer opinion letter, the Petitioner requested that the Auditors not issue their final audit report. Whether the Petitioner is a going concern does not impact on the calculation of its operational revenues and expenses as represented in the Petitioner's unaudited 1988 fiscal year financial statements. If the Petitioner is not considered a going concern the Petitioner would be considered on a liquidation basis for purposes of its financial statements. Therefore, the question of whether the Petitioner is a going concern does impact the manner in which its assets would be valued and the determination of the Petitioner's liabilities. A management representation letter, which the Auditors also need to complete their audit of the Petitioner, is a letter from the management of a business, such as a hospital, representing that management has made available all of the books and records of the hospital, that management understands generally accepted accounting principles and the financial statements of the hospital have been prepared in accordance with such principles, that all liabilities have been accrued and that proper disclosures have been made in the financial statements. A management representation letter is required by the American Institute of Certified Public Accountants before an audit opinion letter may be issued. A management representation letter should provide assurances to the auditors that management has made available all financial records and related data, and minutes of the meetings of the stockholders and directors, if a corporation, and that there are no irregularities involving management employees that could have a significant effect on the financial statements. Without a management representation letter there are no assurances that a hospital such as the Petitioner's has engaged in related-party transactions or, if so, the nature and impact on expenses of such transactions. In addition to submitting unaudited financial statements to the Respondent, the Petitioner provided the Respondent with a "comfort letter" from the Petitioner's Auditors. The Respondent needs audited actual experience in order for it to perform a full budget review of a hospital's proposed budget submitted pursuant to Section 407.50(3), Florida Statutes. The financial data contained in the audited actual reports of a hospital is used in the methodologies and formulas utilized by the Respondent in its budget review. The purpose of conducting a budget review is to determine the recommended levels of charges that a hospital may impose upon its patients in the budget year. Audited actual experience provides the starting point for determining whether a hospital's proposed budget is reasonable. A comfort letter merely indicating that the information on the financial statements should not change is not sufficient to provide the reliability the Respondent should demand of a hospital's financial statements. The Respondent's budget review includes an analysis of a hospital's ability to earn a reasonable rate of return. This analysis requires reliance upon the financial data contained in the hospital's balance sheet and income statement. The data must be reliable. Accuracy of the data can only be assured if it is part of an auditor's final report. As part of the audited actual experience of a hospital such as the Petitioner's hospital, it is reasonable for the Respondent to require that an audit opinion letter be provided. Without an audit opinion letter the Respondent cannot determine whether there are any disclaimers, qualifying statements or notes about subsequent events of the hospital. The Respondent does not have the resources necessary to perform its own audit of hospitals. Therefore, it is reasonable for it to require that hospital's provide audited actual experience to the Respondent. The rules of the Respondent allow it to waive the requirement that a hospital file audited financial statements. Rule 10N-1.006, Florida Administrative Code. The Respondent grants waivers pursuant to Rule 10N-1.006, Florida Administrative Code, if it is "impossible" for a hospital to file audited financial statements. The Petitioner did not file a request for such a waiver. The evidence failed to prove that the Respondent was prejudiced by the Petitioner's failure to file a request for a waiver. The Petitioner has failed to prove that the information necessary for it to file audited financial statements for its 1988 fiscal year was "not available at the time nor can be reasonably developed by the hospital " Unaudited financial statements may be relied upon for some purposes. The Respondent relies upon unaudited data for some purposes. But not for full budget review purposes. The weight of the evidence failed to prove that it is unreasonable for the Respondent to refuse to rely upon the Petitioner's 1988 fiscal year unaudited financial statements to complete the budget review the Respondent is required to conduct for 1990.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent issue a Final Order dismissing the Petitioner's Petition for Administrative Hearing. DONE and ENTERED this 31st day of May, 1990, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of May, 1990. APPENDIX TO RECOMMENDED ORDER The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. The Petitioner's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1-7 and hereby accepted. The last two sentences of proposed finding of fact 6 is not supported by the weight of the evidence. 8 2. 9 1-2. 10 3 and 10. See 29. Not relevant. Hereby accepted. The proposed finding of fact that the data on the financial statements "will not change" and the last sentence are not supported by the weight of the evidence. 11-14. The last sentence is not relevant. See 26. 16 See 27-28. The Respondent's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 2. 3 4. Hereby accepted. 2 and 4. 6 6. 7 6-7 and 9. 8 8. 9 9-11. 10 12. 11-12 15. 13 12. 14 21. 15 3, 22 and 29. 16 21-22. 17 22-23. 18 16-19. 19 25. 20 Not relevant. The Intervenor's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 3. 3 2. 4-8 Hereby accepted. 9-11 10. 12 16. 13 18. 14 16-19. 15 11-12. 16 11 and 13. 17 10, 14-15 and hereby accepted. 18 15. 19 Hereby accepted. 20 11. 21 14. 22 Hereby accepted. 23-26 8 27 20 and 22. 28 Hereby accepted. 29 9 and 14. 30 Hereby accepted. 31 8. 32 Not supported by the weight of the evidence. 33 21 and 24. 34 13. 35 12. 36 9. 37 12. 38 13. 39 29. 40 Hereby accepted. 41 26-27. 42 Hereby accepted. 43 9. 44 8 and hereby accepted. 45 21. 46 23. 47 24. 48 25. 49 22. 50 23 and hereby accepted. COPIES FURNISHED: James M. Barclay, Esquire Suite 500 315 South Calhoun Street Tallahassee, Florida 32301 Robert D. Newell, Jr., Esquire 817 North Gadsden Street Tallahassee, Florida 32303-6313 Jack Shreve Public Counsel David R. Terry Associate Public Counsel Peter Schwarz Associate Public Counsel c/o The Florida Legislature 812 Claude Pepper Building 111 West Madison Street Tallahassee, Florida 32399-1400 Stephen Presnell, General Counsel Health Care Cost Containment Board Woodcrest Office Park 325 John Knox Road Building L, Suite 101 Tallahassee, Florida 32303
The Issue Whether the Respondents' Florida real estate licenses should be disciplined based upon the following charges, as alleged in the administrative complaint: COUNTS I and II: Whether Respondent Richard Michael Regazzi ("Regazzi") is guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence, or breach of trust in any business transaction in violation of Section 475.25(1)(b), Florida Statutes. COUNT III: Whether Respondent Regazzi is guilty of failure to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized in violation of Section 475.25(1)(k), Florida Statutes. COUNT IV: Whether Respondent Atlantic Rentals Realty, Inc. is guilty of failure to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized in violation of Section 475.25(1)(k), Florida Statutes. COUNT V: Whether Respondent Regazzi is guilty of failure to prepare the required written monthly escrow statement- reconciliations in violation of Rule 61J2-14.012(2) and (3), Florida Administrative Code, and therefore in violation of Section 475.25(1)(e), Florida Statutes. COUNT VI: Whether Respondent Atlantic Rentals, Inc. is guilty of failure to prepare the required written monthly escrow statement-reconciliations in violation of Rule 61J2-14.012(2) and (3), Florida Administrative Code, and therefore in violation of Section 475.25(1)(e), Florida Statutes. COUNT VII: Whether Respondent Regazzi is guilty of having been found guilty for a third time of misconduct that warrants his suspension or has been found guilty of a course of conduct or practices which shows that he is so incompetent, negligent, dishonest, or untruthful that the money, property, transactions, and rights of investors, or those with whom he may sustain a confidential relation, may not safely be entrusted to him in violation of Section 475.25(1)(o), Florida Statutes.
Findings Of Fact Petitioner is a state government licensing and regulatory agency charged with the responsibility and duty to prosecute Administrative Complaint pursuant to the laws of the State of Florida, in particular Section 20.165, Florida Statutes, and Chapters 120, 455 and 475, Florida Statutes, and the rules promulgated pursuant thereto. Respondent Regazzi is, and was at all times material hereto, a licensed Florida real estate broker. License number 0273453 was issued in accordance with Chapter 475, Florida Statutes. The last license issued was as a broker in care of Atlantic Rentals, Inc., 6811 North Atlantic Avenue, No. B, Cape Canaveral, Florida. Respondent Atlantic Rentals, Inc. is, and was at all times material hereto, a corporation registered as a Florida real estate broker having been issued license number 0273444 in accordance with Chapter 475, Florida Statutes. The last license issued was at the address of 6811 North Atlantic Avenue, No. B, Cape Canaveral, Florida. At all times material hereto, Respondent Regazzi was licensed and operating as the qualifying broker and officer of Respondent Atlantic Rentals, Inc. On January 28, 1997, Petitioner's Investigator Maria Ventura ("Investigator Ventura") conducted an audit of Respondents' escrow account #3601612291, maintained at NationsBank and titled Atlantic Rentals, Inc., Multi Unit escrow Account (escrow account). On January 28, 1997, Respondents had a reconciled bank balance of $46,166.93. As of January 28, 1997, Investigator Ventura determined that Respondents had a total trust liability of $84,586.77. By comparing Respondents' reconciled bank balance with Respondents' trust liability, it was determined that Respondents had a shortage of $38,419.84 in their escrow account. In addition, Respondents were not performing monthly reconciliations of their escrow account. On January 28, 1997, Respondent Regazzi prepared a monthly reconciliation statement (reconciliation statement) for December 1996, and provided it to Petitioner on the same day. Respondent Regazzi's reconciliation statement indicated that there was shortage of $28,885.36 in the escrow account. Respondent Regazzi's reconciliation statement is not signed, and does not indicate what month was being reconciled. The statement indicates that the reconciled bank balance and trust liability agree when, in fact, the reconciliation statement indicates a shortage of $28,885.36. Respondent Regazzi's explanation of how the funds were removed from the escrow account by a third party is not credible. Even if this account were credible, it does not lessen Respondent Regazzi's culpability. On April 21, 1992, the Florida Real Estate Commission ("FREC") issued a final order whereby Respondent Regazzi was found guilty of misconduct and was fined $200, and placed on probation for one year with a requirement to complete and provide satisfactory evidence to the Department of having completed an approved 30-hour broker management course. Respondent successfully completed the terms of probation. On November 12, 1996, the FREC issued a final order whereby Respondent Regazzi was fined $250 for misconduct and Respondent Atlantic Rentals, Inc. was reprimanded.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Respondent Regazzi be found guilty of violating Sections 475.25(1)(b), (e), (k), and (o), Florida Statutes (1995), as charged in the Administrative Complaint. Respondent Atlantic Rentals, Inc. be found guilty of having violated Sections 475.25(1)(b), (k), and (e), Florida Statutes, as charged in the Administrative Complaint. That Respondents Regazzi's real estate license be revoked and that he be ordered to pay restitution in the amount of $38,419.84, plus interest. That Respondent Atlantic Rentals, Inc.'s corporate brokerage registration be revoked. RECOMMENDED this 23rd day of December, 1997, at Tallahassee, Leon County, Florida. DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of December, 1997. COPIES FURNISHED: Daniel Villazon, Esquire Department of Business and Professional Regulation 400 West Robinson Street, Suite N-308 Orlando, Florida 32801 Richard Michael Regazzi, pro se Atlantic Rentals, Inc. 6811-B North Atlantic Avenue Cape Canaveral, Florida 32920 Henry M. Solares, Division Director Department of Business and Professional Regulation Post Office Box 1900 Orlando, Florida 32802-1900 Lynda L. Goodgame General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
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
The Issue The basic issue in this case is whether the Petitioner's application for CON Number 6220 should be withdrawn from consideration or processed to conclusion on the merits. The disposition of this issue turns on the nature of the financial information submitted in support of the application.
Findings Of Fact The Petitioner, Support Systems Services Corporation (hereinafter "SSSC"), is a Florida corporation. It is a subsidiary of, and is wholly owned by, John Knox Village of Florida, Inc. (hereinafter "JKV"). JKV is a regulated continuing care retirement center. SSSC currently provides home health services to non-Medicare residents of John Knox Village. SSSC seeks to become a Medicare-certified provider of such services. On March 23, 1990, SSSC filed a timely application for a certificate of need ("CON") to establish a Medicare certified home health agency. The SSSC application included audited consolidated financial statements for the years ending December 31, 1988, and December 31, 1989, for an entity described in the audit report as "John Knox Village of Florida, Inc., and Subsidiary." The audited consolidated financial statements submitted as part of the application are consolidated financial statements of both JKV and SSSC. The first paragraph of the notes to the consolidated financial statements includes the following: "The consolidated financial statements include the accounts of the subsidiary. All significant intercompany transactions and balances have been eliminated." The independent financial status of SSSC cannot be determined from the consolidated financial statements submitted with the application. On April 12, 1990, the Department of Health and Rehabilitative Services (hereinafter "DHRS") sent a so-called "omissions letter" to SSSC. The letter described four elements of the application that had been omitted from the application. The omitted element relevant to this case was described in the letter of April 12, 1990, as follows: Audited financial statements were not provided for Support System Services, Inc., (the applicant) in accordance with 381.707(3), Florida Statutes. Please submit the correct audited financial statements for the previous two fiscal years. The letter of April 12, 1990, also included the following information: Section 381.709, Florida Statutes, requires that you respond to the above omissions by May 14, 1990. Failure to provide responses by this date will result in your application being deemed incomplete and administratively withdrawn from further consideration. By letter dated May 7, 1990, SSSC submitted its response to the omissions letter. With regard to the financial statements, SSSC responded, in pertinent part: Section 381.707(3): Pursuant to our conversation of April 30, 1990, please find enclosed the excerpted audited financial statements by Coopers & Lybrand for fiscal year 1988 and 1989. Attached to SSSC's letter of May 7, 1990, were six pages of financial information regarding SSSC. The information consisted of balance sheets for December 31, 1988, and December 31, 1989, statements of revenue and expenses for the years ending December 31, 1988, and December 31, 1989, and consolidating statements of cash flow for the years ending December 31, 1988, and December 31, 1989. The financial information submitted with SSSC's letter of May 7, 1990, did not contain any information from which it could be determined whether those financial statements had been examined by an independent certified public accountant. The financial information submitted with SSSC's letter of May 7, 1990, was not accompanied by an opinion of a certified public accountant as to the fairness with which the financial statements presented financial position, results of operations, and cash flows. The financial information submitted with SSSC's letter of May 7, 1990, was not an audited financial statement. At the time SSSC filed its CON application there were no audited financial statements in existence that addressed only the financial status of SSSC. By letter dated May 15, 1990, DHRS advised SSSC, inter alia: In accordance with the provisions of Sections 381.707 and 381.709(3), Florida Statutes, you were given until May 14, 1990, to respond satisfactorily to the omissions noted in the correspondence from this office dated April 12, 1990, relative to your proposal to initiate a Medicare certified home health agency in Broward County. Because of your failure to provide separate and complete audited financial statements for Support Systems Services Corporation (the applicant and license holder) as required by Section 381.707(3), Florida Statutes, your proposal has been withdrawn from further consideration effective May 14, 1990. The letter of May 15, 1990, also advised SSSC of its right to invoke administrative hearing proceedings, which rights were timely invoked by SSSC. In the February 17, 1989, issue of the Florida Administrative Weekly, the DHRS published a "Notice To All Potential Certificate Of Need Applicants." That notice was for the purpose of informing future applicants regarding the need to include an audited financial statement "of the applicant." The DHRS procedure manual for processing certificate of need applications addresses, in Chapter 11, the need for an audited financial statement "of the applicant." Neither the F.A.W. notice of February 17, 1989, nor Chapter 11 of the manual specifically mention consolidated statements, but both emphasize that the required audited financial statement must be that "of the applicant." The purpose for the requirement of an audited financial statement of the applicant is two-fold. First, where there are competing applicants, it assists the DHRS in making its determination with respect to which applicant is the better candidate for a CON. Second, the audited financial statement provides an objective source of evidence (through the independent opinion of the auditor) as to the applicant's financial condition and capabilities. These purposes are not fulfilled by the financial information submitted by SSSC with its application or in its response to the omissions letter.
Recommendation Based on all of the foregoing, it is RECOMMENDED that the Department of Health and Rehabilitative Services issue a final order in this case deeming the Petitioner's application to be incomplete and withdrawing the application from further consideration. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 3rd day of December 1990. MICHAEL M. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of December, 1990. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-4448 The following are my specific rulings on all proposed findings of fact submitted by all parties. Findings proposed by Petitioner: Paragraphs 1, 2, 3, 4, and 5: Accepted in substance. Paragraph 6: First sentence accepted in substance. Second sentence rejected as contrary to the greater weight of the evidence. Paragraph 7: Rejected as subordinate and unnecessary details. Paragraphs 8 and 9: Accepted in substance. Paragraph 10: Rejected as subordinate and unnecessary details. Paragraph 11: First sentence accepted. The remainder is rejected as, for the most part, subordinate and unnecessary details; portions are also contrary to the greater weight of the evidence. Paragraph 12: Rejected as irrelevant. Paragraph 13: Accepted in substance, without the editorial implications. Paragraphs 14 and 15: Accepted in substance. Paragraphs 16, 17, and 18: Rejected as subordinate and unnecessary details. Paragraphs 19 and 20: Rejected as contrary to the greater weight of the evidence. Paragraph 21: Rejected as constituting argument or subordinate and unnecessary details. Paragraph 22: Rejected as constituting argument or conclusions of law, rather than proposed findings. Paragraphs 23, 24, and 25: Rejected as irrelevant. Paragraph 26: Accepted in substance. Paragraph 27: Rejected as contrary to the greater weight of the evidence. Findings proposed by Respondent: Paragraph 1: Rejected as constituting conclusions of law, rather than proposed findings of fact. Paragraphs 2, 3, 4, 5, 6, 7, and 8: Accepted in substance, with some subordinate and unnecessary details omitted. Paragraph 9: Rejected as subordinate and unnecessary details. Paragraph 10: Accepted in substance. Paragraph 11: For the most part rejected as unduly repetitious or as subordinate and unnecessary details. Paragraphs 12, 13, 14, and unnumbered paragraph at end: Rejected as constituting argument, rather than proposed findings of fact. COPIES FURNISHED: Alisa S. Duke, Esquire DYKEMA GOSSETT 790 East Broward Boulevard Suite 400 Fort Lauderdale, Florida 33301 Edward Labrador, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Linda K. Harris, Esquire General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
